Commercial Tenancy (Retail Shops) Agreements Act 1985

(WA), s 16(1), s 26(1), s 27

British Anzani (Felixstowe) LCD v International Maritime Management (UK) Ltd [1980] 1 QB 137

Mek Nominees Pty Ltd v Billboard Entertainments Pty Ltd [1994] ANZ ConvR 363

MR T J CAREY (MEMBER):

REASONS FOR DECISION

Introduction - application for transfer to a court

1 It is fair comment to say that this matter has had a chequered history. It was commenced on 25 June 2004 by the filing of a reference of a number of questions arising under a retail shop lease under s 16 of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("the Act") with the Registrar of the former Commercial Tribunal. It appears that there have been two mediation conferences in July and September of 2004, with limited or no success. As the member authorised by the President to constitute the Tribunal, I have not informed myself any further than this in relation to the mediations.

2 The matter came before me for a directions hearing on 22 March 2005, when I adjourned it for hearing on a date to be fixed. The date fixed for the hearing was 13 April 2005.

3 On 11 April 2005, the Tribunal received a facsimile from Knight Frank, the property agent for Aspen (Septimus Roe) Pty Ltd ("Aspen"), in terms that:

"We acknowledge receipt of your notice of hearing set for Wednesday 13 April 2005 and wish to advise that following the hearing on 22 March 2005 the tenant Mapen Pty Ltd has since vacated their premises at 256 Adelaide Terrace, Perth, prior to the expiration of their Lease. ...Since the applicant has now vacated the tenancy, our opinion is that there is an issue [sic] no longer exists between (the applicant) and (the respondent). Therefore, we respectfully request that the matter be suspended or closed due to our seeking legal avenues for its resolution."

4 The applicant ("Mapen") expressed its desire that the hearing proceed on 13 April 2005. At that hearing, Mr Vern Middlemass and Mr Vern Middlemass Jnr appeared for Mapen, and Ms Ng participated by telephone for Aspen. Mr Middlemass confirmed that Mapen had vacated the leased premises, and said that it had done so for "health reasons" associated with cooking exhaust fumes allegedly experienced in the premises which emanated from another tenancy and which were the subject of Mapen's application to the Commercial Tribunal. Mr Middlemass' preference was for the application to be heard and determined, if necessary independent of claims by Aspen for arrears of rent and any other claims arising from the early termination of the lease.

5 Ms Ng, on the other hand, regarded the termination and arrears issues as important ones which had been referred to Aspen's solicitors, which, failing a resolution, would be more appropriately dealt with by a court. That being so, it would be inappropriate to accede to Mapen's request for the matters the subject of the referral to proceed, as it were, in isolation. I have regarded Ms Ng's submission to be an application under s 27(3) of the Act for transfer of the proceedings to a court.

6 In order to place me in a better position to decide where the merits of the respective positions lay, I made orders for the filing -

(a) by the respondent of evidence relating to the existence of issues other than those raised by the application between the parties and written submissions regarding the continuation or otherwise of the application before the Tribunal, including if appropriate reference to the jurisdiction of the Tribunal; and

(b) by the applicant of any written submissions in response.

7 The parties having complied with those orders, I have considered the documents filed by each of them.

Aspen's evidence of other issues and written submissions

8 The evidence filed by Aspen includes notifications by Aspen's agent of Mapen's alleged breaches of lease constituted by non-payment of rent and other charges, and the issue on 4 March 2005 of a notice of default based on an outstanding amount of $26 464.35. According to the notice, failure to remedy the stipulated breaches would result in the lessor commencing legal proceedings to recover all monies owed, and in addition the possible exercise of other remedies available including the right of re-entry.

9 The evidence provided by Aspen did not include evidence of the commencement of any proceedings against Mapen in respect of either the alleged arrears or Mapen's vacation of the premises. According to Aspen's written submissions, both matters have "been forwarded ...to the Lessor's solicitors".

