Cheng v Sydney Markets Ltd; Gao v Sydney Markets Ltd; Weng v Sydney Markets Ltd

Supreme Court of NSW|2024-06-18|Before: Peden J, Commission J

Proceedings 2023/00080651 Yi Ming Weng (First Plaintiff) Suat Kopuz (Second Plaintiff) Ferhat Kopuz (Third Plaintiff) Su Lin Wu (Fourth Plaintiff) Yan Rong Yang (Fifth Plaintiff) Ali Kopuz (Sixth Plaintiff) Linna Zong (Seventh Plaintiff) Nurhan Kamanli (Eighth Plaintiff) Jian Ran Tang (Ninth Plaintiff) Myung Eoi Kwon (Tenth Plaintiff) Ran Lin (Eleventh Plaintiff) Thi Hong Hoa Nguyen (Twelfth Plaintiff) Halim Kopuz (Thirteenth Plaintiff) Seung Ju Kim (Fourteenth Plaintiff) Hyesuk Kim (Fifteenth Plaintiff) Kyung Kwo Lee (Sixteenth Plaintiff) Jianfeng Gong (Twenty-third Plaintiff) Rekha Ahadizad (Twenty-fourth Plaintiff) Fereidun Ahadizad (Twenty-fifth Plaintiff) Sydney Markets Ltd (Defendant)

Proceedings 2023/00226718 Jing Gao (First Plaintiff) Heng Feng Cai (Second Plaintiff) Sydney Markets Ltd (Defendant) Representation: Counsel: Proceedings 2023/00205953 D Elliott (Plaintiff) J Lazarus SC, J Rodgers (Defendant)

Proceedings 2023/00226718 M Maconachie (Plaintiffs) J Lazarus SC, J Rodgers (Defendant)

Solicitors: Proceedings 2023/00205953 Bartier Perry (Plaintiff) Kardos Scanlan (Defendant)

Proceedings 2023/00080651 Bartier Perry (Plaintiffs) Kardos Scanlan (Defendant)

Proceedings 2023/00226718 Eden King Lawyers (Plaintiffs) Kardos Scanlan (Defendant) File Number(s): 2023/00205953 2023/00080651 2023/00226718 Publication restriction: Nil

Judgment

Sydney Markets Ltd (SML) wants to redevelop "Paddy's Markets" in Haymarket, New South Wales. The development would involve Doltone Hospitality Group (Doltone) constructing and operating a food and beverage "hawker style" market within the wider market. To carry out the development, SML must relocate many stall holders from their existing stall locations to other stall locations within the market.
The plaintiffs are stall holders who resist being relocated, on the basis that SML's relocation notices are not valid under s 34A Retail Leases Act 1994 (NSW). The proper construction of that provision is essential for the determination of the matters.
For the reasons that follow, I consider that the notices are valid.

