plaintiff. Declaration that the term of the plaintiff's lease was extended by operation of s 44(3) of the Retail Leases Act to 14 August 2020; existing injunction discharged; matter adjourned for parties to...
Key principles
A document described as a 'Retail Licence' that satisfies the statutory definition of a 'retail shop lease' is subject to the Retail Leases Act 1994 (NSW) and parties cannot...
A statement in the lease instrument that the lease 'will not extend past' a date does not, standing alone, constitute written notification under s 44(1)(b) that the lessor does...
Where a lessor fails to give the notification required by s 44 within the specified period, the lessee may, before expiry, give written notice requesting the extension under s...
The 'notification required by this section' for the purposes of s 44(3) is a later communication by the lessor amounting to notification under either s 44(1)(a) or s 44(1)(b);...
Issues before the court
Whether the Deed of Retail Licence was a 'retail shop lease' and therefore subject to the Retail Leases Act 1994 (NSW).
Whether the Deed of Retail Licence (or other communications before 1 October 2019) constituted written notification under s 44(1)(b) that the lessor...
Plain English Summary
The tenant occupied Shop 22 under a Deed called a 'Retail Licence' that was, in substance, a retail lease subject to the Retail Leases Act. The landlord ran a tender for a new lease but did not, within the statutory 6-12 month window before expiry, give the written notification required by s 44 that it did not propose to offer renewal. The tenant's solicitors wrote on 11 February 2020 requesting the statutory six month extension under s 44(3). The landlord's letter of 14 February 2020 confirming the tenant's unsuccessful bid was held to be the notification required, so the lease was extended by operation of s 44(3) until 14 August 2020. COVID-19 Regulations and the National Code did not alter that statutory outcome.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Deep Dive
2,395 words · generated 19/06/2026
What happened
Cameli Pty Ltd (the tenant/operator of a café called Dare) occupied Shop 22 at The Rocks. Its original registered lease expired on 23 March 2019. Following the lease expiry the tenant remained in possession under the lease's holding-over provision, producing a month-to-month tenancy terminable by one month's written notice (Introduction [2]-[3]). The parties then executed a Deed described as a "Retail Licence" on 12 September 2019, which recorded the term from 24 March 2019 to 31 March 2020 and contained an express statement that the Deed would not extend past 31 March 2020 and that the Retail Leases Act "will not apply to this Deed" (Salient Facts [4]). The defendant later conceded, and the court agreed, that the Deed in substance constituted a retail shop lease subject to the Retail Leases Act 1994 (NSW) (the Act) (Introduction [4]).
Whether the plaintiff's solicitors' letter of 11 February 2020 constituted a valid written request under s 44(3) for the six month extension.
Whether and when the lessor gave 'the notification required by this section' such that the six month extension period under s 44(3) commenced.
Cited legislation
4 cited instruments linked from this judgment.
In late 2019 the defendant engaged in a tender or expression-of-interest process for the grant of a new five-year lease commencing 1 April 2020 (Salient Facts [5]-[13]). The plaintiff submitted a proposal and signed a Letter of Offer dated 6 December 2019. The defendant's Executive Leasing Committee (ELC) ultimately selected another operator (Salient Facts [11]-[13], [22]). The plaintiff's solicitors wrote on 11 February 2020 asserting, inter alia, that because the landlord had failed to give the notice required by s 44(1) of the Act within the prescribed period, the lease was "hereby extended by 6 months to 3 June 2020" pursuant to s 44(3) (Salient Facts [24]).
The defendant replied by letter received 14 February 2020 denying the existence of a lease and that the Act applied. A further defendant letter dated 2 March 2020 reiterated that the plaintiff had no right to possession after 31 March 2020 and offered an alternative exit date (Salient Facts [25]-[26]). Proceedings were commenced by the plaintiff on 23 March 2020 and an injunction restrained the defendant from leasing the shop to anyone but the plaintiff (Salient Facts [27]). The principal issue before Darke J was whether s 44 of the Act had been engaged in a way that extended the lease term, and if so, to what date (Introduction [6]).
The court concluded: (i) the Deed of Retail Licence was, in substance, a retail shop lease subject to the Act (Intro [4]); (ii) statements in the Deed and the earlier tender-stage communications did not amount to the written notification required by s 44(1) within the prescribed period (Was the term... [3], [15]-[16]); (iii) the plaintiff's solicitors' letter of 11 February 2020 satisfied s 44(3) as a request for the statutory six month extension (Was the term... [9]-[10]); (iv) the defendant's letter received on 14 February 2020 constituted the lessor's notification required by s 44(1)(b) (Was the term... [17]) and therefore the six month extension ran to 14 August 2020 (Was the term... [19]). The court declared accordingly and discharged the injunction (Conclusion [1]).
Why the court decided this way
The decision turns on statutory construction and the application of objective communication principles to what counts as "notification" under s 44 of the Act.
Identification of the statutory regime: The judge began by determining that the Deed labelled a "Licence" nevertheless met the statutory definition of a retail shop lease and was therefore governed by the Act; s 7 prevents parties contracting out of the Act's mandatory protections (Introduction [4], citing Pyrmont Point [55]-[64]).
Meaning and purpose of s 44: s 44 imposes a temporal duty on lessors to give written notice either offering renewal/extension (s 44(1)(a)) or stating the lessor does not propose to offer renewal/extension (s 44(1)(b)) between six and twelve months before expiry. s 44(3) provides the remedy where the lessor fails to give that notice: the lease is extended until six months after the lessor gives the notification, provided the lessee has requested that extension in writing before expiry.
