Landlord and tenant ­ Commercial Tenancy (Retail Shops) Agreements Act 1985 ­ Assignment of lease or new lease ­ Management fees

Commercial Tenancy (Retail Shops) Agreements Act 1995 (WA), s 8, s 12(1f), s 12(f)

Commercial Tenancy (Retail Shops) Agreements Amendment Act 1998 (WA)

Property Law Act 1969 (WA), s 33(1), s 34, s 34(i), s 34(i)(c), s 34(2)

State Administrative Tribunal Act 2004 (WA), s 7, s 167

State Administrative Tribunal Regulations 2004 (WA)

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226; 64 ALR 481.

Milroy v Lord [1862] EngR 951; (1862) 4 De G F & J 264

Parker & Parker v Ledsham & anor [1988] WAR 32

Walsh v Lonsdale (1882) 21 Ch D 9.

1 In their application dated 14 October 2004, the applicants posed the following question arising under a retail shop lease:

"Can the Lessor charge retail tenants for 'Management and Administration' in the variable outgoings? Can the tenants be reimbursed if Management and Administration fees were incorrectly charged?"

2 The matter was originally filed with the Commercial Tribunal of Western Australia as it was then on 14 October 2004.

3 On 1 January 2005, the State Administrative Tribunal ("the Tribunal") commenced pursuant to s 7 of the State Administrative Tribunal Act 2004 (WA) ("the SAT Act"). By virtue of s 167 of the SAT Act, this matter was transferred to the Tribunal.

4 On 18 April 2005, the application was heard and final written submissions were received from the applicants on 13 May 2005 and from the respondent on 17 May 2005.

5 The respondent is the owner of the Osborne Park Shopping Centre and the landlord of Shop 2 pursuant to a lease ("original lease") entered into in 1987 between the landlord, Messrs AV and E Gianotti, and the original tenants, Messrs MJ and KE McMahon ("original tenants").

6 The original lease provided for an initial term from 1 July 1986 to 30 June 1991 with an option for a further term from 1 July 1991 to 30 June 1996.

7 The original tenants exercised the option for the further term and assigned their interest to new tenants, PA and EM Ellis ("second tenants") by deed of extension and assignment dated 11 March 1993.

8 By deed dated 2 August 1996, the second tenants assigned their interest to MJ and KE McMahon and PW and S McKrill ("third tenants") by deed of assignment and variation, the effective date of that deed being 21 February 1996.

9 That same deed also granted the third tenants:

(a) an extension of the lease for the period 1 July 1996 to 30 June 2001, and;

(b) an option for a further term from 1 July 2001 to 30 June 2006.

10 In or about June 1999, the applicants completed an Agreement to Purchase the business of the third tenants. One of the special conditions of their agreement was the satisfactory assignment of the premises' lease.

11 In or about July 1999, the applicants completed the document entitled "Offer to take leasehold premises by way of assignment" and it was uncontroverted evidence at the hearing that, after discussions, the applicants were not approved as assignees, but a sublease dated 29 September 1999 was put in place.

12 It is the result of issues concerning the sublease and the circumstances surrounding the applicants' ongoing occupation of the premises following the expiry of the sublease that have brought the parties to this point.

13 The sublease was dated 29 September 1999 and stamped 13 October 1999.

14 Parties to the sublease were the respondent as the head landlord, the third tenants as the sublandlords, and the applicants as the subtenants.

15 The term of the sublease, on the face of the document, gave the commencement date of 3 September 1999 and a termination date of 19 February 2001.

16 The applicants contended that the termination date was as stated on the face of the sublease dated the 19 February 2001.

17 The respondent, on the other hand, said that that date was a mistake and should have been one day short of the end of the extended lease, namely 29 June 2001.

18 Clause 11.2 of the sublease stated:

"The parties further acknowledge that the memorandum of understanding set out in Churchill Knight's letter dated 25 August 1999 to Messrs McMahon and McKrill as annexed to this deed forms the full understanding of the terms of consent given by the head­landlord to this sub­lease."

19 Attached to the sublease as an annexure was a letter dated 25 August 1999 as described above, the first page of which stated:

"Further to application for assignment from the above in respect of the lease on your premises and subsequent discussions as well as discussions with Mr Bykowski indicating that Mr Bykowski and Ms Hartley would be happy with a consent to a sub­lease we are pleased to advise as follows:

The lessors have given their consent to a sub-lease in favour of Mr Bykowski and Ms Hartley subject to the execution of a suitable deed of sub­lease prepared by the lessors Solicitors.

It is intended that this letter with its contents noted in the deed of sub­lease be appended to the deed of sub­lease to ensure a full understanding of the terms of consent together with a clarification of a number of other issues.

