203 Castlereagh Street Pty Ltd v Skybloo Holdings Pty Ltd

NCAT Appeal Panel|2014-12-16|Before: Hodgson J

Solicitors: Retail Leases Doctor (Appellant - agent) Osbornes Lawyers (First Respondent) Kheir Lawyers (Second Respondent) File Number(s): AP 14/46529 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: Skybloo Holdings Pty Ltd v 203 Castlereagh Street Pty Ltd Date of Decision: 22 July 2014 Before: K Rickards, Senior Member File Number(s): COM 14/36787

Introduction

This is an appeal from a decision of the Consumer and Commercial Division given on 22 July 2014 in proceedings between the Appellant, 203 Castlereagh Street Pty Ltd ('Castlereagh'), and the First Respondent, Skybloo Holdings Pty Ltd ('Skybloo').
The subject matter of these proceedings is a lease of premises in Homebush Bay ('the Lease') granted to Castlereagh during 2010 by the then owner, Payce Properties Pty Ltd ('Payce'). The minimum rent due under the Lease was $53,100 p.a. plus GST. The primary permitted use was 'convenience store', though various ancillary uses including the running of a café were also permitted. The Lease contained a four-year option of renewal. The parties agreed that it was governed by the Retail Leases Act 1994 ('the RL Act').