Formality and substance of communications: The court emphasised substance over form. Communications need not cite s 44 or adopt any particular form; the relevant question is whether a reasonable recipient in the lessee's position would understand the communication as conveying the requisite intention (Was the term... [10], [13]).
Application to the facts: The Deed's internal statement that the licence would not extend beyond a date was about present contractual rights; it did not convey the lessor's present intention not to offer renewal or extension, which s 44(1)(b) requires. Communications during the tender process were not sufficiently explicit about the lessor's intention and could plausibly be consistent with the lessor's intention to offer a new lease at the conclusion of the process. By contrast the defendant's written letter of 14 February 2020, after the process had concluded, amounted to a written notification that the defendant did not propose to offer a renewal or extension (Was the term... [3], [15]-[17]).
Lessee's request under s 44(3): The plaintiff's solicitors' 11 February 2020 letter, even though it mischaracterised the date of the lessor's notification, plainly manifested a request to take the s 44(3) extension; it therefore satisfied the statutory requirement that the lessee request "that extension" in writing before expiry (Was the term... [9]-[10]).
Commencement of extension period: The six-month extension runs from the date the lessor gives the statutory notification after the expiry of the prescribed period. The court identified 14 February 2020 as that date and fixed the extension to 14 August 2020 (Was the term... [11], [17]-[19]).
COVID-19 Regulation and Code: The judge rejected the submission that cl 9 of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 and the National Code of Conduct leasing principles required the court to extend the tenancy further. The relevant facts about s 44 occurred before the Code and Regulation came into force; further, no prescribed action under the Regulation was being taken by the lessor based on COVID impacts and no cross-claim engaged the court in decision-making of the kind contemplated by cl 9 (Reg. analysis).
The reasoning rests on an ordinary-objective construction of communications and a strict but purposive approach to the statutory scheme.
Before and after state of the law
Before this decision:
It was established law that parties cannot contract out of the Retail Leases Act and that a document labeled as a licence could, in substance, be a lease falling within the Act (Pyrmont Point [2016] NSWCA 33 was cited and followed, and the court accepted the concession that the Deed was caught by the Act: Intro [4]).
Prior authority, notably Anka (Civic Center) Pty Ltd v Sahyoun [2014] NSWSC 17, had held that s 44(3) notices need not adopt any particular form or cite the statute; the present decision expressly applies that principle (Was the term... [10], citing Anka).
This decision clarifies:
That statements in the operative lease instrument fixing a terminal date do not, of themselves, discharge the lessor's s 44(1) obligation to convey its intention not to offer renewal or extension (Was the term... [3]).
That communications during an ongoing selection/tender process will not necessarily constitute s 44(1)(b) notification; the court will look at whether the lessor's intention was in fact conveyed as of the relevant time window (Was the term... [15]-[16]).
The practical operation of s 44(3): the lessee's written request may validly be made even if its legal analysis is imperfect; and the six-month extension begins to run from the date the lessor later gives the notification (Was the term... [9], [11], [19]).
Key passages with plain-English translation
"In my opinion, the Deed of Retail Licence does not constitute written notification for the purposes of s 44(1)(b)." (Was the term... [3])
Plain English: Saying in the lease that it ends on a certain date does not count as the landlord telling the tenant 'I will not offer you an extension' in the statutory sense.
"It seems to me that the 11 February 2020 letter amounts to such a request ... the letter conveys an intention to take advantage of the extension provided for in s 44(3)." (Was the term... [9]-[10])
Plain English: The tenant's lawyer wrote saying the landlord hadn't given the required notice in time and was asking for the six-month extension; that letter was a valid request under the statute even if its legal reasoning was imperfect.
"It follows from the above that the defendant gave the notification required by s 44 on 14 February 2020. On that basis, the term of the plaintiff's lease... was extended... to 14 August 2020." (Was the term... [19])
Plain English: The landlord's letter of 14 February clearly told the tenant it would not be offered a new lease; because the tenant had already requested the statutory extension, the tenancy continued until 14 August 2020.
"Section 44(3) does not prescribe any particular form for a notice ... It is sufficient... that such a notice convey to a reasonable recipient ... that the lessee wants to have the extension." (Was the term... [10])
Plain English: The law does not demand a special phrase or formula to ask for the extension; it just has to be clear enough that a reasonable landlord would understand the tenant is asking for the statutory six-month extension.
"The defendant could have more clearly stated what its intentions were... Had it done so, I think that would have been sufficient to be a notification in terms of s 44(1)(b)." (Was the term... [16])
Plain English: If the landlord had plainly told the tenant during the tender process that it did not intend to offer a renewal, that would have satisfied the statutory notice requirement.
What fact patterns trigger this precedent
This decision controls or strongly informs cases where:
A tenancy governed by the Retail Leases Act approaches expiry and the lessor conducts a tender, expression-of-interest, or selection process for a new lease, with communications to the sitting tenant during that process.
A document executed between the parties is labeled a licence but exhibits the substantive attributes of a retail lease (requiring analysis under s 3 and s 7).
The lessor does not give a clear s 44(1) notification in the 6-12 month window before lease expiry, and the lessee sends a written communication before expiry purporting to request the extension under s 44(3).
The lessor later provides explicit written confirmation after the process concludes that the tenant was unsuccessful; the timing of that confirmation determines the six-month extension period.
In short, where there is ambiguity about whether a landlord has given s 44 notification during the prescribed window, and the tenant has attempted a written s 44(3) request, this judgment is directly relevant.