Undisputed facts

A heritage impact statement prepared in June 2023 for SML provides a brief summary of the history of Paddy's Markets and the development proposal: [The markets are] located within the boundary of the Gadigal region, occupied by the Gadigal (or Cadi) people who spoke a dialect of the Darug Language. The area was abundant in estuarine and terrestrial resources, providing an ideal environment for the Aboriginal population before European settlement. In 1834, Governor Bourke made a significant decision to relocate hay and grain traders to a new site adjacent to the newly established cattle market in Campbell Street, Sydney. This move led to a division amount the stallholders in the existing "fringe" market. Some stallholders, who had regular customers among the cattlemen and growers of hay and grain, chose to join farmers in the newly formed Haymarket area. The true beginnings of Paddy's Markets, as we know them today, stated when Governor Bourke allowed the market to operate until late on Saturdays in the late 1840s. The name "Paddy's Markets" has uncertain origins but has been in use since at least the 1870s. It likely drew inspiration from a similar market in England, particularly Liverpool's Paddy's Market. The Sydney Paddy's Market featured a mix of attractions, vendors and activities, catering to a diverse population, including Irish immigrants. … The Market Buildings 1 and 2 opened in the early 20th century, and additional market buildings were constructed in subsequent years. … the Market City development was opened in 1997, retaining the facades of the original market buildings. … The existing interior fabric and layout dates from 1997. The proposed plan aims to include a "hawker-style" market within the northeast section, which will be owned and managed by Doltone Hospitality Group. … The proposal addresses challenges such as low occupancy rates and the impact of the COVID-19 pandemic, aiming to support existing stallholders and maintain the market's profitability. By revitalizing the market, attracting new users, and embracing the changing demographics, the plan ensures the continued vibrancy and relevance of Paddy's Market …
SML is the sub-lessee of Jen Retail Properties Limited, who leases the premises from Place Management NSW.
All the plaintiffs occupy their market stalls under a standard form SML occupancy agreement (Occupancy Agreement). By cl 23, each licence continues until it is terminated in accordance with that clause. SML may terminate the agreement in circumstances where the occupier is no longer able to meet financial obligations under the agreement, for any of the reasons specified in cl 23.3(a) or with 90 days' notice if it becomes necessary, for any reason, to permanently close the markets, in accordance with cl 23.3(c).
Clause 6.5 of the Occupancy Agreement provides: 6.5 Location of the Premises (a) If the Premises the subject of your Licence is a Store then the location of your Store will be as set out in Item 3 of Schedule 1. (b) If the Premises the subject of your Licence is a Stand then the location of your Stand will be as set out in Item 3 of Schedule 1. (c) SML may vary the location of your Stand for any particular day without notice or permanently with 30 days' notice in writing at its discretion. (d) SML may vary the location of your Store with 30 days' written notice in writing at its discretion.
Clause 19 of the Occupancy Agreement provides a contractual right to SML to relocate stall holders on terms. However, all the parties accept that s 34A must be satisfied, rather than merely the contractual requirements.
On 14 September 2022, as part of the progression of the redevelopment, SML and Doltone executed a non-binding Heads of Agreement, concerning Doltone becoming the lead tenant in the marketplace in relation to about 25% of the floor space. Doltone would occupy an area where the plaintiffs, and others, currently occupy market stalls.
By letter dated 1 December 2022, SML advised stall holders that it's "Landlord, Market City, has formally agreed in principle to SML's proposal to sublease approximately 3,000m2 of space in Paddy's Markets Haymarket to Doltone House Group for development of a food and beverage and events precinct".
The letter further included: … the process has now commenced to obtain the required formal approvals from the NSW Government agency, Place Management NSW to proceed with the project.
On or about 20 December 2022, the plaintiffs received a purported relocation notice. Section 1 of the covering letter stated: 1. The Proposed Redevelopment SML intends to substantially redevelop part of Paddy's Markets Haymarket which cannot be carried out without vacant possession of the Premises. This redevelopment will involve the creation of a single premises of approximately 3,000m2 Paddy's Haymarket. SML is pleased to announce that this new anchor tenant is Doltone House Group. Extensive works will be undertaken by SML and Doltone House. It is SML's view that these works and the introduction of Doltone House to Paddy's Market will be beneficial to all standholders. SML anticipates that the development works will commence in approximately 3 months from the date of this Notice. The details of the redevelopment, including the commencement date of the development works, are subject to change. SML will notify you of any substantial changes or any changes that impact the occupancy of your stand(s).
Those notices provided, relevantly: 1. Pursuant to clause 6.5(c) of the Occupancy Agreement and section 34A of the Retail Leases Act 1994 (NSW) SML hereby notifies You that: (a) it intends to permanently vary the location of your Stand and to relocate your Stand to alternate premises in Paddy's Markets Haymarket; (b) Your Occupancy Agreement will terminate on the Termination Date at which time you are required to vacate the Stand. (c) SML will provide you with a new Occupancy Agreement for the alternative premises within Paddy's Markets Haymarket. The alternative premises are located at ######### 2. The Occupancy Agreement for the alternative premises will be on the same terms as your current Occupancy Agreement taking into account any difference in commercial values between the Stand and the alternative premises. Signed on behalf of Sydney Markets Limited
On 10 March 2023, the Weng Proceedings were commenced, seeking declarations that the original relocation notices were invalid. On 27 June 2023, the Cheng Proceedings were commenced and on 17 July 2023, the Gao Proceedings were commenced. All the plaintiffs seek the same relief, setting aside the Relocation Notices.
On 27 April 2023, SML and Doltone executed a Deed of Agreement for Sub-Lease in respect of the premises, conditional on various matters, including: 1. Development approval satisfactory to the parties; 2. Approval from the head-landlord, which occurred on 3 August 2023; 3. Construction by Doltone of "tenant's works" in accordance with a Development Approval.
In June 2023, stall occupancy rates were recorded at around 44%.
On 11 October 2023, SML's lawyers wrote to the plaintiffs' lawyers including: Our client will shortly issue relocation notices … to all standholders affected by the Doltone House redevelopment… … As is obvious from: (a) the lodgement of the Development Application; (b) recent media reports; and (c) the information provided by Doltone House and our client to the standholders of Paddy's Haymarket … the proposed redevelopment is genuine, well developed and progressing positively. …
It is not clear from the letter what information said to have been provided by Doltone and SML concerning the proposed redevelopment had in fact been provided, although presentations were given to stall holders affected by the relocation in early 2023 regarding the proposal, and flyers were issued to stall holders on 9 January 2023, 9 February 2023 and 1 March 2023.
On 18 October 2023, SML withdrew the original relocation notices, and issued new relocation notices (Relocation Notices), which are the subject of the current dispute. The Relocation Notices are substantially in the same form as the initial relocation notices. However, the Relocation Notices do not contain a relocation date, and were accompanied by an "information pack" together with a cover letter.
Each of the Relocation Notices in question are identical, other than identifying the various plaintiffs and the alternative stands. The Relocation Notice sent to Ms Gao and Mr Cai is as follows:
The "information pack" contained the following documents: 1. a notification letter from the City of Sydney, stating that it had received and was reviewing the development application; 2. drawings prepared by "loopcreative" in respect of the development of the site.
The letter from the City of Sydney, dated 8 August 2023, confirming the receipt of an application for a development, included: Food and drink premises (food markets) within Paddy's Markets. Proposed trading hours are 7.30am to 12.00 (midnight) Monday to Saturday and 7.30am to 10.00pm Sundays. … View the full application and send us your comments by typing city.sydney/find-da in the address bar on your browser.
On 20 December 2023, the City of Sydney granted SML development approval.
On 20 February 2024, a construction certificate was issued to Doltone House in respect of the proposed works.
The plaintiffs seek orders declaring the relocation notices invalid, based on their construction of s 34A.
There is no dispute that the plaintiffs bear the onus of proving every element that would give rise to a declaration: see eg Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 at 660 (McLelland CJ in Eq).

