1. Declare that the Applicant has not exercised its option for a new lease of the premises known as Ormond Hall 559 St Kilda Road Melbourne.

2. Liberty to the parties to apply for any further consequential orders or relief upon the findings made in these reasons.
3. Costs reserved.

1. In this proceeding the Applicant ("the Tenant") seeks declaratory and injunctive relief in relation to the alleged exercise of an option to renew a lease of premises leased from the Respondent ("the Landlord") for a further term of five years commencing 1 March 2007.
2. The premises in question ("the Land") adjoin other premises leased by the Tenant from the Landlord. This proceeding originally involved a dispute concerning those adjoining premises as well but that has been resolved by agreement. I am only concerned with the alleged exercise of the option to renew the lease of the Land.

1. The Land was leased by the Landlord by a lease dated 28 March 2002 to one Spotless Services Australia Ltd ("Spotless"), for a term of five years commencing 1 March 2002 with options for two further terms of five years each. Because Spotless was a public company and because the Land exceeds 1,000 square metres in area that lease was not subject to the provisions of the Retail Tenancies Reform Act 1998 (see the definition of "retail premises" in s.3 of that Act).
2. By a deed of assignment dated 5 June 2003 Spotless assigned the balance of the term of the lease to the Tenant with the consent of the Landlord. The deed is in the usual form with the usual covenant by the Tenant to comply with the tenant's obligations under the lease as if it had been named in the lease as lessee and the lessor's consent and acknowledgement that there were no present breaches by the assignor.
3. Following the assignment the Tenant took possession of the land on 6 June 2003 and thereafter paid rent to the Landlord.

1. The option in question was for a further term of five years commencing 1 March 2007. It is common ground that it had to be exercised by no later than 31 August 2006 and that the Tenant did not exercise it until 19 March 2007.
2. The Landlord seeks declaratory relief (inter alia) that the Tenant has not exercised the option.
3. To be entitled to the further term the Tenant must show that the lease pursuant to which it held the premises following the assignment was governed by the Retail Leases Act 2003 ("the 2003 Act"). If it is, then s.28 of the 2003 Act required the Landlord to notify the Tenant in writing of the day after which the option was no longer exercisable at least six months and not more than 12 months before midnight on 31 August 2006. It is common ground this did not occur and in those circumstances, by reason of s.28(2) of the 2003 Act, the Tenant would have until six months after the date upon which it is notified by the Landlord as required.

1. The matter came before me for a one day hearing on 27 September 2007. There was no dispute as to the facts and the hearing proceeded on the basis of legal argument. Dr. C. Croft SC and Mr. R. Hay of Counsel appeared on behalf of the Tenant and Mr. M. Borsky of Counsel appeared on behalf of the Landlord. Written submissions were provided together with copies of a number of authorities.

1. Dr Croft relied upon s.11 of the 2003 Act which provides:

(1) This Act applies to a retail premises leased that is -

(a) entered into after the commencement of this section; or

(b) renewed after the commencement of this section, whether the lease was entered into before or after that commencement.

(2) Except as provided by Part 10 (Dispute Resolution), this Act only applies to a lease of premises if the premises are retail premises (as defined in s.4) at the time the lease is entered into or renewed."

1. The term "retail premises lease" is nowhere defined in the Act but its meaning can be ascertained from the definition of "retail premises" to be found in s.4 and the definition of "lease" to be found in s.3. It is acknowledged that the land is "retail premises". The term "lease", means a lease, sub-lease or an agreement for a lease, whether or not in writing.
2. Dr Croft argued that when the lease was assigned to the Tenant a retail premises lease was "entered into" with the Landlord and, because this occurred after 1 May 2003 (the commencement date of s.11) the assigned lease is caught by the 2003 Act.
3. The basis for saying that the assignment constituted the entering into of a lease is s.7 of the 2003 Act, which provides:

"7. When retail premises lease is entered into or assigned

For the purposes of this Act, a retail premises lease is entered into or assigned when either of these things happen -

(a) under the lease or assignment, the tenant enters into possession of the premises with the consent of the landlord or begins to pay rent for the premises;

(b) the lease or assignment has been signed by all of the parties to it."

