SIR THE LABEL PTY LTD and BILIKIKI PTY LTD ATF PRICELINE TRUST
[2024] WASAT 21
•2 APRIL 2024
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: SIR THE LABEL PTY LTD and BILIKIKI PTY LTD ATF PRICELINE TRUST [2024] WASAT 21
MEMBER: MS R PETRUCCI, MEMBER
HEARD: 28 MARCH 2024
DELIVERED : 2 APRIL 2024
FILE NO/S: CC 180 of 2024
BETWEEN: SIR THE LABEL PTY LTD
Applicant
AND
BILIKIKI PTY LTD ATF PRICELINE TRUST
Respondent
Catchwords:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Commercial tenancy - Whether licence or lease - Retail shop lease - Lease term less than 5 years - Application by tenant to Tribunal for order that an option of renewal does not arise - Whether application made by tenant on their own free will - Whether circumstances warrant granting the application
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13, s 13(1), s 13(2A), s 13(7b), s 13(7b)(a)
Result:
Application granted
Order made
Category: B
Representation:
Counsel:
| Applicant | : | In Person |
| Respondent | : | In Person |
Solicitors:
| Applicant | : | N/A |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194
Kruger & Ors v The Commonwealth of Australia (1997) 190 CLR 1
Minister for Immigration and Citizenship v Li [2013] HCA 18
Mistelle Bickley Pty Ltd and Sykes [2023] WASAT 69
Radaich v Smith [1959] HCA 45
Saje and Sampson [2023] WASAT 101
Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
The applicant in this proceeding is SIR The Label Pty Ltd trading as SIR The Label (SIR). SIR is the acronym for 'Separates, Intimates, Ready‑to‑wear'. It is an Australian contemporary fashion house that was founded in 2014. SIR currently operates one of its retail clothing shops at Shop 14, Bay View Terrace, Claremont, Western Australia (premises).
On 21 March 2024, SIR made an application to the Tribunal under s 13(7b) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act). That section provides:
(7b)The Tribunal may, on application in writing by a tenant or prospective tenant, order that an option of renewal does not arise under subsection (1), if it is satisfied that —
(a)the application was made by the tenant or prospective tenant of his own free will; and
(b)the circumstances of the case warrant the granting of the application.
SIR seeks the following order in this proceeding:[1]
[T]hat an option of renewal does not arise in SIR's favour under s 13(1) [of the CTRSA Act].
[1] Application filed with the Tribunal dated 21 March 2024.
Section 13(1) of the CTRSA Act provides:
(1)Subject to this section, where under a retail shop lease —
(a)the term of the lease (in this section called the current term) is more than 6 months but less than 5 years; and
(b)the current term plus any term (in this section called the option term) that may be obtained by the tenant by way of an option to renew the lease totals more than 6 months but less than 5 years,
the lease shall be taken to give the tenant an option to renew the lease for a term commencing immediately after the expiry of the current term and the option term, if any, and ending on a day specified by the tenant that is not later than 5 years after the day of commencement of the current term.
Section 13(1) of the CTRSA Act is to be read with s 13(2A) which provides:
(2A)For the purposes of subsection (1), a lease for a term of more than 6 months includes a tenancy where the tenant has been continuously in possession of the retail shop for more than 6 months as a result of either or both of the following —
(a)the lease being renewed (one or more times);
(b)the lease being continued.
Section 13 of the CTRSA Act including its key features was set out in Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast) at [20] - [24]. The proper construction of s 13(7) of the CTRSA Act is provided at [25] - [32] in Synicast.
The respondent in this proceeding is Bilikiki Pty Ltd as trustee for the Priceline Trust (Bilikiki). Bilikiki is part of the JJ Leach Group (Leach Group) which made a development application in December 2022 for an eight-storey development at 10 to 40 Bay View Terrace, Claremont with 46 built to rent apartments, a 30 bed hotel, medical consulting rooms, 16 commercial and retail tenancies and basement parking (development application). The premises currently occupied by SIR are part of the development application.
