Skiwing Pty Ltd v Trust Company of Australia (Trading As Stockland Property Management) - [2006] NSWCA 276

NEW SOUTH WALES COURT OF APPEAL

CITATION: Skiwing Pty Ltd v Trust Company of Australia (trading as Stockland Property Management) [2006] NSWCA 276

FILE NUMBER(S):
40278/05

HEARING DATE(S): 23 June 2006

DECISION DATE: 09/10/2006

PARTIES:
Skiwing Pty Ltd (Appellant)
Trust Company of Australia Ltd trading as Stockland Property Management (Respondent)

JUDGMENT OF: Spigelman CJ Hodgson JA Bryson JA

LOWER COURT JURISDICTION: The Appeal Panel of the Administrative Decisions Tribunal

LOWER COURT FILE NUMBER(S): 049023 of 2005

LOWER COURT JUDICIAL OFFICER: Acting Judge M Chesterman, Judicial Member Molloy & Non Judicial Member Weule.

COUNSEL:
A. Tonking, S. Aspinall (Appellant)
R. Darke SC, M. Allars (Respondent)

SOLICITORS:
R. Baron (Appellant)
RAJ Lawyers (Respondent)

CATCHWORDS:
ADMINISTRATIVE LAW – Appeals from Administrative tribunals – Administrative Decisions Tribunal (NSW) – Appeal on questions of law – Meaning of “no evidence”.
LANDLORD AND TENANT – Retail and commercial tenancies legislation – s34 Retails Leases Act 1994 (NSW) – meaning of “genuine proposal” – availability of damages for non-compliance.
LANDLORD AND TENANT – Covenants – Actions for breach of covenant
LANDLORD AND TENANT – Leases and tenancy agreements – Construction and interpretation – Implied Obligations.
LANDLORD AND TENANT – Leases and tenancy agreements – Construction and interpretation – s133B(2) Conveyancing Act 1919 (NSW) – meaning of “improvements”.

LEGISLATION CITED:
Administrative Decisions Tribunal Act 1997, s119(1), s120
Conveyancing Act 1919, s133B(1), s133B(2)
Landlord & Tenant Act 1927 (UK), s19(2)
Retail Leases Act 1994, s10, s34A, s35
Trade Practices Act 1974 (Cth)

DECISION:
1 Set aside Order 2 of the Appeal Panel made on 11 March 2005 and substitute the following
“Order 1 of the Tribunal is set aside and Order 2 of the Tribunal is varied by substituting $50,000 for ‘$53,000’.”
2 The Respondent to pay half of the Appellant’s costs of the appeal.

JUDGMENT:

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40278/05
SPIGELMAN CJ
HODGSON JA
BRYSON JA
Monday 9 October 2006

SKIWING PTY LTD v TRUST COMPANY OF AUSTRALIA LTD (trading as STOCKLAND PROPERTY MANAGEMENT)

Judgment

SPIGELMAN CJ: The Appellant appeals from part of the decision of the Administrative Decisions Tribunal Appeal Panel of 11 March 2005, whereby the Appeal Panel set aside certain orders made by the Retail Leases Division of the Administrative Decisions Tribunal awarding damages to the Appellant for certain conduct by the Respondent.
Skiwing Pty Ltd (“Skiwing”) conducts a café in the Stockland Imperial Arcade in the central business district of Sydney as lessee from the owner, Trust Company of Australia Ltd (“Stockland”).
Skiwing entered into a new lease with effect from 1 May 2000 for a period of seven years over the café. Shortly after the new lease came into effect a series of disputes emerged between Skiwing and Stockland which led Skiwing to make three separate claims in the Retail Leases Division of the Administrative Decisions Tribunal. It was substantially successful with two of the claims in the hearing at first instance. Stockland successfully appealed to the Appeal Panel with respect to the matters decided against it at first instance. Skiwing appeals to this Court with respect to these two claims.
An issue also arose as to whether or not the Administrative Decisions Tribunal had jurisdiction to consider a claim under s52 of the Trade Practices Act 1974 (Cth). Stockland succeeded on this issue at first instance but the Appeal Panel held that the Tribunal did have such jurisdiction and remitted the matter to the Tribunal for further consideration. Stockland successfully appealed to this Court, which held that the Tribunal did not have jurisdiction under the Trade Practices Act. (See Trust Company of Australia Ltd (t/as Stockland Property Management) v Skiwing Pty Ltd (t/a Café Tiffany’s) [2006] NSWCA 185.)
Background Facts
For a period of approximately six months, between October 2001 and April 2002, Stockland pursued a possible redevelopment of the Imperial Arcade. This was directed to changing the tenant mix in the Arcade, particularly to attract a new tenant which would appeal to a youth market. This proposal would have necessitated the relocation of the café conducted by Skiwing. Over the course of this period it issued three relocation notices purportedly in pursuance of the Retail Leases Act 1994 dated, respectively, 23 October 2001, 30 November 2001 and 1 March 2002. The Appellant contested the validity of each of the relocation notices it received. On 27 March 2002 Stockland withdrew the last of the three notices.
Prior to and during the period in which Stockland pursued the possible redevelopment of the Arcade there were a substantial number of vacancies in the Arcade, up to 25 percent of all the shops. As a result customer traffic in the Arcade declined and the business of Skiwing was adversely affected. During this period Stockland failed to expend a significant proportion of its advertising budget.
These two matters gave rise to what was referred to in the proceedings as the relocation and disturbance of trading claim. In my opinion it is convenient to separate these two matters and, despite some interrelationship, to treat them separately.
Prior to the renewal of the lease in 2000, indeed from late 1998, until April 2002, Skiwing was actively pursuing, with Stockland’s approval, a development application with the City of Sydney Council, which would enable it to extend its premises by the construction of a balcony over a pedestrian mall on the Pitt Street frontage of the Imperial Arcade, over land owned by the Council. On 4 April 2002, Stockland withdrew its support for the project. This has been referred to as the balcony claim.
The Appeal Panel overturned the first instance finding in favour of Skiwing on both the relocation and disturbance of trading and the balcony claim. Accordingly, what is before this Court are three separate matters, which it is convenient to refer as:

The relocation notices claim.
The disturbance of trading claim.
The balcony claim.

