Yang v Hapisun Pty Ltd - [2018] SASC 17

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
YANG & ANOR v HAPISUN PTY LTD & ANOR
[2018] SASC 17
Judgment of The Honourable Justice Parker
23 February 2018
LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - OTHER MATTERS
Appeal against a decision by a Magistrate to dismiss an application for a declaration concerning the rights of the appellants under the Retail and Commercial Leases Act 1995 (SA) (‘Act’).
The appellants occupy premises under a retail shop lease which commenced in July 2015 for a term of five years. In July 2017, the respondents sought to terminate the lease by relying on a demolition clause. That clause complies with the requirements for demolition clauses in s 39 of the Act.
Section 20B of the Act provides that the term for which a retail shop lease is entered into must be at least five years. Section 20K of the Act provides that the "statutory rights of security of tenure" can only be excluded by a certified exclusionary clause. The issue on appeal is whether the demolition clause in the lease must be certified under s 20K.
Held per Parker J, dismissing the appeal:
1. There is no identifiable basis in policy or principle to suggest that demolition clauses should be treated differently to other rights to terminate that exist at common law and under the Act, at [64].
2. The substantial constraints upon a lessor’s use of a demolition clause imposed by s 39 means that demolition clauses are distinguishable from clauses that simply permit termination without cause on notice, at [63].
3. Subject to compliance with s 39, a lessor may terminate a lease under a demolition clause. That clause is not required to be certified under s 20K, at [63].
Retail and Commercial Leases Act 1995 (SA) ss 5, 20A, 20B, 20K and 39, referred to.
Blackler v Felpure Pty Ltd [1999] NSWSC 958, considered.

YANG & ANOR v HAPISUN PTY LTD & ANOR
[2018] SASC 17
Magistrates Appeal: Civil

PARKER J: This is an appeal against a decision of a Magistrate to dismiss an application for a declaration concerning the rights of a lessee under the Retail and Commercial Leases Act 1995 (SA) (‘Act’). The issue is whether the Act permits a lessor to terminate a lease prior to the expiry of the minimum five year term in order to demolish the property in circumstances where the lease does not contain a certified exclusionary clause covering demolition. The Magistrate held that the lessor was entitled to terminate the lease notwithstanding the absence of a certified exclusionary clause.
For the reasons that follow, I consider that the matter was correctly decided by the Magistrate and the appeal should be dismissed.
Background
The lessees operate a snack bar at premises in Franklin Street, Adelaide. They occupy the premises under a lease which commenced on 1 July 2015 for a term of five years with a right to renewal for a further five years (‘Lease’). The identity of the lessors has since changed. By way of a deed dated 28 March 2017 the Lease was assigned to the current lessors. For the purposes of this appeal the lessees are the appellants and the lessors are the respondents.
The parties have proceeded on the common understanding that the Lease is a “retail shop lease” and the premises are not located in a “retail shopping centre” for the purposes of the Act.[1]
[1] See definitions in Retail and Commercial Leases Act 1995 (SA), s 3(1).
On about 26 July 2017 the lessors served the lessees with a notice of termination of the Lease together with a redevelopment proposal for the premises. The notice of termination requires that the lessees provide vacant possession as at 30 April 2018. The Court has been informed that the lessor proposes a major re-development of the site.
Neither the Lease nor the notice of termination was in evidence before the Magistrate. However, the parties filed a statement of agreed facts. The matter proceeded on the basis that cl 15.9 of the Lease constitutes a demolition clause within the meaning of s 39 of the Act and the Lease does not contain a certified exclusionary clause within the meaning of s 20K of the Act.
In light of the agreed facts, the Magistrate identified the issue for determination as being whether s 39 concerning demolition clauses is subject to the requirements of s 20K concerning exclusionary clauses. In other words, can the lessors rely on the demolition clause in cl 15.9 of the Lease despite the fact that there is no certified exclusionary clause in the Lease.
The lessees state that they have invested a significant sum in the fitout of the premises and contend that it is unlikely they would have done so if a certified exclusionary clause had brought to their attention the risk that the Lease may be brought to an early end.
The legislative scheme
The relevant provisions of the Act are as follows:
5—This Act overrides leases
(1)     This Act operates despite the provisions of a lease.
(2)     A provision of a lease or a collateral agreement is void to the extent that the provision is inconsistent with this Act.