The development application is currently before the State Development Assessment Unit (SDAU) in order to inform a recommendation for the Western Australian Planning Commission (WAPC).
For the reasons which follow, in my view, the application sought by SIR should be granted and the order made under s 13(7b) of the CTRSA Act.
The application
SIR's application to the Tribunal dated 21 March 2024 was supported by the following documents:
(a)the 'Casual Licence Agreement - Confidential' (Agreement) between SIR and Bilikiki;
(b)the order made by the Tribunal in matter CC 385 of 2023 concerning the same parties as in this proceeding;
(c)a written statement made by SIR;
(d)a written statement made by Mr Christian Leach for the Leach Group; and
(e)development application information for 10 to 40 Bay View Terrace, Claremont, Western Australia.
As the Agreement is due to end on 5 April 2024, the Tribunal heard SIR's application urgently on 28 March 2024.
Both Mr William Brogan, Chief Executive Officer of SIR, along with Ms Charlotte Wieland, Head of Retail for SIR, attended the hearing by teleconference.
Mr Christian Leach, Chief Executive Officer of the Leach Group, also attending the hearing by teleconference.
Following the hearing, I reserved my decision.
Issues
While the parties agree that the application falls to be determined under the CTRSA Act, it is first necessary to determine if the Tribunal has jurisdiction to decide the matter.
The first step is to determine if the Agreement which is entitled 'Casual licence agreement - Confidential' is a 'lease' or a mere 'licence'. If the Agreement is a 'lease' then the second step is to determine if it is a 'retail shop lease' as that term is defined in s 3 of the CTRSA Act.
If the lease is a 'retail shop lease', then the following issues arise for determination:
(a)Whether the 'current term' or the 'option term' of the Agreement is more than six months but less than five years?
(b)Whether SIR made its application to the Tribunal of its own free will?
(c)Whether the circumstances of the case warrant the Tribunal granting SIR's application?
(d)If 'yes' to (a), (b) and (c), whether the Tribunal should exercise its statutory discretionary power to make the order sought by SIR under s 13(7b) of the CTRSA Act?
If, however, it is determined that the Agreement is not a 'retail shop lease' under the CTRSA Act, then SIR's application must be dismissed because the Tribunal does not have jurisdiction.
Consideration
Is the Agreement a retail shops lease?
As noted earlier, the Agreement is titled 'Casual Licence Agreement - Confidential'. It is common ground that the Agreement was executed by the parties on or about 11 April 2023.
It is first necessary to determine if the Agreement is a 'lease' or a mere 'licence'. If the Agreement is a 'lease' then it is necessary to determine if it is a 'retail shops lease' under the CTRSA Act. If the Agreement is a mere 'licence' then the application must be dismissed.
The Agreement relevantly provides:
(a)for a 'periodic casual licence' of the premises for the period 13 April 2023 to 5 April 2024;
(b)that the 'licence fee' is payable monthly in advance;
(c)for use of an area of 131.7m² on 'an exclusive use occupancy';
(d)that the permitted use of the premises is for retail clothing; and
(e)that at part of the 'Terms and Conditions', at the end of term, SIR must 'vacate the area provided and remove all fittings, equipment, stock, promotional material, signage, refuse and other articles. Further, any existing fixtures, fittings equipment that belong to Bilikiki must remain. SIR is responsible for any repair and damage caused by such removal and to leave the area in a clean condition. SIR is also responsible for the removal of all rubbish from the premises, and Bilikiki makes no provision for refuse disposal in the rental'.
As the Tribunal explained in Saje and Sampson [2023] WASAT 101 (Saje) at [81] whether the terms of document (in this case the Agreement) creates a 'lease' rather than a mere 'licence' is a matter of substance and not form. In other words, in this case, the relationship between SIR and Bilikiki is to be determined by the legal effect of the arrangement and not by the label or title the parties choose to put on the document.
