Aegean Food Import Export Pty Ltd v R & C Mazzei Nominees Pty Ltd [2004] VSC 515

Supreme Court of Victoria|2004-12-14|Before: Ashley J

Landlord and tenant - Circumstances in which landlord required to provide disclosure statement under s. 8(1), Retail Tenancies Reform Act 1998.

This is an appeal brought by leave from an order of the Victorian Civil and Administrative Tribunal under s 148 of the Victorian Civil and Administrative Tribunal Act . The impugned order was made on 28 July 2004 by Deputy President McNamara.

The applicant in the proceeding before the Tribunal was the present appellant, Aegean Food Import Export Ltd ("Aegean"). It was the tenant of premises known as shops 32, 32A and 32B at the Centreway, Preston.

The respondent in the proceeding before the Tribunal was the present respondent, R & C Mazzei Nominees Pty Ltd ("Mazzei"). It was the landlord.

By its Tribunal proceeding, Aegean sought an order for repayment of certain rent paid under protest. It also pursued claims concerning the condition of the leased premises. The Tribunal found for Aegean on the latter claims; and against it on the former claim.[1] Upon the claim for repayment of rent, it held that Mazzei had not been required to provide a disclosure statement as referred to in s. 8 of the Retail Tenancies Reform Act 1998 ("the 1998 Act") in connection with a lease entered into by way of a so-called Deed of Renewal of Lease dated 27 September 2001 ("the 2001 lease"). In the circumstances, it did not address the question whether, had a disclosure statement been required, the appellant could successfully maintain its claim for repayment of rent.

By this appeal, the appellant contends that as a matter of construction and authority the respondent was required to give it a disclosure statement. The respondent contends that as a matter of construction and on authority it was not obliged to give a statement.

Pausing for a moment, it is convenient to note two matters: First, it was common ground, if I concluded that a disclosure statement had been required, that the matter should be remitted to the Tribunal. It was agreed that the Tribunal would have to find facts, and then fit them within a legal framework.

Second, the respondent's written submissions raised a contention that the question whether a disclosure statement had been required raised simply factual issues which had been decided by the Tribunal adversely to the appellant and were not reviewable on appeal under s. 148 of the Victorian Civil and Administrative Act. But that contention was not pursued, in substance, by senior counsel for the respondent in his oral submissions.[2]

The critical questions debated on the appeal need to be set in context. The following matters were either common ground or were the subject of findings by the Tribunal:

* The appellant became tenant of the premises in 1986.

* It continued to be the tenant, uninterruptedly, until the time when the 2001 lease was executed.

* In the course of its tenancy it entered into a lease in 1994 ("the 1994 lease").

* The 1994 lease was for a 5 year term commencing 1 October 1994.

* The 1994 lease was subject to the provisions of the Retail Tenancies Act 1986 ("the 1986 Act"), that being the predecessor legislation of the 1998 Act.

* The 1994 lease provided an option for two further 5 year terms.

* 2001 lease was executed on 27 September 2001. The landlord granted the tenant a new lease for a 5 year period.

* The terms of the 2001 lease were very similar to, but not identical with, the terms of the 1994 lease.

* The 2001 lease was the first lease between the parties governed by the 1998 Act.

* The respondent did not give the appellant, before the plaintiff entered into the 2001 lease, a disclosure statement as referred to in s. 8 of the Act.

* The appellant paid rent under the 2001 lease as from October 2001. But there was a dispute about how to deal with GST. The appellant withheld certain amounts.

* The landlord sued for unpaid rent. It initiated Magistrates' Court proceedings in late 2002. A director of the tenant, Mr Isaakidis, consulted the tenant's solicitor at that time. It was the solicitor who asked whether the tenant had been provided with a disclosure statement. When discussion revealed that no disclosure statement had been provided, the solicitor told Mr Isaakidis that there was no obligation to pay rent. But in fact rent was paid, under protest as it was claimed.[3]

* At the time of the Tribunal hearing in 2004 the amount of rent paid under protest exceeded $60,000; and still, it appears, no disclosure statement had been provided by the respondent to the appellant.

