CONTRACTS - Retail Leases Act 1994 (NSW) - nature of inconsistency with terms of head lease required by s 16(5) of Retail Leases Act
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CONTRACTS - Retail Leases Act 1994 (NSW) - nature of inconsistency with terms of head lease required by s 16(5) of Retail Leases Act
Judgment (23 paragraphs)
[1]
Solicitors:
LAS Lawyers & Consultants (Plaintiff)
Penhall & Co (Defendant)
File Number(s): 2015/377356
Decision under appeal Court or tribunal: New South Wales Civil and Administrative Tribunal
Jurisdiction: Appeal Panel
Date of Decision: 30 November 2015
Before: P R Callaghan SC, Principal MemberR C Titterton, Senior Member
File Number(s): AP 14/46547
[2]
Introduction
These proceedings concern Norma Farah's (the defendant's) right to occupy an area within the Ashfield Hotel (the Premises) from which she runs a restaurant. The property on which the Ashfield Hotel is situated is owned by Meerlen Pty Ltd (Meerlen). It leases the Ashfield Hotel to the plaintiff, Nelmeer Ashfield Pty Ltd (Nelmeer Ashfield), pursuant to a monthly tenancy at a monthly rent of $120,000. Nelmeer Ashfield in turn contracted with Ms Farah to give her a right to occupy the Premises for her restaurant business.
In 2014 Nelmeer purported to terminate Ms Farah's right of occupation. She commenced proceedings in the Civil and Administrative Tribunal (the Tribunal). On 1 August 2014 the Tribunal found that she was entitled to occupy the Premises pursuant to a retail shop lease for a term of five years from 19 October 2012 to 18 October 2017 (the Original Decision).
Nelmeer Ashfield's appeal to the Tribunal's Appeal Panel was dismissed on 30 November 2015 (the Appeal Decision).
By summons filed on 23 December 2015 Nelmeer Ashfield seeks leave to appeal and, if leave is granted, seeks to have the Appeal Decision set aside and the interim order dissolved. Ms Farah opposes the grant of leave and submits that, if leave is granted, the appeal ought be dismissed.
The plaintiff seeks leave to appeal on the following two grounds:
"(1) The Appeal Panel erred in law in failing to find that the effect of s 16(5) of the Retail Leases Act was that s 16 did not apply to the Second Agreement.
(2) The Appeal Panel erred in law in:
(i) failing to find that provision by the defendant of a certificate under the Retail Leases Act 1994 (NSW) was a condition precedent to the Second Agreement giving rise to binding legal relations between the parties (the "condition precedent ground"); and
(ii) holding that the condition precedent ground was not available to the plaintiff on appeal to the Appeal Panel."
[3]
Retail Leases Act 1994 (NSW)
In s 3 of the Retail Leases Act 1994 (NSW), "retail shop" is relevantly defined as including premises that are used for the purposes of a restaurant. The term "retail shop lease" is defined in s 3 as follows:
"retail shop lease or lease means any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:
(a) whether or not the right is a right of exclusive occupation, and
(b) whether the agreement is express or implied, and
(c) whether the agreement is oral or in writing, or partly oral and partly in writing."
Section 7 of the Retail Leases Act provides:
"This Act overrides leases
This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease."
Section 16 of the Act relevantly provides:
"Minimum 5 year term
(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.
(2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section.
(3) This section does not apply to a lease if a lawyer, or a licensed conveyancer, not acting for the lessor certifies (before, or within 6 months after, the lease was entered into) in writing that:
(a) the lessee or prospective lessee requested the lawyer or conveyancer to give the certificate, and
(b) the lawyer or conveyancer has explained to the lessee or prospective lessee the effect of subsections (1) and (2) and that the giving of the certificate will result in this section not applying to the lease.
If the certificate is given within 6 months after the lease was entered into, then, without affecting the validity of the lease, subsection (2) ceases to apply to the lease and the extension of the term of the lease effected by that subsection accordingly ceases to be operative.
. . .
(5) This section does not apply to a lease to the extent that its application would be inconsistent with the terms of any head lease under which the lessor holds the retail shop."
Section 63 of the Retail Leases Act relevantly defines "retail tenancy dispute" as meaning:
"retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates, . . ."
Section 70 of the Retail Leases Act relevantly defines "retail tenancy claim" as meaning any of a list of matters, including:
"(ix) a claim for a declaration of the rights, obligations and liabilities of the parties under a lease"
Section 71(1) of the Retail Leases Act provides
"Lodging of retail tenancy claims with Tribunal
(1) A party or former party to a retail shop lease or former retail shop lease may lodge a retail tenancy claim in respect of the lease with the Tribunal for determination of the claim."
[4]
The Civil and Administrative Tribunal Act 2013 (NSW)
Section 3 of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act), lists its objects, which include:
"(d) to enable the Tribunal to resolve the real issues in proceedings justly, quickly, cheaply and with as little formality as possible".
Section 36 of the CAT Act provides in part:
"Guiding principle to be applied to practice and procedure
(1) The guiding principle for this Act and the procedural rules, in their application to proceedings in the Tribunal, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
(2) The Tribunal must seek to give effect to the guiding principle when it:
(a) exercises any power given to it by this Act or the procedural rules, or
(b) interprets any provision of this Act or the procedural rules.
. . .
(4) In addition, the practice and procedure of the Tribunal should be implemented so as to facilitate the resolution of the issues between the parties in such a way that the cost to the parties and the Tribunal is proportionate to the importance and complexity of the subject-matter of the proceedings."
Section 38 of the CAT Act relevantly provides:
"Procedure of Tribunal generally
(1) The Tribunal may determine its own procedure in relation to any matter for which this Act or the procedural rules do not otherwise make provision.