Pursuant to s119(1) of the Administrative Decisions Tribunal Act 1997, (“the ADT Act”) an appeal to this Court against any decision of the Appeal Panel may be made “on a question of law”. Furthermore, by s120 the Court may make such orders as it thinks appropriate in the light of its decision, which orders include, but are not limited to, an order affirming or setting aside the decision of the Appeal Panel and an order remitting the case.
The Relocation Notice Claim
The alleged invalidity of the relocation notices turns on the provisions of s34A of the Retail Leases Act 1994. That section provides:
“34A     If a retail shop lease contains provision that enables the business of the lessee to be relocated, the lease is taken to include provision to the following effect:
(a)          The lessee’s business cannot be required to be relocated unless and until the lessor has provided the lessee with details of a proposed refurbishment, redevelopment or extension sufficient to indicate a genuine proposal that is to be carried out within a reasonably practicable time after relocation of the lessee’s business and that cannot be carried out practicably without vacant possession of the lessee’s shop.
(b)          The lessee’s business cannot be required to be relocated unless the lessor has given the lessee at least 3 months written notice of relocation and that notice gives details of an alternative shop to be made available to the lessee within the retail shopping centre. Such a notice is referred to as a relocation notice.
(c)          The lessee is entitled to be offered a new lease of the alternative shop on the same terms and conditions as the existing lease except that the term of the new lease is to be for the remainder of the term of the existing lease. The rent for the alternative shop is to be the same as the rent for the existing retail shop, adjusted to take into account the difference in the commercial values of the existing retail shop and the alternative shop at the time of relocation.
(d)          If a relocation notice is given to the lessee, the lessee may terminate the lease within 1 month after the relocation notice is given by giving written notice of termination to the lessor, in which case the lease is terminated 3 months after the relocation notice was given unless the parties agree that it is to terminate at some other time.
(e)          If the lessee does not give a notice of termination as referred to in paragraph (d), the lessee is taken to have accepted the offer of a lease as referred to in paragraph (c), unless the parties have agreed to a lease on some other terms.
(f)           The lessee is entitled to payment by the lessor of the lessee’s reasonable costs of the relocation, including (but without being limited to) costs incurred by the lessee in dismantling and reinstalling any fixtures and fittings, and legal costs, in connection with the relocation.”
The relevant ground of appeal alleges that the Appeal Panel:
“(f) Erred insofar as it held that the relocation notices were not invalid by reason of their involving a genuine proposal within s34A(a) of the Retail Leases Act.”
Mr B G Donald, a judicial member of the Tribunal sitting as the Retail Leases Division of the Tribunal, determined, relevantly, that the proposal for relocation was not a “genuine proposal” for purposes of s34A(a). (See Skiwing Pty Ltd v Trust Co of Australia Ltd (No 3) [2004] NSWADT 94.)
He concluded:
“[88] I find that all three relocation notices were invalid. The first simply did not comply at all with the Lease or the Act and Stockland has acknowledged it was invalid. The second and third were for the purpose of securing a preferred tenant in a prime location within the Arcade with a two level shop fronting the Mall and not for the permitted purposes. While they recited a formula reflecting the provisions of s.34A and cl 20 of the Lease, neither was a genuine proposal for ‘refurbishment, redevelopment or extension’. Instead, it was the attempted use of the right under those provisions to replace an existing tenant, who had only recently had its Lease renewed for a 7 year term and who had satisfactorily refurbished its shop as required under its Lease, with a preferred major tenant believed likely to be more attractive to a range of tenants for which the Arcade was being repositioned.
[89]        My ruling in Eddie Azzi Australia Pty Limited -v- Citadin Pty Ltd [2001] NSWADT 79 also applies here:-
[95]        In my opinion no Lease could be construed as being intended by both parties to operate so that, on the day following the granting of a registered proprietary interest to a lessee in premises, for which the lessee had incurred fit-out costs or had an established business with goodwill, the lessor could decide to terminate the Lease to connect those premises to adjacent units, re-configure the shop fronts and let them to another lessee who would fit them out and occupy the combined space, thereby providing the lessor with occupation of otherwise vacant premises in its building and a commercially preferable return on its building overall.
[96]        In my opinion the right under this clause is available in respect of premises where having regard to the condition of the building, including the condition of the Leased premises, the lessor genuinely determines to repair, renovate or reconstruct the building to a substantial degree. There would be no such genuine determination where the decision in respect of the Leased premises was to incorporate them into a parcel with other premises to achieve a preferable return as opposed to continuing the existing Lease and leasing those other premises separately or in combinations not including the Leased premises.
[97]        Leasehold interests are proprietary interests in land, not merely contractual rights and while the exercise of that proprietary interest is determined by the provisions of the Lease, and may indeed cease to continue as such a proprietary interest according to those provisions, the operation of any such conditions must be strictly construed.
[90]        Secondly, in my opinion none of the premises offered were ‘alternative’ premises. They were not at all comparable from any point of view. I do not think the proper construction of ‘alternative’ in the relocation provisions is simply to allow the offer of any ‘other’ premises at all; there must be some degree of commercial similarity such that they are appropriate for the nature and size of the business conducted by the tenant.
[91] In addition, the base rent proposed in the second relocation notice was $85 000 when the then current base rent for the alternative premises under the Lease just negotiated in 2001 was about $25 000; this could not comply with s.34A(c). The third relocation notice tried to get around this by leaving the rent open in the attached Disclosure Statement, Ex A p.34, to be the same as under the existing lease ‘or adjusted to take into account the differences in the commercial values of the premises… determined independently in accordance with the Act’. There is no process under the Act for an independent determination.
[92]        I am satisfied that the notices were all demonstrably invalid and that they were properly withdrawn. It was however quite inappropriate for the lawyers to suggest in withdrawing them that the tenants who disputed them were somehow the cause of loss to Stockland, Ex A p.57. “
The Appeal Panel accepted the conclusion of the Tribunal but not with respect to the first reason proffered by the Tribunal. The Appeal Panel said:
“[223] We do not agree with the first ground relied on by the Tribunal. This was that the notices did not involve a ‘genuine proposal’ for ‘refurbishment, redevelopment or extension’ within s 34A(a), but instead were aimed at replacing an existing tenant with a preferred major tenant.
[224] The Tribunal, in upholding this ground, relied on the interpretation of these phrases within s 34A set out in Eddie Azzi Australia Pty Ltd v Citadin Pty Ltd [2001] NSWADT 79 at [95 – 97]. The crucial proposition in these paragraphs is that there can be no such ‘genuine proposal’ where what the lessor seeks to do is to incorporate the leased premises into a parcel with other premises in order to achieve a preferable return.
[225] We endorse, however, Mr Biscoe’s submission that this statement of principle is at odds with the judgment of Bryson J in Blackler v Felpure Pty Ltd [1999] NSWSC 958. In construing the phrase ‘genuine proposal’ in s 35 of the RL Act (this provision provides for demolition of leased premises in terms similar to s 34A), Bryson J stated that the lessor may use the power conferred by the section to terminate the lease ‘with a view to its own advantage’. This of itself does not prevent a proposal for demolition from being ‘genuine’.
[226] On the other hand, we agree with the Tribunal’s ruling regarding the second alleged ground of invalidity. This was that none of the premises offered to Skiwing in substitution were an ‘alternative shop’ within the meaning of s 34A(b). The differences in floor area and layout (see [24] and [26] above) were sufficient to support its finding that there was no ‘commercial similarity’ to the existing premises. We agree that some similarity along these lines is an implicit requirement of the subsection. On this issue, Stockland has failed to satisfy us that the Tribunal was in error.
[227] This ruling regarding the requirements of s 34A(b), and indeed of clause 20 of the Lease, is sufficient to support a conclusion that, for the purposes of determining this appeal, we should not disturb the Tribunal’s determination that the second and third relocation notices were invalid.”
Notwithstanding the fact that Skiwing was successful in its basic contention that the notices were invalid, it nevertheless appealed from the finding that one of the grounds of invalidity could not be found to be the absence of a “genuine proposal”.
The Appellant relied on the conclusion by the Retail Leases Division in Eddie Azzi Australia Pty Ltd v Citadin Pty Ltd [2001] NSWADT 79, which was not found to have contained any error of law by the Appeal Panel in Citadin Pty Ltd v Eddie Azzi Australia Pty Ltd [2001] NSWADTAP 30 at [28]. In the course of the latter judgment the Appeal Panel distinguished the decision of Bryson J in Blackler v Felpure Pty Ltd [1999] NSWSC 958; (2000) 9 BPR 17,257 on the basis that the observation by Bryson J at [32] that a lessor could “exercise its powers to terminate the lease with a view to its own advantage” was, according to the Appeal Panel at [23], a “statement … made in the context of a discussion of the scope of the duty of good faith between parties to a contract” and that “no principle of law can be derived from this observation”.
As the Applicant submits, the Appeal Panel in the present case did not refer to its own earlier decision in Eddie Azzi. Nevertheless, in my opinion, the former judgment was correct in concluding that Bryson J did not address the question of when a proposal was a “genuine proposal”.
Blackler v Felpure was a case concerned with a notice under s35 of the Retail Leases Act 1994 which is concerned with demolition, expressed similar terms to those found in s34A, relevantly:
“35(1) If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect:
(a) The lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated.
…”
In the course of dealing with the submissions in Blacker v Felpure, Bryson J said:
“[36]      The plaintiff’s counsel contended that the provision of details did not comply with para.(a) because some of the works which are proposed were not referred to. In my view the facts that the defendant proposes to do further works, and may do them subject to the need to obtain Development Consent, and proposed to do them at the same time as the works specified in the notice, do not establish that para.(a) was not complied with. It is not necessary for compliance with para.(a) to furnish every detail of the proposed demolition, and it is enough if the details provided are sufficient to indicate a genuine proposal to demolish. If that is indicated, it is not a defect in the provision of details that more is to be done.
[37]        It is in my view significant to consider the purpose for which the provision which the Lease is taken to include requires that details be provided. The requirement to provide details is not merely a formal step imposed in the lessor’s path, but the details are to be provided so that the lessee can come to a conclusion about whether the termination will be effective, and whether the lessee should accept that it will be effective or dispute it. The sufficiency of details provided should be tested in relation to that purpose. The question is whether the details provided are sufficient to indicate a genuine proposal to demolish the building; if they are not the termination cannot take place and if they are it will be effective no matter what other details of the proposed demolition exist or could have been provided.
[38]        There is on the evidence tendered by the defendant, particularly of Mr Sevelle, no reason to doubt that there is a genuine proposal to do the work described in the letter of 14 December 1998, and to do further work subject to Development Consent, with the object of providing the defendant itself with office space in which to operate when its present lease expires on 4 January 2000, and also of creating enlarged office space in the upper storey which the defendant now proposes to let to its solicitor. There was no attack on the genuineness of this proposal and the proofs of it are clear.”