Proper construction of section 34A Retail Leases Act

Section 34A provides: 34A Relocation If a retail shop lease contains provision that enables the business of the lessee to be relocated, the lease is taken to include provision to the following effect-- (a) The lessee's business cannot be required to be relocated unless and until the lessor has provided the lessee with details of a proposed refurbishment, redevelopment or extension sufficient to indicate a genuine proposal that is to be carried out within a reasonably practicable time after relocation of the lessee's business and that cannot be carried out practicably without vacant possession of the lessee's shop. (b) The lessee's business cannot be required to be relocated unless the lessor has given the lessee at least 3 months written notice of relocation and that notice gives details of an alternative shop to be made available to the lessee within the retail shopping centre. Such a notice is referred to as a "relocation notice". (c) The lessee is entitled to be offered a new lease of the alternative shop on the same terms and conditions as the existing lease except that the term of the new lease is to be for the remainder of the term of the existing lease. The rent for the alternative shop is to be the same as the rent for the existing retail shop, adjusted to take into account the difference in the commercial values of the existing retail shop and the alternative shop at the time of relocation. Note: Paragraph (c) only specifies the minimum entitlements that the lessee can insist on. It does not prevent the lessee from accepting other arrangements offered by the lessor when the details of a relocation are being negotiated. (d) If a relocation notice is given to the lessee, the lessee may terminate the lease within 1 month after the relocation notice is given by giving written notice of termination to the lessor, in which case the lease is terminated 3 months after the relocation notice was given unless the parties agree that it is to terminate at some other time. (e) If the lessee does not give a notice of termination as referred to in paragraph (d), the lessee is taken to have accepted the offer of a lease as referred to in paragraph (c), unless the parties have agreed to a lease on some other terms. (f) The lessee is entitled to payment by the lessor of the lessee's reasonable costs of the relocation, including but not limited to-- (i) costs incurred by the lessee in dismantling fittings, equipment or services, and (ii) costs incurred by the lessee in replacing, re-installing or modifying finishes, fittings, equipment or services to the standard existing immediately before the relocation but only to the extent that they are reasonably required in the premises to which the lessee's business is relocated, and (iii) legal costs incurred by the lessee. (g) If the lessor and the lessee do not agree as to what the actual amount of reasonable costs of the relocation are to be, the amount of the costs is to be determined by a quantity surveyor-- (i) appointed by agreement between the parties to the lease, or (ii) failing agreement, appointed by the person for the time being holding or acting in the office of President of the Australian Institute of Quantity Surveyors. Note: This section does not prevent the parties negotiating a new 5 year lease for the purpose of relocating the lessee. Paragraph (f) only specifies the minimum entitlements that the lessee can insist on and the parties can come to some other arrangement for the payment or sharing of the lessee's relocation costs when the details of a relocation are being negotiated.
In this matter, there are various issues of construction of the section to be determined, together with factual determinations. If there is no valid "relocation notice", then these provisions of the legislative scheme do not take effect: see Skiwing Pty Ltd v Trust Company of Australia (trading as Stockland Property Management) [2006] NSWCA 276 (Skiwing) at [26]-[27] (Spigelman CJ, Hodgson and Bryson JJA agreeing).
The parties agree the issues to be determined are: 1. On the proper construction of s 34A, does a relocation notice need to contain sufficient details to indicate a genuine proposal of redevelopment? 2. If the answer to (1) is yes, did the Relocation Notices include sufficient details to indicate a genuine proposal of redevelopment that is to be carried out within a reasonably practicable time after the relocation of the plaintiffs, and if not, are the Relocation Notices invalid? 3. On the proper construction of s 34A does a proposed redevelopment need to be sufficiently well developed and mature as at the date a relocation notice is issued? 4. If the answer to (3) is yes, as at the date of the Relocation Notices, was the proposed redevelopment sufficiently well developed and mature to proceed within a reasonably practicable time of relocation of the plaintiffs, and if not are the Relocation Notices invalid? 5. On the proper construction of s34A, is SML permitted to relocate the plaintiffs' businesses only to alternative premises which are "commercially similar" to their current premises? 6. If the answer to (5) is yes, are each of the alternative premises proposed by SML "commercially similar" to each of the plaintiffs' existing premises?
Each is considered below, having regard to the general principles governing statutory construction, which are not in dispute and include the following: 1. Construction begins and ends with a consideration of the text: Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ). However, text must be considered in context, which includes not only surrounding provisions, but also the general purpose and policy of the provision, and the mischief it seeks to remedy: Alcan (NT) Alumina Pty Ltd v Cmr of Territory Revenue (Northern Territory) (2009) 239 CLR 27 at [47] (Hayne, Heydon, Crennan and Kiefel JJ). 2. The Court must prefer the construction which best promotes the purpose of the provision: s 33 Interpretation Act 1987 (NSW). While purpose is primarily to be discerned from the text and structure of the statute, regard may also be had to legislative history and extrinsic materials: Lacey v Attorney-General of Queensland (2011) 242 CLR 573 at [44], [86] (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ). 3. Contextual and purposive considerations mean that the literal meaning of the words of a statute will not always correspond with their legal meaning: Jackmain (a pseudonym) v R [2020] NSWCCA 150 at [14] (Bathurst CJ), [143] (Leeming JA). However, the legal meaning must be one which the words of the provision are capable of bearing: Momcilovic v The Queen (2011) 245 CLR 1 at [39] (French CJ).

