SEACRESS NOMINEES PTY LTD and KIMBRIKI NOMINEES PTY LTD
[2017] WASAT 95
•30 JUNE 2017
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: SEACRESS NOMINEES PTY LTD and KIMBRIKI NOMINEES PTY LTD [2017] WASAT 95
MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)
HEARD: 15 MARCH AND 20 APRIL 2017
DELIVERED : 30 JUNE 2017
FILE NO/S: CC 1528 of 2015
BETWEEN: SEACRESS NOMINEES PTY LTD
Applicant
AND
KIMBRIKI NOMINEES PTY LTD
Respondent
Catchwords:
Landlord and tenant Retail shop Determination of a question under a lease Whether rent reviews are required Whether management fees are lawful Review of rent
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3(3), s 11, s 11(2), s 12(1f), s 16(1), s 26
Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA)
State Administrative Tribunal Act 2004 (WA)
Result:
Questions arising under lease answered
Matter adjourned
Summary of Tribunal's decision:
The applicant is the lessee under a lease of certain shop premises in Mandurah. The respondent is the lessor under the lease. The lease is a retail shop lease under the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), and the applicant referred a number of questions under the lease to the Tribunal for determination.
The first question related to the management fees paid by the applicant to the respondent. During the course of the proceedings, the parties came to the agreement that the applicant should not have paid management fees to the respondent and also agreed the quantum of the management fees which had been paid. The Tribunal determined that the applicant should not pay management fees to the respondent in the future and made orders that the respondent should repay the management fees to the applicant.
The second question related to whether the respondent was required by the terms of the lease to conduct annual market rent reviews of the rent payable under the lease. The applicant said that, on the proper construction of the lease, and considering the imperative language of the market rent review provisions in the lease, the respondent was required to conduct these reviews. The respondent said that the wording of the lease was such that it could elect whether or not to conduct a market rent review in any given year.
The Tribunal considered the terms of the lease and also certain amendments which were made to the Act in 1999. The Tribunal determined that the respondent ought to have conducted a market rent review on the relevant years.
In anticipation of this answer from the Tribunal, the applicant also referred questions to the Tribunal regarding the rent that should have been paid by the applicant, the current rent payable by the applicant and whether the respondent should pay the applicant damages equal to the amount of any rent that has been overpaid. However, the Tribunal found that these were not questions that could be referred to it under the Act. The parties need to conduct the relevant rent reviews and only if they fail to reach agreement on the question of what rent is payable can this be referred to the Tribunal.
Category: B
Representation:
Counsel:
Applicant: Mr M Blundell
Respondent: Dr E Heenan
Solicitors:
Applicant: Solomon Brothers
Respondent: AustAsia Legal Pty Ltd
Case(s) referred to in decision(s):
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
Seacress Nominees Pty Ltd (applicant) is the lessee under a lease of certain shop premises in Mandurah. On 1 October 2015, the applicant filed with the Tribunal an application under s 16(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTA Act). Section 16(1) of the CTA Act provides that a party to a retail shop lease may refer to the Tribunal any question between the parties which it believes to be a question arising under the lease.
The application sets out the first articulation of the applicant's questions to be determined by the Tribunal. It is as follows:
Can the Lessor charge management fees to a retail tenant? Can the Lessor demand payment of outgoings from a retail tenant, where the outgoings budget includes an allowance for management fees? Can the Lessor demand payment of the outgoings and default the tenant for non payment of outgoings when there's an SBDC made Mediation Agreement Outcome Contract that prescribes the Lessor will not take precipitous action in respect of the lease whilst mediation is ongoing? Can the Lessor demand payment of outgoings two days after they provide the tenant with 7 years audited VO account reconciliations and budgets and when a mediation agreement gave rise to a 14 day review period before a second mediation conference is called? Can the Lessor have his annual outgoings accounts audited by the director of an accounting firm, where that director is also a director of the Real Estate firm employed by the Lessor? (Specifically Graeme Wovodich) Can the tenant demand copies of the invoices contained in the auditors report before paying further outgoings where the tenant has strong reason to believe the inclusion of rubbish removal, cleaning and repairs and maintenance expenditure was not carried out or was carried out at another property? Can the Lessor elect to skip a market rent review opportunity when the lease sets out alternating CPI, market rent reviews? Can the tenant initiate a market rent review? Can the Lessor charge and collect GST on rent and outgoings when the Lessor is not registered for GST?