His Honour made further findings of fact in this respect and concluded, relevantly for present purposes:
“[61] It is not in my view open to contention by the lessee whether the lessor’s decision to demolish, repair, renovate or reconstruct the building is reasonable or appropriate; it is sufficient if there is a genuine proposal. Nor in my opinion is it open to debate whether the lessor could in some way modify the lessor’s proposal so as to continue to accommodate the lessee after the premises have been demolished, repaired, renovated or reconstructed. The opportunity to break a lease, retake possession and take advantage of the demolition clause is a contractual opportunity made available to the lessor by the terms of the lease itself, including the provisions notionally incorporated by s.35, it is not injurious to the lessor’s position whether the lessor has decided to take that advantage, and it is not relevant that the lessor has in view occupying the premises itself, or selling them after reconstruction, or leasing them again, even if the lease should be to a business similar to the lessee’s. The demolition clause is a reality of the party’s relationship, and so is its potential operation to end the lease.”
In my opinion, similar reasoning is applicable in the present case with respect to the parallel formulation in s34A(a). A proposed “refurbishment redevelopment or extension” does not lose the character of a “genuine proposal” by reason of the fact that the commercial motivation of the lessor is to attract a tenant or a particular kind of tenant. The reasoning of Bryson J in Blackler v Felpure is relevantly analogous and, in my view, correct. It is as the Appeal Panel found, applicable to this case. I can see no error of law in the Appeal Panel’s analysis.
As noted above, the Appeal Panel did find that the notices were invalid under s34A. The Appellant contends that the Appeal Panel erred in holding that non-compliance with s34A could not give rise to a claim for damages. Two distinct issues appear to arise under this ground of appeal. First, whether general damages can arise from non-compliance and secondly, whether damages to reimburse for legal expenses incurred in contesting invalid notices can be awarded.
The Appeal Panel noted that the Tribunal at first instance asserted that Stockland’s reliance on invalid notices was a breach of the lease and that that entitled the lessee to claim damages. The Appeal Panel said:
“[229] In our view, this misstates the effect of non-compliance with s 34A. If in the exercise of a power conferred in a retail shop lease, a lessor issues a relocation notice purporting to comply with s 34A, but which does not in fact comply, the result is that the lessee’s business ‘cannot be required’ to be relocated. If the lessor nonetheless attempts to compel the lessee to vacate the premises, the lessee may assert in an appropriate forum, such as this Tribunal, that the lessor has no rightful claim to possession and may, if necessary, obtain an order prohibiting the lessor making any further attempt of this nature.
[230] A further consequence may be, as we have already mentioned, that the lessor cannot rely on s 34A to defend a claim that, through measures that it has adopted in order to relocate the tenant, it has breached the covenant for quiet enjoyment and/or the covenant not to derogate from its grant.
[231]     We see, however, no reason why the serving of a notice which has no legal effect should, without more, confer on the recipient lessee a right to claim damages from the lessor. Any such right must have some other basis, such as the breach of one or other of these covenants. This ruling has two significant consequences.
[232]     First, we consider that the Tribunal’s awards of damages, in so far as they are based on the ‘disruption’ of Skiwing’s business or the ‘diversion of management effort’ which it found (at [95]) to have been caused by the service of invalid relocation notices, cannot be supported.
[233]     Secondly, the Tribunal’s award of damages totalling $3,918 to reimburse Skiwing for its legal expenses in opposing the relocation notices must be set aside. We agree with Mr Biscoe that there is no general principle that a party incurring legal costs in order to contest successfully the validity of a document served upon it that purports to affect its legal rights or obligations may recover those costs from the party that served the document.”
The Appellant submitted that the Appeal Panel failed to have regard to the factual findings of the Tribunal to the effect that the notices created a state of uncertainty as to the future of the tenancy and, therefore, of the Appellant’s business. The Appellant sought to support the Tribunal’s finding that the giving of an invalid notice constituted “a fundamental breach of the provision of the lease constituted by s34A” and it was this breach that gave rise to a claim for damages. The Appellant submitted that a breach of the lease, accordingly, sounded in damages. Furthermore, it submitted that the attempt to rely on invalid notices constituted a derogation from the grant which should in turn sound in damages. In oral submissions it was submitted that, in effect, s34A incorporates into leases a code in relation to the subject matter of relocations.
Section 34A, as set out above, operates in circumstances where a retail shop lease contains a provision enabling the business of the lessee to be relocated. It comprises a scheme which, by force of the statute, is included in the lease. One of these provisions is a stipulation for a “relocation notice”. Unless such a notice has been given then, pursuant to s34A(b), “the lessee’s business cannot be required to be relocated”. Where such a notice has been given, s34A(d) provides for termination of the lease. Pursuant to s34A(f) a lessee is entitled to payment of reasonable costs of relocation.
If there is no valid “relocation notice” then these provisions of the legislative scheme do not take effect. The contractual provisions inserted into the lease agreement by s34A do not incorporate any kind of a promise that a purported “relocation notice” will be a valid “relocation notice”, so that the service of an invalid notice constitutes a contractual breach of any character capable of sounding in damages.
The reasoning of the Appeal Panel is, in my opinion, plainly correct. The service of an invalid relocation notice does not constitute any kind of failure to fulfil a contractual obligation of the lease.
This is not to say that there will not be circumstances in which service of notices may, together with other facts, constitute a derogation from a grant or breach of the covenant for quiet enjoyment. Nothing on the facts of this case would suggest that could be said to be so here. I should note that the Tribunal has a jurisdiction with respect to unconscionable conduct claims and it may be that such a claim would cover the field of the circumstances in which the service of relocation notices could have any such effect. However, it is unnecessary to further consider this issue.
An issue has also arisen as to whether or not the service of the invalid notice involved a breach of an implied term, based on s34A, which was deemed to form part of the lease. This issue was not raised with the Appeal Panel or in written submissions in this Court. It arose during the course of oral submissions.
The implied term contended for by Skiwing was centrally formulated as follows:
1The lessor shall not give any notice requiring the lessee to relocate unless the notice is given in accordance with the provisions of this section.
2The lessor shall not be liable for any damage caused to the lessee by the giving of any notice which does not comply with (1) where the non-compliance was inadvertent.
This implied term is said to be based on the usual test of necessity. In my opinion, I can see no basis on which that test could be satisfied. However, this does not need to be finally determined. The jurisdiction of this Court is limited to an appeal from a decision of an Appeal Panel on a question of law. This was not a matter raised before the Appeal Panel. It has made no relevant findings of fact. The implication of terms is a mixed question of law and fact. In the absence of any relevant findings of fact this Court should not determine such a matter.
Mr Tonking relied on the finding of the Tribunal at first instance that there was “a fundamental breach of the provision of the lease constituted by s34A” and contended that his implied term was simply a reformulation of this finding at [120]. That finding was, in substance, overturned by the Appeal Panel which rejected the proposition that non-compliance with s34A operated as a breach of the provisions of the lease being the provision inserted by s34A (at 228-229).
The alternative way of formulating this proposition is that the service of invalid notices may constitute a breach of the covenant for quiet enjoyment. Although that was put at first instance it was not decided by either the Tribunal or by the Appeal Panel. Again it is not appropriate for this Court to deal with the matter in the absence of findings of fact that the degree of uncertainty attending the service of the relocation notices was such as to constitute a breach of the covenant for quiet enjoyment. I should add nothing in the material before this Court would suggest that such a finding was open.
I do not understand the Appeal Panel to have ruled out such a line of inquiry. In par [231] of its judgment, which I have set out above, the Appeal Panel stated that the service of an invalid notice would not “without more” confer a right to claim damages. It does, however, go on to say that any such right must depend on breach of some other provision than that inserted into the lease by s34A.
It is not, in my opinion, open to this Court to consider whether there was some other basis for claiming damages in an appeal limited to a question of law.