Evidence relating to the purported exercise of the option of renewal

The documents relating to the Lease were an agreement for lease ('the Agreement'), a memorandum of lease ('the Memorandum'), a lessee's disclosure statement and a lessor's disclosure statement. A copy of the Memorandum ('the Copy Memorandum'), in which some spaces were left blank, formed part of the Agreement
In the Agreement, the Copy Memorandum and the Memorandum, Payce was designated as the lessor, Castlereagh as the lessee and Usama Maqableh (a director of Castlereagh) as a guarantor of the lessee's obligations.
The Agreement and the Copy Memorandum did not set out the dates of commencement and termination of the Lease. The Memorandum, however, stated on the first page that the Commencing Date was 18 July 2010 and the Terminating Date was 17 July 2014. (The evidence as to when and by whom these dates were inserted is outlined below.) A statement that the Term of the Lease was 4 years appeared in the Copy Memorandum and the Memorandum.
The Agreement and the Memorandum were executed on behalf of Payce by its secretary and by a director (Mr Klevansky) who was also a director of Skybloo. These documents were also executed by Mr Maqableh, both as the sole director and secretary of Castlereagh and as guarantor. No dates of execution were entered, but there was evidence to the effect that they were executed at the same time.
The lessor's and lessee's disclosure statements were both signed. The date of signature of the lessor's statement was entered as 25 January 2010.
Clause 17.1 of both the Copy Memorandum and the Memorandum provided for the option of renewal. It stated:- 17.1 Option of renewal (a) The lessee, from the expiry of the lease, is entitled to take a renewed lease of the premises for the further term of years, if any, set out in item 10 of the reference schedule on the conditions of this clause 17. (b) The lessor, if the lessee: (1) gives the lessor no more than 9 months and no less than 6 months written notice of the intention to renew; and (2) is not in default under the lessee's covenants, must grant to the lessee, at the lessee's own cost, a renewal of the lease for that further term of years unless clause 17.2 applies.
The period stipulated in item 10 of the Reference Schedule was 4 years.
On the footing that the Terminating Date of the Lease was 17 July 2014, as stated in the Memorandum, the latest date on which Castlereagh could give written notice under clause 17.1(b) of its intention to exercise the option was 17 January 2014.
Skybloo and Mr Rustom relied on a concession by Castlereagh that the first occasion on which it gave any indication of wanting to exercise the option was in an email sent by Mr Maqableh to Skybloo's managing agent, John Wurth, on 13 February 2014. This email included statements that Mr Maqableh wanted to 'stay in the shop for long term', that the content of previous emails sent by him to Mr Wurth was such as to 'prove my attention (sic) to exercise the option another 4 years' and that previous emails, meetings, phone conversations and text messages between them amounted to 'verbal agreement to exercise and extend the lease'.
In a witness statement signed on 5 November 2014, Mr Maqableh testified that on or about 22 January 2014 Mr Wurth telephoned him and told him that he had failed to exercise the option.
An email from Mr Wurth to Mr Maqableh on 27 February 2014 included the following passage:- As you know, under the terms of your lease you had from 18 October 2013 until 17 January 2014 to exercise your option for a further term. You did not do this, and as a result the lease will expire on 17 July 2014, and you have no security of tenure beyond that date.
Castlereagh's principal response to this contention by Skybloo's agent was that the period during which the option was exercisable was not as stated by him, but was a period commencing and ending some six weeks later. Consequently, Mr Maqableh's email of 13 February 2014 was within the permitted period.
In seeking to establish this line of argument, Castlereagh relied on several clauses of the Agreement. Along with some other related provisions that should be quoted, these were as follows:- 1.1 Definitions... commencement date means the date the lease commences, being the date occurring 1 day after the completion of the lessee's work period. lessee's work commencement date means the date the lessor allows the lessee access to the premises to commence the lessee's work in accordance with clause 5.3. lessee's work period means the period set out in item 7 of the reference schedule commencing on the lessee's work commencement date. 3 Rent reduction (a) If and only if: (1) the lessee completes the lessee's works within the lessee's work period: and (2) the lessee's works are completed to the lessor's satisfaction, then the lessor will grant to the lessee a 6 month rent free period commencing on the commencement date and expiring on the date being 6 months after the commencement date. 5.1 Lessor's approval (a) The lessee must prepare the lessee's plans and specifications and obtain all of the lessee's approval (sic). (b) Before the lessee's work can commence, the lessee must: (1) submit the lessee's plans and specifications to the lessor for consent: and (2) supply the lessor with all evidence of the lessee's approval… 5.3 Access When: (a) the lessor notifies the lessee that the lessor's works are at a stage that, in the opinion of the lessor, the premises are ready for the commencement of the lessor's work; (b) the lessee has complied with clause 5.1; and (c) the lessee provides the security deposit to the lessor, the lessor will allow the lessee and its contractors access to the premises at all reasonable times for carrying out the lessee's work. 5.4 Lessee's obligations The lessee must:… (g) complete the lessee's work within the lessee's work period. 6.4 Completion of lease The lessor must: (a) complete the lease by filling in all the blanks including the commencement date and the minimum rent… (and the lessee hereby authorises and directs the lessor to do so); (b) register the lease; and (c) return a copy of the lease to the lessee. Annexure A - Reference Schedule Item 7 - lessee's work period - 6 weeks, extended by the number of days that the lessee's works are delayed due to natural disasters (excluding inclement weather) or negligent acts of the lessor Item 10 - lessee's work - Fitout for the premises so that the lessee can carry out the permitted use (as defined under the lease)