How later courts have treated it
This deep dive covers this single Supreme Court decision. The judgment itself relies on, and applies, Anka (NSWSC) regarding form of notices and Pyrmont Point (NSWCA) regarding the inability to contract out of the Act. Practitioners should monitor appellate treatment for refinement on:
The objective test of whether a communication conveys a lessor's intention not to renew under s 44(1)(b), particularly in the context of tendering processes;
The precise moment that constitutes the giving of the notification required for s 44(3) to run; and
Interplay with COVID-era Regulations where prospective relief might be sought under cl 9 or the National Code.
(At the time of this judgment the court did not accept that the COVID Regulations or Code changed the operation of s 44 in these circumstances: Regulation analysis.)
Still-open questions
Tender-stage communications: The judge described the matter as 'finely balanced' and found that the tender-stage emails and documents did not constitute s 44(1)(b) notification (Was the term... [16]). There remains scope for appellate clarification about what degree of specificity or directness is required in communications that occur during an active selection process; for example, whether an unequivocal statement during the process that 'we will only offer a new lease if you are successful' would amount to s 44(1)(b).
Temporal operation in complex processes: This case treats the 'notification required by this section' as capable of being given after the statutory window and that the six-month extension runs from that later notification (Was the term... [11], [19]). Future cases may explore timing issues when multiple communications are sent, or where the landlord partially indicates an intention before the six-to-twelve month window closes.
Notice formality and electronic communications: While this decision (following Anka) confirms that notices need not be formulaic, disputes will arise about whether particular emails or letters meet the reasonable-recipient test. More guidance about factors (language used, context of communications, audience) would be useful.
Interaction with emergency regulation frameworks: The court rejected reliance on cl 9 of the COVID Regulation for extending the lease in these facts because the events pre-dated the Code and Regulation (Reg. analysis). There is an open question about how cl 9 and the National Code may influence outcomes where the relevant lessor actions or applications to the court are explicitly tied to COVID-19-related prescribed action and are contemporaneous with the Regulation.
Remedies and equitable relief beyond declaration: This case determined the statutory extension issue declaratorily and addressed the injunction. The longer-term consequences for rent, quantum of damages, or equitable adjustments where parties have partially performed or relied on the outcome remain to be litigated in reserved damages claims (Introduction [7], Conclusion [2]).
Practical takeaways for practitioners:
If acting for a lessor engaged in a selection process, state your intentions clearly within the s 44 window if you genuinely do not intend to offer renewal; do not rely on tender-stage material alone to discharge the duty.
If acting for a lessee, ensure any written request for a s 44(3) extension is timely and unmistakable about the desire to rely on the statutory extension, even if the letter is imprecise on legal detail.
Maintain careful records of communications and dates; timing controls the length of any statutory extension.
Where COVID-era relief is invoked, address jurisdictional and temporal scope: where the operative facts pre-date the Regulation, the Code will generally not reshape s 44's operation.
This judgment is a clear, practicable application of s 44 emphasising substance and timing. It confirms that statutory protections cannot be displaced by labels, and that clarity in lessor communications is essential where renewal intentions are being decided through a competitive process.
Judgment (6 paragraphs)
[1]
Introduction
These proceedings concern the land known as Shop 22 at The Rocks Centre in Playfair Street, The Rocks ("the shop"). The plaintiff conducts a café business, known as Dare, at the shop. The defendant, which is a corporation established pursuant to the Place Management NSW Act 1998 (NSW), is the registered proprietor of the land that includes the shop.
In about early July 2016 the plaintiff became the lessee under a registered lease (AK376888) of the shop premises. The lease was for a term that commenced on 24 March 2016 and terminated on 23 March 2019. The lease incorporated the provisions set out in Memorandum AD480860M to the extent that they were not inconsistent with the special conditions of the lease.
After the expiration of the term on 23 March 2019, the plaintiff remained in possession of the shop with the consent of the defendant in accordance with the holding over provisions of the lease (see cl 3.5 of the Memorandum). There was thus a monthly tenancy terminable by either party on one month's prior written notice. It was not disputed that the lease, and the monthly tenancy, were subject to the provisions of the Retail Leases Act 1994 (NSW) ("the Act").
By a Deed dated 12 September 2019, the defendant as Licensor and the plaintiff as Licensee entered into what was described as a Retail Licence for the shop for a term commencing on 24 March 2019 and terminating on 31 March 2020. The Retail Licence contained an acknowledgement by the plaintiff that notwithstanding anything contained in the Licence and in particular the holding over provision "this Licence will not extend past [31 March 2020]" and the Act "will not apply to this Deed". There was an issue about whether the Retail Licence is nonetheless subject to the Act, but on the morning of the hearing, counsel for the defendant stated that it was accepted that the Retail Licence was subject to the Act. That concession seems to me to be correct having regard to the definition of "retail shop lease" in s 3 of the Act, and the provisions of s 7 of the Act which operate to prevent parties to leases that fall within the purview of the Act from making agreements that are inconsistent with the Act (see Pyrmont Point Pty Ltd v Westacott [2016] NSWCA 33 at [55]-[64]).
At the commencement of the hearing, the principal issue in the proceedings was whether the parties had entered into a further lease of the shop for a five year term commencing on 1 April 2020 and terminating on 31 March 2025. The plaintiff claimed that in December 2019 it accepted an offer made by the defendant to enter into a lease for that term on certain terms and conditions. The defendant denied that such an offer was made by it, and further said that any agreement was subject to the approval of its Executive Leasing Committee ("ELC"), and such approval has not been given. The evidence establishes that in late 2019 and early 2020 the defendant conducted what might be described as a tender or expression of interest process in relation to the granting of a new five year lease over the shop; that the plaintiff participated in that process; and that ultimately the ELC decided that the new lease should be granted to another entity. The defendant thus maintained that the plaintiff had no right to any further term.