* The appellant did not give to the respondent, before the appellant entered into the 2001 lease, a business plan as referred to in s 9 of the Act.

The learned Deputy President, in characteristically careful and comprehensive reasons, explained why he concluded that no disclosure statement need have been given. He rightly concluded, in my respectful opinion, that the provisions of the 1998 Act applied to the 2001 lease. He noted that disclosure statements were required by that Act in the three situations described in ss. 8, 17 and 23. The last-mentioned section was not in point. Section 17 would have been the more obviously applicable of the two remaining sections. But the Court of Appeal had decided in Ensabella & Sons Pty Ltd v Players On Down Under Pty Ltd[4] that s. 17 only applied to the exercise of an option where the lease being renewed was a lease entered into under the 1998 Act; and the 1994 lease was not such a lease. Then, as to s. 8, Judge Davey, then Vice-President of the Tribunal, had held in Khodr v Foo Quan Eng Holdings Pty Ltd (No. 2)[5] that the section had no application in the case of an "existing tenant" wishing the renewal of a lease. Whilst the Deputy President, uninstructed by Khodr, would have arrived at a contrary conclusion, in circumstances such as the present he had applied it before in the interests of consistency and conformity. Counsel had not suggested that he should take a different view in the instant case[6]. The question, then, was whether the circumstances of the instant case made it distinguishable from Khodr. A distinction could not be drawn. Aegean could not be regarded as a "prospective tenant" according to the reasoning in Khodr. It was a sitting tenant which took a renewed five year lease on premises of which it had been the uninterrupted occupant since 1986. The terms of the 2001 lease were almost identical with the term of the 1994 lease. The latter had statutory operation in the interim period between September 1999 and October 2001. Mazzei had not relied upon s. 14(5) of the Act so as to deny the appellant a new term.

Before me, counsel for the appellants submitted that the respondent had been obliged to give a disclosure statement in the instant case because, first, Khodr was wrong in principle; and, second, because the circumstances of the present case were significantly different to those which were addressed in Khodr, so that the decision in that case, if correct, was distinguishable.

In my opinion Khodr was correct in the result, but for reasons which differ somewhat from those expressed by the learned judge. He concluded that the language of s. 8(1), "a prospective tenant of a retail premises lease" referred not to an existing tenant in the premises but to a new tenant. It followed that an existing tenant wishing the renewal of a lease was not a prospective tenant. In my opinion, however, the preferable analysis is that s. 8(1), as a matter of statutory construction, did not apply (at least until 1 November 2003) in the case of renewal of a lease upon exercise of an option - regardless whether the option was granted by a lease entered into under the 1986 Act or the 1998 Act.

There are reasons tending against the conclusion which I have reached. They can be summarised this way:

* The purpose of the 1998 Act would be advanced if s. 8(1) was read to require the provision of the information there referred to in the case of renewal of a 1986 Act lease after the commencement of the 1998 Act.

* The language of s. 8(1), read literally, could apply to renewal of a lease.

* It would be anomalous if s. 8(1) did not require the provision of information in the case of renewal of a 1986 Act lease; for if such a renewed lease had itself been renewed in the life of the 1998 Act, s. 17(1) would have required the provision of information at the latter time.

Next I should foreshadow the reasons why, in my opinion, the issue of statutory construction should be resolved in a different way. They can be summarised as follows:

* Unlike the predecessor legislation, disclosure provisions in the 1998 Act separately addressed each of the circumstances of entering into, renewal and assignment of a lease - by sections 8, 17 and 23. Provision of information was required in each situation; but not the same information in every situation.

* Whilst, read literally, the language of s. 8(1) could extend to the circumstances of renewal of a lease after exercise of an option, so to read it would give ss. 8 and 17 an improbable overlapping operation. Further, it would impose two obligations, different in content, upon a landlord in the event of renewal.

* If, however, a propos renewal, s. 8(1) was to be read as applying only to the renewal of a lease within the life of the 1998 Act that resulted from the exercise of an option granted under a 1986 Act lease, s. 8(1) must be given a shifting meaning - which is at the least unsatisfactory as an approach to statutory construction.

