Warwick Entertainment Centre Pty Ltd v McKenzie
[2000] WASCA 280
•28 SEPTEMBER 2000
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: WARWICK ENTERTAINMENT CENTRE PTY LTD -v- McKENZIE & ANOR [2000] WASCA 280
CORAM: WALLWORK J
PARKER J
MILLER J
HEARD: 5 SEPTEMBER 2000
DELIVERED : 28 SEPTEMBER 2000
FILE NO/S: FUL 13 of 2000
MATTER :Section 79 of the District Court Act
BETWEEN: WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
Appellant
AND
CAROLINE McKENZIE
PETER ROBERT DOVE
Respondents
Catchwords:
Landlord and tenant - Retail and Commercial Tenancies legislation - Whether payment for share in plant and equipment "key money" - Whether agreement for lease a sham
Evidence - Failure on part of appellant to contradict evidence that its employee described payment as "upfront money" - Application of Jones v Dunkel
Practice and procedure - Appeal by way of re-hearing - Distinction from hearing de novo - Nature of appeal from Commercial Tribunal
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985, s 3, s 9(1), s 9(3)
Commercial Tribunal Act 1984, s 15, s 17, s 17(3), s 20, s 20(3)
District Court Rules 1996, O 8 r 2, O 8 r 29, O 8 r 30, O 8 r 30(1), O 8 r 30(2)
Property Law Act 1969, s 129
Result:
Appeal dismissed
Representation:
Counsel:
Appellant: Mr M J Buss QC & Ms C L Woo
Respondents : Mr D R Clyne
Solicitors:
Appellant: Freehills
Respondents : D'Angelo & Partners
Case(s) referred to in judgment(s):
Bradshaw v Medical Board (WA) (1990) 3 WAR 322
Building Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616
Devries v Australian National Railways Commission [1993] 177 CLR 472
Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1
Jones v Dunkel (1959) 101 CLR 298
Moursellas v Pharmaceutical Council of Western Australia (1992) 10 WAR 240
Payne v Parker [1976] 1 NSWLR 191
Scott v Commissioner of Taxation (Cth) (No 2) (1966) 40 ALJR 265
Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449
Van Den Bergh v Clever Management Pty Ltd, unreported; FCt SCt of WA; Library No 970319; 20 June 1997
Vickery v Waitaki International Ltd [1992] 2 NZLR 58
Whitemore Pty Ltd v O F Gamble Pty Ltd (1991) 6 WAR 110
Case(s) also cited:
Claremont Petroleum NL v Cummings (1992) 110 ALR 239
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Eon Metals NL v Commissioner of State Taxation 91 ATC 4841
Fabre v Arenales (1992) 27 NSWLR 437
Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336
Natural Extracts Pty Ltd v Stotter (1997) 24 ACSR 110
Palumberi v Palumberi (1986) NSW Conv R 55,673
Ringthane Pty Ltd v Commissioner of State Taxation (WA) 93 ATC 4824
Snook v London & West Riding Investments Ltd [1967] 2 QB 786
State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 160 ALR 588
Wing Luck Foods v Lay Choo Lim [1989] WAR 358
WALLWORK J: I agree with the reasons for judgment of Miller J and to the order proposed by his Honour.
PARKER J: For the reasons given by Miller J I agree that this appeal should be dismissed.
MILLER J: This is an appeal from a judgment of his Honour Judge Viol delivered in the District Court at Perth on 27 January 2000 in which his Honour dismissed an appeal from a decision of the Commercial Tribunal. That decision had been given by the Tribunal on 26 September 1997. In its decision the Tribunal found that the sum of $65,000 paid by the respondents to the appellant was a premium paid for the granting of a lease of premises and therefore "key money" within the meaning of s 9(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 ("the Act"). In accordance with the provisions of s 9(3) of the Act the Tribunal ruled that the respondents were entitled to a full refund of the $65,000 paid by them to the appellant. The Tribunal was also called upon to consider whether the payment of $65,000 was in breach of s 12 of the Act but it found it unnecessary to answer that question and the learned District Court Judge concluded that the Tribunal was correct in that regard. The issue of whether or not the payment was in breach of the provisions of s 12 of the Act does not arise on the hearing of this appeal.
The appeal from the decision of the Commercial Tribunal was brought to the learned District Court Judge pursuant to the provisions of s 20 of the Commercial Tribunal Act 1984. A party to proceedings before the Tribunal who is dissatisfied with a decision or order of the Tribunal may, where there is a question of law involved, or in circumstances where a question of law is not involved but the Tribunal or District Court gives leave to do so, appeal to the District Court against the decision or order. The appeal to the learned District Court Judge was on the basis that various errors of law had been made by the Commercial Tribunal.
Under the provisions of s 20(3) of the Commercial Tribunal Act the District Court has jurisdiction to hear and determine the appeal and on the hearing of the appeal may, according to the nature of the case, (relevantly) affirm, vary or quash the decision or order appealed against. In his reasons the learned District Court Judge stated that the hearing of the appeal was a hearing de novo. The appellant sought leave before this Court to amend its notice of appeal to include a ground asserting that the learned Judge had erred in law in holding that the appeal before him was a
hearing de novo when he should have held that the appeal was an appeal by way of re‑hearing.
The procedure relating to appeals to the District Court is contained within O 8 of the District Court Rules 1996. Order 8 r 2 provides that an appeal from a judgment of a Local Court shall be instituted by notice of motion and (relevantly) unless the parties otherwise agree "shall be by way of a re‑hearing". Order 8 r 29 provides that in addition to an appeal from the Local Court and subject to the enabling legislation the Rules shall apply mutatis mutandis to an appeal from any Tribunal where a right of appeal to the court is given by law. Powers of the court on appeal are contained within O 8 r 30 which provides that on appeal to the District Court a party may on special grounds only apply to the court for special leave to adduce further evidence and the court has full discretionary power to grant such leave. Under O 8 r 30(2) the court is given the power to affirm, reverse or modify the judgment appealed from and to give or make such judgment, order, decision, determination or award as ought to have been given or made in the first instance. It is also empowered to review any finding of fact and to draw inferences of fact (my emphasis) and may order a new trial or hearing on such terms as it thinks just or make any other order on such terms as the court thinks proper to ensure the determination on the merits of the real questions in controversy between the parties or the real merits of an application (my emphasis). Although the provisions of O 8 r 2 provide for an appeal by way of re‑hearing, the provisions of O 8 r 30 expand the powers of the court on the hearing of an appeal to give to the court an unfettered discretion to do justice on "the merits of the real questions in controversy". It is against this background that the question whether the learned Judge erred in describing the hearing of the appeal as a hearing de novo is to be considered.
