Wilde and Smith
[2008] WASAT 310
•30 DECEMBER 2008
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)
CITATION: WILDE and SMITH [2008] WASAT 310
MEMBER: MR C RAYMOND (SENIOR MEMBER)
HEARD: 5 SEPTEMBER 2008
DELIVERED : 30 DECEMBER 2008
FILE NO/S: CC 825 of 2007
BETWEEN: ANNE MARIA WILDE
Applicant
AND
BARRY SMITH
LYNN SMITH
Respondents
Catchwords:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) Application to strike out particular claims under s 47(1) and s 48 of the State Administrative Tribunal Act 2004 (WA) Claims reliant on implications of terms relating to fitness for purpose and repair obligation
Legislation:
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 12(1)(a), s 12(3)
State Administrative Tribunal Act 2004 (WA), s 9, s 47, s 47(1), s 48
Result:
Application dismissed
Category: B
Representation:
Counsel:
Applicant: Mr AJ Aristei
Respondents : Mr JCW Skinner
Solicitors:
Applicant: Lawton Gillon
Respondents : Jackson McDonald
Case(s) referred to in decision(s):
Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264
Ambrus and Churches of Christ Homes & Community Services Incorporated [2006] WASAT 141
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20
Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272
Casey v Aldous (1994) 63 SASR 347
City of Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146
Codelfa Constructions v State Rail Authority of New South Wales (1982) 149 CLR 337
Edler v Auerbach [1950] 1 KB 359
General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125
Hill v Harris [1965] 2 QB 601
Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381
Liverpool City Council v Irwin (1976) QB 319
Progressive Mailing House Pty Ltd v Tabarli Pty Ltd (1985) 157 CLR 17
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
In this matter, the Tribunal dealt with an application by the respondent under s 47 and s 48 of the State Administrative Tribunal Act 2004 (WA) to strike out allegations made in proceedings for the implication of terms as being necessary in order to give business efficacy to the lease and in particular the business to be operated at the leased premises.
The Tribunal accepted that legal authority established that the mere letting of premises does not give rise to any implied term that the premises are fit for any particular purpose and that a landlord has an obligation to put the demised premises into repair at the commencement of the tenancy or to keep the premises in a state of repair during the continuance of the tenancy.
However, the Tribunal held that there is a distinction between an implied term necessary to give business efficacy as a question of fact to a particular contract as alleged in these proceedings and an implied term which is a legal incident of a particular class of contract. The Tribunal noted that, following Progressive Mailing House Pty Ltd v Tabarli Pty Ltd (1985) 157 CLR 17, in which the High Court held that ordinary principles of contract law apply to leases, there have been cases in which the courts have applied to leases the general criteria on which terms are to be implied as a matter of fact rather than as a legal incident into a contract, as set out in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20.
The Tribunal held that a decision to dismiss particular claims as lacking in substance is one that should only be taken after very careful consideration and that, in order to strike out a claim, it should be demonstrated that it is so obviously untenable that it cannot possibly succeed or is manifestly groundless, or that it discloses a case which the Tribunal is satisfied cannot succeed.
The Tribunal had taken the unusual course of requiring the applicant to file pleadings in the form of a properly particularised particulars of claim because of ongoing difficulties which the applicant had in formulating a claim in any sensible way. The Tribunal observed that its usual procedures which required the filing of a statement of issues, facts and contentions together with a bundle of all relevant documents, meant that, in an ordinary case in which an application was made to strike out a particular claim or claims, the Tribunal would have more information before it than a court would have in considering a strike out application. Because the Tribunal was required to act as speedily and with as little formality and technicality as is practicable, and minimise the costs to the parties, the Tribunal observed that the case should not be allowed to proceed without further consideration being given to how the applicants intended to establish at a final hearing the circumstances necessary to take the case out of the ordinary landlord and tenant relationship, and support the alleged implied terms based on business efficacy. The Tribunal stated that, unless this was addressed, both parties might be put to a not inconsiderable expense based on the technicality of pleading principles which would be contrary to the objectives of the Tribunal set out in s 9 of the State Administrative Tribunal Act 2004 (WA).
Relief sought
The respondents (landlord) have applied for orders striking out particular paragraphs of the applicant's (tenant's) claim under s 47(1) and s 48 of the State Administrative Tribunal Act 2004 (WA) (SAT Act). The bases upon which the criticisms are advanced are detailed below.
