MJHQ Pty Limited v Wynne Ave Pty Limited

Evidence of the Applicant

1. The evidence of the applicant was: 1. Affidavit of Mr Giuseppe Scarano dated 11 December 2017. 2. Affidavit of Mr Vincent Scarrano dated 20 February 2018. 3. The written license agreement dated 30 March 2015 (which had not been annexed to the affidavits, but had been attached to the application filed in Matter Com 17/32109). 4. The written agreement of the parties dated 9 August 2017 which formed the basis of the consent orders of the same date.

The Licence Agreement

1. The licence agreement dated 30 March 2015 contains the following demolition clause: "33. If at any time during the term of the license, the Licensor wants to demolish, substantially repair, renovate or reconstruct the Centre or part of it containing the premises, the Licensor must give the Licensee thirty (30) days notice to terminate the license agreement and vacate the premises".

Evidence of Mr Giuseppe Scarano

1. The affidavit of Mr Giuseppe Scarano is brief. Mr Giuseppe Scarano is a director of the respondent.
2. Mr Giuseppe Scarano stated that after previous proceedings between the parties were settled on 9 August 2017, the respondent served a termination notice based on demolition of premises on 25 August 2017.
3. According to Mr Giuseppe Scarano: "At no time before I received the demolition notice was I informed the respondent wanted to do works in the manner or extent described in that notice".
4. Mr Giuseppe Scarano stated that he believed the demolition notice was designed to allow the respondent to amalgamate Shop 52 into larger premises, and lease the area to another tenant.
5. Mr Giuseppe Scarano attended the hearing and was cross examined. In cross examination, it was put to Mr Giuseppe Scarano that he was a director of M.J. Corp Pty Ltd, which had signed a lease for the premises with the previous owner of the premises on 7 February 2008 and M.J. Corp Pty Ltd had been placed into voluntary liquidation in 2014. Mr Giuseppe Scarano denied that M.J. Corp Pty Ltd had been placed into voluntary liquidation due to being unable to meet its debts.

Cross Examination of Mr Giuseppe Scarano

1. Mr Giuseppe Scarano was cross examined on the circumstances in which the applicant entered the license agreement with the respondent in March 2015. Mr Giuseppe Scarano agreed that the license agreement, unlike the previous lease involving M.J. Corp Pty Ltd, made the applicant liable to pay rent, rathe rather than rent and monthly outgoing expenses. It was put to Mr Giuseppe Scarano that this involved a major reduction in expenses to the applicant, and a reason for this was that the applicant was losing the "security of a lease" and there was uncertainty regarding the redevelopment of the centre in which the shop was located. Mr Giuseppe Scarano said that the reduction in expenses was a "major consideration" for signing the license agreement, but denied the applicant had been told of any proposed redevelopment of the centre.

Evidence of Mr Vincent Scarano

1. The affidavit of Mr Vincent Scarano is, in substance, a reply to the witness statement of Mr Kevin Nassif dated 13 February 2018 that the respondent relies upon.
2. Mr Vincent Scarano states that he "manages the day to day business operations of the Ronis business with Joe" (i.e. with Mr Giuseppe Scarano).
3. According to Mr Vincent Scarano, it is his "understanding" that Mr Kevin Nassif "is the son of the owner and founder of Holdmark Property Group", who purchased Burwood Plaza "with the purpose of a future, but likely, complete demolition and re-build and to incorporate retail and residential as part of a long-term outlook and redevelopment".
4. Mr Vincent Scarano's affidavit annexes a document by Bonnefin Property entitled "Retail Development Consultancy" addressed to Holdmark Property Group for an address that partially includes Burwood Plaza, and states that it was "updated 19 September 2016". Further, the affidavit annexes a Planning Proposal to Burwood Council on behalf of Holdmark Property Group, for an address that partially includes Burwood Plaza.
5. Mr Vincent Scarano states that he "cannot recall ever attending a meeting on or about 8 June 2016" to discuss any refurbishment proposal for Burwood Plaza, and could only recall a meeting of tenants of Burwood Plaza with the respondent to discuss "a legionella disease outbreak".
6. According to Mr Vincent Scarano, he had discussions with other tenants after the applicant was served with the termination notice dated 25 August 2017 regarding whether they had been served any termination notice based on demolition or refurbishment of Burwood Plaza, and was told they had not received such a notice.
7. Mr Vincent Scarano states that the "first time" he became aware of any refurbishment of Burwood Plaza was when the notice of termination was served on 25 August 2017. According to Mr Vincent Scarano, he "would have recalled" any meeting that involved a plan to amalgamate shops 48, 52, and 53 in Burwood Plaza.
8. Mr Vincent Scarano states that he has spoken to other tenants at Burwood Plaza. The centre has vacancies due to natural attrition and leases expiring, but no other tenants have received termination notices based on demolition and re-development.
9. Mr Vincent Scarano states that the notice of termination dated 25 August 2017 attached a "programme for the refurbishment and lessor works" dated August 2017 and a contract with a builder for the refurbishment works dated 3 August 2017. Mr Vincent Scarano asserts that "some of the plans" contained in the programme for refurbishment were covered with "post it notes".
10. On 20 December 2017, Mr Vincent Scarano asserts that he had a telephone conversation with Mr Kevin Nassif. Relevantly, Mr Vincent Scarano asserts that Mr Nassif said the landlord needed to make the site "bigger" (i.e. amalgamate 3 shops); that the respondent was suffering financially because it was not receiving sufficient rent because the rent the applicant was paying "does not even cover outgoings"; and that the applicant had until February to vacate as "the builders are coming in to remove the walls".

