LANDLORD AND TENANT --- RETAIL AND COMMERCIAL TENANCIES LEGISLATION --- SOUTH AUSTRALIA

Commercial tenancy retail shop - expiry of written lease - tenant in possession of premises for period in excess of five years - tenant holding over for period in excess of six months - whether tenant entitled to a further term of five years - application of Retail and Commercial Leases Act 1995, s 20B.

• Acts Interpretation Act 1915 s 16;
• Retail and Commercial Leases Act 1995 s 20A s 20B, s 20C, s 68, s 81;
• Retail Shop Leases Act 1995 s 17, referred to.
• Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396;
• Harvey v Pratt [1965] 2 All ER 786, applied.
• Beer v Bowden [1981] 1 All ER 1070, distinguished.
• Burns v Dennis [1948] NSWStRp 8; (1948) 65 WN(NSW) 55;
• Commonwealth Life (Amalgamated) Assurance Ltd v Anderson [1945] NSWStRp 31; (1945) 46 SR (NSW) 47;
• Elders Pastoral Ltd v Bank of New Zealand [1990] 1 WLR 1090;
• Francis Longmore & Co Ltd v Stedman [1948] VicLawRp 30; [1948] VLR 322;
• King's Motors (Oxford) Ltd v Lax [1969] 3 All ER 665;
• Landale v Menzies [1909] HCA 48; (1909) 9 CLR 89;
• Leibler v Air New Zealand Ltd [1998] 2 VR 525;
• Lewis v Bell (1985) 1 NSWLR 731;
• The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17;
• Walsh v Lonsdale [1882] UKLawRpCh 85; (1882) 21 Ch. D. 9;
• Woodford Nominees Pty Ltd v Masjakan Medical Pty Ltd [1998] ANZ Conv. Rep. 254, considered.

Counsel: MR B JENNER - Solicitors: THOMSON PLAYFORD

Judgment No. [2003] SASC 190

[2003] SASC 190

DUGGAN J I agree that the appeal should be allowed for the reasons given by Debelle J. I also agree with the orders which he proposes.

DEBELLE J This is an appeal by leave from the decision of a judge of this Court dismissing an appeal from the decision of a magistrate.

Since 1991 the respondent has been the tenant of a shop on the ground floor of an eleven storey building at the corner of King William Street and Waymouth Street, Adelaide. At that shop, she carries on business as a florist trading under the name of "The Wild Bunch". She has occupied the shop pursuant to two consecutive leases. The first lease was from a date in 1991 to 31 December 1995. The second commenced on 1 January 1996 and expired on 31 December 1999. The second lease contained a right of renewal. The respondent elected not to exercise that right but to enter into negotiations with the appellant for a new lease on terms more favourable to her. During the negotiations the respondent remained in possession of the shop from 1 January 2000 as a monthly tenant holding over pursuant to the expired lease. She is still in possession of the shop premises.

The negotiations continued until July 2000. In the meantime, the appellant was negotiating for the sale of the building in which the shop is located. The building was sold in June 2001 before the negotiations for the new lease had been completed. The new owner sought to obtain possession of the shop premises. The respondent contended that she held a lease of the shop. The action was heard by a magistrate who concluded that the respondent held an equitable lease of the shop premises. He made a declaratory order to that effect. The following is the relevant part of the order:

"I declare that the plaintiff is entitled to a lease of the shop premises which she currently occupies being Shop 2 at the corner of Waymouth and King William Streets known as 'the Wild Bunch' for a period of 5 years from and including 17 July 2000 at an annual rental of $27,000.00, the first three months of which period shall be rent free, with annual adjustments for rent at the CPI rate and with regard to other terms on the terms comprised in Document 15 to Exhibit D1 with the exception of any right of renewal."

(The reference to Document 15 appears to be to a form of lease.) The respondent protected her equitable lease by lodging a caveat in reliance on the magistrate's order. The appellant appealed to a judge of this Court who dismissed the appeal. The appellant now appeals by leave to this Court.

It is the appellant's case that, before any agreement to lease had been made, the shop premises were sold and thereafter no agreement for lease was made between the appellant and the respondent. It is the respondent's case that, before the shop premises were sold, the parties had agreed all essential terms of a new lease subject to two matters and that the learned magistrate was correct in his conclusion there was an equitable lease. In the alternative, the respondent claims that she is entitled to a lease for five years pursuant to s 17 of the Retail Shop Leases Act 1995.

