SENTINEL COUNTRYWIDE RETAIL PTY LTD and HE
[2020] WASAT 110
•16 SEPTEMBER 2020
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: SENTINEL COUNTRYWIDE RETAIL PTY LTD and HE [2020] WASAT 110
MEMBER: MR K BALES, SESSIONAL MEMBER
HEARD: 5 AUGUST 2020
DELIVERED : 16 SEPTEMBER 2020
FILE NO/S: CC 897 of 2020
BETWEEN: SENTINEL COUNTRYWIDE RETAIL PTY LTD
Applicant
AND
MINGCUI HE
Respondent
Catchwords:
Retail shop lease - Events of Default - Unlimited scope - Undisclosed events of default - Need to comply with scope of defaults referred to s 13(6) of Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Default limited to circumstances affecting leasehold relationship between landlord and tenant - Purported 'conversion' of the term of a lease
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13(6), s 13(7)
Interpretation Act 1984 (WA), s 18
Property Law Act 1969 (WA), Pt IV
Result:
Reasons provided pursuant to s 78 of the State Administrative Tribunal Act 2004 (WA)
Category: B
Representation:
Counsel:
| Applicant | : | N/A |
| Respondent | : | N/A |
Solicitors:
| Applicant | : | Jackson McDonald |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59
REASONS FOR DECISION OF THE TRIBUNAL:
On 31 July 2020, Sentinel Countrywide Retail Pty Ltd (applicant) lodged an application under section 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) in respect of a retail shop lease between the parties relating to Shop 17, Port Hedland Boulevard Shopping Centre, for approval of the following clauses (inter alia):
13.DEFAULT BY THE LESSEE
13.1Events of default by the Lessee
The Lessee is in default under this document, including but not limited to if:
(a)any rent or other money payable by the Lessee is unpaid after becoming payable whether formally demanded or not;
(b)a Dissolution occurs to the Lessee or the Guarantor or both;
(c)the Lessee fails to promptly comply with any of the covenants under the Lease Documents;
(d)the Guarantor defaults under the Lease Documents or under any guarantee concerning the Lease Documents; or
(e)any combination of those things occur.
13.2Consequences of default by the Lessee
(a)If the Lessee defaults under or repudiates this document and the Lessee fails to remedy it to the Lessor’s reasonable satisfaction within a reasonable time after the Lessor has given the Lessee written notice to remedy it, then the Lessor may, without limiting any other rights, either:-
(i)terminate this document (including any Further Term that may have been granted); and
A.re-enter into and take exclusive possession of the Premises (by force if necessary), eject the Lessee and remove or otherwise deal with the Lessee’s Property; or
B.convert this document into a tenancy from month to month; or
(ii)remedy the default or repudiation in the way reasonably required by the Lessor(but without being obliged to do so).
The application provided the following relevant definitions from the lease:
Agreement for Lease
The signed agreement (if any) between the Lessor, the Lessee and any Guarantor prepared by the Lessor pursuant to which this document may have been entered into.
Dealing
Any transfer (including assignment), subletting, Franchise Dealing, licencing, parting with or sharing possession or other dealing by the Lessee concerning the Premises, this document or the Lessee’s interest in this document in favour of any incoming Lessee.
Disclosure Documents
Any disclosure statements and legal and financial advice reports given by any party to another under the Retail Shops Act before entering into this document or completing a Dealing.
Franchise Dealing
Any franchise or other similar agreement entered into between the Lessee (or any Related Body Corporate of the Lessee) and a Franchisee.
Lease
This deed as amended, varied or supplemented from time to time including any schedule or annexure, however it is not limited to the legal estate created on registration but also includes any tenancy or other right whether legal, equitable or otherwise under which the Lessee occupies or is entitled to occupy the Shop, including a tenancy for a fixed term, a periodic tenancy or a tenancy at will.
Lease Documents
(a)the Agreement for Lease, this document and the Disclosure Documents: and
(b)any variation, guarantee or covenant prepared and signed by the Lessor concerning any of them
In support of the application, the applicant stated:
(a)we ask you to approve the inclusion of clause 13 on the basis that the specified events of default are reasonable.
Section 13(7) of the Act provides:
The Tribunal may, upon application made to it by the landlord notice of which has been given to the tenant, approve of the inclusion in a retail shop lease of a provision under which the landlord may determine the lease (other than under subsection (6)(a), (b) or (da)) before the day set out in subsection(6)(aa) or (ab), as is relevant, if it is satisfied that special circumstances exist by reason of which such approval ought to be given.
On 5 August 2020 the Tribunal made the following order (inter alia):
Clause 13.2 is not approved as the events of default are not defined.
