Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd & Ors
[1999] NSWSC 186
•12/03/1999
NEW SOUTH WALES SUPREME COURT
CITATION: Taylor Farms (Aust) Pty Ltd v A Calkos Pty Ltd & Ors [1999] NSWSC 186
CURRENT JURISDICTION: Admin Law Division
FILE NUMBER(S): 30048/98
HEARING DATE{S): 11/02/99, 12/02/99
JUDGMENT DATE: 12/03/1999
PARTIES:
Taylor Farms (Australia) Pty Limited (Pl)
A Calkos Pty Limited (1 Def)
Union International (NSW) Pty Limited (2 Def)
Commercial Tribunal of NSW (3 Def)
JUDGMENT OF: Kirby J
LOWER COURT JURISDICTION: Commercial Tribunal of NSW
LOWER COURT FILE NUMBER(S): 1089/97
LOWER COURT JUDICIAL OFFICER: Deputy Chairman Hoeben
COUNSEL:
Ms E A Collins (Pl)
Dr R J Desiatnik (Defs)
SOLICITORS:
S Barton Adams & Co (Pl)
Astley Thompson & Valtas (1 Def)
Blake Dawson Waldron (2 Def)
Stephen H Montgomery (3 Def)
CATCHWORDS:
Jurisdiction of Commercial Tribunal re damages Fair Trading Act 1987, and defence of promissory estoppel
Application of Retail Leases Act 1994 to assignment of lease.
ACTS CITED:
Commercial Tribunal Act 1983
Fair Trading Act 1987
Retail Leases Act 1994
Law Reform (Law and Equity) 1972
DECISION:
See para 87
JUDGMENT:
THE SUPREME COURT
OF NEW SOUTH WALES
ADMINISTRATIVE LAW DIVISIONKIRBY J
Friday 12 March 1999
30048/98 - TAYLOR FARMS (AUSTRALIA) PTY LIMITED v A CALKOS PTY LIMITED & ORS
JUDGMENT
HIS HONOUR: This is an appeal against a decision of Deputy Chairman Hoeben of the Commercial Tribunal, given on 9 April 1998. The Tribunal determined that it had no jurisdiction to entertain certain matters raised by the defendant (Taylor Farms (Australia) Pty Limited (“Taylor Farms”) in a document headed “Amended Cross Claim and Further Defence to Claim”. The pleading was struck out.
A Calkos Pty Limited (“Calkos”) is the owner of a shopping centre near Penrith, known as the Emerton Shopping Centre. On 20 July 1994, Calkos executed a lease of shop 37 within that centre. The lessee was Angliss (NSW) Pty Limited (“Angliss”). The lease was for a period of five years, commencing on 1 May 1994. It was scheduled to end, therefore, on 30 April 1999.
Within a short time Angliss decided to assign its interest in the lease. A substitute tenant, Taylor Farms, was found. The consent of the owner was sought and given. A Deed of Consent and Assignment of Lease was drawn up. The recitals to the deed were as follows:
“A.The Lessor is the registered proprietor of the land referred to in Item 4 of the schedule to this Deed.
B.The Lessor has granted the Lease to the Assignor.
C.The Assignor wishes to assign all its right, title and interest in the Lease and the Premises to the Assignee.
D.The Lessor has consented to the assignment of the Lease to the Assignee in accordance with this Deed.”
The Deed defined a number of terms. Amongst the definitions provided, were the following:
“1.1 ‘Lease’ means the lease of the Premises granted by the Lessor to the Assignor and being of the date referred to in item 5 of the schedule to this Deed;
1.2‘Premises’ means the premises referred to in item 6 to the schedule to this Deed;
1.3‘Assignment Date’ means the date referred to in item 7 of the schedule to this Deed;”
The Schedule was, relevantly, in these terms:
“Item 1Lessor: A Calkos Pty Limited …
Item 2Assignor: Angliss (NSW) Pty Limited ..
Item 3Assignee: Taylor Farms (Australia)
Pty Limited
Item 5Date of Lease: July 20, 1994
Item 6Premises: Shop 37, Emerton Shopping
Centre, Emerton
Item 7Assignment Date: November 11, 1994”
The Deed effected the assignment with these words:
“3.1 The Assignor assigns to the Assignee on and from the Assignment Date all its right, title and interest as lessee under the Lease and in the Premises (together with the benefits and burdens of the covenants under the Lease whether or not such covenants touch and concern the land) including the rights so far as may be necessary to demand performance or to sue for and enforce the terms and conditions of the Lease in the name of the lessee for the residue of the term of the Lease.”
The relationship between the owner, Calkos, and the new tenant, Taylor Farms, did not run smoothly. One gathers from the Amended Cross Claim that Taylor Farms asserted that, before the Deed was signed, and it entered into possession, there were certain misrepresentations by the owner, or its agents. It was said, for instance, that the floor upon which shop 37 was located would remain a food court, that certain improvements would be made, and facilities provided.
At some point Taylor Farms ceased to pay rent. An action was commenced in the Penrith Local Court. Again, drawing on the Cross Claim, one gathers that it was settled on 14 June 1996. The Cross Claim asserted that, in consideration of Taylor Farms agreeing to pay certain monies allegedly owing as rent, the owner would devote part of those monies towards the refurbishment and improvement of the centre.
One further gathers from the Amended Cross Claim and Defence that on 19 July 1996 the owner sent Taylor Farms a letter repeating some of the assurances which had previously been given.
In June 1997, Calkos issued a further summons in the Penrith Local Court. Taylor Farms was named as first defendant. The company which had assigned the lease was named as second defendant. That company had since changed its name from Angliss (NSW) Pty Limited to Union International (NSW) Pty Limited (“Union International”). The summons claimed rent from September 1997, together with outgoings said to be payable under the lease.