As this will be a sub­lease and will be for a term that will expire one day prior to the expiration of the lease (as required by law to be a valid sub­lease and not an assignment) and it is the request of the assignees and assignors that the assignees be entitled to exercise an option persuant [sic] to the lease then the following shall apply:

Subject to the sub­lessee observing all of the terms of this lease in accordance with the provisions of clause 12.02 option to renew page 31 that would entitle a lessee in the normal course to be able to validly exercise an option then the sub­lessees will be invited to and permitted to take an assignment of this lease and exercise the 5 year option commencing on the 21st February 2001 which assignment and exercise option will be required to take place at the request of the sub­lessee three months prior to the expiration of the current term that is on the 21st November 2000."

20 In the evidence given at the hearing, it was common cause that in or about the beginning of February 2001, the applicants contacted the respondent's agent, Mr Ivor Cohen of Churchill Knight Real Estate, to discuss the applicant's ongoing occupation of the premises, and following a discussion, a letter dated 6 February 2001 was sent to Churchill Knight Real Estate by the applicants which stated:

"Dear Churchill Knight Real Estate

RE: SHOP 2, 212 MAIN ST OSBORNE PARK 6017

This letter is to inform you that we wish to take an assignment of the lease and exercise the option of renewing the lease for a further five years. (due to expire in June 2001)

Could you please put the lease in our names as we have been sub­leasing from Messers [sic] McMahon and McKrill. This probationary period of leasing will expire when the new lease is signed."

21 An important point to note at this juncture was that none of the four individuals who were third tenants/sublandlords were party to these discussions. They apparently could not be located.

22 Indeed, it is their absence which is at the very heart of this matter.

23 As a result, Mr Cohen wrote a letter dated 15 February 2001 to the landlord's solicitor in the following terms:

"RE: SHOP 2, OSBORNE PARK SHOPPING CENTRE ­ 212 MAIN STREET, OSBORNE PARK

Under the terms of the sub­lease to Darek Bykowski and Sarah Elizabeth Bykowski [(]formerly ([sic]Hartley) the sub­lease term was inadvertently shown as expiring on the 19th February 2001 and should have shown as 29th June 2001 (as the lease had an expiry of 30th June 2001).

Similar errors of drafting were also made in my letter of 25th August 1999, which has been appended to the sub­lease.

It is the intention of the parties to have permitted the sub­lessees the right under the sub­lease to take an assignment of the lease and to exercise the option to renew the lease for a five­year period the further term commencing 1st July 2001 and expiring 30th June 2006 subject to the sub­lessees['] good performance as a lessee which has occurred.

Enclosed is a copy of the Lease, a copy of the assignment to Ellis[,] a copy of the assignment, variation and extension of the lease in favour of the Lessees McMahon and McKrill, the sub­lease to Bykowski and Hartley including the appended letter and the exercise of the option by Bykowski and Bykowski (formerly Hartley).

It should be noted that it may not be possible to locate Messrs McMahon and McKrill and provision should be made if possible to validate the extension of lease in favour of the Lessees Mr & Mrs Bykowski without the execution by the Assignors."

24 Two important issues should be noted in respect of that letter. First, Mr Cohen acknowledges and explains the mistake in the termination date in the sublease, and secondly, he outlines what the intention of the parties was. He also notes that, as it may not be possible to locate the third tenants/sublandlords, provisions should be made "if possible" to validate the extension of lease in favour of the applicants without the execution of the assignors.

25 As a result of that letter, a document which, on the title page, was headed "Assignment and Extension of Lease" was prepared. It was dated 15 May 2001, stamped on 21 May 2001, and executed by the applicants and the respondents.

26 The applicant, Sarah Bykowski, admitted under cross­examination that, some time after signing that deed, she obtained legal advice to the effect that, as on the face of the sublease, the termination date was 19 February 2005, and after that date, the applicants were tenants at will.

27 The respondent, on the other hand, submits that the termination date of 19 February 2005 was clearly a mistake, and the deed described as an assignment and extension of lease dated 15 May 2001 was exactly that, and was enforceable as such.

28 As stated earlier, the cover sheet is headed "Assignment and Extension of Lease". However, the heading on top of the reference schedule on the first page is headed "Assignment of Lease and the Grant of New Lease", and the heading on the actual first page of the deed is headed "Assignment of Lease and Grant of New Lease".

29 For the purposes of clarity, the recitals to the deed of 15 May 2001 need to be detailed, and they are:

A. The Former Tenant was the tenant of the Premises pursuant to the terms of the Lease for the Current Term.

B. By a contract of sale of business made between the Former Tenant and the Assignee and signed by the Former Tenant on 11 June 1999, the Former Tenant has agreed, subject to the Landlord's consent, to assign the Lease and the Premises to the Assignee for the balance of the Current Term.

C. By further negotiation, the Former Tenant, the Assignee and the Landlord have agreed that:

(a) the Assignee were [sic] first to become a subtenant of the Former Tenant for term as provided in the Sub­Lease;

(b) if the Assignee has duly observed and complied with those obligations and covenants set out in the Sub­Lease and the Lease on the part of the Assignee as sub­tenant and the Former Tenant to observe and comply:

(i) the Assignee would be entitled to an assignment of the Lease and the Premises by the Former Tenant effective on the Assignment Date; and

(ii) the Assignee as tenant in the place of the Former Tenant would be entitled to exercise the option to renew the Lease and the Premises for the Additional Term.