A number of directions hearing in respect of this matter were convened, including one on 23 September 2016, when the parties were given leave to amend their respective statements of issues, facts and contentions. Consequently, the applicant filed an amended statement of issues, facts and contentions on 4 October 2016 (applicant's First Amended Statement). The respondent filed an amended response on 18 October 2016.
Questions referred
In the applicant's First Amended Statement, the applicant reframed the questions to be referred to the Tribunal under s 16(1) of the CTA Act. Those questions appear at paragraphs 2, 3 and 4 of the applicant's First Amended Statement as follows:
2.Management Fees: Pursuant to s 12(1f) of the [CTA Act], a tenant is not obliged to pay, and a landlord is not entitled to receive, management fees. [The applicant], a tenant, contends that it has paid to [the respondent], a landlord, management fees. [The applicant] requests that the Tribunal answer the following questions:
2.1Should [the respondent] return the management fees to [the applicant]?
2.2Should [the applicant] pay any management fees to [the respondent] in the future?
3.Market Rent Review: [The applicant] contends that the Lease obliged [the respondent] to review and adjust the rent to the market rent on dates which included 1 September 2011, 1 September 2013 and 1 September 2015. The rent was not reviewed and adjusted on those dates. [The applicant] requests that the Tribunal answer the following questions:
3.1Should [the respondent] have reviewed and adjusted the rent to the market rent on 1 September 2011, 1 September 2013 and 1 September 2015?
3.2What rent should [the applicant] have paid from 1 September 2011?
3.3Should [the respondent] pay to [the applicant] damages equal to the difference between the rent paid by [the applicant] and the rent that [the applicant] should have paid?
3.4What should be the current rent payable by [the applicant] to [the respondent]?
4.Waste Collection Invoices: Pursuant to s 12(1e) of the [CTA Act], a tenant is not liable to contribute towards an operating expense an amount in excess of the proportion of lettable area that the premises bears to other premises to which the operating expense is referable. [The applicant] contends that it has paid more than it should have to [the respondent] for waste collection, and requests that the Tribunal answers the following question:
4.1How much should [the applicant] pay for waste collection in the future?
Matter part heard
The substantive hearing of the matter was then listed to take place over two days, on 15 and 16 March 2017.
During the first day of the hearing, the Tribunal heard argument from the parties with regard to the questions relating to, respectively, rent review and management fees.
With regard to the latter, the respondent conceded that at least since 24 February 2006 and following the enactment of the Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA) (Amendment Act), a tenant is not obliged to pay, and a landlord is not entitled to receive, management fees. The respondent therefore considered that it was unnecessary for the Tribunal to address the applicant's question about management fees. The applicant, whilst not accepting that this was the case, agreed with the respondent that the hearing should be adjourned to enable the parties to file further submissions on this point.
The Tribunal agreed and the matter was adjourned to a further directions hearing on 20 April 2017, at which time the Tribunal heard the parties and made programming orders for the filing of amended statements of issues, facts and contentions and any further witness statements.
The matter is now listed for a final day of hearing on 23 August 2017.
In the meantime, on 17 May 2017, the applicant wrote to the Tribunal confirming that 'the amounts of management fees that were paid to the respondent have been agreed'. The applicant with that letter also filed its further amended statement of issues, facts and contentions (applicant's Second Amended Statement). In it, the applicant reframed the question concerning management fees as follows:
2.Management Fees: Pursuant to s 12(1f) of the [CTA Act], a tenant is not obliged to pay, and a landlord is not entitled to receive, management fees. [The applicant] contends that it and the former tenants Walter John Phillipe and Alan Carl Hipper have paid to [the respondent] management fees. [The applicant] requests that the Tribunal answer the following questions:
2.1AWas the deed of assignment that was entered into between Mr Phillipe, Mr Hipper, [the applicant] and [the respondent] about 13 March 2011 effective to assign from Mr Phillipe and Mr Hipper to [the applicant] any rights to recover the management fees paid by Mr Phillipe and Mr Hipper to [the respondent]?