The strike out application was set down for hearing on 5 September 2008 at the same time as an application by the tenant for a trial of separate issues. The breadth of the strike out application required that it be dealt with first, and consequently, the application for the trial of separate issues was ordered to be held over until the strike out application was determined. The parties were provided with an opportunity to file further written submissions in relation to the strike out application and the decision on that application was reserved with effect from the date on which the last submission was filed, being 3 October 2008.
The strike out application originally also included criticisms of the claim on the grounds that necessary particulars had not been provided. On 4 September 2008, the day prior to the oral hearing, the tenant filed further and better particulars of claim. As a consequence, the landlord abandons one aspect of the strike out application and reserves the right to renew, on the same or similar grounds, criticisms of paragraphs relating to the quantum of damages, as the formulation of the damages claim may be affected by the strike out application.
Background and history of the proceedings
In February 2005, the tenant purchased a bakery, café and tearoom business known as the 'York Village Bakehouse and Tearooms' (business). The lease then existing was renewed, varied and assigned to the tenant with effect from 21 April 2005, for a term terminating on 20 April 2008, but incorporating an option to renew for a further five‑year period thereafter.
It is evident that the relationship between the landlord and tenant broke down, resulting in the lease being terminated.
On 24 May 2007, the tenant lodged an application with the Tribunal seeking unspecified compensation for expenses said to have been incurred arising from the need to undertake structural repairs to comply with health requirements. The supporting documentation was insufficient to enable sense to be made of the application. The Tribunal issued directions over a period of time in an attempt to clarify the basis of the application and referred the matter to mediation. The mediation was unsuccessful and unfortunately the basis of the application had by then become even more confused.
When the tenant first made application to the Tribunal, she was not legally represented. Subsequently, she engaged her current solicitors. In an attempt to obtain greater clarity as to the basis on which any claim was to be advanced, the Tribunal took the unusual course of issuing directions on 20 December 2007 requiring that the tenant file a properly pleaded particulars of claim (POC). The POC was filed on 15 February 2008. Thereafter, the matter progressed slowly through the various stages of discovery (which was necessary, given the nature of the case), inspection and the provision of further particulars, all of which was made more difficult by the tenant having since relocated to Tasmania and having to give instructions at a distance. Ultimately, the tenant made application for the trial of separate issues aiming to have the issue of liability determined first. While the landlord was not opposed in principle to that course, the application was considered to be premature because the criticisms raised in the strike out application went to the heart of the tenant's claims and so it was submitted that the strike out application be first determined.
The POC
Relevantly, and in summarised form, the POC includes the following allegations.
It is alleged in POC (3) that the tenant entered into an agreement for lease with the landlord by an agreement in writing dated 15 April 2005 (lease). The documents comprising the agreement for lease are fully particularised. In POC (4), it is alleged that the lease is a retail shop lease and again full particulars are provided to support that allegation. The lease is in respect of the land described in POC (2) (premises).
A number of material allegations then follow, which are the subject of criticism.
In POC (6), it is alleged that it was an implied term or covenant of the lease that the premises would be reasonably fit for the purposes of conducting the business as earlier described (business). Particulars of the allegation are provided and are to the effect that the implied term was:
i)necessary to give business efficacy to the lease of commercial premises, particularly the business;
ii)reasonable in its nature and in the circumstances;
iii) so obvious that it was not required to be expressed in the written terms of the lease; and
iv)otherwise consistent with the written terms of the lease.
In POC (7), it is alleged further, or alternatively, that it was an implied term that the premises were, or alternatively would be, structurally sound at the commencement of the lease. The same particulars are provided as under POC (6).
In POC (8), it is alleged that, alternatively, it was an implied term that the premises were, or alternatively would be, in good repair at the commencement of the lease. The same particulars are provided as under POC (6).
In POC (9), it is alleged that further, or alternatively, it was an express term of the lease that the landlord was responsible for all structural maintenance and repairs of the premises. The same particulars are provided as under POC (6).
Thereafter, allegations are made relating to the tenant's entitlement to the quiet use and enjoyment of the premises, the existence of a statutory implied term of the lease relating to the inability to recover outgoings and then various breaches of the implied terms are pleaded. It is alleged in POC (18) that, in breach of the statutorily implied term or covenant of the lease, the landlord recovered outgoings from the tenant that were not expenses incurred in operating, repairing or maintaining the premises. Particulars of this allegation were provided on 4 September 2008, but the landlord maintains the strike out application in respect of this paragraph because it is alleged that the particulars provided to not relate to the subject matter of POC (18).