Under s 34A must the "details" be included in the "relocation notices"?

The plaintiffs submit that the proper construction of ss 34A(a) and (b) requires a lessor to have provided a lessee with details of the redevelopment "sufficient to indicate a genuine proposal that is to be carried out within a reasonably practicable time after relocation of the lessee's business and that cannot be carried out practicably without vacant possession of the lessee's shop", either before or in a relocation notice.
In contrast, SML submits that the only prescription concerning the content of the notice is found in s 34A(b), and the detail referred to in s 34A(a) need not be provided at any particular time, and may be provided after a notice has been issued. However, a lessor's failure to provide that detail would have the result that the lessee could not be relocated until such information is provided. On that basis, the notice need not be particularly detailed, but may be.
There are very few authorities that consider the proper construction and application of s34A. However, the Court of Appeal in Skiwing at [22] (Spigelman CJ, Hodgson and Bryson JJA agreeing) referred to Bryson J's reasoning in Blackler v Felpure [1999] NSWSC 958; (2000) 9 BPR 17,257 (Blackler v Felpure) at [61] concerning the meaning of a "genuine proposal" in the context of s 35, and approved that reasoning as also applicable to s 34A. It is therefore an important decision.
In Blackler v Felpure, a "demolition" letter was sent by the lessor to the lessee outlining a proposal to "substantially repair, renovate and reconstruct the building" and noting that "such proposals cannot be carried out practicably without vacant possession of the premises". The letter also referred to an intention to "gut the premises" and carry out works including new ceilings and removal of all kitchen equipment.
Significantly, Bryson J appears to have construed s 35(1)(a) concerning the provision of "details" as separate to the requirement for a written notice required in s 35(1)(b). At [34] and [36] his Honour stated: It will be seen from the expressions in subs 35(1) that a lease cannot be terminated without at least six months' written notice. Paragraph (a) operates on the act of terminating the lease; it does not prescribe what must appear in the written notice, and the requirement that the lessor provide the lessee with details of the proposed demolition could be complied with less than six months before termination and otherwise than in writing. There is no evidence that any details were in fact provided in any other way or at any other time than with the letter [notice of termination]. What paragraph (a) requires, according to its express terms, is the provision of details, and that the details provided should be sufficient to indicate a genuine proposal. … … It is not necessary for compliance with para (a) to furnish every detail of the proposed demolition, and it is enough if the details provided are sufficient to indicate a genuine proposal to demolish. If that is indicated, it is not a defect in the provision of details that more is to be done.
Further, Bryson J considered the particular notice was valid, whether or not it required development approval from the local council for the works, which had not yet been obtained: at [35]. It was not a "defect in the provision of details" that more works than those notified were to be done: at [36].
Bryson J explained the approach to be taken to judging the "details" at [37]: It is in my view significant to consider the purpose for which the provision which the Lease is taken to include requires that details be provided. The requirement to provide details is not merely a formal step imposed in the lessor's path, but the details are to be provided so that the lessee can come to a conclusion about whether the termination will be effective, and whether the lessee should accept that it will be effective or dispute it. The sufficiency of details provided should be tested in relation to that purpose. The question is whether the details provided are sufficient to indicate a genuine proposal to demolish the building; if they are not the termination cannot take place and if they are it will be effective no matter what other details of the proposed demolition exist or could have been provided.
I agree with Bryson J that, as with s 35, each subparagraph of s 34A has its own work to do. Subparagraph (a) concerns the provision of "details" or information, which is necessary before a relocation can be required. However, subparagraph (b) sets out the requirements of the "notice" that must be provided; being at least 3 months' notice and the details of the alternative premises. Both subparagraphs must be satisfied before a lessee can be required to be relocated. However, sub-paragraph (a) need not be satisfied at the same time as sub-paragraph (b).
SML submits that Bryson J's reasons did not require the "details" of the demolition to come before the termination notice. I accept that Bryson J does not expressly say so but, as a matter of logic, the time at which a lessee would be considering whether a termination notice or relocation notice is valid, or ought to be challenged, is when it is issued, which does not allow for the details of the lessor's proposal to be provided at some time later. Instead, in both sections 34A and 35, the legislature includes the requirement of the provision of "details" as a subparagraph, before the requirement to issue a notice. There is some reason to accept that the ordering of the subsections is intentional: see eg Patman v Fletcher's Fotogrpahics Pty Ltd (1984) 6 IR 471 at 474-5 (Priestley JA, Samuels and Mahoney JJA agreeing). Logically, that order also makes sense, and I consider that construction of s 34A preferrable.