(2) The Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.
. . .
(4) The Tribunal is to act with as little formality as the circumstances of the case permit and according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms.
(5) The Tribunal is to take such measures as are reasonably practicable:
. . .
(c) to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings.
(6) The Tribunal:
. . .
(b) may require evidence or argument to be presented orally or in writing, and
. . ."
Section 80 of the CAT Act relevantly provides:
"Making of internal appeals
(1) An appeal against an internally appealable decision may be made to an Appeal Panel by a party to the proceedings in which the decision is made.
(2) Any internal appeal may be made:
(a) in the case of an interlocutory decision of the Tribunal at first instance - with the leave of the Appeal Panel, and
(b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with the leave of the Appeal Panel, on any other grounds.
(3) The Appeal Panel may:
(a) decide to deal with the internal appeal by way of a new hearing if it considers that the grounds for the appeal warrant a new hearing, and
(b) permit such fresh evidence, or evidence in addition to or in substitution for the evidence received by the Tribunal at first instance, to be given in the new hearing as it considers appropriate in the circumstances."
An "internal appeal" includes an appeal from a decision made by the Tribunal in proceedings for a "general decision": s 32(1)(a). A "general decision" includes a decision of the Tribunal concerning the liabilities or obligations of a party to a "retail shop lease": s 29(1) and (4). A decision made by the Appeal Panel in an internal appeal is an "appealable decision" for the purposes of s 82(1).
This Court's jurisdiction arises from s 83 of the CAT Act, which relevantly provides:
"Appeals against appealable decisions
(1) A party to an . . . internal appeal may, with the leave of the Supreme Court, appeal on a question of law to the Court against any decision made by the Tribunal in the proceedings.
. . .
(3) The court hearing the appeal may make such orders as it considers appropriate in light of its decision on the appeal, including (but not limited to) the following:
(a) an order affirming, varying or setting aside the decision of the Tribunal,
(b) an order remitting the case to be heard and decided again by the Tribunal (either with or without the hearing of further evidence) in accordance with the directions of the court."
[5]
The facts
Because of the content of the parties' submissions it is necessary to set out the factual background, including some detail about the proceedings in the Tribunal.
Nelmeer Ashfield operates the Ashfield Hotel. It is a member of the Nelson Meers Hotel Group which operates various licensed hotels in New South Wales. Robert Aldridge is the General Manager of the Nelson Meers Hotel Group. He is not an officer of Nelmeer Ashfield.
On 14 October 2011 Nelmeer Ashfield entered into an agreement with Ms Farah for the provision of catering services in the Premises for the period of a year from 18 October 2011 (the First Agreement). The First Agreement contained a clause which required Ms Farah to provide a certificate pursuant to s 16(3) of the Retail Leases Act to Nelmeer Ashfield. On 15 October 2011 Ms Farah's solicitor, Mr Penhall, provided such a certificate. It is common ground that the effect of the certificate was that s 16 of the Act did not apply to extend the term of the First Agreement from one year (as provided for by the terms of the First Agreement) to five years (as otherwise required by s 16(1)).
On 19 October 2012 Nelmeer Ashfield and Ms Farah entered into an agreement in similar terms to the First Agreement which was expressed to commence on 19 October 2012 and run for a period of twelve months, subject to cl 7 (which provided for termination for breach) (the Second Agreement). The "licence fee" payable by Ms Farah was $1,200 per month excluding GST.
Clause 1 of the Second Agreement provided in part:
"b) The parties expressly agree that no relationship of landlord or tenant is intended to be created by this agreement or the matters contemplated by this agreement, and further that the licence granted to 'The Bistro Contractor' is not a licence to occupy any part of the premises owned by the 'The Company'."
Clause 2 of the Second Agreement provided in part:
"b) It is an essential term and a condition of this agreement that "The Bistro Contractor" provides "The Company" with a certificate signed by a suitably qualified legal practitioner pursuant to section 16 of the Retail Leases Act 1994.
c) In the event that "The Bistro Contractor" continues to provide food and kitchen services and provide wait staff to service the hotel dining and/or eating areas after the expiration of the term with the consent of "The Company" it shall do so as if the other provisions of this agreement were to apply, and either party may terminate this agreement for any reason after providing 14 days written notice."
As with the First Agreement, the Second Agreement obliged Ms Farah to provide Nelmeer Ashfield with a certificate pursuant to s 16(3). Ms Farah did not provide any such certificate. She continued to operate her restaurant business from the Premises.
In early 2014, Nelmeer Ashfield, which believed that the Second Agreement had expired (as the year from 19 October 2012 to 18 October 2013 had passed), sought tenders for provision of restaurant services at the Ashfield Hotel. Ms Farah was not the successful tenderer. On 9 April 2014 Nelmeer Ashfield issued a notice of termination pursuant to cl 2(c) of the Second Agreement which required Ms Farah to vacate the Premises by 8 May 2014.
[6]
The proceedings in the Tribunal
On 6 May 2014 Ms Farah commenced proceedings in the Tribunal by filing two applications. The first (COM 14/23465) was an application for a declaration that she had a retail lease of five years (on the basis of s 16(1) of the Retail Leases Act). The second (COM 14/23468) was an application for an interim order restraining Nelmeer Ashfield from evicting her from the Premises or otherwise interfering with the conduct of her business there.
On 8 May 2014 the Tribunal (Deputy President Westgarth) made orders and gave reasons as follows:
"The Tribunal orders:
1 The respondent [Nelmeer Ashfield] is restrained until further order from taking any action which would deny the applicant [Ms Farah] access to the premises or hinder the applicant's use of the premises for the purposes of conducting the applicant's business.
