Walsh v Pitman - [2016] SADC 143

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
WALSH AND ANOR v PITMAN & ANOR
[2016] SADC 143
Reasons for Decision of His Honour Auxiliary Judge David Smith
30 November 2016
MAGISTRATES - APPEAL AND REVIEW
Jurisdiction conferred on District Court by s 38(6) of Magistrates Court Act 1991 (SA) to review judgments of Magistrates Court in minor civil actions - whether application to Magistrates Court by tenants to a retail shop lease for an order under s 68 of Retail and Commercial Leases Act 1995 (SA) that they be entitled to a minimum statutory term of five years on their lease is a minor civil action within the meaning of s 3 of the Magistrates Court Act - whether application involved a monetary claim of more than $25,000.
Held: application was for an order under the Retail and Commercial Leases Act and did not involve a monetary claim of more than $25,000 and therefore, pursuant to s 3 of the Magistrates Court Act, was a minor civil action so that the District Court of South Australia had jurisdiction to review any judgment of the Magistrates Court upon the said application.

LANDLORD AND TENANT - AGREEMENTS FOR LEASE
Retail shop lease to which Retail and Commercial Leases Act (1995) applied - parties entered into lease for a term of 2 years not aware that provisions of said Act imposed a minimum five year term - At the end of the 2 years term the parties still unaware of the application of the said Act entered into a second lease for a term of "6 months and monthly thereafter" - before the end of the second period of occupancy the tenants became aware of and claimed their statutory right to a five year term - landlords disagreed - at trial in Minor Civil Division of Magistrates Court, Magistrate found tenants not entitled to five year term as lease to which the said Act applied was terminated or surrendered by operation of law - such common law principles not affected by the provisions of the Retail and Commercial Leases Act.
Held: On review Magistrate erred in that purported termination or surrender was of no effect to preclude the operation of the statutory provision which imposed the five year term - tenants granted right to occupy shop premises under first lease for period extended to five years - second lease was void as being inconsistent with the said Retail and Commercial Leases Act.
Retail and Commercial Leases Act 1995 s 68; Magistrates Court Act 1991 s 38, referred to.
International Finance Trust v New South Wales Crime Commission [2009] 240 CLR 319; Lawrence Sambevski (1997) 187 LSJS 451; Avon v Administrative Appeals Court (1997) 69 SASR 7; Harradine v District Court of South Australia [2012] 280 LSJS 572; Collpitts v Australian Telecommunications Commission (1986) 9 FCR 52; Belluco v Netting and Netting [2009-2010] 267 LSJS 385; Qantas Airlines Ltd v Gubbins (1992) 28 NSWLR 26; Ory and Ory v Betamore Pty Ltd (in Liq) (1993) 60 SASR 393; Jenkin R Lewis & Son Limited v Kerman [1971] Ch 477; Polish Club Limited v Gynch [2014] NSWCA 321; O'Sullivan v Farrer [1989] 168 CLR 2010, considered.

WALSH AND ANOR v PITMAN & ANOR
[2016] SADC 143
Introduction

This application for Review arises from a landlord and tenant dispute concerning the lease of a retail shop on the Port Elliott Road near Victor Harbor.
The Applicants, who are the Tenants, seek to set aside a Magistrate’s decision that the Retail and Commercial Leases Act 1995 (‘the R&CL Act’) did not apply to give them a statutory five year term. The Respondents, who are the Landlords, contend that the Magistrate was correct in not imposing the statutory term because the tenancy had been rightly terminated.
Consequent on his decision, the Magistrate ordered the Applicants to vacate the premises. That order has been stayed pending the outcome of this Review.
Apart from the issue relating to whether or not the R&CL Act applies to impose the five year term, there is a threshold issue relating to this Court’s jurisdiction to entertain this application. The appellate jurisdiction of this Court, to Review a decision of the Magistrates Court, is conferred by s 38(6) of the Magistrates Court Act 1991 (‘the MC Act’). That jurisdiction is predicated upon the action being a ‘minor civil action’, as defined by the MC Act. The Respondents contend that the action is not a ‘minor civil action’, but rather is an ordinary Magistrates Court action, and as such, the Supreme Court is the correct forum for any appeal.