…
20A—Objects
(1)     The Parliament recognises that conflicts sometimes arise between a lessor's expectation to be able to deal with leased premises subject only to the terms of the lease and a lessee's expectation of reasonable security of tenure.
(2)     The objects of this Part are to achieve an appropriate balance between reasonable but conflicting expectations and to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a retail shop lease.
Division 2—Initial term of lease
20B—Minimum 5 year term
(1)     The term for which a retail shop lease is entered into must be at least five years.
The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into.
(2)     A lease is not invalidated by contravention of this section but the term of the lease is extended to bring the term (or aggregate term) to five years.
Example—
If a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years).
(3)   This section does not apply to a lease if—
(a)the lease is a short-term lease (ie a lease entered into for a fixed term of 6 months or less); or
(b)the lease arises when the lessee holds over after the termination of an earlier lease with the consent of the lessor and the period of holding over does not exceed 6 months; or
(c)    the lease contains a certified exclusionary clause; or
(d)the lessee has been in possession of the retail shop premises for at least 5 years; or
(e)in the case of a retail shop lease that is a sublease—the term of the retail shop lease is as long as the term of the head lease allows; or
(f)the lease is of a class excluded by regulation from the ambit of this Division.
…
20K—Certified exclusionary clause
(1)     Subject to this section, the rights conferred by this Part cannot be excluded or modified by contract.
(2)     However, the statutory rights of security of tenure may be excluded by a certified exclusionary clause.
(3)     A certified exclusionary clause is a provision of a retail shop lease in respect of which a certificate signed by a lawyer who is not acting for the lessor is endorsed on the lease to the effect that—
(a)the lawyer has, at the request of the prospective lessee, explained the effect of the provision and how this Part would apply in relation to the lease if the lease did not include that provision; and
(b)the prospective lessee gave the lawyer apparently credible assurances that the prospective lessee was not acting under coercion or undue influence in requesting or consenting to the inclusion of the provision in the lease.
…
39—Demolition
(1)     If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect:
(a)the lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated;
(b)the lease cannot be terminated by the lessor on that ground without at least six months written notice of termination;
(c)if notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than seven days written notice of termination at any time within six months before the termination date notified by the lessor.
(2)     If the lease is for a term of 12 months or less, the period of six months in subsection (1)(b) and (c) is shortened in each case to three months.
(3)     If a retail shop lease is terminated on such a ground and demolition of the building is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time.
The term “demolition” is defined in s 3(1) of the Act to include not only total demolition of a building but also “a substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop”. Thus, a demolition clause will have a wider operation than is suggested by the title of s 39.
I also note that s 12 of the Act requires that the lessee must be given a disclosure statement before entering the lease. Subsections 12(2) and (3) set out in considerable detail the matters that must be included in a disclosure statement. However, the inclusion of a demolition clause in the lease is not one of the matters that must be disclosed.
The Magistrate’s reasons
The Magistrate observed that the key words in s 20B(1) are that “the term for which a retail shop lease is entered into must be at least five years”.[2] Her Honour interpreted those words to mean that the lessee must have a right to occupy the premises for five years and cannot be unilaterally evicted unless they are permitted to do so by a provision of the Act or a certified exclusionary clause. However, s 20B(1) “does not mean that a retail tenant will stay in a particular location until the five years is up, regardless of the circumstance”. Her Honour adopted the view expressed by the authors in Commercial Tenancy Law that the Act does not codify the law relating to the termination of leases.[3] Thus, the basic common law rules will continue to apply to retail shop leases to the extent that there is no contradictory statutory provision.
[2] The emphasis is her Honour’s.
[3] Adrian J. Bradbrook, Clyde E. Croft and Robert S. Hay, Commercial Tenancy Law (LexisNexis Butterworths, 3rd ed, 2009) [27.17].
The Magistrate stated that the Act did not cover all possible means by which a lease may be terminated. Her Honour observed that it would be an absurd and inconvenient result if, for example, s 20B prevented the mutual termination of a lease. Her Honour also stated that s 20B does not cover termination for non‑payment of rent as it would be an unjust result if a lease could only ever be terminated for non-payment if the default clause was a certified exclusionary clause. [4]
[4] The Magistrate actually referred to s 20 which deals with repayment of a security bond. Her Honour obviously intended to refer to s 20B.
