APPEAL - point not raised by Notice of Appeal - pure question of law - construction of standard form lease - point permitted to be raised - guiding principle
Source
Original judgment source is linked above.
Catchwords
APPEAL - point not raised by Notice of Appeal - pure question of law - construction of standard form lease - point permitted to be raised - guiding principle
Judgment (2 paragraphs)
[1]
reasons for decision
The appellant in this matter is one of three tenants occupying premises at Davistown pursuant to a retail lease. The respondent is the landlord. Although all three tenants were parties to the proceedings at first instance, only one tenant is named as a party to the appeal. Although it would not ordinarily be appropriate that an appeal proceed in the absence of all parties to the proceedings below, we have determined that it is appropriate in the circumstances of this case to resolve the appeal without requiring the joinder of the other tenants.
By the decision under appeal the Tribunal determined to appoint a retail specialist valuer. The orders of the Tribunal, made on 20 July 2016, were:
(1) The Tribunal will proceed to appoint a valuer. The fact that no valuer was appointed prior to the review date does not disentitle the lessor to seek an appointment prior to the next review date.
The issue between the parties arose in the circumstances set out in the decision under appeal as follows:
2. The applicant, as lessor, entered into a lease with Alain, Dianne and Andrew Sauvage, as lessee, (the respondents) for a term of 10 years. The rent under the lease is reviewed annually to CPI and to market on 25 January 2016 (Item 16 of the Schedule) (the Lease).
3. The Lease is in the form of the Law Society Commercial Lease and clause 5 of that Lease determines the methodology and time for a market review. Clauses 5.13 to 5.15 and clause 5.21 state as follows:
5.13 The lessor or the lessee can inform the other in writing at least 60 days before the rent review date of the rent that the lessor or lessee thinks will be the current market rent at the review date.
5.14 If the lessor and the lessee agree on a new rent then that rent will be the new rent beginning on the rent review date and the lessor and the lessee must sign a statement saying so.
5.15 If the lessor and lessee do not agree on the amount of the new rent 30 days before the rent review date, the current market rent will be decided by a valuer appointed under clause 5.16.
5.21 If the lessor and the lessee do not agree upon a valuer and neither ask for a valuer to be nominated before -
5.21.1 the next review date passes; or
…
then the rent will not change on that rent review date.
4. There is no contention between the parties that neither the lessor nor the lessee provided to the other in writing an estimate of what that party thought the current market rent would be.
5. There is also no dispute between the parties that no agreement as to the market rent had been achieved nor had there been any agreement upon the appointment of a valuer prior to 25 January 2016.
…
8. The respondents confirmed that the first correspondence received from Central Coast Commercial on behalf of the applicant was on 12 February 2016 requesting an increase in the rent.
…
13. As noted, there were no negotiations concerning the market rental before the rent review date of 25 January 2016. The first request raising the issue of the appointment of a retail valuer was on 26 February 2016, after the market rent review date.
On 21 April 2016 the respondent commenced proceedings in the Tribunal seeking the appointment of a valuer pursuant to clause 5.16.2 which is as follows:
5.16.2 Where the property is a retail shop, the valuer appointed must be a specialist retail valuer appointed by agreement of the parties or, failing agreement, by the Administrative Decisions Tribunal.
The tenants objected to the appointment of a valuer on the basis that the right to seek the appointment of a valuer through the Tribunal had lapsed.
The parties and the Tribunal Member proceeded on the basis that the reference to the Administrative Decisions Tribunal should be read as a reference to its successor, the Civil and Administrative Tribunal.
The tenants lodged their own application on 19 May 2016 seeking an order:
"That the monthly rent remain the same for the amount of $3,080.90 (inc GST) per calendar month from 25/1/16 to 24/1/17."
That claim was a retail tenancy claim by virtue of Section 70(a)(ix) of the Retail Leases Act 1994 (NSW) ("RLA").
The Tribunal had power to make such an order pursuant to s72(1)(f)(iii) of the RLA which empowers the Tribunal in determining a retail tenancy claim to make orders:
"declaring the rights and liabilities of the parties under law, whether any consequential relief is or could be claimed or not."
Both applications were determined on the papers.
The Tribunal Member in his decision dated 20 July 2016 set out the tenants' submissions as follows:
11. The submission from the respondents is that clauses 5.13 - 5.21 of the Lease set out the methodology to determine market rent and the procedures for the parties to invoke for market rent to be assessed. The respondents submitted that although clause 5.16 provides a mechanism for the Tribunal to appoint a specialist retail valuer, this clause only applies if one of the parties has requested a valuer to be nominated before the next review date.
12. This arises from a reading of clause 5.21 which states that if the lessor or the lessee do not agree on a valuer and neither ask for a valuer to be nominated before the next review date passes then the rent will not change on that review date.
…
15. The submission from the respondents is that it does not matter if a valuer is appointed because pursuant to clause 5.21 the rent is now fixed as the current rent. The applicant has lost the opportunity for a market rent review.