The Facts – The Magistrate’s Decision
The facts are set out compendiously in the Magistrate’s judgment. There is no dispute, of any substance, as to their correctness. I adopt them and set them out together with some detail of the course of proceedings in the following summary form:
·From 2010, the Respondents owned a shop and warehouse at 289 Port Elliott Road, Hayborough.
·On 3 October 2013, the Respondents leased the shop and warehouse to the Applicants. The lease was signed on 3 October 2013 and was expressed to commence on 14 October 2013. I assume that the Applicants took possession on that day and so ‘entered into’ the lease then.[1] It was for a period of one year with a right of renewal for one year. The rent was $3,125 per month. The Applicants exercised the option to renew for the second year. The lease period thereby extended to the 14 October 2015 (see exhibit P1). I will refer to this lease as the 2013 Lease.
·Neither the Applicants nor the Respondents were aware of the R&CL Act and the application of the statutory minimum term of five years. They were not legally represented when they negotiated for and entered into the leases of 2013 and 2015.
·On 13 October 2015, the parties, still oblivious to the application of the R&CL Act, signed an ‘Agreement to Renew lease’ The term of this 2015 Lease was expressed as follows:
- Terms 6 months
- Renewal monthly thereafter
[1] See s 6 of the R&CL Act.
This agreement was expressed to commence on 14 October 2015 (see exhibits P2) I will refer to this lease as the 2015 Lease.
·On 1 March 2016 the Respondents wrote to the Applicants. The letter was in the following terms:
We regret to advise that we are unable to renew your lease past 30^th of June 2016. The current lease expires on 14^th of April 2016 but we are able to extend this on a monthly tenancy until 30^th of June if this would be helpful. As long as we can give vacant possession of the 1^st of July.
·On 28 April 2016, the Applicants, by letter, notified the Respondents that, in the course of looking for other premises to occupy, they discovered the R&CL Act. They contended that its provisions applied so that they were entitled to a five year term from 14 October 2013 (see exhibit P4).
·On 7 June 2016, the Respondents, by their Solicitors, replied, contesting the claim by the Applicants. In particular the Respondents asserted that the 2013 Lease had no current effect, because it had been terminated and that the 2015 renewal was a ‘short term lease’ excluded from the operation of the R&CL Act by s 20B(3)(a) (see exhibit P6).
·On 30 June 2016, the Applicants instituted proceedings in the Magistrates Court. In particular they sought an order restraining the Respondents from evicting them and a declaration that they were entitled to occupy 289 Port Elliott Road until 15 October 2018.
·On 15 July 2016, an Interim Injunction was granted in favour of the Applicants. An urgent trial in the Magistrates Court took place on 1 and 3 August 2016.
·On 8 August 2016, the Magistrates Court decided:
-that the 2013 Lease was surrendered by the parties and though the provisions of the said R&CL Act applied, its provisions, in particular s 20B, did not operate to prevent that surrender;
-that the 2015 Lease for six months, and monthly thereafter, was a ‘short term lease’ within the meaning of s 20B(3)(a) and so s 20B(1) had no application to impose on the parties a five year term in respect of that tenancy; and
-that the Applicants vacate the premises by 26 August 2016.
·On 9 August 2016, the Applicants applied to this Court to review the Magistrate’s decision. They seek a declaration that their occupancy extends to 14 October 2018. They claim that the Magistrate erred in not declaring that they were entitled to a statutory term of five years ending on 14 October 2018.
·On 23 August 2016, the District Court, on the assurance that the Applicants intended to appeal against the Magistrates Court decision, ordered a stay of the Magistrate’s order until 5 September 2016. That order of stay was extended by me until further order.
·The Applicants have been in possession of the shop premises continuously from 14 October 2013 when they took possession pursuant to the 2013 Lease.
Some Legal Principles – Statutory Construction – Nature of Application for Review
As indicated there are two issues to be resolved. First, whether this Court has jurisdiction to review the Magistrate’s decision. Second, whether the provisions of the R&CL Act entitle the Applicants to a five year term.
The answer to both questions involves an exercise of statutory interpretation – in particular a step by step consideration of the relevant provisions of both the MC Act and the R& CL Act. In carrying out this exercise I will have regard to the following comments of French CJ at [41] in International Finance v New South Wales Crime Commission:[2]
… the process of statutory construction, including the identification of constructional choices, is informed by text, context and legislative purpose and, when applicable, the conservative principle that, absent clear words, Parliament does not intent to encroach upon fundamental common law principles …
[2] [2009] 240 CLR 319.