The Magistrate noted that the opening words of s 39 refer to a lease that “provides for termination of the lease on the grounds of proposed demolition”.[5] Section 39 does not require that a demolition clause be certified. Her Honour also reasoned that because demolition clauses are dealt with in a separate Part of the Act to the Part that refers to certified exclusionary clauses, a demolition clause does not require certification under s 20K in order to be effective. Accordingly, the Magistrate held that the lessor was entitled to rely upon the demolition clause in cl 15.9 of the Lease if the requirements of s 39 were otherwise met. Section 39 “is not to be read in light of the term of a lease entered into pursuant to s 20 (sic), nor that it is subject to s 20K”.[6] Her Honour expressed the view that s 39 contemplates that a proposed demolition will be likely to cause detriment to a lessee and the provision operates to minimise that detriment.
[5] The emphasis is her Honour’s.
[6] Once again, the Magistrate clearly intended to refer to s 20B rather than s 20.
The Magistrate also noted that she agreed with the observation made by Bryson J of the Supreme Court of New South Wales in Blackler v Felpure Pty Ltd that a “demolition clause was a reality of the party’s relationship and so is its potential operation to end the lease”.[7]
[7] [1999] NSWSC 958 at [61].
The appellants’ submissions
The appellants contend that the aim of the Act to protect consumers would be satisfied by adopting an interpretation that prevents early termination of a lease by notice of a proposed demolition unless the demolition clause is a certified exclusionary clause. They submit that a contrary interpretation may have serious consequences for a lessee who has invested substantial money in the premises. For that reason the legislative scheme requires that the presence of the demolition clause be brought to the specific attention of the lessee. This enables the lessee to make an informed decision and prevents a demolition clause simply being buried in a lengthy and complex document.
The appellants submit that Blackler can be distinguished or, alternatively, it should not be followed. While the Retail Leases Act 1994 (NSW) (‘NSW Act’) no longer provides for a minimum term of five years, the NSW Act as it stood when Blackler was decided was materially different to the Act. The appellants have observed that the NSW Act did not contain any provision analogous to the words in s 20K(1) of the Act that “[s]ubject to this section, the rights conferred by this Part cannot be excluded or modified by contract”.[8] The NSW Act also did not include a provision analogous to the phrase “… the statutory rights of security of tenure may be excluded by a certified exclusionary clause” that appears in s 20K(2) of the Act.[9]
[8] The emphasis is that of the appellants.
[9] Once again, the appellants have added the emphasis.
The appellants note that the NSW Act currently requires a demolition clause to be brought to the attention of the lessee in the disclosure statement, thereby providing an element of protection to the lessee.[10] However, that was not a requirement in the NSW Act at the time Blackler v Felpure was decided.
[10] See, cl 18.2 of Schedule 2 of the Retail Leases Act 1994 (NSW).
The appellants observe that Blackler stands for the proposition that the inclusion of a minimum statutory term in a lease does not prevent the lease from being terminated for other reasons prior to the expiration of the term. The appellants contend that this proposition is only correct in so far as it goes. The appellants accept that s 20B of the Act would not prevent a lessor from terminating a lease upon a breach by the lessee provided that the lessor complies with the requirements with respect to notice in the Landlord and Tenant Act 1936 (SA) and subject to the equitable doctrine of relief against forfeiture. However, the appellants submit that the termination of a lease on account of a breach by the lessee is a different matter to a lessor having a unilateral right to reduce the term for its own commercial reasons. The appellants also submit there is a fundamental difference between a clause that permits termination of the lease for reasons that are not caused by either the lessor or the lessee (such as a fire, an earthquake or compulsory acquisition by the Crown), and a demolition clause that permits the lessor to terminate the lease unilaterally.
The appellants submit that cl 15.9 of the Lease which permits the lessors to reduce the term at their sole discretion interferes with the statutory right to security of tenure which cannot be excluded or modified by contract, except where permitted by s 20K. That section requires the use of a certified exclusionary clause. The interference of cl 15.9 of the Lease with the statutory right to security of tenure cannot be resolved by simply stating that s 39 regulates the use and content of demolition clauses. Although s 39 does regulate the use and content of demolition clauses, it does so by providing certain protections to the lessee. However, whether a demolition clause properly forms part of a lease in the first place is subject to the operation of ss 12, 20A, 20B and 20K of the Act which cover disclosure statements, the objects of Part 4A, the requirement of a minimum five year term and certified exclusionary clauses respectively.
