Stremo Pty Ltd v Opal Collections Pty Ltd
[2010] QCAT 707
•5 November 2010
| CITATION: | Stremo Pty Ltd v Opal Collections Pty Ltd [2010] QCAT 707 | |
| PARTIES: | Stremo Pty Ltd | |
| v | ||
| Opal Collections Pty Ltd | ||
| APPLICATION NUMBER: | RSL046-10 |
| MATTER TYPE: | Retail shop leases matters |
| HEARING DATE: | On the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe, Member |
| DELIVERED ON: | 5 November 2010 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | The proceeding is dismissed. |
| CATCHWORDS: | RENT REVIEW – where lease has expired – whether rent review clause is valid – whether rent review clause can still be exercised – whether lessor has waived right to rent review – whether lessor estopped from exercising rent review |
APPEARANCES and REPRESENTATION (if any):
This matter was heard on the papers in accordance with section 32 of the Queensland Civil and Administrative Tribunal Act 2009.
REASONS FOR DECISION
On 8 September 2005, the parties entered into a five year lease of premises. The tenant, Opal Collections Pty Ltd (“Opal”) vacated the premises at the expiration of the term.
The lease provided for a rent review to market in the fourth year of the term. During 2003 and 2004, Stremo Pty Ltd (“Stremo”), by its lawyer, wrote to Opal advising of Stremo’s progress in actioning the rent review. By letter of 26 September 2005, after the lease had expired, Stremo’s lawyers advised Opal that Stremo had calculated the market rent and that it was claiming an additional $56,933.69 rent.
Correspondence between the parties in late 2005 shows that Opal disputed the review to market. There was discussion about the appointment of a specialist valuer but no agreement was reached.
Opal now says that Stremo has no right to exercise the rent review provision because:
a) The rent review provision does not comply with section 27 of the Retail Shop Leases Act 1994 (“RSL Act”) because the lease does not state the timing of the reviews.
b) Section 27 of the RSL Act requires the review to occur during the term of the lease.
c) The rights enlivened by section 28 of the RSL Act occur only if the parties cannot agree on the current market rental in one month after the review date.
d) Stremo’s delay in making a claim for rent review involves prejudice to Opal because its sub-tenant has been wound up, preventing it from recouping any additional rent.
e) Stremo has waived its right to a review to market.
Does the rent review clause comply with section 27 of the RSL Act?
Section 27(1) of the RSL Act says:
“If, under a retail shop lease, the rent payable under the lease or any renewal or extension of the lease is to be reviewed during the term of the lease or under an option to renew or extend the lease, the lease must state the timing of the reviews and the basis on which each review is to be made.”
Clause 1.2 of the lease says: “That the rental hereinbefore reserved and payable shall be increased annually in accordance with item one of the Appendix.”
Relevantly, the Appendix states: “The yearly rental for the fourth year of the original and option terms thereof shall be such sum as it is mutually agreed upon as the then current market rent for the demised premises…”
Unusually, the lease does not refer to an “anniversary date” or a “review date”. It is clear from the terms of sections 27A and 28 of the RSL Act that section 27 does contemplate a specific date, or a date that is ascertainable:
a) Section 27A provides for an early determination of a review to market rent in situations where the lease provides for an option on the lessee’s part to renew or extend the lease at the current market rent of the leased shop. It stipulates specific time frames in which the parties must do certain acts.
b) Section 28 applies if the parties cannot agree on the current market rent within 1 month after the review date. The phrase “review date” is not defined but there is no need to do so if the parties have complied with section 27. Without a review date (as opposed to a review year) the terms of section 28 cannot operate.
I find that the rent review clause does not comply with section 27 of the RSL Act.
Does section 27 of the RSL Act require the review to occur during the term of the lease?
Opal says that the review must occur within the term of the lease because of the words “during the term of the lease” in section 27.
Stremo points to a number of cases in which a rent review, or the enforcement of a legal right, occurred after the lease had been terminated.[1] Opal says that the tribunal can have regard to none of these authorities because they do not contemplate the operation of the RSL Act.
[1]Amherst v James Walker Goldsmith & Silversmith Ltd [1983] Ch 305; Torminster Properties Ltd v Green [1983] 1 WLR 676; Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 3] [2009] WASC 52; Commonwealth of Australia v Verwayen (1990) 170 CLR 394.
