Seacress Nominees Pty Ltd and Kimbriki Nominees Pty Ltd (No 2)
[2017] WASAT 128
•29 SEPTEMBER 2017
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: SEACRESS NOMINEES PTY LTD and KIMBRIKI NOMINEES PTY LTD (No 2) [2017] WASAT 128
MEMBER: JUDGE T SHARP (DEPUTY PRESIDENT)
HEARD: 23 AUGUST 2017
DELIVERED : 29 SEPTEMBER 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 - Reimbursement of management fees
Legislation:
Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA), s 3, s 12(1f), s 16, s 16(1)
State Administrative Tribunal Act 2004 (WA), s 83
Result:
Question is not a question arising under the lease
Summary of Tribunal's decision:
Seacress Nominees Pty Ltd is the lessee under a lease of certain shop premises in Mandurah. The respondent is the landlord under that lease. Seacress, under s 16(1) of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) (CTA Act) referred a number of questions which it believed to be questions arising under the lease to the Tribunal for determination.
Some of those questions have been heard and determined by the Tribunal; Seacress Nominees Pty Ltd and Kimbriki Nominees Pty Ltd [2017] WASAT 95. One question remained to be heard. It related to the repayment of management fees which under the CTA Act the landlord was not entitled to recover and the tenant was not obliged to pay.
The landlord conceded that management fees paid by Seacress should be repaid. However, the question referred to the Tribunal was whether or not the assignment of lease in favour of Seacress also entitled Seacress to recover from the landlord management fees paid by the preceding tenant to the landlord. Seacress argued that its rights under the lease which were assigned to it included the right to demand payment of those management fees.
The Tribunal heard the parties and concluded that the question was not a question under the lease itself. It was instead a question entirely about the provisions of the assignment of the lease, and the Tribunal considered that this is not a question which can be referred to the Tribunal under s 16 of the CTA Act.
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):
Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbeltown) Pty Ltd (2008) 234 CLR 237
Sammut v AVM Holdings Pty Ltd [No 2] [2012] WASC 27
Seacress Nominees Pty Ltd and Kimbriki Nominees Pty Ltd [2017] WASAT 95
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
The background to this matter is set out in Seacress Nominees Pty Ltd and Kimbriki Nominees Pty Ltd [2017] WASAT 95 (Seacress). Terms used in these reasons which are defined in Seacress have the same meaning given to them in Seacress.
In short, the applicant has been since March 2011 the lessee under a lease of certain shop premises in Mandurah. The respondent is the landlord under that lease. The applicant on 1 October 2015 filed with the Tribunal an application under s 16(1) of the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA) (CTA Act). That section provides that a party to a retail shop lease may refer to the Tribunal for determination any question between the parties which it believes to be a question arising under the lease.
There is no dispute between the parties that the lease is a retail shop lease under the CTA Act.
Questions referred
The questions referred to the Tribunal, as they were amended during the course of the proceeding, are set out in Seacress. They can be described broadly as questions relating to, respectively, management fees, rent reviews and waste collection costs.
The Tribunal part heard the matter on 15 March and 20 April 2017 and has dealt with the questions relating to rent reviews; Seacress [48] [60] and [61] [63].
The applicant referred three questions relating to management fees. The applicant and the respondent agreed that two of those could be dealt with by the Tribunal in the manner set out in Seacress at [41] [45] and at [46] [47] respectively.
The question relating to waste collection costs was withdrawn; Seacress [13] [15].
The matter was then adjourned to a final day of hearing on 23 August 2017 to hear the parties on the one question still outstanding.
The remaining question to be determined
The remaining question which the Tribunal expected to determine following the final day of the hearing is the question which is set out in the applicant's Second Amended Statement as follows:
2.1AWas the deed of assignment that was entered into between Mr Phillipe, Mr Hipper, [the applicant] and [the respondent] about 13 March 2011 (the 'Third Assignment of Lease') 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]?
Application for leave to further amend the question
The applicant then on 11 August 2017, a few days prior to the final day of hearing, filed a further amended statement of issues, facts and contentions, which contained a proposed further amendment to that question, so that the question now reads as follows (the amendment is underlined):
21AWas the deed of assignment that was entered into between Mr Phillipe, Mr Hipper, [the applicant] and [the respondent] about 13 March 2011 (the 'Third Assignment of Lease'), further or alternatively, the deed of assignment that was entered into between Mr Phillipe, Mr Hipper and [the applicant] on 24 July 2017 (the '2017 Deed'), 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]?