2 The applicant is to file and serve its evidence on or before 12th May 2014
3 These proceedings and related proceedings are to be listed for directions on 13th May 2014
Reasons
The parties were heard and oral reasons were given. In brief the balance of convenience requires an order protecting the status quo. The respondent has submitted that the agreement between the parties is not a retail lease and the respondent put forward a number of submissions in support of that proposition. That raises the question of whether the Tribunal has jurisdiction in these matters. That issue may be the subject of further argument at the directions hearing."
On 30 May 2014 the Tribunal notified the parties that the "issue of preliminary jurisdiction" would be decided on the papers. As Nelmeer Ashfield contended that the Tribunal lacked jurisdiction, the directions provided that Nelmeer Ashfield was to file its submissions first and that Ms Farah was to file submissions in response. There was no direction for Nelmeer Ashfield to file submissions in reply. Nelmeer Ashfield's submissions made no mention of s 16(5) since s 16(5) was not germane to the jurisdictional point. However, when Ms Farah put on her submissions in response for the purposes of the jurisdictional point, she addressed s 16. Nelmeer Ashfield did not put on any submissions in reply.
In support of its argument on jurisdiction, Nelmeer Ashfield argued that the Tribunal did not have jurisdiction because Ms Farah's claim was not a retail tenancy claim (within the meaning of s 70 of the Retail Leases Act) and did not give rise to a retail tenancy dispute (within the meaning of s 63 of the Retail Leases Act) because there was no retail shop lease (within the meaning of s 3 of the Retail Leases Act). Nelmeer Ashfield argued that Ms Farah, accordingly, had no right to lodge a claim under s 71 of the Retail Leases Act.
Although the application before the Tribunal at that stage was limited to the question whether the Tribunal had jurisdiction, and the parties submissions had been directed to that issue, the Tribunal purported to decide not only that it had jurisdiction (on the basis that the Second Agreement created a retail shop lease) but also to determine the whole matter. On 1 August 2014 Senior Member Meadows, who sat in the Consumer and Commercial Division of the Tribunal, found that Ms Farah occupied the Premises pursuant to a retail shop lease, within the meaning of s 3 of the Retail Leases Act, which had a term of five years from 19 October 2012 to 18 October 2017: Farah v Nelmeer Ashfield Pty Ltd [2014] NSWCATCD 144 (the Original Decision). The Tribunal also made an interim order restraining Nelmeer Ashfield from disturbing her possession of the Premises.
When the matter came back for directions before Senior Member Meadows on 26 August 2014, Nelmeer Ashfield's solicitor sought to have the Tribunal withdraw the findings in the Original Decision that went beyond the jurisdictional question. The question arose whether that avenue was open to the Tribunal or whether the better (or only) course was for Nelmeer Ashfield to appeal to the Appeal Panel against the Original Decision. The Tribunal noted on its record of proceedings for that day:
"NOTES
The original interim application sought the above orders. The respondent submitted that the agreement between the parties was not a retail lease. That matter was listed for a preliminary determination and was decided by me on 01 August 2014. The substantive application was then listed for directions to progress towards a hearing.
The respondent indicated today that certain parts or elements of the decision made by me on 01 August 2014 were still be [sic] the subject of ongoing submissions and evidence. The parties discussed whether it was appropriate rather that the respondent appeal the preliminary determination. The respondent is to consider that option. In the meantime, the respondent consents to orders in the nature of an injunction as contained in order 2 above."
On that day, 26 August 2014 the Tribunal directed Nelmeer Ashfield to advise Ms Farah and the Tribunal no later than 9 September 2014 whether an appeal in relation to the "preliminary decision" had been filed.
On 9 September 2014 Nelmeer Ashfield appealed to the Appeal Panel of the Tribunal against the Original Decision. The Appeal Panel was constituted by Mr Callaghan SC (Principal Member) and Mr Titterton (Senior Member).
On the first day of the appeal, 13 February 2015, Nelmeer Ashfield sought, and was granted, leave to rely on additional evidence and make submissions on the substantive questions: namely:
1. whether the Second Agreement created a "retail shop lease" within the meaning of s 3 of the Retail Leases Act; and, if so,
2. whether, as Ms Farah contended, she had a right to possession for a term of five years by reason of s 16(1) of the Retail Leases Act; or, as Nelmeer Ashfield contended, her right to occupy the Premises could be terminated, the period of the Second Agreement having expired, as s 16 was inapplicable since a five-year sub-lease would be inconsistent with the terms of the Head Lease pursuant to which it occupied the hotel where the Premises were located.
The Appeal Panel refused leave to Nelmeer Ashfield to argue the point that is raised by the second ground of the summons (concerning the effect of cl 2(b) of the Second Agreement). Its refusal is addressed in more detail below in the context of whether leave to appeal should be granted by this Court.
The proceedings before the Appeal Panel were heard over three separate days: 13 February 2015, 27 April 2015 and 3 June 2015. The additional evidence before the Appeal Panel included the following:
1. A title search of the property where the Ashfield Hotel was situated which identified Meerlen as the registered proprietor;
2. Extracts from the Australian Securities and Investment Commission (ASIC) database which showed that Meerlen and Nelmeer Ashfield had common directors and shareholders;
3. An affidavit of Mr Aldridge sworn 12 December 2014 in which he deposed:
"18. The respondent occupies the Premises at the will of Meerlen Pty Limited and pays valuable consideration to Meerlen Pty Limited for the right to occupy the Premises. There is no agreement between the parties as to the duration of the tenancy of Nelmeer Ashfield Pty Limited.