Did SML provide the plaintiffs with the relevant detail in the Relocation Notices or beforehand?

The plaintiffs submit that the information in the Relocation Notices did not provide details sufficient to indicate to the lessees a genuine proposal to redevelop "that is to be carried out within a reasonably practicable time after relocation of the lessee's business". I disagree. As Bryson J in Blackler indicated at [36], it is "not necessary for compliance with para (a) to furnish every detail".
The information must be considered from the perspective of a lessee, and whether that lessee has been provided with sufficient detail to come to a conclusion about whether the notice is effective or not, namely, whether it is genuinely intended to be actioned after the relocation of the lessee's business: Blackler at [37]. It is not necessary for development approval to have been received at the time of the Relocation Notices: Blackler at [37].
The focus of s 34A(a) is on the genuineness of the proposal and whether it is intended to be carried out in a reasonable time. There is no requirement of exactly when the proposal will be carried out, nor must a date be specified in the notice. Instead, timing is relevant to whether the proposal is "genuine" or not. There is no penalty if a development is not carried out.
I consider that the fact of the development application having been submitted and accepted by Council, and that the development application in full was available to be viewed by the plaintiffs online, together with the plans and reports that had been prepared, provided the plaintiffs with information which indicated that: 1. SML had a mature and developed plan to redevelop as soon as practicable after the stall holders' relocation. 2. The site of the plaintiffs' licensed premises could not be maintained when the redevelopment occurred.
I also note that no plaintiff gave evidence that he or she did not consider SML had provided sufficient information for the s 34A analysis to be carried out. That further supports the conclusion that there was sufficient detail.

Under s 34A must the proposal be sufficiently well developed and mature as at the date of the issuing of the relocation notice?

The Weng and Cheng plaintiffs originally submitted that the proper construction of s 34A is that the proposal must be sufficiently well developed and mature to proceed within a reasonably practicable time of the issuing of the relocation notice. I reject that construction. It is contrary to the language of the section which expressly provides the time frame for judgment of the proposal's maturity is "after the relocation of the lessee".
Bryson J explained the concept of "sufficiently well-developed and mature to proceed within a reasonably practicable time" in Blackler at [39]: A proposal which was immature or only partly formed or to which the lessor was not committed could not comply. … it was necessary for para (a) to circumvent manoeuvres such as terminating leases on the basis that the building would come to the end of its useful life in five or ten years' time…
The focus on the time frame is on the genuineness of the proposal, rather than on specific timing, in which a redevelopment could practically take place.

Was the proposal sufficiently well developed and mature as at 18 October 2023?

As noted above, as at the time of the Relocation Notices, SML had submitted a development application to the City of Sydney, including the detailed plans and reports necessary, which had been accepted for formal consideration.
The day before the notices were issued, on 17 October 2023, Doltone had provided detailed answers to the Council's request for information.
The Head Lessee had approved the development, and the proposal had been in the media.
I consider these facts demonstrate sufficient "maturity" in the proposal. I consider SML was "committed", even though it was waiting on approvals, and that the proposal was "genuine". I consider that the plaintiffs were able to determine that the proposal was "genuinely" intended to be implemented within a "reasonably practicable time" after the relocation of the plaintiffs, from the details that had been provided.

Under s 34A must the "alternative premises" be "commercially similar"?