The Tribunal Member determined the proceedings adversely to the tenants. The Member's reasoning was set out in paragraph 16 and 17 of his decision as follows:
16 Clause 5.21.1 does not quite say what the respondents believe it to say. The word 'next' is relevant because it talks about the next review date. So initially the clause talks about the review date and it is clear that the review date is as set out in the Schedule to the Lease at Item 16. It is nominated as 25 January for each year of the Lease and on 25 January 2016 a market review is chosen as opposed to a CPI review which is what occurs on every other rent review date. Item 16 specifically refers to 'rent review date'. There is no definition of next rent review date which is what is specifically referred to in clause 5.21.1. The Tribunal interprets next rent review date to be the rent review date after the rent review date the subject of these proceedings. That is to say, the next rent review date is 25 January 2017. It cannot be 25 January 2016 as that it is in fact the review date.
17 Accordingly, as the next rent review date is 25 January 2017, clause 5.21.1 would read that "that if the lessor and the lessee do not agree upon a valuer and neither ask for a valuer to be nominated before 25 January 2017 passes, then the rent will not change on that review date". The parties have up to 25 January 2017 to agree upon a valuer and utilise the methodology in clause 5.16, and failure to do so by 25 January 2017 means that the rent on 25 January 2016 would not alter, which is in fact the request of the respondents in file COM 16/23621.
The appellant alleges that in so construing the lease the Tribunal Member made an error with respect to a question of law. The correct construction of a contract is a question of law (Westport Insurance v Gordian Runoff (2011) 244 CLR 239 at 279 [82] fn88).
The appellant therefore appeals as of right and does not require the leave of the Appeal Panel to maintain the appeal (see s80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act)).
At the hearing of the appeal both parties appeared by telephone represented by solicitors.
Mr Brent, who appeared for the appellant, submitted that, in context, both the terms "the next rent review date" in clause 5.21.1 and "that rent review date" in the last line of clause 5.21 must mean the same rent review date and that the only rent review date to which they could both refer is the relevant market rent review date, that is 25 January 2016.
Mr Brent further submitted that the lease should be construed so as to operate commercially. Mr Brent submitted that the consequence of the interpretation adopted by the Tribunal Member could be that one party could trigger a market valuation by requesting that a valuer be nominated almost 12 months after the market rent review date, leading to a situation where the tenant would not know for over 12 months after the market rent review date what the revised rent payable from the market rent review date would be. Mr Brent submitted that it was not a commercial result that a party to a lease should potentially be left uncertain as to the rent it was obliged to pay under the lease for a period of 12 months or longer.
Mr Brent relied upon the decision of the Supreme Court of Queensland in Domino's Pizza Enterprises v Seldex [2009] QSC 137.
In that decision Martin J considered the application of a rent review clause in a lease.
The rent review clause required the landlord to notify the tenant of the proposed market rent at least 6 months before the rent review date. The lease also contained an option for a further term which provided that, if the tenant exercised the option, the rent for the first year of the further term would be determined in accordance with the market rent review clause. The option was exercisable between 3 and 6 months prior to the expiration of the term. The landlord did not notify a proposed market rent more than 6 months prior to the expiry of the original term. The tenant then exercised the option.
The landlord argued that it was entitled to give notice of the proposed market rent from the commencement of the new term after the tenant had exercised the option. The landlord submitted that a construction of the lease which required it to notify market rent at a time when it was not aware whether the tenant would exercise the option was uncommercial and absurd.
Martin J rejected the landlord's submissions, holding that:
[30] That does not, to my mind, evidence an absurd result. The landlord need only give notice of what it believes the market rent will be. It is not required to engage in any unnecessarily onerous activities in order to do that.
[31] The terms of the lease are clear - if the landlord wants to have the rent reviewed to market it must take steps by a particular time. There is no other mechanism available under the lease to review the rent in that manner after the tenant has given notice of renewal. This lease may be more "tenant friendly" than other commercial leases but that, in itself, is no reason to abandon the plain words of the lease.
Mr Brent submitted that, by analogy with the lease in Domino's Pizza, the landlord here was required to "act or face the consequences".
The appellant also relied upon the decision of Campbell J in Baycloud v Dowling Investments [2005] NSWSC 237.
Mr Bradshaw, who appeared for the respondent landlord, submitted that the decision of the Tribunal Member was correct. He submitted that the words of the lease were plain and that the suggested uncommercial consequences of the construction favoured by the Tribunal Member could not overcome the plain words of the lease. Mr Bradshaw submitted that the use of the different expressions "rent review date" and "next rent review date" suggests that the terms are intended to signify different things and that "a distinct meaning is to be given to each phrase".