* Amendment of the 1998 Act by the 2003 Act, relevantly by insertion of a definition of "prospective tenant" operative from 1 November 2003, does not assist the process of statutory construction.

* The principle that a beneficial construction should be given to remedial legislation in the event of ambiguity in legislation does not assist the appellant.

A little later I will expand upon the considerations which tell in favour of the construction which I place on s. 8(1) of the 1998 Act. But before doing so, I should address matters tending against my conclusion.

First, it is clear that the policy of the 1998 Act - I speak in the past tense because it was repealed by s. 118 of the Retail Leases Act No 4_/_ 2003, though given continuing operation with respect to leases to which it applied immediately before its repeal by s. 119(1) of that Act - was to ensure that tenants be provided with a deal of information before entering into, or renewing a lease; likewise that proposed assignees of leases be provided with information.[7] The requirement that information be provided continued a policy evident in the predecessor legislation.[8]

Second, the 1998 Act expanded the application of the policy; for the 1986 Act only required provision of a disclosure statement "before entering into a retail lease". It specifically provided that a disclosure statement was not required to be given on renewal or assignment.[9]

Third, the 1998 Act required the provision of more information than did the 1986 Act in the case of proposed entry into a lease. So, the 1986 Act required provision only of a disclosure statement, whereas the 1998 Act required provision of a statement, a copy of the proposed lease or such of its terms as were in writing, and a copy of an information booklet published by the government.

Fourth, the 1998 Act imposed more extensive sanctions upon a defaulting landlord than did the 1986 Act. It provided, where the 1986 Act did not, that in the event of default the tenant might withhold rent and was not liable to pay rent attributable to the period of default.[10]

Fifth, the 1998 Act applied to retail premises leases entered into after the commencement of s. 4(1) of that Act, including one entered into under an option provided for by a retail premises lease entered into during the currency of the 1986 Act.[11]

Sixth, it was submitted for the appellant that the language of s. 8(1) was on its face applicable to its position in the period before the 2001 lease was executed. The subsection was forward looking. It imposed obligations upon a landlord before a retail premises lease was entered into. In that context it was right to speak of a "prospective tenant", because the lease under which such person would become a tenant had not yet been concluded. It was the lease in prospect that must be examined to see whether it would be a lease of retail premises, this calling the landlord's obligations into play.

I agree with that submission, which was rooted in the words of s. 8(1) read literally. I do not consider that use of the adjective "prospective" evidences the contrary. The 1986 Act did not use that adjective, even though circumstances which it addressed were essentially anticipatory of a lease being entered into.[12] Nonetheless, it was understandable that the adjective should have been introduced into the 1998 Act to emphasise the point.

I reject the respondent's contention that the appellant could be regarded as a "prospective lessee" but not as a "prospective tenant" in respect of the 2001 lease before it was consummated. "Landlord" was defined in the 1998 Act, as was "Lease".[13] "Tenant" was not defined. But it seems to me that it must have carried a meaning which correlated with the definition of "Landlord". Remember also that the focus of the 1998 Act was upon leases.

Seventh, if the appellant was not entitled to provision of documents under s. 8(1) in 2001, it was not entitled to provision of any documents at that time. Ensebella so decided. Yet if the 2001 lease had come up for renewal in the life of the 1998 Act, then according to the position adopted by the parties it would have been entitled to a disclosure statement (but not the other documents mentioned in s. 8(1)) by operation of s. 17(1). Whilst it can be expected that the appellant received a disclosure statement complying with the requirements of the 1986 Act when it entered into the 1994 lease, the absence of any requirement of disclosure in 2001 should be regarded as anomalous having regard both to the relevant purpose of the 1998 Act and to the agreed position of the parties had there been a further renewal governed by that Act.

I turn to matters tending in favour of the conclusion which I have reached.

First, looking to the history of the development of the legislation, the language of s. 7(1) of the 1986 Act was wide enough to embrace a lease arising in consequence of the exercise of an option; and perhaps the assignment of a lease. But s. 7(2) made it clear that such transactions were not caught up by s. 7(1).