Castlereagh also relied on handwritten annotations within clause 3 of the lessor's disclosure statement identifying the 'lease start date' as 'After "Lessee's Work Period" in Agreement for Lease' and the 'Lease end date' as '4 yrs after Lessee Work Period'.
In the Copy Memorandum and the Memorandum, Special Condition 2, forming part of Item 14 of the Reference Schedule, replicated the substance of clause 3(a) of the Agreement.
On behalf of Castlereagh, Mr Soltan claimed that the Commencing Date appearing in the Memorandum, 18 July 2010, was in fact the lessee's work commencement date and that the correct commencement date for the Lease itself was therefore 29 August 2010 (this being six weeks after 18 July).
In making this claim regarding the lessee's work commencement date, Castlereagh relied on the following four items of evidence.
First, the issue of a Complying Development Certificate relating to Castlereagh's fit-out works did not occur until 30 June 2010. In a statement signed on 31 July 2014, Mr Maqableh stated that he received this Certificate during the first week of July 2010. It had been issued by a Principal Certifying Authority.
Secondly, in this statement Mr Maqableh also stated as follows: 'I recall that I was first granted access to the subject premises to commence the fitout in the middle of July 2010.'
Thirdly, in a witness statement signed on 31 July 2014, Mr Soltan (who described himself as 'the professional agent that acts of the Applicant in these proceedings') testified as follows. On 29 July 2014, he had a conversation with Troy Deviesseux, who was the agent responsible for the granting of the Lease by Payce to Castlereagh. This conversation included the following exchanges:- Soltan: The date of the start of the lease is 18 July 2010. That was the date that you first granted them access to the premises? Devessieux: If that date is the start date in the lease itself, yes that was the date I first granted access to the premises. Why are you asking? Soltan: Because the date of the start of the lease should have been six weeks after you first granted access to the premises as per the agreement for lease. Devessieux: I have not seen any agreement for lease.
We note in passing that if Mr Soltan had been required to answer questions in cross-examination relating to this passage in his witness statement and had declined to withdraw it from his testimony, the appropriateness of his continuing to represent Castlereagh as its 'professional agent… in these proceedings' may have been open to question.
Fourthly, a page in a ledger maintained by Mr Wurth included the following entry relating to Castlereagh on 30 June 2010: 'New Tenancy details Entered.'
In seeking to rebut Castlereagh's claim as to the date when it took possession of the premises, Mr Salama relied on two items of email correspondence on 3 June 2010 between Mark Thompson, a paralegal employed by solicitors (Morgan Lewis) acting for Payce, and Mr Devessieux. In the first of them, Mr Thompson pointed out that the parties were 'awaiting Council Approval' and asked to be notified 'as soon as this is achieved'. Mr Devessieux's reply was in the following terms:- CDC applications were just signed off by Strata and are now with the PCA for final approval. Should received (sic) in next 7 days. We have advised the tenants that handover will be taking effect from Monday 7 June 2010.
As indicated earlier, the circumstances in which the Commencing and Terminating Dates were entered into the Memorandum were the subject of evidence. This principally comprised emails as follows (with formal parts omitted) between agents or solicitors acting for Payce or Castlereagh:- 28 July 2010, Dorian Sarkissian (a solicitor in the firm Morgan Lewis, acting for Payce) to Devessieux: 'Do we have a commencing date for this lease as yet?' 28 July 2010, Devessieux to Sarkissian: 'Commencement date is 18 July 2010.' 14 January 2011, Sarkissian to Tim Breene (of Breene & Breene, solicitors acting for Castlereagh): 'Looks like this one fell through the cracks. Can you please confirm that we may insert into the lease 18 July 2010 as the commencing date and 17 July 2014 as the terminating date. On receipt of your confirmation we will arrange for the lease to be registered.' 21 February 2011, Sarkissian to Breene: 'I refer to previous correspondence (emails and letter and attached (sic)) which remain unanswered. I urgently need you to confirm that a commencing date of 18 July 2010 can be inserted into the lease.' 24 February 2011, Breene to Sarkissian: 'I confirm that you can insert 18 July 2010 as the commencing date…'
Mr Salama relied in addition on a statement in Mr Wurth's affidavit, referring to an entry in a ledger maintained by him, that Castlereagh's first payment of rent due under the Lease was made on 25 January 2011. This date is consistent with a Commencing Date of 18 July 2010 because of the provision, in special condition 2 of the Memorandum, of a rent-free period of six months.
Two statements made by Castlereagh in the context of the present litigation were also drawn to our attention by Mr Salama. First, in its initial Application to the Consumer and Commercial Division, filed on 7 July 2014, Castlereagh pleaded that it 'did not give a written notice of its intention to renew the lease by 17 January 2014 as required under clause 17 of the lease'. Secondly, a letter sent by Mr Soltan to Skybloo's solicitors (Osbornes Lawyers) on 14 July 2014 referred to Castlereagh's 'failure to give a written notice within the specified time under clause 17.1(b)(1) of the lease'.