However, after the evidence had closed, counsel for the plaintiff stated that the plaintiff no longer pressed the claim for the further lease of five years. The plaintiff continued to press its alternative claim that the provisions of s 44 of the Act operate so that the tenancy under the Retail Licence has been extended, and may indeed remain on foot. This is disputed by the defendant. The defendant says that no extension came into effect pursuant to s 44, and even if there was an extended term, it has now expired.
Various other claims are advanced by the plaintiff, including that its tenancy should be further extended pursuant to the provisions of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) ("the Regulation"), and claims for damages for alleged unconscionable conduct, or misleading or deceptive conduct, on the part of the defendant.
An order was made before the commencement of the hearing pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2 for the separate and later determination of those damages claims.
[2]
Summary of salient facts
From 24 March 2019 the plaintiff was in possession of the shop pursuant to a monthly tenancy arising from the holding over provisions of the expired lease.
On about 14 June 2019 Mr Patrick Sergi of United Property Services Pty Ltd (the defendant's leasing agent) provided a Place Management NSW/Lease Proposal document to Mr Sinan Acar, a director of the plaintiff. The document, which could be said to take the form of a heads of agreement, contained details for a lease of the shop from the defendant to the plaintiff for a term of one year and eight days from 24 March 2019 to 31 March 2020. The document made provision for execution by both parties. The document had not been executed by the defendant when it was provided to Mr Acar. The document contained a statement to the effect that by signing the document it was acknowledged that the heads of agreement are subject to the approval of the ELC.
On 25 June 2019 Mr Acar and his brother Selayi, another director of the plaintiff, signed the document on behalf of the plaintiff. I infer that the document so signed was returned to Mr Sergi.
As already mentioned, on 12 September 2019 the parties entered into the Deed of Retail Licence in respect of the shop for the period 24 March 2019 to 31 March 2020. Whilst it employed the language of a licence rather than that of a lease, the provisions of the Retail Licence plainly constitute an agreement that falls within the definition of "retail shop lease" found in s 3 of the Act. Again, it was correctly conceded by the defendant that the Retail Licence was subject to the Act.
On 18 October 2019 Mr Sergi posted an advertisement on the United Property Services Pty Ltd website in relation to the shop and the nearby shop 21. The advertisement stated that the shops were for lease, and were offered as two separate sites. Interested persons were requested to contact Mr Sergi for further information.
On 5 November 2019 Mr Sergi sent an email to Mr Acar about the advertising. The email was in the following terms:
Your site is currently being advertised. I wanted to let you know so you can submit an offer if you like. Please see link below;
https://www.unitedpropertyservices.com.au/listing/21-22-playfair-street-the-rocks/
I am anticipating quite a bit of interest.
Please put forward a proposal that includes a Vision for the new business, proposed concept and commercial offer.
I am looking to have this finalised by the end of this month. Call me if you have any questions.
[3]
Was the term of the plaintiff's lease extended by operation of s 44 of the Act?
By entering into the Deed of Retail Licence on 12 September 2019, the parties entered into a retail shop lease for the purposes of the Act for the term commencing on 23 March 2019 and terminating on 31 March 2020. As the provisions of the Act applied to the lease, it was subject to s 44 of the Act which provides:
44 Notice to lessee of lessor's intentions at end of lease
(1) Not less than 6 months and not more than 12 months before the expiry of a lease, the lessor must by written notification to the lessee either -
(a) offer the lessee a renewal or extension of the lease on terms specified in the notification (including terms as to rent), or
(b) inform the lessee that the lessor does not propose to offer the lessee a renewal or extension of the lease.
Note. A notice under paragraph (b) may include other information as to the lessor's intentions (for example, that the lessor intends to allow the lessee to remain in possession of the shop as a periodic tenant under any provisions of the lease as to holding over, or as a tenant at will). Because such a statement is only a statement of intention, a lessee should be aware that it may not of itself bind the lessor.
(2) An offer made for the purposes of subsection (1) (a) is not capable of revocation for 1 month after it is made.
Note. This allows the lessee 1 month to decide whether to accept the offer. The lessor may agree to hold the offer open for longer than 1 month. The parties may also negotiate a new lease.
(3) If the lessor fails to give a notification to the lessee as required by this section, the term of the lease is extended until the end of 6 months after the lessor gives the notification required by this section, but only if the lessee requests that extension by notice in writing to the lessor given before the lease would otherwise have expired.
(4) During any extension of the lease under subsection (3), the lessee may terminate the lease by giving not less than 1 month's notice of termination in writing to the lessor.
(5) This section does not apply to a lease containing an option to renew or extend the lease or that is the subject of an agreement for the renewal or extension of the lease.
(6) If a retail shop lease is for a term of 12 months or less, the periods of 12 months and 6 months in this section are shortened to 6 months and 3 months respectively.
[4]
Retail and Other Commercial Leases (COVID-19) Regulation 2020
The plaintiff seeks to invoke the Regulation as a means to have its tenancy further extended. In that regard, the plaintiff relies upon cl 9 of the Regulation which is in the following terms:
9 Tribunal and court consideration of National Code of Conduct leasing principles
The Tribunal and any court, when considering whether to make a decision or order relating to any of the following, is to have regard to the leasing principles set out in the National Code of Conduct -
(a) the recovery of possession of premises or land from a lessee,
(b) the termination of a commercial lease by a lessor,
(c) the exercise or enforcement of another right of a lessor of premises or land.