The distinction between a re‑hearing and a hearing de novo was fully and authoritatively discussed by the Full Court in Moursellas v Pharmaceutical Council of Western Australia (1992) 10 WAR 240. That was a case in which there was a right of appeal from proceedings before the Pharmaceutical Council to the Supreme Court. The relevant provision of the Pharmacy Act 1964 provided that the hearing and determination of the appeal "shall be in the nature of a re‑hearing". Rowland J had referred to the Full Court the question whether the appeal "in the nature of a re‑hearing" should be conducted:
"(a)de novo, without regard to material that was before the Council;
(b)de novo, on the basis of material placed before the Judge and the material to which the Council had regard;
(c)as a rehearing, with leave to adduce further evidence under O 65;
(d)as a rehearing with leave to adduce further evidence only on the basis that 'fresh evidence' would be admitted on an appeal at common law."
The Full Court held that the appeal in that case was to be heard de novo on the basis of evidence given anew before the Judge hearing the appeal and concluded that the meaning of "re‑hearing" will be dependent upon the statutory provision within which it is found. The general rule is that an appeal by way of re‑hearing is a hearing de novo, but factors to be considered include whether the Tribunal keeps a transcript, whether written reasons are given, whether representation is allowed, whether evidence is given on oath, whether a formal hearing is conducted and so on. The presence of these factors will mitigate against a hearing de novo. Malcolm CJ (at 245 ‑ 246) applied the statement of Mason J in Building Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 (at 621 ‑ 622) wherein the principles and considerations relevant to determining the meaning of the provision that an appeal is to be by way of re‑hearing were stated:
"Where a right of appeal is given to a court from a decision of an administrative authority, a provision that the appeal is to be by way of rehearing generally means that the court will undertake a hearing de novo, although there is no absolute rule to this effect. Despite some suggestion in argument to the contrary, I do not read Ex parte Australian Sporting Club Ltd; Re Dash (1947) 47 SR (NSW) 283 as enunciating such an absolute rule. There are, of course, sound reasons for thinking that in many cases an appeal to a court from an administrative authority will necessarily entail a hearing de novo and I exclude for present purposes the case of an appeal to a federal court exercising the judicial power of the Commonwealth under Ch III of the Commonwealth Constitution. The nature of the proceeding before the administrative authority may be of such a character as to lead to the conclusion that it was not intended that the court was to be confined to the materials before the authority. There may be no provision for a hearing at first instance or for a record to be made of what takes place there. The authority may not be bound to apply the rules of evidence or the issues which arise may be non‑justiciable. Again, the authority may not be required to furnish reasons for its decision. In all these cases there may be ground for saying that an appeal calls for an exercise of original jurisdiction or for a hearing de novo.
On the other hand the character of the function undertaken by the administrative authority in arriving at its decision may differ markedly from the instances already supposed. The authority may be required to determine justiciable issues formulated in advance; to conduct a hearing, at which the parties may be represented by barristers and solicitors, involving the giving of oral evidence on oath which is subject to cross‑examination; to keep a transcript record; to apply the rules of evidence; and to give reasons for its determination. In such a case a direction that the appeal is to be by way of rehearing may well assume a different significance.
But in the end the answer will depend on an examination of the legislative provisions rather than upon an endeavour to classify the administrative authority as one which is entrusted with an executive or quasi‑judicial function, classifications which are too general to be of decisive assistance. Primarily it is a question of elucidating the legislative intent, a question which in the circumstances of this case is not greatly illuminated by the Delphic utterance that the appeal is by way of rehearing."
Malcolm CJ (at 246) added that it is apparent that the meaning of "re‑hearing" is very much dependent upon the context of statutory provisions in which it is found. His Honour pointed out (at 254) that in Bradshaw v Medical Board (WA) (1990) 3 WAR 322, Rowland J (at 335), applying the principle stated by Mason J in Builders Licensing Board v Sperway Constructions (supra), concluded that the nature of the re‑hearing on an appeal from the Medical Board would be similar to a re‑hearing by an appellate court from another court, bearing in mind that the Rules expressly provided for a party being at liberty to adduce with leave further evidence. Malcolm CJ (at 254) said:
"Consequently, Rowland J regarded the relevant statement in Warren v Coombes (supra) (at 552) of the duty of an appellate court to decide for itself the facts as well as the law as being the approach to apply. Ipp J (at 338) came to the same conclusion, noting the distinction between the power of the Full Court to receive fresh evidence on an appeal from a single judge under O 63 and compared to the power to receive additional evidence under O 65, r 10(2)."
In Moursellas v Pharmaceutical Council (supra), Malcolm CJ (with whom Walsh and Anderson JJ agreed) concluded that an appeal under s 27(3) of the Pharmacy Act was to be heard de novo on the basis of evidence given anew before the Judge hearing the appeal, which may be given either orally or by affidavit, and the material that was before the Council. His Honour added:
"The material that was before the Council is relevant in order that the decision of the Council may be given due weight. Where the parties agree, or the court so directs on the ground that relevant evidence sufficiently appears from the transcript or record of the proceedings of the Council, it would not be necessary for such evidence to be given anew. This would be the position with respect to any evidence previously given which was not subject to any challenge on credibility grounds. Any additional evidence could be given as of right, saving any right to object to its admissibility. The parties would be entitled to agree whether any such evidence should be given orally or on affidavit. Any disagreement could be resolved by direction by the court."
Section 15 of the Commercial Tribunal Act 1984 makes provision for the manner in which hearings before the Tribunal shall be conducted. It provides (inter alia) that the Tribunal shall cause to be given to a person who is a party to proceedings instituted before the Tribunal reasonable notice of the time and place at which it intends to conduct those proceedings and shall afford any such person a reasonable opportunity to call or give evidence, to examine or cross‑examine witnesses, and to make submissions to the Tribunal. Parties may appear personally or be represented by counsel. Section 17 provides that the Tribunal may by summons require the attendance before the Tribunal of any person or the production before the Tribunal of any document, may require persons to give evidence on oath and may require persons appearing before the Tribunal to answer any relevant question put by a member of the Tribunal or any other person appearing before the Tribunal. There is no right to refuse to answer a question, but where privilege is claimed on the basis that the answer may incriminate the witness, the answer is not admissible in evidence against the person in civil or criminal proceedings other than proceedings for perjury or an offence under a relevant Act arising out of the false or misleading nature of the answer. Section 17(3) contains other procedural provisions:
"(3)In the course of any proceedings the Tribunal may -
(a)receive in evidence any transcript of evidence in proceedings before a court or other person or body acting judicially and draw any conclusion of fact therefrom as it thinks fit; and
(b)adopt, as in its discretion it thinks fit, any finding, decision, or judgment of a court or other person or body acting judicially that is relevant to the proceedings before the Tribunal.