Cross Examination of Mr Vincent Scarano

1. Mr Vincent Scarano was cross examined on a number of issues. Relevant to the dispute, Mr Vincent Scarano stated that he and his brother were involved in a number of companies, but he did not know why M.J. Corp Pty Ltd was liquidated. Mr Vincent Scarano stated that he was not personally involved in the negotiations surrounding the licence agreement after the respondent purchased Burwood Plaza in 2015, but denied that the reason the rent had been significant reduced was that the tenant could be given 1 months' notice and that Burwood Plaza was being redeveloped.
2. Mr Vincent Scarano stated he recalled sign an advertisement in the local paper that development approval was being sought by the respondent to build a 3 level shopping centre and units on the site of Burwood Plaza, but he could not recall the date. Mr Vincent Scarano continued to maintain in cross examination that there were no meetings the applicant had been invited to in 2016 regarding redevelopment of Burwood Plaza or redevelopment of shop 48 and he could only recall one meeting in 2016 involving "bad publicity" to Burwood Plaza due to a "salmonella scare". In respect of the conversation with Mr Nassif in December 2017, Mr Vincent Scarano agreed that there had been meetings between the parties to resolve the dispute, but continued to assert that Mr Nassif had claimed the applicant was not paying enough rent.

Evidence of the Respondent

1. The written evidence of the respondent involved a witness statement of Mr Kevin Nassif dated 13 February 2018. Attached to that statement, and admitted into evidence, were: 1. The notice of termination dated 25 August 2017. 2. Burwood Plaza "refurbishment program" document dated August 2017 by Colliers International, which was attached to the notice to terminate. 3. A "letter of acceptance/fit out contract of Upright Builders Pty Ltd dated 3 April 2017 and plans for the re-development of shops 48, 52 and 53, which were attached to the notice to terminate. 4. An email from the managing agent of Burwood Plaza to the applicant dated 25 August 2017 confirming personal service of the notice to terminate.
2. The respondent was also granted leave to adduce brief further oral evidence in response to the evidence of Mr Vincent Scarano.
3. Mr Nassif states that he is the general manager of Holdmark Property Group which is a "property development and investment group". The respondent is owner of Burwood Plaza and a "member of the Holdmark Property Group". The respondent purchased Burwood Plaza on 6 March 2015.
4. After purchasing Burwood Plaza, the respondent engaged Colliers International to "provide a marketing and refurbishment programme to rejuvenate the Centre (sic)" because it was "run down".
5. According to Mr Nassif, on or about 8 June 2016 the respondent "had a meeting with all of the tenants in the Centre (sic)" to discuss "the proposed refurbishment and capital works program". Mr Nassif states that the redevelopment of Level 1 of Burwood Plaza: "…included the amalgamation of 3 tenancy spaces, being Shops 48, 52 and 53, into one shop to attract a mini major tenant into the Centre".
6. Mr Nassif states that the west wing of Level 1 of Burwood Plaza was "not trading well" and there was a number of empty shops. The "refurbishment" of Burwood Plaza was intended to attract more customers to Level 1 and "improve the overall trading of the Centre (sic)".
7. Mr Nassif states that the proposed refurbishment works: "…include the removal of internal walls and a mezzanine floor, the creation of new perimeter walls, the creation of new shop fronts, the reconfiguration of common property into retail space, the renewal or replacement of services, including air conditioning and sprinklers, to comply with Building Code (sic) requirements, the upgrading of the lift and travelators and the replacement and upgrading of the existing flooring and ceilings. All of these works are to be undertaken in and around shop 52".
8. According to Mr Nassif, the refurbishment works "are expected to take approximately 3 months" and will commence "immediately Shop 52 is vacant". Shop 52 is "the last tenancy for which vacant possession is required" to undertake the refurbishment works.
9. Mr Nassif states that Holdmark Property Group has "a long and continuing relationship" with Upright Builders, and Upright Builders will conduct the works as soon as Shop 52 is vacant.
10. Mr Nassif states that the respondent was "previously in negotiations with TK Maxx to lease the new reconfigured leasing space on level l of the Centre" but due to the delay in refurbishment caused by Tribunal proceedings, TK Maxx withdrew its interest. According to Mr Nassif, the refurbishment of Burwood Plaza is "not contingent" on the applicant signing a new lease, and the work will be performed with the view of "attracting a mini major tenant".