19. Meerlen Pty Limited has issued invoices to the respondent for rent since the respondent has occupied the Premises. Copies of rent invoices relating to the Premises for the period 1 July 2011 to 30 June 2014 are set out at Annexure D. I am aware that the respondent has paid all of these invoices.
20. Meerlen has not granted a lease to the respondent for a term of 5 years."
The invoices in annexure "D" to Mr Aldridge's affidavit show that Meerlen rendered monthly invoices to Nelmeer Ashfield for "monthly rental" of $120,000 not including GST and that Nelmeer Ashfield paid those invoices.
Mr Angyal SC, who appeared on behalf of Nelmeer Ashfield, accepted that the approach taken by the Appeal Panel was sufficient to overcome any denial of natural justice relating to s 16 that had been occasioned by the Original Decision going beyond the determination of the preliminary question of jurisdiction. In any event the operative decision for the purposes of the application for leave to appeal to this Court is the Appeal Decision: Wishart v Fraser (1941) 64 CLR 470.
Mr Smark SC, who appeared on behalf of Ms Farah in this Court, contended that leave ought not be granted with respect to the s 16 point as Nelmeer Ashfield, by not putting on submissions in reply prior to the Original Decision, had chosen not to engage with the s 16 issue that had been raised by Ms Farah. As the Appeal Panel admitted evidence and heard full submissions on s 16(5), I do not consider that anything turns on whether it was raised in the submissions that were forwarded to the Senior Member before he made the Original Decision. Moreover, s 16 did not arise on Nelmeer Ashfield's jurisdictional argument. This matter is relevant to Ms Farah's notice of contention which is addressed at the conclusion of these reasons.
[7]
The conduct of the hearing in the Appeal Panel and the Appeal Decision
The Appeal Panel's decision to dismiss the appeal was published on 30 November 2015: Nelmeer Ashfield Pty Ltd v Farah [2015] NSWCATAP 252 (the Appeal Decision).
Of present relevance, the Appeal Panel noted at [60] the respective arguments of the parties in the hearing before it which, in my view, indicate that Ms Farah accepted that Nelmeer Ashfield's right to possession of the Ashfield Hotel derived from a monthly tenancy implied from the payment of rent by s 127(1) of the Conveyancing Act 1919 (NSW), of which Meerlen was the lessor and Nelmeer Ashfield was the lessee (the Head Lease).
[8]
The s 16(5) question
Nelmeer Ashfield argued that the effect of the Head Lease was to engage s 16(5) of the Retail Leases Act and thereby render s 16 inapplicable to the retail shop lease pursuant to which Ms Farah occupied the Premises. It relied on the decision of the Court of Appeal in Conoid Pty Ltd v International Theme Park Pty Ltd [2000] NSWCA 189 (Conoid). Ms Farah argued that Conoid did not apply because the relationship between Meerlen (which owned the hotel) and Nelmeer Ashfield was not at arm's length.
The Appeal Panel rejected Nelmeer Ashfield's argument and distinguished Conoid (on the various bases considered in more detail below). It found that Ms Farah was entitled to the benefit of a five-year lease by reason of s 16 since there was no inconsistency for the purposes of s 16(5). Its analysis of Conoid appears from the following passage:
"[61] In Conoid the Court of Appeal dismissed an appeal from a decision in the Equity Division which had held that certain non-exclusive licenses of parts of a theme park constituted leases under the RL Act [Retail Leases Act] but their terms, evidently for periods of 12 months or thereabouts, were not extended to 5 years under s 16 because of the operation of s 16(5). The holding that the licenses constituted leases under the RL Act was not challenged and the appeal was against the holding in respect of s 16. At all relevant times a company called Hartford Lane Pty Limited was the registered proprietor of the property on which the theme park was situated, the respondent was a tenant which was holding over on a monthly tenancy to which s 127 of the Conveyancing Act applied and the appellants were the licensees or sub-lessees.
[62] The trial judge held, in effect, that the respondent as head-lessee having only a periodic tenancy, could not grant a lease for a term and s 16(5) did not apply: "… it is plain, in my opinion, that the legislative purpose of s 16(5) of the Act was to protect the position of a head lessor from what would otherwise have been an unintended consequence of section 16".
[63] The Court of Appeal, in separate judgments by Meagher JA and Giles JA with both of which judgments Sheller JA agreed, found that reasoning to be inapplicable as it was contrary to the line of authority dealt with in Lee v Ferno Holdings Pty Ltd (Meagher JA at [6] and [7] and Giles JA especially at [17], [18] and [20]). Nevertheless, the Court of Appeal ruled that if the head lease were terminated, any 5 year term implied by the Act into the sub-leases would subject the sub-lessor to a liability to the sub-lessees in damages which it would not have otherwise had, and that would constitute an inconsistency between the sub-lessor's right of termination in those different situations; and that the rights of termination were so radically different as discussed in cases such as Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133, as to be "inconsistent" within the language of s 16(5) of the RL Act, (Meagher JA at [8] and [9] and Giles JA especially at [18], [19], [26]-[30] and [41].
[64] The Court of Appeal also expressed the view, contrary to the suggestion of the trial judge that the purpose of s 16(5) was to protect the head lessor, that its purpose was to protect the sub-lessor (especially Giles JA at [40] and [41])."
The Appeal Panel distinguished Conoid, on the basis set out in its reasons as follows:
"[65] We see significant differences between the situations of the parties in this appeal and the situations of the parties in the Conoid case including:
(1) The appellant and Merleen Pty Ltd have the same shareholders and directors.
(2) They are both within the Nelson Meers Hotel Group and they have common management.