The often repeated purpose of the Minor Civil Action Division of the MC Act is to enable parties, who are embroiled in minor civil disputes, to have them resolved, in the Magistrates Court, with speedy inexpensive informality. Consistent with that objective, any challenge to a judgment in a minor civil action, is not by way of appeal to the Supreme Court, which is the route taken in the case of an ordinary civil action, but by an Application for Review to the District Court which, again, is not to be attended by any legal formality and is final.
The R&CL Act, which came into operation in June 1995, reformed the law relating to retail and commercial leases and in particular retail shop leases. As the Minister said, in the Second Reading Speech, “… The Bill focuses upon retail lease agreements and recognises the need for a regulatory framework which is fair to both landlords and retail tenants …”[3] The Act outlaws a number of unfair practices, which had become common place in the industry and which disadvantaged lessors. The Act does not apply to all leaseholds. In particular, it does not apply to retail shop leases for which the annual rent exceeds $400,000. The original ceiling for over a decade was $250,000, then, in April 2011, by Regulation, it was raised to $400,000. Nor does the Act apply to shop leases held by a public corporation, an insurance company, an agent or instrumentality of the Crown or a municipal council. The purpose of such provisions is plainly to limit the reach of the Act to small shop tenancies. One of the central features of the enactment, is a provision which imposes a minimum five year term on a retail shop lease. The purpose of this measure is to give the lessee a realistic opportunity to build up and capitalise on goodwill. That statutory right of tenure cannot be excluded by contract, but it can be avoided if the lease is endorsed with a ‘certified exclusionary clause’. Finally, consistent with its focus upon the smaller retail leases, Parliament, by provisions in both the R&CL and the MC Acts vest the Magistrates Court with jurisdiction to hear and determine applications for orders under the R&CL Act. Further, and again consistent with the focus upon small lease holders, a number of those applications are consigned to the Minor Civil Action Division of the Magistrates Court. I turn now to the principles applicable to a Review in the District Court.
[3] Hansard 8 March 1995 Government Gazette pp 1856-59.
The jurisdiction of the District Court to review a judgment of the Magistrates Court, given in a minor civil action, is conferred by s 38(6) of the MC Act. In exercising that jurisdiction the District Court is given a range of powers.[4] It may inform itself, as it thinks fit, and is not bound by the rules of evidence.[5] Further, it is empowered to rehear evidence taken in the Magistrates Court[6] and may take fresh evidence if satisfied that such evidence ought to have been addressed before the Magistrate (see Lawrence Sambevski).[7] Finally, in both the trial and the Review the ‘… court must act in accordance with equity, good conscience and with substantial merit of the case without regard to technicalities and legal forms’.[8] Upon review, the courses open to this Court are to affirm the judgment, or rescind it and substitute a judgment that it considers appropriate.[9] Any decision, on a review, is final and not subject to appeal.[10]
[4] See s 38(7) of the MC Act.
[5] See s 38(7)(b).
[6] See s 38(7)(c).
[7] (1997) 187 LSJS 451.
[8] See s 38(1)(f) and (7)(e).
[9] See s 38(7)(d)(i) and (ii).
[10] See s 38(8).
The question which remains is, what constitutes a review? The dictionary definition of ‘review’ is the act of looking over something with a view to correction or improvement.[11] The meaning of the word ‘review’ in the legal setting, has been the subject of much judicial consideration over the years (see Avon v Administrative Appeals Court,[12] and more recently see Harradine v District Court of South Australia).[13] In the case of Avon Olsson J makes it clear that the meaning of the word ‘review’ is to be derived from its statutory context.[14] Section 38(7)(d) of the MC Act provides that the District Court is empowered to, not only to identify an error, but also correct it.[15] Finally I consider that the principles applicable to the role of appellate courts have a guiding application to a review under s 38(6) of the MC Act.[16]
[11] See The Shorter Oxford Dictionary 3^rd edition 1973.
[12] (1997) 69 SASR 7 at 34 & 35.
[13] [2012] 280 LSJS 572 at 581 & 582.
[14] See Avon per Olsson J at 34 and 35.