Before the Tribunal at the final day of the hearing on 23 August 2017, the applicant argued that leave had been given by the Tribunal on 20 April 2017 to amend the question in this way. The Tribunal has examined the transcript of the hearing on 20 April 2017 and agrees that leave was given to further amend the applicant's statement of issues, facts and contentions to reflect in it what the Tribunal determined in Seacress. However, the Tribunal does not agree that leave was given to amend the question itself.
The Tribunal has considered the proposed amendment to the question. While the Tribunal has encouraged the applicant over the course of this proceeding to amend its questions to assist with identifying what is being asked of it, this latest amendment introduces a document which was not in existence at the time of the application. At least as far as the Tribunal is concerned the document was not even in contemplation. The question as amended is, in the Tribunal's view, a new question. If the applicant wishes to refer a new question it should do so by way of a separate application.
Leave to amend the remaining question in this proceeding as requested is refused. The Tribunal will now consider the applicant's question as framed in the applicant's Second Amended Statement and first, decide whether it is a question arising under the lease and, second, if it is such a question, determine it.
Is the question a question arising under the lease?
At this point, it is appropriate to mention that the decision in Seacress contained a statement that the Tribunal considered that this particular question is a question arising under the lease. The Tribunal has since informed the parties that this paragraph was included in error. The parties had clearly stated to the Tribunal that they wish to be heard on this issue, which was the purpose of the final day of hearing on 23 August 2017.
Seacress has been amended under s 83 of the State Administrative Tribunal Act2004 (WA) in accordance with the Tribunal's normal procedures for doing so. The specific amendment is that [39] of Seacress as originally formulated has been deleted.
Turning now to the final question as set out in the applicant's Second Amended Statement, the Tribunal will first set out the background to the issue of management fees and the relevant provisions of the lease.
Under clause 6.1 of the lease the lessee was obliged during the term of the lease to pay to the lessor a proportion of the 'Variable Outgoings'. The term 'Variable Outgoings' is defined in clause 1.1 of the lease to include '[a]ll reasonable management control and security costs …', including 'fees and charges paid to the Managing Agent'.
The parties agree that in practice in respect of the lessee's liability to pay its proportion of variable outgoings, the lessor would, for each financial year, estimate the costs, charges, expenses, fees and other outgoings that would be payable or become payable by the lessor in managing, supervising, maintaining and keeping secure the leased property during that financial year. The lessee would then, by equal monthly instalments, pay to the lessor a proportion of the estimated amount of variable outgoings, which proportion would be that which the shop premises bears to the lettable area of the whole property.
As soon as practicable after the end of each financial year, the lessor would give to the lessee a statement which specifies that the actual amount of variable outgoings for that financial year and then, within 21 days of the lessee receiving the statement, any over-payment would be returned to the lessee and any underpayment would be paid by the lessee.
In 1998, s 12(1f) of the CTA Act was enacted, which provided as follows:
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.
As set out in Seacress at [37] and at [43], the respondent conceded that, following the enactment of s 12(1f) and since 24 February 2006, the respondent was not entitled to receive and the applicant was not obliged to pay management fees. The parties agreed that the amount of management fees paid by the applicant to the respondent is $42,248.74 and the Tribunal, with the consent of the parties, ordered that the respondent repay that amount to the applicant.
The parties also agreed that the amount of management fees paid by the previous tenants, Mr Phillipe and Mr Hipper, to the respondent between 24 February 2006 and the date when the lease was assigned to the applicant was $16,186.22.
This then gives rise to the remaining question which has been referred to the Tribunal, namely, when the lease was assigned by Mr Phillipe and Mr Hipper to the applicant, was that assignment effective to assign to the applicant any rights to recover the management fees paid by Mr Phillipe and Mr Hipper to the respondent during the time when Mr Phillipe and Mr Hipper were the tenants?
Even though that right may be capable of being assigned, the respondent contends that the question of whether the Third Assignment of Lease was effective to do so is not a question arising under the lease.