Castlereagh's submissions on exercise of the option

Mr Soltan's principal argument brought together the following propositions: (1) according to the evidence just outlined, the date on which Castlereagh took possession of the premises was a date on or about 18 July 2010; (2) by virtue of clauses 5.1 and 5.3 of the Agreement and special condition 2 of the Memorandum, this date was to be treated as the lessee's work commencement date (as defined in clause 1.1 of the Agreement), not the commencement date of the Lease itself; (3) the commencement date of the Lease was in fact a date six weeks later, i.e., 29 August 2010; (4) accordingly, both the Commencing Date and the Terminating Date entered into the Memorandum by Payce's solicitors were incorrect; (5) since Mr Klevansky was a director of both Payce and Skybloo, Skybloo was on notice that in this respect the Memorandum misdescribed the Lease; and (6) since the Terminating Date was in fact 28 August 2010, Mr Maqableh's exercise of the option to renew on 13 February 2014 was within the period permitted by clause 17.1(b)(1) of the Memorandum.
In seeking to establish the first of these propositions, Mr Soltan relied in particular on the fact that the Complying Development Certificate for Castlereagh's fit-out works in the premises was not issued until 30 June 2010. He placed emphasis on the stipulations in clauses 5.1 and 5.3 of the Agreement that the lessee's fit-out works were not to commence until all necessary approvals had been obtained and the lessee had supplied the lessor with evidence of these approvals.
A further submission of Mr Soltan relating to this first proposition was based on the fact that neither Mr Klevansky nor Mr Devessieux had furnished affidavits or witness statements in these proceedings. Mr Soltan claimed that we should apply the rule in Jones v Dunkel [1959] HCA 8; 101 CLR 298 and presume that any evidence given by them would not have assisted Skybloo's case. He argued also that Mr Devessieux's suggestion to Mr Sarkissian that 18 July 2010 should be entered in the Memorandum as the Commencing Date was open to question because Mr Devessieux had admitted to being unaware that the Agreement had come into existence.
Mr Soltan sought to reinforce these arguments by calling in aid sections 7 and 8 of the RL Act. These state as follows:- 7 This Act overrides leases This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease. 8 When the lease is entered into (1) For the purposes of this Act, a retail shop lease is considered to have been entered into when a person enters into possession of the retail shop as lessee under the lease or begins to pay rent as lessee under the lease (whichever happens first). (2) However, if both parties execute the lease before the lessee enters into possession under the lease or begins to pay rent under the lease, the lease is considered to have been entered into as soon as both parties have executed the lease. Note. Therefore, if the lessee starts to pay rent as lessee or enters into possession as lessee, the lease is considered to have been entered into even if neither party has executed the lease at that time. Money paid in advance (purportedly as rent) as a deposit to secure premises for a proposed lease does not constitute rent paid as lessee under the lease.
According to Mr Soltan, the effect of section 8 on the legal relationship between Payce and Castlereagh was to create a single statutory lease of the premises including the following terms: (a) a commencement date of 18 July 2010, being the date on which Castlereagh took possession of them; (b) a term of four years (as stated in the Memorandum) plus six weeks (being the lessee's work period provided for in the Agreement) and (c) an expiry date of 30 August 2014. In so far as these terms were at odds with the terms of the Memorandum, they prevailed, by virtue of section 7.
In support of these submissions, Mr Soltan relied on the decision of Hodgson J in Aspromonte Pty Ltd v Zagari [1999] NSWSC 831. The dicta that he cited were at [54 - 55], but to give meaning to these dicta it is necessary in our opinion to take account of extracts commencing at [48]. The relevant passage as a whole is as follows:- 48… the entry into possession of the shop on the payment of rent meant that there was some kind of lease in existence from about the middle of March [1998]. This, in my opinion, would be so at general law, and it would be confirmed by s.8 of the Act… 49 On the facts as I have found them, at the time of entry into possession and commencement and payment of rent, no agreement or consensus was established as to any particular term… The disclosure statement of 26 May suggests a consensus at that stage that there should be a six month lease and six month option arrived at some time before the actual signing of the lease, and I am satisfied that there was, in fact, such a consensus. 50… However, whichever approach one takes on that question, it seems to me that, if there is entry into possession of a shop and payment of rent during negotiations for a lease of at least six months, and such a lease is subsequently entered into, the effect of s.8 is that the Act requires that the lease which is ultimately entered into be considered as having been entered into at the earlier time… 51 In an earlier decision of mine in Whiteway House No. 199 Pty Ltd v Abracoona Pty Ltd, 29 May 1998, unreported, I said this in relation to the construction of s.8(i): It would be possible to give a construction to s.8(1) to the effect that there cannot be entry into possession as lessee under a lease, or payment of rent as lessee under a lease, unless the lease is already in existence in the full sense of the word; that is, unless there had already been a formally executed lease or at least a concluded agreement. However, in my opinion that construction of s.8(1) should be rejected, particularly having regard to the terms of s.8(2). Section 8(2) deals with a situation where both parties execute the lease before the lessee enters into possession under the lease, or begins to pay rent under the lease. Those words, in my opinion, clearly contemplate the possibility that the lease may not be executed by both parties until after the lessee has entered into possession under the lease, or has begun to pay rent under the lease. That means in my opinion that the words "under the lease" in both subsections should not be given a narrow and restricted construction, but rather should be considered to be satisfied where there is entry into possession or payment of rent pursuant to a consensus as to terms which is subsequently given effect to by an executed lease. That is a situation which happens very commonly, and in my opinion that is the situation which the section is intended to deal with. 52 I remain of the view that s. 8(1) discloses an intention that there can be entry into a retail shop as lessee and payment of rent as lessee under a lease, where these events occur at a time when there is consensus as to the terms of such a lease but not yet any written lease entered into. 53 In my opinion the effect of these views in this case is that under s.8(1) there must be considered to have been a lease effected by the Act commencing in about mid-March 1998. That lease would then be extended to a period of five years with four and a half years plus a six month option, unless that is excluded by the effect of s.16(3). 