(4)In any proceedings the Tribunal shall act according to equity, good conscience, and the substantial merits of the case without regard to technicalities and legal forms and, subject to subsection (5), shall not be bound by the rules of evidence but may inform itself on any matter in such manner as it thinks fit."
Careful consideration of the provisions of the Commercial Tribunal Act makes it clear that the Tribunal is required to conduct a hearing at which parties may be represented by counsel and at which oral evidence on oath may be given which will be subject to cross‑examination. Although the Tribunal is not bound by the rules of evidence and may inform itself on any matter in such manner as it thinks fit, the proceedings are generally to have all the characteristics of an administrative hearing conducted judicially. In the present case extensive reasons were given by the Tribunal for its decision, with the arguments put before it carefully analysed and distilled. Applying the principles enunciated by Mason J in Builders Licensing Board v Sperway Constructions, it is apparent that an appeal by way of re‑hearing from the Commercial Tribunal is to be similar to a re‑hearing by an appellate court from another court. The proceedings of the Tribunal are not such that one could conclude that the appeal process calls for an exercise of original jurisdiction or for a hearing de novo. To the extent therefore that the learned Judge stated that the hearing of the appeal was to be a hearing de novo, he was, in my view, in error. However, the appeal by way of re‑hearing was one in which the learned Judge was entitled (District Court Rules, O 8 r 30(1)) to take other evidence and (O 8 r30(2)) to review findings of fact and draw such inferences of fact as the learned Judge thought fit, with an overriding power to ensure the determination on the merits of the real questions in controversy between the parties. This gave to the learned Judge somewhat wider powers than might normally be exercised by an appellate court conducting a re‑hearing from another court. The right of a re‑hearing from the Tribunal thus involved a broad review of the decision of the Tribunal without there being a fresh hearing at which witnesses were called to testify anew before the appellate court. Close consideration of the way in which the proceedings were conducted by the learned Judge and the manner in which his Honour formulated his reasons indicate that a re‑hearing of this nature was in truth conducted by him. To the extent therefore that his Honour declared that he was conducting a hearing de novo, there was no error, as the hearing constituted a re‑hearing within the meaning of the District Court Rules. In relation to the application for leave to amend the notice of appeal I would grant leave to incorporate ground 1A, but for the reasons which I have given I would dismiss that ground of appeal. I might add that although the amended ground of appeal asserted that the learned Judge was in error in holding that the appeal before him was a hearing de novo, no detailed submissions in support of the ground were made by counsel for the appellant. The only reference in the written submissions of the appellant was to the provision in the District Court Rules providing that an appeal should be by way of re‑hearing.
The dispute before the Tribunal centred around the circumstances in which the respondents had taken a tenancy in the food court section of the Warwick Entertainment Centre ("the Centre") which was a development of the appellant. Some time during the second half of 1992 the second respondent spoke with a man named Steele who was a representative of the appellant. He enquired about the possibility of operating a coffee shop in the food court and the evidence in relation to the conversation was as follows:
"In those discussions you had with Robert Steele, was anything mentioned about a payment of $65,000?---Yes, there was.
MR BARROW: Can you remember the exact words that were said to you?---No, I can't.
Can you remember the gist of the conversation about it?---The gist of it was that to gain entrance to the tenancy there, a payment of $65,000 was required.
Did Mr Steele amplify in any way on the nature of that payment?---He didn't go into a great deal of detail but said it was customary in those sort of centres to get an upfront payment in a good shopping centre to go in.
What was your reaction to that statement by Mr Steele---I wasn't happy about having to pay that money.
It is the fact you paid the money?---I did, yes."
On 22 July 1993 the respondents entered into an agreement for lease with the appellant. By that agreement the appellant agreed to lease to the respondents premises within the food court area of the centre for a term of ten years with two options to renew, each for a period of five years. The Tribunal found that prior to signing the agreement to lease the second respondent had a discussion with a man named Carey in relation to the proposed tenancy. Carey was a director of the appellant, and he gave evidence that he explained to the second respondent that the food court area was being structured so that the tenants of the area would own a share of the plant and equipment in the common area of the food court. Extracts from Carey's testimony are as follows:
"Now the lease and the agreement to lease are in evidence all ready. Could you explain why you decided to structure the food court in the way that you did? Why did you have a $65,000 payment and have provisions giving ownership to the lessee? What was in mind there?---The way I worked that up was that I had calculated, through a number of different methods, industry averages what I thought the food court tenants in total would turnover, what the tenancy of 760 square metres would turnover as an alternative tenancy.
…
So when you say 'occupancy costs' - - ?---Oh, the tenant's occupancy costs that were derived as a consequence of our rental structure, plus the rentalisation of the fitout of the common area. It made more sense to me to in fact have the tenants - - or put together an ownership structure where the tenants themselves could own the fitout, pay for that fitout, and therefore have an asset which was represented by a one‑eighth share of that ownership structure, rather than pay the higher rents. That's what I had designed. That was the basis on which that structure was devised and put together prior to us speaking with any tenant.
With each tenant, including Mr Dove, that was clearly explained to him; the structure. That's the basis we proceeded."
The second respondent was asked whether he was aware of the provisions within the agreement to lease in relation to the share of plant and equipment which he and his partner would acquire and he said:
"Now, you were aware that the agreement to lease contains provisions about $65,000, weren't you?---I was, yes.
Did you seek advice on that aspect?---I did.
Now, in your discussions with people from Warwick, did anyone explain to you what the $65,000 was for, or did you think you were just paying over $65,000 for the sake of it?---I was paying an upfront payment to get into the tenancy.
It was explained to you that you were acquiring some plant and equipment? Was that explained?---Not in the initial stages, no.
Well, what do you mean by the initial stages?---Well, the discussions that I had with Robert Steele who was the first person that I spoke to there didn't explain that it was for acquisition of plant and equipment at that stage.
When was that explained to you?---When we initially - - or after that time we were told that it would be a capital contribution and some time after that - - -
Who told you that?---Initially a Morrie Hill told me who is another tenant - - -
I asked you about Warwick Entertainment Centre, or someone on their behalf, telling you what the $65,000 was for. Now, you have said - - did anyone from Warwick Entertainment Centre tell you what it was for, apart from Mr Steele?---Not that I'm aware of, no.
…
Now, when you read the document and you saw that you were acquiring an eighth share in the plant and equipment, comprising the plant and equipment in the food court area, did you then have a discussion with anyone from Warwick about that matter?---I did discuss it with Rob Steele, yes.
So you knew that you were paying $65,000 in order to obtain a share in some plant and equipment. Is that correct?---I read it in the document but the information I had externally was that it was a veiled way of showing key money.