10 On the question of the continuation of the application before the Tribunal (or otherwise), Aspen submits that Mapen is in substantial arrears, and, having vacated the premises, has relinquished its status as tenant. The further issues which are now to be dealt with (being the alleged arrears and vacation) should be dealt with in accordance with the rules of evidence by a court. According to Aspen, Mapen has used the matter in the Tribunal as an excuse to not pay rent owing and to terminate the lease. Further, it asserts that a lack of complaint in respect of the fumes issue for over six months prior to vacating the premises, and its involvement in negotiations for a five year extension of the lease, were indicative that the fumes issue lacked substance.

11 Mapen makes a number of allegations against Aspen, including its total disregard for the problems which Mapen brought to its attention, which, at least to some extent, has been acknowledged; an alleged offer by Aspen in late 2004 or in early 2005 to terminate the lease; Aspen's allegedly unreasonable dealings with a possible assignee of Mapen's business which resulted in the assignment not taking place; and Aspen's alleged failure to comply with agreements made and undertakings given to both Mapen and the Registrar of the Commercial Tribunal which may have lead to resolution.

12 As to the appropriate forum for determination of the questions referred to the Commercial Tribunal registrar, Mapen relies upon its election to refer the questions it did to the registrar under s 27(1) of the Act (which in 2004 was in identical terms to the current provision except that it referred to the Registrar of the Commercial Tribunal rather than the State Administrative Tribunal) as an informal and low cost alternative to a court, and that Aspen should not now be permitted to countermand that lawful election. Should it be, Aspen might escape the consequences of its alleged failure to honour commitments made to the Commercial Tribunal. Regarding the question of outstanding rent, Mapen had always recognised the existence of rent arrears, but it had to endure premises which were not fit and proper for leasing for three years. If and when that problem was resolved, Mapen would be prepared to return to the premises on the basis of a "reasonable rental established for an ongoing lease". Finally, Mapen is not aware that any legal process has been served on behalf of Aspen on solicitors authorised by Mapen for that purpose.

13 Section 16(1) of the Act provides:

(1) Subject to s 11(5), a party to a retail shop lease may refer to the Tribunal any question between the parties which he believes to be a question arising under the lease and the Tribunal shall -

(a) determine whether or not the question referred to him is a question arising under the lease_;_ and

(b) if it is such a question, hear the question with a view to achieving a solution acceptable to the parties to the lease."

14 Section 26(1) provides relevantly:

(1) Without limiting any power to make an order that is conferred by the State Administrative Tribunal Act 2004 but subject to this Act the Tribunal may make -

(a) an order that requires a party to proceedings before it to pay money to a person specified in the order;

15 Section 27(1) and s 27(3) provide:

(1) Where this Act provides for the reference of a question to the Tribunal and the question is one that a court also has jurisdiction to determine, proceedings may be instituted to determine the question either -

(3) Where a question has been referred to the Tribunal under this Act and the question is one that a court also has jurisdiction to determine, the proceedings for the determination of the question shall -

(a) if all the parties to the proceedings so agree; or

(b) if, on the application of a party or of its own motion, the Tribunal so directs,

be transferred to the court and shall be disposed of as if the proceedings had been instituted before the court."

16 In filing its application with the Commercial Tribunal, Mapen made an election between the two types of proceedings available to it under s 27(1) of the Act. Whilst this is informative as to whether the matter should remain in the Tribunal subsequent to a question being raised as to the possible transfer of the matter to a court, it is not determinative of that question.

17 Despite Mapen's claim set out in its application being expressed in terms of breaches of a number of subclauses of the lease, Mr Middlemass conceded at the hearing that it is confined to the question of Aspen's liability in respect of the cooking exhaust fumes. According to Aspen, rental arrears have accrued since January 2004 and Mapen ceased making any weekly payments in respect of rent and outgoings after 14 December 2004. It is not clear, based on Mapen's submission, to what extent its unwillingness or inability to pay the full rent owing under the lease was attributable to the fumes issue, as its submission makes reference to other issues, including its belief that the rent is excessive relative to total expenses and an apparent breakdown in communication and trust between landlord and tenant. As for its early vacation of the leased premises, Mapen unequivocally asserts that the premises were not fit and proper for its business because of the alleged fumes problem.