1. Dr. Croft submitted that the purpose of s.7 was to define two situations namely, when, under the 2003 Act, a lease is entered into and when it is assigned. I think that is right but the word "when" in this context is ambiguous as pointed out below.
2. Dr. Croft submits that I should interpret s.7 as meaning that in any situation where a tenant enters into possession of premises with the consent of the landlord under a lease or assignment or begins to pay rent for the premises or any situation where a lease or assignment has been signed by all of the parties to it then a retail premises lease is "entered into or assigned".
3. At first sight, this seems odd because it effectively reverses the order of the words in the section. The way the section is set out would suggest that what it is concerned about is fixing a time at which the lease is entered into or assigned not whether a retail premises lease is entered into or assigned.
4. In support of his submission Dr. Croft relies upon the case of Bradbun Pty Ltd v. Bobo Nominees Pty Ltd (1994) V ConvR 54-501, a decision of a single judge of the Supreme Court of Victoria. That case concerned a lease entered into before the commencement of the Retail Tenancies Act 1986 ("the 1986 Act") but was assigned after its commencement. Section 4(1) of the 1986 Act provided:

"The whole of this Act applies to a retail premises lease that is entered into after the commencement of this section unless the lease is entered into under an option granted or agreement made before that commencement."

"3(4) For the purposes of this Act a retail premises lease is entered into when -

(a) under the lease, the tenant enters into possession of the premises or begins to pay rent for them; or

(b) all of the parties to the lease have signed the lease -"

1. The learned judge decided that, when the tenant became the assignee of the term a lease was entered into within the meaning of the 1986 Act. Dr. Croft submits that that case is on all fours with the one before me and that I should follow it.

1. One might also wonder why, if it was the intention of Parliament that an assignment would, contrary to the general law, be elevated by force of statute to a new lease, this could not have been expressed in clear terms The decision in Bradbun has been much criticised and is inconsistent with decisions in other jurisdictions. For example in Dileun Pty Ltd v. J K Corporation Pty Ltd (1988) 1 WAR 244, a decision of the Full Court of Western Australia, it was held that an assignment did not amount to a new lease. A similar conclusion was reached in the Victorian County Court by his Honour Judge Jones in Hamatam Pty Ltd v. Narracan Nominess Pty Ltd and anor. (1993) V ConvR 54-471 where his Honour said that what occurred was the substitution of one tenant for another under an existing lease and not a new lease.
2. In Taylor Farms (Australia) Pty Ltd v. A. Calkos Pty Ltd and others (12 March 1999 - Supreme Court of NSW) (unreported) after referring to the authorities Kirby J said (at paragraph 55):

"I prefer, with respect, the reasoning in Dileun Pty Ltd v J K Corporation Pty Ltd and Hamatam Pty Ltd v Naeracan Nominees Pty Ltd to that in Malsons Pty Ltd and Bradbun Pty Ltd v Bobo Nominees Pty Ltd. Ultimately, it is, of course, a matter of statutory interpretation. But it is not without interest that the parties, at the time they executed the Deed of Consent and Assignment, plainly believe that they were transmitting to Taylor Farms the rights of Angliss acquired under the lease of 20 July 1994 and that for the balance of the term."

1. The views expressed in Taylor Farm, Dileun and Hamatam accord with the common law position which is that an assignment of an existing lease is not a grant of a new lease (see for example, Mason, Herring and Brooks v. Harris [1921] 1 KB 653.)
2. Of course I am bound by a decision of a single judge of the Supreme Court but that was a decision concerning the interpretation of the 1986 Act, not the 2003 Act.