Mr Steele hadn't told that to you?---Mr Steele didn't tell me that it was key money, no. He told me that there was a payment and if I wanted to get in - - he had other people waiting to go in to take my place. Also, I did my own numbers on it and with payment of that money the business on the projections and the information provided by Warwick on the people throughout would have provided sufficient profitability to amortise that."
Clause 29 of the agreement for lease was headed "Special Conditions" and these conditions related to the contribution of $65,000 which the respondents agreed to make in return for an interest in the plant and equipment to be installed in the food court common area. They were given an undivided one‑eighth share in the plant and equipment and (subject to cl 29.10) had the right at any time during the term of the lease to remove the one‑eighth share of plant and equipment, provided that:
(i)the lessee had the consent to consider all other tenants of the food court area; and
(ii)the lessee promptly made good to the satisfaction of the lessor any damage caused by that removal.
Clause 29.10 gave to the lessor the right of first refusal in the event that the lessee sought to sell, transfer or agreed to sell or transfer or remove from the food court area the whole or any part of its share of the plant and equipment. In the event that the lessor accepted an offer to acquire that share of the plant and equipment, it was obliged to pay the purchase price to the lessee and the lessee was obliged to do all things necessary to transfer title in the lessee's share of the plant and equipment to the lessor. In the event that the offer was rejected the lessee was given the right, within two months of the date of the offer, to remove the lessee's share of the plant and equipment or enter into a contract to sell or transfer it to any other person at a price not less than the purchase price.
The plant and equipment in relation to which the one‑eighth undivided share was acquired by the respondents was listed in a Schedule of Costs provided by the appellant to the respondent and it is convenient to reproduce it.
"WARWICK ENTERTAINMENT CENTRE
SCHEDULE OF COSTS 93/94
| Tenancy No 3 Description Leasehold Improvements | Total Cost of Establishing Food Court | Tenant Apportionment | Landlord Apportionment |
| Architectural & Interior Design | 43,790 | 43,790 | |
| Structural Engineer | 2,386 | 2,386 | |
| Electrical Engineer | 3,477 | 3,477 | |
| Hydraulic Engineer | 2,501 | 2,501 | |
| Partitions | 96,598 | 96,598 | |
| Ceilings and Bulkheads | 49,431 | 49,431 | |
| Hydraulic Services | 17,079 | 17,079 | |
| Electrical Services | 67,095 | 67,095 | |
| Mechanical Services Airconditioning units | 83,320 | 83,320 | |
| Floor Tiling | 57,978 | 57,978 | |
| Furniture - | |||
| Stools | 43,000 | 43,000 | |
| Planters | 10,000 | 10,000 | |
| Umbrellas | 2,500 | 2,500 | |
| Seating entry statement | 6,000 | 6,000 | |
| Memorabilia case and glass screen | 35,000 | 35,000 | |
| Waitress stations | 7,000 | 7,000 | |
| Crockery and cutlery | 8,000 | 8,000 | |
| Scullery | 8,000 | 8,000 | |
| Memorabilia display stand | 4,000 | 4,000 | |
| Memorabilia | 10,000 | 10,000 | |
| Signage | 15,000 | 15,000 | |
| $572,154 | 520,000 | $52,154 " |
It will be observed that the provision in the agreement to lease entitling the respondents to remove their share of plant and equipment in accordance with subcl 29.2 was somewhat curious when regard is had to the fact that the one‑eighth divided share in the plant and equipment included a share in ceilings and bulkheads, hydraulic services, electrical services, floor tiling and the like.
The Tribunal reached a conclusion of fact upon which substantial reliance was placed by counsel for the appellant. It was in these terms:
"9.It is clear from the provisions of Clause 29 of the Lease and the evidence of Mr Carey that it had been the intention of the Respondent that each of the eight tenants would contribute $65,000 to the Food Court area plant and equipment ('the Plant and Equipment') for which they would be entitled to a one‑eighth share interest in the Plant and Equipment."
I shall deal with the importance of this conclusion later in these reasons.
Section 9(1) of the Act is in the following terms:
"(1)Subject to subsection (2), a provision in a retail shop lease to the effect that the landlord or a person claiming through him is entitled to, or may require from the tenant -
(a)any key‑money; or
(b)any consideration in respect of the goodwill of the business,
is void."
The term "key‑money" is defined in s 3 of the Act as follows:
" 'key‑money' means -
(a)money that is to be paid by, or at the request or direction of, a tenant; or
(b)any benefit that is to be conferred by, or at the request or direction of, a tenant,
by way of a premium or something of a like nature in consideration of the granting of, or agreeing to grant, a lease or the renewal of a lease or the consenting to an assignment of a lease or the sub‑leasing of the premises the subject of a lease;"
Section 9(3) of the Act provides:
"(3)Any amount paid or the value of any benefit conferred by a person under a provision of a lease that is void by reason of subjection (1) or (1a) may be recovered by that person from the person to whom the amount was paid or on whom the benefit was conferred in the Tribunal or a court of competent jurisdiction as a debt due."
The Tribunal concluded on the evidence that the respondents had established a prima facie case that the payment of $65,000 was key‑money. It considered that the onus was therefore on the appellant to establish that the payment was a genuine consideration for the purchase of an interest in plant and equipment and held that it was not satisfied that the respondents had received a real benefit by owning a one‑eighth interest in the plant and equipment. It said:
"Certainly it was not worth $65,000 to the Applicants. Accordingly, the payment of $65,000 was not a genuine consideration for the interest in the Plant and Equipment.
The Tribunal considers that the substance and reality of the transaction was that the payment of $65,000 was a premium paid for the granting of the lease of the Premises and was therefore key money under Section 9(1) of the Act."
The learned Judge reviewed the material before the Tribunal and its conclusions. He considered the ramifications of the decision in Whitemore Pty Ltd v O F Gamble Pty Ltd (1991) 6 WAR 110 and concluded that the Tribunal had correctly applied the principles enunciated in that case. His Honour said:
"The correct approach, in my view, is this:
1.Consider the evidence to determine the true nature of the transaction. The agreement itself must be considered, but must be looked at primarily in the light of the evidence and the true nature of the transaction as a whole including any words and acts on the part of those involved before and after the creation of the lease agreement.
2.In consideration of that evidence, it may well appear that a prima facie case has been established for the existence of a premium.
3.If that is the case, the question then is whether the appellant has rebutted the evidentiary burden so arising."
His Honour reviewed the evidence of the second respondent in relation to his discussion with Steele and the evidence in relation to his discussions with Carey and concluded:
"There is an inference clearly open on the evidence that before the lease document was made available for execution by the tenants, he was not told that the $65,000 was a payment for plant and equipment. Once the document was prepared and given to Dove for perusal and signature it may well be that he was told by Corey that the $65,000 was expressed to be for plant and equipment. The cross‑examination of Dove and the evidence of Corey suggests that the request for $65,000 was put in the terms as stated by Dove. Certainly, without any evidence of Dove as to the conversations between Dove and Steele, at the least a prima facie case exists that the proposal was as described by Dove.