Cross Examination of Mr Kevin Nassif

1. Mr Nassif was questioned about the notice give to the applicant and other tenants about the refurbishment. He stated there had been a "number of meetings" over a period of time and the refurbishment was "not a secret". Mr Nassif stated that the managing agent of Burwood Plaza had spoken to tenants on a number of occasions. The tenant in the premises next to Shop 52 was given written notice that works were to occur, and left.
2. In respect of the meeting on 8 June 2017, Mr Nassif stated that the managing agent of Burwood Plaza had given tenants notice of the meeting, and the meeting was to discuss "all of the issues". Mr Nassif did not personally attend the meeting, but believed there was a presentation by the "head of development".
3. Mr Nassif was questioned about the relationship between Upright Builders and Holdmark Property Group. He stated that Upright Builders "did work" for Holdmark Property Group. Mr Nassif stated that his father, Mr Sarkis Nassif, was a director of both companies.
4. In respect of the extent of the proposed works amalgamating Shops 48, 52, and 53, Mr Nassif did not agree that the proposed work was minor or cosmetic in nature.
5. Mr Nassif was questioned about the heads of agreement with TK Maxx. Mr Nassif stated that Colliers International was dealing with that issue, and he was not directly involved in negotiations. He stated that plans attached to the termination notice had a yellow post-it note attached at various areas prior to being photocopied, and the information redacted referred to TK Maxx. Mr Nassif stated that the reason this was done was due to confidentiality, not to prevent the applicant from knowing that the plans related to TK Maxx.
6. Mr Nassif denied that the motivation for issuing the termination notice based on demolition and redevelopment of Shop 52 was because the consent orders of the Tribunal dated 8 August 2017 prevented the respondent from terminating the respondent's tenancy, and the issue of the termination notice was a fresh mechanism for obtaining possession of Shop 52.
7. Mr Nassif was questioned about the status of any development application Holdmark Property Group had lodged regarding redevelopment of Burwood Plaza. Mr Nassif stated that there was a "long term vision" for the site, involving the construction of residential buildings and redevelopment of the shopping centre, but there was "no time frame" as to when the work would be completed, which was dependent upon development approval being granted by the local Council.

Contents of the Termination Notice Dated 25 August 2017

1. The termination notice is signed by a representative of Colliers International (NSW) Pty Ltd, as managing agent for the respondent. Relevantly, the notice contains the following information: 1. The works involved at to "demolish, renovate and substantially reconstruct the western end of the Centre" by amalgamating Shops 48, 52, and 53 into one large premises. 2. The works "are part of a strategy to strengthen the western end of the Centre which has experienced declining trading conditions due to substantial vacancies and large void areas in that part of the Centre". 3. The respondent has "entered into a contract with Upright Builders Pty Ltd" to undertake the works. 4. As the works "are a complying development" the respondent has entered into a contract appointing a private certifier. 5. The respondent has "entered into binding heads of agreement with a major tenant for an amalgamated tenancy consisting of shops 48, 52 and 53". 6. A detailed scope of works is identified including demolition of internal walls; construction of perimeter walls; recladding of columns; installation of new ceilings; installation of new flooring; and upgrading of mechanical, fire and electrical systems.
2. Attached to the notice of termination is the "Colliers Refurbishment Program-August 2017"; letter of acceptance of fit out contract to Upright Builders Pty Ltd; and architectural drawings of "the West Wing upgrades".

Jurisdiction of the Tribunal

1. There is no dispute (and the consent orders of the Tribunal dated 9 August 2017 make clear) there is a retail lease between the parties.
2. The parties attended a mediation before the Commissioner for Small Business, and a certificate was issued pursuant to s 68 (1) of the RL Act on 20 November 2017 that mediation had failed to resolve the dispute. The provisions of ss 68 and 71 of the RL Act have been complied with, and the Tribunal has jurisdiction in this matter.

