Trimat Holdings Pty Ltd v Investment Club Pty Ltd
[2019] WADC 81
•21 JUNE 2019
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: TRIMAT HOLDINGS PTY LTD -v- INVESTMENT CLUB PTY LTD [2019] WADC 81
CORAM: GOETZE DCJ
HEARD: 5 JUNE 2019
DELIVERED : 21 JUNE 2019
FILE NO/S: CIV 2167 of 2018
BETWEEN: TRIMAT HOLDINGS PTY LTD
Plaintiff
AND
INVESTMENT CLUB PTY LTD
Defendant
Catchwords:
Preliminary issue with respect to a retail shop lease subject to the Commercial Tenancy (Retail Shops) Agreements Act 1985 - Requirement for an operating expenses statement to be issued by the landlord prior to making recovery of those expenses from a tenant
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)
Limitation Act 2005 (WA)
Result:
Preliminary issue decided in favour of the landlord
Representation:
Counsel:
| Plaintiff | : | Mr D H Solomon |
| Defendant | : | Mr A Aristei |
Solicitors:
| Plaintiff | : | Solomon Brothers |
| Defendant | : | Irwin Legal |
Case(s) referred to in decision(s):
Cotic v Cuscuna Nominees Pty Ltd [2000] WASCA 92
Maff v Master Key Properties Pty Ltd [No 3] [2001] WADC 88
Reds (WA) Pty Ltd v Edwards & others [2012] WASAT 85
GOETZE DCJ:
In or around August 2010, Investment Club Pty Ltd, as the registered proprietor of real property commonly known as Unit 11, O'Connor Homemakers Centre, 378 South Street, O'Connor, leased that property comprising a retail shop to Trimat Holdings Pty Ltd, for a term of 10 years from 1 November 2010.
The parties have agreed that the true construction of the lease agreement, which Trimat argues is subject to the provisions of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (the Act), raises a preliminary question as follows:
If the Commercial Tenancy (Retail Shops) Agreements Act 1985 (the Act) does apply to the Lease (as defined in par 3 of the statement of claim), can a landlord comply with the requirements of section 12 of the Act by providing estimates and operating expense statements, which have not been provided to the tenant within the prescribed periods, after those prescribed periods have expired?
There is some dispute on the pleadings between the parties as to whether or not the Act applies to the subject lease, but for the purpose of the determination of the preliminary question, it is agreed that the Act is assumed to apply.
The lease
It is agreed that the lease includes express terms which, on their proper construction, are to the effect that:
1.all outgoings, costs and expenses properly and reasonably assessed or assessable, charged or chargeable or payable or otherwise incurred in respect of the building in which the leased premises are situated, and in the control, management and maintenance thereof, would accrue on a day-to-day basis; and
2.the tenant must pay to the landlord 100% of the outgoings in respect of the leased property, calculated from time-to-time, for any financial year or part of it falling within the term or any proportionate part thereof.
Principles of statutory construction
Mr D H Solomon, counsel for the tenant, provided written submissions as to the relevant principles of statutory construction with which 'no real issue is taken' by counsel for the landlord, Mr A Aristei. I respectfully adopt the submissions provided by Mr Solomon as follows:
2.The principles of statutory construction are well established. The task of statutory construction begins and ends with consideration of the text of the written law, which is to be interpreted by reference to the language of the statute considered as a whole. Although a construction that promotes the purpose or object underlying a statute is to be preferred to one that would not promote that purpose or object, this does not detract from the fundamental importance of the language used by the legislature.
3.A judge construing a statutory provision is obliged to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have, and must strive to give meaning to every word of the provisions. The Interpretation Act 1984 does not permit the court to construe a statutory provision based on what 'will best achieve' the object of the Act.
4.The purpose of a statutory provision is to be determined objectively, and may be based upon an express statement in the statute, by inference from its text and structure and, where appropriate, by reference to extrinsic materials. As stated in (Lacey v Attorney General for the State of Queensland [2011] HCA 10; 242 CLR 573 (at [44]):
'The purpose of a statute is not something which exists outside the statute. It resides in its text and structure, albeit it may be identified by reference to common law and statutory rules of constructions'.