D. The whereabouts of the Former Tenant became unknown to the Assignee and the Landlord after the Assignee has entered into the Sub­Lease.

E. Pursuant to the parties' agreement set out in paragraph C:

(a) the Assignee has validly exercised the option to renew the Lease and the Premises for the Additional Term on 6 February 2001;

(b) the assignment of the Lease and the Premises by the Former Tenant to the Assignee is deemed to have taken place.

F. At the request of the Assignee, the Landlord has agreed to:

(a) expressly record its consent to the assignment of the Lease and the Premises to the Assignee; and

(b) the grant of the lease of the Premises for the Additional Term

on and subject to the terms of this deed."

30 Several clauses in the deed of 15 May 2001 should also be noted, namely:

The Assignee warrants to and confirms with the Landlord that from and including the Assignment Date, the Former Tenant has assigned to the Assignee all the Former Tenant's estate, interest, rights and powers in the Lease and the Premises for the balance of the Current Term subject to the Assignee paying the rent and all other moneys from time to time payable under the Lease on time and complying with all the Former Tenant's other obligations under the Lease.

The Assignee acknowledges its request to the Landlord to expressly record the assignment from the Former Tenant and releases and indemnifies the Landlord from all liability arising from the fact that the Former Tenant is not a party to, and has not executed, this deed including without limitation, any claim by or through the Former Tenant in respect of the Premises and the Lease which is held to be superior to that of the Assignee.

Subject to the execution of this deed by the Assignee, the Landlord consents to the assignment of the Lease and the Premises to the Assignee but nothing in this deed releases or discharges the Former Tenant from or is a waiver of any of the provisions of the Lease or any of the Former Tenant's obligations under the Lease.

The Landlord grants to the Assignee a new lease of the Premises for the Additional Term on the terms of this deed and the Assignee accepts the grant of new lease:

(a) paying the Rent which is to be adjusted and reviewed pursuant to clause 7; and

(b) otherwise on the same terms and conditions as the Lease (with only necessary modifications) except

(i) for all the options of renewal contained in the Lease which have been exercised and are expressly excluded; and

(ii) to the extent that those terms and conditions are varied by this deed."

31 From the question posed and the facts outlined, three issues fall to be determined:

1. What was the correct date of termination of the sublease entered into on 29 August 1999?

2. Was the deed of 15 May 2001 a new lease for the purposes of s 12(1f) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("CTRSA Act") or was it an assignment of an existing lease?

3. If it was a new lease, should the landlord (respondent) reimburse the applicants in respect of any "management fees" that have been levied and collected?

32 Lawyers for both the applicants and the respondent filed two written sets of submissions. For the applicants, they took the form of letters of advice to the applicants and were dated 13 January 2005 and 21 April 2005 respectively. The applicants represented themselves at the hearing.

33 For the respondent, a document entitled "Outline of Contentions" was filed before the hearing on 14 April 2003, and a document entitled "Respondent's Submissions" dated 17 May 2005 was filed following the hearing.

34 The submissions received included the following:

"The term of the Sub­Lease expired on 19 February 2001 and this term therefore did not expire one day prior to the term of the Lease as envisaged by the letter from Churchill Knight dated 25 August 1999.

After the expiry of the term of the Sub­Lease on 19 February 2001 the Applicants remained in occupation of the premises as tenants at will until 15 May 2001 at the earliest when the Deed of that date was executed.

Clause 14.08 of the Lease (the holding over provisions) did not apply because the Third Tenants' whereabouts were unknown and it was therefore impossible to obtain their consent to the Applicants continuing occupation of the premises known as shop 2.

The letter from Churchill Knight to the Third Tenants dated 25 August 1999 is virtually unintelligible but seems on one view to require some one [sic] to invite the Applicants to take an assignment of the Lease and exercise a five year option commencing on 21 February 2001 provided the Applicants request the assignment and exercise the option on 21 November 2000. There is no mention of the Applicants having been granted an irrevocable right.

In relation to the so-called 'Assignment and Extension of Lease':

"(i) Although the cover sheet of the deed dated 15 May 2001 ("the Deed") refers to "Assignment and Extension of Lease" the heading to the Lease on page 1 reads:

'This Assignment of Lease & Grant of New Lease is made between the Landlord and the Assignee on 15 May 2001'

(ii) Notwithstanding the use of the word "Assignment" in the Deed, it is clear that no assignment was possible because the whereabouts of the Third Tenants were unknown and the Deed was not ever executed by them.

(iii) The Deed dated 15 May 2001 at recital E.(b) makes it clear that the Lease was not assigned although it states that the Assignment "is deemed to have taken place".

(iv) Clause 2 of the Deed dated 15 May 2001 demonstrates that the deemed Assignment relates only to "the balance of the current Term" which is defined as expiring on 30 June 2001. The said clause 2 in itself demonstrates that a new Lease was agreed to in respect of a term from 15 May 2001 to 30 June 2001 because it is inarguable that no assignment to the Applicants ever took place.