The matter was, thereafter, by consent, transferred to the Commercial Tribunal. It is not clear whether, at the time of its transfer, the action included a cross claim by Taylor Farms against the owner. At some point a cross claim was commenced. The document ultimately struck out by Deputy Chairman Hoeben was described as the “Amended Cross Claim and Further Defence to Claim”. The document opened with the following paragraph:
“The cross claimant/first respondent seeks the following orders:
1. Pursuant to Section 72(2)(a) of the Retail Leases Act 1994 that the cross defendant pay to the cross claimant the sum of $236,000 for damages made up as follows:
a.Loss of Profits $180,000
b.Loss of goodwill $15,000
c.Expenditure wasted $21,000
d.Mental stress and physical inconvenience $20,000”
The monetary limit of the Commercial Tribunal in respect to the Retail Leases Act 1994 is $250,000 (s 73). Section 72(2)(a) simply gives the Tribunal power to order a party to pay a specified sum of money. The pleading does not identify the basis upon which the money is said to be payable by Calkos. The Tribunal assumed, reasonably, that the basis for the claim was the paragraph which followed in the Amended Cross Claim and Further Defence (para 2). That paragraph relied upon ss 42 and 68 of the Fair Trading Act 1987.
The remaining paragraphs of the Amended Cross Claim and Further Defence to Claim identified the following claims:
Para 3: Section 34 of the Retail Leases Act 1994
Para 4: Is uncertain, but was assumed by the Tribunal to raise “a type of promissory estoppel”.
Paragraph 5 of the Statement of Cross Claim and Defence (which was the final paragraph) was also struck out. Taylor Farms does not contest the validity of that order.
Jurisdiction Under the Fair Trading Act 1987
The Commercial Tribunal was established by the Commercial Tribunal Act 1984. Section 18(1) defines its jurisdiction. It is in these terms:
“18(1) The Tribunal has such jurisdiction as is, and such functions as are, conferred on it by or under an Act.”
A number of Acts have conferred jurisdiction upon the Tribunal. They are set out in a note, forming part of the Act. They include the Building Services Corporation Act 1989, Credit Act 1984, Motor Dealers Act 1974, and many besides. They also include the Fair Trading Act 1987, and the Retail Leases Act 1994.
The Fair Trading Act 1987 was designed to overcome a specific inadequacy in state consumer protection law. The Trade Practices Act 1974 provided a measure of consumer protection. However, it did not cover the field. Constitutional limitations confined its operation to corporations. The Fair Trading Act 1987 was designed as its companion, applying to individuals. Under Pt 5 of the Fair Trading Act, the unfair practices proscribed by Pt V of the Trade Practices Act 1974 were replicated. Part 5 includes s 42 (the equivalent of s 52 of the Trade Practices Act). It is in these terms:
“42.Misleading or deceptive conduct -
1. A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Part 6 of the Fair Trading Act deals with Enforcement and remedies. Offences are created (s 62(1)) where the Act is contravened (although not for contravention of s 42). Such offences may be dealt with by either the Local Court or the Supreme Court in its summary jurisdiction (s 63(2)). Injunctions may be granted by the Supreme Court, in circumstances where a breach of the Act is apprehended (s 65). Section 68 provides a right of action to a person who suffers damage or loss. It is in these terms:
“68(1) A person who suffers loss or damage by conduct of another person that is in contravention of a provision of Part 3, 4, 5 (section 43 excepted), 5A or 5B may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.”
Part 7 of the Fair Trading Act deals with Codes of practice. Provision is made for the preparation of Codes for fair dealing between suppliers and consumers, and for undertakings to be filed by persons found to be in breach. The Commercial Tribunal is specifically given jurisdiction in relation to such Codes of practice, and undertakings.
Section 68 does not specify the court which is to have jurisdiction to determine claims for damages arising out of an alleged breach of an obligation imposed by the Act. Such claims, therefore, were taken to be within the general jurisdiction of the Supreme Court (s 23 Supreme Court Act 1970). In 1992 the District Court Act 1973 was amended to insert s 135, which was in these terms:
“Jurisdiction in proceedings under the Fair Trading Act 1987
135. The Court has the same jurisdiction as the Supreme Court, and may exercise all the powers and authority of the Supreme Court, in any proceedings in which relief is sought under the Fair Trading Act 1987 and where the amount of the claim concerned does not exceed the amount for the time being specified in section 44(1)(a).”
In 1996, the jurisdiction of the Local Court was enlarged by inserting the following subsection, accompanied by a note:
“12(9) In this section, a reference to an action extends to an action referred to in section 68 of the Fair Trading Act 1987.
Note: The effect of subsection (9) is to confer jurisdiction on a Local Court in respect of actions for damages referred to in section 68 of the Fair Trading Act 1987. That jurisdiction is similar to the jurisdiction conferred on a Local Court by section 86 of the Trade Practices Act 1974 of the Commonwealth in respect of actions for damages referred to in section 82 of that Act.”
No such amendment has been made to the Commercial Tribunal Act 1984. Neither the Commercial Tribunal Act 1984, nor the Fair Trading Act 1987, therefore, confer jurisdiction upon the Tribunal in respect of a claim for damages under s 68 of the Fair Trading Act 1987. So much was common ground in the present application.
The issue is whether that position has been disturbed by the passage of the Retail Leases Act 1994, that being a later statute. Taylor Farms claims that it has. Under the Retail Leases Act 1994, the Commercial Tribunal is given the following jurisdiction:
“s 72(1) The Tribunal has jurisdiction to hear and determine a retail tenancy claim lodged with the Tribunal under this Part.”
The powers of the court are defined in these terms:
“72(2) In proceedings on such a claim, the Tribunal is empowered to make such one or more of the following orders as it considers appropriate:
(a)an order that a party to the proceedings pay money to a person specified in the order,
(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person,
(c)an order that a party to the proceedings do any specified work or perform any specified service.”
