Australian Institute of Music Ltd v LM Investment Management Pty Ltd

Australian Institute of Music Ltd v LM Investment Management Pty Ltd - [2000] NSWIRComm 201 - NSWIRComm 1997 case summary — Zoe

[38]

On 1 September 1999, the Applicant wrote to the Respondent's Managing Agent requesting the exclusion from the calculation of Budgeted Operating Expenses of the amounts in respect of electrical service, electricity, repairs and maintenance of the lifts for the Building and repairs and maintenance for areas not accessible by the Applicant. 6 This approach was rejected and so the applicant commenced to make monthly payments in advance of an amount in respect of its contribution to Budgeted Operating Expenses but excluding amounts in respect of lift maintenance and repairs and maintenance for areas of the building not accessible by the applicant. The respondent then in January 2000 commenced proceedings against the applicant in the Local Court for the balance of its proportion of expenses. 7 It may be readily said that the terms of a lease of the perhaps more usual kind, under which the principal benefit obtained by the lessee is the right to occupy premises, would appear to be beyond the scope of s106. The primary jurisdictional requirement that the contract or arrangement be one "whereby a person performs work in any industry" is unlikely to be satisfied in such a case. That, of course, is not the question for decision here; the present matter relates to a lease which imposes an obligation to use the lease property in a particular way; the issue revolves around the terms of Part 5, Use of Premises, of the lease. That Part provides a clause under which is described the limited use of the premises permitted by the lease and a number of particular obligations, some of which are here not relevant. The relevant provisions of the clause appear to be as follows: Permitted Use 5.1(a) The Lessee shall not without the prior written consent of the Lessor (which consent may be withheld at the absolute discretion of the Lessor) carry on or permit or suffer any other person to carry on in or from the Premises any trade business profession or purpose except the Lessee's business set out in Item 11 of the Schedule.

[51]

"Section 88F confers jurisdiction only where the transaction has as its purpose the performance of relevant work. The present transaction did not have, in the relevant sense, that purpose. Its purpose was that the assets constituting the business of 'Yasmin boutique' be transferred to the purchasers for the consideration stated in the agreement. It was not, in the relevant sense, the purpose of the transaction that the purchasers should perform work in it. They might, of course, do so and no doubt the vendor and the purchaser thought it likely or 'contemplated' that they would. But that was not the purpose, ie, that which was sought to be achieved by it. It was of no interest to the vendor whether the purchasers worked in the business or closed it up." 13 There are three decisions of this Court (or its predecessors) to which the parties have referred concerning lease arrangements under which a lessee was compelled by the lease to maintain a particular use of the leased premises. 14 In Jennings v Auto Plaza Cahill Dep.CJ held that jurisdiction existed under s275 of the Industrial Relations Act 1991 ("the 1991 Act") to hear and determine proceedings relating to a lease which required the premises to be utilised as a licensed restaurant and take away food outlet. After referring at length to the judgments in Production Spray Painting his Honour said: Returning to the circumstances of the present case, it is obvious, as already noted, that the contract here under consideration is substantially different from the contract in Production Spray Painting. That contract, which involved the sale of a business for a consideration calculated by reference to several factors, the most important being goodwill, was characterised by (a) the absence of any ongoing relationship between the parties upon completion and (b) a complete indifference, so far as the vendor was concerned, as to whether the purchaser continued to carry on the business, as no doubt was the purchaser's intention, or not.

[62]

19 Schmidt J said this of the lease and its requirements: This was not a lease where all that was involved was the lease of premises, it being thereafter a matter of no concern to the lessor whether the lessees put the property to the use specified in the lease. Here the terms of the lease not only specified the use to which the property would be put, it also contained detailed requirements as to how the lessees would conduct the business, particularly the hours during which the business would be kept open. It also required that necessary staff, contractors and subcontractors would be provided to adequately carry on the business. Specific obligations were imposed which required work to be performed in redecorating, repairing and cleaning the premises over the period of the lease. The lease also imposed a positive obligation upon the lessor to operate a promotional fund to promote and advertise the retail section of Glasshouse on the Mall and the businesses conducted there, including the coffee lounge in question. It seems to me that all of these positive obligations remove this lease from the class of contract considered in Production Spray Painting . After referring to the judgment of the High Court in Stevenson v Barham (1976-77) 136 CLR 190, her Honour said: Here there are a number of obligations arising from the terms of the lease which directly require the performance of work. Such work is necessary for the terms of the lease to be satisfied and is not merely an indirect or remote or consequential result of that contract. This is not a case where the lessee could have closed up the business and continued paying rent and thereby have satisfied the terms of the lease. Under the lease the lessor had a clear and ongoing interest in the performance of work in the coffee lounge. The lessee had an ongoing interest in the operation of the promotional fund by the lessor. This was not the mere lease of a piece of property by a lessor, but an ongoing relationship with obligations for the performance of work on both sides. Accordingly , jurisdiction was found to exist.

[63]

20 The conduct of that business could not be said to be "an accidental incident or consequence" (per Mahoney JA) of the lease. The conduct of that business was a particular and fundamental term thereof. The requirement to conduct the business, which necessarily implies work, as do the words in the lease "proper staffing", make clear that it was an express purpose of the lease. The extent of obligations imposed by the lease is not as found in Kostakis v New World; however, in the critical respect the leases are similar in effect and I find it impossible to take any different view in the present case. The obligation to maintain a particular identified business in a "proper, orderly and businesslike manner including the proper staffing and, where appropriate, stocking of the Premises", as here, achieves in my view satisfaction of the essential jurisdictional fact. 21 The argument for the respondent to the effect that the nature of the relief sought does not relate in any sense to the conduct of the business seems to me not to be germane on a jurisdictional issue. Whether it is an argument of substance on the merits is a matter for another day. Nevertheless, if the nature of the relief sought be thought to be critical at this stage, in my view the relief sought would relate relevantly to the conduct of the business. As the facts of the matter demonstrate, the issue in effect concerns a limitation upon the charges relating to outgoings which have been imposed upon the lessee. Those charges, substantial as they are, seem to me to go to the heart of the business in that they would affect its profitability, perhaps its viability. There is in my opinion no basis upon which it could be said that the notion of increased charges which are to be levied by a lessor would not be a relevant matter for the purposes of a business. 22 I conclude that the Commission has jurisdiction to hear and determine the summons for relief in this matter. The motion is dismissed with costs, as agreed or assessed, to the applicant, the respondent to the motion.

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Before

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Judgment (64 paragraphs)

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Cases Cited (4)