[15] See s 38(7)(d).
[16] See International Finance Trust v New South Wales Crime Commission [2009] 240 CLR 319 per French CJ at [41].
There are no issues of substance relating to the credibility of any of the witnesses nor as to the Magistrate’s findings of fact. Therefore there is no need to either re-hear evidence or take fresh evidence.
I turn now to the threshold issue of jurisdiction.
Jurisdiction
It is a fundamental proposition of law that the parties to a dispute cannot confer jurisdiction on a Court by consent or agreement. Jurisdiction must arise from the Act establishing the Court or from other enactments conferring it.
The jurisdiction of this Court to review the Magistrate’s decision, is as I have indicated, predicated upon the action being properly characterised as a ‘minor civil action’ as defined by s 3 of the MC Act. The answers to the three following questions will provide the key to whether, in the circumstances of this case, the District Court has jurisdiction to review the Magistrates judgment:
First, do the Applicants have the requisite standing to make the application to the Magistrates Court, as provided in s 68 of the R&CL Act?
Second, is the application, when made in the Magistrates Court, properly characterised as a Minor Civil Action in accordance with s 3 of the MC Act.
Finally, and more obviously, is the District Court the forum in which to challenge to the Magistrates Court decision.
The following trail, which draws upon the evidence and invokes provisions of both the R&CL Act and the MC Act, leads to the conclusion that this Court has jurisdiction to review the Magistrate’s judgment in this action. The following steps constitute my findings:
1.The leased premises at 289 Port Elliott Road Hayborough is a retail shop as defined by s 3 of R&CL Act. The lease of those premises (Exhibit P1), is a retail shop lease as defined by s 3 of the R&CL Act. It follows that the Applicants and Respondents are parties to a retail shop lease.
2.The R&CL Act applies to the retail shop lease (Exhibit P1) in accordance with s 4(1) of the Act. The lease is not one of those which are excluded from the operation of the R&CL Act by s 4(2) of the Act.
3.Section 68(1) of the R&CL Act confers jurisdiction on the Magistrates Court to hear an application, by a party to a retail shop lease, for any of the orders particularised in s 68(2) of the said Act. I set out hereunder s 68:
(1)     An application for an order under this section may be commenced by application to the Magistrates Court by a party (or former party) to a retail shop lease or a collateral agreement.
(2)     The Magistrates Court may on application under this section, by order—
(a)restrain an action in breach of this Act, a retail shop lease or a collateral agreement; or
(b)require a person to comply with an obligation under this Act, a retail shop lease or a collateral agreement; or
(c)order a person to make a payment (including a payment of compensation) that is payable under this Act, a retail shop lease or a collateral agreement; or
(d)order the payment of compensation for loss or damage resulting from a breach of this Act, a retail shop lease or a collateral agreement; or
(e)relieve a party to a retail shop lease or a collateral agreement from the obligation to comply with a provision of the lease or agreement; or
(f)reinstate rights under a retail shop lease that have been forfeited or have otherwise terminated; or
(g)require the payment of rent under a retail shop lease into the Magistrates Court until the lease has been performed or an application for compensation has been determined; or
(h)require that rent paid into the Magistrates Court be paid out and applied as directed by the Magistrates Court; or
(i)     require a tenant to surrender possession of premises to the lessor; or
(j)do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.
4.On 9 August 2016, being parties to a retail shop lease, and therefore, having requisite standing to make an application under s 68(1) of the R&CL Act, the Applicants applied to the Magistrates Court on the form appropriate for a Minor Civil Action (ie Form 3) for the following orders:
·An order under s 68(2)(a) of the Act restraining the other party or their agents from evicting the Applicants from the premises;
·Further or in the alternative, an interim injunction pursuant to s 25 of the Magistrates Courts Act;
·A declaration under s 38(2)(j) of the Act that the lease term extends, subject to compliance with fundamental terms of rent and outgoings, to 15 October 2018;
·An order under s 68(2)(b) of the Act requiring the other party and their agents to honour the lease and its applicable term;
The above remedies are substantially within the scope of the powers conferred on the Magistrates Court by s 68(2) of the R&CL Act.