The term “retail tenancy claim” is defined by s 70 as follows:
“70 … retail tenancy claim means any of the following claims in connection with a liability or obligation with which a retail tenancy dispute is concerned:
(a)a claim for the payment of a specified sum of money,
(b)a claim for relief from payment of a specified sum of money,
(c)a claim for the doing of specified work or the provision of specified services.”
The term “retail tenancy dispute” is also defined:
“63(1) … retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease, being liabilities or obligations which arose under the lease or which arose in connection with the use or occupation of the retail shop to which the lease relates.”
It was argued that the legislation is remedial in nature. It was designed to provide a forum where retail landlords and tenants may sort out their differences. The legislature has manifested a clear preference for the Commercial Tribunal as a place where such disputes should be resolved. That preference is revealed by s 75 which includes the following:
“75(1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that:
(a) the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal, and
(b)the interests of justice do not require that the matter be dealt with by the court.
(2) In determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a court is to have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court.
(3) Proceedings are taken to involve a retail tenancy dispute if any issue in dispute in the proceedings involves a liability or obligation with which a retail tenancy dispute is concerned.”
That section reflects a change of heart on the part of the Government during the passage of the Bill. The Minister, when introducing the Bill on 20 April 1994, referred to a requirement that retail lease disputes should initially be dealt with by mediation. He then said this:
“If the mediation is unsuccessful, the parties will seek resolution through the court system. Both the BOMA and the RTA have suggested to me that the Commercial Tribunal is the appropriate forum for arbitration. I believe, however, that the court system is a more accessible option, particularly to those in regional areas of the State.”
When the Bill next came before the House, however, the Minister made the following statement:
“I have examined a number of options for dispute resolution that have been put to me recently. I am now of the view that access to both courts and a tribunal would be preferable to access to the courts alone. The amendment I have moved will allow just that. Should mediation fail, one or both parties will now be able to approach either the Commercial Tribunal or to a court to seek an order. Preference will be given to having the tribunal, rather than a court, determine an order.
The applicant before the tribunal may claim payment, relief from payment, or that specified work be carried out. The tribunal will decide whether to make an order. However, an applicant before a court may seek a host of other directions, such as terminating a lease agreement, varying a lease agreement, assigning a lease, et cetera. Once the tribunal makes an order its decision will be final. The tribunal will not be a rent-determining authority; it will be a body to resolve disputes concerning the liabilities or obligations of the parties to a lease.”
The tenant, Taylor Farms, contends that a “retail tenancy claim” has been deliberately framed in broad terms. Relevantly, it is a claim for payment of a specified sum of money, or a claim for relief from payment. The issue is whether a claim under s 68 for a breach of s 42 of the Fair Trading Act 1987 is a “retail tenancy claim”.
The Cross Claim of Taylor Farms seeks to establish liability on the part of the landlord under the Fair Trading Act, which might then be set off against any liability for unpaid rent. The contention is, therefore, that the Commercial Tribunal has jurisdiction to determine whatever issues may separate retail landlord and tenant.
Counsel for the landlord, Calkos, resisted such a construction upon a number of bases. First, given the history of the Fair Trading Act 1987, had Parliament intended that the Commercial Tribunal should have jurisdiction to deal with a claim for damages under that Act, it would have said so, as it has in the case of the District Court, and the Local Court.
To accede to the plaintiff’s submission would be to alter the careful balance in the distribution of business relating to claims for damages under s 68 “by a side wind” (cf Brennan J Parkdate Custom Built Furniture Pty Limited v Puxu Proprietary Limited (1981-82) 149 CLR 191 at 224).
Secondly, the Second Reading Speech, and the provisions of s 75 itself, reflect the limitations upon the jurisdiction of the Commercial Tribunal. Not all issues arising between the retail landlord and tenant may be dealt with by the Commercial Tribunal. It may be more convenient, and just, that a dispute remain with the court, rather than be transferred to the Commercial Tribunal by reason of such limitations.
Thirdly, jurisdiction in the Commercial Tribunal is founded upon there being “a retail tenancy claim”. A retail tenancy claim, in turn, is dependent upon their being “a retail tenancy dispute”. The “retail tenancy dispute” has, as its touchstone, a liability or obligation which arises in one or other of two ways, namely:
either under the lease, or
in connection with the use of the retail shop to which the lease relates.
Taylor Farms do not suggest that the obligation upon Calkos arose under the lease. Do such obligations arise “in connection with the use or occupation of the retail shop to which the lease relates”? The words “in connection with” are of wide import. (Burswood Management Limited & Ors v Attorney General (Cth) & Anor (1990) 23 FCR 144) Barwick CJ, in Brown & Ors v Rezitis & Ors ((1970-71) 127 CLR 157), a case concerned with s 88F of the Industrial Arbitration Act 1940, said this: (at 165)
"Whilst it can be said that the expression 'in connection with' is of wide import, it does emphasise the need for a close connection between the order made and the contract or arrangement varied or avoided..."
However, I do not believe that the words in the definition are so broad as to encompass any liability, whatever its source. The retail landlord and tenant come into contact by reason of that relationship. That contact may give rise to liability in a variety of ways. The tenant may assert, for instance, that he or she has been defamed by remarks made by the landlord. However, in a claim for rent by the landlord, the Commercial Tribunal, in my view, would not be vested with jurisdiction to determine (without a jury) whether rent should be offset by an award of damages for defamation. It was suggested, by counsel for Calkos, that the causal connection required to satisfy the requirements of a “retail tenancy dispute” can only be met if the obligations arise either under the lease, or by virtue of the Retail Leases Act 1994. The definition, for instance, is apt to pick up obligations upon the landlord arising under s 34, in respect of which the retail landlord may be obliged to pay compensation, were he in breach.