2.1Should [the respondent] return the management fees to [the applicant]?
2.2Should [the applicant] pay any management fees to [the respondent] in the future?
The applicant's Second Amended Statement also provides, in respect of management fees, as follows:
18.1during the period of about 1 October 2009 to about 31 March 2011, Mr Phillipe and Mr Hipper paid management fees to [the respondent]; and
PARTICULARS
The parties have agreed that Mr Phillipe and Mr Hipper paid $16,186.22 (inclusive of GST) in management fees to [the respondent].
18.2during the period of about 1 April 2011 to about 27 April 2015, [the applicant] paid management fees to [the respondent].
PARTICULARS
The parties have agreed that [the applicant] paid $42,248.74 (inclusive of GST) in management fees to [the respondent].
The respondent's amended response was dated and filed with the Tribunal on 9 June 2017. The respondent accepts the particulars of the management fees paid to it as set out in the preceding paragraph.
On 14 June 2017, the applicant's solicitors wrote to the Tribunal to further clarify the issues which the applicant still considers to be outstanding between the parties.
That letter relevantly provides:
Notwithstanding the fact that neither party has deleted the relevant paragraphs in their amended [applicant's Second Amended Statement, respondent's amended response] that deal with the waste collection services, we wish to inform his Honour that the parties have reached agreement in relation to this issue.
Accordingly, the only live issue that remains to be dealt with in the proceedings is, as indicated by the relevant amendments to the above mentioned [applicant's Second Amended Statement, respondent's amended response], in relation to whether the assignment of lease effectively transferred to [the applicant] the rights of the former tenants to recover the management fees paid to [the respondent] by those tenants.
The applicant's solicitors, in a subsequent letter dated 15 June 2017, provided the following further clarification:
We confirm that the assignment of lease issue is the only live issue that remains to be argued before the Tribunal. (Original emphasis)
The lease and subsequent lease documentation
Lease
The lease under which the applicant's questions arise is a lease dated 21 October 1996. It was entered into between Elk Marine Products Pty Ltd as the then landlord (Elk Marine) and Brenzo Pty Ltd and Rouseabout Nominees Pty Ltd as tenants (Original Tenants).
The leased premises are described as a shop situated at and known as 10 Sholl Street at the corner of Smart Street, Mandurah, having an area of 321.3m² and erected on a portion of Cockburn Sound location 16 being Lot 13 on Diagram 27435 and being the whole of the land comprised in Certificate of Title Volume 1788 Folio 645. The lease was originally for a term of five years commencing on 1 May 1996 with an option of renewal for a further five years commencing on 1 May 2001.
The parties do not dispute that the lease is a retail shop lease within the meaning of the CTA Act.
The lease requires the payment by the lessee of a 'Base Rent' of an amount specified in the Second Schedule to the lease. Clause 5.3 then relevantly provides as follows.
Clause 5.3(a):
The Base Rent shall be reviewed and adjusted on each Review Date in accordance with the provisions following and the Method of Review set forth in Item 6 of the Second Schedule.
Clause 5.3(d):
The Base Rent to be payable on each Review Date shall not be less than the Base Rent payable during the period immediately preceding the Review Date.
Clause 5.3(g):
If the Lessor fails to require a review of the Base Rent on any Review Date as a result of a determination by the Lessor not to require a review of the Base Rent or due to inadvertence or for any reason other than as a result of statutory enactment of governmental regulation the Lessor shall be entitled at any time after the relevant Review Date to require a review of the Base Rent as from the relevant Review Date or at the election of the Lessor as from any subsequent date and the failure of the Lessor to require a review of the Base Rent on any Review Date shall not in any way prejudice the right of the Lessor to require a subsequent review of the Base Rent.
Item 6 of the Second Schedule provides that the first review date will be 1 May 1998, and thereafter annually on the first day of May in each subsequent year.
The rent review mechanism in the lease provides that the rent upon review is to be the greater of:
a)the current market rent for the leased premises; or
b)the rent calculated by multiplying the rent paid immediately preceding the rent review date by a fraction obtained by dividing the consumer price index all groups (Perth) as determined immediately prior to the rent review date in each case.