The respondents’ submissions
The respondents submit that the issue to be decided on this appeal is whether cl 15.9 of the Lease excludes or modifies the rights conferred on the lessee by Division 2 of Part 4A of the Act. The requirement in s 20B that the initial term of a lease must be at least five years may benefit or burden either the lessee or the lessor.
The stated object of Part 4A is to achieve an appropriate balance between the reasonable but conflicting expectations of lessor and lessee and to ensure that there is, as far as practicable, fair dealing between them.[11] It is incorrect to approach the interpretation of the Act as if its sole object is consumer protection.
[11] Retail and Commercial Leases Act 1995 (SA), s 20A.
The respondents submit that in achieving the balance sought by the Act it should be recognised that termination of a lease under a demolition clause has the potential to affect adversely a lessee, whether it occurs during the initial statutory term of five years or during a subsequent negotiated five year term. The right to terminate early to allow for a proposed demolition is an important aspect of the balancing of the competing interests between lessor and lessee.
Unless a certificate is obtained under s 20K of the Act, a lease which contravenes the minimum five year term requirement will be extended to an initial term of five years. While the appellants rely upon the phrase “statutory rights of security of tenure” in s 20K(2) of the Act, that is merely a shorthand expression for the statutory requirement that the initial term of a lease be for five years.
The respondents note that s 39 appears in an entirely different Part of the Act dealing with “Alterations and other interference with the shop”. Section 39 is included with other provisions which are plainly intended to operate within the five year minimum term and, in the case of s 40, confer a right of termination.
Section 39 deals with the power of a lessor to terminate a lease by bringing it to an end prior to the expiry of the minimum term. The exercise of that power does not have the consequence that the agreed term of the lease is less than five years. Further to that submission the respondents also contend that cl 15.9 of the Lease does not exclude or modify the right to a minimum five year term provided by s 20B of the Act. This is the case because the term of the lease is determined under s 20B at the time the lease is entered.

There are numerous reasons why a lease may not last for five years. One such reason is an exercise by the lessor of a right to terminate for demolition. The exercise of that right does not change the fact that at the time the lease was entered it was for a term of at least five years, as required by s 20B. In those circumstances the respondents submit that there was no requirement for a certificate to be issued under s 20K and any such certificate would have no effect.
The respondents submit that even to the extent that the Act modifies certain aspects of the law of landlord and tenant it does not codify those matters, nor is it an exhaustive code governing their entire legal relationship. The Act guarantees an initial term of five years but does not otherwise differentiate in its operation as to the relationship between lessor and lessee within that five year term or any subsequent term.
Subject to the statutory restrictions imposed in s 39 on the right to terminate for a proposed demolition, the question of termination within the term of a lease is left to the common law. That approach is consistent with that adopted in all other Australian jurisdictions, with the exception of Western Australia. In that State the legislation provides that a lease may only be terminated on certain specified grounds within the minimum statutory term. Unlike the legislation in most other Australian jurisdictions, that of Western Australia does not otherwise impose any restriction on the operation of a demolition clause. The respondents submit that the effect of the approach advanced by the appellants is to read into the Act a provision to the same effect as the Western Australian legislation.
A further submission by the respondents is that it is clear from the wording of s 20B that compliance is to be assessed at the time when the lease is entered rather than whether, in fact, the lease does last for five years. That is apparent from the use of the phrase “entered into” and also from the fact that s 20B(2) deems a three year lease with a two year option to be a five year term regardless of whether the option is exercised. The respondents also note that s 12 does not require that a demolition clause be mentioned in the disclosure statement.
The respondents contend that cl 15.9 of the Lease complies in all respects with s 39 of the Act. Clause 15.9 requires the lessor to provide the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish the building within a reasonably practicable time after the termination of the Lease.[12] The Act also requires the giving of notice of at least six months but cl 15.9 stipulates nine months.[13] Clause 15.9 also requires that if demolition is not carried out within a reasonably practicable time after the termination date notified by the lessor, reasonable compensation must be paid to the lessee for damage suffered due to early termination unless the lessor can establish that at the time notice of termination was given there was a genuine proposal to demolish the premises within that time.[14]
[12] Retail and Commercial Leases Act 1995 (SA), s 39(1)(a).