Such a construction may be too narrow. Negligence by the landlord impacting upon the tenant, where damage was foreseeable, may be enough (cf Brian Oxley and Frances Peroni v Imperial Charter Pty Limited (Commercial Tribunal, 26.8.96, Deputy Chairman R B Davidson).
Whatever the limits, I believe that determining a claim for damages under the Fair Trading Act 1987 (ss 42 and 68) is beyond that limit. I believe, with respect, Deputy Chairman Hoeben expressed the point well when she said this:
“Statutory substantive jurisdiction cannot be found by mixing and matching any number of pieces of legislation, whether they give limited jurisdiction to the Tribunal (as it does by s 78 of the FTA) with another jurisdiction conferred by legislation, the latter forming the basis of the claim. If the Tribunal was to have jurisdiction under ss 42 (and therefore 68) Parliament would either have enacted the relevant amendment under either the Tribunal Act or the FTA, as it did with the District Court in 1992 with the introduction of s 135. Parliament has made no such amendment.”
I believe, therefore, that the Tribunal was correct to strike out paragraph 2.
The Retail Leases Act 1994
Paragraph 3 of the Amended Cross Claim and Defence sought compensation against the owner, Calkos, pursuant to s 34 of the Retail Leases Act 1994. That provision implies a number of obligations upon the lessor in any retail shop lease. Where the lessor is in breach of these obligations, the lessee may, subject to certain formalities, claim compensation. The obligations include:
“34Lessee to be compensated for disturbance
(1)A retail shop lease is taken to provide that if the lessor:
(a)inhibits access of the lessee to the shop in any
substantial manner, or
(b)takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or
(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or
(f) in the case of a shop within a retail shopping centre, fails to adequately clean, maintain or repair the retail shopping centre (including common areas),”
and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.”
Before these obligations are implied there must be a “retail shop lease”. The Act includes the following:
“6. Leases to which Act does not apply
This Act does not apply to any of the following leases of retail shops:
(c)leases entered into before the commencement of this section,”
The commencement date was 1 August 1994. The lease between Calkos and Angliss was entered into before the Act, namely on 20 July 1994. The Deed of Consent and Assignment between Calkos, Angliss and Taylor Farms, however, was entered after, namely on 11 November 1994. Is the date of the lease, for the purposes of s 6(c), the date of the original grant to Angliss, or the date of the assignment? Only if it were the latter, could the obligations under s 34 be implied.
The Act includes a definition of “lessee” and “lessor” which, in each case, include assignees. The definitions are as follows:
“lessee means the person who has the right to occupy a retail shop under a retail shop lease, and includes a sublessee and a lessee’s or sublessee’s heirs, executors, administrators and assigns.
lessor means the person who grants or proposes to grant the right to occupy a retail shop under a retail shop lease, and includes a sublessor and a lessor’s or sublessor’s heirs, executors, administrators and assigns.”
The word “lease” is given the following meaning for the purposes of the Act:
“retail shop lease or lease means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:
(a)whether or not the right is a right of exclusive occupation, and
(b)whether the agreement is express or implied, and
(c)whether the agreement is oral or in writing, or partly oral and partly in writing.”
The terminology chosen in this definition is that of the common law (“lease”, “grant”), although the subparagraphs which elaborate upon the definition alter and extend the common law. Paragraph (a), for instance, would include a “licence”.
Taylor Farms, also drew attention to s 8(1). It was suggested that the section emphasised the need for privity between the lessor and the person in occupation. This section provides as follows:
“8. When the lease is entered into
(1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first).”
At common law, the assignment of a lease did not create a new lease (Mason v Harris (1921) 1 KB 653 at 655). The issue is whether the Retail Leases Act 1994 alters the common law so that the assignment, rather than the lease, provides the relevant date for the purposes of s 6. That issue has been considered in a number of jurisdictions in the context of legislation comparable to the Retail Leases Act of New South Wales.
In Dileum Pty Ltd v J K Corporation Pty Ltd (1988) 1 WAR 244, the Full Court of Western Australia construed the Commercial Tenancy (Retail Shops) Agreement Act 1985. A lease was granted which included an option. The lessee exercised the option. Thereafter there was a change to the Act. The lessee subsequently assigned the lease. The new lessee sought to exercise certain rights which were only available if the assignment could be regarded as a new lease for the purposes of the legislation. The court held (Wallace J dissenting) that it could not. Kennedy J said this: (at 256)
“Counsel for the appellant argued that the assignment itself constitutes a lease for the purposes of the Act. The assignment in question amounted to a transfer or conveyance by the original tenant of the balance of a pre-existing term. The assignment itself did not create any new term. Nor did it contain any grant by the lessors to the appellant of any entitlement to occupy the premises. The assignment contained no covenant by the lessors in favour of the appellant to observe the terms of the lease. The lessors’ grant and the covenants made by them are only to be found in the lease. So far as the lessors were concerned, the assignment simply records their consent to the assignment, albeit the price of that consent was a number of covenants by the appellant directly in favour of the lessors, together with certain undertakings and an acknowledgment with respect to the existing liquor store licence. The estate in leasehold which was assigned to the appellant was not the lessors’ to grant to the appellant. That had already been granted to Gordon Matheson Pty Ltd.”