The permitted use of the leased premises is retail pharmacy, dispensary and photographic processing.
First assignment
On or around 1 September 1997, the Original Tenants assigned their interest in the lease to Brenzo Pty Ltd (Brenzo). The leased premises by this time were referred to as Shop 1, 10 Sholl Street at the corner of Smart Street, Mandurah.
Second assignment
On or around 10 April 2000, Brenzo assigned its interest in the lease to Walter John Phillipe (Phillipe) and Alan Carl Hipper (Hipper). The assignment of lease included the right to renew the lease in favour of the new tenant as provided in the lease, together with a further option to renew the lease for five years from 1 May 2006.
First 'extension'
On 19 February 2001, Phillipe and Hipper entered into an agreement with Elk Marine under which the leased premises were leased to the tenant for a further term of five years commencing on 1 May 2001. This agreement seems to be an exercise of the option to renew the lease and included the further option in the second assignment.
Second extension
On 24 February 2006, Elk Marine, with Phillipe and Hipper, entered into an agreement extending the lease for an additional term of five years commencing on 1 May 2006 and ending on 30 April 2011.
Third extension
The respondent acquired the leased premises on 19 April 2007.
The lease was further extended and varied by a deed dated 21 April 2010 (2010 deed) entered into by the respondent and Phillipe and Hipper. The lease was extended for a period starting on 30 April 2011 ending on 31 August 2024.
It was also agreed under the 2010 deed that the lease would be varied as provided in item 6 of its schedule.
Relevantly, item 6 of the schedule provides that:
… the rental shall be reviewed in accordance with the provisions of the Lease on the following amended review dates:
6.4.1CPI Review Dates:
1 September 2010
1 September 2012
1 September 2014
1 September 2016
1 September 2018
1 September 2020
1 September 2022
6.4.2Market Review Dates:
1 September 2011
1 September 2013
1 September 2015
1 September 2017
1 September 2019
1 September 2021
1 September 2023
The Tribunal is unaware of any concerns which the parties might have with regard to the wording of that item 6.
Third assignment
Finally, under a deed dated 13 March 2011, the lease was assigned by Phillipe and Hipper in favour of the applicant as trustee for the Mandurah Pharmacy Trust. That document provides that the lease is to be varied as described in item 6 of the schedule, although there is no item 6 in the schedule.
The facts concerning the lease as set out above are not in contest between the parties.
Legislative scheme
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (as amended by the Amendment Act)
3. Terms used
…
(3)A reference in this Act to a question arising under a retail shop lease includes a reference to -
(a)a question whether or not a lease exists or has existed, including a question as to forfeiture; or
(b)a question whether or not a lease is or was a retail shop lease; or
(c)a question arising -
(i)in relation to any communication, including a disclosure statement under section 6, between the parties to the retail shop lease, prior to their entry into the retail shop lease, which communication was material to the terms and conditions of the retail shop lease; or
(ii)in relation to the retail shop lease under a provision of this Act;
or
(d)a matter that is in dispute between the landlord and the tenant under section 12 in relation to -
(i)operating expenses of the landlord under the retail shop lease generally; or
(ii)an allocation made under section 12(1)(b) of the proportion of those operating expenses; or
(iii)a determination of the relevant proportion for the purposes of section 12;
or
(e)any other matter that is in dispute between the landlord and the tenant in connection with the retail shop lease, whether or not that matter is dealt with by the provisions of the retail shop lease[.]
11.Rent review, provisions for in lease and conduct of etc.
(1)A provision in a retail shop lease for review of the amount of rent payable under the lease during the currency of the lease is void unless the lease specifies, in respect of each occasion on which the review is to be made, a single basis on which the review is to be made.