In my opinion there was clearly some evidence that the sum of $65,000 was sought by the appellant for the purpose described by the respondent."
His Honour then pointed out that the Schedule of Costs revealed a total cost for the items therein listed of $520,000 in relation to which each of the eight tenants was to be charged an equal share of $65,000. He said that this amount "significantly was that said by Dove to have been mentioned by Steele in 1992 as being the money required to obtain the lease" and considered that when looking at the true nature of the transaction this fact was particularly important. His Honour found that when the agreement was executed in July 1993 there was in contemplation of the parties an amount to be paid for the cost of plant and equipment of no less than $65,000, a figure which was the same as that mentioned by Steele to Dove in 1992 and which ultimately was the amount required to be paid by the letter of 12 August 1993 (which enclosed the Schedule), the calculations having been made on the basis of costs during 1993 and also due to be charged in 1994. His Honour pointed out that cl 29(1)(f) provided for "any other items of plant and equipment of a similar nature to the matters mentioned in the subcl 29(1)" and this, his Honour said, was vague enough to enable the appellant to "create a list of plant and equipment which ultimately could arrive at a figure of $65,000 if it so desired." The essential conclusion reached by his Honour was:
"In my view the creation of the lease agreement in the circumstances had all the hallmarks of an intention on the part of the appellant to legitimise the demand by Steele that the respondent pay a designated sum in order to qualify for the granting of a lease to them. The draftsman of the lease agreement was careful to include a reference to the figure of $65,000 in Clause 29. One may ask why this was thought to be necessary when any reference to the figure might be construed against the landlord. The issue may well be found in the judgment of Pidgeon J in Whitmore (sic), the decision in which was handed down on 9 May 1991. No doubt the draftsman of the lease agreement was aware of the decision and its import. At p126 of Whitmore (sic) Pidgeon J said, 'In my view if there is evidence of a large payment required to be made before a deed is executed and if that payment is not referred to in the deed, that would be sufficient to raise a rebuttable inference that it was a payment of key money within the meaning of the Act'. The inclusion of 'no less than $65,000' appears to me to be a deliberate attempt to avoid the consequences of his Honour's opinion as expressed at p126. In other words, assuming that the lessors were aware of the demand by Steele upon the respondents that the sum of $65,000 be paid before a lease were to be granted, the absence of any reference to that figure in the deed on the basis of Pidgeon J's reasoning, would have been sufficient to raise a rebuttable inference that the payment was of key money within the meaning of the Act. It is possible to conclude in my view that the reference to $65,000 was included in the lease to satisfy any objection which might have arisen as a result of the dicta of Pidgeon J in Whitmore (sic).
In my view the true nature of the transaction in this case was that the $65,000 was to be paid as a premium and that the lease agreement was a sham, intended to convey the impression that the $65,000 was being paid for the purchase of plant and equipment. I doubt whether the appellant and respondents were ad idem in relation to the preparation and contents of the agreement and it is the case in my view, that the respondents, being anxious to obtain and occupy the premises, were to some extent prepared to sign a document which may not have reflected the true arrangement between them. In my view there is a clear basis to find that the document represented an arrangement which was different to that which was proposed originally by the appellant (through Steele at least) and the respondents.
This being so, there was in my view a clear prima facie case that the payment was a premium and therefore amounted to key money within the provisions of s9(1) of the Act."
In accordance with his Honour's interpretation of the decision in Whitemore (supra), he concluded that the appellant was required to rebut the existence of a premium and held that there was little, if any, evidence on the part of the appellant to rebut the inference that the $65,000 was key‑money. His Honour held that the evidence suggested strongly that a long time before the creation of the lease agreement "there was an arrangement involving the respondents having little alternative but to pay the sum of $65,000 and that if they did not, a lease would not be forthcoming". For these reasons the learned Judge concluded that the Tribunal was correct in its view that the sum of $65,000 was key‑money.
The appellant's notice of appeal contains many grounds, but essentially contends that the learned Judge erred in law in his determination that the Tribunal was correct in categorising the $65,000 payment as key‑money. Various particulars are appended to each ground of appeal which it is unnecessary to repeat. The appellant basically contests each and every finding of the learned Judge and contends that on the whole of the evidence it was not open to either the Tribunal or the learned Judge to reach the conclusion that the $65,000 was key‑money. The grounds of appeal also contend that the learned Judge misinterpreted the "approach in Whitemore's case on the issue of prima facie case". There is a contention that the learned Judge erred in law and in fact by in substance applying the rule in Jones v Dunkel against the appellant in circumstances where it was not expected that the appellant would call Steele as a witness and further, or alternatively, in circumstances where Steele's absence had been explained. A further ground of appeal contends that the learned Judge erred in law in finding that it was a material matter that the lease documentation referred to a sum payable of "not more than $65,000" and in finding that the express reference to payment was intended to be a deliberate attempt to avoid the consequences of the view expressed by Pidgeon J in Whitemore's case. It is contended that the appellant was denied procedural fairness in that the learned Judge upheld the decision of the Tribunal on the basis of grounds and findings of fact which were not made or relied upon by the Tribunal and (finally) it is contended that the learned Judge erred in concluding that the agreement for lease was "a sham" when the Tribunal had made a clear finding that the appellant intended the agreement for lease to be given effect to.
The grounds of appeal are so prolix that I have set out only the essential features of them. It is convenient to deal with the grounds of appeal in the order in which they were argued by counsel for the appellant and as they are contained within the extensive outline of submissions of the appellant.