It is necessary to examine in some detail the events before and after the determination of the lease on 31 December 1999.

The appellant had appointed Colliers Jardine ("Colliers") to act as its agent to manage the building in which the shop was located. The property manager at Colliers was Mr Robert Buckland. Mr Buckland conducted all negotiations with the respondent on behalf of the appellant.

The appellant had instructed Colliers to sell the building. There is some dispute about when the building was advertised for sale. According to Mr Buckland, that occurred late in 1999. He said that at that time signs were erected advertising the building for sale. His evidence was that on a number of occasions before 31 December 1999 he had informed the respondent that the appellant intended to sell the building. Offers to purchase were to be submitted by 10 December 1999. No offers were received. The building remained on the market for sale throughout 2000. The respondent's evidence was that she did not learn that the building was for sale until early October 2000. It is not necessary to resolve this conflict in the evidence.

When the lease determined on 31 December 1999 the respondent did not exercise the right of renewal contained in that lease but negotiated for a new lease on more favourable terms as to rent. She had earlier informed Colliers of her intention to seek a new lease. The negotiations began in January 2000 with the respondent holding over on a monthly tenancy pursuant to the expired lease.

On 5 January 2000 Mr Buckland wrote to the respondent referring to the earlier discussions. The letter offered either a renewal of the expired lease for a period of three years or a new lease for a period of five years. In the letter, he spelled out the essential terms of the new lease. The rent was to be the current rent of $28,904.64 per annum with a rent-free period of two months. Rent reviews were to be according to the Consumer Price Index as provided in the expired lease. On 28 January the respondent replied by letter. She expressed her willingness to enter into a lease for five years or longer but sought a reduction of the rental to $21,000 from the existing rent of $28,904.64 per annum. She also expressed her willingness to accept the offer of a rent-free period of two months. Thus, the respondent rejected the appellant's offer and put a counter-offer.

On 9 February 2000 Mr Buckland replied accepting the respondent's election to negotiate a new lease. The letter stated that the appellant was prepared to reduce the rental to $27,000 per annum for the first year but stipulated that the annual rent reviews were to be adjusted at the rate of 4 per cent per annum instead of being adjusted according to the Consumer Price Index as offered in January. The offer included a rent-free period of two months. Mr Buckland enclosed a draft form of the new lease in the letter. The respondent did not accept the offer. Instead, she orally informed Mr Buckland that she agreed to the rent being $27,000 per annum but rejected the method of the rent reviews. She asked that rent be reviewed on the basis of the Consumer Price Index. In her affidavit sworn in support of her claim in the Magistrates Court, the respondent summarised the position as at March 2000 in these terms:

"As at March 2000, I and the defendant had not reached agreement in relation to the rate at which the rental would be increased in any new lease in relation to the property but had agreed all other relevant terms of the lease."

That was a correct assessment of the position at that date.

Apart from further discussions between the respondent and Mr Buckland, nothing of significance happened until 22 March 2000 when Mr Buckland wrote again asking the respondent to let him know within seven days whether she would accept the offer made on 9 February. At that stage the only matter not agreed was the basis of the annual rent review. The respondent did not reply within seven days.

It seems that nothing of any moment transpired between the parties until the respondent wrote a letter dated 31 May 2000 to Mr Buckland. The letter was in these terms:

"Attention Robert Buckland regards Lease at 117 King William Street, Adelaide.

As you are aware I have been a tenant at 117 King William Street Adelaide for a period greater than ten years. We have been negotiating the terms of leasing at the above mention (sic) property for the past six months. I still have not come to a decision on the leasing arrangements. During these negotiations we have remained on a monthly tenancy and would appreciate it if we could continue to do so and not a deemed lease of five years until I can make my final decision. I appreciate your patience on this matter."

It is apparent that the parties were still negotiating. They had exchanged offer and counter-offer but the terms on which the annual rent review was to be made had still not been agreed.

By this time the appellant was seeking to finalise the terms of an agreement providing an option to purchase the building. On 21 June 2000 the appellant granted an option to purchase the building to Probity Nominees Pty Ltd ("Probity Nominees"). The appellant disclosed to Probity Nominees that the respondent was holding over under the lease which had expired on 31 December 1999.