Section 18 of the Interpretation Act 1984 (WA) provides:
In the interpretation of a provision of a written law, a construction that would promote the purpose or object underlying the written law (whether that purpose or object is expressly stated in the written law or not) shall be preferred to a construction that would not promote that object or purpose.
Section 13(6) of the Act provides:
The landlord under a retail shop lease is not entitled to determine the lease
(aa)if the lease is a lease referred to in subsection (1), before the day on which the term that may be obtained by the tenant under that subsection expires; or
(ab)if the lease is a lease the current term of which, or the current term plus the option term, is 5 years or longer, before the day that is 5 years after the day on which the current term commenced,
except
(a)by reason of default by the tenant or failure of the tenant to remedy any such default in accordance with the lease; or
(b)by reason that
(i)it would be inconsistent with a head lease under which the premises are held by the landlord for the retail shop lease to continue; and
(ii)that inconsistency is not, by reason of section 13A(1), removed;
or
(c)under and in accordance with a provision that is included in the lease with the approval in writing of the Tribunal given under subsection (7) or (7a); or
(da)under and in accordance with a provision of the lease that is the same, or substantially the same, as a provision prescribed for the purposes of this section; or
(d)where the Tribunal has granted an application by the tenant under subsection (7b), in relation to a lease referred to in paragraph (aa).
In the interpretation of the provisions of s 13(7) of the Act, the Tribunal has formed the view that because of the specific reference in s 13(7) of the Act to the provisions of s 13(6) of the Act, all of which relate exclusively to the leasehold relationship between the landlord and the tenant, each event of default referred to in the clause submitted for approval under s 13(7) of the Act should be limited to the leasehold relationship of landlord and tenant within the general context or purview of the provisions of s 13(6) of the Act.
The Tribunal makes the following findings:
a)The words in clause 13.1(c) encompass the wide ranging tranche of documents listed in the definitions at [2] above, the events of default in respect of which were not submitted with the application for approval by the Tribunal.
b)The words in clause 13.1(d) encompass the wide ranging tranche of documents listed in the definitions at [2] above, the events of default in respect of which were not submitted with the application for approval by the Tribunal.
c)The words 'including but not limited to' in clause 13.1 encompass a limitless range of events of default, whether or not disclosed in the lease or any of the documents listed in the definitions listed at [2] above.
Following the rule of interpretation in s 18 of the Interpretation Act 1984 (WA), the Tribunal has determined that on the evidence submitted, the events of default described in clause 13.1 purporting to give rise to the right of the landlord to terminate the term of the leasehold estate under clause 13.2 are not limited to the general context or purview of the provisions of s 13(6) of the Act.
Except in the case of a periodic tenancy, the act of execution of a lease instrument by the landlord creates by way of grant a leasehold estate in the premises with a specified finite term. The term of a leasehold estate may only be terminated by surrender and subsequent merger in the superior estate, by expiry, by notice, or by re-entry. The Tribunal finds that the words 'terminate this document' in clause 13.2(a)(i) do not refer to the term of the leasehold estate, and are not effective to terminate the term of the leasehold estate.
Except in the case of a periodic tenancy which is terminable at any time by notice, the term of a leasehold estate is finite, and cannot be varied. The only means of altering the date on which the relationship of landlord and tenant ends are by way of surrender of the leasehold estate by the tenant, by way of termination of the term of the leasehold estate by the landlord following an event of default on the part of the tenant, or by way of a grant of a further leasehold estate by the landlord, often referred to as a renewal of the term.
The remaining provisions of a leasehold estate may be varied during the term of the leasehold estate, but only by deed executed by both parties in accordance with the provisions of Pt IV of the Property Law Act 1969 (WA). The Tribunal finds that the concept and wording of clause 13.2(a)(i)B. purporting to 'convert this document' is not a variation of the remaining provisions of the leasehold estate, and is therefore void and does not comply with the provisions of the Property Law Act 1969 (WA).
In the case of 480 Hay Street Pty Ltd v Irwin St Lower Pty Ltd [2020] WASC 59 at [42] Curthoys J stated (obiter) in relation to the interpretation of s 13(7) of the Act:
… In the context of costs, the term 'special circumstances' has been held to mean 'circumstances that are out of the ordinary, but without having to be extraordinary or exceptional'. I have concluded that that is an appropriate manner in which to interpret that term in the Act[.]
The Tribunal finds that the reason given by the Applicant in support of the application for approval of clause 13.2 does not satisfy the test approved by Curthoys J for the identification of special circumstances.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MR K Bales, SESSIONAL MEMBER
16 SEPTEMBER 2020
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