[13] Retail and Commercial Leases Act 1995 (SA), s 39(1)(b).
[14] Retail and Commercial Leases Act 1995 (SA), s 39(3).
The respondents contend that the effect of the appellants’ submissions is that the Court is being asked to treat a demolition clause differently to all other situations where a five year lease may be brought to an early end. There is no basis in policy or principle for the contention by the appellants that because a demolition clause can be exercised unilaterally by the lessor it shortens the term of the lease while other methods of termination that cannot be unilaterally adopted by the lessor do not shorten the term. There is no basis in policy or principle for the distinction sought to be drawn by the appellants.
The respondents note that there are a number of different ways whereby a lease can be brought to an early end before the expiry of the minimum five year term. These include breach of a covenant by the lessee even if the act which caused the breach was not within the direct control of the lessee e.g. an insolvency event occurring because of the appointment of a receiver over the lessee. Other examples where a lease may be brought to an early end include an exercise of the right to terminate the lease for repudiation, mutual surrender, frustration (e.g. where a planning authority prohibits a proposed use that was a condition of the lessee entering the lease), rescission of the lease due to a common mistake as to its term, resumption or acquisition of the land by the Crown, a force majeure event and at the election of either the lessor or lessee where the lessor considers that repair of the premises following damage is impracticable or undesirable under s 40 of the Act.
The respondents submit that the initial term of a lease which contains a right to terminate for demolition will be five years, whether by operation of Part 4A or by its express terms. Such a clause does not modify the right to an initial five year term. A demolition clause is conceptually different to a clause which allows a lessor to terminate a lease for any reason upon the giving of six months’ notice. A clause of the latter type would be regarded as simply a device to avoid the minimum statutory term. The true effect of such a clause is that the minimum five year term would never have been granted. It is unnecessary for the Act to specifically prohibit leases that operate in that fashion.
The respondents also submit that the appellants’ contention that a demolition clause can only operate if covered by a certified exclusionary clause effectively adds another restriction on the right to terminate for demolition to that already imposed expressly by s 39. A demolition clause is a recognised and important circumstance giving rise to the termination of a commercial lease. The exercise of that power is regulated by s 39 of the Act. The Parliament has struck a balance between the rights of lessor and lessee by ensuring that any demolition clause complies with the minimum standards set by s 39. This protects lessees and prevents arbitrary use of demolition clauses.
Discussion
Blackler v Felpure
While I am not bound by a decision of a single judge of the Supreme Court of another State, Blackler v Felpure was decided under legislation that is very similar, but not identical, to the Act. Furthermore, it appears to be the only Australian case where the effect of a demolition clause upon a guaranteed minimum term has been considered by a superior court. Authors of leading text books have also treated it as an authoritative decision. For those reasons I will accord considerable respect to the decision and only depart from it if I consider it to be plainly wrong or distinguishable.
Blackler v Felpure was concerned with the operation of the NSW Act as it stood in 1999. Section 16(1) of the NSW Act provided that “[t]he term for which a retail shop lease is entered into … must not be less than 5 years”. Section 16(2) operated to extend a shorter lease so that it did not contravene the section.
Section 16(3) of the NSW Act provided that s 16 did not apply to a lease if a lawyer or licensed conveyancer, not acting for the lessor, certified in writing that he or she, at the request of the prospective lessee, explained the effect of s 16(1) and s 16(2) to the prospective lessee and that the giving of the certificate would result in s 16 not applying to the lease. Thus, the effect of a certificate given under s 16(3) was that the requirement in s 16(1) that the “term for which a retail shop lease is entered into … must not be less than 5 years” would not apply to the lease.
Section 7 of the NSW Act invalidated a lease that was inconsistent with the Act. Section 11 required that the lessee must be given a disclosure statement. The contents of that disclosure statement were required to comply with Schedule 2. Whilst clause 18.2 of Schedule 2 of the NSW Act as it now stands requires that the inclusion of a demolition clause in the proposed lease be disclosed to the lessee, at the time that Blackler v Felpure was decided no equivalent requirement existed.
Furthermore, s 35 of the NSW Act was identically worded to s 39 of the Act apart from the placement of the definition of the term “demolition”.[15]
[15] See s 35(4) of the Retail Leases Act 1994 (NSW) as it stood when Blackler v Felpure was decided.