On 14 July 2000 Mr Buckland met the respondent to continue the negotiations for the proposed lease. At the meeting the respondent rejected the offer in the letter dated 9 February. She said that she was prepared to enter into a lease for five years on the footing that the rent was $27,000 per annum, that rent reviews were to be in line with the Consumer Price Index, and that the rent-free period was to be increased from two months to six months. Mr Buckland reported the outcome of the meeting with the respondent on 17 July 2000 to the appellant. The material part of the report is as follows:

"Negotiations have continued with this tenant for a new lease. Further to our facsimile of 8.2.00 and your instructions of 9.2.00 an amended proposal was submitted to the tenant for a new 5 year lease at a commencing rental of $27,000 pa gross with fixed annual rent reviews increasing by 4.0%. After several meetings the tenant confirmed that she preferred to remain as a monthly tenant. Since then we have had further meetings and discussions in an attempt to bring this matter to a successful conclusion by reaching agreement on a shorter lease term. We are pleased to advise that, following a meeting last week, the tenant has moved towards accepting a new lease for a term of 5 years on the following basis:

Rent $27,000 pa gross as per our proposal of 9.2.00

Rent free The rent free period is increased from 2 to 6 months

Having achieved a rental of appx $600/m2 at $27,000 pa gross we believe that there is room for movement in the treatment of rent reviews and the rent free period. As a last resort we would recommend acceptance of the CPI reviews to tie up a new 5 year lease. However, we suggest that a compromise is proposed whereby the lease alternates CPI and fixed reviews (ie Yr1 - CPI, Yr 2 fixed 3 or 4%, etc). With regard to the rent free period, our retail leasing manager has advised that a period of up to 6 months would be reasonable for a 5 year lease. We suggest that we offer 3 months and be prepared to move by a month at a time up to 6 months if required.

In summary we recommend that a counter offer is submitted as follows:

Rent $27,000 pa gross as per our proposal of 9.2.00

Rent free The rent free period is increased from 2 to 3 months"

It will have been noticed that Mr Buckland believed there was room for movement in the treatment of rent review and the rent-free period and he made recommendations as to how he would negotiate those issues. He sought instructions from the appellant. On 20 July Mr Buckland was instructed by the appellant to proceed on the basis he had recommended in his report of 17 July. However, he was also instructed to obtain the consent of Probity Nominees to a lease on those terms.

On 24 July Mr Buckland contacted Probity Nominees seeking, among other things, its consent to the terms of the proposed lease. Between 24 July and 31 December, Mr Buckland did not receive any further instructions. In that period, Probity Nominees decided that it would divide the building into strata titles. At some time, Probity Nominees assigned its rights under the call option to Mr D Georgiadis or his nominee. Mr Georgiadis later assigned his interest to Adelaide Property Investments Pty Ltd. It appears that a kind of development consent was obtained for the proposed strata titles. A strata title was created for the shop premises on the ground floor occupied by the respondent. On 14 February 2001 the interest in the strata title for the shop premises was assigned to a Mr Dean Larwood. However, the contract for the sale of the strata units was not completed until June 2001.

In the meantime, the respondent had had several conversations with Mr Buckland. According to Mr Buckland, the respondent enquired about the lease and he told her that he was waiting for instructions. The respondent does not entirely agree with that account. There are no findings of fact by either the magistrate or the judge below on this question. However, it is not necessary to examine the details. The simple fact is that the negotiations for a new lease did not proceed any further after 14 July 2000.

In October 2000 the respondent spoke to the selling agents for the intended purchaser enquiring as to the proposed strata titles and asking the price of the title for her shop.

On 10 January 2001 Mr Buckland wrote to the respondent informing her that the building had been sold, that the purchaser intended to create strata titles, and that the strata title for the area of her tenancy had been sold subject to the settlement of the sale of the building. He informed her that the appellant was, therefore, unable to enter into further negotiations for the lease until the status of the sale of the building had been confirmed. He had spoken to the respondent along those lines on 9 January. Mr Buckland says in para 47 of his affidavit that he informed the respondent that there would be an opportunity to negotiate for a lease if the option to purchase did not proceed. He denies informing her that she would have an opportunity to negotiate if the sale proceeded.