5.The purpose of the legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions - or by the Court exceeding the constitutional limitations of its powers by masking an attempt to impute to the legislature its own constructed idea of a desirable policy (Australian Unity Property Limited v City of Busselton Square [2018] WASCA 38 [85]).
6.Although the court is permitted to have regard to the Minister's second reading speech and any explanatory memorandum for an Act to identify the purpose or object of the provision, extrinsic materials cannot be used to displace the clear meaning of the text.
…
10.Further, in light of the obvious purpose of s.12 of the Act apparent from its text, being to ensure that tenants receive the prescribed information timeously, it is clear that s.12 should be construed on the basis that it is remedial legislation. Accordingly, if, contrary to the above, it is held that more than one construction is available or there is ambiguity, s.12 should be construed broadly so as to effectuate the beneficial purpose it is intended to serve, namely to ensure that tenants receive information timeously (that is, within the prescribed 3 month period) by rendering operating expenses not recoverable if the requirements of s.12 are not complied with within the prescribed 3 months.
(footnotes omitted)
Mr Aristei also observed that the provisions of the statute should be construed in the manner by which they can operate consistently with one another.
Both parties agree that the Act was established for the purpose of protecting tenants and to improve the position of small business retail tenants: Cotic v Cuscuna Nominees Pty Ltd [2000] WASCA 92 [13] and Maff v Master Key Properties Pty Ltd [No 3] [2001] WADC 88 [12]. Accordingly, the Act should be construed broadly so as to give effect to this purpose including, in this case, the requirement that tenants receive information relating to outgoings, for which they are responsible, within the timeframe specified by s 12(1a)(a).
Section 12 of the Act
Section 12(1)(a), s 12(1)(d), s 12(1a) and s 12(1d) and s 12(3) of the Act provide for payment by retail shop tenants of a landlord's outgoings as follows:
12.Landlord's operating expenses etc., effect of provisions in lease for payment by tenant of
(1)If provision is made in a retail shop lease for payment by the tenant, in addition to rent, of all or any of the operating expenses of the landlord -
(a)the amount payable by the tenant under the retail shop lease is limited to the items of operating expenses that the retail shop lease specifies are to be paid wholly or in part by the tenant and does not include an amount in respect of which the retail shop lease does not specify both -
(i)how that amount is to be determined and, when applicable, apportioned to the tenant; and
(ii)how and when that amount is to be paid by the tenant;
… and
(d)the retail shop lease shall be taken to provide that —
(i)the tenant is not required to make any payment of, and the landlord is not entitled to recover, any such operating expenses in respect of a year or part of a year until at least one month after the landlord has given to the tenant annual estimates of expenditure under each item of operating expenses in respect of the year; and
(ii)the landlord is required to give to the tenant a written statement in accordance with subsection (1a) (an operating expenses statement) that details all expenditure by the landlord in each accounting period of the landlord during the term of the lease on account of operating expenses to which the tenant is required to contribute.
(1a)An operating expenses statement -
(a)is to be given to the tenant within 3 months after the end of the accounting period to which it relates; and
(b)if the relevant retail shop is in a retail shopping centre, must include a statement of the current total lettable area of the retail shopping centre and details of any material change in that total lettable area during the period to which the statement relates; and
(c)is to be prepared in accordance with relevant principles and disclosure requirements of the applicable accounting standards made by the Australian Accounting Standards Board, as in force from time to time; and
(d)may be a composite statement (that is, it may relate to more than one tenant) if each tenant to which it relates is able to ascertain from the statement the information required by subsection (1)(d)(ii) that is relevant to that tenant; and
(e)is to be accompanied by a report on the statement prepared by a registered company auditor within the meaning of the Corporations Act 2001 of the Commonwealth which includes a statement by the auditor as to whether or not the operating expenses statement correctly states expenditure by the landlord during the accounting period concerned in respect of operating expenses to which the tenant is required to contribute, and as to whether or not the total amount of estimated operating expenses for that period (as shown in the estimate of operating expenses given to the tenant) exceeded the total actual expenditure by the landlord in respect of those operating expenses during that period.
