Jurisdiction : STATE ADMINISTRATIVE TRIBUNAL OF WESTERN AUSTRALIA

Citation : EDGAR ENTERPRISES PTY LTD and MINISTER FOR TRANSPORT [2005] WASAT 260

Appeal - State Administrative Tribunal - Question of law - Interpretation of provision in lease - Whether levy described as a Forecourt Levy a sinking fund, a variable outgoings fund or a contribution to other funds and reserves - Application of the provisions of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) - Whether fund contrary to provisions of Act

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 12, s 12A, s 12B, s 15(2), s 16(1)

State Administrative Tribunal Act 2004 (WA), s 105, s 167

Australian Broadcasting Commission v Australian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99

Life Insurance Co of Australia Ltd v Phillips [1925] HCA 18; (1925) 36 CLR 60

Permanent Building Society v Wheeler (1992) 10 WAR 109

1 MILLER J: This is an application for leave to appeal from a decision of the State Administrative Tribunal ("the Tribunal") made on 27 September 2005 by Dr B De Villiers. I shall refer to the decision of Dr De Villiers as a decision of the Tribunal.

2 The application for leave to appeal is brought pursuant to s 105 of the State Administrative Tribunal Act 2004 (WA). Section 105(1) provides that a party to a proceeding may appeal from a decision of the Tribunal in the proceeding, but only if the court to which the appeal lies gives leave to appeal. Section 105(2) provides that the appeal can only be brought on a question of law. There is no contest that the appeal involves a question of law. Because the decision in the Tribunal was not made by a judicial member of the Tribunal or by the Tribunal constituted by members who included a judicial member, the appeal comes before me as a single Judge under s 105(3)(b).

3 After the hearing of the appeal, written submissions were filed by both parties. These included the appellant's and respondent's supplementary submissions and the appellant's response to the respondent's supplementary submissions. No leave was granted for the filing of these submissions. What was allowed and requested by me was a précis of the appellant's submissions at the hearing, which differed a little from the written outline of submissions. However, all submissions were considered by me in reaching this judgment.

4 The proceedings in the Tribunal were by way of transfer from the Commercial Tribunal pursuant to s 167 of the State Administrative Tribunal Act 2004 (WA). The proceedings had originally been commenced at the Commercial Tribunal on 1 December 2004 but were transferred to the State Administrative Tribunal on 1 January 2005. The proceedings were by way of application pursuant to s 16(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ("the Retail Shops Act"). This section provides that a party to a retail shop lease may refer to the Tribunal any question between the parties which they believe to be a question arising under the lease.

5 The appellant and the respondent entered into a lease as lessor and lessee respectively of premises situated in part of the Western Pavilion of Barrack Square. The lease was dated 27 December 2000 and was for a term of 10 years at an initial rent of $9257.50 per annum reviewable on certain dates provided for in Schedule A of the lease. The lease and Schedule A contained provision for what was described as a Forecourt Levy in the sum of $15,000, the lessee's proportion of which was payable by the respondent at the same time as the rent by equal monthly payments.

6 The Forecourt Levy was defined in cl 1 of the lease in the following terms:

"'Forecourt Levy' means the forecourt levy payable by occupiers of the Pavilions in respect of the forecourt to Barrack Square, specified in Item 11 of Schedule A as varied from time to time under this Document ... "

7 The entitlement to the Forecourt Levy was provided for in cl 6.2 of the lease which was as follows:

"6.2 Forecourt Levy

(a) The lessee must pay the Lessee's Proportion of the Forecourt Levy at the same time as the Rent by equal monthly payments in advance on the 1st day of each month with the first payment to be made on the Date of Commencement.

(b) ... "

It is unnecessary to set out the provisions of cl 6.2(b) which provided a mechanism for review of the Forecourt Levy.