This issue of construction is the most important to the dispute between the parties. If the Relocation Notices are held to be invalid for want of details or maturity, then the plaintiffs accept that SML could re-issue notices that are compliant in that regard, particularly in circumstances where all approvals are now complete and Doltone is committed to the lease.
However, if it is a requirement that the plaintiffs must be offered commercially similar premises, then the plaintiffs' view is that any Relocation Notices that do not offer "commercially similar" premises would be invalid, and relocation could not be compelled.
As a matter of construction of s 34A, I do not accept that the plaintiffs must be provided with "commercially similar" premises, for the following reasons.
First, the word "alternative" does not require such a construction, which would effectively involve the incorporation of extra words into the section. Such implication of words involves "a judgment of matters of degree" and will not be done where the insertion would be "too big, or too much at variance with the language in fact used by the legislature": Taylor v Owners Strata Plan 11564 (2014) 253 CLR 531 at 548 at [38] (French CJ, Crennan and Bell JJ).
The legislature could have used language of "commercially similar" or even "similar", but did not. Instead, the word "alternative" ought be taken to have its ordinary meaning, which is "another", without reference to "similarity".
Instead, the phrase "commercially similar" appears to have been chosen by the plaintiffs' lawyers in preparing the summons, and when briefing their expert, Mr Sanidas, and possibly taken from the appeal panel decision in Trust Company of Australia Ltd v Skiwing Pty Ltd [2005] NSWADTAP 9.
That is the only case referred to by the plaintiffs in which proposed relocated shops were found to be not "alternative". There, the notices were considered invalid by the tribunal member, because the relocation shops offered were either smaller than the existing shop and/or on a different level and/or were separated by a corridor: Skiwing Pty Ltd v Trust Company of Australia Ltd (No 3) [2004] NSWADT 94. The appeal panel considered that the "differences in floor area and layout" were sufficient to support a conclusion that there was no "commercial similarity" to the existing premises, and that "some similarity along the lines is an implicit requirement" of s 34A: [2005] NSWADTAP 9 at [226] (Chesterman ADCJ, Molloy JM, Weule NJM). That issue was not considered by the Court of Appeal in Skiwing. In any case, even in the single relevant paragraph at [226], there was not a conclusion of a requirement of "commercial similarity", only that the section required "some similarity" in relation to "floor area and layout" of the alternative shop.
I accept SML's submission that the plaintiffs' construction reads far more into "alternative" shop in s 34A by requiring "commercial similarity".
I consider the proper construction is one in which the focus is solely on whether an "alternative" shop is being provided, which provides a lessee with a shop offering the same ability to operate the existing business.
Secondly, if "alternative" was given the plaintiffs' construction, then all lessors would need to plan any redevelopment to ensure that every existing lessee was given commercially similar premises, which may in fact be impossible. It is unlikely the legislature had that intention to restrict lessors' proprietary interests in that way, without expressly saying so. Instead, the focus of s 34A is to ensure lessees' interests are protected, in that they can only be burdened with relocating if: 1. there is a genuine redevelopment proposal, and 2. they are given information about the proposal, time to consider and prepare for a move, and a right to terminate, should they wish to.
Similarly, it is unlikely that the legislature intended that lessees were to make a detailed analysis of whether the proposed alternative shop was "commercially similar" to their current shop, when they only had a time frame of 1 month to make a decision whether to challenge the notice or not. The fact that in this case there has been voluminous expert evidence, and most of the hearing time was taken up with expert evidence, is an example of what such a determination may require, and would likely be impossible for most individual lessees to finalise in the 1 month timeframe.
Thirdly, s 34A(c) refers to a difference in "commercial values" of the existing and relocated premises in the context of adjustments of rent. That inclusion arose after a legislative amendment in 1997: see Retail Leases Amendment Act 1997, schedule 1 [9]. Previously, the relevant section did not allow for rent adjustment. The second reading of the relevant bill suggests the purpose of the amendment concerning rent adjustment was to ensure increased fairness to tenants, who may be relocated to a less attractive shop, with negative financial consequences on their profitability: New South Wales Legislative Council, Parliamentary Debates (Hansard), 16 June 1997, at 10206. The amending legislation made various changes to the equivalent of s 34A, but none added language to import the concept of "commercial similarity" of an alternative shop.
It is only in the context of adjusting rent that the legislature had a concern with "commercial" similarity or difference. Further, if it was necessary to consider "commercial similarity" of alternative premises in determining the validity of the notice, it would seem unnecessary to have any rent adjustment provision, as the issue would already have been determined. Therefore, another reason why "commercial similarity" ought not be implied as submitted by the plaintiffs, is because the issue was already explicitly dealt with in s 34A(c): see eg Esso Australia Pty Ltd v Australian Workers' Union (2018) 263 CLR 551 at [47] (Kiefel CJ, Keane, Nettle and Edelman JJ).
It follows that, providing the relocation shops are "alternative" as construed above, I do not accept the plaintiffs' submissions that it is possible that there are differences in alternative shops that cannot be appropriately compensated.

Are the proposed alternative premises "commercially similar"?