It was submitted that cl 9 operated because it was clear that the defendant wanted to recover possession of the shop from the plaintiff. It was submitted that when regard was had to the leasing principles set out in the National Code of Conduct it would be just and equitable for the Court to order that the term of the lease be further extended to compensate for disruptions to the plaintiff's trading brought about by government restrictions imposed since the outbreak of the COVID-19 pandemic. The plaintiff, by reference to the six month deferral of rent given by the defendant, and paragraph 12 of the leasing principles in the National Code of Conduct, submitted that a six month extension of the term would be appropriate. Paragraph 12 of the leasing principles is in the following terms:
The tenant should be provided with an opportunity to extend its lease for an equivalent period of the rent waiver and/or deferral period outlined in item #3 above. This is intended to provide the tenant additional time to trade, on existing lease terms, during the recovery period after the COVID-19 pandemic concludes.
The defendant submitted that the Regulation had no relevant application in the circumstances of this case. It was put that even if the plaintiff was an "impacted lessee" for the purposes of the Regulation (see cl 4), the defendant was not taking any "prescribed action" (as defined in cl 3) contrary to either cl 6(1) or cl 7(1), which provide:
6 Prohibitions and restrictions relating to commercial leases
(1) If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of -
(a) a failure to pay rent, or
(b) a failure to pay outgoings, or
(c) the business operating under the lease not being open for business during the hours specified in the lease.
…
7 Obligation to renegotiate rent and other terms of commercial leases before prescribed action
…
(1) A lessor under an impacted lease must not take or continue any prescribed action against the impacted lessee concerned on grounds of a breach of the impacted lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause.
[5]
Conclusion
I have found that the term of the plaintiff's tenancy under the Deed of Retail Licence was extended by the operation of s 44 of the Act to 14 August 2020. A declaration to that effect should be made, and the existing injunction should be discharged.
The proceedings will be adjourned for a short period to give the parties the opportunity to come to suitable arrangements concerning the giving up of possession of the shop. I note that counsel for the defendant informed the Court that the defendant is prepared to forego the recovery of any rent for the period from 1 May 2020 if the plaintiff vacates the premises. The parties should also seek to reach agreement on appropriate orders to be made (including as to costs), and any directions to be made in relation to the issues that were ordered to be determined separately.
At this stage, the Court will simply list the matter on 18 September 2020 for directions, and order that the parties bring in Short Minutes of Order by no later than 11 September 2020.
[6]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 25 August 2020
Parties
Applicant/Plaintiff:
Cameli Pty Ltd
Respondent/Defendant:
Place Management NSW
Legislation Cited (4)
Retail and Other Commercial Leases (COVID-19) Regulation 2020(NSW)
Declaration that the term of the plaintiff's lease was extended by operation of s 44(3) of the Retail Leases Act to 14 August 2020; existing injunction discharged; matter adjourned for parties to make arrangements for vacating premises and for directions including costs; list for directions (see Conclusion [1]-[3]).
The plaintiff set about preparing a Lease Proposal for the shop. It appears that one had been prepared by 20 November 2019.
On 3 December 2019 Mr Sergi sent an email to Mr Acar in the following terms:
Please see an [sic] general offer for Shop 22 at The Rocks.
Can you please issue your proposal with a signed copy of this offer, with any hand amended changes, at your discretion.
We will need this back within 7 days to allow us time to approve a proposal this year.
If you have any questions, please call me.
Attached to the email was a Place Management NSW/Letter of Offer document which contained details of a lease of the shop by the defendant for a five year term from 1 April 2020 to 31 March 2025. The document had not been signed. The section of the document for Lessee was left blank. As was the case with the document provided in June 2019, the document contained a statement to the effect that the heads of agreement was subject to the approval of the ELC.
On 6 December 2019 the Letter of Offer, with the plaintiff's details inserted as Lessee, was signed by Mr Acar on behalf of the plaintiff. The signed Letter of Offer, together with the plaintiff's Proposal, was sent by Mr Acar by email to Mr Sergi on 8 December 2019. On 9 December 2019 Mr Sergi replied by email, stating that the documents would be presented that week to the ELC. Mr Acar sent a copy of the Proposal in PDF format to Mr Sergi on 11 December 2019.
On 13 December 2019, Mr Acar sent an email to Mr Sergi in the following terms:
Not sure what the process is, this is the first time we're engaging in something like this, at what point do we make our commercial offer? The letter of offer already had an amount on it but I thought we had to put in our own offer?
We are also willing to make an offer for both shops 21 and 22.
Arrangements were made for Mr Acar and Mr Sergi to meet at the shop later on 13 December 2019. A discussion occurred at that time between them about various aspects of the plaintiff's Proposal, and in relation to the possibility of the plaintiff making changes, including by increasing the rent above the $92,000 p.a. plus GST that had been included in the Letter of Offer. It appears that Mr Acar decided that a rent of $102,000 p.a. could be offered. Mr Acar initialled a handwritten amendment to the signed Letter of Offer document accordingly, and, I infer, provided that amended document to Mr Sergi.
There are numerous differences between the accounts of Mr Acar and Mr Sergi of their discussion on 13 December 2019. It is not necessary to attempt to resolve those differences. It is sufficient to state that on either version it is clear that Mr Acar was aware that the plaintiff's Proposal was to be one of a number of proposals to be considered by the defendant in relation to the leasing of the shop for the period from 1 April 2020.
Mr Sergi later presented the various proposals to the ELC. It is not clear exactly when that happened, but it seems that the ELC had made a decision by early February 2020. I note that on about 13 January 2020 Mr Acar had sent an email to Mr Sergi in the following terms:
Hope you're settling well into the new year. Just chasing up the lease matter, has the decision been made? We need to know soon so we can plan accordingly.