Shortly thereafter, a similar issue came before the Queensland Supreme Court, Re Malsons Pty Ltd (1991) 2 Qd R 61 (Thomas J). In that case the lease was executed in 1987. The lessors were given the right to determine the lease, should they require the property for redevelopment, and to do so without payment of compensation. In October 1988 the lease was assigned. In the same year the Retail Shop Leases Act 1984 was amended. The amendments required a lessor, in certain circumstances, to compensate a lessee where the premises were required for demolition or redevelopment. In 1990 the owner gave the lessee notice that the premises were required for redevelopment. The lessee then sought a Declaration that it was entitled to compensation under the 1988 amendment. Thomas J said this: (at 65)
“It is true that when the present lessee applied for assignment of the lease, and when the lessor decided to consent to assignment of it to the new lessee, the assignee was acquiring the bundle of rights contained in the old lease, which included cl 15.13. but the law at that time included the 1988 Act which engrafted a particular right in favour of the tenant in leases coming into existence from then on. It did not matter what the parties wrote into their leases in that respect, or what they might adopt from existing documents, the legislative provision would prevail. Upon the lessor’s consent to this assignment a new set of rights and obligations was created as between this lessor and this lessee.”
The Queensland legislation was subsequently altered. The Retail Shop Lease Act 1994, S 15, expressly excluded assignments from the operation of the Act. One author made the following comment in relation to that change: (‘Assignment of Leases entered into prior to the Retail Leases Act 1994 (NSW)’ by Catherine Hallgath, Law Society Journal, vol 34 no 3 April 1996.)
“It is likely that the express exclusion of assignments in the Queensland legislation was in order to correct the decision in Malsons. That case may have been correct on the facts, but had the potential to produce commercially unrealistic results when applied.”
In the Victorian County Court in Hamatan Pty Ltd v Narracan Nominees Pty Ltd & Anor (1993) V ConvR 54-471, Jones J said this:
“I have carefully considered the views expressed by Thomas J in Malson’s case and they have force. They are, of course, made in the context of the Queensland legislation although that is similar to the Victorian legislation. However, after giving the matter careful consideration and, in particular, the views of his Honour, I have reached a different conclusion as to the position under the Act in the circumstances of an assignment. I do not consider that it is the intention of the Act that the assignment in this case constitute the entering into a new lease by the Plaintiff and First Defendant at the time of the assignment. Rather, it seems to me, what occurs is the substitution of one tenant for another under an existing lease. The only thing that changes is the tenant. Otherwise the position is the same, the new tenant having the same rights and obligations as the old. The position would be different, in my view, if the Deed of Assignment changed the terms of the lease of the premises to apply to the First Defendant by, for example, changing the basis of the rent that was to be paid by the First Defendant under the lease.”
Here, the Deed of Assignment did not alter in any way the terms of the lease.
Finally, in Bradbun Pty Ltd v Bobo Nominees Pty Ltd (1994) V ConvR 54-501, in the Victorian Supreme Court, O’Bryan J considered the Retail Tenancy Act, 1986, and expressed the following views:
“Section 3(4) in the Victorian Act is couched in different language: ‘A retail premises lease is entered into when under the lease the tenant enters into possession of the premises etc.’ (underlining for emphasis).
If the words underlined refer to the original lease why should one not conclude that a retail premises lease was entered into when Bradbun entered into possession of the premises and became a tenant with the approval of Bobo.
The effect o the assignment of the original lease to Bradbun was to create rights and obligations between the parties from the possession date in the nature of a landlord and tenant relationship. On 6 February 1992, and not before, the parties’ rights and obligations as landlord and tenant commenced.
I am of the opinion that the reasoning of Thomas J in Malsons Pty Ltd may be applied to the facts and circumstances in the present case, with the result that a retail premises lease was entered into when Bradbun entered into possession of the demised premises.”
The Commercial Tribunal, having considered these authorities, determined that the assignment did not create a new lease under the Retail Leases Act 1994. The lease, therefore, predated the Act, and s 34 had no application. Paragraph 3 of the Cross Claim and Defence was, therefore, struck out.
I agree with that Determination. I prefer, with respect, the reasoning in Dileum Pty Ltd v J K Corporation Pty Ltd, and Hamatan Pty Ltd v Narracan Nominees Pty Ltd, to that in Re Malsons Pty Ltd and Bradbun Pty Ltd v Bobo Nominees Pty Ltd. Ultimately, it is, of course, a matter of statutory interpretation. But it is not without interest that the parties, at the time they executed the Deed of Consent and Assignment, plainly believed that they were transmitting to Taylor Farms the rights of Angliss acquired under the lease of 20 July 1994, and that for the balance of the term.
I favour the view reached by the Commercial Tribunal for a number of reasons. First, the Retail Leases Act 1994 affected significant changes. A lessor would, henceforth, be obliged to provide a copy of the proposed lease to the lessee when conducting negotiations. To do otherwise was an offence (s 9). Proceedings could be taken to recover a fine before a Local Court (s 84). The lessee was to be given what was termed a Disclosure Statement. It was to take the form of Schedule 2. That schedule runs for some five pages. A detailed summary of the provisions of the lease had to be provided. Provision was made for the inclusion of any representation by the lessor, or lessee, or side agreements between them. If a disclosure statement was not provided, or was incomplete, or contained false and misleading information, the lessee had the right to terminate the lease (s 11(2)). The parties may agree upon compensation in the event of there being pre-lease misrepresentations (s 10). Provision was made for a minimum term of five years (s 16). If a lease was entered in contravention of that section, the validity of the lease was not effected. The term, however, was simply extended so that it amounted to five years (s 16(2)).