54 In my opinion a lease extended in that way by force of the statute could be surrendered by agreement between lessor and lessee. It seems to me that the question in this case is whether it can be superseded or displaced by a written lease commencing at a different date and with a term of six months plus a six month option. 55 Having regard to the terms particularly of s.7 of the Act, I am of the view that the entry into such a written lease would not, by force of that entry alone, displace a lease extended by statute in the way I have described. In my opinion such a situation is not the same as a surrender by the lessee of a lease extended by the terms of the statute.
Mr Soltan put forward three further propositions regarding section 8. Along with the authorities on which he relied, these were as follows: (a) the operation of section 8(1) may be triggered even though a memorandum of lease is never at any stage executed by the parties (Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) (No 2) [2012] NSWADTAP 2 at [178 - 192]); (b) as long as there is 'consensus' between the parties as to the principal terms of a proposed lease, section 8(1) will have the effect (once the express conditions stated in it are satisfied) of 'filling in the blanks' in the agreement between them (Randi Wixs Pty Ltd v Pokana Pty Ltd (No 2) [2003] NSWADT 4 at [31]); and (c) section 8(2) will not be brought into play unless the relevant lease document has been executed in circumstances that would render it binding at general law (Re Bevillesta Pty Ltd [2013] NSWSC 1258 at [29 - 33]).
Mr Soltan's submission regarding the Terminating Date shown on the Memorandum was that it was incorrect and that its insertion by Payce's solicitor, Mr Sarkissian, was in breach of clause 6.4 of the Memorandum. In response to the argument that during February 2011 Castlereagh's solicitor (Mr Breene) agreed with the Commencing Date and the Terminating Date proposed by Mr Sarkissian, Mr Soltan pointed out that the only date with which Mr Breene expressly agreed was the Commencing Date
In this connection, Mr Soltan advised us that in one of the hearings in the Consumer and Commercial Division following delivery of the decision under appeal, Castlereagh had unsuccessfully sought the remedy of rectification. It had claimed to be entitled to an order correcting the Terminating Date inserted in the Memorandum, on the ground that it did not reflect the true agreement between the parties. In his submissions in the appeal Mr Soltan relied on written submissions that counsel then retained by Castlereagh had prepared for the purposes of this claim.
With reference to the evidence that Castlereagh's first payment of rent under the Lease had been made about six months after the Commencement Date asserted by Skybloo, Mr Soltan argued that a payment of rent made on account of a mistaken belief that it was due and owing should not be treated as evidence that it was in fact due. He relied here on observations of Burchett AJ in Callaghan v Merivale Cbd Pty Ltd [2005] NSWSC 985 at [27].
Mr Soltan sought also to dispel any argument that statements made in Castlereagh's initial application to the Consumer and Commercial Division and in correspondence with Osbornes Lawyers (see [46] above) amounted to admissions. He pointed out that the Tribunal was not a court of strict pleading and that in exercise of the well-recognised right of litigants to amend pleadings, Castlereagh had filed amended applications which did not include the statement in question.
A subsidiary argument put by Mr Soltan was that despite the express stipulation in clause 17.1(b)(1) of the Lease that any exercise of the option should take place within a specified period of time, it was open to Castlereagh to exercise it at any time up to the date of expiry of the Lease. He maintained that this followed from the failure of this clause to state clearly that the lessor's obligation to grant a new lease would only arise if the conditions set out in clause 17.1(b) were satisfied. He added that Mr Wurth did not at any time advise Mr Maqableh of the need to exercise the option within the specified period.
In support of this argument, Mr Soltan relied on the following statements of principle by the High Court. First, in Downey v Prior (1960) 103 CLR 353 at 362, with reference to a statutory provision authorising electors to inspect the records of a local authority, McTiernan J said that 'a person exercising the authority must observe any method which is prescribed for the time being ; but if none is prescribed the authority is exercisable by any appropriate method'. (An additional passage that Mr Soltan cited from Windeyer J's judgment in this case need not be quoted, because in our opinion it has no relevance at all in the present context.) Secondly, in Trustees Executors and Agency Co Ltd v Peters (1960) 102 CLR 537 at 552-553, Menzies J stated as follows:- It is the law that an option for the renewal of a lease which is granted without any express limitation of time for its exercise, is prima facie to be exercised during the currency of the lease, or at least, while the relationship of landlord and tenant continues between the parties. The reasons for this implication are obvious and are of compelling weight. When parties are negotiating a lease, it is highly probable that they are dealing with their relationship as landlord and tenant and it is highly improbable that they would intend that after that relationship had ended, the tenant could exercise an option to renew a lease that had already come to an end. To bind the "landlord" to renew the "lease" when it had run out and he was no longer landlord would require very clear words indeed.
As Mr Soltan pointed out, this passage was cited and relied on by the Supreme Court in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29 at [185].
Finally, Mr Soltan responded to a claim by Skybloo that Mr Maqableh's email of 13 February 2014 to Mr Wurth (see [29] above) did not unequivocally purport to exercise the option. He referred to authorities, such as Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, establishing that in deciding whether a purported notice of exercise was sufficient, an 'inflexible insistence on form would lead to plain injustice'.