The appellants have noted in their submissions that the NSW Act did not contain any provision analogous to the words in s 20K(1) of the Act that “[s]ubject to this section, the rights conferred by this Part cannot be excluded or modified by contract”. However, as I outlined above, s 7 of the NSW Act provided that a provision of a lease was invalid to the extent that it was inconsistent with the Act. In my view, the rights protected by s 20K of the Act are limited to the right for the initial term for which a lease is entered into be at least five years and, in some instances, the right to be given notice of the lessor’s intentions concerning renewal. Those rights may be excluded or altered by a certified exclusionary clause under s 20K. At the time Blackler v Felpure was decided, s 16(2) of the NSW Act provided that if a lease was entered into contrary to s 16 its validity was not affected, but rather the term was extended to satisfy the requirement of a five year minimum term. The effect of that section was that it was impossible to contract out of the minimum term requirement unless a lawyer or licensed conveyancer issued a certificate under s 16(3). In that situation s 7 of the NSW Act would not have operated to invalidate the shorter term. Thus, s 16 of the NSW Act operated in the same manner as the Act to guarantee the five year minimum term in the absence of a lawyer’s certificate (in NSW) or a certified exclusionary clause (in SA). I therefore consider the omission from the NSW Act of a phrase to the same effect as “the rights conferred by this Part cannot be excluded or modified by contract” does not, of itself, render the NSW Act relevantly distinguishable from the SA Act. The only additional protection conferred by the SA Act is the right under s 20J to receive notice, in some circumstances, of the lessor’s intentions at the end of the lease. That right is not relevant in the present case.
The preceding analysis also extends to the appellants’ submissions about the omission from the NSW Act of a provision analogous to the phrase “the statutory rights of security of tenure may be excluded by a certified exclusionary clause” in s 20K(2). As I have indicated above, s 16 of the NSW Act guaranteed a five year minimum term except in cases where a certificate was issued under s 16(3).
The reasoning of Bryson J in Blackler v Felpure was as follows. The demolition provision contained in s 35 of the NSW Act (as it then stood) does not operate unless the lease expressly provides for termination on the ground of proposed demolition. If the lease makes provision for demolition, the terms outlined in s 35 are deemed to apply to the lease. In that situation both the clause of the lease relating to demolition and the terms implied into the lease by s 35 must be complied with. However, if there is an inconsistency s 35 will prevail. Bryson J stated that the plaintiff’s argument could only succeed if the inclusion of the demolition clause was in some way inconsistent with the minimum term required by s 16(1), insofar as the demolition clause allowed for termination of the lease less than five years after it had been granted.
Bryson J considered that s 16 and s 35 of the NSW Act used two quite different concepts. The impact of s 16 depended upon the provisions of the lease when it was entered and what the lease said about the term. The basic concept of s 35 was to make provision for termination on the grounds of a proposed demolition. This concept could only apply if termination occurred before the expiry of the term for which the lease had been entered into. For that reason the assumption underlying s 35 was that the term for which the lease was entered would be cut short. Section 35 simply operated to impose controls on the process of cutting the lease short. There was no guarantee in the NSW Act that the term for which a lease is entered into will not subsequently be interrupted by a supervening event. The supervening event could be conduct of a public authority resuming the land or the operation of provisions of the lease itself. For example, a lease might be brought to an end for breach of a covenant. The NSW Act regulated the operation of demolition clauses but other grounds for early termination were not regulated. The NSW Act protected lessees by fixing a minimum term under s 16 and by restricting the operation of demolition clauses under s 35. In the view of Bryson J the provisions of the NSW Act contemplated that both minimum term clauses and demolition clauses may potentially bring a lease to an end.
Part 4A of the Act
Section 20K(1) provides that, subject to that section, the rights conferred by Part 4A cannot be excluded or modified by contract. In the case of a retail shop lease (that is not a shopping centre lease), Part 4A confers, at most, only two rights.[16] The first right is that the term for which a retail shop lease is entered into must be at least five years. The second right potentially arises under s 20J.[17]
[16] The rights conferred are more extensive in the case of a shopping centre lease, see Part 4A, Division 3.
[17] However, by virtue of s 20I(b) this right is not conferred in those cases where there is a subsisting right or option to renew or extend the lease. Where that exception does not apply, s 20J entitles a lessee to be given notice of the lessor’s intentions concerning renewal or extension of the lease at a time between six and 12 months before the lease expires.