Applicable Legal Principles

1. Section 35 of the RL Act states: 35 Demolition (1) If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building or any part of the building of which the retail shop forms part, the lease is taken to include provision to the following effect: (a) The lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal for demolition within a reasonably practicable time after the lease is to be terminated. (a1) The lease cannot be terminated by the lessor on that ground unless the proposed demolition cannot be carried out practicably without vacant possession of the shop. (b) The lease cannot be terminated by the lessor on that ground without at least 6 months written notice of termination. (c) If notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than 7 days written notice of termination at any time within 6 months before the termination date notified by the lessor. (2) If the lease is for a term of 12 months or less, the period of 6 months in subsection (1) (b) and (c) is shortened in each case to 3 months. (3) If a retail shop lease is terminated on such a ground and the proposed demolition is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish within that time. (3A) If a retail shop lease is terminated on such a ground, the lessor is liable to pay the lessee compensation for the fit out of the retail shop if the lessee is required under the lease to fit out the retail shop, whether or not the proposed demolition is carried out. (4) For the purposes of this section, demolition includes repair, renovation and reconstruction.
2. Section 35 of the RL Act was amended by the Retail Leases Amendment (Review) Act 2017 which was assented to on 1 March 2017 and commenced on 1 July 2017. By reason of cl 38 Sch 3 of the RL Act, the amendments to s 35 of the RL Act apply to this dispute.
3. In Blackler v Felpure Pty Ltd [1999] NSWSC 958; (2000) NSWConvR 55-921; (2000) 9 BPR 17,257; [2001] ANZ ConvR 166 ('Blackler'), the Supreme Court (Bryson J) held that there is an implied term in a retail lease that the lessor will exercise its contractual right to terminate on grounds of proposed demolition in good faith. To exercise the contractual right in good faith, there must in fact have been a genuine proposal to demolish the building with a reasonably practicable time after the lease is terminated. It is unnecessary to furnish every detail of the proposed demolition, just sufficient details to indicate a genuine proposal to demolish. However, to be a "genuine proposal", the proposal must be sufficiently well-developed and mature to proceed within a reasonably practicable time. Consideration and assessment of practical concerns such as time, expense and inconvenience are relevant to determine whether or not the proposed work can be performed without requiring vacant possession.
4. However, it is not open to the lessee to contend that the lessor's decision to demolish or renovate the building is reasonable or appropriate provided there is a genuine proposal. The Supreme Court held (at [61]-[62]): "It is not my view open to contention by the lessee whether the lessor's decision to demolish, repair, renovate or reconstruct the building is reasonable or appropriate; it is sufficient if there is a genuine proposal. Nor in my opinion is it open to debate whether the lessor could in some way modify the lessor's proposal so as to continue to accommodate the lessee after the premises have been demolished, repaired, renovated or reconstructed. The opportunity to break a lease, retake possession and take advantage of the demolition clause is a contractual opportunity made available to the lessor by the terms of the lease itself, including the provisions notionally incorporated by s 35, it is not injurious to the lessor's position whether the lessor has decided to take that advantage, and it is not relevant that the lessor has in view occupying the premises itself, or selling them after reconstruction, or leasing them again, even if the lease should be to business similar to the lessee's. The demolition clause is a reality of the party's relationship, and so is its potential operation to end the lease. It was contended that the duty of good faith referred to Alcatel [Alcatel Australia Ltd -v- Scarcella (1998) 44 NSWLR 349] and the Retail Leases Act operating together make it impermissible to use the break clause when the underlying purpose is to put another occupant into possession. In my view this lease includes the break clause and it is not possible to say that by exercising rights under it the lessor is stepping outside the contemplated relationship."
5. However, in Eddy Azzi Australia Pty Limited v Citadin Pty Limited; Citadin Pty Ltd v General Pants Co Ltd [2001] NSWADT 79; (2001) 10 BPR 18,689 ('Eddy Azzi') the Administrative Decisions Tribunal (Judicial Member Donald) distinguished Blackler in respect of the comment by Bryson J that a lessor can exercise its power to terminate the lease "with a view to its own advantage". The Tribunal held that such a comment was obiter dicta, and distinguishable on the facts of the respective cases. Rather, in the context of a lessor issuing a demolition notice for the sole purpose of replacing an existing tenant with a more commercially attractive tenant who would take the premises after being amalgamated with other premises in the building, the Tribunal held (at [94]-[96]: "The Lease contains both a demolition and a relocation clause. It operates with the additional provisions of s 33, 34 and 35 of the Act. In my opinion the proper construction of the Lease so read is that these rules and regulations govern the right of a lessor to engage in that conduct having regard to the physical condition of the premises. In my opinion no lease could be construed as being intended by both parties to operate so that, on the day following the granting of a registered proprietary interest to a lessee in premises, for which the lessee had incurred fit-out costs or had an established business with goodwill, the lessor could decide to terminate the lease to connect those premises to adjacent units, re-configure the shop fronts and let them to another lessee who would fit them out and occupy the combined space, thereby providing the lessor with occupation of otherwise vacant premises in its building and a commercially preferable return on its building overall. In my opinion the right under this clause is available in respect of premises where having regard to the condition of the building, including the condition of the leased premises, the lessor genuinely determines to repair, renovate or reconstruct the building to a substantial degree. There would be no such genuine determination where the decision in respect of the leased premises was to incorporate them into a parcel with other premises to achieve a preferable return as opposed to continuing the existing lease and leasing those other premises separately or in combinations not including the leased premises."
6. Eddy Azzi was appealed to the Appeal Panel of the Administrative Decisions Tribunal. An error of law asserted was that the Tribunal in Eddy Azzi failed to correctly apply the legal principles set out in Blacker. In Citadin Pty Ltd v Eddy Azzi Australia Pty Ltd & General Pants Co Pty Ltd [2001] NSWADTAP 30, the Appeal Panel of the Administrative Decisions Tribunal held (at [25]): "In this case the Tribunal engaged in a similar fact-finding task, and was satisfied that the circumstances did not amount to a substantial renovation. Clearly there are some differences of perspective as between Bryson J and the Judicial Member (see, for example, para [95] of the decision below) as to the policy objectives within the workings of the contractual relationship that s 35 seeks to achieve. But we do not see these matters as having had any significant bearing on the analytical approach adopted by the Tribunal."
7. In Skiwing Pty Ltd v Trust Company of Australia (trading as Stockland Property Management) [2006] NSWCA 276 ('Skiwing'), the NSW Court of Appeal considered the issue of whether a relocation notice under s 34A of the RL Act contained a "genuine proposal" in respect of a proposed refurbishment, redevelopment or extension of retail premises. One of the arguments raised by the appellant was that the principles enunciated in Eddy Azzi meant that a relocation notice could never be a "genuine proposal" if it was motivated by a lessor seeking to obtain a more commercially advantageous tenant. The NSW Court of Appeal (Spigleman CJ, with whom Hodgson JA and Bryson JA agreed) rejected this argument and stated (at [22]): "In my opinion, similar reasoning is applicable in the present case with respect to the parallel formulation in s 34A(a). A proposed "refurbishment redevelopment or extension" does not lose the character of a "genuine proposal" by reason of the fact that the commercial motivation of the lessor is to attract a tenant or a particular kind of tenant. The reasoning of Bryson J in Blackler v Felpure is relevantly analogous and, in my view, correct. It is as the Appeal Panel found, applicable to this case. I can see no error of law in the Appeal Panel's analysis."