In POC (23), it is pleaded that further, or alternatively, the landlord's acts or omissions in breaching the terms of the lease referred to in POC (6) ‑ POC (10), or either of them and by the landlord's unlawful termination of the lease (as earlier pleaded) constituted repudiatory conduct and the tenant elected to terminate the lease on grounds of such repudiation, and vacated the premises on 28 October 2007. In POC (24), allegations are made concerning loss and damage suffered as a result of the breaches of lease and repudiatory conduct. Some particulars of loss and damage are pleaded in POC (24A) ‑ POC (24C), which were supplemented by the further particulars provided on 4 September 2008. The landlord, while maintaining its objection to the adequacy of the particulars, now accepts that it is appropriate that its criticisms be dealt with following the termination of the strike out application in respect of certain of the alleged implied terms.
The grounds for striking out
Fit for purpose ‑ POC (6)
The landlord refers to the City of Subiaco v Heytesbury Properties Pty Ltd (2001) 24 WAR 146 (Heytesbury) at 155 as authority for the proposition that the letting of premises does not give rise to any implied term that the premises are fit for any particular purpose. In Heytesbury, Ipp J considered a submission for the City of Subiaco that the mere letting of the premises for a particular purpose did not give rise to an implied term that the premises could be lawfully used for that purpose. The point was considered in the context of an appeal against the conclusion of the Judge at first instance that the term was to be found in the proper construction of the clause for quiet enjoyment. The quiet enjoyment clause was construed as entitling the lessee to the quiet enjoyment of the premises for the purposes of conducting a manufacturing business. Justice Ipp rejected that reasoning, relying on Hill v Harris [1965] 2 QB 601 (Hill) at 615 ‑ 615 and Edler v Auerbach [1950] 1 KB 359 (Edler) at 373/4. His Honour held that, as stated by Devlin J in Edler (at 374), '(i)t is the business of the tenant, if he does not protect himself by an express warranty, to satisfy himself that the premises are fit for the purpose for which he wants to use them'.
The tenant submits that Heytesbury 'merely ruled that no inference could be drawn from the express terms of the relevant lease' and did not address whether a term could be implied as a matter of business efficacy, relying on Liverpool City Council v Irwin (1976) QB 319 (Irwin); Codelfa Constructions v State Rail Authority of New South Wales (1982) 149 CLR 337 (Codelfa) at 347 and BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26 (BP Refinery). The tenant also refers to Carbure Pty Ltd v Brile Pty Ltd [2002] VSC 272 at 2 (Carbure) as a recent example of the court applying the general criteria set down in BP Refinery for the implication of terms in respect of a lease.
The landlord contends that the terms in question cannot be implied in fact, by reference to over one hundred years of settled case law in which, as a matter of law, the courts have refused or declined to imply such terms in fact.
There is a distinction between an implied term necessary to give business efficacy to a particular contract and an implied term which is a legal incident of a particular class of contract: see Codelfa at 345 and the discussion in Cheshire and Fifoot's Law of Contract, 8th Australian Edition, LexisNexis Butterworths 2002 at par 10.50 and par 10.55. As Cheshire and Fifoot discussed, generic terms implied by law in contracts of a particular class are 'the legal incidents of a particular class of contract'. Examples of the classes of contract are given, being sales and leases of land and goods, sales of business, mortgages, guarantees, insurance, employment contracts, building and construction contracts, contracts for labour and materials, contracts of carriage and others (at par 10.50).
In Progressive Mailing House Pty Ltd v TabarliPty Ltd (1985) 157 CLR 17, the High Court held that the ordinary principles of contract law apply to leases. Consequently, in Carbure, in which Balmford J had to consider whether a lease contained an implied term requiring the landlord to repair and maintain the structure of the demised premises, the court examined whether the ordinary principles of contract law relating to the implication of conditions into a contract can, in the face of the traditional approach of the common law, be applied so as to allow the implication into a lease of the particular term. The court referred to Karaggianis v Malltown Pty Ltd (1979) 21 SASR 381 (Malltown) and Advance Fitness Corp Pty Ltd v Bondi Diggers Memorial & Sporting Club Ltd [1999] NSWSC 264 (Bondi Diggers). In Karaggianis, the issue was whether or not a term could be implied into a lease that the landlord would not, during the term of the lease, vary or withhold certain facilities. In Bondi Diggers, the issue was whether or not a term could be implied into a lease that the landlord was required to consent to certain repairs. In Bondi Diggers, Austin J concluded, after consideration of various authorities, that:
Therefore, as I understand the law, it is permissible and necessary for the Court, where the parties to a lease are in a commercial contractual relationship such as they are in the present case, to consider whether any implied term arises under the principles applicable to commercial contracts, rather than limiting its attention to the applied covenants recognised by the law of landlord and tenant.