8 The lessee's proportion of the Forecourt Levy was defined in cl 1 of the lease in the following terms:

"'Lessee's Proportion' means the proportion which the total floor area of the Pavilions bears to the Total Lettable Floor Area of the Pavilions from time to time ... "

9 Pursuant to what it assumed to be its obligation to pay a proportion of the Forecourt Levy the respondent paid to the appellant between 11 December 2000 and 30 June 2005, a total of $1443.35. An affidavit of Peter Andrew Duffield sworn 12 August 2005 and accepted as evidence in the proceedings before the Tribunal, reveals that the contributions of the respondent and other tenants were deposited into an interest bearing account held by McGees Property on behalf of the appellant with BankWest. No monies have been expended from the Forecourt Levy (which Mr Duffield describes as "the Forecourt Sinking Fund") but McGees Property had, as at August 2005, arranged for an audit of the fund for the financial years from and including 1 July 2000 to 30 June 2005. A copy of the auditor's report and accompanying schedules detailing income and expenditure from the fund had been provided to the respondent at the time the affidavit was sworn. The reason why no monies had been expended from the fund was set out by Mr Duffield in his affidavit as follows:

"11. The reason that no moneys have been expended from the Forecourt Sinking Fund to date is because the Respondent has categorised all works carried out to the Forecourt to date as capital expenditure and has paid for the cost of these works itself. These works have included installation of signage points, installation of new paving and curbing [sic], installation of new hard and soft landscaping and installation of new lighting and directional signage."

"12. Now that the majority of the capital works have been completed, it is anticipated that the Forecourt Sinking Fund will be applied for repairs and maintenance of the Forecourt for the benefit of all tenants of and users of the Barrack Square Precinct."

10 The Tribunal noted that five questions had been referred to it. They were listed as follows:

"1. Is the landlord obliged to account for all items of expenditure covered by the Forecourt Levy?

2. Can the landlord demand payment of the levy before giving the estimate of expenditure?

3. Are payments made to date by the [respondent] in respect of the Forecourt Levy refundable to him?

4. Must the landlord account for all payments made to date and have such account audited?

5. If items of expenditure do not equate with or exceed the amount collected by way of the Forecourt Levy, is the landlord obliged to refund any surplus to the [respondent]?"

11 Before the Tribunal the primary question was the categorisation of the Forecourt Levy provided for in cl 6.2 of the lease. The respondent interpreted it as a fund for variable outgoing purposes and the appellant interpreted it as a sinking fund. The respondent contended that although the Forecourt Levy was clearly for variable outgoing purposes, none of the requirements for such expenses as contained within s 12 of the Retail Shops Act were met. Section 12 provides that if provision is made in a retail shop lease for payment by the tenant, in addition to rent, of all or any of the operating expenses of the landlord, various requirements and conditions are to be met. None of these had been complied with in relation to the lease in question. They included things such as annual estimates of each item of operating expense in respect of each year, and a written statement (an "operating expenses statement") detailing all expenditure in accordance with estimated expenses.

12 The appellant's case was that the Forecourt Levy was designed to maintain the forecourt common area at Barrack Square which was the "face" of the retail complex to the public. It was admitted that at no time prior to Mr Duffield swearing his affidavit was the Forecourt Levy referred to as the "Forecourt Sinking Fund", but it was contended that the levy had always been intended to be a sinking fund within the meaning of s 12A of the Retail Shops Act. Mr Duffield swore in his affidavit that whilst the appellant had been non-compliant with statutory requirements for management of the Forecourt Levy as a sinking fund, this was because there had been a mistaken belief that no audit of the levy was required in light of the fact that no expenditure had been incurred. The appellant's submission was that on a proper construction of the lease the Forecourt Levy was a sinking fund, its purpose being for repair and maintenance of the forecourt area at Barrack Square.

13 The appellant submitted that the respondent could not have been under any misapprehension about the nature of the Forecourt Levy and certainly could not have understood it to be a variable outgoings fund because such a fund was separately and independently provided for in cl 7 of the lease.