The first ground of appeal concerns the proper construction of cl 29 of the agreement for lease. The appellant argues that by cl 29 the respondents obtained an undivided eighth interest in the plant and equipment listed in the Schedule. The point is made that co‑ownership of property may exist and take the form of a joint tenancy or a tenancy‑in‑common and that the appellant was entitled at law to create and dispose of an undivided one‑eighth interest in the plant and equipment as expressly provided for in cl 29.2(b). The acquisition of that interest was said to be supported by valuable consideration and was recorded in a deed. Clause 29.10 gave to the appellant a valid and enforceable right of first refusal in relation to the respondents' undivided one‑eighth share of the plant and equipment and it was argued that the holder of an undivided interest in property may grant such a right of first refusal without the consent or approval of other co‑owners. Clause 29.10(a) ‑ (d) was said to expressly and unambiguously create the appellant's right of first refusal on terms and conditions which were certain. It was further argued that the appellants were entitled to transfer or sell their undivided one‑eighth share in accordance with the provisions of cl 29.2(c)(i) and cl 29.10(e)(ii). This provision was said to constitute an agreement as between the appellant and respondents to the effect that the respondents could agree with the other tenants of the food court area to the plant and equipment being divided in specie between them, agreement being necessary both to a division in specie occurring and also the manner and terms of that division: cl 29.10(e)(i). It was further put that when the agreement was entered into the appellant and respondents clearly contemplated that each tenant in the food court area would obtain an undivided interest in the plant and equipment (cl 29.2(a)) but if, as in fact occurred, a tenant did not obtain an interest in the plant and equipment it was an implied term that the requirement under cl 29.2(c)(i) to obtain the consent of all other tenants of the food court area would apply only to those other tenants who in fact had an interest in the plant and equipment. In respect of this latter submission reliance was placed upon the decision in Vickery v Waitaki International Ltd [1992] 2 NZLR 58 where (at 64) Cooke P said:
"It has been said that there are varieties of implications in contracts, that they are categories or shades in a continuous spectrum: see Liverpool City Council v Irwin [1977] AC 239, 253‑254 per Lord Wilberforce. Discussions of the subject are legion, and it may be doubted whether tabulated legalism will ever produce an exhaustive or a rigidly discrete classification. But three broad classes are obviously terms implied by rules of law in certain kinds of contract (eg sale of goods), terms deduced by implication or interpretation from the express terms of the contract, and terms held to be implied to give business efficacy to the contract - which is a short way of referring to the kind of case under consideration in the Devonport and BP (Westernport) cases cited earlier. As already mentioned, it was the latter class on which the argument and judgment in the High Court were primarily concentrated; but it is the class concerned with what is implicit in the actual language of the contract which appears to me to call for first consideration in this case."
By way of final submission in relation to the agreement, it was argued for the appellant that independently of the agreement the respondents (and indeed any other owner of an undivided interest in the plant and equipment) could obtain a division by agreement between all co‑owners or alternatively by an order for division under s 129 of the Property Law Act 1969 (subject to the application being made by persons together holding interests to the extent of a half‑share or upwards.) All of these submissions may be accepted in general terms. The question which remains, however, is whether cl 29 of the agreement constituted a sham. Although counsel for the appellant argued that the $65,000 was not key‑money because it was paid to obtain a proprietary interest in the plant and equipment, and in form and substance the agreement provided for the disposition of and acquisition of that interest, the payment still begs the question whether the agreement was in truth for the genuine disposal and acquisition of that undivided one‑eighth interest or whether it constituted a sham to disguise a payment which was in fact key‑money.
In addressing the question whether the agreement was a sham, counsel for the appellant rightly pointed out that for a document to constitute a sham all parties to it must have a common intention that the document is not to create the legal rights and obligations which it gives the appearance of creating. It was argued that in this case the agreement constituted a contract in which the parties were at arms length. Reliance was placed upon evidence of the second respondent that he had obtained advice from solicitors in relation to it. Reference was made to the test formulated by Lockhart J in Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 where (at 453 ‑ 455), his Honour said:
"A 'sham' is therefore, the for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive."
Counsel relied in particular upon references by Lockhart J (at 455) to transactions which may in themselves be legally effective, although intended to achieve an unacceptable purpose:
"The transactions may in themselves be legally effective although intended to achieve an inacceptable purpose. In Miles v Bull (supra) Megarry J said (at 264):
'A transaction is no sham merely because it is carried out with a particular purpose or object. If what is done is genuinely done, it does not remain undone merely because there was an ulterior purpose in doing it.'
Megarry J went on to observe (at 264) that in the context of determining whether a sale of property was a sham so as to allow a defence to an action for possession that:
'mere circumstances of suspicion do not by themselves establish a transaction as a sham; it must be shown that the outward and visible form does not coincide with the inward and substantial truth'.
The characterisation of a sham adopted by Megarry J in Miles v Bull is consistent with that adopted by Windeyer J in Scott's case at 279, in the passage which I cited above. Following a thorough review of the earlier authorities, Windeyer J there defined the issue as whether the parties who entered the ostensible transaction
'… mean it to be in truth their transaction, or did they mean it to be, and in fact use it as, merely a disguise, a façade, a sham, a false front - all these words have been metaphorically used - concealing their real transaction …' "
Lockhart J qualified Windeyer J's definition of a sham in Scott v Commissioner of Taxation (Cth) (No 2) (1966) 40 ALJR 265 (at 279) by saying (at 456):
"Windeyer J in Scott's case gave some support to a purposive characterisation of a sham in describing a sham as 'a mere facade behind which activities might be carried on which were not really directed to the stated purposes but to other ends'. It is doubtful that his Honour intended this description to function as a definition of a sham which might operate apart from the other characteristics to which he referred."
In Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1, Heerey J (at 129) accepted the formulation of Lockhart J in Sharment Pty Ltd v Official Trustee in Bankruptcy as authority on the concept of sham:
"It is said that the option agreement was a sham. There is much authority on the concept of sham but it is sufficient if I refer to what was said by Lockhart J in Sharment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 454:
'A "sham" is therefore for the purposes of Australian law, something that is intended to be mistaken for something else, or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive.'
As Turner J said in Paintin & Nottingham Ltd v Miller [1971] NZLR 164 at 175:
'The word "sham" is well on the way to becoming a legal shibboleth; on its mere utterance it seems to be expected that contracts will wither like one who encounters the gaze of a basilisk. But by a "sham" is meant, in my opinion, no more or no less than an appearance lent by documents or other evidentiary materials, concealing the true nature of a transaction, and making it seem something other than what it really is.' "
In the present case, it seems clear to me that both the Tribunal and the learned Judge (although not saying so in precise terms) were of the view that the appearance lent by the agreement for lease concealed the true nature of the transaction between the appellant and respondents and made it seem something other than what it really was. For the reasons expressed by the learned Judge in which he concluded that the creation of the lease agreement had all the hallmarks of an intention on the part of the appellant to legitimise the demand by Steele, it was, in my view, open to his Honour to conclude that the document was in truth a sham within the meaning of the accepted definition of that concept.