(3) The arrangement here that is said to constitute a lease to which s 127 of the Conveyancing Act is an informal arrangement between related corporations whereas in Conoid there was a tenant holding over as a monthly tenant under what evidently was a formal lease.
(4) The subject premises are licensed hotel premises under the Liquor Act and the licensee is an employee of the appellant.
(5) The first and second agreements referred to the hotel premises as being owned by the appellant.
(6) Any extension of the term of the second agreement pursuant to s 16 of the RL Act would expire only two years hence.
[66] We assess these matters as establishing on the balance of probabilities that there is no real risk of termination by Nelmeer Pty Ltd of its arrangement with the appellant in relation to the hotel within the next two years and that there is no real risk to the appellant of liability to the respondent for damages consequent upon such a termination. We conclude, therefore, there is not such a difference involved in the position of the appellant under the statutorily extended term of the second agreement as to require a finding that, within the terms of s 16(5) such an extension would be contrary to the terms of any head lease between Nelmeer Pty Ltd and the appellant. Accordingly, we find against the appellant on the Head Lease Ground."
I note that the Appeal Panel was also critical of Nelmeer Ashfield for not squarely raising the s 16(5) point before Senior Member Meadows. For the reasons given above, I am persuaded that the s 16(5) point was not germane to the jurisdiction point raised by Nelmeer Ashfield, which was the sole matter for decision by Senior Member Meadows. Indeed, for Nelmeer Ashfield to argue the s 16(5) point would have required it to concede that there was a retail shop lease and that the Tribunal had jurisdiction.
In these circumstances, no inference can be drawn against Nelmeer Ashfield, and no criticism levelled at it, for not raising it. It was properly raised before the Appeal Panel which admitted evidence and permitted submissions beyond those raised before the Tribunal as originally constituted by Senior Member Meadows, as it was entitled to do by reason of s 80(3) of the CAT Act.
[9]
The condition precedent question: cl 2(b)
Nelmeer Ashfield also argued that cl 2(b) of the Second Agreement was a condition precedent to the formation or existence of that agreement and that, since it was not fulfilled, the Second Agreement did not come into existence and therefore was not a binding agreement at all. It contended that this argument, if accepted, would have the following effect:
1. Ms Farah's right to occupy the Premises would derive from the First Agreement, in respect of which s 16 of the Retail Leases Act did not apply as a certificate under s 16(3) had been given.
2. As the term of the First Agreement had expired but Ms Farah continued to pay rent, there was a holding over which could be terminated by notice.
3. Section 16 would not operate to extend any holding over period to five years because the s 16(3) certificate had been given in respect of the First Agreement.
The Appeal Panel, in the exercise of its discretion, refused to entertain the argument based on cl 2(b) on the ground that it could have been, but was not, raised in the Tribunal below. However, it addressed the substantive argument (in case its discretion to refuse to deal with it was later found to have miscarried) and rejected it. In this Court, Mr Angyal accepted that this point could have been, but was not, raised before Senior Member Meadows since it formed part of Nelmeer Ashfield's challenge to the Tribunal's jurisdiction.
[10]
The questions of law
Nelmeer Ashfield has identified, in the course of its submissions, the following questions of law:
1. Whether the application of s 16(1) of the Retail Leases Act to Ms Farah's retail shop lease would be inconsistent with the terms of the Head Lease under which Nelmeer Ashfield holds the Premises (the s 16(5) question); and
2. Whether cl 2(b) of the Second Agreement is a condition precedent, the non-fulfilment of which prevents the Second Agreement coming into existence (the condition precedent question).
I am satisfied that both of these questions amount to questions of law. For the reasons given in more detail below I consider that leave ought be granted in respect of the first question, but not in respect of the second.
I note that the formulations of the questions set out above do not appear in terms in the summons for leave to appeal. Mr Smark was critical of Nelmeer Ashfield's failure to formulate the grounds in its summons and referred to Osland v Secretary of the Department of Justice [2010] HCA 24; 241 CLR 320 at [21] where the High Court referred to the need for "better definition of the questions of law" upon an appeal to a superior court from the Victorian equivalent of the Tribunal. I consider that the questions of law set out above are apparent from the grounds. The parties' written and oral submissions addressed the substance of the questions. In these circumstances I do not consider that any omission to specify questions in the summons ought prevent my considering them as formulated above: the matter is to be approached as one of substance not form. I respectfully adopt what was said and the authorities referred to in Luck v Secretary, Department of Human Services [2015] FCAFC 111; 233 FCR 494 at [45]-[47] per Collier, Griffiths and Mortimer JJ.
[11]
The s 16(5) question
Mr Smark submitted that the subject matter of the dispute is a sub-lease which involves the payment of rent of about $300 per week and which has 15 months to run (to 18 October 2017). He referred to the hearing before the Appeal Panel which ran over three separate days as well as the total length of time (18 months) from the filing of the application on 6 May 2014 to the publication of the decision of the Appeal Panel on 30 November 2015. Mr Smark contended that, in these circumstances, having regard to the object in s 3(d) of the CAT Act, leave ought be declined.
Mr Angyal contended that the arrangement between the parties ought to have ended in May 2014 when the notice of termination expired. He submitted further that I could not draw inferences as to the amount at stake solely by reference to the rent Ms Farah paid under the Second Agreement, since it could not be assumed that it reflected the value of possession of the Premises to Nelmeer Ashfield. I accept the force of that submission and do not regard the amount of rent Ms Farah paid for possession of the Premises as a particularly strong factor against the grant of leave.