5.The above application is and was at the time of its institution, properly characterised as a ‘minor statutory proceeding’ and thereby a ‘minor civil action’ because it was ‘… an application under the R&CL Act, other than an application that involves a monetary claim for more than $25,000.[17] In August 2016 the level of monetary claim was reduced to $12,000 (see 27 of 2016). The relevant portions of s 3(1) and (2) of the MC Act provide as follows:
[17] See s 3(1) and (2) of the MC Act.
3(1) In this Act unless the contrary intention appears –
…
minor civil action—See subsection (2);
minor statutory proceeding means—
…
(ba)an application under the Retail and Commercial leases Act 1995, other than an application that involves a monetary claim for more than $25,000; or
…
(2) Subject to subsections (3) and (4), a minor civil action is an action founded on—
…
(c) a minor statutory proceeding.
6.Finally pursuant to s 38(6) of the MC Act the District Court is conferred with jurisdiction to review a judgement given in a minor civil action.

Implicit in the finding in paragraph 5 above, is my view that, in the claim for relief by the Applicants, there is no claim ‘which involves a monetary claim for more than $25,000’. Indeed there is no claim at all by the Applicants which involves any monetary sum. Because the annual rental, payable under the subject 2013 Lease exceeded $25,000, which until August 2016 was the ceiling, it does not follow that the remedies sought involve a claim of more than $25,000. I reject the Respondents’ contention in that regard.
Notwithstanding, that the application was instituted in the Minor Civil Actions Division of the Magistrates Court and proceeded to trial in that Division, neither the Magistrate nor counsel at the trial, addressed the applicable procedural strictures prescribed in s 38(1)-(5) of the MC Act . Rather the trial proceeded in the traditional adversarial way, with counsel representing each side. This oversight, if indeed it could be so described, relates to form rather than substance and cannot be determinative of the true character of the action.
The conclusions set out above in the paragraphs numbered 1-5 accord with, not only the straightforward ordinary meaning of the wording of the provisions looked at their context, but also with the evident statutory purpose of both the MC Act and the R&CL Act. There is no basis for making any other ‘constructional choices’. Also in arriving at the above conclusions I have rejected the contention of Counsel Mr Crocker including that s 3(1)(ba) of the MC Act should be read down. I conclude, therefore, that the application instituted in this matter is a ‘minor civil action’. It follows that the only forum, in which this appellate process could take place, is this Court. Notably s 41 of the MC Act, which provides for appeals against judgments in civil actions in the Magistrates Court, specifically excludes ‘minor civil actions’. Counsel for the Applicants, Mr McCarthy, was right when he submitted that the Applicants, dissatisfied with the result and intending to challenge it, had no choice but to apply to this Court for a review.
I turn now to the second issue.
Review – Are Applicants Entitled to the Minimum Five Year Statutory Term?
The Applicants contend, that the Magistrate erred in concluding that the 2015 Lease had the effect of terminating or surrendering the 2013 Lease and, with it, their entitlement to the minimum statutory term of 5 years. They seek rescission of the Magistrate’s decision and a declaration that they are entitled to possession of the premises under the 2013 Lease, until 14 October 2018. The Applicants’ counsel further argued that the 2015 Lease was not excluded from the application of s 20B(1) of the R&CL Act because it was not a short term lease, within the meaning of s 20B(3)(a) and therefore, the minimum term of five years also applied to that later lease.
The Respondents contend, that the original 2013 Lease was lawfully surrendered or terminated, upon the parties entering into the new 2015 Lease. They argued, by their Counsel, that s 20B of the R&CL Act does not abrogate the parties’ common law right to terminate their lease agreement, and that s 20B of the R&CL does not apply to the new 2015 Lease, because it is a short term lease and therefore excluded from the operation of s 20B.
I now turn to the Judgment. I summarise the key conclusions as follows:
·The R&CL Act applied to the subject shop lease, so that upon entering into the 2013 Lease, the Applicants were entitled to a term of no less than five years taking into account periods of renewal.
·At common law the Applicants, by entering into the 2015 Lease are regarded as having surrendered the earlier 2013 Lease and are, as a result, estopped from asserting that it continues. In particular, the surrender takes place by operation of law.
·The R&CL Act did not preclude the common law principles of surrender or termination applying to retail shop leases to which the said Act applied. The language of the Act did not indicate that Parliament intended to prevent parties from surrendering or mutually agreeing to terminate a retail shop lease ‘inside five years’.