Much reliance was placed upon counsel for the appellant upon the conclusion of the Tribunal that "it had been the intention of the respondent that each of the eight tenants would contribute $65,000 to the food court area, plant and equipment for which they would be entitled to a one‑eighth share interest". Counsel sought to elevate this conclusion to one which was binding upon the learned Judge and one which by reason of its terms was a conclusion that the agreement for lease was not a sham but a contract between the parties made at arms length in pursuance of which, both in form and substance, the appellant disposed of and the respondents acquired an undivided one‑eighth interest in the plant and equipment. However, in my view the conclusion of the Tribunal upon which such reliance is placed still begs the question whether the agreement for lease was a sham. It may well have been the intention of the appellant to seek by the agreement to effect the transfer of the one‑eighth interest in the plant and equipment, but (as the Tribunal in fact found) it was still necessary to consider whether the respondents received a real benefit by owning a one‑eighth interest in that plant and equipment. The Tribunal found as a fact that the interest was not worth $65,000 to the respondents and that the payment of $65,000 was not a genuine consideration for the interest in the plant and equipment. The substance and reality of the transaction was considered to be a payment of $65,000 as a premium for the granting of the lease. Further, and in any event, the learned Judge was entitled to review any finding of fact of the Tribunal and to draw such inferences of fact as he saw fit in order to ensure "the determination on the merits of the real questions in controversy" and in no sense was his Honour bound by the conclusion of the Tribunal even if it be given the character urged for by counsel for the appellant.
What told against the appellant in relation to the transaction was the evidence of the second respondent that Steele had told him that "it was customary in those sorts of centres to get an upfront payment in a good shopping centre to go in". This evidence was uncontradicted and if (as it was) accepted by both the Tribunal and the learned Judge as the fact of what was said, it coloured the whole transaction from beginning to end. It is not to the point to argue that Carey may have sought to provide within the agreement for lease for ownership by the respondents of a portion of the plant and equipment if in truth at all relevant times the agreement for lease was merely a document which concealed the true nature of the transaction and made it seem something other than what it really was. That was the unequivocal conclusion reached by the Tribunal and the trial Judge, and in my view it is a conclusion which should not be disturbed.
It is unnecessary to deal with the appellant's challenge to the Tribunal's understanding and application of the decision in Whitemore Pty Ltd v O F Gamble Pty Ltd (supra). On the face of it, I can see nothing in the reasons of the Tribunal to suggest that it misunderstood the reasoning of the majority. The learned Judge clearly understood it and correctly applied it. The following passage from the judgment of Malcolm CJ in that case (at 119 ‑ 120) is entirely apposite to the present case:
"It is in these circumstances that the characterisation of the payment of the $150,000 as an 'option fee' simply begs the question. As an option fee it was paid as consideration for the inclusion in the lease of the right or option of renewal. That provision constituted a conditional contract to grant a new lease for a further term of eight years. That conditional contract constituted the deed of variation itself a lease within the extended definition of 'lease' in the Act. In my opinion it necessarily follows that the $150,000 was paid 'in connection with' the grant or renewal of a lease. Alternatively the sum was paid 'for' the variation by the inclusion of the option or right of renewal, but 'in connection with' the renewal of the existing lease by way of a grant of a further lease: cf Berry v Commissioner of Taxation (Cth) (1953) 89 CLR 653 at 658‑659, per Kitto J. On either view given that the rent being paid was, on the face of it, a fair market rent, the 'option fee' was a capital sum in addition to that rent. In its ordinary meaning a premium is an amount paid in addition to rent: cf Shorter Oxford Dictionary and Elmdene Estates Pty Ltd v White. The paradigm case of the ordinary meaning is an amount paid by way of a capital sum over and above the market rent. In my opinion, on the evidence before him in this case, the learned Commissioner was clearly entitled to conclude that the $150,000 paid for the grant of the option or right of renewal was a premium and, consequently, 'key‑money'. In this respect I agree with the analysis of the evidence in the judgment of Pidgeon J. The circumstances surrounding the payment strongly suggest that it was a premium. If it was for some other genuine consideration the appellant had an evidentiary burden to displace the prima facie position established on the case of the respondent."
After a full review of the case the learned Judge pointed out that "quite correctly … the respondents (and the Tribunal) relied upon the dicta in Whitemore (supra) ie that the substance in reality of the transaction must be looked at not simply its form". His Honour went on to refer to the judgment of Pidgeon J (at 126) where his Honour stated that if there was evidence of a large payment required to be made before a deed was executed, and if that payment was not referred to in the deed, that would be sufficient to raise a rebuttable inference that it was a payment of key‑money within the meaning of the Act. The learned District Court Judge then said:
"The inclusion of 'no less than $65,000' appears to me to be a deliberate attempt to avoid the consequences of his Honour's opinion as expressed at p126. In other words, assuming that the lessors were aware of the demand by Steele upon the respondents that the sum of $65,000 be paid before a lease were to be granted, the absence of any reference to that figure in the deed on the basis of Pidgeon J's reasoning, would have been sufficient to raise a rebuttable inference that the payment was of key money within the meaning of the Act. It is possible to conclude in my view that the reference to $65,000 was included in the lease to satisfy any objection which might have arisen as a result of the dicta of Pidgeon J in Whitmore (sic)."
Counsel for the appellant contended that the learned Judge erred in law and in fact in reaching this conclusion. It was claimed that his Honour had misapplied the words of Pidgeon J and incorrectly inferred from them that if a deed itself recorded the payment in question, this was evidence of a deliberate attempt to avoid the consequences of the Act. I do not read his Honour's observations in that way at all. Rather, his Honour seems to have been making but an observation that the very use of the words "no less than $65,000" gave the appearance of the deliberate attempt to avoid the consequences of what Pidgeon J had said in the Whitemore case. The conclusion was, in my view, open to the learned Judge and I do not consider that there was any denial of procedural fairness to the appellant in consequence of his Honour reaching that conclusion. Neither this, nor in my view any other conclusion reached by the learned Judge, required as a matter of procedural fairness that the appellants needed to make any submissions on the subject. The Whitemore case was fully canvassed in the course of the Tribunal's reasons and the case appears to have been fully articulated before his Honour, as is evident from the extensive reference to the case in his Honour's reasons for judgment. The appellant's proposition need only be tested by asking the question what more the appellant could have done in relation to the conclusion reached by the learned Judge had it been given the opportunity to specifically argue the ramifications of that conclusion. It is clear that all that the appellant could say is what it says now. That is, that it is not open to conclude that reference to a payment of "not more than $65,000" in the lease documentation was intended to be a deliberate attempt by the appellant to avoid the consequences of the view expressed by Pidgeon J in the Whitemore case.
In the course of his reasons the learned Judge placed considerable emphasis on the fact that the second respondent's evidence that Steele had advised him that "a payment of $65,000 was required to gain entrance to the tenancy" was not contradicted by evidence from the appellant and Steele was not called to give any evidence to contradict that of the second respondent. As I have already pointed out, the evidence of the second respondent was not quite that Steele had advised him that "a payment of $65,000 was required to gain entrance to the tenancy". What he said was that "the gist of it was that to gain entrance to the tenancy there, a payment of $65,000 was required". The difference is, however, insignificant. The essential aspect of the second respondent's evidence was that Steele had told him that it was customary in "those sort of centres to get an upfront payment in a good shopping centre to go in".