The Disturbance of Trading Claim
Between January 2001 and April 2004 the Imperial Arcade suffered from high vacancy rates which affected the flow of customers into the Arcade. This, obviously, had adverse affects on the business of lessees, including the Appellant.
It was on this basis that the Tribunal at first instance awarded damages for the disturbance to the trading of the Appellants. The Appeal Panel overturned this award.
The grounds of appeal relevant to this issue were as follows:
“2 … the Tribunal:
(a)          erred in performing its own assessment of the evidence as to whether there had been a deliberate policy on the part of the Respondent to sustain a high level of vacancies;
(b)          alternatively, erred in holding that there was no evidence of a deliberate policy.
…
(d)          erred, as a result of (a) or (b), in holding that the conduct of the Respondent did not constitute a breach of a covenant of quiet enjoyment or the covenant not to derogate from the grant;
(e)          alternatively, erred as a result of holding that the covenant for quiet enjoyment and the covenant against derogating from the grant must be read down, by reason either of the terms of the Lease or the terms of the Disclosure Statement, in holding that the conduct of the Respondent did not constitute a breach of either covenant.”
In oral submissions, Mr Tonking identified 2(a) as consequential upon 2(b). He subsequently identified the questions of law for this Court in a document which made no reference to 2(a). With respect to 2(b) the document identified the proposition as being that it was impermissible to reject a factual finding where there is any evidence to support it.
The Appeal Panel noted that the award of damages to Skiwing was based not only on the invalidity of the relocation notices but also on a finding that Stockland intentionally sustained a high vacancy rate as part of its strategy to obtain a new icon tenant for the Arcade, designed to reposition the Arcade to a youth market.
The Appeal Panel made the following findings:
“[235]    A major plank of Stockland’s argument in this appeal was its contention that there was no probative evidence to support this finding. We accept its submission, based on authorities such as Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, that if this is indeed the case, the Tribunal erred in law in making the finding.
[236]     In disputing this issue, both Mr Biscoe and Mr Tonking referred principally to evidence given to the Tribunal by Mr Doherty, who was employed by Stockland as the Centre Manager of the Arcade between April 2001 and December 2003.
[237]     Mr Doherty did not deny (see Transcript, 4 March 2004, p 78, line 30 to p 79, line 22) that between February 2001 and the middle of 2002 there was a ‘high vacancy level’, indeed ‘one of the highest’ for a shopping mall in the vicinity at that time. In terms of numbers of shops, he estimated the vacancy rate at 28%. In terms of lettable area, the percentage, he said, was lower, because a number of the vacant shops were relatively small.
[238]     Mr Doherty gave some explanations for this vacancy rate: for example, that some tenants under-estimated the effect of the downturn in trade after the Sydney Olympics and that a number of leases happened to expire at the same time without any renewal being sought by the tenant or desired by Stockland (Transcript, 3 March 2004, 117, lines 23-45; 4 March 2004, 79, lines 28-38).
[239]     Mr Doherty stated also that the sending of relocation notices to other tenants in addition to Skiwing did not in fact result in a significant number of vacancies (Transcript, 3 March 2004, 119, lines 1-12). Mr Biscoe pointed out, without dissent from Mr Tonking, that after the service of relocation notices upon six tenants, only one shop became vacant.
[240]     The issue of whether this vacancy rate was the outcome of a deliberate policy adopted by Stockland was raised with Mr Doherty in a question by Mr Donald, the Tribunal Member conducting the hearing. Specifically (see Transcript, 4 March 2004, 20, lines 21-32), Mr Donald asked whether Stockland ‘began letting on a long-term basis’ as from June 2002, because the plan for McDonalds or General Pants to become an icon tenant had then ‘lapsed’. Mr Doherty’s reply (at lines 34-41) was that Stockland ‘always’ had that intention and that it had ‘continued to look for long-term tenants even from June-July 2001’, but that it was ‘more successful in doing that from June 2002’.
[241]     In seeking to rebut this, Mr Tonking relied on the letter, dated 12 April 2002, that Mr Doherty sent to all tenants to announce that there would be no further redevelopment of the Arcade. It included this sentence: ‘We are now seeking tenants for all vacant premises in the Arcade’ (emphasis added).
[242]     Mr Doherty testified also that throughout the period in question Stockland wished to find tenants to fill the vacancies (see for example Transcript, 3 March 2004, 116, lines 33-45). He also outlined the steps that were taken: for example, preparing lists of potential tenants and engaging a real estate agency (see Transcript, 3 March 2004, 116, lines 35-46; 4 March 2004, p 79, line 49 to p 80, line 14). On the other hand, Mr Doherty conceded that during the period of vacancies Stockland underspent its advertising budget by a factor of about 33% (see Transcript, 4 March 2004, 68, lines 6-16).
[243]     None of these answers by Mr Doherty was challenged and the issue of whether there was a deliberate policy of encouraging vacancies was not put to Mr Doherty at any other part of his oral evidence. There was no suggestion in the Tribunal’s judgment that Mr Doherty was an unreliable witness, even though Skiwing made a submission to this effect.
[244]     After careful consideration, we have come to the conclusion that we must uphold Stockland’s arguments on this matter. In our opinion, there is no evidence of significance to support the finding, made by the Tribunal at [93], that Stockland’s ‘commercial course to reposition its Arcade’ involved ‘intending to sustain a high vacancy rate for a substantial period’.
[245]     We also discern no evidence to support the more specific finding, at [112], that there occurred a ‘process of issuing the notices, seeking to enforce them and sustaining a high vacancy rate as part of that’ (emphasis added). As we have just pointed out, and as indeed Mr Tonking conceded, the issue of the relocation notices to Skiwing and other tenants contributed only marginally, if at all, to the vacancy rate.
[246]     It may well be that during 2001 Stockland, in pursuit of what it saw as long-term goals that would benefit both itself and its tenants, expended energy and resources on seeking to reach agreement with an icon tenant that could otherwise have been expended on trying to fill vacancies. But a conclusion along these lines falls well short of the Tribunal’s finding that it intentionally sustained a high vacancy rate. “
The Appeal Panel characterised its own finding, presently under consideration, in different ways. It identified the submission on behalf of Stockland as a submission based on “no probative evidence” [235]. In its actual conclusion, the Appeal Panel described the finding in terms of “there is no evidence of significance” [244]. However, it also used the formulation “no evidence” [245] and “no evidentiary basis” [247]. The formulation which should be regarded as the relevant one for present purposes is that found in the statement of the actual finding in [244], i.e. “no evidence of significance”.
It is also pertinent to note that, when it turned to determine whether or not Stockland was in breach of any relevant obligation, the Appeal Panel said, with respect to the Tribunal’s decision that there was such an obligation:
“[247] … it is not sustainable on the grounds on which the Tribunal relied, because an important element of these was the finding that we have just held to have had no evidentiary basis.”
The Appeal Panel went on to state at [248] that the Tribunal error in this regard was an “error of law in making this finding”.
The Tribunal went on to say that it would extend the appeal to the merits and proceeded to do so. This is a reference to s113 of the ADT Act which provides that a party may appeal from the Tribunal to an Appeal Panel and:
“113(2)                 An appeal under this Part:
(a)          may be made on any question of law, and
(b)          with the leave of the Appeal Panel, may extend to a review of the merits of the appealable decision.”
It is an important part of the Appellant’s case with respect to its appeal on the disturbance of trading claim that the Appeal Panel was not considering a merits review in pars [235]-[246] of the Appeal Panel’s judgment as set out above.
At the time of the decision by the Appeal Panel in the present case it was the jurisprudence of the Appeal Panel that, on the proper interpretation of s113(2), an Appeal Panel had first to decide that there was some form of error of law before it could exercise its power to extend an appeal to a review of the merits of the decision. About a year later this Court overturned this jurisprudence. (See Lloyd v Veterinary Surgeons Investigating Committee [2005] NSWCA 456.)
In form, the matter presently under consideration was determined on the basis of a finding by the Appeal Panel of an error of law. This Court’s jurisdiction is also limited to a question of law. Accordingly, the issue is whether or not a question of law arises in this Court with respect to the determination by the Appeal Panel that a question of law had arisen before it.
The submissions on behalf of the Appellant approached the matter in two distinct ways. First, if it could be said that the relevant test applied by the Appeal Panel was a “no evidence” test. This was an error because there was evidence capable of supporting the Tribunal’s original finding.