·The parties shared lack of awareness of the application of the provisions of the R&CL Act and in particular s 20B(1), does not affect the conclusion that the 2013 Lease stands surrendered.
·The minimum term of five years prescribed by s 20B(1) does not apply to the 2015 Lease to extend its term to five years because the lease is a short term lease (ie for six months or less) and is thereby excluded from the reach of s 20B(1).
·The entry into the 2015 Lease constitutes a termination of the 2013 Lease and therefore the claim by the Applicants that they are entitled to remain in possession to October 2018 is rejected. The Applicants are to vacate the premises.
In my view the Magistrate erred in concluding that the provisions of the R&CL Act did not exclude the operation of common law principles, such as, surrender by operation of law, or surrender by agreement. My view is that the provisions of the R&CL Act and in particular s 20B(1) preclude the application of common law principles such as surrender by operation of law and termination, to the extent that the application of those principles modifies, contradicts or precludes the right given by the statute.
The above common law principles when applied as the Magistrate has done in this case, had the effect of abridging or nullifying the mandatory statutory minimum term of five years applicable to the 2013 Lease. The Magistrate applied those common law principles, despite the mandatory requirement set out in s 20B(1), and despite the protective provisions of ss 5 and 20K.
I am of the view that the entry into the 2015 Lease by the Applicants was ineffective to cause the surrender or termination of the 2013 Lease, which in October 2015, still had three years to run, although the parties were oblivious to that being the case.
Accordingly, I consider it unnecessary to determine whether the Magistrate was correct, when he decided at common law, that the Applicants had surrendered the 2013 Lease and were estopped from later seeking to rely on it. I indicate only that given their shared lack of awareness of the legal position it is somewhat difficult to accept that the Applicants’ stance, namely their insistence now on the continuation of the 2013 Lease, could be characterised as, so unconscionably inconsistent behaviour, as to give rise to an estoppel.
I turn now to examine those provisions of the R&CL Act relevant to this case. They are however part of a wider statutory framework of rights, duties and obligations intended to regulate the retail shop leasing industry or rather part of it. Clearly the statutory scheme will have the effect of changing the law, to the extent, at least, of preventing any application of the existing common law, which modifies, contradicts, precludes, frustrates or otherwise thwarts the operation of a particular provision of the Act.
For example, parties to a retail shop lease to which the R&CL Act applies are not free, effectively at least, to negotiate a lease term of less than five years unless there is certified exclusionary cause. In that sense the freedom to contract is affected or changed.
I start by referring to s 5 of the R&CL Act. That provision provides as follows:
(1) This Act operates despite the provisions of a lease.
(2)A provision of a lease or a collateral agreement is void to the extent that the provision is inconsistent with this Act.
There is no argument that the R&CL Act applies to the 2013 Lease as I have pointed out repeatedly.
Accordingly the term of two years (ie 1 plus 1), prescribed in the 2013 Lease is inconsistent with the R&CL Act in that it fixes a term of less than five years when s 20B(1) demands a term of five years. Pursuant to s 5(2) the provision in the 2013 Lease as to term is void.
Section 20B(1) of the R&CL Act, and in particular Part 4A, applied to the 2013 Lease to impose on the parties thereto, inter alia, a minimum term of five years. Therefore that lease extended to 14 October 2018. The Magistrate agreed with this proposition at least as a starting position (see [16] of the judgment). Section 20B of the R&CL Act provides as follows:
(1) The term for which a retail shop lease is entered into must be at least five years.
The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into.
(2)A lease is not invalidated by contravention of this section but the term of the lease is extended to bring the term (or aggregate term) to five years.
Example—
If a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years).
(3)This section does not apply to a lease if—
(a)the lease is a short-term lease (ie a lease entered into for a fixed term of 6 months or less); or
(b)the lease arises when the lessee holds over after the termination of an earlier lease with the consent of the lessor and the period of holding over does not exceed 6 months; or
(c) the lease contains a certified exclusionary clause; or
(d)the lessee has been in possession of the retail shop premises for at least 5 years; or
(e)in the case of a retail shop lease that is a sublease—the term of the retail shop lease is as long as the term of the head lease allows; or
(f)the lease is of a class excluded by regulation from the ambit of this Division.