(v) Because the Lease was not assigned no option to renew in favour of the Applicants came into existence and the Applicants' letter dated 6 February 2001 was an obvious nullity.

(vi) The otherwise insurmountable obstacle relating to the inability of the Applicants to take an assignment and thereafter exercise an option to renew was overcome by the simple expedient of the Respondent as landlord and the Applicants as tenants entering into a new Lease for a term commencing on 1 July 2001.[.]

(vii) To place matters beyond doubt Clause 6 of the Deed dated 15 May 2001 expressly grants the Applicants "a new" lease for the Additional Term in very explicit words to this effect.

(viii) To place the matter even further beyond doubt the Additional Term is defined under clause 1 of the said Deed as "the Additional Term specified in item F1 of the Reference Schedule being the term of the new Lease granted by this Deed". The underlining is our emphasis.

(xi) The Reference Schedule is inter alia divided into Sections D and E which have the heading "Assignment of Lease" and "Grant of New Lease" respectively. It is thereby made clear in the Deed that although there is deemed to be an Assignment in respect of the current term, there is no exercise of an option but there is a grant of a new Lease.

The facts demonstrate that a new Lease was granted to the Applicants and that no assignment could or did take place.

The Deed dated 15 May 2001, by way of express words throughout places it beyond doubt, that the Respondent granted the Applicants a new Lease for five years commencing 1 July 2001 and terminating on 30 June 2006.

Since the Applicants were granted a new Lease on 15 May 2001, this Lease was clearly subject to the Commercial Tenancy (Retail Shops) Agreements Act 1985.

Section 12 (1f) of the Act reads as follows:

'If there is a provision in a Retail Shop Lease in respect of any premises to the effect that the tenant is obliged to make a payment to or for the benefit of the landlord for management fees, the landlord is not entitled to recover, and the tenant is not obliged to make, that payment.'

It is submitted that this section has application in the circumstances of this dispute and the Respondents should refund all management fees which it has recovered from the Applicants to date and it should be precluded from endeavouring to recover future management fees."

35 At the hearing, I requested the respondent's counsel to address the issue of s 34(1) of the Property Law Act 1969 (WA) in respect of the unavailability of the third tenant to assign the lessees' interest to the applicants.

36 The respondent's counsel submitted that equity would cure any defect in form that is required by s 34.

37 It was therefore agreed that counsel would furnish written submissions on the point. The applicants were also given the opportunity of having their lawyers address the matter, and submissions were filed which stated that:

"If we understood Mr Bykowski correctly, the argument has been advanced that because you would in Equity have been able to compel the Respondent to grant you an additional term of 5 years commencing 1 July 2001, this demonstrates that the Deed dated 15 May 2001 is not a new lease notwithstanding that it is expressed to be a new lease."

38 Unfortunately, that was not quite the proposal that had been put, and therefore, the submissions furnished, to a large extent, addressed an irrelevant issue.

39 This is not to be taken as criticism, as it would have been difficult for the applicants, who were lay people and appeared themselves at the hearing, to understand and then inform their solicitor of the precise issue to be addressed.

40 Suffice to say that, although I will not set out the balance of the submissions received from the applicants' solicitor, I have read them and taken them into account when considering the matter.

"The applicants' claim is that the respondent is not entitled to recover management fees in respect of the premises under the current lease by reason of Section 12(1f) of the Commercial tenancy (Retail Shops) Agreements Act 1985 (Act) which provides:

'If there is a provision in a retail shop lease in respect of any premises to the effect that the tenant is obliged to make a payment to or for the benefit of the landlord for management fees, the landlord is not entitled to recover, and the tenant is not obliged to make, that payment'

Section 12(1f) of the Act was incorporated into the Act by section 8 of the Commercial Tenancy (Retail Shops) Agreements Amendment Act of 1998 (Amending Act).

Section 14 of the Amending Act sets out which of the provisions of the Amending Act apply to "existing leases" and which only apply to "new leases".

Section 14(2) of the Amending Act provides that the amendments to the Act brought about by the Amending Act apply only to new leases, not existing lease [sic], save for the exceptions set out in Section 14(3) of the Amending Act. Section 12(1f) is not included in the list of exceptions in Section 14(3) of the Amending Act.

Thus, Section 12(1f) applies only to new leases, not existing leases. : [sic]

Thus, the applicants' claim turns on whether the current lease is properly characterised as a new lease or an existing lease under the Amending Act.

This is to be determined by reference to the relevant provisions of the Amending Act and by construing the current lease in light of those provisions. This is to be determined as a matter of substance, not form. The fact that the current lease refers to a "new lease" is not determinative.

Under Section 14(1) of the Amending Act an existing lease includes a lease entered into "pursuant to an option granted in a retail shop lease entered into before the coming into operation of that provision."

The reference to "the coming into operation of that provision" is a reference to the date on which [the] Amending Act was assented; 15 January 1999.