Counsel for the appellant contends that the learned Judge erred in law and in fact by in substance applying the rule in Jones v Dunkel (1959) 101 CLR 298 against the appellant in circumstances where it was not to be expected that the appellant would call Steele as a witness and, further, or alternatively, in circumstances where Steele's absence had been explained. It is true that there was evidence from Carey that Steele no longer worked for the appellant and had left two or three years beforehand. Carey was unaware of where he was at the time of trial and testified that there had been "some court disputes" with him in relation to a particular matter at least. This led counsel for the appellant to rely upon what was said about Jones v Dunkel by Glass JA in Payne v Parker [1976] 1 NSWLR 191 at 201 ‑ 202:
"(6)Whether the principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained.
(7)The first condition is also described as existing where it would be natural for one party to produce the witness: Wigmore, par 286, or the witness would be expected to be available to one party rather than the other: O'Donnell v Reichard, or where the circumstances excuse one party from calling the witness, but require the other party to call him: ibid, or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him: ibid, Regina v Burdett, or where the witness' knowledge may be regarded as the knowledge of one party rather than the other: Earle v Castlemaine District Community Hospital, or where his absence should be regarded as adverse to the case of one party rather than the other: ibid. It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary: ibid. If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so: ibid. Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman: Café v Australian Portland Cement Pty Ltd; his safety officer: Earle v Castlemaine District Community Hospital; his accountant: Steele v Mirror Newspapers Ltd; his treating doctor: O'Donnell v Reichard.
(8)According to Wigmore, par 285, the second condition is fulfilled where the party or his opponent claims that the facts would thereby be elucidated. Under other formulations, the condition is made out when the witness is presumably able to put a true complexion on the facts: Jones v Dunkel, might have proved the contrary: ibid; would have a close knowledge of the facts: O'Donnell v Reichard, or where it appears that he had knowledge: Nuhic v Rail & Road Excavations. I would think it insufficient to meet the requirements of principle that one party merely claims that the missing witness has knowledge, or that, upon the evidence, he may have knowledge. Unless, upon the evidence, the tribunal of fact is entitled to conclude that he probably would have knowledge, there would seem to be no basis for any adverse deduction from the failure to call him.
(9)The third condition is satisfied if no explanation is offered for the absence of the witness, or the tribunal thinks that the explanation given is unsatisfactory. The explanation tendered may be that the witness is ill, overseas, dead or refuses to waive his privilege: Wigmore, par 286."
The learned Judge did not in the present case refer to Jones v Dunkel, although by inference it might be said that he had the principles enunciated in the case in mind when reference was made to the failure to call Steele. His Honour seems to me to have merely stated that the second respondent's critical evidence on the subject of what Steele said was not contradicted by any evidence adduced at the hearing. His Honour made the point that Steele was not called to give evidence, which was of course the fact. There is no doubt in my mind that Steele was a witness who might have been expected to be called by the appellant rather than by the respondents. His evidence would certainly have elucidated what was said before the execution of the agreement for lease about the purpose of the $65,000 payment; and although his absence was explained to some extent, there was nothing in the evidence of Carey to suggest that he could not have been summoned to the court by subpoena, irrespective of what court dispute or disputes he may have had with the appellant. As I have already pointed out, it was the uncontradicted evidence of the second respondent as to what Steele had told him prior to any consideration of an agreement for lease which left it open to both the Tribunal and the learned Judge to conclude that the $65,000 was paid as a premium and the lease agreement was a sham intended to convey the impression that the $65,000 was being paid for the purchase of plant and equipment. When regard is had to the whole nature of the transaction, and in particular to the Schedule of plant and equipment; to the unreality of the acquisition of a one‑eighth undivided share in it; and to the unreality of the respondents ever being able to remove that share of the plant and equipment, the conclusions reached by both the Tribunal and the learned Judge are fully sustainable.
It remains only to consider the ground of appeal which asserts that the finding of the learned Judge was contrary to the findings of fact made by the Tribunal in relation to the evidence of Carey that "it had been the intention of the respondent that each of the eight tenants would contribute $65,000 to the food court area plant and equipment for which they would be entitled to a one‑eighth share interest in the plant and equipment". I have already pointed out that this conclusion needs to be read in the context of the Tribunal's own finding in relation to the second respondent's testimony about Steele's statement that it was necessary to make an upfront payment to get into the centre. However, counsel for the appellant contends that the learned Judge overturned the Tribunal's finding in relation to the testimony of Carey without having had the opportunity of seeing, hearing or evaluating the witness and without any proper justification. Reliance was placed upon the decision in Devries v Australian National Railways Commission [1993] 177 CLR 472 where (at 479) Brennan, Gaudron and McHugh JJ said:
"More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his advantage' or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'."
In my view the learned Judge did not in this case set aside a finding of fact based on the credibility of a witness. What his Honour did was place reliance upon the uncontradicted evidence of the second respondent as to what Steele had told him - that and no more. I have already pointed out that the Tribunal's conclusion in relation to Carey must be read in light of what the second respondent said in relation to what Steele had told him.
The submissions made on behalf of the respondent were concise. Counsel for the respondent supported the decision of the learned Judge on the basis that his Honour had correctly applied the principles of law enunciated in Whitemore and had looked at the true nature of the transaction and rightly concluded that it was a sham. Reference was made to Van Den Bergh v Clever Management Pty Ltd, unreported; FCt SCt of WA; Library No 970319; 20 June 1997, a case in which a provision in a deed of lease assigned by a deed of assignment requiring the payment of base rent was declared void under the provisions of s 9 of the Act. White J (with whom Pidgeon and Parker JJ agreed) said in relation to the facts in the case before him:
"The submission that, the parties having agreed that base rent was part of the rent, the court cannot contradict the words used by the parties is unsupported by authority and, in my opinion, is clearly wrong. It cannot be thought that such a transaction which is rendered void by the terms of a statute can escape such fate simply be being given a different name in the deed. If what is called 'Base Rent' in the Lease is, in fact, key money, describing it as 'rent' cannot, in my judgment, alter its true character. It was pointed out by Commissioner Anderson QC (as he then was) in O F Gamble Pty Ltd v Whitemore Pty Ltd (1990) 2 WAR 327 at 331 that:
'There is ample authority for the proposition that, in applying rental control legislation to any particular transaction, what must be looked at is the substance and reality of the transaction, not its form: Samrose Properties Ltd v Gibbard [1958] 1 WLR 235; Elmdene Estates Ltd v White [1960] AC 528.' "
Counsel for the respondents contends that what was said in Van Den Bergh v Clever Management Pty Ltd (supra) can be applied directly to the facts of the present case, and with that general submission I agree.
For the reasons which I have given I would dismiss the appeal on all grounds.
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