Second, on any view the 1998 Act marked a departure from that position. At least to some extent it dealt separately with the situations of entry into a lease, renewal and assignment. Further, emphasising that there was a real difference in the three situations, the landlord had to provide more information in the first of them than in the case of the others. Thus, in the first situation, the landlord had to provide copies of the lease and the information booklet in addition to a disclosure statement. Note also a cross obligation that was imposed upon the prospective tenant to provide the landlord with a business plan[14].

Third, s. 17 of the 1998 Act - addressing the situations of exercise of an option and of a landlord proposing to renew a retail premises lease - was given a somewhat confined area of operation by Ensabella. Specifically, the Court held that it only applied in the case of an exercise of option (the case concerned that situation) under a lease entered into after the commencement of the 1998 Act.

It can therefore be said that the area of operation given to s. 17(1) by Ensabella would not conflict with s. 8(1) having operation in the case of renewal by the exercise of a 1986 lease option after the commencement of the 1998 Act. But that is by no means the end of the matter.

It turned out that the 1998 Act only had a life, subject to the operation of the transitional and savings provisions contained in the 2003 Act, of about five years. That means I suppose, in light of s. 15 of the 1998 Act, that there would have been a limited number of cases in which the question of renewal of a lease entered into after the commencement of the 1998 Act would have arisen. But there is no reason to think that such cases did not arise; and, more importantly, when the 1998 Act was enacted there was no necessary limitation on the period of its operation.

Consider, then, the case of exercise of an option to renew a lease which had been entered into after the commencement of the 1998 Act. If a "prospective tenant" where appearing in s. 8(1) should be construed to apply to any person yet to enter into a future lease of retail premises, then a current lessee would have met that description at a time antecedent to entering into the renewed lease upon exercise of an option. But the circumstances would also have been such as called s. 17(1) into play.

It is true that s. 8 referred to a "prospective tenant" and s. 17 to a "tenant". But logically, according to the appellant's argument, this could not have meant that one section operated and the other did not. Section 8 would have applied because, a propos a future lease, the tenant was a "prospective tenant". Section 17 would have applied because the focus of that section was upon the position of the tenant as lessee under a lease which granted an option, or which the landlord proposed to renew.

So, as it seems to me, the logic of the appellant's position was that the landlord in such a case would have been bound to comply with the requirements of s. 8(1), notwithstanding that it would have been bound to comply with the lesser requirements of s. 17(1). I find it very difficult to imagine that ss 8 and 17 should be construed as to give them an overlapping, and inconsistent, operation. Indeed, contrary to the logic of its position, I do not understand the appellant to have so contended. Counsel accepted, indeed relied upon, the correctness of Ensabella.

Fourth, and following on from the last-mentioned matter, consider the case of a lease for a 5 year term entered into in 1994, renewal of that lease after exercise of an option in 1999, and renewal of the 1999 lease after exercise of an option in (say) 2002. The appellant's position, as I understand it, was that s. 8 would apply to the 1999 renewal; but that s. 17 would apply to the 2002 renewal. That would give s. 8(1) a shifting meaning; and as a matter of statutory construction that would be unsatisfactory.

This should be added: on its face, s. 17(1) could have applied to each of the 1999 and 2002 renewals in the example just given. It was not in debate between the parties that it would have operated in the latter case; and Ensabella says that it would have done so. The only reason that it would not have operated in the case of the 1999 renewal is that Ensabella would have barred it doing so. The barrier so created had nothing to do with s. 8 operating in place of s. 17.

Fifth, whilst s. 118 of the 2003 Act repealed the 1998 Act, s. 119(1) provided that -

"Despite the repeal of the Retail Tenancies Reform Act 1998... that Act continues to apply, and from 1 November 2003 applies as amended by Part 12 of this Act, to a retail premises lease to which it applied immediately before its repeal.