The Act, therefore, introduced a very different regime. There were significant penalties, including criminal penalties, for failure to observe that regime. The Act recognised that it would be unfair to make those changes retrospective (s 6(c)). You would have expected, therefore, that if the common law position in respect of assignments were to be changed, s 6(c) would have made that clear (Potter v Minahan (1908) 7 CLR 277, per O’conner J at 304) . You would have expected s 6(c) to provide that the Act did not apply to leases entered into before the commencement of the section, unless that lease were assigned after the commencement date. The construction for which Taylor Farms (the lessee) contends, would, in my judgment, be attended by significant commercial inconvenience (cf Butt 69 ALJ 763; Halgarth, Law Society Journal supra). The parties here, for instance, plainly gave no thought to the requirements of the new Act at the time they executed the Deed of Consent and Assignment. The lease of 20 July 1994 was simply assigned, being the balance of the term of five years (cf s 16),
Secondly, the construction suggested by Taylor Farms would operate as an inhibition upon assignment, and that cannot have been the legislative intention. Professor Butt made the following comment relevant in this context (69 ALJ 763 at 764):
“The assignment will free the assignee from some of the obligations imposed on the original tenant, and will give the assignee rights that the original tenant did not enjoy. The landlord will find that the lease is now something quite different to the lease that existed between the landlord and the original tenant. Would this be a ground for the landlord to refuse consent to an assignment? English case law suggests that it would be: see Bickel v Duke of Westminster [1977] QB 517 (landlord entitled to refuse consent where assignee would have a statutory right to purchase the free hold at a reduced value); West Layton Ltd v Ford [1979] 3 WLR 14 (landlord entitled to refuse consent where assignee would be entitled to the benefit of the Rent Acts).”
Thirdly, the definition of “retail lease” speaks of a “grant” of the right of occupation. The grant was to Angliss. The Deed of 11 November 1994 simply assigned the lease to Taylor Farms. The original lessee (Angliss, which became Union International) remained liable under the retail lease of 20 July 1994, although it was provided with an indemnity by the assignee (cl 4(2)).
I do not believe s 8(1) alters the construction which I favour. It uses the word “lease”. The lease was the grant by Calkos to Angliss. Section 8(1) simply fixes the date of the lease, should entry into possession or the payment of rent not correspond with the date on the document.
Promissory Estoppel
Paragraph 4 of the Amended Cross Claim and Further Defence to Claim was in these terms:
“4. Pursuant to the Agreements between the Cross Claimant and Cross Defendant on 14 June 1996 the Cross Defendant is estopped from proceedings:
PARTICULARS
a. Agreement by Cross Defendant to withdraw proceedings number 718/96 at Penrith Local Court in consideration for part payment of purported arrears of rent and the Cross Defendant covenanting to complete the matters raised in the Second Representations.
b. Continuing agreement between June 1996 and August 1996 by Cross Defendant to complete matters referred to in Second Representations and Third Representations in consideration for payment of reduced rental in the sum of $2,372.00 per calendar month (instead of lease amount of $2,791.66).”
The pleading is certainly unclear. It refers to the “Second Representations” and “Third Representations”. The Second Representations were said to have been made on 14 June 1996. They are described in the particulars which accompany para 2(b). One gathers that Calkos sued Taylor Farms in the Penrith Local Court claiming rent. It appears that the action was settled. Presumably, the terms were not reduced to writing. The settlement, one gathers, imposed obligations upon each party. Picking one’s way through the pleadings, it appears that the essential terms of the agreement, according to Taylor Farms, were as follows:
First, Calkos would withdraw the Summons.
Secondly, Taylor Farms would pay Calkos $13,000.00.
Thirdly, Calkos would refurbish the Centre, cleaning it and removing graffiti. Further, it would promote the Centre, taking steps to introduce a number of major tenants. It would devote $5,500.00 of the monies paid by Taylor Farms towards these ends.
Fourthly, that, during the period June 1996 to August 1996, the monthly rental of Taylor Farms would be reduced from $2,791.66 to $2,372.00 (presumably whilst the promises were being carried out).
That is a charitable construction of what the pleading appears to be saying. It does not state (as it should) that, relying upon these promises, Taylor Farms paid the sum of $13,000.00, and yet the promises were not kept.
Deputy Chairman Hoeben dealt with this aspect in these words:
“As paragraph 4 of the cross-claim is also headed ‘Further Defence to Claim’ the Tribunal allows the defence contained in that paragraph to be pleaded. However, the defence would seem to plead a type of promissory estoppel. If this is the case, and from the pleadings it is not clear, the Tribunal has no jurisdiction to hear an equitable estoppel: Phillips v Acsai, supra; Jarre Pty Limited v Vmbaca, Commercial Tribunal of New South Wales, unreported 14 November 1997. To the extent that this is the case, the Tribunal finds that no cause of action arises in respect of the paragraph and therefore it is accordingly struck out.”
On first reading, there appears to be a contradiction between the opening sentence of the Deputy Chairman’s judgment, and the order she ultimately made. She allowed the defence, and then struck it out. The explanation lies in the heading of the pleading. It carries the title “Amended Cross Claim and Further Defence to Claim”. The document does not (as it should) identify which paragraphs are pleaded by way of cross claim, and which by way of defence. The Deputy Chairman was simply saying that para 4 was not a cross claim. She proposed to view it as a defence. She then characterised that defence as in the nature of promissory estoppel. She took the view that the Tribunal had no jurisdiction to deal with a defence of promissory estoppel, and therefore, struck out that paragraph.
Taylor Farms makes two complaints about the Deputy Chairman’s order:
First, it was inappropriate to characterise para 4 as simply a plea of promissory estoppel. The tenant asserted an agreement. The agreement affected the rent payable. The Tribunal had jurisdiction to deal with that issue.
Secondly, assuming that para 4 did raise (or raised in part) a defence of promissory estoppel, the Tribunal had jurisdiction to deal with such a defence, in circumstances where it was not required to grant equitable relief.
Dealing with the first issue, one can sympathise with the Deputy Chairman, confronted by a pleading as deficient as para 4. The Tribunal should not have to guess what a party is saying. Nonetheless, the Tribunal is a forum in which the formalities often associated with a court have been relaxed (cf s 19(9)(a) and (b)).