The respondent submits that the jurisdiction of the Tribunal invoked by the applicant's application to the Tribunal is its power under s 16 of the CTAAct to determine 'a question arising under [a] lease'. A 'lease' is defined under s 3 of the CTA Act relevantly to mean a lease, licence or agreement 'that provides for the occupation of premises'. A 'retail shop lease' incorporates that definition of a 'lease'.
The respondent says that the question as to whether or not any right possessed by Mr Phillipe and Mr Hipper for repayment of management fees was assigned to the applicant, is a question arising, not under the lease, but under the Third Assignment of Lease, pursuant to which the lease was assigned by Mr Phillipe and Mr Hipper to the applicant. The respondent submits that the Third Assignment of Lease is an agreement that provides for the assignment of a lease, not an agreement that provides for the occupation of premises.
The respondent, however, concedes, properly in the Tribunal's view, that its position is not assisted by the decision of the Supreme Court in Sammut v AVM Holdings Pty Ltd [No 2] [2012] WASC 27 (Sammut).
Sammut is a decision of the Supreme Court on appeal from this Tribunal. The question referred to the Tribunal for determination at first instance is described in Sammut at [4] as a question 'arising from the notice of default', although later in Sammut, at [65], the question was found to have arisen in respect of a breach of the relevant deed of assignment.
The applicant's argument is that the right to repayment of the management fees by the respondent to Mr Phillipe and Mr Hipper is a chose in action assigned by Mr Phillipe and Mr Hipper to the applicant through the terms of the Third Assignment of Lease. The applicant says that the Third Assignment of Lease is effectual at law to pass to the applicant the legal right to, and all remedies for, such chose in action from the date of assignment.
The applicant goes on to say that the obligation of the respondent as lessor to repay the management fees runs with the land and is, by reason of the assignment to the applicant, enforceable and may be taken advantage of by the applicant.
The applicant then says that, applying these principles, the privity of estate between the respondent and the applicant resulting from the Third Assignment of Lease had the consequence that the rights of Mr Phillipe and Mr Hipper under the lease passed to the applicant, including the right to recover the management fees, whether or not that right is a legal chose in action, or any equitable remedy, including restitution.
The applicant says that the covenant to pay management fees and outgoings contained in the lease 'touches and concerns the land'. The applicant, citing Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbeltown) Pty Ltd (2008) 234 CLR 237 (Gumland), says that if a covenant touches and concerns that the land, the rights to enforce that covenant also touch and concern the land, whether these are the right to sue for breach of that covenant, to forfeit the lease, or to sue for a loss of bargain damages.
Determination
The Tribunal accepts the respondent's submission that an assignment of lease is not a lease within the meaning of s 16 of the CTA Act.
In Sammut, it is clear that although the referred question was prompted by the breach of a provision of the relevant deed of assignment, the question referred to the Tribunal at first instance was in substance a question arising under the lease, namely the permitted use of the leased premises as stipulated in the lease.
Accordingly, it is necessary to consider whether in this case, a question arising in substance under the lease has been referred.
The Tribunal agrees that the covenant by the lessee under the lease to pay management fees and variable outgoings to the lessor 'touches and concerns the land' and that the right to enforce that covenant also touches and concerns the land.
While the covenant to pay management fees and variable outgoings to the lessor touches and concern the land, that is not the issue. The issue between the parties is that Mr Phillipe and Mr Hipper paid money to the respondent which the parties agree they were not obliged to pay under the lease. The right to have that money repaid to them is not as a result of a breach of a covenant to pay money to the respondent under the lease, but as a result of a subsequent amendment to the relevant statute, rendering unlawful the payments which were received by the respondent. In the Tribunal's view, Mr Phillipe and Mr Hipper may have a claim for restitution of money paid under the mistaken belief that it was due. However, the question which has been referred to the Tribunal is whether the Third Assignment of Lease had the effect of assigning that claim to the applicant.
Whereas the other two questions concerning management fees were questions arising under the lease because they related to the lawfulness or otherwise of the covenant to pay management fees contained in the lease, this remaining question does not arise as a result of anything contained in the lease.
The Tribunal concludes that the question referred is not a question arising under the lease.
Orders
The Tribunal orders:
Question:Was 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?
Answer:This question may not be referred to the Tribunal.
I certify that this and the preceding [39] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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JUDGE T SHARP, DEPUTY PRESIDENT
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