14 The Tribunal concluded that the Forecourt Levy was not a sinking fund or indeed a variable outgoings fund under the Retail Shops Act. It concluded therefore that the appellant was obliged to account for all income and expenditure related to the Forecourt Levy and could not demand further payment by the respondent of any proportion of the Forecourt Levy, cl 6.2 of the lease being void. It ordered all payments made by the respondent into the Forecourt Levy to be refunded.

15 The Tribunal was largely concerned with the question whether the Forecourt Levy "by implication of law" referred to a sinking fund. After an exhaustive analysis of submissions in that respect it concluded that the appellant had failed to demonstrate that the Forecourt Levy could in fact be implied to refer to a sinking fund.

16 The Tribunal considered that the appellant bore the onus of proving that the Forecourt Levy was a sinking fund but that was not a correct conclusion. There was no evidentiary onus on the appellant to prove that the Forecourt Levy was a sinking fund. The appellant bore the onus of establishing the relief it claimed.

17 In any event, the Tribunal found that the Forecourt Levy was not a sinking fund and its purpose was not clear. It concluded that by reason of s 15(2) of the Retail Shops Act, cl 6.2 was void. Section 15(2) of the Retail Shops Act provides:

"A provision of a retail shop lease, to the extent that it is contrary to or inconsistent with anything in this Act or with anything that by this Act the lease is taken to provide, is void."

18 The proposed grounds of appeal, as amended by leave at the hearing, are as follows:

"1. The Tribunal erred in law in concluding that clause 6.2 of the Lease is void in that:

(a) clause 6.2 is not contrary to or inconsistent with anything in the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) ('Act'); and

(b) clause 6.2 is consistent with section 12A(1) or alternatively, section 12B of the Act.

2. As a consequence of the error identified in ground 1, the Tribunal erred in finding that:

(a) the Appellant (Respondent) cannot demand further payment by the Respondent (Applicant) of a proportion of the Forecourt Levy; and

(b) payments made by the Respondent (Applicant) into the Forecourt Levy must be refunded.

3. The Tribunal erred in concluding that the Forecourt Levy is not a sinking fund in that the purpose is expressly stated in the Lease and is permitted by section 12A(1) or section 12B of the Act."

Hearing of the application for leave to appeal

19 At the hearing of the application for leave to appeal, counsel for the appellant approached the matter in a rather different manner from the way in which the questions were argued in the Tribunal. In the Tribunal the conflict between the parties was whether the Forecourt Levy constituted a fund for variable outgoing purposes (perhaps more properly described as a fund for "the operating expenses of the landlord") within the meaning of s 12 of the Retail Shops Act, or whether it constituted a sinking fund for repairs or maintenance or any similar purpose within the meaning of s 12A of the Retail Shops Act. The appellant below argued for the former and the respondent below argued for the latter.

20 At the hearing of this appeal the appellant categorised the Forecourt Levy as being either a sinking fund or a fund for marketing and promotion within the meaning of s 12B of the Retail Shops Act.

21 The provisions of s 12B(1) and (2) are as follows:

"(1) This section applies if provision is made in a retail shop lease in respect of premises in a retail shopping centre for payments to be made by the tenant into a fund (other than a fund referred to in section 12A) or a reserve for marketing or promotion of the retail shopping centre or any similar purpose.

(2) The purpose of the fund or reserve is to be specified in the retail shop lease."

Section 12B(3) goes on to provide that amounts paid by tenants for the credit of the fund are to be deposited in appropriate interest bearing accounts and the amounts standing to the credit of the fund to be used only for the purpose mentioned in s 12B(2).

22 The submissions put for the appellant on the hearing on the application for leave to appeal mean that the focus of the appeal proceedings is different from that in the Tribunal.