Thus the question is whether the applicants' present tenure i.e., the current lease, is pursuant to an option granted in a retail shop lease entered into before 15 January 1999.

In the Respondent's submission the correct characterisation of the current lease is as follows:

"(a) By deed dated 2 August 1996 the respondent granted the third tenants an option for a term of 5 years from 1 July 2001 (Option);

(b) The Option is plainly an option granted pursuant to a retail shop lease entered into prior to 15 January 1999;

(c) In August 1999 a binding contract was entered into between the respondent, the third tenant and the applicants pursuant to which the applicants were contractually entitled to exercise the Option, and the respondent was contractually bound to honour that exercise, subject to performance by the applicants of their obligations under the sub­lease;

(d) The applicants fulfilled their obligations under the sub­lease and thus became contractually entitled to exercise the Option;

(e) On 6 February 2001 the applicants exercised the Option in writing;

(f) The current lease was prepared and entered into pursuant to the applicants' exercise of the Option.

The recitals of the current lease, particularly C, D and E make it clear that it was the intention of the partiers [sic] and the effect and purpose of the instrument not to create a new lease but simply to confirm the taking up of rights from the arrangement in August 1999.

The mere reference in the current lease to a "new lease" cannot alter the substance and effect of the instrument[.]

Thus, the Option exercised by the applicants was an option granted in [a] retial [sic] shop lease prior to 15 January 1999.

Accordingly, the present tenure of the applicants is an "existing lease" as that term is defined in the Amending Act.

For those reasons Section 12(1f) is not applicable to the present lease and management fees remain payable."

41 Following the hearing on 18 April 2005, the respondent filed the following submissions on the issue of whether equity would cure any defect in form that is required by s 34 of the Property Law Act 1969 (WA).

"These Submissions are provided in response to the Tribunal's request for submissions in respect of the enforcement of the agreement to assign the lease to the applicants in equity and the necessity of compliance with the requirements of section 34 of the Property Law Act.

It should first be observed that there was a written agreement executed by all the parties providing for an assignment of the lease by the previous tenants to the applicants. The question is whether that agreement entitled the applicants to an assignment of the lease ­ an entitlement they purported to exercise in February 2001.

In the respondent's submission there is plainly a document under seal and for good consideration entitling the applicants (subject to conditions which were met) to an assignment of the lease. The only deficiency is the physical absence of the assignor.

The doctrine of Walsh and Lonsdale based on the case Walsh v. Lonsdale (1882) 21 Ch D9 provides that equity will regard as done that which ought to be done. The Master of the Rolls said in the classic formulation in that case "a tenant holding under an agreement for lease of which specific performance would be decreed, stands in the same position as to liability as if the lease had been executed". The maxim is expressed as equity looks on that as done which ought to be done. See Meagher, Gummow and Lehane's Equity Doctrines & Remedies, Fourth Edition, R Meagher D Heydon and M Leeming, ("Equity Doctrines & Remedies") at paragraphs 2­180 and 3­205.

Significantly in this regard the authors of Equity Doctrines & Remedies state at the top of page 114:

'Similarly, a contract to assign is often treated as an assignment'.

In this instance the contracting parties have for valuable consideration and under seal agreed to enter into an arrangement pursuant to which the applicants were entitled to an assignment of the lease. Equity will not permit that to fail for the absence of an assignor to formally execute the instrument.

Indeed it appears that equity would grant relief in such circumstances even if specific performance were not available. At page 115 of Equity Doctrines & Remedies the authors state:

'There are at least some cases (for example the assignment of future property where the contract no longer subsists at the time the property comes into existence) where the basis of the doctrine cannot depend on the availability of the specific performance even in this extended sense, that is, because no contract then exists. Although there is no clear authority to this effect, it seems that the maxim operates in this situation, the court regarding [sic] the assignor as still bound, not because he remains contractually bound, but because he is morally bound by virtue of his earlier enjoyment of the consideration which passed from the assignee'.

The point is further emphasised in Equity Doctrines & Remedies at paragraph 6­055. There the authors say that if the consideration pursuant to which there is an agreement to assign has been provided (as is the case here) it does not matter whether the agreement is one of a kind in which specific performance would be ordered. As the authors there state:

'Whether it is or not, equity, once the assignee has done what is required of him, regards as done that which ought to be done by the assignor'.

Significantly at paragraph 6­060 the authors go on to state that equity will uphold such an agreement to assign even if it fails to comply with the formal requirements prescribed in legislation.

Equity will enforce even an oral agreement for the assignment of the lease by reason of the imposition of the "equity" or a constructive trust in favour of the assignee. In those circumstances section 34 of the Property Law Act is no barrier to the assignee's relief. Section 34(2) expressly provides that the section does not apply to the operation of constructive trusts (see also Equity Doctrines & Remedies paragraph 7 ­ 150).

In this instance the agreement is not oral, it is in writing and contained in a deed of August 1999. Thus the applicants here have an equitable entitlement to the assignment and to that extent the previous tenants held the relevant leasehold interest on constructive trust for the applicants."