The respondent instructed solicitors. On 23 January her solicitors sent a letter to Mr Buckland referring to the negotiations and stating the respondent's wish to enter into a lease for five years. The letter was in these terms:

"We refer to our telephone and facsimile communications of 23 January 2001.

We confirm our advice to you that we act on the instructions of Ms Baryzcka in relation to the issue of the renewal of the lease over the above premises.

We confirm further that as is noted in the correspondence between yourself and our client, she has previously intimated to you that she intends to activate and exercise her right to renew the lease over the premises.

We confirm that our client indicated her intention to sign a new lease by her letter to you received on 28 January 2000 and referred to in your letter to her dated 9 February 2000. A copy of that letter is enclosed.

We confirm further that our client accepted this proposal after she was given two options by you in your letter to her dated 5 January 2000, namely that she can either exercise her option in the then extant lease, or take up a new lease for a term of 5 years. Again our client indicated her agreement to take up the latter of these options.

Subsequently, as you know, negotiations were underway between yourself and our client in relation to rentals to be paid under the new lease, and these negotiations are referred to in your letters to our client dated 9 February 2000 and 22 March 2000 respectively.

We are instructed that despite the ongoing negotiations, no agreement was reached in relation to what the new rental payable would be under the new lease which our client was to take up.

In addition, and whilst these negotiations were ongoing, our client occupied the premises on the basis of a monthly tenancy pursuant to the provisions of the old lease. Our client continues to occupy the premises on that basis and subject to the resolution of the rental issue.

We are instructed that there has been a long delay since the negotiations which took place last year between yourself and our client, and we are instructed further that the reason for this delay has been the fact that your client is negotiating a sale of the premises, which sale is incomplete as at the date of this letter. We are instructed that our client was informed that subject to the resolution of the sale issue, no further negotiations can be undertaken by you and it was on this basis and for this reason that no concluded lease agreement was executed.

It is our further understanding that our client still had not as at 31 May 2000 signed a new lease and this was so partly because she still had not clarified the issue of the rental with you.

We are now instructed that steps may be afoot to refuse to offer our client a new lease over the premises, and indeed our client has serious fears and concerns about the future of her business and her occupation of the premises given the uncertainty caused by the events of the past year or so.

We are instructed to make our clients position clear, namely:

1. That she maintains her position that she wishes to enter a new 5 years lease over the premises; and

2. That the only issue to be finalised between the parties is the issue of rental and not the issue of whether or not our client would stay in occupation of the premises; and

3. That our client looks forward to receipt of a new lease for her execution in relation to the premises.

We would appreciate if you could confirm by return facsimile, that our client will be offered a new lease.

We would appreciate if you could give this matter your urgent attention in order that our client may know with some certainty the position in which she finds herself in relation to the lease.

It will have been noticed that the tenor of this letter is that the negotiations between the appellant and the respondent were still on foot. For the reasons which appear later, the letter correctly states the position in that respect.

Mr Buckland responded to the letter of 23 January on the same day. He denied that the respondent was entitled to renew the lease and stated that the negotiations had failed to reach a concluded agreement. Further correspondence was exchanged between the respondent's solicitors and Mr Buckland and the agents for the intended purchaser.

The respondent sought to resolve the matter. On 28 March 2001 she issued an application out of the Adelaide Magistrates Court pursuant to s 68 of the Retail and Commercial Leases Act 1995. Section 68 vests quite a wide jurisdiction in the Magistrates Court in respect of retail and commercial leases. In her application, the respondent claimed that she occupied the shop pursuant to an agreement for lease with the appellant. She claimed that the terms of the agreement were

(1) that the lease was to be for a period of five years commencing on 1 January 2000;

(3) that the respondent would be granted rights as lessee including rights for exclusive possession and quiet enjoyment of the premises.

The respondent sought, among other things, an order confirming her rights as lessee and an order requiring the appellant to execute a lease in accordance with the agreement she alleged had been made. The appellant denied the existence of such a lease agreement and itself sought a declaration that the respondent occupied the premises as a monthly tenant.

After hearing the application over several days, the magistrate published his reasons on 24 May 2001. He held that the respondent had been holding the premises as a monthly tenant from the expiration of the lease on 31 December 1999 to 17 July 2000 and from that latter date the respondent had held an equitable lease for a term of five years. I have already referred to the detailed terms of the order. On 20 June the magistrate made some further findings. It is unnecessary to refer to them.