Skybloo's and Mr Rustom's submissions on exercise of the option

As indicated earlier, Mr Rustom adopted Skybloo's arguments on this topic.
The main proposition urged by Mr Salama on behalf of Skybloo was that the parties to the Lease, through their solicitors, had agreed that its dates of commencement and expiry should be as stated in the Memorandum. He placed strong reliance on the fact that in the exchange of emails set out above at [44]. Mr Breene, in his role as the solicitor for Castlereagh, had expressly agreed to the insertion of 18 July 2010 as the Commencing Date and had raised no objection to the insertion of 17 July 2014 as the Terminating Date.
With reference to the evidence relied on by Mr Soltan as tending to show that Castlereagh first took possession of the premises on or about 18 July 2010, Mr Salama maintained that we should not take account of it because Skybloo had had no opportunity to put on evidence in response. But he also contended that there was sufficient documentary evidence before us to establish that Castlereagh took possession on or about 7 June 2010, treated this date as the lessee's work commencement date (even though it may not have actually started work until after it received the Complying Development Certificate on or about 30 June 2010) and regarded itself as liable to pay rent once the lessee's work period of six weeks and the ensuing rent-free period of six months had elapsed. The evidence on which he chiefly relied was the email of 3 June 2010 from Mr Devessieux to Payce's solicitors, Morgan Lewis (see [43] above) and Castlereagh's payment of the first instalment of rent on or about 25 January 2011 (see [45]).
In response to Mr Soltan's submissions based on section 8(1) of the RL Act, Mr Salama argued that a case relied on in those submissions, Spuds Surf Chatswood Pty Ltd v PT Ltd (RLD) (No 2) [2012] NSWADTAP 2, was distinguishable because it involved a memorandum of lease that was never executed by the parties.
As already indicated, Mr Salama relied on recent statements by Castlereagh acknowledging that it failed to exercise the option within the time-frame stipulated in clause 17.1(b)(1). He described as 'clearly misconceived' Mr Soltan's subsidiary argument that this failure was did not resolve the issue because the option was in fact exercisable at any time before the expiry of the Lease. He also claimed that Mr Maqableh's email of 13 February 2014 to Mr Wurth (see [29] above) did not purport unequivocally to exercise the option and was therefore ineffective to do so.