42 The issues to be decided which I have identified earlier are:

1. What was the correct date of termination of the sublease entered into on 29 August 1999?

2. Was the deed of 15 May 2001 a new lease for the purposes of s 12(1f) of the Act or was it an assignment of an existing lease?

3. If it was a new lease, should the landlord (respondent) reimburse the applicant in respect of any management fees that have been levied and collected?

Issue 1 ­ What was the correct date of termination of the sublease entered into on 29 August 1999?

43 The applicants' argument is that the termination date as stated in the sublease as 19 February 2001 is clear and should be accepted.

44 On the other hand, the respondent argues that the date of 19 February 2001 was plainly an error, and all the evidence points to that.

45 Mr Cohen, in his evidence, freely admitted that the date of 19 February 2001 was an error. He explained how he made the mistake by inadvertently adopting the dates of an earlier assignment.

46 He realised his mistake on receipt of the applicants' letter dated 6 February 2001, and made a note to correct the date.

47 He then followed that up in his letter to the landlord's solicitor dated 15 February 2001.

48 It is clear from a reading of all the documents that the date of 19 February 2001 is an anomaly. It did not achieve what all the parties had attempted to, by the agreements of June 1999 (Agreement to Purchase a Business), July 1999 (Offer to take leasehold premises by way of assignment) and September 1999 (the sublease), namely the transfer of the business and the applicants' ability to avail of the 1 July 2001 to 30 June 2006 option.

49 Indeed, when pressed in cross-examination, the applicants conceded that the date of 19 February 2001 could have been a mistake and that, at the time, that is, September 1999, what was important to the applicants was to ensure their security of tenure, which explained the letter dated 25 August 1999 annexed to the sublease.

50 I am satisfied that par 4 of the letter dated 25 August 1999 from Churchill Knight to the third tenant and annexed to the sublease confirmed the correct intention of the parties by stating:

"As this will be a sublease and will be for a term that will expire one day prior to the expiration of the lease" (as required by law to be a valid sublease and not an assignment).

51 The lease expired on 30 June 2001, and the correct termination date should have been 29 June 2001. That date makes sense of all the other agreements and the actions of the parties.

52 Furthermore, the applicant conceded that the issue of the mistake in the termination date had not occurred to her until she sought legal advice some time later.

53 I am satisfied that the correct termination date of the sublease was, in fact, 29 June 2001 and this is the date all parties believed to be the termination date at the time they entered into their agreements.

54 The finding on this issue, however, is not determinative of the matter but merely puts the actions of the parties into proper context.

55 It does, however, put an end to the applicants' argument that the period between 19 February 2001 and 1 July 2001 was a tenancy at will. I do not accept that this was the case.

Issue 2 ­ Was the deed dated 15 May 2001 a new lease for the purposes of s 12(1f) of the Act or was it an assignment of an existing lease?

56 What is undisputed is that the third tenant/sublandlord, although referred to, was not a party to the deed dated 15 May 2001, and the recitals in the deed, particularly recitals D and E recognise this.

57 Recital D states:

"The whereabouts of the Former Tenant became unknown to the Assignee and the Landlord after the Assignee has entered into the Sub­Lease."

"(b) The assignment of the lease and the premises by the former tenant to the assignee is deemed to have taken place."

59 The importance of the issue whether the deed of 15 May 2001 was an assignment or a new lease is recognised in the respondent's submission, when they state:

"The applicants' claim is that the respondent is not entitled to recover management fees in respect of the premises under the current lease by reason of Section 12(1f) of the Commercial tenancy (Retail Shops) Agreements Act 1985 (Act) which provides:

'If there is a provision in a retail shop lease in respect of any premises to the effect that the tenant is obliged to make a payment to or for the benefit of the landlord for management fees, the landlord is not entitled to recover, and the tenant is not obliged to make, that payment'.

Section 12(1f) of the Act was incorporated into the Act by section 8 of the Commercial Tenancy (Retail Shops) Agreements Amendment Act of 1998 (Amending Act).

Under Section 14(1) of the Amending Act an existing lease includes a lease entered into "pursuant to an option granted in a retail shop lease entered into before the coming into operation of that provision.

Thus the question is whether the applicants' present tenure i.e., the current lease, is pursuant to an option granted in a retail shop lease entered into before 15 January 1999."

60 If the deed of 15 May 2001 is an assignment, then the applicants' current term would be seen as being entered into pursuant to an option granted in a retail shop lease entered into before 15 January 1999, and the landlord would be entitled to recover management fees from the tenant.

61 An issue that should be clarified here is that the operative date for the Amendment Act was 1 July 1999, the day it was proclaimed, not 15 January 1999 as stated by the respondent. However, as the original lease was granted in 1987, the difference in the dates between 15 July 1999 and 1 July 1999 is of no consequence.

62 If, on the other hand, the deed of 15 May 2001 is a new lease, then provisions of s 12(f) of the Act would apply and the landlord would not be entitled to recover management fees.