On 4 July the appellant appealed against the magistrate's orders of 24 May and 20 June.

In the meantime, the contract for the sale of the land was completed on about 14 June 2001. The memorandum of transfer has been registered. From that time, the appellant had no interest in the building. When the appeal came on for hearing before the judge below, the respondent contended that the appeal was incompetent because the appellant had sold its interest in the building so that there was no live issue between the appellant and the respondent. The judge below dismissed the application and held that the appeal was competent, holding that the claim for costs of the application in the Magistrates Court was a sufficient ground to constitute a live controversy between the parties. He referred to the fact that the respondent seeks an order that the appellant pay the costs of the proceedings in the Magistrates Court and for an order that those costs be awarded on the Supreme Court scale. He had been informed by the appellant that its costs to the point of judgment in the Magistrates Court were about $43,000 and that it expected that, if it succeeded, it will recover about 60 per cent of those costs. I interpolate that the claim for costs appears to be an unduly large amount for a matter of this kind. But that is a matter for the taxing officer. The respondent's costs for the same period were said to be about $17,000. The judge dismissed the appeal. On 1 March 2002 he granted the appellant leave to appeal.

The respondent then applied for orders to dismiss the appeal as incompetent and to rescind the order granting leave to appeal. On 8 May 2002 Lander J ordered that the application be referred to this Court. The application was argued at the hearing of this appeal. The court announced that the appeal was competent and proceeded to hear argument. I set out my reasons for concluding that the appeal was competent.

The costs of these proceedings have now been increased by the costs of the unsuccessful appeal to the judge below. In addition to the costs of the appeal, further costs have been incurred on the appellant's application for leave to appeal from the judge below and on the application by the respondent to stay the appeal on the ground that it is incompetent.

If the only effect as between the parties of a successful appeal will be to reverse an order for costs made in the court below, there is a lis or issue between the parties: Elders Pastoral Ltd v Bank of New Zealand [1990] 1 WLR 1090 at 1095; Leibler v Air New Zealand Ltd [1998] 2 VR 525 at 529 - 530. The court retains a discretion whether to hear the appeal: Elders Pastoral (supra) at 1095. Given that the costs have now reached a substantial level, I decided that the court should exercise its discretion to allow the appeal to proceed. When exercising that discretion, I had regard also to the fact that the appeal had considerable prospects of success.

I turn to examine the issues on the appeal. The first is whether there was a binding agreement for a lease.

It is well-established that, where parties have entered into a binding contract to lease land or premises and the agreement is capable of specific performance but has not been reduced to writing, the lease may nevertheless be enforceable in equity: Walsh v Lonsdale [1882] UKLawRpCh 85; (1882) 21 Ch. D. 9; The Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 per Mason J at 26. In this case, the question is whether the parties have made a binding contract sufficient to found an equitable lease.

The only essential characteristic of a lease is that it should give the right of exclusive possession of premises to a tenant: Commonwealth Life (Amalgamated) Assurance Ltd v Anderson [1945] NSWStRp 31; (1945) 46 SR (NSW) 47 at 49; Francis Longmore & Co Ltd v Stedman [1948] VicLawRp 30; [1948] VLR 322 at 323; Lewis v Bell (1985) 1 NSWLR 731 at 734. Although a lease usually provides for rent, the reservation of rent is not an essential element: Landale v Menzies [1909] HCA 48; (1909) 9 CLR 89 per Griffiths CJ at 100 - 101, per Barton J at 111; Commonwealth Life (Amalgamated) Assurance Co v Anderson (supra) at 49; Burns v Dennis [1948] NSWStRp 8; (1948) 65 WN(NSW) 55 at 56; Francis Longmore & Co Ltd v Stedman (supra) at 323. However, where the intended landlord seeks payment of monies as consideration for allowing the intended tenant to occupy the premises, rent is an essential term of the contract: Harvey v Pratt [1965] 2 All ER 786 per Lord Denning MR at 788; Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396 per Murray J at 408. It follows that where rent is payable as consideration for the occupation of premises, the essential elements of an enforceable agreement for a lease are that the agreement

• identifies the land or premises the subject of the lease;

• enables the commencement and duration of the term to be clearly ascertained; and

See Harvey v Pratt (supra) and Copperart Pty Ltd v Bayside Developments Pty Ltd (supra). In this case, it is possible to identify the parties, the premises the subject of the lease and the duration of the term and its commencement. The question is whether the parties have agreed the rent.