Section 100(1) of the 2003 Act inserted a definition of "prospective tenant" into the 2003 Act -

"'Prospective tenant' in relation to a lease entered into under an option provided under a retail premises lease to which the Retail Tenancies Act 1986 applied (a 1986 lease), includes a tenant under the 1986 lease;"

"(8) The definition of `prospective tenant' inserted in sub-section (1) by section 100(1) of the Retail Leases Act 2003 only has effect from 1 November 2003."

I mention also s. 101(4), which was apparently intended to cast some light on Parliament's intention in cases where it provided that a provision, or amended provision, was only to have effect from 1 November 2003.

The Tribunal addressed the definition of "prospective tenant" and the operative date of the definition, in its Reasons[15]. It did so to see what light, if any, the definition cast on the operation of s. 8(1).

The Second Reading Speech did not explain the purpose of the insertion of the definition, or its date of commencement of operation. A commentator[16] has suggested that the provisions were inserted without careful consideration whether they were needed or what their effect would be.

That said, I agree with the Tribunal that the definition of "prospective tenant" inserted by the 2003 Act, assuming it could apply at all in the context of s. 8 having regard to its commencement date of operation, would appear to have statutorily reversed Khodr - in a way which would give s. 8(1) a different meaning depending upon whether the option was granted by a lease entered into under the 1986 Act or by a lease entered into under the 1998 Act.

There are two possibilities. First, that Parliament was simply stating its understanding of what s. 8(1) always meant[17]. Second, that Parliament was aware of Khodr, was aware that it had been followed in the Tribunal, and was intending to effect a statutory reversal.

If asked to choose, I would think the latter the more likely, particularly in light of the commencement date. It might be expected that Parliament was aware of the problem which would be created if s.8(1) was given a meaning contrary to Khodr, a meaning which, it might be thought, had influenced the actions of landlords and tenants for a period of two and a half years[18]. But either way, the question is what s. 8(1), construed in orthodox fashion, actually meant before 1 November 2003. The definition of "prospective tenant" inserted by the 2003 Act does not answer that question; and is in my opinion of no real assistance in arriving at an answer to the critical question in this case[19].

Sixth, the 1998 Act, at least so far as it provided for provision of information to tenants, should be regarded as remedial legislation. Counsel for the appellant submitted that such legislation should be beneficially construed if any ambiguity existed. He cited the judgment of Isaacs J in Bull and Ors v Attorney General for New South Wales.[20] His Honour dissented in the result, but that did not touch the statement of principle.

I do not consider, however, that the principle avails the appellant. This is a case, in my opinion, where the words of the statute are not ambiguous. That is not to say, read literally, that the words of s. 8(1) might not yield a contrary result. It is to say that, considered in overall context, the words cannot sensibly be accorded their literal meaning. That is the situation despite the evident policy of the 1998 Act concerning the provision of information by landlords.

I should mention two other matters. First, counsel for the respondent relied upon a passage in the judgment of Phillips JA in Pirea Building Supplies Pty Ltd v Graphics 103 Pty Ltd and Ors[21] as supporting the relationship between ss 8 and 17 for which he contended. I have not relied upon his Honour's brief remarks in giving a meaning to s. 8. Whilst giving the respondent some comfort, they were obiter dicta, and evidently inconclusive. Second, the Tribunal was understandably concerned that there should be a construction of s. 8(1) which provided a "bright line" - that is, a construction susceptible of general application - whether a disclosure statement had been required or not. Although it is a consequence and not a cause of the construction which I have placed on the sub-section, I think that such construction meets that concern.

Khodr focused upon the question whether the tenant was an existing tenant. It was the fact that the tenant had exercised an option to renew a lease. But that , as I read it, was not the focus of the decision. According to the conclusion which I have reached, however, it could not be said, simply because a tenant was an existing tenant, that such person or entity necessarily was or necessarily was not a "prospective tenant" for the purposes of s. 8(1). Rather, addressing this case, the question was whether the 2001 lease, in prospect and in realisation, involved the exercise of an option granted by the 1994 lease. If it did, then s. 8(1) had no application. If it did not, then the respondent was required to provide information in accordance with s. 8(1). It follows that the question whether Khodr is distinguishable does not truly arise.