It can be seen that the 2013 Lease is not excluded from the operation of s 20B by being in those categories caught by s 20B(3)(a) to (f). In particular there is no debate in this matter that neither the 2013 Lease nor the 2015 Lease contained a certified exclusionary clause as referred to in s 20B(3)(c).
Further, it is to be noted that, pursuant to s 20B(2), the lease is not invalidated if it contravenes the section by, for instance, not giving the tenant the minimum term. Rather, the lease remains otherwise binding save only that its term is extended to bring it to five years’.[18] I note in this respect that the Respondents were prepared initially to grant the Applicants a five year term, but apparently the Applicants did not want that. What was then open to the parties, had they been aware of the statutory applicable minimum, was to fix a term of ‘1x1x1x1x1’. Notably s 20B(1) makes it clear that the term of the lease is worked out by assuming that the right or option to renew will be exercised.
[18] See s 20B(2).
Section 20K(1) puts the question of whether the five year minimum term can be avoided beyond sensible debate. The section provides as follows:
20K – Certified exclusionary clause
(1)    Subject to this section, the rights conferred by this Part cannot be excluded or modified by contract.
(2)    However, the statutory rights of security of tenure may be excluded by a certified exclusionary clause.
(3)    A certified exclusionary clause is a provision of a retail shop lease in respect of which a certificate signed by a lawyer who is not acting for the lessor is endorsed on the lease to the effect that –
(a)the lawyer has, at the request of the prospective lessee, explained the effect of the provision and how this Part would apply in relation to the lease if the lease did not include that provision; and
(b)the prospective lessee gave the lawyer apparently credible assurances that the prospective lessee was not acting under coercion or undue influence in requesting or consenting to the inclusion of the provision of the lease.
Notably s 20K(1) provides that the rights conferred by Part 4A, which include the right given by s 20B(1) to a minimum term of five years, cannot be excluded or modified by contract unless there is a certified exclusionary clause endorsed on the lease. Given the absence of an exclusionary clause, that clear prohibition renders any surrender or termination of the 2013 Lease inside five years ineffective.
Accordingly, in this case the entry into the 2015 Lease in October 2015 was of no effect to reduce the Applicants statutory right to five years not withstanding the principle of surrender by operation of law.
The provisions I have referred to above are those which directly relate to the accepted circumstances of this case. A perusal of the balance of the provisions of the R&CL Act demonstrate Parliaments intent that the battery of reforms included in the Act are to prevail against any adverse application of common law principles. In particular as evidenced by provisions such as s 5 and s 20K(1)they are intended to withstand any agreement which either modifies or excludes rights conferred by the Act. The R&CL Act amends or rather precludes the operation of common law principles but only to the extent that any agreement or arrangement which is inconsistent with provisions such as s 20B(1) will be void and ineffective.
Accordingly my concluded view is that the so-called surrender and termination of the 2013 Lease in October 2015, was of no effect. In the result, the five year minimum statutory term applies to the 2013 Lease. The Magistrate erred in concluding that the arrangements made by the parties in October 2015 had the effect of surrendering and terminating the 2013 Lease. The provisions of the R&CL Act to which I have referred give the Applicants a right of tenure until 14 October 2018.
I would therefore order that the 2013 Lease stands and the period of the tenancy is five years which commences at the date of commencement of that lease, namely 14 October 2013. I will hear counsel as to whether the further terms agreed and included in the 2015 Lease should in justice be binding on the parties. (nb that may require an order under s 68(2) of the R&CL Act.) As to how the five year term is to be constituted I note that the parties seem to be in agreement that, in the event of this decision, the term should be four plus one years. However I will hear counsel as to their final positions.
Review – Are the Applicants entitled to the minimum five year term on the 2015 Lease?
In the light of my categorical view about the Applicants’ entitlement to a five year term, I consider there is no warrant to explore in detail the impact of the provisions of the R&CL Act on the 2015 Lease. Suffice it to say I consider that there is a compelling argument that the 2015 Lease, considered in isolation, is not a ‘short term lease’ because, assessing the circumstances surrounding the agreement embodied in that lease objectively, the words ‘monthly thereafter’ indicate an intent by the parties that these can be a month by month renewal. I refrain from a final decision not only because I regard the answer to the primary question as clear, but also because throughout these proceedings the Applicants, sensibly, have sought a right of occupancy under only the 2013 Lease to 14 October 2018. I do acknowledge that their counsel did argue that the 2015 Lease was subject to the minimum statutory tenure of five years.