On 2 February 2020 arrangements were made for a meeting to take place on the following day at the defendant's office. The meeting was to be attended by Mr Acar and, on behalf of the defendant, Ms Susan Lee and Ms Kylie Doulman.
At the meeting on 3 February 2020 (also attended by Ms Leyla Yuksel on behalf of the plaintiff), the plaintiff was informed by Ms Doulman that the defendant had selected another operator for the shop.
On 11 February 2020 the plaintiff's solicitors sent a letter to the defendant. The letter included the following:
7. On 3 December 2019, a "Letter of Offer" was sent via email to our Client by Mr Patrick Sergi of United Property Services on behalf of Place Management NSW. The Letter of Offer contained, inter alia, the following terms:
…
8. Under Mr Patrick Sergi's cover email of 3 December 2019, he requested that a signed copy of the Letter of Offer together with our Client's proposal be provided within 7 days. On 8 December 2019, a signed Letter of Offer dated 6 December 2019 and lease proposal was sent by Mr Sinan Acar to Mr Patrick Sergi.
9. Naturally, given that the Letter of Offer was provided to our Client outside the time stipulations of section 44(1)(a) of the Retail Leases Act 1994 (NSW) (Leases Act), our Client puts you on notice pursuant to section 44(3) that the lease is hereby extended by 6 months to 3 June 2020. This extension as provided for by the Act, is addition to and without prejudice to the further matters raised below, in particular the existence of a statutory lease which is now on foot under the Letter of Offer.
…
On 3 February 2020 we are instructed that Ms Kylie Doulman and Ms Susan Lee of Place Management NSW met with Mr Sinan Acar and Ms Leyla Yuksel of our Client. Ms Doulman and Ms Lee advised Mr Sinan Acar and Ms Leyla Yuksel that the Premises together with Shop 21 will be let to another operator. At the outset, our Client rejects that proposition of Ms Doulman and Ms Lee of Place Management NSW as discussed in that meeting. Their contention that the Premises can simply be let to other persons is severely misconceived.
Place Management NSW simply cannot renege unilaterally from the New Lease, a legally binding agreement which is currently on foot, and should they maintain that position our Client reserves its rights to commence action against Place Management NSW for losses it may suffer arising therefrom.
The defendant responded by an undated letter that was received by the plaintiff's solicitors on 14 February 2020. That letter included the following:
In light of the above, as your client was operating under a licence, and the Retail Leases Act provisions were specifically excluded from application to the licence under which your client operated from the premises in Playfair St, PMNSW responds to your assertions as follows:
6. PMNSW rejects your assertion that there was a lease in place. For the period March 24th 2019 until March 31st 2020, the tenancy has operated under a Deed of Licence, signed by both parties.
7. PMNSW rejects your assertion that the time stipulations of the Retail Leases Act 1994 (NSW) applied, as there was no lease in place, and specific agreement in the Deed of Licence that the Retail Leases Act did not apply.
8. PMNSW rejects your assertion that there was a breach of the Retail Leases Act 1994 in advertising the premises, as there was no lease in place.
9. PMNSW rejects your assertion that the email from Patrick Sergi of December 3rd 2019 was a Letter of Offer from PMNSW. The email of Dec 3rd was an invitation to your client to submit an offer and a business proposal for consideration by PMNSW. It was clear to your client that other proposals were also being considered.
10. PMNSW rejects your assertion that the submission of a proposal, which was not accepted by PMNSW could create any legally binding agreement or any form of 'new lease'.
A further letter from the defendant was received by the plaintiff's solicitors on 2 March 2020. This letter included a lengthy account of the various communications between the parties since the expiry of the earlier lease on 23 March 2019, and included the following:
9. The offer letter signed by your client includes the specific acknowledgement at Point 42 that the offer was subject to approval from the Executive Leasing Committee.
10. On 13th January 2020, your client emailed Patrick Sergi asking if a decision had been made so he could plan accordingly. It is clear that your client understood that he had made an offer and was waiting to hear whether it was accepted or not. Please see attached email at Tab E.
11. Given the above, PMNSW is of the view that your assertion of a valid and legally enforceable lease arrangement of the period 1st April 2020 until March 2025 is unsupported by the evidence. Your client was clear that he was making an offer to PMNSW, which PMNSW would consider alongside other offers. Should you decide to proceed to litigation, PMNSW intends to defend its position.
12. To assist your client with making arrangements for exiting and defitting the premises, PMNSW offered to agree to an exit date of 30th April instead of 31st March 2020. Please advise us if your client would like the additional time before 6th March 2020.
The proceedings were commenced by Summons filed on 23 March 2020. There is no Cross-Claim. Since 27 March 2020 the defendant has by order of the Court been restrained from, inter alia, leasing the shop to any entity other than the plaintiff, or re-taking possession of the shop.
The plaintiff has thus remained in occupation of the shop beyond the expiry of the term of the Retail Licence on 31 March 2020. The plaintiff paid an amount of rent on 7 April 2020 (calculated at a rate equivalent to $92,000 p.a. plus GST), but has not since paid rent. It appears to be common ground that the defendant has included the plaintiff in a 6 month deferral of rent that has been given by the defendant to its tenants for the period from 1 May 2020 to 31 October 2020, due to the economic effects of the current COVID-19 pandemic.
As submitted by counsel for the plaintiff, the relevant period for the giving of written notification pursuant to s 44(1) in respect of the lease was the period between 31 March 2019 and 1 October 2019.