Balmford J observed in Carbure at (18) that, in each of the above two cases, there was a commercial relationship between the parties involving agreement on matters beyond the normal purview of a simple landlord and tenant relationship, which was not so in the matter under consideration. After considering a number of cases and texts, His Honour stated, at (29), that:
… I would have some doubt as to whether under the law of Victoria, it is possible to imply into a simple lease, where there is no relationship between the parties other than that of landlord and tenant, an obligation on the landlord to repair and maintain the structure of the leased premises. However, assuming for the present, without deciding, that such a covenant can be implied into the lease, the question then is whether such an implication is possible in this case, having regard to the ordinary principles of contract law.
His Honour then went on to consider the five criteria for the implication of the term as summarised in BP Refinery and concluded that there was no room for the implication of the term.
In this case, the tenant has not pleaded any relationship other than that of landlord and tenant. However, the term sought to be implied is one which is not stated to be a term implied by law as the legal incident of a lease of land, but one which is necessary to give business efficacy to the lease of commercial premises, particularly the business.
The Tribunal does not usually use pleadings to define the issues for determination. Its usual practice is to require the parties to file a statement of issues, facts and contention which serves not only to define the issues but to provide the Tribunal with a statement of the facts relied on by the parties. Further, at the time of filing a statement of issues, facts and contentions, a party is usually required to file all the documents on which the party relies.
The Tribunal therefore usually has a great deal more information before it than a court might have when considering an application to strike out a claim under s 47 of the SAT Act. Further, the Tribunal is charged to act as speedily and with as little formality and technicality as is practicable, and minimise the costs to the parties (s 9 of the SAT Act). In the circumstances, it is appropriate to have regard to all the material which has been placed before the Tribunal, which includes the lease documentation. That documentation shows that the original lease was varied and a new term granted to the tenant with effect from 21 April 2005. The amendments to the original lease had the effect of limiting the tenant's maintenance obligations and specifically imposing on the landlord responsibility for all structural maintenance and repairs. It is apparent therefore that there may be some background to the variation and extension of the lease which may support the implication of a term that the premises be fit for purpose.
As stated by Deputy President Judge Chaney in Ambrus and Churches of Christ Homes & Community Services Incorporated [2006] WASAT 141 at (44), the decision to dismiss an application as lacking in substance is one that should only be taken after very careful consideration. Further, his Honour held, at (8), following General Steel Industries Inc v Commissioner of Railways(NSW) (1964) 112 CLR 125, that in order to strike out a proceeding, it should be demonstrated that it is so obviously untenable that it cannot possibly succeed or is manifestly groundless or that it discloses a case which the court is satisfied cannot succeed. Those principles apply equally to the strike out of part of a proceeding based on discrete claims.
For these reasons, I do not consider that the allegations made in POC (6) should be struck out at this stage. I say 'at this stage' because I do not think that this matter should be allowed to proceed to final hearing on a tenuous possibility that there might be circumstances to take the case out of the ordinary landlord and tenant relationship so as to support the implication of a term because it is necessary to give business efficacy. To allow that course would put both parties to a not inconsiderable expense based on the technicality of pleading principles contrary to s 9 of the SAT Act. I shall revert to this issue in considering the way forward at the conclusion of these reasons.
Implication that premises structurally sound and in good repair ‑ POC (7) and POC (8)
The parties' contentions are similar to those referred to above in respect of POC (6). The landlord asserts that it is a longstanding principle of common law that, in the absence of express agreement, a landlord is under no liability towards a tenant either to put the demised premises into repair at the commencement of the tenancy or to keep the premises in a state of repair during the continuance of the tenancy. Reliance is placed on a number of authorities as referred to in Casey v Aldous (1994) 63 SASR 347 (Aldous). In Aldous, reference is also made to the common law principle that, where there is an express term imposing a covenant on the landlord to repair the demised premises, the law construes that covenant to be a covenant requiring repair only upon notice.
On an application of the principles discussed above in relation to POC (6), I conclude that it cannot be said that the claims pleaded are so obviously untenable that they cannot possibly succeed or are manifestly groundless, or that the case disclosed is one which the Tribunal can be satisfied cannot succeed. Consequently, the allegations should not be struck out, at least at this stage, for the same reasons as given above in relation to POC (6).