Mr Tonking referred particularly to the inferences available from the primary facts namely that the Arcade had a high vacancy rate by industry standards (28 percent) over a two year period and that even during this period Stockland underspent on its advertising budget by 33 percent. This occurred in a context in which it was reviewing the marketing position of the Arcade from the start of 2001 with a clear intention to reposition the Arcade by canvassing a new tenant mix for the youth market and their issue of relocation notices to a number of tenants with this in mind.
The Appellant relied on the well-known judgment, which has frequently been applied in this Court, in which even perverse findings of fact do not give rise to a “question of law” under a statutory formulation limiting an appeal to such questions. (See Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139 at 156-157.) For the reasons I gave in Bruce v Cole (1998) 45 NSWLR 163 at 188.2-189.5 acting without probative evidence is the equivalent of acting without evidence. (Note the correction in Attorney General (NSW) v X (2000) 49 NSWLR 653 at [123]-[124].)
In the context of judicial review, there are statements in English authorities which support a test of facts not reasonably capable of supporting a finding or insufficiency of evidence. (See e.g. Lee v The Showman’s Guild of Great Britain (1952) 2 QB 329 at 345 per Lord Denning; Colleen Properties Limited v Minister of Housing & Local Government (1971) 1 WLR 433 at 438; R v Governor of Brixton Prison; Ex parte Armah [1968] 1 AC 192 at 235 per Lord Reid.) This formulation has never been adopted in Australia. (See e.g. the analysis in Australian Broadcasting Tribunal v Bond (1991) 170 CLR 321 at 355-357 per Mason CJ; see also Aronson et al Judicial Review of Administration Action (3rd ed) esp at 231-241.) In any event, in a statutory context involving an appeal limited to questions of law, whatever may turn out to be the position with respect to judicial review jurisprudence, so long as Azzopardi remains authority in this State, such an extension is not open.
The submission made on behalf of the Respondent in this case is that the Appeal Panel was correct in holding that the Tribunal erred in law with respect to the finding that Stockland had a deliberate policy of sustaining a high level of vacancies on the basis that there was no probative evidence to support the finding (Orange AB 74 at 2.4) or the evidence was not legally capable of supporting the inference (T 23/6/06 p33). If the Tribunal had applied that test it would have committed, in my opinion, an error. There was probative evidence, or evidence capable of supporting the finding, albeit not of a direct character. The matters that I have referred to above could constitute an appropriate basis for drawing an inference to the effect of the first instance findings.
Whether the nature of this error was itself such as to raise a question of law for purposes of this Court’s jurisdiction does not need to be determined. In my opinion, that was not the test the Appeal Panel applied. The test actually applied by the Appeal Panel was, in my opinion, a test of whether there was any “evidence of significance”. This is not a test consistent with Azzopardi.
The Appeal Panel, and the Respondent in its submissions, relied on the fact that the critical witness called on this matter by the Respondent was not relevantly challenged in cross-examination and it was not put to him that a deliberate policy of this character existed. In the context of judicial review an attempt to extend a no evidence ground has often intersected with the application of the procedural fairness ground. (See e.g. Minister for Immigration & Ethnic Affairs v Re Pochi (1980) 44 FLR 41 at 67-68 and Australian Broadcasting Tribunal v Bond supra at 367.) However, no question of law alleging a denial of procedural fairness was raised before the Appeal Panel or in this Court with respect to the relevant finding.
In my opinion, the Appellant has substantiated its contention that the Appeal Panel erred when it rejected the finding of the Tribunal that there was a deliberate policy of sustaining a high vacancy rate. However, that is not the end of the matter because the Appeal Panel did in fact extend the appeal to the merits.
As indicated above, subsequent authority of this Court has determined that it was not necessary for the Appeal Panel to first identify an error of law before extending an appeal to the merits. The Tribunal’s subsequent consideration of “the merits” was not in terms directed to the question of whether an appeal should be allowed on the basis of an error of fact finding. However, it is, in my opinion, incontestable that the analysis by the Appeal Panel which rejected the process of reasoning which led the Tribunal to conclude that there was a deliberate high vacancy rate policy would inevitably have led to the same result, if the Appeal Panel had considered this matter, as it would have been entitled to do, after, rather than before, it gave leave to extend the appeal to the merits.
In response to a suggestion from the Court, Mr Tonking submitted (T 23/06/06 D6.39-50) that the finding, if made, that there was no evidence to support a deliberate policy was a legal error if there was some evidence to support it and the failure to recognise that there was some evidence vitiates the ultimate finding of fact. Nevertheless, as I have said, the Appeal Panel’s reference to “no evidence of significance” indicates that it did accept there was some evidence but that that was an inadequate basis for the inference. There is no legal error here.
Mr Tonking submitted that if this matter turned on the credit of the witness the Appeal Panel should not have rejected the Tribunal’s conclusion in this respect. Nothing in the Tribunal’s reasons suggests that the matter was determined on the basis of credit and, in any event, there was no cross-examination on credit with respect to this particular matter. In this context it was, in my opinion, open to the Appeal Panel to overturn the finding of fact when it determined the matter on the merits. Accordingly, the error identified in this appeal was of no practical significance.
Breach of Covenants
Grounds of appeal 2(d) and (e) are as follows:
“2 … the Tribunal:
…
(d) erred, as a result of (a) or (b), in holding that the conduct of the Respondent did not constitute a breach of the covenant of quiet enjoyment or the covenant not to derogate from the grant;
(e) alternatively, erred as a result of holding that the covenant for quiet enjoyment and the covenant against derogating from the grant must be read down, by reason either of the terms of the Lease or the terms of the Disclosure Statement, in holding that the conduct of the Respondent did not constitute a breach of either covenant.”
Ground of appeal 2(d) turns on grounds 2(a) and (b) which I have considered above. It was as a preliminary to dealing with the case for the breach of these two covenants that the Appeal Panel determined that it should grant leave to extend the appeal to a review of the merits.
The Appeal Panel rejected the Appellant’s case and allowed the appeal on two alternative bases. In each case it did so by reason of the application of its own characterisation of the conduct of Stockland which led to the high vacancy rates. This was the finding in par [246] of its judgment, that I have quoted above, to the effect that Stockland “expended energy and resources on seeking to reach agreement with an icon tenant that could otherwise have been expended on trying to fill vacancies”.
The first basis on which the Appeal Panel allowed the appeal was its conclusion at [255] and [258], quoting from the latter, that Stockland’s conduct characterised as at [246]:
“… did not sufficiently interfere with Skiwing’s business to constitute a breach of either the covenant for quiet enjoyment or the covenant not to derogate from the grant.”
In his document outlining the questions of law, Mr Tonking said that Ground 2(d), as the express reference to grounds 2(a) and (b) makes clear, was consequential on the finding of no evidence. He accepted that this ground only arises because of that question of law.
This approach requires the Court to somehow set aside the fact that the Appeal Panel did extend the appeal to a review of the merits. It was in the course of its merits consideration that the Appeal Panel determined that the facts, as the Appeal Panel found them to be with respect to the high vacancy rate, were not such as to constitute a breach of either covenant. Even if, as I have held, the Appeal Panel was in error in its finding of no evidence that does not, in my opinion, vitiate its subsequent consideration of the merits of the appeal.
This Court is limited to an appeal on a question of law. The factual finding in [246], on the basis of which the Appeal Panel concluded there was no breach of either covenant, was a factual finding open to it. Mr Tonking urged the Court to find there was a deliberate high vacancy policy. However, he did not articulate any question of law that arose from the fact that the Appeal Panel substituted its finding in this regard for that of the Tribunal. Nor was there any suggestion that an error of law occurred when the Appeal Panel determined that that set of facts did not constitute a breach of either covenant.
In oral submissions (23/06/06 p6), Mr Tonking adopted a suggestion from the Court that the finding at [246] was vitiated by the fact that the Appeal Panel failed to appreciate that there was some evidence for a deliberate high vacancy policy. However, as I have stated, the Appeal Panel said there was “no evidence of significance”. That involved a question of weight which was for the Appeal Panel to determine.
Furthermore, even if I had been of a different opinion, and there had been a finding that the Respondent had adopted a deliberate high vacancy policy, an impact on the business does not appear to me to have an effect on the lessee’s proprietary rights, to which the covenants relate. No authority was cited to the Court which suggests that commercially adverse consequences of conduct can constitute a breach of the covenant for quiet enjoyment or constitute a derogation from the grant. However, this matter does not need to be determined.
Ground 2(e) did give rise to a question of law as to whether the reasoning in Carpet Fashion Pty Ltd v Forma Holdings Pty Limited [2003] NSWSC 460, [2004] NSWCA 150 was authority for the proposition that the covenants for quiet enjoyment and non derogation must be read down by reference to express covenants in the lease and, relevantly, by the Disclosure Statement required under the Retail Leases Act. The Appellant sought to contend under ground 2(e) that the Disclosure Statement in this case did not override the effect of either covenant.
However, this aspect of the Appeal Panel’s decision was in the alternative to its finding that, on the facts, there was no breach of either covenant; it is unnecessary for this Court to determine the issue.
In oral submissions, Mr Tonking adopted a point raised by the Court (T 2/06/06) that maintaining the validity of an invalid relocation notice could also cause such disruption as to breach the covenant of quiet enjoyment. Whether that be so or not, there is no finding of fact either by the Tribunal or the Appeal Panel, that the invalid notices in the present case had any such effect. Indeed, nor could such be sustained on the facts.
The first relocation notice was served on 23 October 2001, the second on 30 November 2001 and the third on 1 March 2002, only to be rescinded three weeks later. The period of about five months would not give rise to an interference with property rights of a lessee and, no doubt, that is why there is no finding of fact that it did.