To the extent that "alternative" shop ought to be construed to mean "commercially similar", it must be determined whether the relocation stalls proposed by SML are "commercially similar". There is no debate that all the relocation stalls are within the marketplace, are approximately the same size as the original stalls, and that the plaintiffs will be able to operate their businesses in the same way from those relocated sites.
The Cheng and Weng plaintiffs relied on expert reports of Mr John Sanidas, certified practising valuer. SML relied on expert reports of Mr Peter Leyshon, town planner, with expertise in retail performance analysis and centre strategies. The Gao plaintiffs served an expert report of a Mr Neverman, but did not rely on his evidence at the hearing.
Neither expert witness explained what "commercially similar" means, or when a relocation shop changes from "commercially similar" to not commercially similar. Neither expert considered the fact that SML charges the same fee to every stall holder, irrespective of exact size, frontage or location of the stall.
While both experts accepted that factors relevant to determining whether stalls were "commercially similar" included a list of factors suggested by the plaintiffs' solicitors, Mr Sanidas considered the most important factors were the relative placement of the existing and replacement stall to the market entry points, the current assumed foot traffic past the replacement stalls based on evidence of customers entering the markets, and the shape of the stalls, including the number of shop frontages based on whether they are on a corner or not.
However, Mr Elliott, counsel for the Weng and Cheng plaintiffs, accepted that the comparison to be undertaken was between the existing stalls and the relocation stalls after the development. Yet there was no evidence of the actual foot traffic in the various areas, nor was there any evidence of projections of foot traffic after the development. It was not in contest that it is expected that there will be an increase in market visitors of about 1.75 million visitors in the first year of operation after completion of the development. Further, the only evidence is that current market visitors are overwhelmingly repeat customers, meaning they currently attend the markets for the existing offerings, rather than because of the development food and drink offerings.
In those circumstances, I do not accept it is possible on the plaintiffs' evidence to determine that the various relocation stalls will be other than "commercially similar" to the original stalls.
The plaintiffs do not positively indicate which stall sites, if any, would be commercially similar. Mr Maconichie, counsel for the Gao plaintiffs, submitted that the only way stalls would be "commercially similar" would be if SML had taken steps to "ameliorate the disadvantages that have come upon the plaintiffs by being moved" and to ensure foot traffic near the proposed new sites was increased to make up for the move away from the Doltone development site, where most customers enter the markets. However, again there was no evidence about the signage that will be included after the development in order to assess that submission.
Further, Mr Maconichie submitted that the Court did not require expert evidence to assess "commercial similarity", and instead could make a determination from the objective evidence of the shops' locations and pedestrian entry data. As noted above, I do not consider there is sufficient evidence, upon which to draw the conclusion sought by the plaintiffs.
If that conclusion is incorrect, I below consider the competing expert evidence, in the context of the plaintiffs' submission that the relocated stalls are not "commercially similar", because the differences mean that there cannot be appropriate rental adjustment.
Mr Sanidas considered that the locations of every relocation stall was inferior based on an analysis of the existing stalls' features compared the relocation stalls. The main features for him were the current foot traffic entering the market in its current layout, and assumed negative qualities of the relocated shops, such as being close to the toilet blocks, loading dock or fresh fruit and vegetable market. However, there was no empirical evidence that customers considered those aspects negative. For example, a survey of customers indicated that the fresh fruit and vegetables was the most commonly cited reason for visiting the markets, which might suggest the location of a stall nearby was a positive attribute. While Mr Leyshon accepted that a stall near the bathroom location "may" be less desirable for a stall owner, there was no evidence, upon which he was basing that opinion. Neither did Mr Sanidas give a basis for his opinion that having a market stall near the bathrooms would be less desirable because of "smell". It would be thought that the proper operating of the bathroom facilities was a matter of importance for SML. Further, it might also be thought that there would be additional passing traffic near the bathrooms by customers, who otherwise might not pass by those nearby stalls.
Part of Mr Sanidas' ratings were based on conversations with stall holders as to what they subjectively considered important, their experience of traffic flow and what they allegedly had paid a former stall holder for a transfer of the occupancy agreement. I agree with Mr Leyshon that the Court ought to be "cautious in accepting the anecdotal views of affected stall-holders". There is no evidence that the "value" of the relocation stalls will be less after the redevelopment.
As noted, there was no compelling evidence of existing pedestrian patterns inside the markets and the current foot traffic passing each of the plaintiffs' stalls or the proposed relocated stalls. Further, if customers want to access the general market stalls, it is likely they will be prepared to walk through or around the Doltone development to do so, rather than what is being suggested, that purchases only occur if people enter the markets and immediately see an item for an "impulse buy".
Based on the plan of Paddy's Markets for after the redevelopment, it appears that all general market stalls of the plaintiffs and others will be grouped together, separate from the fresh food produce and Doltone area. It is anticipated that there will be many fewer vacant stalls.
Therefore, there is no objective basis for Mr Sanidas' opinion that the relocation stalls would not be "commercially similar" after the redevelopment.
In any event, Mr Sanidas was generally an unimpressive witness, who on multiple occasions refused to answer simple questions without engaging in long monologues about matters he appeared to consider relevant to support the plaintiffs' cases. In doing so, I consider that he entered into the arena as advocate: see eg Sarian v Elton [2011] NSWCA 123 at [25], [55], [58] (Whealy JA, Beazley JA agreeing). For example, in response to a simple question from Mr Lazarus, senior counsel for SML, as to whether Mr Sanidas had undertaken research into the demographic of the market's customers, which could have led to a "yes" or "no" answer, Mr Sanidas responded: … this is a very simple market. It does not carry out ‑ it does not work in a sophisticated way in the manner that you're suggesting. The market is quite simple. They're filled with the plaintiffs who are here today that work hard to create a small business and they look at it in terms of the volume of people coming into the market from Hay Street, international tourists. Yes, there's a lot of Asian‑dominant customers and shoppers, but there's also other non ‑ other Australian, Greeks, Italians and the like that visit the markets. I haven't done any empirical analysis on the customer demographic in international or national. We're not talking about a multimillion dollar business; we're talking about small businesses that have paid a lot of money to get in the current locations, and when moved will lose that money because they're not commercially similar premises.
Mr Sanidas gave this evidence in circumstances where there was no evidence from any plaintiffs about their business operations, including the revenue generated from their current stalls. Nor was any basis given for the statements about nationalities of the shoppers.
There were other general weaknesses in his evidence. For example, he variously accepted that: 1. most market customers are repeat customers and would be likely to continue to attend the markets after the development; 2. the development would bring in more customers to the markets and there is generally a positive benefit to a centre or market where there is an anchor tenant.
He then reluctantly conceded that he had not carried out any analysis of future likely foot traffic or operation of the market after the Doltone development, but had done so "notionally", without explaining what that meant. However, nevertheless, he made sweeping statements that the relocation "has to support the existing commerciality" of the plaintiffs' businesses, and the development would "dilute" their businesses. Those statements were not supported by any empirical analysis or evidence.
I prefer the evidence of Mr Leyshon, and accept his opinion that Mr Sanidas' opinions as to whether a stall is more or less commercially attractive were "very subjective".
I accept Mr Leyshon's evidence that no one can know exactly how the Doltone development will change the flow of foot traffic, and it was impossible to engage on a granular level as to the differences between the respective existing and relocated shops as they will be in the future. However, based on his decades of experience of the development of shopping centres, Mr Leyshon considered the effect of the relocations would concentrate all general market stalls, rather than being interspersed, as currently, with many vacant stalls; this concentration would be more attractive to customers. I accept that unchallenged evidence, which also makes logical sense.
I accept that for a few plaintiffs, their relocation sites are not corner stalls, and subjectively they would prefer such corner stalls. However, there is no conclusive evidence about the increased benefit to a stall holder in having a corner stall, nor what the success or desirability of the relocation sites after the redevelopment will be.
For completeness, I note that Mr Leyshon did accept that for Plaintiff 11, Myung Eoi Kwon, the relocation stalls were not "commercially similar", based on the combination of the loss of one corner stall frontage and the existence of a large structural concrete post in front of the relocation stalls. However, Mr Leyshon did not resile from considering that it was impossible to know with certainty the impact of the benefits of the development on relocated stalls. Further, as noted, Mr Leyshon did not give evidence as to what "commercially similar" meant. Nor was he asked whether his conclusion about "commercial similarity" was something that could be dealt with in the context of a rent adjustment. I note, for example, that his firm view in the experts' joint report, was that the issue of "commercial similarity" was to be considered in that rent adjustment context and he was not asked whether he departed from that view in relation to Myung Eoi Kwon. Therefore, Mr Leyshon did not accept that the relocation stalls were not "commercially similar", because the differences meant they could not be appropriately compensated.
Therefore, for the reasons above, I do not consider that the plaintiffs have demonstrated on the balance of probabilities that the relocated stalls are other than "commercially similar", so as to invalidate the Relocation Notices.