8. However, the facts of Skiwing did not involve a landlord entering into heads of agreement with a prospective new tenant prior to the proposed repair, renovation or demolition. In Skiwing, the dispute involved a large retail complex in Sydney known as 'Imperial Arcade'. Over a period of time, the landlord pursued a redevelopment of the retail complex to attract younger consumers. A number of shops had become vacant. The landlord issued the tenant with a number of relocation notices. The Appeal Panel of the Administrative Decisions Tribunal held that there was no error in the Member's decision that the relocation notices were invalid because the alternative premises offered to the tenant during the relocation were not commercially similar.
9. The Appeal Panel held that the fact that the landlord was seeking to renovate or redevelop the building to attract tenants who would pay a higher rent did not "of itself" (emphasis added) mean that a proposal for demolition is not a "genuine proposal" (Appeal Panel decision at [225]; Court of Appeal decision at [15]). It was in this context that the Court of Appeal set out the principle enunciated at para [22] of its decision.
10. Blackler also did not involve a situation where a landlord had entered into heads of agreement with a prospective new tenant prior to the issue of the demolition notice.
11. The principles in Blackler and the interpretation of s 35 of the RL Act were considered by Senior Member Bluth in the related decisions of Helen Lazaros t/as Perfect Health v IOF Custodian Pty Limited [2015] NSWCATCD 25 ('Lazaros') and Fancy Bite Pty Limited v IOF Custodian Pty Limited [2015] NSWCATCD 27 ('Fancy Bite').
12. The decisions in Lazaros and Fancy Bite focus upon whether the demolition notice involved "substantial repair, renovation or reconstruction of the Building that cannot be carried out practicably without vacant possession of the shop" under the predecessor provision of s 35 of the RL Act. The previous version of s 35 of the RL Act stated as follows: 35 Demolition (1) If a retail shop lease provides for termination of the lease on the grounds of proposed demolition of the building of which the retail shop forms part, the lease is taken to include provision to the following effect: (a) The lease cannot be terminated on that ground unless and until the lessor has provided the lessee with details of the proposed demolition sufficient to indicate a genuine proposal to demolish that building within a reasonably practicable time after the lease is to be terminated. (b) The lease cannot be terminated by the lessor on that ground without at least 6 months written notice of termination. (c) If notice of termination on that ground is given to the lessee, the lessee may terminate the lease by giving the lessor not less than 7 days written notice of termination at any time within 6 months before the termination date notified by the lessor. (2) If the lease is for a term of 12 months or less, the period of 6 months in subsection (1) (b) and (c) is shortened in each case to 3 months. (3) If a retail shop lease is terminated on such a ground and demolition of the building is not carried out within a reasonably practicable time after the termination date notified by the lessor, the lessor is liable to pay the lessee reasonable compensation for damage suffered by the lessee as a consequence of the early termination of the lease, unless the lessor establishes that at the time notice of termination was given by the lessor there was a genuine proposal to demolish the premises within that time. (3A) If a retail shop lease is terminated on such a ground, the lessor is liable to pay the lessee compensation for the fit out of the retail shop if the lessee is required under the lease to fit out the retail shop, whether or not the demolition of the building is carried out. (4) For the purposes of this section, demolition of the building of which a retail shop forms part includes any substantial repair, renovation or reconstruction of the building that cannot be carried out practicably without vacant possession of the shop.
13. In Lazaros and Fancy Bite, the Tribunal held that to determine whether the proposal to demolish was a "genuine proposal" the Tribunal must consider the proposal to demolish in the "wider context" of whether repair or renovation to the building, rather than the individual retail premises was substantial. Accordingly, a repair or renovation to "one or two shops" in a large shopping centre or commercial retail complex is not a "genuine proposal" to conduct a "substantial, repair, renovation or reconstruction of the building" within the meaning of the former s 35 (4) of the RL Act, but demolition of all retail shops that involved part of the building would be sufficiently substantial (Lazaros and Fancy Bite at [55]).
14. As s 35 (4) of the RL Act has been amended to remove the words "substantial" and "the building" the decisions in Lazaros and Fancy Bite do not greatly assist the task of the Tribunal in respect of interpretation of the new s 35 of the RL Act. However, the Tribunal (at para [54] referred to Eddy Azzi and stated: "In that case the genuineness of the proposal of the lessor was called into question where the lessor appeared to seek to use section 35(1) to terminate the lease to install a "better" tenant and that would not be a genuine proposal. There would be a lack of good faith by the lessor."
15. In respect of reconciling the authorities of Blackler and Skiwing on the one hand, and Eddy Azzi on the other hand, the Tribunal is satisfied that the correct approach is that a lessor who has entered into an agreement with a 'better' tenant is a relevant consideration to whether a demolition notice is a "genuine proposal" because of the obligation the lessor to act in good faith; but circumstances where the lessor has not entered into such an agreement, and merely intends to demolish and re-develop premises to attract 'better' tenants, is not indicative of a lack of good faith by the lessor.
16. Subject to the amendments to s 35 of the RL Act introduced in 2017, salient principles for consideration of whether a demolition notice contains a "genuine proposal" for demolition of the building or part of the building of which the retail shop forms part include: 1. Whether the notice contains sufficient details of the proposed demolition; 2. Whether the proposed demolition is a genuine proposal. In this regard, the Tribunal can take into account the type of demolition proposed; the extent of the demolition; whether Council approval is required for the demolition; if Council approval is required, whether or not it has been sought or obtained; whether or not a contract has been entered into with a builder to perform the work identified in the demolition notice; who has been contracted to perform the demolition work and their relationship with the lessor; whether or not any contract or agreement with the builder contains a scope of works; and whether the lessor had an agreement with another potential lessee prior to the issue of the demolition notice. However, the fact that the lessor intends to demolish the building or a part of the building to which the retail shop forms a part of to attract more commercially attractive potential tenants does not mean, of itself, the proposal is not a genuine proposal. 3. The proposed demolition identified in the demolition notice must be scheduled to occur within a reasonably practicable time after the lease is to be terminated. 4. The proposed demolition must not be able to be carried out practicably without vacant possession of the shop. 5. If the demolition notice is a valid notice and the lease is terminated pursuant notice, the work identified in the notice must be carried out within a reasonably practicable period of time after the termination date, or the lessor is liable to pay the lessee compensation for damage suffered by reason of early termination, unless the lessor establishes that that at the time the notice for termination was given, there was a genuine proposal to demolish within that time (s 35 (3) RL Act); 6. If the lease is terminated early on the basis of a demolition notice, the lessor is liable to pay the lessee compensation for the cost of fit out, irrespective of whether the proposed demolition takes place (s 35 (3A) of the RL Act).