The relevant authorities to be considered in deciding whether a document is a lease, or a licence are set out at [76] - [80] in Saje. It is sufficient to note here that the sole test for deciding whether something is a lease or a licence, although not an easy one to apply, is whether the putative lessee has a right to exclusive possession: Radaich v Smith [1959] HCA 45. The consequence is that an arrangement that gives exclusive possession, and so in substance a lease, cannot be converted into a licence by merely calling it a licence.
In my view the form of the document before the Tribunal, that is the Agreement, is clearly that of a licence because it is titled 'Casual licence agreement - Confidential' and refers to the parties as 'licensor' and 'licensee'. Further, the document uses the term 'licence' and 'licence fee' throughout the document. However, the substance of the Agreement, is in my view, that of a lease. The reasons for this are as follows.
First, the document provides for an exclusive use of the premises.
Second, the nature of the business carried on by SIR at the premises necessitates it being able to exclude persons from the premises. Ms Wieland gave evidence that SIR holds the keys to the premises and a person may only enter the premises when SIR opens the doors.
Consequently, in my view the true nature of document entitled 'Casual licence agreement - Confidential' is to give SIR exclusive use of the premises for the period stipulated in the Agreement.
In conclusion, as the language of the document contradicts the reality of a lease, the reality must prevail. In other words, the Agreement is a lease (and not a licence).
Having determined that the document titled 'Casual licence agreement - Confidential' is in substance is a lease, it is now necessary to go on to the next step, that is to determine if the lease is a 'retail shops lease' as that term is defined in s 3 of the CTRSA Act.
The legislative framework and principles to be applied in considering if a lease is a 'retail shops lease' under the CTRSA Act is relevantly set out in Mistelle Bickley Pty Ltd and Sykes [2023] WASAT 69 at [20] ‑ [23] and [25] - [30]. I have applied that legislative framework and principles in determining if the Agreement in this case is a 'retail shop lease' under the CTRSA Act. The result is that I am satisfied that the lease is a retail shops lease under the CTRSA Act for the following reasons.
First, bearing in mind the primary object of the CTRSA Act is to characterise as a 'retail shop' premises of which the whole or predominant use is for the retail sale of goods, Ms Wieland gave evidence that the nature of the business carried on at the premises is that of retail clothing.
Second, the sale of clothing by way of retail is the only permitted use and the only use of the premises. Ms Wieland informed the Tribunal that there is no other use(s) of the premises.
The end result is, in my view, the only purpose of the business at the premises is this case, is to sell clothing by way of retail. It is therefore a 'retail shops lease' under the CTRSA Act.
Having found that the Agreement is a 'retail shop lease' under the CTRSA Act, and therefore the Tribunal has jurisdiction to decide the matter, I now turn to consider the other issues (see above at [17]) to determine if the order sought by SIR should be made.
Whether the 'current term' or the 'option term' of the Agreement is more than six months but less than five years?
The Agreement provides for a current term of 11 months and 24 days from 13 April 2023 to 5 April 2024. The result is that it is for a term of greater than six months but less than five years for the purposes of s 13(1) of the CTRSA Act.
According to the statement made by SIR, its position going forward is that is seeks to only have a 'short term (month-to-month) lease of the premises for a period of no longer than 6 - 12 months from 5 April 2024'. This is on the basis that SIR was fully aware of the development application when the parties executed the Agreement on or about 11 April 2023 and that SIR understands that if the development application is approved, SIR must vacate the premises.
SIR's position is that it understands that if it continues to occupy the premises after 5 April 2024 this will mean that it will have had continuous possession of the premises for more than six months and therefore by application of s 13(2A) of the CTRSA Act it will have an option of renewal under s 13(1) of the CTRSA Act. The legislative purpose behind s 13(1) of the CTRSA Act as explained in Synicast at [28] is to confer on the tenant of a retail shop lease a minimum five‑year lease.