Discussion and conclusions regarding exercise of the option

In our opinion, Castlereagh's claim to have duly exercised the option to renew the Lease must fail, broadly for the reasons advanced by Mr Salama.
This claim is principally based on the contention that the date on which Castlereagh first obtained possession of the premises was on or about 18 July 2010. The evidence on this contested question is deficient, particularly because there has been no cross-examination of relevant witnesses such as Mr Maqableh or Mr Devessieux. But a notable aspect of this evidence is that the only contemporaneous document specifically referring to this date - i.e., Mr Devessieux's email of 3 June 2010 to Payce's solicitors, Morgan Lewis - indicates that it was to be 7 June 2010.
Mr Devessieux referred in that email to Complying Development Certificate ('CDC') applications, adding that they were expected to be granted within seven days following final approval by the Principal Certifying Authority ('PCA'). The fact that, as Mr Soltan submitted, this Certificate was not in fact issued until as late as 30 June 2010 does not materially reduce the likelihood that, as foreshadowed in the email, the 'handover' to Castlereagh occurred on or about 7 June 2010.
In making this submission, Mr Soltan relied to a significant extent on the provisions in the Agreement (clauses 5.1 and 5.3) to the effect that access to the premises was not to be granted until relevant approvals for Castlereagh's fit-out works had been submitted to Payce. But Mr Devessieux's email of 3 June 2010 indicates that if he was aware of these provisions he did not propose, in his role as Payce's letting agent, to insist on compliance with them. An alternative explanation, consistent with evidence furnished by Mr Soltan himself, is that Mr Devessieux was unaware of the existence of the Agreement. Either way, the result is the same. The probability is that Castlereagh was granted access to the premises on or about 7 June 2010 even though at that stage no Certificate had been issued.
Apart from this Certificate and the somewhat equivocal entry dated 30 June 2010 of 'New Tenancy details' in Mr Wurth's ledger (see [42] above), the evidence as to the date of possession on which Mr Soltan relied was not contemporaneous. Mr Maqableh's contribution to this evidence was an assertion made in a witness statement dated 31 July 2014. The reliability of this assertion is, in our opinion, significantly undermined by the fact that he must be presumed to have been aware of the acknowledgments made on Castlereagh's behalf at about the same time (see [46] above) that it had failed to exercise the option within the time specified in the Lease.
As Mr Salama submitted, a finding that Castlereagh took possession on or about 7 June 2010 is entirely consistent with the later statements by representatives of the parties - i.e. Mr Devessieux, Mr Sarkissian and Mr Breene - that the Commencing Date should be entered in the Lease as 18 July 2010. This would be in conformity with the provisions in the Agreement for a lessee's fit-out period of six weeks. But even if Castlereagh took possession somewhat later than 7 June 2010, we agree with Mr Salama's argument that the parties must be treated as bound by the agreement as to the Commencing Date of the Lease itself reached by their respective solicitors (Mr Sarkissian and Mr Breene). This conclusion receives support from the statement in clause 6.4 of the Agreement that the lessee authorised and directed the lessor to fill in 'all the blanks including the commencement date…' before registering the Lease.
We reject Mr Soltan's submission that because Mr Breene did not expressly agree to the Terminating Date it would be incorrect to treat Castlereagh as bound by the date, 17 July 2014, that Mr Sarkissian inserted in the Memorandum. It suffices to point out that this date is four years later than the Commencing Date to which Mr Breene expressly assented and that in both the Memorandum and the Agreement the Term of the Lease was stated to be four years. Furthermore, in the correspondence between these two solicitors, Mr Breene had ample opportunity, of which he did not avail himself, to object to this date.
After careful consideration, we also reject Mr Soltan's submissions based on section 8(1) of the RL Act. In reaching this conclusion, we have taken account particularly of the principal authority on which he relied, Aspromonte Pty Ltd v Zagari [1999] NSWSC 831.
Our reasons are as follows. First, Mr Soltan's argument that a statutory lease of four years and six weeks arose under section 8 is based on the premise that the lessee's work period, both under the Agreement and in actual fact, was a fixed period of six weeks. But this was not the case. Under Item 7 of the Reference Schedule in the Agreement, the period could be longer on account of inclement weather. Alternatively, it could be shorter, because the lessee's works might be completed in less than six weeks (as indeed was contemplated in clause 3(a)(1) of the Agreement). In the latter event the Commencing Date of the Lease would be less than six weeks and one day after the lessee's work commencement date.
Secondly, it appears to us, having regard to the drafting of the Agreement and to the point just made, that Castlereagh's entry into the premises for the purposes of commencing fit-out works could not properly be regarded as entry 'as lessee under the lease' for the purposes of section 8(1). In contrast to the situation in Aspromonte, there was in the present case a clear distinction, maintained in the Agreement, between occupation of the premises by Castlereagh during the lessee's work period and occupation under what might be called the 'lease proper'. During the former occupation, in contrast to the lessee in Aspromonte, Castlereagh paid no rent.
Thirdly, we are not convinced that when (a) the parties to an intended retail shop lease have expressly contemplated in an agreement for lease that the commencing and terminating dates of the lease should be entered into a formal memorandum of lease at some future time, (b) their authorised agents have subsequently agreed on what those dates should be, and (c) the dates have been duly entered in the memorandum, this agreement reached by the parties through their agents should be held ineffective to vary the commencing and terminating dates of a section 8 lease, the existence of which was not realised by either party until some years later. We say this after taking careful account of the observations by Hodgson J in Aspromonte (at [54 - 55]) on which Mr Soltan particularly relied.
We agree with Mr Salama that the evidence as to the timing of Castlereagh's first payment of rent lends support to, or at least is consistent with, Skybloo's case on this matter.
We also agree with Mr Salama that the time limits on exercise of the option imposed by clause 17.1(b)(1) of the Memorandum were binding on Castlereagh and that the submission by Mr Soltan that the option was exercisable at any time before the expiry of the Lease was 'clearly misconceived'.
Contrary to Mr Salama's contention, we incline to the view that Mr Maqableh's email of 13 February 2014 to Mr Wurth sufficiently displayed an unequivocal intention to exercise the option. But it is not necessary for us to resolve this question formally.
For the foregoing reasons, we conclude that Castlereagh failed to exercise the option of renewal contained in the Lease and that the Lease therefore came to an end on 17 July 2014, the Terminating Date entered in the Memorandum. It follows that Castlereagh's claim of entitlement to possession of the premises must fail.