Mr Smark further contended that the several bases on which the Appeal Panel distinguished Conoid were factually specific to the present case and that the precise factual matrix was unlikely to recur. He submitted that, in these circumstances, the Appeal Panel's decision would be unlikely to have any particular influence on other cases, or the resolution of other disputes that were likely to come before the Tribunal. Accordingly, he submitted that there was no relevant public importance in favour of a grant of leave.
For the reasons given below I consider that the Appeal Panel was wrong to distinguish Conoid and it thereby applied the incorrect test as a matter of law and misconstrued s 16(5). If leave were not granted, there would be a risk that a body of law would develop in the Tribunal (by reason of the respect generally paid by the Tribunal and Appeal Panel to its own decisions for reasons of comity and consistency) which is inconsistent with the law as established by the Court of Appeal in Conoid and by which the Tribunal (and this Court) is bound. In my view this issue is an important one of principle and warrants a grant of leave to appeal on that question.
[12]
The condition precedent question
The question whether leave ought be granted in respect of the condition precedent question is more difficult. As set out above, the Tribunal refused, as a matter of discretion, to permit Nelmeer Ashfield to raise it but then, after dealing with the submissions in detail, rejected the argument. In this sense there is a question anterior to the condition precedent question set out above, which relates to whether the Appeal Panel's discretion miscarried. Whether a discretion relating to a matter of procedure miscarried would not usually warrant a grant of leave.
Mr Angyal accepted that, in substance, he was seeking leave to appeal against the exercise of a discretion but submitted that the condition precedent point was a matter of general importance because of the widespread disinclination by hotel owners or operators (who may be lessees) to have their arrangements with restaurant operators converted into five-year shop leases. He contended that it was a matter of public interest to have the legal effect of cl 2(b) determined by a superior court and that, as the Appeal Panel had dealt with the question, it was appropriate to grant leave. Furthermore, I understood Mr Angyal to contend that the Appeal Panel's discretion miscarried because it ought to have taken into account the nature of its jurisdiction, which permitted it to hear further submissions beyond those that were put before the original Tribunal.
I am not satisfied that the Appeal Panel's discretion miscarried or that Mr Angyal has formulated a question of law arising from the exercise of the discretion (as opposed to the subsequent, substantive condition precedent question set out in (2) above) which would warrant a grant of leave.
However, for completeness, and in deference to the arguments of counsel, I shall consider, on the leave question, the underlying arguments on the condition precedent point as well as the findings of the Appeal Panel (made in the event that its discretion were found to have miscarried).
Mr Angyal called in aid the following principles of construction:
1. where the words of a contract are capable of two meanings, one of which is lawful and the other unlawful, the former construction ought be preferred; and
2. a contract is to be construed in a way which does not render it invalid.
He argued that, if cl 2(b) was construed as a condition precedent to the performance of the Second Agreement, as distinct from a condition precedent to the formation of the Second Agreement, it would be invalid by reason of s 7 of the Retail Leases Act and that, accordingly, it ought be construed as a condition precedent to formation. Mr Angyal argued, on this basis, that the Second Agreement was never formed.
I regard this argument as circular in the context of a provision such as s 7 of the Retail Leases Act. In my view, the proper approach is to start by construing the words of the statute. The evident purpose of s 7 is to ensure that the policy objectives of the Retail Leases Act are met. The Act contains terms which, in large measure, alter the common law relating to leases. For example, s 3 defines retail shop leases as including arrangements which would be disqualified from being regarded as leases at common law, including because no right to exclusive possession is conferred or because the duration is uncertain. Section 16(1) has the effect of imposing a five year term irrespective of the intention of the parties. Section 7 is designed to prevent parties from setting the statute at naught by contracting out of it. It is to be construed in order to promote this object: s 33 of the Interpretation Act 1987 (NSW).
Clause 2(b) is not worded in such a way as is apt to connote a condition precedent to formation of the contract. Rather it is expressed to be "an essential term and a condition of the agreement". The words chosen indicate that the parties intended: first, that there be an agreement; secondly, that it be an essential term that a s 16(3) certificate be provided; and, thirdly, that Nelmeer Ashfield would be entitled to terminate for breach of that term (as it is an essential term). Moreover, cl 2(b) does not specify when the s 16(3) certificate is to be provided. On Nelmeer Ashfield's argument, there is no enforceable promise to provide the certificate at all (since there is no contract), although, under the Retail Leases Act, a certificate that is provided within six months of the retail shop lease being entered into (in this case, within six months of 19 October 2012) is effective to make the extension to five years under s 16(1) inapplicable to the lease.
The relevant principles to be applied to the determination whether a clause is to be construed as a condition precedent to the formation of a contract or a condition which is precedent to the obligation of a party to perform its part of the contract were summarised by Mason J in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 550 in the following terms:
"Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the fact of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes the stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion."
On the basis of these principles, I am not persuaded that cl 2(b) ought properly be construed as a condition precedent to the formation of the Second Agreement. Mr Angyal accepted that if cl 2(b) were to be construed as a condition precedent in the second sense (to the performance of the contact), it would be invalid by reason of s 7. In my view, cl 2(b) is, accordingly, invalid.
Had I been persuaded that the Appeal Panel's discretion miscarried, I would have granted leave to appeal on the condition precedent ground (because of the general importance of the question), but dismissed the appeal for the reasons given above.
I note for completeness that both parties adduced evidence as to disputes between them relating to the present operation of the Premises. I do not regard these matters as having a significant bearing on whether leave ought be granted in the present case.
[13]
The appeal on the s 16(5) point
As referred to above Nelmeer Ashfield contended (and Ms Farah accepted in the proceedings before the Appeal Panel and in this Court) that the Head Lease was a monthly tenancy implied by s 127(1) of the Conveyancing Act. It was also common ground in this Court that the Second Agreement constituted a retail shop lease.