Review – whether given a declaration in favour of the Applicants on the primary issue and any ameliorative order should be made in favour of the Respondents pursuant to Section 68 of the R&CL Act.
Apparently after final addresses had been taken, the Magistrate raised with Counsel whether in the event of him making a declaration in favour of the Applicants, he should consider granting the Respondents relief under s 68(2) of the R&CL Act.
In response Counsel for the Respondents, Mr Crocker, submitted that, in the event that s 20B(1) was held to apply to the 2013 Lease to impose the minimum statutory term of five years, then, nonetheless, that period should be abridged pursuant to s 68(2)(e)(j) of the R&CL Act and the Applicants be compelled to give possession of the premises to the Respondents by 8 September 2016. The Applicants’ Counsel, Mr McCarthy opposed any such relief, and complained that the trial did not proceed on the basis of any such application. He pointed out rightly that the section required an application to be made in order to enliven an entitlement to any such relief. It is clear that none was made. In the end result the Magistrate did not deal with this matter perhaps because he did not need to consider it.
These arguments were agitated before me. Despite Counsel, Mr McCarthy’s contentions I will deal with the submissions as if an application had been made. I start by setting out those portions of s 68 invoked by the Respondents’ counsel.
(2) The Magistrates Court may on application under this section, by order—
…
(e)relieve a party to a retail shop lease or a collateral agreement from the obligation to comply with a provision of the lease or agreement; or
…
(j) do anything else necessary or desirable to resolve a dispute between the parties to the retail shop lease.
Counsel Mr Crocker argued that the powers given by s 68(2) were discretionary, and while the discretion must be exercised judicially, the generous language in both sub-ss (e) and (j), conferred on the Count what was effectively an unfettered discretion to do what is just. Strictly speaking there is no such concept as an unfettered discretion. Rather, the scope, intent and purpose of the legislation – here the R&CL Act – controls even the most generously framed discretion.[19]. Given that the legislation controls the exercise of the discretion, it would not be a proper exercise of it, for either the Magistrates Court or this Court, to make an order which was in conflict with, for example the mandatory requirement of s 20B(1). Accordingly an order abridging the minimum statutory term of five years would not be proper. Further to that I note that sub-s (e) of s 68(2) unsurprisingly does not empower the Court to give relief from a provision of the Act itself. Rather the relief canvassed in the subsection extends only to obligations ‘to comply with a provision of the lease or agreement’. There is no power given to the Court to excuse compliance with one of the core requirements of the Act itself, namely that imposed by s 20B(1). Therefore reliance on s 68(2)(e) for the purpose articulated by Counsel, Mr Crocker, is misconceived.
[19] See O’Sullivan v Farrer [1989] 168 CLR 2010 per Mason CJ, Brennan, Dawson and Gordon JJ at 216.
For much the same reason s 68(2)(j) cannot provide a basis upon which either this Court or the Magistrates Court could abridge the minimum term of five years.
On the basis that I have regarded the submissions on this matter as tantamount to an application, I dismiss it.
Conclusion
My decisions are as follows.
·This Court pursuant to s 38(6) of the MC Act has jurisdiction to review the Magistrate’s decision in this matter, because the application instituted by the Applicants in the Magistrates Court, was a Minor Statutory Proceeding within the meaning s 3(1) of the MC Act and therefore pursuant to s 3(2) was a Minor Civil Action.
·Pursuant to s 36(7)(d)(ii) of the MC Act I rescind the decision of the Magistrates Court dated 8 August 2016 and substitute therefore a declaration that pursuant to s 20B(1) of the R&CL Act the Applicants are entitled to a five year term in respect of the 2013 Lease commencing on 14 October 2013.
·There is no need to consider if the statutory right of tenure applies to the 2015 Lease.
·I decline to make any order in favour of the Respondents under s 68(2) of the R&CL Act.
I will hear Counsel as to the precise terms of the judgment and order made by me bearing in mind what I have said in relation to, not only the 2013 Lease, but also the terms of 2015 Lease. I will also hear Counsel as to the question of costs.