Mr Leach said Bilikiki welcomes SIR continuing their tenancy of the premises for a period were it not for the option to renew that would be granted to SIR, and if exercised by SIR, could impede the development application.
Mr Leach explained that by May 2024, the SDAU may be in a position to inform a recommendation for the WAPC regarding the development application. Further, on the basis, if the development application is approved, Mr Leach said that some time will be required to obtain the necessary approvals including a building licence before works can commence. Because of this, Mr Leach said that he anticipates that SIR will be given three months' notice to vacate the premises.
I am satisfied that it is the intention of the parties that upon expiry of the Agreement on 5 April 2024, that Bilikiki will, if the Tribunal makes the order sought by SIR, grant to SIR an option to continue in occupation of the premises either by way of a periodic tenancy or a tenancy at will for a period less than five years.
Whether SIR made its application to the Tribunal of its own free will?
According to SIR's written statement, in order to mitigate the option arising in SIR's favour and in order for Bilikiki to accommodate SIR's continuation of the retail business at the premises, SIR understands that it must vacate the premises for a period of time prior to negotiating a new and separate lease for the premises. This according to SIR would be at a significant financial cost including loss of sales revenue during SIR's best retail season, expense of additional staff to assist with vacating the premises as well as short term storage expenses. Sir is also concerned about the current difficult trading environment and interest rate environment which is 'creating headwinds for discretionary consumer spending'.
At hearing, Ms Weiland confirmed that she made the application on behalf of SIR to the Tribunal entirely on her own free will. A similar statement was made by SIR in its written statement.
Mr Leach explained that he understood and supported SIR's application.
I find that SIR made its application to the Tribunal of its own free will. The result is that I am satisfied that the requirements of s 13(7b)(a) of the CTRSA Act is stratified.
Whether the circumstances of the case warrant the granting of SIR's application?
In its application, SIR implored on the Tribunal to give serious consideration to the following consequences that are likely to arise if it dismisses its application. First, there will be loss of employment. Second the loss of employment may cause unnecessary financial strain on those people as well as on SIR's broader business operations.
Ms Weiland explained that SIR expended at least $100,000 on fixtures and fittings at the premises. Mr Brogan explained that it would be quite impractical and unnecessary for SIR to vacate the premises on 4 April 2024 because of s 13(1) of the CTRSA Act. Mr Brogan described SIR's tenancy relationship with Bilikiki as good, and they appreciate the flexibility of being allowed to continue with the tenancy and to continue to trade at the premises until they are notified of the outcome of the development application. Further, Mr Brogan said they fully understand and are comfortable that if development approval is granted, then SIR must vacate the premises when directed to do so.
As noted earlier, Mr Leach informed the Tribunal that if the development application is approved then he intends to proceed with the development noting that some time will be required to obtain the necessary approvals before works can commence.
For all of the above reasons, I find that Bilikiki does intend to develop the premises (along with the other premises at 10 to 40 Bay View Terrace, Claremont). Further, I find that SIR knew of the development application before it entered into the Agreement and that it is of the view that it is in SIR's best interests including for commercial reasons to continue conducting its retail business from the premises while the development application is currently under consideration by the SDAU and that it is fully aware that it will be required to vacate the premises should the development application receive approval from the WAPC.
I finally turn to consider whether I should exercise the Tribunal's statutory discretionary power to make the order sought by SIR (see above at [3]).
Whether the Tribunal should make the order sought by SIR?
Section 13(7b) of the CTRSA Act provides that the Tribunal may order that an option of renewal does not arise under s 13(1) of the CTRSA Act. The Tribunal's power under s 13(7b) of the CTRSA Act is a statutory discretionary power.
The term 'discretion' was explained in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194 at [19] as follows:
'Discretion' … refers to a decision-making process in which "no one [consideration] and no combination of [considerations] is necessarily determinative of the result". Rather, the decision-maker is allowed some latitude as to the choice of the decision to me made. The latitude may be considerable … [or] it may be quite narrow[.]
