Gordon v The Trustees of the Roman Catholic Church of the Diocese of Lismore

Gordon v The Trustees of the Roman Catholic Church of the Diocese of Lismore - [2003] WASCA 290 - WASCA 2010 case summary — Zoe

[18]

15 With regards to the issue of whether the payment was "key-money", the relevant sections of the Retail Leases Act 1994 are: Section 3 - Definitions: key-money means any money paid to or at the direction of a lessor or lessor's agent, by way of a premium, non-repayable bond or otherwise, or any benefit that is conferred on or at the direction of a lessor or lessor's agent, in connection with the granting, renewal, extension of assignment of the lease (and a reference in this Act to the payment of key-money includes a reference to the conferral of any such benefit). Section 14: Key-money and lease preparation expenses prohibited (1) a person must not, as lessor or on behalf of the lessor, seek or accept the payment of key-money or lease preparation expenses in connection with the granting of a retail shop lease and any provision of a retail shop lease is void to the extent that it requires or has the effect of requiring the payment of key-money or lease preparation expenses in connection with the granting of the lease. (2) if a person contravenes this section: (a) the person is guilty of an offence and liable to a penalty not exceeding 100 penalty units, and (b) (whether or not the person is convicted of an offence under paragraph (a)) the lessee is entitled to recover from the lessor as a debt any payment made or the value of any benefit conferred by the lessee and accepted by or on behalf of the lessor in contravention of this section. (3) This section does not prevent a lessor: (a) (Repealed); (b) from receiving payment of rent in advance, or (c) from securing performance of the lessee's obligations under the lease by requiring the provision of a security bond or other bond or a guarantee from the lessee or any other person (such as a requirement that the directors of a company that is the lessee guarantee performance of the company's obligations under the lease), or (d) from seeking and accepting payment for goodwill of a business from a purchaser of the business, but only to the extent that the goodwill is attributable to the conduct of the business by the lessor, or (e) from seeking and accepting payment for plant, equipment, fixtures or fittings that are sold by the lessor to the lessee in connection with the granting of the lease, or (f) from seeking and accepting payment for the grant of a franchise in connection with the granting of the lease.

[37]

34 Smith J at page 23 stated: "In the present case, the learned trial judge's analysis of the concept of "premium" was carried out in the context of his conclusion that term A provided a consideration be paid for the granting of or agreeing to grant a lease. His Honour took the view that any consideration over and above the payment of rent should be regarded as a premium in the ordinary meaning of that term. … The task that was presented to him was to define the term "premium" and the phrase "something of a like nature" and apply those definitions to the facts before him. Bearing in mind the purposes of the legislation and the definition of "key-money" I find the analysis of Rowland J persuasive. The Act is attempting to protect small tenants with little bargaining power. The definition of "key-money" extends beyond "premiums" as such to "something of a like nature" and thus its meaning was intended to be different from the traditional meaning of a payment for the grant of the lease or assignment of a lease. The problem is to identify the sense in which the word "premium" is used in its statutory context and to identify the criteria intended by the legislature to be used in identifying "something of a like nature". Some indication of the purpose of the legislation is to be found in the parliamentary debates… From this material, it is reasonable to conclude that an objective was to prevent landlords using their bargaining strength to demand a payment in addition to market rental. That objective appears most clearly … Rowland J's approach requires a demonstration of a detriment to the tenant or proposed tenant and: (a) the payment of something over and above the true or lawful rental; or (b) the payment of something for which there is no real consideration; or (c) a consideration that is so out of proportion to the benefit that it cannot be a true consideration. This approach requires the substance of the transaction to be considered and this may require an extensive, but manageable, investigation."

[48]

46 McKechnie J at paragraphs 70 to 75 stated as follows: "70. The object and purpose of the Commercial Tenancy (Retail Shops) Agreements Act 1985 is to regulate commercial tenancy agreements. 71. A clearly expressed purpose of the Act is to outlaw the practice of requiring payment of key-money as consideration for entering into a lease when that payment is unconnected with the normal terms and conditions of a commercial lease. The method by which Parliament seeks to accomplish that purpose is to deem all such arrangements as void - with a consequent right of recovery. 72. The entitlement to key-money must be found in a provision in a retail shop lease including the expansion given under s3(2) of the Act. Whether an identified provision in a lease is or is not key-money must be determined by reference to all the facts and cannot be decided solely on the words used. To do otherwise would be to render the application of the Commercial Tenancy Retail Shops (Agreements) Act subject to the ingenuity of the drafter of the lease. It would also leave out of account oral arrangements for key-money carefully excluded from a written agreement. 73. There is a direct analogy with rent control legislation. In Palser v Grinling [1948] AC 291, Viscount Simon at 310: "The [Rent Restriction] Act is not to be evaded … by a merely colourable use of words which do not correspond with what is really provided." 74. In Elmdene Estate Ltd v White [1960] AC 528 Viscount Simonds at 538: "…it has been said before and it must be said again, that in the consideration of questions arising under the Rent Acts the Court must look at the substance and reality of a transaction, not to form… ." 75. Examining the substance and reality of the transaction, not its form, was the approach taken by Anderson C in O F Gamble Pty Ltd v Whitemore Pty Ltd (1989) 2 WAR 327 and confirmed by the Full Court (Malcolm CJ, Pidgeon J - Rowland J dissenting) in Whitemore Pty Ltd v O F Gamble Pty Ltd (1991) 6 WAR 110 at 119."

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