1. In Happy Century Pty Ltd v. Nezville Pty Ltd (2000) V ConvR 58-546 the tenant contended that the landlord was obliged to provide a disclosure statement as required by the Retail Tenancies Reform Act 1998 ("the 1998 Act") upon an assignment of a lease to it after that Act came into force. It was contended that the assignment was equivalent to the grant of a new lease. The 1998 Act is very similar to the 2003 Act in many respects. The learned Deputy President referred to the authorities, including Bradbun, and said (at paragraph 25):

"Is there anything in the 1998 statute which would require a different conclusion as to the affect of an assignment relative to that statute's application that would follow with respect to the 1986 Act?

The first observation to be made is that Bradbun was not concerned with disclosure statements at all. Given that s.7(2) specifically provided that a disclosure statement was not required to be given on the assignment of a retail premises lease it is open to doubt whether a lease entered into, say in 1983 and signed 1992, would upon the assignment have attracted the obligation under s.7 to give a disclosure statement. Of course one possible interpretation of s.7(2)(b) of the 1986 Act is that where it refers to the assignment "of a retail premises lease" the reference is to a retail premises lease which is already (before the assignment) under the operation of the statute. Apart from the exclusion in s.7(2), the 1986 Act deals with assignments only in relation to regulating landlord's consent to them. In contrast, as previously noted, the 1998 statute makes separate provision for disclosure statements upon assignments. Sub-section 3(4) provides:

"For the purposes of this Act, a retail premises lease is entered into or assigned when -

(a) under the lease or assignment, the tenant entered into possession of the premises with the consent of the landlord or begins to pay rent for them; or

(b) all of the parties to the lease or assignment have signed the lease or assignment whichever first occurred."

The corresponding provision in s.3(4) of the 1986 Act makes no reference to assignments. Dr. Croft, an eminent commentator in these matters, considered the effect of the 1998 Act to the Bradbun principle in a seminar paper presented at the Leo Cussen Institute upon the operation of the 1998 Act. Dr. Croft concluded that had Parliament intended to reverse the decision of Bradbun "it would have been very easy to indicate clearly and expressly that an assignment to a lease term is not to be take to be a lease for the purposes of the Act".

I respectfully disagree with Dr. Croft. In my view, the provision of the 1998 Act shows a clear intention to treat assignments and "entry into" retail premises leases as separate subject matters. It cannot have been intended in the case of the lease entered into in 1999 which is assigned in 2000 that there be two separate regimes, namely ss.8 and 23 requiring the provision of disclosure statements. The s.8 would require the landlord to provide the disclosure statement directly to the assignees. Section 23 would require the landlord to give the disclosure statement to the assignor or tenant. The assignment is to be treated as the equivalent of the entry into a lease, s.23 was wholly unnecessary."

1. Sub-section 3(4) of the 1998 Act is substantially the same as s.7 of the 2003 Act. I respectfully agree with and adopt the reasoning of the learned Deputy President. Like the 1998 Act, s.7 of the 2003 clearly treats the entry into a lease and the assignment of an existing lease as separate things. That was not the case under the 1986 Act.

"8.Effect of assignment of retail premises lease

For the purposes of this Act, an assignment of a retail premises lease is taken to be a continuation of that lease (and not the entering into of a new lease)."

Identical provisions were inserted into each the 1986 Act and the 1998 Act (see sections 101 and 111 of the 2003 Act)

1. When I asked Dr. Croft why these sections did not defeat his argument he said that none of those sections could apply to a lease that was not already subject to the act in question. He said that each Act had to be interpreted in the manner adopted by the Court of Appeal in the case of Antonino Giuseppina Ensabella & Sons Pty Ltd v. Players on Downunder Pty Ltd [2000] V Conv R 54-626.
2. In that case a lease that was subject to the 1986 Act was renewed after the commencement of the 1998 Act. Section 4(1) of the 1998 Act provided:

"This Act applies to a retail premises lease that is entered into after the commencement of this section including one entered into under an option provided under a retail premises lease that was entered into before that commencement."