The precondition which enlivens the discretion conferred on the Tribunal to make an order under s 13(7b) of the CTRSA Act is that the Tribunal must be satisfied that the tenant, in this case SIR, made the application on its own free will. Further, if that condition is satisfied, the Tribunal must also be satisfied that the circumstances of the case warrant the granting of the application to the tenant, in this case, SIR.
The discretion conferred by s 13(7b) of the CTRSA Act to order that an option of renewal does not arise under s 13(1) of the CTRSA Act, is not limited by any mandatory considerations. However, that is not to say that the statutory power is not without limitation. As stated by French CJ in Minister for Immigration and Citizenship v Li [2013] HCA 18 (Li) at [23] every statutory discretion, however broad, is constrained by law.
Legal reasonableness provides the boundaries within which a decision-maker such as the Tribunal has a genuine free discretion: Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 and Li at [23]. To determine the boundaries of the statutory discretionary power, regard must be had to the scope, subject matter and purpose of the statutory scheme that creates and confers on the Tribunal the discretion to make an order: Li at [67].
The scope and purpose of the CTRSA Act provides limits on the exercise of the statutory power by the Tribunal. By its long title, the CTRSA Act is to provide for, among other related purposes, for the regulation of commercial tenancy agreements relating to certain shops.
The Tribunal's statutory task, as revealed by a consideration of the CTRSA Act as a whole and, in particular, s 13(7b) of the CTRSA Act is that if the Tribunal finds that a tenant makes an application on its own free will and if the circumstances warrant then the Tribunal may order that an option of renewal of the lease does not arise under s 13(1) of the CTRSA Act.
Therefore, it follows that in making an order under s 13(7b) of the CTRSA Act, the Tribunal must determine if the tenant has made the application on its own free will and that the circumstances of the case warrant the granting of the application. In other words, the Tribunal must make findings of fact. In making the findings, the Tribunal is obliged to have regard to any matters relevant to forming the requisite opinion prescribed by s 13(7b) of the CTRSA Act.
Importantly, in exercising its statutory discretionary powers, the Tribunal must do so reasonably: Li at [23]. The same was said in the earlier decision of Kruger & Ors v The Commonwealth of Australia (1997) 190 CLR 1 at [36]:
[W]hen a discretionary power is statutorily conferred on a repository, the power must be exercised reasonably, for the legislature is taken to intend that the discretion be so exercised[.]
In other words, the statutory discretionary power is subject to the presumption of law that the legislature intends the power to be exercised reasonably. Sections 13(7b) of the CTRSA Act is to be construed accordingly.
If the Tribunal makes findings of fact that the tenant has made the application on its own free will and that the circumstances of the case warrant the granting of the tenant's application, then the Tribunal in making its decision as to whether or not to exercise its statutory discretionary power to make an order, must ultimately take all considerations into account.
Taking into account all considerations, I am satisfied that pursuant to s 13(7b) of the CTRSA Act that I should make the order under s 13(1) of the CTRSA Act as sought by SIR. The reasons for this are as follows.
First, SIR is an established Australian fashion house. It was established in 2014. It has been operating from the premises since 11 April 2023.
Second, SIR fully understands the nature of and the consequences of the application it has made to the Tribunal.
Third, SIR made the application to the Tribunal on its own free will.
Fourth, SIR believes that it is in its best interests, including for commercial reasons, to seek the order under s 13(1) of the CTRSA Act (see above at [3]) from the Tribunal.
Finally, SIR is cognisant that if the development application is approved by the WAPC, that SIR will be required to vacate the premises.
Conclusion
For all of the above reasons, the following order is made.
Orders
The Tribunal orders:
1.Pursuant to s 13(7b) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) an option of renewal does not arise under s 13(1) of that Act on the expiry or termination of the term of the lease for Shop 14, Bay View Terrace, Claremont on or before 5 April 2024.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS R PETRUCCI, MEMBER
2 APRIL 2024
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