The circumstances upon which counsel for the appellant relied before the Tribunal to distinguish Khodr[22] addressed, as it turns out, matters pertinent to what I consider to be the critical question. In its Reasons, the Tribunal analysed what it described as the "relatively fine distinctions" drawn by appellant's counsel between the situation in Khodr and the circumstances of the instant case. It concluded that they were "less impressive than [counsel's] initial formulation would suggest".[23] It appears to have concluded that this was a case of renewal by exercise of an option,[24] although it noted that the tenant was now saying that this was not the truth of the situation[25] - despite, I interpolate, its own solicitor having prepared the "Deed of Renewal of Lease". The Tribunal's ultimate conclusion why Khodr was not distinguishable, however, whilst it referred to "a renewed five year lease", emphasised rather the continuity of the appellant's possession.

In the event, the answer to the critical question cannot be safely deduced from the Tribunal's Reasons. The Tribunal must have the opportunity to consider that question. It may need to make further findings of fact before it can characterise what occurred. Depending upon that characterisation, it may need to make still further findings of fact in order to address the question of recoverability of rent paid, on multiple occasions, under protest.

I have already noted that the Tribunal's formal order did not specifically address its dismissal of the claim to repayment of rent. The parties, however, conducted argument on the footing of the substance of the matter. I consider that I should make orders, accordingly, which deal with the substance of the matter. Remitter to the Tribunal, I add, should certainly be to the Tribunal as earlier constituted.

Subject to anything that counsel may wish to say, I will make orders in accordance with the following minutes:

1. Appeal allowed. Set aside the Tribunal's order made 28 July 2004 insofar as the same reflected dismissal of appellant's claim for repayment of rent.

2. Remit to the Tribunal, for further hearing and determination in conformity with the Reasons of the Honourable Justice Ashley delivered 14 December 2004, the question whether the appellant is entitled to repayment of rent.

3. Upon the further hearing of the question referred to in paragraph 2 hereof the Tribunal be at liberty to receive further evidence.

4. Direct that the Tribunal which further hears and determines the question referred to in paragraph 2 hereof be constituted by the member who made the order of 28 July 2004.

5. The respondent pay the appellant's costs of the appeal.

If asked, I would grant the respondent a certificate under the Appeal Costs Act 1998.

[1] Though by its formal order it made no reference to the rent repayment claim.

[3] The appellant's solicitor wrote to the respondent's solicitor on 27 February 2003 advising that rent was being paid under protest.

[6] Paragraph 42, Reasons of the Tribunal, exhibit JM11 to the affidavit of James Mangopoulos sworn 6 August 2004.

[9] 1986 Act, s. 7(2).

[11] A possible anomaly in the operation of s. 4(1) was addressed by s. 119(4) of the 2003 Act. Nothing was said by the parties to turn on s. 119(4).

[12] Section 7(1) of the 1986 Act addressed the situations where -

" ... a tenant [had] not been given a disclosure statement at least 7 days before entering into a retail premises lease, or a ... statement [was] misleading or [did] not contain all the required information ..."

The remedy which it gave the tenant was a right to give notice of termination. It seems to me that the sub-section was able to speak of a "tenant", although there was an anticipatory element in the obligation to give a disclosure statement, because it was necessarily implicit in the remedy available in the event of the landlord's default that the tenant, so-called, had entered into a lease.

[13] Each was defined identically in the 1986 Act.

[16] Victorian Conveyancing Law and Practice, CCH, at 28-340.

[17] Though compare s. 119(4) of the 2003 Act.

[18] Khodr was decided in December 2000. The 2003 Act, for the most part, commenced on 1 May 2003.

[19] See, upon the question of the use that may be made of a statutory amendment in construing an earlier statute, Allina Pty Ltd v Commissioner of Taxation [1991] FCA 78; (1991) 28 FCR 203 at 212; and Interlego AG and Anor v Croner Trading Ltd [1992] FCA 624; (1992) 39 FCR 348 at 382 per Gummow J.

At a glance

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Judgment (101 paragraphs)

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