Other matters raised in the appeal

As indicated earlier, a number of other issues were argued before us. Since it is not necessary for us to resolve them in order to determine this appeal, we will discuss them only briefly.
Whether the decision under appeal was interim or final. This issue was raised in Question 2 and 3 in the 'Appellant's list of issues and outline of submissions' filed by Mr Soltan. In his reasons for the decision under appeal, Senior Member Rickards described the decision as 'interim'. If it was indeed an interlocutory decision, Castlereagh would need leave under section 80(2)(a) of the NCAT Act to prosecute its appeal. Having regard, however, to the nature of the orders made in the decision, we doubt whether this characterisation was correct. An order granting possession of premises and a declaration that an option to renew a lease has expired appear to us to be final in substance.
We indicated at the hearing of the appeal that if in fact the decision was properly to be regarded as an interlocutory one it was appropriate to grant leave under section 80(2)(a), on account of the importance of the orders made for the rights and entitlements of the parties.
Whether Castlereagh was denied procedural fairness at the hearing on 22 July 2014. This was Question 3 in Mr Soltan's list. He argued to us that the Consumer and Commercial Division failed in its duty under section 36(2) of the NCAT Act to observe the rules of natural justice. He relied in particular on the following aspects of the hearing: (a) the Divisional Registrar's notice setting it down described it as a directions hearing relating to Skybloo's application filed the previous day and contained standard information as to the limited scope of directions hearings; (b) the solicitor appearing for Castlereagh, Mr Ajaje, indicated that he had briefed counsel for a hearing scheduled for 5 August 2014; (c) Mr Ajaje also indicated that he was prepared for a directions hearing only and was not in a position to obtain instructions or to address the Bench on the substantive questions arising from Skybloo's application; (d) at the hearing, Skybloo's representative gave material to Mr Ajaje that he had not previously seen; and (e) although Senior Member Rickards indicated that the proceedings could be adjourned so that he could study this material, it would have been a brief adjournment only.
Mr Salama's response included the following arguments: (a) the documents that Mr Ajaje claimed not to have seen were communications between Skybloo's solicitors and Mr Soltan; (b) after having been offered some time to consider these documents, Mr Ajaje stated that he could address the Tribunal 'now'; and (c) he did in fact proceed to put forward submissions covering all the substantive issues in dispute.
We agree with Mr Soltan that Castlereagh was not afforded procedural fairness at this hearing on 22 July 2014. This breach of the rules of natural justice amounted to an error of law.
In so deciding, we rely in particular on the well-recognised distinction between directions hearings and substantive hearings. We accept Mr Ajaje's evidence that, when preparing to attend the hearing, he assumed that it would be concerned with directions only and that substantive matters would be canvassed at the scheduled hearing on 5 August 2014 for which he had briefed counsel. In our opinion, his apparent willingness to address the Tribunal on the substantive issues raised in Skybloo's application - which, it should be recalled, had been filed only one day earlier - does not detract from the proposition that he should not have been called upon to do this.
Our conclusion on this matter accords with observations made by Principal Member Cowdroy in the stay decision at [33 - 38]. We gratefully acknowledge the assistance provided by these observations and rely, as he did, on the three leading cases on procedural fairness cited by him at [36 - 37].
Remaining questions identified by Mr Soltan. Although Mr Soltan's list contained twelve further questions and his written submissions addressed some of these, we do not need to deal with any of them. On account of our conclusion on the substantive question of primary importance in these appeal proceedings - whether the option to renew was validly exercised - an answer favouring Castlereagh to any or all of these other questions would not be sufficient to render the appeal successful.

Concluding observations

We have held that the decision under appeal was made following a hearing at which the unsuccessful party, Castlereagh, was not afforded procedural fairness. But we have also held, following consideration of additional evidence and argument, that the decision was correct in substance and that the orders made in it should not be disturbed. Our order on the appeal is therefore that the decision under appeal is affirmed.
In its submissions, Skybloo indicated that it wished to be heard on the costs of the appeal. Having regard to our rulings that the decision under appeal involved a denial of procedural fairness and that fresh evidence should be admitted, our provisional view on this matter is that Castlereagh, although unsuccessful, might not be liable to pay costs under the relevant provision (section 60) of the NCAT Act.
We will however furnish Skybloo and Mr Rustom with the opportunity to apply for a costs order. Any such application must be filed and served, with supporting submissions, within 21 days of this decision. Within a further 21 days, Castlereagh is to file and serve any submissions in response. If any party considers that a hearing on the matter of costs is required, it must address this topic in its submissions. This matter will then be determined by the Appeal Panel, with or without a hearing.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 August 2015

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