The parties had agreed, as early as February 2000, that rent for the first year was to be $27,000. However, it is quite apparent that in July 2000 they were still negotiating on two factors which directly affected the amount of the rent to be paid in each year. Those factors were the duration of the rent-free period and the basis on which the rent would be reviewed in each year.

Mr Buckland had initially offered a rent-free period of two months and on 28 January the respondent expressed a willingness to accept that rent-free period. She did not seek a long rent-free period until 14 July, when she asked that the rent-free period be increased to six months. Clearly, a rent-free period equivalent to one-half of the first year's rent significantly affected the amount of rent payable in the first year of the lease.

At no time did the parties agree the terms on which the rent would be reviewed in each year. On 9 February 2000 Mr Buckland had proposed that the rent would be increased from year to year at the rate of four per cent per annum. For her part, the respondent proposed that the rent be increased in line with increases in the Consumer Price Index as had been provided in the lease which had expired on 31 December 1999. At 14 July they still differed as to the manner in which the rent review should be made. In other words, as at 14 July, the parties had agreed that there was to be an annual rent review but had not agreed the manner in which it was to be conducted. There is no basis on which the court is able to determine how the review should be made. There were two alternative proposals. There is no basis on which the Court can choose between them.

In the result, it cannot be said that the parties had agreed the rent. While they had agreed an annual rent of $27,000, two factors which had a real bearing on the amount of rent to be paid in each year remained outstanding. The rent was neither agreed nor ascertainable. For these reasons, there was no agreement on an essential term of this lease, namely, the rent which was to be paid in each year. There was, therefore, no binding agreement for lease. The respondent fails to establish a binding agreement for much the same reasons as the appellant who failed in Woodford Nominees Pty Ltd v Masjakan Medical Pty Ltd [1998] ANZ Conv. Rep. 254.

Both the magistrate and the judge below relied on the decision in Beer v Bowden [1981] 1 All ER 1070, holding that the decision is authority for the proposition that agreement as to rent is not essential for the existence of a lease. They also relied on the proposition that the reservation of rent is not essential to the creation of the lease. By that route, they concluded that a binding agreement for a lease had been created. Their reliance on the proposition that reservation of rent is not an essential term is misplaced for the reasons already given. In this case, the appellant clearly sought the payment of rent as consideration for the occupation of the subject premises. Thus, in order for a binding contract to exist, the parties had to agree rent. The decision in Beer v Bowden is a special case and must be distinguished on its facts. In that case, there was a subsisting lease for a term of 14 years. The rent was to be reviewed every five years, the new rent to be "such rent as shall ... be agreed between the landlords and the tenant but no account shall be taken of any improvements carried out by the tenant in computing the amount of the increase, if any, and in any case [the rent shall be] not less than the yearly rental" of ₤1250 payable under the lease. The landlord and tenant could not agree the rent at the end of the first five years. The trial judge ordered that they pay a fair rent. The Court of Appeal upheld the decision. It was strongly influenced by the fact that there was a subsisting lease which had created an estate in the land and that it was conceded that rent was payable. The court was, therefore, willing to imply a term to give business efficacy to the contract: see Goff LJ at 1074 - 1075. It therefore held that a fair rent was payable subject to the provisos expressed by the parties in the lease. The important distinction is that a lease was on foot, that the parties sought to continue the lease, and that the tenant conceded that rent was payable. As the reasons of Goff LJ at 1074 make clear, that is the basis upon which the Court of Appeal acted. The decision in Beer v Bowden does not assist the respondent.

In Beer v Bowden, the Court of Appeal distinguished the decision in King's Motors (Oxford) Ltd v Lax [1969] 3 All ER 665 where an option to renew was held to be unenforceable because an essential term, namely, the rent, was neither agreed nor ascertainable. The decision in King's Motors is an example of the operation of the general principles which defeat the respondent in this case.