1. Section 17 of the 1998 Act required disclosure statements to be given to lessees where a retail premises lease was renewed. The Court held that the requirement only applied where a lease already caught by the Act was renewed.
2. Dr Croft argues that similarly, each of the three Acts should be interpreted as regulating only those retail tenancy leases to which that Act is expressed to apply. Hence s.8 can only apply to the assignment of a lease that was already, at the date of the assignment, subject to the 2003 Act.
3. Logically, I think there are three things wrong with the argument. In the first place, s.8 immediately follows s.7. They are both in Part 2 of the 2003 Act which is entitled "Definitions and Key Concepts". If s.7 is intended to say when as a matter of fact (rather than when in a temporal sense) a lease is entered into, why cannot s.8 say when as a matter of fact a lease is not entered into. The operation of these sections does not seem to be confined to leases already caught by the Act. These sections define key concepts. They are not the regulatory provisions. The regulatory provisions would certainly only apply to leases caught by the Act but to know whether the Act applies or not one needs to understand the key definitions and concepts which are found in Part 2.
4. The second problem is that the layout of the section suggests that it is not intended to define whether or not a lease comes into existence. Rather it is concerned about when, in a temporal sense, a lease comes into existence. That is clear enough from the wording of both of subsections (a) and (b) which assume that a lease or assignment is already consented to or agreed upon. The section then provides when it comes into effect. This is a logical objection but it is inconsistent with the reasoning in Bradbun which binds me and so I do not rely upon it.
5. The third and conclusive objection is that it is the clear intention of Parliament that the Bradbun principle, if it can be called such, be abrogated and that it was to achieve that purpose that s.8 and the corresponding sections in the other two Acts were enacted.
6. Mr Borsky referred me to the Exposure Draft document for the Retail Leases Bill 2002 produced by the Office of Regulation Reform. Draft recommendation 6 of that document was:

"An assignment be treated as a continuing lease so as to attract the provisions of the law affecting substantive matters applying at the date of the commencement of the original lease."

1. The stated "outcome" of this recommendation is as follows:

"Agreed. The Bill clarifies that an assignment is to be treated as a continuing lease.

The judgment of O'Bryan J in Bradbun Pty Ltd v Bobo Nominees Pty Ltd (1994) V ConvR held that an assignment of a lease constitutes a new lease. This has the consequence that assignments may attract laws requiring obligations and the like that were not in contemplation at the commencement of the original lease, and further, may result in a reluctance to consent to an assignment. This is considered undesirable and the preferred policy position is to clarify that an assignment does not constitute a new lease but is a continuation of the original lease."

1. Clause 8 of the 2002 Bill is in identical terms to s.8 of the 2003 Act.
2. Dr Croft pointed out that the 2002 Bill lapsed due to the holding of an election that year. That is true but, as the Minister pointed out in his Second Reading Speech of the Bill which led to the enactment of the 2003 Act, that 2003 Bill was a reintroduction of the 2002 Bill. (Hansard Legislative Assembly 27 February 2003 p. 230).
3. In submitting that I should not follow the decision in Happy Century, Dr. Croft went to great lengths to show how the legislative regime had changed since that decision was handed down. Certainly, Parliament has gone to great lengths to try and remove ambiguities and anomalies, including the insertion of sections that specifically say that an assignment is not a new lease. For the reasons given I do not accept Dr. Croft's submission that these cannot apply to leases that are not already subject to the 2003 Act. In any event, I agree with the reasoning in Happy Century and so adopt the same approach.
4. Dr. Croft submitted that, if Parliament intended to abrogate the principle expressed in Bradbun it could have done so. It seems to me that it has done so and in very clear words.

1. I therefore conclude that the assignment of the lease to the Tenant did not result in the entering into of a retail premises lease after the commencement of the 2003 Act and that therefore that Act does not apply.
2. As a consequence there will be a declaration that the Applicant has not exercised its option for a new lease of the premises known as Ormond Hall 559 St Kilda Road Melbourne.
3. Liberty to the parties to apply for any further consequential orders or relief upon the findings made in these reasons.