23 Under O 65 r 10(1) of the Rules of the Supreme Court 1971 (WA) the appeal (assuming leave is granted) is to be in the nature of a rehearing and the Judge hearing the appeal may confirm, quash or vary the decision of the Tribunal against which the appeal is made, or remit the matter to the Tribunal for rehearing with or without directions. Order 65 r 10(2) provides that additional or fresh evidence may be taken but otherwise the appeal is to be determined on the material that was before the Tribunal.

24 There is no difficulty in the appellant shifting ground in relation to the submissions made on the hearing of the application, but to some extent the nature of the contest between the parties has changed.

25 Central to the submissions of the appellant is the proposition that the description "the Forecourt Levy" in cl 6.2 of the lease sufficiently identified the purpose of the levy ("fund") within the meaning of either s 12A(2) or s 12B(2). Both of these provisions require the purpose of the fund to be specified in the retail shop lease.

26 The provision for the Forecourt Levy falls within Pt III of the lease, the heading to which is "rent and other money provisions". Whilst the heading cannot determine the meaning to be given to cl 6.2, it was submitted by counsel for the appellant, and the lease so provides (cl 2.1), that the provision for the Forecourt Levy clearly falls within a separate and distinct part of the lease, and must be seen as a levy for the purpose of maintenance and repairs of the forecourt.

27 The whole of the lease has to be considered and the meaning of any one part of it may be revealed by other parts: Australian Broadcasting Commission v Australian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 per Gibbs J at 109.

28 Counsel for the appellant relied upon the fact that the definition of Forecourt Levy in cl 1 of the lease revealed the levy to be payable by occupiers of the Pavilions in respect of the forecourt to Barrack Square, as specified in Item 11 of Schedule A as varied from time to time under the lease. Schedule A has annexed to it a plan which reveals the forecourt area to be that section immediately adjacent to the New East Pavilion and the New West Pavilion, between those Pavilions and the area set aside for car parking. Counsel for the appellant thus argues that there could be no mistake about where the forecourt is or what the Forecourt Levy means. Necessarily, counsel submits, it must mean a levy for the maintenance and repair of that section which is delineated on the plan.

29 The word "forecourt" is not to be found on the plan. However, it is clear enough that the respondent would have been aware of where the forecourt was.

30 Mr Duffield in his affidavit sworn 12 August 2005 deposes to the fact that the appellant has carried out certain works on the forecourt which have included installation of signage points, new paving and kerbing, new hard and soft landscaping and new lighting and directional signage. These have all been categorised by the appellant as capital expenditure and the appellant has paid for the costs of the works itself. It anticipates that the Forecourt Levy will be applied for repairs and maintenance in the future.

31 Counsel for the respondent submitted that the Forecourt Levy could thus be categorised as a provision in a retail shop lease in respect of premises in a retail shopping centre, relating to structural improvement to the centre within the meaning of s 12(2)(b) of the Retail Shops Act and if so categorised, was therefore void. However, the affidavit of Mr Duffield makes it clear that the Forecourt Levy had not in fact been utilised for any structural improvements. I would not categorise the work done as structural improvement. In any event, whatever the categorisation, it has been paid for by the respondent and nothing really turns on that fact. Mr Duffield's affidavit simply explains why it is that none of the funds in the Forecourt Levy have so far been utilised by the appellant.

32 Counsel for the respondent submitted in essence that the decision of the Tribunal was correct because cl 6.2 of the lease does not categorise the Forecourt Levy in any way. It does not describe it as a sinking fund and it does not specify the purpose of the Forecourt Levy. His submission was "it might be for a number of different purposes".

33 The Tribunal in its reasons made reference to the intention and purpose of the Retail Shops Act. The long title to the Act describes it as:

"An Act to regulate commercial tenancy agreements relating to certain shops, to provide for the determination of questions arising under such agreements, and for connected purposes."