Section 20K(2) permits the “statutory rights of security of tenure” to be excluded by a certified exclusionary clause. The “statutory rights of security of tenure” are defined by s 3(1) to mean the rights conferred on a lessee by Part 4A, Division 2. Thus, s 20K(2) only protects the two rights referred to in the preceding paragraph, i.e. the right that the term for which a lease is entered into must be at least five years and, in some instances, the right to be given notice of the lessor’s intentions concerning renewal.
Part 6 of the Act
Part 6 of the Act is titled “Alterations and other interference with the shop”. Several of the provisions included in Part 6 operate by stating that a lease “will be taken to provide” certain specified content. In those instances, the effect is that the particular term is implied into the lease by the Act.
Section 37 states that a lease is taken to provide that the lessee will be given notice of alterations and refurbishment. Similarly, s 38 states that a lease is taken to provide that the lessee will be compensated for disturbance in specified circumstances. Section 40 also adopts the “taken to provide” formula by deeming a lease to contain certain provisions relating to damaged premises. However, s 41 operates quite differently by prohibiting a lease from containing a provision that limits the right of the lessee to employ persons of their own choosing.
Each of ss 37, 38 and 40 operate by specifying that particular terms are implied into all retail shop leases and s 41 operates as a general prohibition. Accordingly, these provisions clearly operate without any requirement that they be identified in a certified exclusionary clause.
The approach adopted in s 39 differs from the other provisions of Part 6. The “taken to include” formula only applies to a demolition clause that has been expressly included in the lease. Thus, s 39 stipulates that if a demolition clause appears in a lease then it will include provision to the effect specified in paragraphs (a) to (c) of s 39(1). The deemed term in paragraph (a) is designed to ensure that a lease can only be terminated where there is a genuine proposal to demolish the building within a reasonably practicable time after termination of the lease. Paragraph (b) requires notice of six months[18] while paragraph (c) entitles the lessee to give seven days written notice of termination at any time during the six month notice period. Section 39(3) entitles the lessee to compensation in some circumstances if the demolition is delayed. These provisions are clearly designed to protect the lessee by ensuring that the lessor’s right to terminate is only exercised where there is a genuine demolition proposal. As I have noted at paragraph [10] above, the term “demolition” is defined to have a much wider operation than its ordinary meaning.
[18] Section 39(2) of the Retail and Commercial Leases Act 1995 (SA) provides that the notice period is shortened to three months where the lease is for 12 months or less.
An important distinction between, on the one hand, s 39 and, on the other hand, each of ss 37, 38, 40 and 41, is that the rights and duties created and imposed by s 39 will only apply to those leases where a demolition clause has been specifically included as a term. However, each of ss 37, 38, 40 and 41 operate by force of the Act without regard to the terms of the lease.
Operation of general tenancy law
The parties acknowledge that the Act does not codify the law relating to termination of retail shop leases. For that reason, general tenancy law applies to a retail shop lease to the extent that it is consistent with the Act. Thus, a lease may be brought to an early end for a number of reasons that are not referred to in the Act notwithstanding the requirement in s 20B that a lease be entered for a minimum term of five years.
A lease may be brought to an early end where the parties mutually agree to do so before the term expires. While s 20K(1) provides that the rights conferred by Part 4A cannot be excluded or modified by contract, I consider that clearer words are required to prohibit parties from agreeing to end a lease. Mutual termination of a lease does not involve an exclusion or modification of the rights conferred by Part 4A, but rather an agreement between the parties that they will no longer be bound by the initial term of the lease.
The respondents refer to a number of situations (see paragraph [33] above) where a lease may be brought to an early end without being the subject of a certified exclusionary clause. Of the examples referred to by the respondents, a mutually agreed termination can be disregarded because of its consensual nature. Termination under s 40 of the Act can also be disregarded for present purposes as it involves the exercise of a right specifically conferred by statute.
None of the other examples of early termination referred to by the respondents are founded entirely upon the unilateral action or decision of a party although, in some instances, the lease will only be terminated if a party elects to exercise the right to terminate after the relevant event, e.g. termination for breach following a failure to pay rent.