18 Aspen sees the matter in rather different terms. It regards the fumes issue, and indeed the proceedings in the Tribunal, as a distraction from Mapen's various breaches, culminating in its unwarranted vacation of the premises. The lessor should in those circumstances be entitled to commence proceedings in a court of appropriate jurisdiction, and Aspen has instructed solicitors to commence such proceedings. Although this is said to have occurred before notice of the hearing on 13 April 2005 was given (which occurred on 7 April 2005), there is no evidence of any proceedings having commenced.

19 The question whether a tenant might avoid liability for the full amount of arrears of rent on the basis of the landlord's failure to comply with its convenants, and typically the covenant for quiet enjoyment, is one which has exercised legal minds for generations. The preponderance of modern legal thinking favours the view that there can be an (equitable) set off in circumstances where the failure by the landlord "impeaches" or goes to the very foundation of the landlord's claim (see British Anzani (Felixstowe) LCD v International Maritime Management (UK) Ltd [1980] 1 QB 137 at 152, applied by Tadgell J in Mek Nominees Pty Ltd v Billboard Entertainments Pty Ltd [1994] ANZ ConvR 363.

20 According to the modern view, where it would be unjust to allow landlords to recover the rent without taking into account damages which it is alleged the tenant has suffered through the landlord's failure to perform its part of the agreement, a set off should be allowed. If Mapen can satisfy the Tribunal as to the extent of the exhaust fumes problem, it seems to me that Mapen would be entitled to a set off against any rental arrears of damages for breach of the landlord's covenant of quiet enjoyment. Both of these claims once made are within the jurisdiction of the Tribunal, the remedy for which, if separately pursued, would be an order under s 26(1)(a) of the Act to pay money to the successful party.

21 This leads to the question whether the Tribunal ought to try all disputes between the parties or whether a court would be a more appropriate forum. With regard to the arguments raised by Aspen supporting its view that a court should take over the matter, I have not been persuaded by any of the grounds relied upon. The size of the alleged arrears has no impact on either the jurisdiction nor the discretionary factors to be considered by the Tribunal. This is not a case where complex issues of fact and law arise, so that the more informal processes of the Tribunal might apply without any likely prejudice to either party. Further, the fact is that even now, it would appear Aspen has not commenced any proceedings in any court, despite, according to its submission, having instructed its solicitors to do so some eight weeks ago. That being the case, there is no current proceeding in any court which can form a reference for the transfer of this matter to such a court.

22 For all the above reasons, the respondent's application to transfer the proceedings to a court in accordance with s 27(3) of the Act is refused.

23 In addition to those parts of my order made at the hearing on 13 April 2005 recited earlier, the applicant was ordered to file any further evidence or other material upon which it intended to rely at the hearing by 15 May 2005. The applicant complied with this order. As the matter is to proceed before the Tribunal, it is appropriate that I make directions for the filing of further material and the re-listing of the hearing.

1. The respondent's application under s 27(3) of the Act for transfer of the proceedings to a court is refused.

2. By 24 June 2005, the respondent to file and serve on the applicant any evidence or other material upon which it intends to oppose the application and provide the Tribunal with a list of any unavailable dates for a hearing of one day's duration in July and August 2005.

3. By 24 June 2005 the applicant to provide the Tribunal with a list of any unavailable dates for a hearing of one day's duration in July and August 2005.

4. By 1 July 2005 the applicant to file and serve on the respondent any evidence or other material in response to the evidence or other material filed by the respondent.

5. The hearing to be re-listed on a date to be fixed after taking the parties' advice regarding unavailable dates into consideration.

I certify that this and the preceding eight pages comprise the reasons for decision of the Tribunal.

________________________

TJ Carey, Member