Utility in declarations?

SML also submitted that there would no utility in the proposed declarations, because new relocation notices could be issued that would either demonstrate sufficient details and maturity, or may offer another relocation shop to Myung Eoi Kwon.
Courts should not grant declarations where doing so "will produce no foreseeable consequences for the for the parties": Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582 (Mason CJ, Dawson, Toohey and Gaudron JJ).
However, here I do not accept that because SML could issue new relocation notices that there is no utility in making the declarations sought. Often notices in various contexts are declared invalid and then the parties make commercial decisions as a result. There is no difference here.
Had it otherwise been appropriate, I would not have refused the declarations on the basis of want of utility.

Orders

For the reasons above, it is appropriate to dismiss each of the amended summons. There is no reason why costs ought not follow the event.
I therefore make the following orders. 1. In proceedings 2023/00080651, the appropriate orders are: 1. Amended Summons dismissed; 2. Plaintiffs to pay the defendant's costs as agreed or assessed. 1. In proceedings 2023/00226718, the appropriate orders are: 1. Amended Summons dismissed; 2. Plaintiffs to pay the defendant's costs as agreed or assessed. 1. In proceedings 2023/00205953, the appropriate orders are: 1. Amended Summons dismissed; 2. Plaintiffs to pay the defendant's costs as agreed or assessed.

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: 20 June 2024

Retails Leases Act 1994(NSW)

Retail Leases Amendment Act 1997(NSW)

Retail Leases Act 1994(NSW)ss 34A, 35

At a glance

Court

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Judgment (19 paragraphs)

Legislation Cited (4)

Cases Cited (13)