…
(1d)If a landlord does not comply with the requirement referred to in subsection (1)(d)(ii), the tenant is not obliged to pay, and the landlord is not entitled to recover, operating expenses from the date of that noncompliance until the landlord complies with that requirement.
…
(3)operating expenses, in relation to a landlord, means expenses of the landlord in operating, repairing or maintaining -
(a)a building of which a retail shop the subject of a retail shop lease to which the landlord is a party forms the whole or a part; or
(b)if that retail shop is in a retail shopping centre, the building or buildings of which a retail shop the subject of a retail shop lease to which the landlord is a party forms the whole or a part and the common area,
and includes, if a strata titles levy is imposed on the landlord, that part of the levy which relates to expenses of the landlord in operating, repairing or maintaining the building or buildings of which the retail shop forms part or that building or those buildings and the common area, as the case requires;
…
relevant proportion, in relation to a retail shop that is part of a group of premises, means the proportion that the lettable area of the retail shop bears to the total lettable area of the group of premises at the commencement of the accounting year;
…
Application of s 12 of the Act to the lease
In the present matter, the lease does provide for the payment by the tenant of certain operating expenses of the landlord. This necessarily brings into play s 12(1) of the Act, such that the amount of operating expenses payable by the tenant is limited to those items which the retail shop lease specifies are to be paid wholly or in part by the tenant. By s 12(1)(a), the landlord must specify how the expenses have been determined and how and when they are to be paid by the tenant.
The retail shop lease is then taken by s 12(1)(d) to provide that first, the landlord may seek to recover from the tenant annual estimates of expenditure and secondly, the landlord is required to give the tenant a written statement detailing all expenditure in each accounting period to which the tenant is required to contribute. The written statement is defined to be an 'operating expenses statement' which, by s 12(1a)(a), is to be given to the tenant within three months after the end of the accounting period to which it relates.
Further, there are other requirements as to the content of an operating expenses statement set out within s 12(1a), including the need to comply with certain accounting standards and, in some circumstances, the provision of an auditor's certificate.
The preliminary question in this case arises because the landlord did not provide operating expense statements within three months after the end of accounting periods in accordance with s 12(1a). The question is whether the landlord can now issue operating expense statements after the three month periods have expired and recover past expenditure from the tenant?
The tenant's submissions
Mr Solomon submitted that the requirement to give a written operating expenses statement, referred to in s 12(1)(d)(ii), necessarily includes the giving of such a statement within three months as stipulated by s 12(1a)(a).
Mr Solomon argued that non-compliance with the three month period stipulated by s 12(1a)(a) is fatal to the landlord's claim for recovery because s 12(1a) stipulates various requirements of a valid operating expenses statement, and the first of those requirements is that such a statement is to be given to the tenant within three months after the end of the relevant accounting period: s 12(1a)(a). If the statement is not given within that limited time, it cannot be a valid statement.
Mr Solomon's construction of s 12 is based on what he said is a literal meaning of the words used in the Act. He said it is the only available construction to give meaning to every word of the applicable provisions of that Act as set out above.