63 I have considered the submissions by both the applicants and the respondent, and suffice to say this particular area of law is generally recognised in the leading texts and the case law as being notoriously difficult and, in the words of Rowland J in Parker & Parker v Ledsham & anor [1988] WAR 32:

"One is inclined to tread warily in this area of law."

64 Section 34 of the Property Law Act 1969 (WA) is clear in requiring instruments which create an interest in land to be in writing, and this is particularly important in the context of this case.

65 Section 34 states:

(1) Subject to the provisions hereinafter contained in this Act with respect to the creation of interests in land by parol ­

(c) no interest in land is capable of being created or disposed of except by writing signed by the person creating or conveying the interest, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(d) a declaration of trust respecting any land or any interest therein shall be manifested and proved by writing signed by a person who is able to declare the trust or by his will;

(e) a disposition of an equitable interest or trust subsisting at the time of the disposition shall be in writing signed by the person disposing of the interest, or by his agent thereunto lawfully authorized in writing or by will.

(2) This section does not affect the creation or operation of resulting, implied or constructive trusts."

66 Furthermore, s 33(1) of the Property Law Act 1969 (WA) states:

"(1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed."

67 The first point to be made is that the sublease dated 29 September 1999 was a separate demise by the third tenant/sublandlord to the subtenant, and it follows that there was no privity of contract or estate between the landlord (the head landlord) and the subtenant as a result of that deed. Furthermore, the subtenant was not an assignee or an agent of the lessee (third tenant) as a consequence of that deed.

68 When it came to the deed of 15 May 2001, it is common cause that the third tenant/sublandlord could not be located and took no part in that agreement.

69 The deed of 15 May 2001 was clearly prepared in an attempt by the landlord to "validate the extension of lease" in favour of the applicants as stated in the letter of 15 February 2001 from Churchill Knight to the landlord's solicitors.

70 I am satisfied, however, that the intention of Mr Cohen of Churchill Knight, in attempting to 'validate the extension of lease' in favour of the applicants, was done in a genuine effort to ensure the applicants' continuity of tenure, and not with any malice towards protecting the collection of the management fee. Mr Cohen was clear in his evidence that the issue of the management fee did not enter his thinking at that time.

71 Bradbrook and Croft in the text "Commercial Tenancy Law in Australia" (Second Edition) at par 15.17 under the heading "Forms of assignment" state:

"One would not have expected doubt to exist as to the form necessary for an assignment of a lease, but the law is not clear. The relevant statutory provisions in the various states are: Property Law Act 1969 (WA)," s 34 it is referred to.

"The doubtful question is whether a legal assignment, as opposed to an assignment good only in equity, must be made by deed in all cases. ...

Woodfall on Landlord and Tenant, 28th ed, Vol 1, para 1 ­ 1711, also takes the traditional view that an assignment of a tenancy of any kind must, to be good at law, be by deed ...

It is clear that something which is ineffective as a legal assignment will be upheld as a good assignment in equity provided that there is either written evidence or part performance, ... "

73 The respondent made similar submissions.

74 However, all of this is based on the premise that the interest in land which is being attempted to be assigned is being disposed of by a person with an interest to convey. This is not the case here.

75 To deal with that issue, the respondent submits that, because of the doctrine in Walsh v Lonsdale (1882) 21 Ch D 9, equity will regard as done that which ought to be done and, furthermore, that equity will not prevent the assignment to fail for the absence of an assignor to formally execute the instrument.

76 The respondent further argues, due to the agreements in 1999, the applicants have an equitable entitlement to the assignment, and to that extent, the previous tenants held the relevant leasehold interest on constructive trust for the applicants.

77 I am not convinced by these arguments. The deed of 29 September 1999 was a sublease and a sublease only, and the landlord insisted on this to protect its interests.

78 If the assignor was party to the Deed of 15 May 2001 or if there was evidence of an oral agreement and the alleged assignor was available, I could see equity stepping in to assist.

79 I am not convinced, however, that equity will intervene to assist a landlord who has no privity of contract or estate with the subtenant.

80 The complete absence of the assignor is not, in my opinion, a defect that will be cured by equity, as argued by the respondent.

81 In the case of Parker & Parker v Ledsham & anor (supra) Rowland J, in dealing with a gift of personalty, and s 34(1)(c) of the Property Law Act 1969 (WA) stated:

"It is beyond doubt that the proposed gift was not perfected by delivery and it was accordingly unenforceable at law. The question arose as to whether it was effective in equity."

82 The strict view is that it is not. In Milroy v Lord [1862] EngR 951; (1862) 4 De G F & J 264; 45 ER 1185, this view is formulated by Turner LJ at 1189. He said:

"For there is no equity in this Court to perfect an imperfect gift. The Court will not give effect to it by applying another of these modes. If it is intended to take effect by transfer, the Court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust".

83 In the circumstances of the present case, I believe the same must apply. There was no assignor in this case, and albeit that equity will, in many instances, endeavour to insist, in this case there is, in my opinion, nothing for equity to assist.