Do the 2017 Amendments to the RL Act Affect Determination of Whether the Proposal to Demolish is a Genuine Proposal?

1. The applicant submits that the amendments to s 35 of the RL Act affect the issue of whether the issue by the landlord of a demolition notice is a "genuine proposal". In this regard, the applicant relies in particular upon the statement by Tobias JA (with whom Mason P and Handley JA agreed) in Manly Council v Malouf [2004] NSWCA 299 ('Malouf') at [74] that the RL Act was "beneficial legislation" and "should not be construed narrowly"; and the NSW Parliament second reading speech of the Retail Leases Amendment Review Bill 2016 by Mr Barillaro, Minister for Small Business ('the second reading speech').
2. In respect of the amendments to s 35 of the RL Act, the second reading speech relevantly stated: "The Act currently provides lessee protections for termination of a lease where the landlord proposes to demolish a building. The amendments clarify when demolition clauses can be triggered by taking out the word "substantial". Termination on the grounds of proposed demolition is only permissible when the shop requires vacant possession. The bill's amendment will eliminate concern that a landlord cannot use a demolition clause unless the whole building is being demolished, yet prevent the use of demolition clauses to terminate a tenant's business for an illegitimate purpose. Demolition clauses are frequently used to change tenancy mixes and deny tenants their property rights in favour of another tenant. When used unjustly, it means a landlord can use a demolition clause as a trigger to terminate a lease if a tenant offering a higher rent wants the tenant's shop, yet the tenant is committed to a lease agreement for three to six years with no ability to terminate the lease, regardless of how things are going."
3. However, despite the second reading speech, the Retail Leases Amendment (Review) Act 2017 did not provide any statutory definition for what constitutes a "genuine proposal" under s 35 (1) (a) of the RL Act. The amendments focus upon the removal of the phrase "any substantial repair, renovation, or reconstruction of the building" so that the proposed demolition is only permissible if the shop requires vacant possession for the proposed demolition, repair, renovation or reconstruction of the building or any part of the building of which the retail shop forms part to occur.
4. When interpreting statutory provisions, the starting point is the plain meaning of the words of the statute in their overall statutory context. Legislation must be "construed by reference to what Parliament has said through its enactment as distinct from what others, including ministers, may wish or thing Parliament intended" (Harrison v Melhem [2008] NSWCA 67; (2008) 72 NSWLR 380 at [159]).
5. In circumstances where Parliament did not amend the RL Act to specifically define what is a "genuine proposal" for demolition, the Tribunal is not satisfied that the amendments to s 35 of the RL Act alter the principles set out in Blackler; Skiwing; and Eddy Azzi, other than in respect of the issue of whether or not the proposed demolition requires vacant possession of the shop.
6. Further, the Tribunal is not satisfied that the statement by the Court of Appeal in Malouf that the RL Act is "beneficial legislation" affects the principles set out in Blackler; Skiwing; and Eddy Azzi. Malouf dealt with the interaction between the Roads Act 1993 and the RL Act, and should not be interpreted in the broad manner submitted by the applicant in respect of the operation of s 35 of the RL Act.

Is the Demolition Notice Dated 25 August 2017 Compliant with s 35 of the RL Act in respect of the proposal being a 'genuine proposal'?