(2)If a retail shop lease provides for the review during the currency of the retail shop lease of the amount of rent payable under the retail shop lease having regard to the market rent of the retail shop concerned
(a)that market rent shall, for that purpose, be taken to be the rent obtainable at the time of that review in a free and open market as if, all the relevant factors, matters or variables used in proper land valuation practice having been taken into account, that retail shop were vacant and to let on similar terms as are contained in the current retail shop lease, and is not to take into account the value of
(i)the goodwill of the business carried on in the retail shop; or
(ii)any stock, fixtures or fittings in the retail shop that are not the property of the landlord; or
(iii)any structural improvement, or alteration, of the retail shop carried out, or paid for, by the current tenant;
and
(b)unless specific provision is made in the retail shop lease for the time at which a review may be initiated, a party to the retail shop lease may not more than 3 months before the date on which that review is to be carried out and not more than 6 months after that date, initiate the review by notice in writing served on the other party to the retail shop lease; and
(c)a provision in the retail shop lease purporting to preclude the increase or reduction of that market rent or to limit the extent to which that market rent may be increased or reduced is void.
(2a)A provision in a retail shop lease purporting to preclude the tenant from voluntarily disclosing the rent under the lease is void.
(3)A retail shop lease that provides for review of the amount of rent payable during the currency of the lease shall be taken to provide that where the parties do not agree on the rent payable as a result of the review, the question shall be resolved, subject to subsection (5), by any of the following
(a)a person licensed under the Land Valuers Licensing Act 1978 agreed to by each of the parties;
(ba)a person licensed under that Act and nominated, at the request of each of the parties, by the Small Business Commissioner;
(b)2 persons licensed under that Act, one of whom is appointed by the landlord and one of whom is appointed by the tenant.
(3a)If the parties to a retail shop lease referred to in subsection (3) do not agree on the rent payable as a result of the review concerned, the rent payable immediately before that review shall not be increased or reduced before the question is resolved or determined under this section, but nothing in this subsection prevents any increase or reduction in rent which takes place after that resolution or determination from being due and payable with effect from the date of that review.
(3B)A landlord under a retail shop lease must, to assist in determining the rent payable as a result of the review, within 14 days after being given a written request to do so by a person who acts under subsection (3), give that person such relevant information as is requested, including any of the following information, about leases for retail shops in the same building or retail shopping centre
(a)current rental for each lease;
(b)rent free periods or any other form of incentive;
(c)recent or proposed variations of any lease;
(d)outgoings for each lease;
(e)any other information prescribed for the purposes of this paragraph.
(3C)If a landlord fails to comply with a request made under subsection (3B) without reasonable excuse
(a)the person who made the request must, within 7 days after the landlord has failed to comply with the request, give to the tenant written notice of the landlord’s failure; and
(b)the tenant may apply in writing to the Tribunal for an order that the landlord comply with a request made under subsection (3B) to supply the information requested.
(4)A person who acts under subsection (3) shall, at the request of and on payment of the required fee by a party to the lease, provide reasons for his decision in writing to that party.
(5)Notwithstanding subsection (3), a party to a retail shop lease may refer to the Tribunal for determination a question as to the rent payable as a result of the review by the parties where
(a)the persons acting under subsection (3)(b) fail to reach an agreement on the rent to be paid; or
(b)a person has not acted under subsection (3) and the leave of the Tribunal has been obtained,
but otherwise such a question shall not be referred to the Tribunal.
[(6), (7) deleted]
(8)In determining a question under subsection (5) the Tribunal, after considering all the circumstances of the case, may determine that any increase or reduction in rent payable as a result of the determination of the Tribunal under that subsection is payable over such period as the Tribunal thinks fit.
12.Landlord's operating expenses etc., effect of provisions in lease for payment by tenant of
…
(1f)If there is a provision in a retail shop lease in respect of any premises to the effect that the tenant is obliged to make a payment to or for the benefit of the landlord for management fees, the landlord is not entitled to recover, and the tenant is not obliged to make, that payment.
…
16.Party to lease may refer question to SAT
(1)Subject to section 11(5), a party to a retail shop lease may refer to the Tribunal any question between the parties which he believes to be a question arising under the lease and the Tribunal shall
(a)determine whether or not the question referred to the Tribunal is a question arising under the lease; and
(b)if it is such a question, hear and determine it[.]
26.SAT's powers to make orders
(1)Without limiting any power to make an order that is conferred by the State Administrative Tribunal Act 2004 but subject to this Act the Tribunal may make -
(a)an order that requires a party to any matter before it to pay money to a person specified in the order; or
(b)an order for a party to any matter before it to do, or refrain from doing, anything specified in the order; or
(c)an order dismissing any matter before it.