The plaintiff submitted that the defendant did not give any written notification within either s 44(1)(a) or s 44(1)(b) during that period. The defendant submitted that the Deed of Retail Licence itself constituted written notification within s 44(1)(b). It was submitted that the acknowledgement, contained in cl 2(b), that notwithstanding anything contained in the Licence and in particular the holding over provision "this Licence will not extend past [31 March 2020]", and Item 20 of the Schedule (concerning "Maximum date [sic] of Licence") which states that "This Licence is not to exceed 31 March 2020", amounted to notice that the defendant did not propose to offer the plaintiff a renewal or extension of the lease. It was put that the Deed of Retail Licence had to be read in the context of the proposed tender process. In response, the plaintiff submitted that merely to state that the lease term is not to extend beyond 31 March 2020 is not the same as a statement that the lessor does not propose to offer a renewal or extension of the lease.
In my opinion, the Deed of Retail Licence does not constitute written notification for the purposes of s 44(1)(b). To my mind, a statement, in the very instrument that records the terms of the lease, that the term of the lease will not extend beyond a certain date does not convey that the lessor does not propose to offer the lessee a new term or an extension of the term. Section 44(1)(b) is directed to the giving of certain information about the lessor's intention or state of mind. The statements in the Deed of Retail Licence about its duration concern the presently existing rights of the parties, and do not clearly relate to the relevant intentions of the lessor. A notification under s 44(1)(b) ought to convey to a reasonable recipient in the position of the lessee that the lessor has the relevant intention, namely, not to offer the lessee a renewal or extension of the lease. Even allowing that the plaintiff might have known that the defendant was contemplating some form of tender or expression of interest process, I am not satisfied that the terms of the Deed of Retail Licence convey that the defendant held the relevant intention.
It was not suggested that any other written notification within s 44(1) was given in the relevant period. It follows that the defendant failed to give a notification to the plaintiff as required by s 44. In those circumstances, s 44(3) is engaged so that the lease is extended until the end of 6 months after the lessor "gives the notification required by this section", but only if, before the lease would otherwise have expired, the lessee requests "that extension" by notice in writing to the lessor.
The plaintiff submitted that the letter sent by its solicitors to the defendant on 11 February 2020 constituted such a request. Relevant parts of the letter are set out above at [24]. Paragraphs 7, 8 and 9 of the letter are germane to s 44. Those paragraphs proceed on the assumption that the email sent by Mr Sergi on 3 December 2019 which attached the Letter of Offer document was written notification of an offer of a renewal or extension of the lease on specified terms. Treated as such, it was said to amount to a notification, albeit late, within the terms of s 44(1)(a). On that basis, the plaintiff's solicitors considered that s 44 would operate to extend the term of the lease to six months after the notification was given on 3 December 2019, being 3 June 2020. In that context, the plaintiff's solicitors stated that, pursuant to s 44(3), "the lease is hereby extended by 6 months to 3 June 2020".
The plaintiff no longer presses its case that the Letter of Offer provided to it on 3 December 2019 was accepted by it such that an agreement for a new five year lease came into existence. In any event, it seems clear to me that the terms of the documents provided to the plaintiff on 3 December 2019 did not constitute an offer by the defendant capable of acceptance by the plaintiff so as to create a binding agreement. The 3 December 2019 documents do not in my view amount to a notification within the terms of s 44(1)(a); they did not constitute an offer by the defendant for a renewal or extension of the lease. The plaintiff appeared to accept this, and indeed sought to characterise the suggested extension to 3 June 2020 as an error.
The defendant submitted that in these circumstances the 11 February 2020 letter from the plaintiff's solicitors could not be regarded as the lessee's notice for the purposes of s 44(3), and thus there could be no extension of the term of the lease pursuant to that sub-section. It was also put that, at its highest, there could only be an extension to 3 June 2020.
Section 44(3) envisages that a lessee may give a notice in writing that the lessee requests "that extension". In my opinion the reference to "that extension" should be read as the extension that would operate according to the sub-section, subject to the giving of the requisite notice by the lessee. Once the lessor fails to give notification as required by the section (i.e. notification under s 44(1) within the specified period), it is open to the lessee to request the extension of the term that is provided for in s 44(3).
It seems to me that the 11 February 2020 letter amounts to such a request. It is true that the letter proceeds on an incorrect basis insofar as the characterisation of the 3 December 2019 documents are concerned; but it is also true that the letter proceeds, correctly, on the basis that the defendant failed to give written notification in accordance with "the time stipulations of section 44(1)(a)". In short, the letter proceeds on the basis that s 44(3) was enlivened. In that context, notice was given pursuant to s 44(3) that the lease was "hereby extended by 6 months to 3 June 2020".
Notwithstanding the erroneous characterisation of the 3 December 2019 documents, and hence the date to which the term was extended, the letter conveys an intention to take advantage of the extension provided for in s 44(3). In my view, the letter serves as a request for "that extension". Section 44(3) does not prescribe any particular form for a notice given under the sub-section by a lessee. It is not even necessary for such a notice to expressly refer to the section (see Anka (Civic Center) Pty Ltd v Sahyoun [2014] NSWSC 17 at [103]-[104] per Beech-Jones J). It is sufficient in my view that such a notice convey to a reasonable recipient in the position of the lessor that the lessee wants to have the extension that is afforded by the operation of s 44(3). I think that the letter sent by the plaintiff's solicitors on 11 February 2020 does so.