34 In the second reading speech of the then Minister for Finance, the Hon Max Evans on 30 June 1998, a portion of which is reproduced in the Tribunal's reason, there was specific reference made to the provisions of the Act relating to sinking funds. The Minister said (Hansard, 30 June 1998, page 4927):

"The area of sinking funds has also seen some conflict between landlords and tenants. Restrictions which limit the use of these funds to future repairs and maintenance and non-capital works will remain. The proposed amendments will require that any other sinking funds are used only for the specific purpose for which they are created ... "

35 The central question for determination is whether the description "Forecourt Levy" in cl 6.2 of the lease in itself sufficiently specified the purpose of the fund, whether it be a sinking fund within the meaning of s 12A of the Retail Shops Act or a contribution to a fund within the meaning of s 12B of the Retail Shops Act.

36 It is difficult to see how the Forecourt Levy could be characterised as a "fund ... for marketing or promotion of the retail shopping centre or any similar purpose", but whether that be so or not, the fact remains in my view that the purpose of the fund was not specified in the lease. No indication at all is given as to the purpose which the levy is to be applied. The use of the word "forecourt" does no more than identify what the levy is for. The levy is for the forecourt but for what purpose at the forecourt? No answer is provided in the lease. Such an answer was to be provided, indeed specified, by reason of the provisions of either s 12A(2) or s 12B(2) of the Retail Shops Act.

37 I find it hard to characterise the Forecourt Levy as a provision in a retail shop lease for payment by the tenant in addition to rent of operating expenses of the landlord within the meaning of s 12(1) of the Retail Shops Act, but again, under s 12(1)(a) any amount payable by a tenant under the lease is limited to items of operating expenses that the retail shop lease specifies. There is no specification contained within the lease.

38 The proposed grounds of appeal seek to set aside the decision of the Tribunal by reason of the fact that the Tribunal erred in law in concluding that cl 6.2 of the lease was void. The grounds contend that cl 6.2 is not contrary or inconsistent with anything in the Retail Shops Act and is consistent with s 12A(1) or alternatively, s 12B. The grounds further contend that the Tribunal erred in finding that the appellant cannot demand further payment by the respondent of a proportion of the Forecourt Levy and such payments that have been made must be refunded. Finally, it is contended that the Tribunal erred in concluding that the Forecourt Levy is not a sinking fund in that its purpose is expressly stated in the lease and is permitted by s 12A(1) or alternatively, s 12B of the Retail Shops Act.

39 I have set out the questions which were referred to the Tribunal. They were five in number. No question was actually posed for determination the question whether the provisions of cl 6.2 of the lease were void within the meaning of s 15(2) of the Retail Shops Act.

40 The answers which were given to the questions did not actually correspond with the questions but were as follows:

"1. The Forecourt Levy is not a sinking fund or a variable outgoings fund under the Act.

2. The [appellant] is obliged to account for all income and expenditure related to the Forecourt Levy.

3. The [appellant] cannot demand further payment by the [respondent] of a proportion of the Forecourt Levy, as cl 6.2 of the lease is void.

4. Payments made by the [respondent] into the Forecourt Levy must be refunded."

41 In my view the Tribunal was correct to find that the Forecourt Levy cannot be characterised as a sinking fund or a variable outgoings fund within the meaning of s 12A and s 12B respectively (although s 12 does not refer to a variable outgoings fund but to provision for payment of all or any of the operating expenses of the landlord).

42 In my view the Forecourt Levy could not be characterised as a provision in a retail shop lease for payment by the tenant in addition to rent of operating expenses of the landlord within the meaning of s 12(1) of the Retail Shops Act. Nor could it be characterised as a provision in a retail shop lease, by way of contribution to a sinking fund or otherwise, for or in respect of the amortisation of all or part of the costs of or incidental to structural improvements to the centre within the meaning of s 12(2)(b) of the Retail Shops Act.