84 I am satisfied, therefore, that the deed of 15 May 2001 was not, and cannot, be seen to be an assignment.

85 The next question is whether it is a new lease.

86 Bradbrook and Croft, in "Commercial Tenancy Law in Australia" (Second Edition) at par 1.6, when dealing with the provisions of s 52 of the Victorian Property Law Act (Vic) states:

"A lease which does not fall within s 54(2), is not made by deed, is void at law. But if the lessee takes possession under a void lease, then at common law a tenancy at will arises."

"Moreover, in equity, under the doctrine of Walsh v Lonsdale (1882) 21 Ch D 9; [1881] 51 All ER Rep Ext 1690, the lessee under the void lease is in the same position as regards the lessor as if a valid lease has been granted, provided that there is either a sufficient memorandum or some act of part performance; ... "

88 In the present case, there is little doubt that what was created between the respondent and the applicant by deed of 15 May 2001 was, in fact, a new lease, based on the provisions of the previous lease and the terms of the agreement of 15 May 2001, which is due to expire on 30 June 2006.

89 In the circumstances, therefore, pursuant to s 12(f) of the Act, the landlord is not entitled to recover management fees and no further management fees should be charged.

Issue 3 - If it was a new lease, should the landlord (respondent) reimburse the applicants in respect of any management fees that may have been collected?

90 Although no privity existed between the landlord and the subtenant arising out of the sublease dated 29 September 1999 which equity could have assisted, there is privity between the respondent and the applicants as a result of what I have decided is, in fact, a new lease dated 15 May 2001.

91 It is also clear that, at the time of that agreement, both parties entered into it believing it to be an assignment and extension of the previous tenure on the same terms, and agreed to the terms, which included the payment of management fees continuing.

92 On the applicant's own admission, it was not until the applicant obtained legal advice some time later that the present questions were raised.

93 The question that must now be answered is whether the applicants are entitled to be reimbursed for any management fees paid or are they estopped from recovering the management fees paid since 1 July 2001.

94 In this instance, the respondent is, in my opinion, entitled to rely on equitable principles of estoppel.

95 Patrick Parkinson, in his text "The Principles of Equity", at page 211, explains estoppel as follows:

"Estoppel is a substantive principle of law which operates to preclude a party to legal proceedings from asserting against another party either facts, legal rights, or the absence of legal obligations, to the extent that it would be unconscionable to do so. The object of estoppel is to preclude the unconscientious departure by a party from an assumption from which he or she bears some responsibility, and which has been adopted by another party as the basis of a course of conduct, an act or an omission which would operate to that other party's detriment if the assumption were not adhered to.

Generally, estoppel has a preclusionary operation. It precludes departure by the party to be estopped from the assumption adopted by the other. When it acts in this preclusionary way, the estoppel establishes the state of affairs by which the rights of the parties are to be determined. In that capacity, it may provide a defence to a cause of action or it may defeat a defence to a cause of action. ... "

96 In "Equity Doctrines & Remedies" by Meagher Gummow & Lehane, (Fourth Edition), at page 540, in dealing with the position in Australia, the authors state:

"Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ said the following of conventional estoppel, in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 244; [1986] HCA 14; 64 ALR 481 at 491:

Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted upon by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be stopped from denying.

Although that passage appeared to require the assumption to concern facts not law, it was immediately doubted by Samuels JA in Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 at 185 ­ 9. It is now clear (as suggested in the previous edition of this work) that the doctrine extends to assumptions of law, as a result of the subsequent observations made in: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 415 ­ 16, 432, 452, 458; [1988] HCA 7; 76 ALR 513 at 532, 545, 559 ­ 60, 564; Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 435, 457; [1989] HCA 51; 88 ALR 413 at 448; ... . "

97 Based on the facts of this case, I am satisfied that the respondent would be entitled to rely on estoppel to prevent the applicants attempting to now insist that the respondent repay all amounts that have been paid in management fees on foot of the deed of 15 May 2001 to date.

98 I believe for the applicants to now rely on my findings in this case to attempt to reconstruct the basis on which the parties willingly entered into the agreement in May 2001 would be unconscionable, and on that basis, I am not prepared to order that the respondent must repay management fees collected to date.

99 Although the applicants, in compliance with orders I made at the close of the hearing, filed details of the amounts they allege were collected by the landlord as management fees, because of the findings I have made above, there has been no need for me to comment in respect of those documents or attempt to make any calculations in respect of the amounts contained therein.

100 Under the circumstances, I make the following orders:

1. The correct date of termination of the sublease dated 29 August 1999 was 29 June 2001.

2. The Deed dated 15 May 2001 was not an assignment deemed or otherwise between the third tenant and the applicants, but was a new lease between the respondent and the applicants due to expire on 30 June 2006.

3. Section 12(f) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 applies to that new lease, and the landlord is not entitled to collect management fees from the applicants which he has not already recovered, nor is he entitled to charge management fees in the future.

4. The applicants are not entitled to be reimbursed for any management fees already paid pursuant to the Deed of 15 May 2001.

I certify that this and the preceding [100] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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MR M SPILLANE, MEMBER