Lack of or insufficiency of particulars
The only complaint with which it is now necessary to deal relates to POC (18). It is there alleged that, in breach of a statutorily implied term or covenant of the lease, the landlord recovered outgoings from the tenant under the lease that were not expenses incurred by the landlord in operating, repairing or maintaining the premises. The particulars furnished on 4 September 2008 detail the costs which the landlord has allegedly been endeavouring to pass on to the tenant. The costs listed are:
|
The statutorily implied term (POC (11)) is that the landlord was entitled to recover outgoings from the tenant under the lease only for expenses incurred by the landlord in operating, repairing or maintaining the premises. The particulars there furnished assert that the term is contained in subsection 12(1)(a) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (CTRSA Act). Section 12(1)(a) of the CTRSA Act refers to an obligation to provide an operating expenses statement and the requirements of that statement. It appears obvious that the POC is intended to refer to s 12(1)(a) of the CTRSA Act, and if so, the POC should be amended. Section 12(1)(a) of the CTRSA Act provides that if a provision is made in a retail shop lease for payment by the tenant, in addition to rent, of all or any of the operating expenses of the landlord, the amount payable is limited to the items of operating expenses that the retail shop lease specifies are to be paid wholly or in part by the tenant, and does not include an amount in respect of which the retail shop lease does not specify both how the amount is to be determined and, when applicable, apportioned to the tenant, and how and when that amount is to be paid by the tenant. The term 'operating expenses' is defined under s 12(3) of the CTRSA Act to mean, in relation to a landlord, the expenses of the landlord in operating, repairing or maintaining, relevantly, a building of which a retail shop the subject of a retail shop lease to which the landlord is a party forms the whole or a part.
The landlord's criticism is that the particulars provided do not relate to the subject matter of POC (18).
In my view, without evidence of the circumstances which have given rise to each of the costs claimed, it is not possible to conclude one way or the other whether the expenses particularised are or are not expenses incurred by the landlord in operating, repairing or maintaining the premises. Certainly, it cannot be said that the items of expenditure are so obviously not within the subject of the claim pleaded that the claim cannot possibly succeed or is manifestly groundless, or that it discloses a case which the Tribunal is satisfied cannot proceed.
It is noted that the landlord, in its response to the POC, has simply denied the allegations made in (18) thereof. That is understandable, given that no particulars were furnished with the POC, the particulars being provided only on 4 September 2008, the day prior to the hearing of the strike out application. It may well be that the expenses particularised relate to damages arising as a result of the condition in which the premises were left on termination if the landlord is able to make out the counterclaim made by it.
Paragraph 33 of the respondent's particulars of response and counterclaim reflects a claim for damages for repairs to the premises, further particulars of which were to be provided.
It is not considered appropriate to strike out POC (18) or the particulars furnished.
The way forward
As stated above, the initial difficulty which the tenant had in properly formulating a basis of claim resulted in the Tribunal requiring the tenant to file pleadings in the form of a properly particularised POC. If it had been possible to follow the Tribunal's usual process of filing a statement of issues, facts and contentions together with a bundle of all relevant documents, it may be that the Tribunal would have come to a different conclusion on some or all aspects of the strike out application. That might have been the result if the parties' contentions are based only on the documentation and are not dependent on any oral evidence. It is appropriate for the basis upon which the tenant proposes to establish its case at trial to be the subject of further discussion at a directions hearing. That is particularly so given the tenant's contention that there should be a separate trial of liability and quantum, and the landlord's tentative acceptance in principle thereof, subject to clarification of the bases of claim which can be properly advanced by the tenant. The Tribunal was informed that the tenant has difficulty financing the proceedings and that if liability is determined in her favour, it is expected that finance can be raised to fund the finalisation of the proceedings in relation to quantum.
If there is no oral evidence relied upon to support the implication of terms as a matter of business efficacy, there may be merit in ensuring that all relevant documentation is before the Tribunal, and that there be a preliminary determination of whether or not the terms are to be implied. Of course, the parties need to be heard on this question, and generally, on the most appropriate way in which to now advance the proceedings. But, for the reasons given, the landlord's application to strike out paragraphs (6), (7), (8) and (18) of the applicant's POC, and the particulars to (18) thereof, will be dismissed.
Orders
The Tribunal will issue orders that:
1.The respondent's strike out application is dismissed.
2.The matter is to be listed for a further directions hearing on 29 January 2009 at a time to be notified to the parties to assess the most appropriate way to advance the proceedings.
I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR C RAYMOND, SENIOR MEMBER
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