It then becomes necessary to consider whether the lessor has, for the purposes of s 44(3), given "the notification required by this section" so as to initiate the six month extension to the term. That expression ought be read as a notification in terms of either s 44(1)(a) or s 44(1)(b), albeit after the relevant period specified in s 44(1) for the giving of such notification. Once that period expires without the lessor having given notification within the period, it will be apparent that the lessor has failed "to give a notification to the lessee as required by this section" (the opening words of s 44(3)), such that s 44(3) is engaged.
The defendant nominated four occasions when it notified or informed the plaintiff in writing that it did not propose to offer the plaintiff a renewal or extension of the lease. These occasions were said to be 5 November 2019, 3 December 2019, 14 February 2020 and 2 March 2020. Those written communications are referred to above at [14], [16], [25] and [26].
None of those communications invoke s 44 in terms. That is not surprising, given that the defendant was apparently proceeding on the basis that the Act did not apply to the Deed of Retail Licence. In any case, I do not think that it is necessary for a notification under s 44 to invoke the section expressly. Again, no particular form is prescribed for such a notification, and it seems to me that whether a written communication amounts to a notification in terms of s 44(1) depends upon whether a reasonable recipient in the position of the lessee would so understand it, viewed in the context in which it is made.
The first two communications were made in the course of the tender or expression of interest process undertaken by the defendant. The last two communications were made after the defendant had made it known to the plaintiff that it had not been successful in that process, and that another operator had been selected to take a lease of the shop.
The 5 November 2019 email, with its link to the advertisement, conveyed to the plaintiff that it was invited to participate in a process in which interested persons could submit lease proposals to the defendant. The plaintiff must have understood that it might not be successful in such a process, and might not be offered a new lease. The position is essentially the same in relation to the 3 December 2019 documents.
I regard the question as finely balanced. However, I have come to the view that neither of those communications amount to notification to the plaintiff that the defendant did not propose to offer the plaintiff a renewal or extension of the lease. The process underway might well have resulted in the defendant offering a new lease. Moreover, the manner in which the defendant proposed to proceed was not clearly spelt out to the plaintiff. This is reflected in the email sent by Mr Acar on 13 December 2019. It was not known at that stage whether the defendant was wedded to the process it had started, or whether it might not carry through with it. The defendant could have more clearly stated what its intentions were, and plainly informed the plaintiff that it did not propose to offer the plaintiff a new lease or an extension of the lease, and would only offer a new lease to the plaintiff if, at the conclusion of the process, the plaintiff was successful. Had it done so, I think that would have been sufficient to be a notification in terms of s 44(1)(b).
The position is different in relation to the communications on 14 February 2020 and 2 March 2020. By that time, the plaintiff knew that the process had been undertaken to a conclusion, and that the defendant had decided to offer a lease of the shop to another entity. Viewed in that light, the letter received by the plaintiff's solicitors on 14 February 2020 ought to have been understood as written notification that the defendant did not propose to offer the plaintiff a renewal or extension of the lease. By paragraphs 9 and 10 of that letter, the defendant confirmed that the process had concluded and that the plaintiff had been unsuccessful. The letter amounted to written confirmation that the defendant did not propose to offer the plaintiff a renewal or extension of the lease (see Anka (Civic Center) Pty Ltd v Sahyoun (supra) at [107]).
The position is clearer in relation to the letter received by the plaintiff's solicitors on 2 March 2020. That letter firmly stated that the plaintiff had no right to possession of the shop after 31 March 2020, and should therefore make arrangements to exit and de-fit the premises. The letter conveys that it is the defendant's intention not to offer the plaintiff a renewal or extension of the lease.
It follows from the above that the defendant gave the notification required by s 44 on 14 February 2020. On that basis, the term of the plaintiff's lease of the shop was extended pursuant to s 44(3) to 14 August 2020. If I was wrong about the effect of the letter received on 14 February 2020, I would have concluded that the term of the lease was extended until 2 September 2020, being six months after the plaintiff's solicitors received the letter on 2 March 2020.
Finally, I should note that I do not accept that any extension could not go beyond 3 June 2020. If s 44(3) of the Act is engaged, and if the lessee gives a notice under s 44(3) requesting "that extension", the length of the extension depends upon the operation of the sub-section in the circumstances. It is not determined by any understanding held by the lessee as to that operation.
The defendant also referred to cl 10 of the Regulation which provides:
10 Lessor action for non-COVID-19 pandemic related reasons
Nothing in this Regulation prevents a lessor taking a prescribed action on grounds not related to the economic impacts of the COVID-19 pandemic.
The defendant submitted that to merely seek to recover possession of the premises upon the expiry of the term of the lease was not taking prescribed action on any grounds related to the economic impacts of the COVID-19 pandemic. The defendant noted that the proceedings were commenced by the plaintiff, and the existing injunction was in place, before the Regulation commenced.
In my opinion, and assuming that the plaintiff is an "impacted lessee", cl 9 of the Regulation does not in the circumstances enable the Court to make an order extending the term of the plaintiff's lease which, as I have found, expired on 14 August 2020. Notwithstanding the breadth of the expression "relating to", in circumstances where no Cross-Claim has been brought by the defendant I doubt that it can be said that the Court is called upon to make a decision or order "relating to" any of the matters referred to in cl 9. In essence, the Court has only been required to decide upon the term of the lease having regard to the operation of s 44 of the Act. In any case, I do not think that the leasing principles set out in the National Code of Conduct have any relevant bearing upon that question. Those principles are stated to apply "in negotiating and enacting appropriate temporary arrangements under this Code". The facts and circumstances relevant to the question of the operation of s 44 of the Act occurred prior to the Code coming into existence on 7 April 2020 and prior to the commencement of the Regulation on 24 April 2020.