How should para 4 be characterised? There are a number of possibilities. First, the agreement between Taylor Farms and Calkos on 14 June 1996 may, depending upon whether certain formalities have been observed (s 23C Conveyancing Act 1919), amount to a variation of the lease. If it were a variation, then any dispute concerning liabilities or obligations arising under that agreement would arise “under the lease” and therefore amount to a “retail tenancy dispute” within s 63(1). It would give rise to a “retail tenancy claim” (s 70). The Tribunal would have jurisdiction to hear and determine such a claim (s 72(1)). Even though the agreement, as described in the Particulars accompanying the Second Representations, purports to include a variation in the rent payable, one assumes that there was no valid variation of the lease, presumably because the formalities were not observed.
Secondly, if one were to assume that there was a contract arising out of the court settlement (along the lines set out in para 62 above), could the tenant, Taylor Farms, rely upon that contract in a claim by the landlord, Calkos, before the Commercial Tribunal? The jurisdiction of the Tribunal ultimately depends upon there being “a retail tenancy dispute” within s 63(1). There is such a dispute where, relevantly, the liability or obligation arises “in connection with the use of the retail shop to which the lease relates” (s 63(1)). Given the subject matter of the contract, and the circumstances in which it was made, do the obligations flowing from the contract arise “in connection with the use or occupation of the retail shop”? It would obviously be convenient if the Commercial Tribunal were to have such jurisdiction. It could then determine the real issues which divide the retail landlord and tenant.
Given the nature of the legislation, and the Second Reading speech, the term, a “retail tenancy dispute”, should not be given a narrow construction. Earlier, I stated my view that a claim for damages under s 68 of the Fair Trading Act 1987 did not come within the statutory definition of that term (supra p 13, para 38). The legislative history relating to the Fair Trading Act 1987 was important in reaching that view.
However, where a contract between retail landlord and tenant (such as a contract made in settlement of litigation relating to the occupancy of the premises) creates liabilities and obligations “in connection with the use or occupation of the retail shop to which the lease relates” (s 63(1)), then a dispute concerning such liabilities and obligations is a “retail tenancy dispute”, and the Commercial Tribunal has jurisdiction.
The third possibility involves promissory estoppel. The Deputy Chairman characterised para 4 as pleading the defence of promissory estoppel. A promissory estoppel would arise if Calkos made a clear and unequivocal promise, or assurance, to Taylor Farms, which was intended to affect the legal relations between them, and to be acted upon, which Taylor Farms then did act upon (by paying the disputed arrears, and paying the reduced rent between June and August 1996), such that Calkos should not be allowed to insist upon the terms of the lease. Rather, Calkos must accept its legal relations with Taylor Farms, subject to the qualifications which it has introduced (see Halsbury 4th ed, vol 16, p 931, para 1071). The issue is whether the Commercial Tribunal has jurisdiction to entertain such a defence?
Neither the Commercial Tribunal Act 1984, nor the Retail Leases Act 1994 specifically confer equitable jurisdiction upon the Tribunal. However, the Law Reform (Law and Equity) Act 1972 does confer limited equitable jurisdiction upon inferior courts. The Commercial Tribunal is, for the purposes of that Act, an inferior court (State Rail Authority of New South Wales v Consumer Claims Tribunal (1988) 14 NSWLR 473, esp Hope JA at 477). The Act makes the following provisions:
“6. Every inferior court shall in every proceeding before it give such and the like effect to every ground of defence, equitable or legal, in as full and ample a manner as might and ought to be done in the like case by the Supreme Court under the Supreme Court Act, 1970.
7. This Act does not enlarge the jurisdiction of any court as regards the nature or extent of the relief available in that court, but any court may, for the purpose of giving effect to sections 5 and 6, postpone the grant of any relief, or grant relief subject to such terms and conditions as the nature of the case requires.”
In a careful judgment, concerning the limitations upon the Commercial Tribunal’s jurisdiction, Deputy Chairman Rossiter in Phillips v Acsai (unreported, Commercial Tribunal, 3 May 1996) said this: (at p 9)
“Unless there is complementary legislation conferring some form of equitable jurisdiction upon the inferior court, as there is in the case of the District Court of New South Wales and the Magistrates’ Courts in Victoria, no inferior court may entertain a ‘defence’ which involves the award of an equitable remedy. For instance, in Smedley v State Building Society, Court of Appeal, Gleeson CJ, Kirby P and Mahoney JA, 17 October 1990 unreported, the Court of Appeal was of the view that a plea raising breach of the duty owed by a mortgagee to a mortgagor was not an equitable ‘defence’ within the terms of s 6 Law Reform (Law and Equity) Act 1972 and might, therefore, be outside the jurisdiction of the District Court. It is the view of Meagher, Gummow and Lehane that the word ‘defence’ in s 6 Law Reform (Law and Equity Act) 1972 is a reference to, for instance, an equity such as unclean hands or laches Equity Doctrines and Remedies 3rd edition (1992) p 62. The term ‘defence’ would also embrace, presumably, a plea of equitable set-off. This appears implied in the reasoning of Jeffrey J in West Street Properties Pty Ltd v Jamison [1974] 2 NSWLR 435 at 441.”
See also Henriksen v Bilpin Inn Pty Limited (unreported, Commercial Tribunal, 16 August 1996) at p 10.
Taylor Farms did not suggest that the Commercial Tribunal had jurisdiction where it would be obliged to grant an equitable remedy (injunction, specific performance and declaration). However, the issue was whether promissory estoppel is a defence which necessarily involved an equitable remedy. Taylor Farms contended that it did not. Accordingly, there was, in its submission, no inhibition upon the Tribunal entertaining such a defence.