In the situations referred to by the respondents (at paragraph [33] above) the lease may be terminated before the five year term has expired without the particular ground for termination being authorised by a clause in the lease. The fact that a lease may be terminated on these other grounds is not inconsistent with the requirement that the lease be for a minimum initial term of five years. The fact that an event, which is not brought about by either party, may entitle a party to bring the lease to an early end does not mean that the lease was not entered for a term of five years.
A decision to give notice of termination because of a proposed demolition of the premises will occur solely at the behest of the lessor. That situation is very different to a decision by a public authority to acquire the land compulsorily or the destruction of the premises by fire.[19] It is also quite different to a termination following any of the other external causes referred to by the respondents at paragraph [33] above. In those situations the event that triggers the right to terminate is not the result of an action by the lessor or the lessee, nor is it necessary for the event to be the subject of a clause in the lease.
[19] In the latter situation s 40 of the Retail and Commercial Leases Act 1995 (SA) would regulate the rights of the parties.

The respondents have correctly identified that a lease expressed to operate for five years but which permits termination without cause upon the giving of a specified period of notice cannot properly be regarded as having an initial term of five years.[20] In that situation the only certainty is that the lease must operate for a period at least equal to the specified period of notice. The ostensible period of five years would merely be the maximum potential duration of the lease. Section 20K(1) of the Act would render invalid a clause permitting unilateral termination without cause. However, s 20K(2) would permit such a clause to be included if it was the subject of a certified exclusionary clause.
[20] Cooper v Darwin Rugby League (1994) 57 IR 238 concerned a very similar point, albeit in the context of an employment contract. Northrop J held that an employment contract for three years that permitted termination upon one month’s notice by either side was not a contract for “a specified period of time”.
Consideration
The essence of the two competing interpretations advanced in this appeal is as follows. One view is that adopted by the Magistrate and by Bryson J in Blackler v Felpure to the effect that the inclusion of a demolition clause in a lease does not derogate from the statutory minimum term of five years. On this view a demolition clause is no different to other express or implied terms which may operate to provide for the early termination of the lease. The operation of both a clause of the latter type and a demolition clause is not dependent on the presence of a certified exclusionary clause.
The essence of the alternative argument advanced by the appellants is that a demolition clause will only be brought into operation by the decision of the lessor to demolish the premises. As the operation of a demolition clause is contingent upon a unilateral decision by the lessor it is fundamentally different to a clause which provides for early termination of a lease on the grounds of default by the lessee or an event which is independent of a decision by either lessor or lessee, e.g. an event which frustrates the lease, compulsory acquisition of the land, a force majeure event or the like.
The key question is whether a clause which permits termination upon the giving of notice because the lessor proposes to demolish the premises would result in the lease being for a period less than the statutory five year minimum. For the reasons that follow, I consider that, for the purposes of the Act, a demolition clause is distinguishable from a clause which authorises the lessor to unilaterally terminate the lease without cause upon the giving of specified notice.
Although a demolition clause permits the lease to be brought to an early end as a result of a decision by the lessor, s 39(1) of the Act imposes significant restrictions upon the use of such a clause to terminate a lease. The lease cannot be terminated unless and until the lessor has provided the lessee with sufficient details of the proposed demolition to indicate that the proposal is genuine and will occur within a reasonably practicable time after termination of the lease. Six months’ notice must also be provided.[21] The effect of those provisions is that s 39 balances the competing interests of lessor and lessee.
[21] Section 39(2) of the Retail and Commercial Leases Act 1995 (SA) provides that the notice period will be three months if the lease is for less than 12 months.
The substantial constraints upon a lessor’s use of a demolition clause in s 39 means that demolition clauses are distinguishable from clauses that permit termination without cause on notice. The basis for the distinction is that a demolition clause can only terminate a lease where it is supported by the existence of objective and provable facts, albeit that those facts arise from the action of the lessor. I do not consider that the inclusion of a demolition clause will, of itself, result in a lease being entered into for a period less than the statutory minimum of five years. Subject to compliance with s 39, a lessor may give notice of termination under a demolition clause. That clause is not required to be the subject of a certified exclusionary clause under s 20K of the Act.
Whilst Blackler v Felpure concerned different legislation, I have come to the same conclusion as Bryson J. There is no identifiable basis in policy or principle to suggest that demolition clauses should be treated differently to the various other rights to terminate that exist at common law and under the Act.
Conclusion
The appeal is dismissed.