The s 16(5) ground (and the associated question of law) turned on Conoid. In Conoid Giles JA (Sheller JA agreeing) identified the "key to the issue" in the appeal as being whether the power conferred on International Theme Park Ltd (who was the party relevantly equivalent to Nelmeer Ashfield in the present case) by s 127(1) of the Conveyancing Act to give one month's notice of termination was properly to be regarded as a term of the tenancy: [41]. Once Giles JA found that it was, his Honour held that the effect of the sub-lease, because of the extension (to five years by reason of s 16(1)), was inconsistent with the effect of the term of the tenancy for the purposes of s 16(5).
The reason was that, if the head lessor (Hartfold Lane Pty Ltd in Conoid and Meerlen in the present case) terminated the head lease, the lessee under the head lease/ sub-lessor under the sub-lease (International Theme Park Ltd in Conoid and Nelson Ashfield in the present case) would be liable in damages to the sub-lessee (Conoid Pty Ltd in Conoid and Ms Farah in the present case) for breach of the sub-lease.
In Conoid it was not contended that the prospect of the head-lessor actually terminating the head lease was a relevant consideration. Nor is there any indication in the reasons of Giles JA to that effect. Justice Giles's reasons for finding inconsistency within the meaning of s 16(5) turned solely on a comparison of legal rights, rather than the prospect of a factual conflict or inconsistency between the respective rights of the parties to the head lease or those of the sub-lease, if it were extended to a five year term.
Justice Meagher (Sheller JA agreeing) specifically rejected Conoid Pty Ltd's argument that because the head lease and the sub-lease could co-exist, there was no relevant inconsistency for the purposes of s 16(5).
Justice Giles's reasons are, in my view, inconsistent with the proposition that the prospect of a head lease being terminated is germane to the operation of s 16(5). The following passage from his Honour's reasons makes it clear that the Court of Appeal regarded the potential for the head lease and sub-lease to co-exist as a matter of fact as irrelevant:
"The extent of inconsistency
[43] The appellants submitted that any inconsistency was only to the extent that the respondent or its landlord might terminate the tenancy on one month's notice, and that s16(5) left the extended term of the sub-lease in place unless or until that occurred.
[44] The submission was in substance a corollary to the appellants' submission concerning co-existence of a periodical tenancy and a sub-lease by the tenant for a term longer than the relevant period. The basis on which I have concluded that there is inconsistency passes beyond the submission. It follows from that basis that the extent of inconsistency is complete, in that there is no room for a wait and see period."
[Emphasis added.]
In the present case the Appeal Panel distinguished Conoid. It assessed the actual risk of termination of the Head Lease and considered whether the Head Lease and the Sub-Lease were likely to be able to continue together as a matter of practical reality. It decided that, because of the relationship between Meerlen and Nelmeer Ashfield, there was no real prospect that Meerlen would terminate the Head Lease while Ms Farah was in possession under the five year Sub-Lease and, accordingly, there was no relevant inconsistency for the purposes of s 16(5). The Appeal Panel adopted the approach for which Conoid Pty Ltd contended in Conoid, which was rejected by the Court of Appeal.
In these circumstances it is necessary to consider the bases on which the Appeal Panel distinguished Conoid which are listed in the extract of its reasons set out above.
[14]
The identity of the shareholders and directors of Meerlen and Nelmeer Ashfield (65 of the Appeal Panel's reasons)
There was no evidence that Mr Aldridge was an officer of either Nelmeer Ashfield or Meerlen; indeed the evidence was that he was not. The evidence did not establish whether Meerlen was a member of the Nelson Meers Hotel Group, of which Mr Aldridge was manager. It is common ground that Mr Aldridge signed the Second Agreement on behalf of Nelmeer Ashfield. Mr Smark withdrew an earlier submission that Mr Aldridge had authority on behalf of Meerlen (relevantly, as Head Lessor) to consent to the Second Agreement.
Mr Smark confirmed that he did not submit either that Nelmeer Ashfield had engaged in any fraud or that the Head Lease from Meerlen to Nelmeer Ashfield was a "device" or a sham. He did, however, submit that if leave were granted and the appeal allowed in the present case on the Conoid point, the incorporation of a separate entity as a head lessor to a lessee/ sublessor "could become a device" which would subvert the operation of s 16, through the application of s 16(5).
The answer to Mr Smark's argument that a head lease could become a device for subverting the effect of s 16 is to be found in the judgment of Giles JA in Conoid at [42], where his Honour said (in answer to a similar argument put on appeal in that case):
"If the floodgates are opened because a judicious break clause in a head lease will preclude extension of the term of a sub-lease, that is the consequence of the words used by the legislature, when other words could have been used. Inundation is unlikely, however, because as the respondent pointed out parties so inclined may already frame a head lease in a manner precluding extension of the term of the sub-lease, simply by including an obligation not to sub-lease for a term exceeding (say) one year."
For these reasons I do not regard the identity of the shareholders and directors of Meerlen and Nelmeer Ashfield as a matter which entitled the Appeal Panel to distinguish Conoid.
[15]
Nelmeer Ashfield and Meerlen are both within the Nelson Meers Hotel Group and have common management (65 of the Appeal Panel's reasons)
I do not regard this matter as raising any point additional to those addressed in the reasons above. It would be germane if the relevant approach were to assess the prospects of the Head Lease being terminated if the sub-lease were for a period of five years. For the reasons given above, this approach was rejected in Conoid. Accordingly, the fact of common management is immaterial, at least in the absence of an allegation of fraud or sham.