The Appeal Panel’s conclusion that Stockland’s conduct did not “sufficiently interfere” with Skiwing to constitute a breach of either covenant was a finding of fact. (See Worrall v Commissioner for Housing for the ACT [2002] FCAFC 127 at [43].) No question of law has arisen which would justify this Court interfering with this finding.
Implied Obligations
Ground of appeal 2(g) was as follows:
“2 ... the Tribunal:
…
(g)          erred in failing to deal with the questions:
(i)           whether the Respondent’s conduct amounted to a breach of an implied obligation of good faith;
(ii)          whether the Respondent’s conduct amounted to a breach of an implied obligation to do all that was necessary to enable the Appellant to perform its obligations under the lease; and
(iii)         whether the Respondent’s conduct amounted to a breach of a term which was to be implied as a consequence of clause 5.02 of the Lease that the Respondent do nothing which would interfere with the Appellant complying with its obligation to operate the business to be conducted from the demised premises in a manner appropriate to a high class retail shopping centre.”
No submissions were made with respect to the implied obligation of good faith in ground 2(g)(i). Indeed, it was not raised before the Appeal Panel by way of Notice of Contention. There is no question of law for this Court.
Ground 2(g)(ii) is an obligation implied as a matter of law for which the authority most frequently cited is Mackay v Dick (1881) 6 App Cas 251 esp at 263.
The implied obligation contended for in ground 2(g)(iii) must either be implied on the usual test of necessity or perhaps, although this authority was not relied upon, as an application of the term implied by Stirling v Maitland (1864) 5 B & S 84 at 852; 122 ER 1043 at 1047. The implication is said to arise from cl 5.02 of the Lease, which imposes upon the Appellant an obligation to operate the business to be conducted from the demised premises in a manner appropriate to a high class retail shopping centre.
None of these matters were dealt with by the Appeal Panel. The implied term based on cl 5.02 of the Lease was rejected by the Tribunal and, although raised by way of Notice of Contention, was not dealt with by the Appeal Panel. In my opinion, the test of necessity is not satisfied. That is particularly so where, as is the case with retail leases, Parliament has intervened extensively to rewrite the bargain between a lessor and lessee in multiple and fundamental respects, including by s34, in a directly applicable sense, namely conduct resulting in a decline in traffic. In the earlier proceedings this Court upheld the decision of the Tribunal to refuse the Appellant’s application to amend to make a claim under s34. (See Trust Company of Australia Ltd (t/as Stockland Property Management) v Skiwing Pty Ltd (t/as Café Tiffany’s) supra [2006] NSWCA 185 at [71]-[77].) In any event, the Appeal Panel’s finding of fact prevents this Court concluding that such a term, if any, was breached.
With respect to the implied term of co-operation, this is a matter that had to be determined in accordance with factual findings by which this Court is bound. If the Appellant had been successful in its contention that the Respondent had adopted a deliberate policy to maintain a high vacancy rate, it may have been appropriate to have drawn the conclusion that this constituted a breach of the obligation to do what is necessary to enable the Appellant to perform its obligations under the Lease. However, this Court cannot proceed on the basis that the Appellant has the benefit of any such finding. Indeed, it only has the benefit of the much narrower finding as set out in par [246] of the Appeal Panel’s judgment which I have quoted. That conduct is not capable of constituting a breach of this implied obligation.
In each of these respects the appeal should be dismissed.
The Balcony Claim
As I have indicated above, from about 1998 to April 2002, the Appellant with the approval of the Respondent pursued an application to the Council for the extension of its premises to a balcony over the Pitt Street frontage.
The grounds of appeal in respect of this matter are:
“3 … the Tribunal:
…
(a)          erred in holding that there was no binding contract between the parties in relation to the balcony proposal;
(b)          alternatively, in so far as it found there may have been a unilateral contractual offer which was accepted by the Appellant, erred in holding that the Respondent had an absolute right to refuse consent to the balcony construction as a consequence of which no damages were suffered by any breach of contract;
(c)          further the Tribunal erred in holding that, if an estoppel arose against the Respondent, there was no causal link between the conduct and the Appellant’s loss;
(d)          further the Tribunal erred in not upholding the award of $3,000.00 paid by the Appellant in reliance on the Respondent’s promises or conduct;
(e) further the Tribunal erred in failing to deal with the claim under s.10 of the Retail Leases Act;
(f)           further the Tribunal erred in failing to deal with the contention that the conduct of the Appellant amounted to a consent under clause 7.01 of the Lease.”
On 12 January 2001 a letter was sent on behalf of the Respondent to the Appellant which stated:
“Further to our discussions, I confirm that Stockland have no objection to you pursuing Sydney City Council to obtain approval to utilize the awning outside your shop for open air catering. The restrictions we place on you pursuing this approval are:
1)           The same consultants we used for the refurbishment program are to be used…
2)           All plans are to be approved by Stockland prior to submission to Council.
3)           All costs are to be at your expense.
4)           It may be possible to arrange a Lease structure for the new floor area incorporating the costs however this should be discussed when it is established the project is viable.”
With respect to this matter the Appeal Panel concluded:
“[139] … no binding contract arose out of the Corbett letter. As we see it, there are instead two possible outcomes of the sending of that letter. One is that the letter had no impact at all on the legal relations between the parties. The other is that it communicated an offer which, if accepted, would have given rise to a contract.
[140]     We do not need to choose finally between these two alternatives. The reason is that, as explained below, Skiwing’s claim for damages for the alleged breach by Stockland of a contract arising out of the Corbett letter must in our view fail on the ground that Skiwing failed to establish that it suffered any damage on account of the alleged breach.
[141]     The first alternative: no contract and no contractual offer. The strongest consideration in support of the first alternative – that is, that the Corbett letter neither gave rise to a contract nor communicated a contractual offer – is the degree of vagueness and uncertainty in the terms of the letter. While stating that there was ‘no objection’ to Skiwing’s seeking Council approval for the balcony proposal, the letter preserved for Stockland an unqualified power of veto over any plans to be submitted. It expressly suggested that the project might not be ‘viable’, then added that even if it did prove viable there was still only a possibility that a lease structure for the new floor area could be arranged.
[142]     Furthermore, important issues were not dealt with at all. For instance, no provision was made for the eventuality, which later materialised, that Stockland might want to exercise its powers under the Lease and the RL Act to require the relocation of Skiwing’s business. The question whether Stockland did or did not promise to refrain from exercising these powers during the term of the alleged contract was not addressed. Nor indeed was it made clear whether, and if so on what conditions, any agreement arising from the letter could be terminated by Stockland.
[143]     For these reasons, there are strong grounds for concluding that the content of what Stockland promised in the Corbett letter was so insubstantial and so ill-defined that no contractual offer capable of acceptance was communicated.
[144]     The second alternative: no contract, but a contractual offer. The alternative view – that a contractual offer was communicated – is supported by the following considerations. As Mr Tonking argued, the letter should be presumed to have conveyed an intention to create legal relations because the parties were already contractually bound to each other by the Lease. The offer made by Stockland was that it would not object to Skiwing’s ‘pursuing Sydney City Council to obtain approval’ for erection of a balcony so long as the conditions set out in paragraphs (1) – (3) of the letter were satisfied. Skiwing was not bound to ‘pursue’ this approval. It could, if it wished, ignore the offer entirely. But if it accepted the offer by submitting an application to the Council in compliance with these conditions, Stockland would be bound by its promise not to raise any objection.
[145]     We do not agree, however, with Mr Tonking’s submission, supported by the reference to ‘pre-judgment’ in the Tribunal’s judgment at [59], that the terms of the agreement contemplated in the Corbett letter included a promise by Stockland to suspend judgment on whether construction of the balcony should go ahead until Council approval had been obtained and it had examined the plans on which this approval was based. As Mr Biscoe argued, implying a term of this nature, which potentially had the effect of significantly restricting Stockland’s freedom of action with respect to the Arcade as a whole, would go beyond what considerations of ‘business efficacy’ would require. At most, Stockland promised to give consideration to creating a ‘lease structure’ for the new floor area if the project proved ‘viable’.
[146]     The contract that would have been created if Skiwing had accepted the offer according to its terms would be what is sometimes called a ‘unilateral’ contract; that is, one in which ‘acceptance and performance of the offeree’s part of the bargain are one’ (Australian Contract Law Reporter, CCH Australia, para 6-180).
[147]     In saying that a contract might then have arisen, we endorse the Tribunal’s view that Skiwing’s expenditure of time and money in preparing and submitting the application would have constituted adequate consideration. Given that on this hypothesis Stockland would have approved the plans pursuant to paragraph (2) of the letter, the balcony, when constructed, would undoubtedly have been of benefit to Stockland.
[148]     Following through this alternative view of the relations between the parties, we consider that when during 2001 Mr Corbett suggested an alternative draftsman because the consultants specified in paragraph (1) of the fax were not available (see [19] above), this had the effect of varying the terms of the offer. But as at August 2001, if not later, the offer remained open for acceptance by Skiwing. No time limit for acceptance had been specified and Stockland’s conduct appeared to reflect an intention to leave it open (see [20] above).
[149]     As at August 2001, Stockland had been aware for some time that Skiwing had commenced to perform the tasks that constituted acceptance of the offer contained in the fax. But on 23 October 2001, Stockland served the first relocation notice. If a contractual offer had been made, we agree with the Tribunal that this step communicated its intention to revoke the offer. Stockland made it clear that it no longer considered itself bound by any promise to raise no objection to Skiwing’s ‘pursuing’ of the balcony proposal.
…”