The cases to which Stremo refer set out the position at common law. I do not think that section 27 of the RSL Act was intended to alter this position and two cases decided in Queensland support this view.
In Neray Holdings Pty Ltd v Spina[2], a case involving a rent review upon the exercise of an option in a commercial lease, Justice M Wilson noted:
a) There is a rebuttable presumption that time is not of the essence in the exercise of a right given by provision for rent review during a subsisting term.
b) Upon the exercise of an option to renew, a new contract comes into existence. The existence of the new lease did not affect the parties’ rights and obligations for a rent review under the mechanism of the old lease.
c) The commercial implications of the timing of the exercise of a market review may be a relevant consideration in ascertaining the contractual intentions of the parties although there may be other countervailing considerations.
[2] [2009] QSC 40.
In Ballymaloe Pty Ltd v Retail Shop Leases Tribunal & Anor[3], the lease expired in June 2002, the tenant exercised an option to renew but the valuation required by the review mechanism did not take place until December 2002. It was accepted by all involved that this was an acceptable process. It could not have been so if Opal’s arguments are valid.
[3] [2003] QSC 369.
I find that section 27 of the RSL Act does not require the review to occur during the term of the lease.
Do the rights enlivened by section 28 of the RSL Act occur only if the parties cannot agree on the current market rental in one month after the review date?
Section 28(1) says that section applies if:
a)rent under a retail shop lease is to be reviewed on the basis of the current market rent of the leased shop; and
b)the lessor and lessee can not agree on the current market rent within 1 month after the review date.
Opal urges the tribunal to interpret this section so that a party loses any right to a market review if, in the event of a disagreement, a party does not make a claim for rent review within 1 month of the rent review date. It says that, if the review date is 11 September 2003, the right to seek a rental review expired on 19 October 2003, one month later.
The better view of this provision is that the parties have one month from the date of the review to sort matters out for themselves. If they cannot agree, and the lease itself does not provide for a dispute resolution mechanism, the valuation regime provided by sections 28 to 35 will apply.
The parties could not sort out their dispute, so Stremo has asked the Chief Executive to appoint a specialist valuer. That the dispute did not arise until after the expiry of the one month period is not, in itself, material.
Has Stremo has waived its right to a review to market?
Opal says that Stremo the gross delay and the prejudice in not being able to recover the increased rent from its sub-tenant amounts to a waiver or disentitlement to a rent review.
This argument is not articulated well. I do not take it that Opal is suggesting that Stremo has positively acted in a way that signifies that it is not going to rely on the rent review clause but that the silence and inaction between 2005 and 2010 amounts to a waiver of the right to a rent review. Of itself, non-enforcement of a contractual right does not amount to a waiver. The correspondence between the parties shows that Stremo did intend to avail itself of the right to a rent review. In the circumstances, I do not consider that mere silence, or delay, constitutes a waiver of this right.
Is Opal prejudiced by the delay in Stremo seeking to enforce the rent review?
Perhaps the better argument for Opal is that, by its conduct, Stremo is estopped from seeking a rent review. A party will be prevented from insisting on its contractual rights if, having regard to the dealings between the parties, it would be inequitable to allow it to do so. As to the concept of inequity, Opal points to the fact that it could not recover the increased rent from its sublessor, which is now in liquidation.
The sublease was executed in 2000. It had an expiry date of 31 August 2005. The rent review clause did not mirror the rent review provisions in the head lease. Therefore, even if the rent review had been acted upon in a timely way, and the sublessor still existed, Opal would not have been able to recover the full amount of the rent increase. Opal does not point to any other way in which it would be inequitable to allow Stremo to rely on its right to a rent review. I therefore find that Stremo is not estopped from relying on the rent review provision.
Conclusion
Section 36(c) of the RSL Act provides that a provision of a retail shop lease is void to the extent that it requires the determination of the current market rent of the leased shop to be made other than in accordance with this Act. The rent review clause does not comply with section 27 of the RSL Act. I therefore find that the rent review clause in the lease is void. Accordingly, Stremo cannot rely on that clause to require a rent review and the proceeding should be dismissed.
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