1. The applicant bears the onus of proving that the demolition notice dated 25 August 2017 is not a "genuine proposal for demolition within a reasonably practicable time after the lease is to be terminated" under s 35 (1) (a) of the RL Act or in the alternative that the proposed demolition can be carried out without vacant possession of the shop under s 35 (1) (a1) of the RL Act.
2. However, although the applicant bears the onus of proof on the balance of probabilities, in weighing the evidence of the parties the Tribunal must take into account that limited evidence, particularly if there is no contrary evidence provided by a party who is easily able to provide evidence but does not do so, may be sufficient to make factual findings: Hampton Court Pty Ltd v Crooks [1957] HCA 28; (1957) 97 CLR 367.
3. The notice of 25 August 2017 contains details of the proposed works in the body of the notice and specifically refers to demolition of walls in shop 52 and the reconfiguration of the shop into an amalgamation of 3 shops.
4. The notice also clearly states that the respondent had entered into "binding heads of agreement" with TK Maxx. By reason of the contents of the notice and the evidence of Mr Nassif, it is clear that, as of 25 August 2017 the respondent had an agreement with TK Maxx to move into the amalgamation of 3 shops, including shop 52. The plans attached to the demolition notice regarding shop 52 are plans that clearly were drawn up on the basis that TK Maxx would move into the amalgamated premises.
5. However, it is also clear from the evidence of Mr Nassif that there is no longer any "binding heads of agreement" with TK Maxx. The respondent asserts that its intention is to refurbish Level 1 of Burwood Plaza, including reconfiguration and amalgamation of shops 48, 52 and 53, irrespective of the fact that TK Maxx has withdrawn from the "binding heads of agreement". No copy of the heads of agreement between the respondent and TK Maxx was part of the documentary evidence of the respondent.
6. There are significant deficiencies in the evidence of the respondent regarding whether there was a "genuine proposal for demolition within a reasonably practicable time after the lease is to be terminated". There was no evidence from an employee of the managing agent of Burwood Plaza, Colliers International to establish the circumstances in which the "refurbishment program" document dated "August 2017" was created, or information conveyed to tenants regarding the proposed refurbishment.
7. The first part of the "refurbishment program" document of Colliers International refers to "Operational, Access and Aesthetic Improvements" to the building, which are identified in "Stage 1 and Stage 2". A number of items are referred to as "completed" and other items left blank. However, there is no indication in the "refurbishment program" document as to when any such work is to be completed. Further, in respect of "Stage 1 and Stage 2" of the program, much of the work referred to relates to refurbishments of the Ground Level and Mezzanine Level of the building, rather than demolition and redevelopment in respect of shop 52.
8. Level 1 of Burwood Plaza and shop 52 are referred to in the part of the "refurbishment program" document of Colliers International headed "Tenancy Amalgamation and Reconfiguration: Level 1 Western Mall", and a plan is attached (page 11 of the "refurbishment program" document). The document states: "STRATEGY To strengthen the weak western end of the mall on Level 1 due to substantial vacancy and large void areas within the vicinity". RECONFIGURATION Amalgamation of three (3) existing tenancies and the extension of shop fronts into the mall, encompassing approximately 60 m2 of common mall area. This will square off the end of the mall to improve access, sightlines and presentation of the dated mall, boasting an area of approximately 2000m2. REFURBISHMENT The reconfiguration is incorporated into Stage 2 of the Refurbishment Program, complimenting the project works to deliver an integrated refurbishment of the Level 1 Western Mall and keys areas throughout the Centre".
9. However, the document does not give any indication when "Stage 2 of the Refurbishment Program" is to commence or be completed.
10. The evidence of Mr Nassif was that the managing agent had made tenants aware generally about the proposed refurbishment of Burwood Plaza, and that a meeting had been held on or about 8 June 2016 to discuss the refurbishment. Mr Nassif asserts that the amalgamation of shops 48, 52, and 53 was disclosed at the meeting. However, Mr Nassif did not attend the meeting, and there was no evidence from the managing agent as to what information was conveyed to tenants at that meeting. There is no evidence of any letters or emails sent to tenants prior to the meeting on 8 June 2016 identifying what would be discussed.
11. The evidence of the Scarano brothers is that the first notification of any proposed demolition and redevelopment of shop 52 occurred when the demolition notice was served. In circumstances where there is no evidence from the managing agent or a representative of the applicant who attended the meeting on or about 8 June 2016, the Tribunal accepts the evidence of the Scarano's that the first notification of the proposed demolition, redevelopment and amalgamation of shop 52 (rather than the building in general) occurred with the service of the demolition notice.
12. Mr Nassif gave evidence that the proposed demolition, redevelopment and amalgamation involving shop 52 was expected to take 3 months after vacant possession. However, the "letter of acceptance/fit out contract" does not support the assertion that the amalgamation involving shop 52 would take 3 months after vacant possession.
13. The "letter of acceptance/fit out contract" dated 3 April 2017 document is not a document from Upright Builders Pty Ltd. Rather, it is a document of the respondent that commences by stating: "This letter of acceptance is binding until the formal written contract is executed and shall not be operative subject to a lease between (sic) entered into by the proposed tenancy combining existing Shops 48, 52 & 53".
14. The document states that a "formal contract shall incorporate and supersede this letter of acceptance"; sets out a lump sum fixed price ($800,000 plus GST) and a "scope of works".
15. The "scope of works" makes reference to the "merging" of shops 48, 53 and 53, but also refers to the "major upgrade of West Wing". The document does not refer to when the work will be competed, but that there is a "programme" for all of the works to commence "4 weeks from commencement for shop merging, arcade programme to be agreed".
16. The document is signed by Mr Nadesh, Accounts Manager of the applicant, and an unidentified "project manager" of Upright Builders Pty Ltd.
17. No evidence was provided by the applicant from any officer or employee of Upright Builders Pty Ltd. Upright Builders Pty Ltd has a common director with the applicant. It is located, according to the "letter of acceptance/fit out contract" document at the same address as the applicant.
18. The "letter of acceptance/fit out contract documents" is dated almost 6 months prior to the respondent being served with a demolition notice, and the Tribunal has previously found that service of the demolition notice was the first occasion when the respondent was notified of the intention to demolish part of shop 52 and renovate it by way of amalgamation with the 2 adjoining shops.
19. The "letter of acceptance/fit out contract" states that it is "subject" to a lease being entered into in respect of the proposed tenancy combining shops 48, 52, and 53. In other words, the "acceptance" of Upright Builders Pty Ltd is not operative until a lease has been entered into regarding the "proposed tenancy combining shops 48, 52, and 53". There is nothing in the document to indicate when a lease involving the amalgamated shops 48, 52 and 53 will come into effect. However, the "letter of acceptance/fit out contract" is predicated upon there being no legal obligation on Upright Builders Pty Ltd to do anything until the applicant enters into a lease in respect of the amalgamated shops 48, 52, and 53.
20. The Tribunal does not accept that the "letter of acceptance/fit out contract" document of the applicant with Upright Builders Pty Ltd dated 3 April 2017 indicates a genuine proposal for demolition of the building, or part of the building to which shop 52 forms part, within a reasonably practicable time after the lease is to be terminated for the following reasons: 1. The letter is dated almost 6 months prior to the demolition notice being served. 2. There was no evidence from any officer or director of Upright Builders Pty Ltd providing detail of any agreement with the respondent to perform demolition work. There was no evidence of any tenders being obtained. 3. Any agreement between the applicant and Upright Builders Pty Ltd to perform demolition, renovation or reconstruction work was not operative until the respondent entered into a lease with a tenant regarding the amalgamated shops 48, 52, and 53. There is no evidence as to when that was to occur, if at all. Further, the fact that the "letter of acceptance/fit out contract" was subject to the respondent entering into a lease with tenant in respect of the amalgamated shops 48,52 and 53 is inconsistent with the evidence of Mr Nassif that the respondent intended to amalgamate shops 48, 52 and 53 irrespective of whether or not it had entered into a lease regarding the amalgamated shops. 4. The "letter of acceptance/fit out contract" document indicates when work to shop 52 is likely to commence (4 weeks from the "shop merging") but gives no indication when the work is likely to be completed.
21. Further, in respect of the proposed work pursuant to the demolition notice, there is no evidence from the applicant regarding whether any Development Consent has been sought and obtained from the local Council; or that a Complying Development Certificate involving a private certifier has been issued; or that no Development Consent or Complying Development Certificate is required under the Environmental Planning and Assessment Act 1979.