(1a)The power in subsection (1)(b) includes power for the Tribunal to order the parties to enter into an agreement varying a retail shop lease as specified in the order where the Tribunal has found that the tenant under the lease was before entering into the lease misled by the landlord as to the meaning or effect of a term or condition of the lease.
(1aa)The Tribunal may, where it considers it appropriate to do so to resolve the matter concerned, make an order terminating a retail shop lease.
(2)In considering whether to make an order under the State Administrative Tribunal Act 2004 section 87(2) in a proceeding, the Tribunal may have regard to a certificate issued under section 25C that relates to the proceeding.
(3)An order of the Tribunal requiring anything to be done or discontinued may fix the time within which that thing is to be done or discontinued, as the case may be.
(4)The Tribunal may allow any equitable claim or defence, and give any equitable remedy, in a matter before it that the Supreme Court may allow or give.
Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA)
Sections 11(2) and 12(1f) of the CTA Act in the form set out earlier in these reasons were brought into effect on the commencement date of the Amendment Act, 1 July 1999. The Amendment Act provides that, while those sections as amended do not apply to leases entered into before 1 July 1999, they do apply to an extension of the term of a lease granted on or after 1 July 1999, of a lease entered into before 1 July 1999. The lease the subject of these proceedings was of course entered into before 1 July 1999, but the lease was extended on 24 February 2006. From that date, those sections apply to the lease.
Questions referred
I will set out the questions which I understand are the questions referred by the applicant to the Tribunal, followed in each case by, where the question has been determined, my determination of those questions.
Was the deed of assignment that was entered into between Phillipe, Hipper, the applicant and the respondent on or around 13 March 2011 effective to assign from Phillipe and Hipper to the applicant any rights to recover the management fees paid by Phillipe and Hipper to the respondent?
The parties have both provided written submissions on this question, but the applicant wishes to be heard on the point. I will determine this question after the next day of the final hearing.
Should the respondent return the management fees to the applicant?
I consider that this question is a question arising under the lease.
I answer this question in the affirmative.
As I have already mentioned, the respondent has conceded that, following the enactment of the Amendment Act, the respondent is not entitled to receive and the applicant is not obliged to pay management fees. The parties have also informed the Tribunal that it has been agreed that the amount of management fees paid by the applicant to the respondent is $42,248.74; applicant's Second Amended Statement para 18.2.
The respondent also agrees that it is obliged to repay to the applicant that amount; respondent's amended response dated 9 June 2017, para 16.1.
The Tribunal will so order.
Should the applicant pay any management fees to the respondent in the future?
I consider that this question is a question arising under the lease.
For substantially the same reasons set out in the preceding answer, I answer this question in the negative.
Should the respondent have reviewed and adjusted the rent to the market rent on 1 September 2011, 1 September 2013 and 1 September 2015?
I consider that this question is a question arising under the lease.
The applicant contends that the lease obliges the respondent to review and adjust the rent to reflect the market rent on dates which include 1 September 2011, 1 September 2013 and 1 September 2015.
The rent has not been reviewed since at least 1 April 2011; applicant's Second Amended Statement para 28, respondent's amended response dated 9 June 2017, para 23. The applicant contends that the terms of the lease oblige the respondent to review and adjust the rent on dates which include 1 September 2011, 1 September 2013 and 1 September 2015.
The applicant point out that clause 5.3(a) of the lease provides that the rent 'shall be reviewed and adjusted' on each of the review dates (applicant's emphasis). Clause 5.3(c)(i), the applicant says, states that the respondent 'shall … give to' the applicant the relevant review notice (applicant's emphasis).
Item 6 of schedule 2 of the lease, which sets out the review dates and the review process, also uses the words 'will' or 'shall'.
The applicant says that the use of the mandatory 'shall' or 'will' results in an obligation on the part of the respondent to review the rent annually.
The respondent does not accept this and points out that any reference to payment of rent and rent reviews is qualified by the words 'in accordance with the provisions' of the lease. The respondent further points out that clause 5.3(g) of the lease (set out in full earlier in these reasons) says that if the respondent 'fails to require a review' of the rent on any of the relevant dates 'as a result of a determination by the Lessor not to require a review' of the rent (respondent's emphasis), then this does not prejudice the right of the respondent to require a subsequent review of the rent. Accordingly, in the respondent's view, the lease expressly contemplates that there are circumstances where the respondent has determined not to review the rent payable under the lease and says that the respondent therefore has no obligation to initiate a market rent review.