What, then, is the nature of promissory estoppel? Counsel for Calkos submitted that the doctrine of promissory estoppel is an equitable defence inextricably linked with the equitable remedies. Since the Tribunal had no power to grant such remedies, it had no jurisdiction to entertain the defence.
The foundation for the modern doctrine of promissory estoppel is, of course, Central London Property Trusts v Hightrees House Limited (1947) 1 KB 130. During the war, the tenant could not afford to pay rent. The landlord agreed that, for the duration of the war, it would accept a reduced rent. The landlord later sued for the full amount payable under the lease. Lord Denning determined that, in respect of the period prior to the end of the war, the promise made by the owner was binding, and that it should be held to that promise. He commented: (at 134)
“The courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it.”
Promissory estoppel, as it became known, was used as a shield to defeat this aspect of the landlord’s claim. No particular remedy was called for. In Waltons Stores (Interstate) Ltd v Maher (1987-88) 164 CLR 387, Mason CJ and Wilson J said this: (at 400)
“There has been for many years a reluctance to allow promissory estoppel to become the vehicle for the positive enforcement of a representation by a party that he would do something in the future. Promissory estoppel, it has been said, is a defensive equity: Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448; Combe v Combe [1951] 2 KB 215 at 219-220.”
Brennan J (as he then was), in the same matter, made the following remarks about the nature of the remedy, where there was promissory estoppel: (at 419)
“The element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity, and the remedy required to satisfy an equity varies according to the circumstances of the case. As Robert Goff J said in Amalgamated Property Co v Texas Bank [1982] QB 84 at 103: ‘Of all doctrines, equitable estoppel is surely one of the most flexible.’ Sometimes it is necessary to decree that a party’s expectation be specifically fulfilled by the party bound by the equity; sometimes it is necessary to grant an injunction to restrain the exercise of legal rights either absolutely or on condition; sometimes it is necessary to give an equitable lien on property for the expenditure which a party has made on it: see Snell’s Principles of Equity, 28th ed (1982) p 562. However, in moulding its decree, the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct.”
Mason CJ provided the following commentary upon that case, and the remedy appropriate in promissory estoppel, in Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 411:
“So, in Waltons Stores, a majority of this Court concluded that equitable estoppel entitled a party only to that relief which was necessary to prevent unconscionable conduct and to do justice between the parties. Mason CJ and Wilson J referred ((1988) 164 CLR 404) to the statement of Scarman LJ in Crabb v Arun District Council [1976] Ch 179 at 198, that the court should determine what was ‘the minimum equity to do justice to the plaintiff’. We went on to state ((1988) 164 CLR at 405): ‘Holding the representor to his representation is merely one way of doing justice between the parties.’”
It is plain, therefore, that in many, if not most, situations, promissory estoppel may involve remedies which the Commercial Tribunal has no power to grant. However, it need not do so. There are many examples in the cases where promissory estoppel has been used as a shield to defeat or moderate the plaintiff’s claim, and no equitable remedy has been necessary (Central London Property Trusts v Hightrees House Limited; Commonwealth v Verwayen; Tasita Pty Limited v Sovereign State of Papua New Guinea (1994) 34 NSWLR 691).
Where a party does not seek a remedy, and merely seeks to use estoppel as a shield, does the Commercial Tribunal have jurisdiction? The question admits no easy answer. One can envisage situations (and the facts in this matter may be one illustration) where there is a dispute between landlord and tenant concerning some aspect of their arrangements, which is resolved informally by the renegotiation of a rent (as in Hightrees), where the landlord represents that he will not insist upon his legal rights under the lease, and gives certain assurances, which the tenant relies upon to his detriment, and thereafter the landlord brings an action claiming rent in accordance with the lease. In such circumstances, the tenant may seek no more than the recognition of the fact that the level of rent for which he is liable is as promised, rather than as set out in the lease.
However, I have some difficulty with the plaintiff’s argument. Promissory estoppel is a flexible defence. However, the court has the ultimate responsibility of fashioning a remedy which will do justice to the parties. To perform that function, the court should have available the range of remedies from which it can then choose. It appears to me wrong in principle that a party, in an effort to give jurisdiction to a court with circumscribed powers, should nominate one possible outcome, which the court is then obliged to accept or reject. On balance, therefore, I believe that the Tribunal has no power to entertain a defence based upon promissory estoppel.
I believe, nonetheless, that in the course of the hearing, para 4 being unclear, Counsel for Taylor Farms should have been invited to identify the precise issue which the defendant sought to raise, and to re-plead, in proper form, that issue. There are time limits which apply to certain defences, and striking out the pleading may effectively prevent a party from re-pleading an issue which it has, inexpertly, sought to raise. There were, it seems to me, within the particulars accompanying para 4, issues which were capable (even without resort to promissory estoppel) of amounting to a “tenancy dispute”, in respect of which the Tribunal would have had jurisdiction.
In the absence of clarification, or a concession by Taylor Farms, that it sought to raise promissory estoppel, and no more, I do not believe that para 4 should have been struck out.
I therefore make the following orders:
1. I allow the appeal.
2. I vary order 1 made by the Commercial Tribunal, so as to exclude para 4, and vacate orders 2 and 3.
3. I remit the matter to the Commercial Tribunal to redetermine the issues arising under para 4. Taylor Farms should have the opportunity of re-pleading para 4 so that the Tribunal can then determine whether it has jurisdiction to deal with the issue.
4. I reserve the question of costs. Taylor Farms has ultimately succeeded upon one aspect of the claim (although not an aspect which it identified, in terms, in the Statement under Part 51A Rule 5). I am inclined to think, subject to further argument, that Taylor Farms should have one-third of its costs. However, I give leave to either party to relist the matter within 14 days to argue the question of costs. If, within that period, neither party does so, my order will be as above.
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LAST UPDATED: 12/03/1999