Mr Manetta, who appeared for the respondent, sought to rely on the fact that Mr Buckland had received instructions from the appellant on 20 July which would have enabled him to agree to the proposal put by the respondent on 14 July. That submission overlooks the fact that the appellant had also instructed Mr Buckland to obtain the consent of Probity Nominees. For reasons which are not clear, that consent was not forthcoming and the negotiations did not proceed. The instructions to Mr Buckland do not, therefore, assist the respondent.

For all of these reasons, the rent was an essential term of the proposed lease and the parties had failed to agree what the rent should be. It was neither agreed nor ascertainable. There was, therefore, no agreement for a lease. It follows that there was no equitable lease.

By a notice of contention, Mr Manetta sought to uphold the magistrate's order with an alternative submission. It relies on the terms of the Retail Shop Leases Act 1995 which came into force on 30 June 1995 and applied to retail shop leases. The lease which expired on 31 December 1999 was a retail shop lease as defined in that Act. Mr Manetta points to s 17 of that Act and, in particular, subsection (3)(b). Section 17 is in these terms:

" 17. (1) The term for which a retail shop lease is entered into must be at least five years.

The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into.

(2) If a lease is entered into in contravention of this section, the lease remains valid but the term of the lease is extended to bring the term (or the aggregate term) to five years.

If (for example) a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years).

(a) the lease is a short-term lease (i.e. a lease entered into for a fixed term of six months or less); or

(b) the lease arises when the lessee holds over after the termination of an earlier lease with the consent of the lessor and the period of holding over does not exceed six months; or

(c) the lease contains a provision excluding the operation of this section and a lawyer who is not acting for the lessor certifies in writing that the lawyer has, at the request of the prospective lessee, explained the effect of the provision and how this section would apply to the lease if the lease did not include that provision; or

(d) the lease results from the renewal of an earlier lease, so long as there was no break in the entitlement of the lessee to possession of the retail shop and the option was granted by that earlier lease or by an agreement entered into before or at the same time as that earlier lease was entered into.

A lease will not be required to be for five years if it is a renewal of an earlier lease (because the minimum five year term requirement applied to the earlier lease and the availability of the renewal will have been taken into account in determining the term of that earlier lease).

(4) This section does not apply to a lease to the extent that its application would be inconsistent with the terms of a head lease under which the lessor holds the retail shop.

(5) This section does not apply in any other case prescribed by the regulations."

(The provisions which are italicised are notes to the respective subsections.)

Pointing to subsection (3)(b), Mr Manetta submits that, as the respondent held over under the lease which expired on 31 December 1999 for a period in excess of six months, she is entitled to a renewal of that lease on the same terms and conditions as are contained in the lease for a period of five years.

I do not think that s 17(3)(b) has the effect for which Mr Manetta contends. It is not clear to what s 17(3)(b) means. I will assume it applies in the circumstances of this case where the respondent held over as a monthly tenant with the consent of the appellant. Although it is provided that s 17(3) does not apply where a tenant holds over for a period less than six months, I do not think that it is intended that a lease for five years will come into existence if the period of the holding over exceeds six months. It is a very serious step to impose a renewed term of five years upon the lessor. I do not think it was intended to achieve it by a legislative side wind of this kind. Furthermore, the respondent had held a lease of these shop premises for more than five years. The intention of s 17 is to provide a minimum term of five years for a retail shop lease. It is not concerned with the term of a renewed lease. That intention is clearly expressed in the note at the end of s 17(3) and it is reinforced by the terms of s 17(3)(d). For these reasons, I do not think that the terms of s 17(3) apply.

Another reason why Mr Manetta's submission must fail is to be found in amendments to the Retail Shop Leases Act. The Retail Shop Leases Act was amended in 1997 and renamed the Retail and Commercial Leases Act 1995. The amending Act came into operation on 6 October 1997. It repealed s 17 and enacted a new provision which was s 20B of the 1997 Act. Section 20B was one of a number of provisions in a new part of the Act dealing with the term of a lease and its renewal. For present purposes, it is necessary to set out all of the terms of s 20A to s 20C:

20A. (1) The Parliament recognises that conflicts sometimes arise between a lessor's expectation to be able to deal with leased premises subject only to the terms of the lease and a lessee's expectation of reasonable security of tenure.

(2) The objects of this Part are to achieve an appropriate balance between reasonable but conflicting expectations and to ensure as far as practicable fair dealing between lessor and lessee in relation to the renewal or extension of a retail shop lease.