43 I do not consider that the Forecourt Levy could be characterised as a provision in a retail shop lease in respect of premises for payments to be made by the tenant into a fund for marketing or promotion of the retail shopping centre or any similar purpose within the meaning of s 12B of the Retail Shops Act. There is absolutely nothing in the lease which would suggest that it was for such a purpose.

44 That leaves the question whether the Forecourt Levy could be characterised as a sinking fund within the meaning of s 12A of the Retail Shops Act. Such a fund would have to be for repairs or maintenance or any similar purpose and the purpose of such a fund would have to be specified in the lease.

45 This lease does not specify the purpose of the Forecourt Levy. It is not to the point that Mr Duffield has sworn that the levy was established by the appellant as a sinking fund for the maintenance and repair of the forecourt. It was never identified as such in the lease or any other documentation relevant to the lease.

46 Assuming that the Forecourt Levy was intended by the appellant to be a sinking fund, it failed to specify it as such in the lease and there is nothing to suggest that the respondent knew or understood the Forecourt Levy to be a sinking fund. The question is whether within the meaning of s 15(2) of the Retail Shops Act the Forecourt Levy provided for in cl 6.2 of the lease is a provision which is contrary to or inconsistent with the Retail Shops Act, or anything that by the Retail Shops Act the lease is taken to provide. If so, it is void.

47 In my view the provision relating to the Forecourt Levy is a provision in a retail shop lease which is contrary to the provisions of the Retail Shops Act. If it is a sinking fund for repairs or maintenance to the forecourt of the complex, it does not say so. Under s 12A(2) the lease must specify what the purpose of the fund is. A Forecourt Levy for no specific purpose appears to be inconsistent with the provisions of the Retail Shops Act. The levy is not described as either a contribution to landlord's expenses within the meaning of s 12, a sinking fund within the meaning of s 12A, or a contribution to other funds and reserves within the meaning of s 12B.

48 The Tribunal was not asked to conclude that the provisions of cl 6.2 of the lease were void. It was asked to answer five questions and in my view the proper answers should have been as follows:

Q1. Is the landlord obliged to account for all items of expenditure covered by the Forecourt Levy?

A. Not applicable, as there have been no items of expenditure covered by the Forecourt Levy.

Q2. Can the landlord demand payment of the levy before giving the estimate of expenditure?

A. This question need not be answered as the Forecourt Levy is inconsistent with the provisions of the Retail Shops Act.

Q3. Are payments made to date by the [respondent] in respect of the Forecourt Levy refundable?

Q4. Must the landlord account for all payments made to date and have such account audited?

A. It is unnecessary to answer this question as payments have not been made to date.

Q5. If items of expenditure do not equate with or exceed the amount collected by way of the Forecourt Levy, is the landlord obliged to refund any surplus to the [respondent]?

A. This question, it is unnecessary to answer, as there has been no expenditure.

49 To the extent that the Tribunal answered the questions by giving answers that did not specifically relate to the questions, there was an error of law. However, the wide powers given to me on the hearing of this appeal by O 65 r 10 mean that I may confirm, quash or vary the decision of the Tribunal. I would vary the decision by setting aside the four answers given at [96] of the Tribunal's reasons and substituting those which I have set out above.

50 It follows that I have effectively agreed with the conclusion reached by the Tribunal, although not for precisely the same reasons. My conclusion is that whatever the Forecourt Levy was, and it seems likely that it was intended to be a sinking fund within the meaning of s 12A, it failed to specify in the retail shop lease the purpose of the fund and by reason of that fact, was a provision inconsistent with the requirements of the Retail Shops Act and is, pursuant to s 15(2), void for that reason. This is essentially what the Tribunal concluded.

51 Although I have the power to remit this matter to the Tribunal, it seems unnecessary that I do that. Clause 6.2 of the lease is void but only that clause. The appellant is therefore required to refund to the respondent such payments as the respondent has made in respect of the Forecourt Levy.

52 Although I have varied the decision of the Tribunal, I would grant leave to appeal but dismiss the appeal on all grounds.