Conclusion

1. The Tribunal is satisfied on the balance of probabilities that the demolition notice issued by the respondent dated 25 August 2017 does not "indicate a genuine proposal for demolition within a reasonably practicable time after the lease is to be terminated" under s 35 (1) (a) of the RL Act. Having been satisfied that the notice is non-compliant with s 35 (1) (a) of the RL Act, it is unnecessary to make findings as to whether the proposed work cannot be carried out practicably without vacant possession being given under s 35 (1) (a1) of the RL Act.
2. As the claim for damages was withdrawn, the Tribunal makes no findings or declarations regarding unconscionable conduct. Further, there appears no utility in these proceedings in light of the declaration made that the Tribunal order the applicant to "register the lease".

Orders

1. Under s 72 (1) (c) (iii) of the RL Act, the Tribunal has the power to make injunctive orders. Under s 72 (f) (i) of the RL Act, the Tribunal has the power to make declaratory orders.
2. In circumstances where the Tribunal makes a declaration regarding the invalidity of the notice to terminate dated 25 August 2017, it is unnecessary to make any injunctive order restraining the applicant from taking further action pursuant to the notice as any such action would be inconsistent with the declaratory relief granted.
3. The Tribunal makes the following orders: 1. Declares that the notice to terminate issued by the respondent to the applicant dated 25 August 2017 is invalid, as the notice is inconsistent with the provisions of s 35 (1) (a) of the RL Act. 2. The applicant's claim for damages is withdrawn, and accordingly dismissed under s 55 (1) of the Civil and Administrative Tribunal Act 2013. 3. Any application for costs is to be determined as follows: 1. The party making a costs application is to file and serve written submissions and documents in support of the application by 14 days from the date of this decision. Included in the submission is reference to whether or not the party consents to the issue of costs being determined on the papers pursuant to s 50 (2) of the Civil and Administrative Tribunal Act 2013. 2. The other party is to file and serve any written submissions and documents in reply by 14 days thereafter. 3. Subject to the submissions of the parties, the issue of costs will be determined on the papers and a further oral hearing on the issue of costs dispensed with.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 24 January 2019