20B. (1) The term for which a retail shop lease is entered into must be at least five years.

The term of a retail shop lease is worked out under this section on the assumption that any right or option of renewal or extension under the lease or a collateral agreement will in fact be exercised. However, a right or option of renewal or extension will not be taken into account if it is given after the lease is entered into.

(2) A lease is not invalidated by contravention of this section but the term of the lease is extended to bring the term (or aggregate term) to five years.

If (for example) a lease is entered into for a term of three years, its term is extended by two years to five years. If a lease is entered into for a term of two years with an option for a further one year after that initial two years, the term of the lease is extended to four years (with the option for a further one year after that initial four years).

(a) the lease is a short-term lease (ie a lease entered into for a fixed term of 6 months or less); or

(b) the lease arises when the lessee holds over after the termination of an earlier lease with the consent of the lessor and the period of holding over does not exceed 6 months; or

(c) the lease contains a certified exclusionary clause; or

(d) the lessee has been in possession of the retail shop premises for at least 5 years; or

(e) in the case of a retail shop lease that is a sublease-the term of the retail shop lease is as long as the term of the head lease allows; or

(f) the lease is of a class excluded by regulation from the ambit of this Division.

20C. (1) This Division applies in relation to a retail shop lease of premises in a retail shopping centre entered into after the commencement of this Division.

(a) the lease is a short term lease (ie a lease entered into for a fixed term of 6 months or less); or

(b) the lease contains a certified exclusionary clause; or

(c) in the case of a retail shop lease that is a sublease-the term of the retail shop lease is as long as the term of the head lease allows; or

(d) the lease is of a class excluded by regulation from the ambit of this Division."

It will have been noticed that s 20B(3)(d) provides that a minimum term of five years is not required in those instances where the lessee has been in possession of the shop premises for at least five years. In my view, s 20B(3)(d) applies to the exclusion of s 20B(3)(b). To conclude otherwise would result in absurdity. As at 31 December 1999, the respondent had been in possession of these premises since 1991. Section 20B was in force when the lease came to an end. For the reasons which follow, s 20B applied to all retail shop leases then in force but, by reason of s 20B(3)(d), did not apply in the particular circumstances of this case.

Mr Manetta contended that the 1997 amendments did not apply to this lease. One reason why that argument fails is that the 1997 Act applied to existing leases. The amending Act contained no transitional provisions. It will have been noticed that s 20C applies only to leases entered into after the commencement of Division 3. Section 20B has no such limitation. In my view, Parliament intended that s 20B should operate immediately and to the extent necessary on leases in force when the Act came into operation. When read together, it is apparent that s 20A and s 20B intend that reasonable security of tenure should be immediately available. If s 20B did not immediately affect existing leases, there would be a hiatus until those leases expired. The terms of s 81(2) of the Act do not affect that conclusion since it applies to leases made before the 1995 Act came into operation. The lease in this case was entered into after that Act came into operation.

Mr Manetta also relied on the terms of s 16(1)(c) of the Acts Interpretation Act but I do not think that they apply. Section 16(1) provides:

"Where an Act is repealed or amended, or where an Act or enactment expires, then unless the contrary intention appears, the repeal, amendment or expiry does not -

(c) affect any right, interest, title, power or privilege created, acquired, accrued, established or exercisable, or any status or capacity existing, prior to the repeal, amendment or expiry; ..."

Section 17(3)(b) does not operate until the earlier lease has come to an end and there has been a holding over for a period in excess of six months. When the 1997 Act came into operation the lease was still on foot. The period of holding over did not commence until 1 January 2000. Thus, the events to which s 17(3)(b) directed its attention had not occurred so that the respondent did not have any right which attracted the operation of s 16(1)(c) of the Acts Interpretation Act. For these reasons, s 20B was the relevant provision for determining the rights of the respondent.

For these reasons, both the magistrate and the judge below erred in concluding that the respondent had an equitable lease. The respondent is not entitled to a lease by reason of s 17 of the repealed Retail Shop Leases Act 1995. I would, therefore, allow the appeal, set aside the orders made by the magistrate and the judge below, and dismiss the application made by the respondent under s 68 of the Retail and Commercial Leases Act.

WILLIAMS J I agree that this appeal should be allowed for the reasons given by Debelle J.