[16]
The s 127(1) lease in the present case arises by reason of an informal arrangement whereas in Conoid it arose by reason of the tenant holding over after the expiry of a fixed term lease (65 of the Appeal Panel's reasons)
Although this is a difference, I do not understand any basis on which it could be said to be a relevant distinction. I am not persuaded that the provenance of the monthly tenancy is material to the approach sanctioned in Conoid.
[17]
The subject premises are licensed hotel premises under the Liquor Act and the licensee is an employee of Nelmeer Ashfield (65 of the Appeal Panel's reasons)
Once again, this matter would be germane to the factual question of the prospects of the Head Lease being terminated if the Sub-Lease were for a term of five years. However, this factual question is irrelevant for the purposes of s 16(5) for the reasons given in Conoid.
[18]
The First and Second Agreements referred to the Premises as being "owned" by Nelmeer Ashfield (65 of the Appeal Panel's reasons)
Mr Smark noted that cl 1(b) of the Second Agreement (and the First Agreement) set out above appeared to proceed on the basis that Nelmeer Ashfield "owned" the Premises and observed that there was nothing in its provisions to alert Ms Farah to the possibility of there being a Head Lease. Mr Smark noted that the first Ms Farah heard of the Head Lease was when the matter was before the Appeal Panel.
In my view, the use of the word "owned" in the Second Agreement was descriptive, rather than promissory. It was not said to found any estoppel. As a matter of common usage the term is apt (depending on the context) to refer to the interest of a lessee, as well as to the interest of the lessor, or registered proprietor. There was no reason to disregard the separate corporate personalities of Meerlen and Nelson Ashfield. I do not consider this factor to constitute a relevant distinction from Conoid.
[19]
Any extension of the term of the Second Agreement pursuant to s 16 of the Retail Leases Act would expire in two years' time (65 of the Appeal Panel's reasons)
This matter would be germane to the factual question of the prospects of the Head Lease being terminated if the sub-lease were for a term of five years. However, this factual question is irrelevant for the reasons given in Conoid.
[20]
Conclusion on the s 16(5) point
The effect of Conoid in the present case is that, because of the inconsistency between the terms of the Head Lease and a five-year retail shop lease to Ms Farah, s 16 does not apply.
The Appeal Panel was, accordingly, bound by Conoid to find that:
1. the inconsistency between the terms of the Head Lease and the Second Agreement (if extended to a term of five years) had the effect of rendering the balance of s 16 inapplicable, including s 16(1): s 16(5) of the Retail Leases Act; and
2. Ms Farah did not have the benefit of a five-year retail shop lease over the Premises.
In these circumstances the Appeal Panel ought to have allowed the appeal against the Original Decision (and set aside the declaration) and dissolved the interim restraining orders. Accordingly, it is appropriate for this Court to set aside these orders pursuant to s 83(3)(a).
[21]
The notice of contention
Ms Farah relied on a notice of contention in which she contended that: the Appeal Panel ought not have permitted Nelmeer Ashfield to raise the issue of s 16(5), as it did not raise the issue before Senior Member Meadows; and that the Appeal Panel failed to give adequate reasons for permitting Nelmeer Ashfield to raise it.
I have already addressed the procedural history of the matter. For the reasons given above, I am satisfied that the issue relating to s 16(5) of the Retail Leases Act did not arise before Senior Member Meadows, who was solely to determine a matter of preliminary jurisdiction. Indeed, it would have been inconsistent with Nelmeer Ashfield's contention on jurisdiction for it to address it.
In these circumstances, it was open to Nelmeer Ashfield to raise the question before the Appeal Panel and open to the Appeal Panel to decide to deal with it. The Appeal Panel was bound to seek to give effect to the "guiding principle" set out in s 36 of the CAT Act, which required it to implement its practice and procedure so as to facilitate the resolution of the issues between the parties in such a way that the costs to the parties is proportionate to the importance and complexity of the subject matter: s 36(1) and (4). I discern no error in the Appeal Panel's approach in deciding to determine the s 16(5) point itself, having regard to its powers under s 80(3)(a) and (b) of the CAT Act and the "guiding principle" referred to above. I consider its reasons to be sufficient to explain why it took that course.
[22]
Orders
I make the following orders:
1. Refuse leave to appeal on the question of law raised by the second ground in the summons.
2. Grant leave to appeal on the question of law raised by the first ground in the summons.
3. Allow the appeal.
4. Set aside the decision and orders of the Appeal Panel dated 30 November 2015 and, in lieu thereof, make the following orders:
1. Appeal allowed.
2. Set aside the decision made by the Civil and Administrative Tribunal (Senior Member Meadows) on 1 August 2014 that the agreement between the plaintiff and the defendant is a retail shop lease with a term of five years expiring on 18 October 2017.
3. Set aside the order restraining the appellant (plaintiff) from disturbing the respondent's (defendant's) possession or use of the premises.
1. Subject to (6) below, order that the matter be remitted to the Civil and Administrative Tribunal to be determined in accordance with law.
2. Direct the parties to put on written submissions within seven days as to:
1. the order she or it (as the case may be) contends ought be made as to the costs of the proceedings in the Tribunal;
2. any further consequential orders for which either party contends to finally dispose of the proceedings in this Court.
1. Subject to an application for a different order being made in writing to my Associate within seven days of the date hereof, order the defendant to pay the plaintiff's costs of the proceedings.
2. Grant liberty to the parties to apply to relist the matter on three days' notice, including, if required, for further short oral submissions on the matters in (6) and (7) above by contacting my Associate.
[23]
Amendments
22 March 2016 - Senior Member Matthews replaced with Senior Member Meadows
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Decision last updated: 22 March 2016