The Tribunal does not agree with the respondent. There is no express provision in the lease, including clause 5.3(g), which allows the lessor to elect not to review the rent. In my opinion, the reference in clause 5.3(g) to the lessor determining not to require a review of the rent on any particular review date is inconsistent with the other terms of the lease, the language of which strongly indicates that an annual rent review is mandatory.
I accept that the wording of clause 5.3(g) contemplates that there are circumstances where the lessor has determined not to review the lease, but there is nothing else in clause 5.3(g) to indicate what those circumstances are. It is therefore necessary to turn to the other terms of the lease to ascertain in what circumstances the lessor may do so.
The lease predates the enactment of the Amendment Act and, at the time when the lease was entered into, clause 5.3(d) of the lease did not breach the CTA Act. However, following the enactment of the Amendment Act, any provision in a lease which precluded a reduction of rent following a review was void. At the hearing, counsel for the respondent explained that, following the application of the Amendment Act, when the lease was extended and became subject to s 11(2)(c), the respondent elected not to make any amendments to the lease but instead simply accepted that clause 5.3(d) was void and no longer applied; T:55; 15.03.17.
However, if clause 5.3(d) is simply to be disregarded, then it is also necessary to disregard the words in clause 5.3(g), which in my opinion are a consequence only of clause 5.3(d). I consider that the words in clause 5.3(g) were intended to apply if the respondent on any review date was satisfied that a market review would result in a decrease in rent. In those circumstances, there would be no point in going to the trouble and expense of a review, when it is obvious that the market rent had fallen and the lessor would simply determine that a review should not be conducted.
Following the application of s 11(2)(c), those words are in my view now redundant and should be disregarded along with clause 5.3(d).
Accordingly, I consider that the rent should have been reviewed on 1 September 2011, 1 September 2013 and 1 September 2015 and I answer this question in the affirmative.
Further questions relating to the review of rent under the lease
With regard to the three subsequent questions raised by the applicant, namely what rent should the applicant have paid from 1 September 2011, should the respondent pay to the applicant damages equal to the difference between the rent paid by the applicant and the rent that the applicant should have paid and what should be the current rent payable by the applicant to the respondent, I do not consider that these questions are questions arising under the lease.
Section 16 of the CTA Act, under which the present application has been brought, is expressly subject to the provisions of s 11(5). Under s 11(5) of the CTA Act a party to a retail shop lease may refer to the Tribunal for determination a question as to the rent payable. However, the effect of the words which follow, namely 'as a result of the review by the parties' in my opinion means the jurisdiction of the Tribunal to determine such a question only arises following a failure by the parties to reach an agreement on the rent to be paid. Section 11(5) expressly provides that, otherwise, such a question shall not be referred to the Tribunal.
My conclusion is that these questions must be the subject of a separate application, if necessary, following the completion of the reviews as ordered.
Conclusion
In the orders that follow, I set out the questions referred to the Tribunal and my answer to each question. The answers follow from the findings which I have made and are set out earlier in these reasons.
Orders
The Tribunal orders:
1.The Tribunal determines and answers the questions referred to it as follows:
a)Question: In respect of the applicant's payment to the respondent of management fees:
i)Should the respondent return the management fees to the applicant?
Answer:Yes
ii)Should the applicant pay any management fees to the respondent in the future?
Answer:No
b)Question: Should the respondent have reviewed and adjusted the rent to the market rent on 1 September 2011, 1 September 2013 and 1 September 2015?
Answer:Yes
c)Question: What rent should the applicant have paid from 1 September 2011, should the respondent pay to the applicant damages equal to the difference to the rent paid by the applicant and the rent that the applicant should have paid and what should be the current rent payable by the applicant to the respondent?
Answer: These questions may not be referred to the Tribunal.
2.The amount of $42,248.74 must be paid by the respondent to the applicant within seven days of the date of this order.
I certify that this and the preceding [63] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE T SHARP, DEPUTY PRESIDENT
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