The Appeal Panel referred to Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 224-228 and added:
“[154]    The Full Court’s judgment in Mobil Oil is binding on us. Applying the principles set out in it, we would hold that the Corbett letter, taken alone, would probably not provide a sufficient basis for inferring an implied promise by Stockland not to revoke its offer – if indeed it contained a contractual offer – once Skiwing had embarked on performance of the tasks constituting acceptance. But when later in 2001 Mr Corbett, knowing that Skiwing had unsuccessfully tried to instruct one of the consultants specified by Stockland, gave permission for an alternative consultant to be used, he provided encouragement to Skiwing to continue committing time and resources to completing these tasks. At this point, in our view, an implied agreement would have arisen binding Stockland not to revoke the offer.
[155]     According to this view of the situation, the offer included promises by Stockland
(a)          to raise no objection to Council’s approval of the application and
(b)          to give consideration to creating a ‘lease structure’ for the new floor area if the project proved ‘viable’.
Stockland revoked this offer by its letter of 23 October 2001, thereby breaching the implied contract that, according to this second interpretation of the relevant events, had arisen between the parties.
[156]     For reasons that we have already foreshadowed, however, this interpretation, despite being more favourable to Skiwing, is insufficient to conclude the balcony claim in its favour.”
The Appeal Panel then turned to a submission that any agreement arising out of the Corbett letter was subject to termination by Stockland. The Tribunal held:
“[163] This point is principally disposed of by our conclusion that Stockland became subject to an implied obligation not to revoke its offer. It may be that that obligation could have been terminated if (for example) Skiwing delayed unduly in completing the proposal to the Council and Stockland, relying on this delay, gave notice to Skiwing that if the proposal were not completed within a reasonable period it would consider itself no longer bound to keep the offer open. But this situation did not arise. “
The Appeal Panel then dealt with a submission on behalf of the Respondent that no damage or scarcely any damage resulted. This was based on a finding by the Tribunal that no promise was made by Stockland to proceed with the balcony, even if Council approval were granted. It was submitted to the Appeal Panel on behalf of the Respondent that no loss could be said to arise where Stockland retained what it categorised as an “absolute right” to decide not to proceed with the balcony.
The Appeal Panel held:
“[189] … if indeed Stockland had an ‘absolute right’ to refuse to consent to the erection of a balcony, its decision in or before October 2001 that it wished to exercise this right was an event to be taken into account in determining damages. We agree also that the consequence of so doing is that any breach of an implied contractual promise that it made to Skiwing – being at most a promise not to revoke the offer contained in the Corbett letter – did not cause any loss to Skiwing.”
In this regard the Appellant relied on s133B(2) of the Conveyancing Act 1919 which provides:
“133B(2) In all leases whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 containing a covenant, condition, or agreement against the making of improvements without licence or consent, such covenant, condition, or agreement shall be deemed, notwithstanding any express provision to the contrary, to be subject to the proviso that such licence or consent is not to be unreasonably withheld; but this proviso does not preclude the right to require as a condition of such licence or consent the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the lessor, and of any legal or other expenses properly incurred in connection with such licence or consent nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the lessee to reinstate the premises in the condition in which they were before the improvement was executed.”
Clause 17.01 of the Lease between the parties is of the kind to which s133B(2) may apply. It prohibits the Lessee making “improvements to the demised premises” without the Lessor’s consent.
The Appeal Panel dealt with this issue as follows:
“[192] No authority cited to us provides any guidance as to whether ‘improvements’ within s 133B(2) can extend to alterations which expand the dimensions of the premises leased. But it appears to us that such an interpretation contradicts the natural assumption that a lessor cannot be compelled to yield to a lessee the right to occupy premises having a larger area than those defined in the lease, merely because proposed ‘improvements’ would call for this to be done.
[193] In such circumstances, we do not accept Mr Tonking’s argument that s 133B(2) operated so as to restrict Stockland’s right to refuse to consent to the erection of a balcony.”
With respect to a claim that the Corbett letter I have set out above gave rise to an estoppel against Stockland, the Appeal Panel concluded:
“[196] In our judgment, even if an estoppel arose, it could not support Skiwing’s claim to retain the Tribunal’s award of $50,000 for loss of a commercial opportunity. For the reasons already given, there was no causal link between the relevant conduct of Stockland and the loss of this opportunity. “
The Tribunal had also awarded the Appellant an amount of $3,000 for the expenses incurred in pursuing the application to Council. The Appeal Panel pointed out that the grounds on which this amount was awarded were not explained in the Tribunal’s judgment. The Appeal Panel concluded in this regard:
“[200] … Skiwing’s claim for this lesser amount might well derive support from (for instance) a finding that, despite having sent the Corbett letter in January 2001, Stockland did not in fact intend, then or subsequently, to grant consent to the erection of a balcony. Skiwing could then rely on s 52 of the TP Act or, possibly, on the existence of an estoppel, in order to assert that Stockland should reimburse it for the expenses that it incurred, with no actual prospect of ultimate benefit, in reliance on the offer contained in the letter.
[201] As we understood Mr Tonking’s references to estoppel and to the implications of our assuming jurisdiction under s 52 of the TP Act, he invited us to adopt this line of reasoning in order to uphold the award of $3,000, as well as the principal award of $50,000.
[202] We consider again, however, that this matter should not be resolved without a further hearing.”
The disposition of this aspect of the matter, accordingly, turned on the decision by the Appeal Panel to remit the matter for further hearing on the s52 case. In the earlier proceedings this Court determined that the Tribunal had no jurisdiction to hear a cause of action under s52 of the Trade Practices Act. It is, therefore, necessary to determine this aspect of the case.
I have set out the letter of 12 January 2001 upon which the Appellant relies as constituting a contract. In my opinion, there is nothing in that letter, or the surrounding circumstances, which manifests an intention to enter contractual relationships. The letter commences with a statement that Stockland has “no objection” to the proposal being pursued with the Council. This is hardly the language of contractual intention. More significantly, the final paragraph of the letter refers to the entering into a new arrangement for the extended floor area which is introduced by the following words: “It may be possible to arrange a lease structure for the new floor area …”. These are words which unequivocally indicate that any formal agreement would be entered into in the future.
There are circumstances in which one party to a contractual arrangement may come to be bound by conduct of another party, undertaken with the first party’s concurrence, where both parties may benefit from the successful culmination of the project. This is not, in my opinion, a case in which any such conclusion can be drawn that constitutes a contractually binding obligation. There was not, in my opinion, any intention to enter a contractual relationship with respect to the balcony proposal.
In any event, as the Appeal Panel set out in par [140] of its reasons, that I have quoted above, it did not determine this question. This was because of its finding that Skiwing failed to establish that it suffered any damage on account of a breach of a contract, if there was any contract.
The Appeal Panel’s conclusion that the Appellant had suffered no loss was based on the proposition that the Respondent at all times retained an unqualified right to withhold its approval and had, indeed, revoked that approval. I agree that there is nothing to establish any form of contractual restraint upon Stockland.
However, s133B(2) of the Conveyancing Act superimposes a specific proviso onto cl 7.01 of the Lease between the parties, which proviso operates as a constraint on the ability of Stockland to withhold its approval. The effect of s133B(2) is to convert such a provision from a shield for the Lessor, to a sword for the Lessee.
This issue turns on the meaning of “improvements” in both cl 7.01 and s133B(2). This does raise a question of law. The words of cl 7.01 which are modified by statute is the reference to “improvements to the demised premises”. The issue before this Court is whether or not that clause, as so modified, is engaged when the major proportion of what could be described as an “improvement”, is to be effected other than on the demised premises. The Appeal Panel concluded that, in the absence of any authority directly on point, s133B(2) did not apply to alterations which extended beyond the premises the subject of the lease.
The letter that I have quoted above expressly contemplated what it described as a “lease structure for the new floor area”. To a substantial degree, however, the balcony proposal involved land that was in the ownership of the City Council. It does not appear from the materials to which the Court’s direction was directed, that it is possible to identify precisely what, if any, additional area owned by the Respondent would be the subject of an additional lease. Nevertheless, construction on the Respondent’s land would be required. If nothing else, it would be necessary to create openings in the wall to permit egress onto the balcony area. Other alterations to the premises would also be required. Accordingly, even if the whole of the balcony was not part of the presently “demised premises” it would be necessary to conduct some kind of activity on the demised premises.
Although the balcony proposal never proceeded to the development of plans, even in sketch form, which could identify even in a general way the premises upon which it was to be constructed, nevertheless, it appears clear that, to a substantial degree, indeed probably entirely, the balcony itself would protrude over the street which was Council property. Nevertheless, in order to effectively use any such balcony some form of reconstruction was required on the property of the Lessor, including within the demised premises. In the absence of any detail, it is appropriate for this Court to proceed on the basis that the balcony area itself would be on Council property.
The letter of Stockland of 4 April 2002 asserted that Stockland would “not consider the extension of the … premises to include the construction of a balcony over the Pitt Street Mall”. This was the relevant refusal of consent. It may have been possible for Stockland to argue that its proposal for relocating the Appellant’s café constituted reasonable grounds for refusing this consent. However, on 27 March 2002, the last of the relocation notices had been withdrawn.
The Respondent did not seek to rely, either before the Panel or in this Court, on any circumstances which would constitute reasonable grounds for withholding consent. Its position throughout has been to deny the existence of any constraint upon it in this respect.
It was possible for Stockland to lease airspace from the Council and provide a sublease to Skiwing. On any view there was a new “floor area” which, at least in large measure and perhaps in whole, was beyond the specific dimensions of the “demised premises” subject to a lease from Stockland to Skiwing, being the area identified in the Disclosure Statement for the then recent renewal, as an area of approximately 154 square metres.
The Appellant places primary reliance on two authorities F W Woolworth & Co Limited v Lambert [1938] 1 Ch 883 and Vesco Nominees Pty Ltd v Stefan Hair Fashions Pty Ltd [2001] QSC 169. These authorities were not drawn to the attention of the Appeal Panel.
Mr Tonking invoked a definition of “improvements” to be found in The Commonwealth v Oldfield (1976) 133 CLR 612. However, the Court was there concerned with a provision in a lease by which the lessee agreed to purchase “improvements on the land”. This was quite a different context to that before this Court.
It appears to be well settled that whether something is an “improvement” within a covenant of this character is to be considered from the viewpoint of the tenant. Balls Bros Ltd v Sinclair [1931] 2 Ch 325 at 331; F W Woolworth & Co Limited v Lambert [1937] 1 Ch 37 at 49 and (on appeal) F Woolworth & Co Ltd v Lambert [1937] Ch 37 at 49 and 55-56; Brodan Pty Ltd v Clearview Industrial Estate Pty Ltd (1986) 4 BPR 9173 at 9177; Shalson v Keepers & Governors of the Free Grammar School of John Lyon (2003) 3 WLR 1 at [35].)
Section 133B(2) is based on s19(2) of the Landlord & Tenant Act 1927 (UK). Under the UK section, it has been held that the making of an opening between demised premises and other premises does constitute an improvement. (See Lilley & Skinner v Crump (1929) 73 S.J. 366.) It is quite apparent that such would also be required, as a minimum, in order to give the Appellant’s café access to the balcony area.
The Appellant places primary reliance on the decision of F W Woolworth & Co v Lambert [1938] 1 Ch 883. In that case the lessee proposed to enlarge a shop by removing a wall and then connecting the shop with premises to be erected on adjoining land, held by the lessee from a different owner. Facilities such as staircases and lavatories would be removed to the new premises. The lessee offered to restore the premises to their original condition at the end of the term and to provide security for doing so.
The Court of Appeal held that these changes did constitute “improvements” to the demised premises within the meaning of the Act. It affirmed earlier reasoning in the first case, by a differently constituted court. The alterations were of the same general character considered in the earlier judgment of Lilly & Skinner v Crump. In F W Woolworth v Lambert, however, the scale of the changes was such that what would be left on the demised premises would not be recognisable as a shop, nor usable as such. (See [1936] 1 Ch 415 at 421.)
On appeal in the first case, Lord Wright MR said, [1937] 1 Ch at 49-50:
“I think the word ‘improvements’ is used here in a wider sense. The question, being regarded from the point of view of the tenant, is: How can he get, consistently with the other conditions of his lease, the most beneficial user of these premises as premises? One way of achieving that result may be to use these premises along with and in conjunction with some other premises, and to achieve that result some structural alterations may be, and probably always will be, necessary.”
In the second case a differently constituted Court of Appeal came to the same conclusion by majority. (See [1938] 1 Ch 983 esp at 902-903 and 909-910.) I note the observations of Mackinnon LJ at 910:
“If the tenant of demised premises has bought or leased adjacent land, and desires to get access to that land by making a doorway or opening through the wall of the demised premises, I think it can clearly assert that such an opening, even if it be pro tanto a destruction of part of the demised premises, is an alteration which is to be regarded as an ‘improvement’ under the section of the Act.”
In Vesco Nominees, the second case relied upon by the Appellant, a restaurant business was conducted within certain demised premises and on an adjoining balcony, the air space of which was leased by the owner of the demised premises and subleased to the restaurateur. The case was quite different. It involved the question of whether the access to the balcony area was a matter to be taken into account in a review of the rent of the principal premises. I do not find this case of assistance.
However, the English cases on the same provision are, in my opinion, applicable. On that basis, s133B(2) applies to the balcony proposal. Stockland could only withhold consent to such of the alteration as applied to its premises on reasonable grounds.
There is authority for the proposition that, by analogy, the principle developed in the case law for refusal of consent to a proposed assignment or sublease, for which s133B(1) of the Conveyancing Act makes provision, has the result that damages are not generally available for the wrongful withholding of consent to which s133B(2) applies. (See Brodan Pty Ltd v Clearview Industrial Estate Pty Ltd supra at p9180.) However, the Respondent placed no reliance on this principle. The relevant authorities were not considered in submissions. Nor was any consideration given to the effect, if any, of any potentially relevant statutory provision. Accordingly, the present judgment should not be regarded as a precedent on this issue.
The Respondent, as the Appellant before the Appeal Panel, raised no issue before the Appeal Panel about the unavailability of damages for a contravention of cl 7.01 as modified by s133B(2). Its position before the Appeal Panel, as in this Court, was that any breach did not cause any, or at best only minimal, damage.
In this Court, counsel for Stockland accepted that Mr Donald’s quantification did not give rise to an issue of law (T 23/6/06 p44). However, he went on to submit that this matter should be remitted to the Tribunal to deal under an extension of the appeal to it, to the merits. He submitted that the evidence used as a starting point by the Tribunal included matters not within s133B(2). However, this starting point was discounted by 50 percent by the Tribunal and it is not apparent that the matters Stockland seeks to re-agitate would not be encompassed within this necessarily broad brush discount.
I accept that the damages as assessed by the Tribunal did not give separate consideration to cl 7.01 of the lease as modified by s133B(2). However, the Respondent’s Notice of Appeal to the Appeal Panel did not raise any issue of quantification. The basis for seeking an extension of the appeal to the merits was only that any breach did not cause any, or caused only negligible, damage (Red AB 100).
An error of law has been identified. There is no proper basis for remitting this matter for further consideration by the Appeal Panel in order to agitate matters not hitherto raised before the Panel. The appropriate order is to restore the award of the Tribunal in this respect.
In view of my above analysis with respect to s133B(2) it is unnecessary to consider appeal ground 3(c) with respect to an estoppel.
As to appeal ground 3(d) with respect to the recovery of expenses, as the Appeal Panel noted, the Tribunal at first instance gave no reasons for this award. I can see no proper basis for such an award in addition to an award of damages for breach.