The landlord's submissions
Mr Aristei relied on Reds (WA) Pty Ltd v Edwards & others [2012] WASAT 85 in which Member Dr B De Villiers ruled that:
52…
a)… The applicant is, firstly, not required to make any payment towards operating expenses until such time an estimate is provided (s 12(1)(d)(i) of the CTRSA Act). Secondly, the applicant is entitled to receive an operating expenses statement after each accounting period (s 12(1)(d)(ii) of the CTRSA Act). Thirdly, the applicant is not obliged to make any payment of operating expenses until the operating expenses statement is provided (s 12(1d) of the CTRSA Act).
b)… Failure on the part of the respondent to provide an annual estimate does not absolve the applicant from its obligation to contribute to operating expenses. The obligation to pay is, however, not enforceable by the respondent until it (respondent) has complied with its statutory obligations. The applicant remains liable to make payments towards operating expenses as soon as the respondent has complied with its statutory obligations. The Tribunal therefore does not accept the contention of the applicant that the effect of s 12(1)(d)(ii) of the CTRSA Act is, in effect, that operating expenses for a particular year cannot be recovered unless an annual estimate for expenditure is provided to the tenant by not later than the end of the year in which the expense was incurred. Section 12(1d) of the CTRSA Act clearly keeps alive the obligation to pay operating expenses, albeit that the landlord has not provided an operating expenses statement within three months after the end of the accounting period. …
Mr Aristei, following Reds, contended that an operating expenses statement can be belatedly provided to a tenant in accordance with s 12(1d). However, Mr Solomon responded that to interpret s 12(1d) in this way would not only be unreasonable or unnatural, but it would also mean that the three month period specified in s 12(1a)(a) would not then have any purpose.
Findings
My finding is that s 12(1d) of the Act does permit a non‑complying landlord to comply with s 12(1)(d)(ii), even if that landlord had not provided a valid operating expenses statement within the required three months after the expiration of the accounting period to which it relates.
The reasons for this finding are that first, s 12(1d), enabling compliance where there has been previous non‑compliance, refers only to 'the requirement referred to in subsection (1)(d)(ii)' requiring the provision of an operating expenses statement. True it is that s 12(1)(d)(ii) requires that statement to be 'in accordance with subsection (1a)' which by s 12(1a)(a) includes the provision of such a statement within three months, but s 12(1)(d)(ii) does not, of itself, specify the timing of the provision of the operating expenses statement. That timing is left to s 12(1a)(a). Section 12(1d) does not refer to that subsection.
Secondly, compliance with the requirement for an operating expenses statement is required before the expiration of three months after the end of the accounting period to which the operating expenses statement relates. It cannot be said that non-compliance occurs either before, or immediately upon the end of, an accounting period. There can only be non‑compliance after the expiration of three months from the end of an accounting period. The sole purpose of s 12(1d) is to operate as a bar to the recovery of operating expenses by a landlord who has not complied with the requirement referred to in s 12(1)(d)(ii) 'until the landlord complies with that requirement'.
It is necessary to construe the relevant statutory provisions within the context of the Act as a whole. To adopt Mr Solomon's interpretation of the Act would mean that the words 'until the landlord complies with the requirement' in s 12(1d) would not have any 'work' to do.
Further, contrary to Mr Solomon's interpretation, my interpretation as set out above provides 'work' for s 12(1a)(a) namely, it sets out the usual time requirement for the provision of an operating expenses statement. It is part of what is expected to be a business-like approach to better assist a retail shop tenant to manage the expenses of a retail shop by the receipt of operating expenses in a timely manner. It need not be fatal to a landlord's claim.
This interpretation not only provides meaning to the whole of s 12, but it also is consistent with the remedial and/or beneficial purpose of the Act as determined by its own text and structure in order to protect and better serve the needs of retail shop tenants until compliance by landlords.
Further still, for example, s 12(1d) permits compliance when an operating expenses statement does not comply with a minor technical breach of certain accounting standards or which, if required, has not been certified by an auditor, including a mathematical error in favour of the tenant which has not been detected in the auditor's certificate. On Mr Solomon's interpretation, such compliance could only be within the three month period specified in s 12(1a)(a). The Parliament cannot have intended the Act to have such a severe result without some purposive wording. The Act does not operate as an absolute bar to recovery as, say, a provision within the Limitation Act 2005 (WA).
Conclusion
The preliminary question must be answered: 'yes'.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
JB
Associate to Judge Goetze19 JUNE 2019
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