Ground of appeal 3(e) concerning Skiwing’s claim under s10 of the Retail Leases Act was based on a false premise. The submission to this Court was that the Tribunal at first instance erred when it made the finding that there was no representation relied upon by the Lessee in entering into the lease. (Red Appeal Book 69.) It was suggested that this finding was based on the absence of a reference to the balcony proposal in the Disclosure Statement.
I can see no link between the two propositions and the reasoning of the Tribunal at first instance. Had this matter been dealt with by the Appeal Panel then, I agree with the Appellant’s submission that, the Appeal Panel would have had to reject Skiwing’s submission. These are matters which could only have been raised before the Appeal Panel on an extension of the appeal to it to encompass the merits in this respect. That was not done. There is no question of law for this Court. As no proper basis has been suggested for reconsideration by the Appeal Panel of this matter, this ground should be rejected.
Appeal ground 3(f), although not abandoned, was not the subject of any submissions. It is unnecessary to deal with it.
The Appellant has only been partially successful. Its major claim has been dismissed, however, it has succeeded on a matter of substance. In my opinion, the Respondent should pay one half of the Appellant’s costs of the Appeal.
The orders I propose are:
1Set aside Order 2 of the Appeal Panel made on 11 March 2005 and substitute the following:
“Order 1 of the Tribunal is set aside and Order 2 of the Tribunal is varied by substituting $50,000 for ‘$53,000’.”
2The Respondent to pay half of the Appellant’s costs of the appeal.
HODGSON JA: I agree with the orders proposed by Spigelman CJ, and with his reasons in relation to the relocation notices claim and the disturbance of trading claim. As regards the balcony claim, my reasons differ a little from his.
In order that the balcony proposal proceed, there needed to be (1) development consent granted by the Sydney City Council, and (2) no operative covenant in Skiwing’s lease precluding the necessary alternations being made to Stockland’s building.
In order that development consent be obtained, a development application had to be made to the Council; and Stockland’s consent to that application was required: Environment Planning & Assessment Regulation 2000 cl.49. Stockland withdrew its approval to the proposal before the relevant development application was lodged, and so prevented satisfaction of the first requirement for the proposal to proceed.
As shown by Spigelman CJ, s.133B(2) of the Conveyancing Act 1919 meant that Stockland could rely on the relevant covenant in the lease to Skiwing to prevent the necessary alterations to the building only if Stockland had reasonable grounds for withholding consent; so that, if the first requirement was satisfied, then Skiwing had at least a valuable commercial opportunity for the loss of which it could obtain damages.
In my opinion, Stockland’s letter of 12 January 2001 did amount to a contractual offer, to the effect that Stockland would consent as owner to a development application to the Council prepared in accordance with the terms of the letter. Stockland later agreed to a variation of the terms, to the effect that a different consultant could be used; and the steps taken and expenditure incurred by Skiwing towards the lodging of the development application were sufficient to amount to an acceptance of Stockland’s offer.
If this analysis is incorrect, then I would agree with Spigelman CJ that, because Stockland did not rely on any circumstances that would constitute reasonable grounds for withholding consent, the appropriate conclusion is that consent was unreasonably withheld within s.133B(2).
However, as Spigelman CJ also pointed out, it has been established that the provision in s.133B(1) of the Conveyancing Act, to the effect that a covenant in a lease against assignment without consent is to be deemed subject to a proviso that consent is not to be unreasonably withheld, does not impose an obligation on the lessor breach of which could sound in damages; but rather has the effect that, where consent is unreasonably withheld, the covenant is ineffective against assignment: see Harvey v. Walker (1945) 46 SR(NSW) 180. Brodan Pty. Limited v. Clearview Industrial Estate (1986) 4 BPR 9173 supports a similar approach to s.133B(2).
I agree with Spigelman CJ that consideration should not now be given to these principles, which were not relied on and as to which there were no submissions. I would add that, if this point had been taken at an appropriate time, Skiwing’s conduct of the proceedings, including the relief sought, could have been different.
Spigelman CJ’s approach raises the question whether, absent the contract I have found or an estoppel, Skiwing could have satisfied the first requirement I identified at the commencement of the judgment: that is, whether Skiwing could have relied on the absence of an effective covenant preventing the alterations to the leased property to compel Stockland’s consent to the necessary development application. Again, this was an issue not raised by Stockland, and should not operate to defeat Skiwing’s claim.
For those reasons, even if my analysis is incorrect, I would still support Spigelman CJ’s orders for the reasons he gave.
BRYSON JA: I agree with Spigelman CJ.

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LAST UPDATED: 11/10/2006