Mr Bradshaw relied upon the decision of the Victorian Court of Appeal in Eureka Funds Management v Freehills Services (2008) 19 VR 676 in which it was held that the use of two different terms "current annual market rental" and "current annual market rental value" indicated that the terms were intended to have distinct meanings. At [53] (page 692) Cavanough AJA (with whom Neave and Redlich JJA agreed) quoted Lord Diplock in Prestcold (Central) v Minister of Labour [1969] 2 WLR 89, at 97:
… the habit of a legal draftsman is to eschew synonyms. He uses the same words throughout the document to express the same thing or concept, and consequently if he uses different words the presumption is that he means a different thing or concept
Mr Bradshaw also submitted that the decisions in Domino's Pizza and Baycloud v Dowling Investments are clearly distinguishable.
[2]
Consideration
The principles that apply to the interpretation of commercial contracts were recently summarised by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 ; [2014] HCA 7 at [35] in the following terms:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience". [Footnotes omitted]
It is important in considering the meaning of clause 5.21.1 to read that clause in its full context. The Tribunal Member did not in his decision set out the whole of clause 5.21. In our view, when that clause is read as a whole, it is clear that the reference to "the next rent review date" is, as the Tribunal determined, a reference to the rent review date following the market rent review date.
The full text of clause 5.21 is as follows:
5.21 If the lessor and lessee do not agree upon a valuer and neither asks for a valuer to be nominated before -
5.21.1 the next rent review date passes; or
5.21.2 this lease ends without the lessee renewing it; or
5.21.3 this lease is transferred after the rent review date with the lessor's consent; or
5.21.4 the property is transferred after the rent review date
then the rent will not change on that rent review date.
It is a general principle of contractual construction that, in construing a contract, all parts of it must be given effect where possible and no part of it should be treated as inoperative or surplus. As the learned authors of Lewison, The Interpretation of Contracts in Australia (2012) state at [7.03] (page 291):
…as a corollary of the principle that a document must be construed as a whole, effect must be given to each part of the document. This in turn means that in general every part of the document is taken to have been deliberately inserted, having regard to all other parts of the document, with the result that there is a presumption against redundant words (usually called "surplusage"). This principle is sometimes labelled the argument from redundancy.
In Re Strand Music Hall Co Ltd, Lord Romilly MR said:
"The proper mode of construing any written [instrument] is to give effect to every part of it, if this be possible, and not to strike out or nullify one clause in a deed, unless it be impossible to reconcile it with another and more express clause in the same deed."
So also in Chapmans Ltd v Australian Stock Exchange Ltd, Lockhart and Hill JJ said:
"It is an elementary proposition that a contract will be read as a whole giving weight to all clauses of it, where possible, in an endeavour to give effect to the intention of the parties as reflected in the language which they have used. A court will strain against interpreting a contract so that a particular clause in it is nugatory or ineffective, particularly if a meaning can be given to it consonant with other provisions in a contract."
Similarly, in Dovuro Pty Ltd v Wilkins, Finkelstein J said: "Speaking generally, it is not permissible to construe one part of a contract so as to render inoperative or as surplusage another part."
If the "next rent review date" in clause 5.21.1 meant "the market review date" then there would be no conceivable circumstances in which clauses 5.21.3 and 5.21.4 could ever have any operation. The same could also be said of clause 5.21.2 but for the sake of clarity we need refer only to clauses 5.21.3 and 5.21.4.
If the "next rent review date" is the market review date (ie in this case 25 January 2016) then there could be no circumstances in which events occurring "after the rent review date" could have any impact upon the capacity of the parties to ask for a valuer to be nominated. That capacity would have terminated on the rent review date by virtue of clause 5.21.1, and the subsequent assignment of the lease by the lessee or the transfer of the property by the lessor could not affect the situation.
Only if "the next rent review date" means the rent review date next following the relevant date, could clauses 5.21.3 and 5.21.4 have any scope for operation. So interpreted, clause 5.21 provides four distinct events which would bring to an end the parties' entitlement to ask for the nomination of a valuer.
Reading clause 5.21 as a whole also renders explicable why the final line refers to "that rent review date". "That rent review date" is the rent review date referred to in clauses 5.21.3 and 5.21.4. There is no reason why "that rent review date" should have the same meaning as the "next rent review date" referred to in clause 5.21.1.
We note Martin J's summary of the appropriate approach to the construction of commercial contracts (including leases) in paragraphs [20] to [21] of the decision in Domino's Pizza:
[20] In construing the lease provisions, and cl 3.3.1 in particular, one must draw upon the broad principles of construction of contracts. These were clearly articulated by Wilson J in Tri-Star Petroleum Co v GPT Funds Managements Ltd, another case involving notice requirements in a rent review clause:
[16] The lease is a contract between two commercially sophisticated parties. The Court's task is to interpret the words they used and to determine their true intent. As Gleeson CJ said of an insurance policy in McCann v Switzerland Insurance Australia Ltd -
… [It] … is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.
[17] The Court must begin with the words used by the parties, and seek to ascertain what a reasonable person would have understood them to mean. In Toll (FGCT) Pty Ltd v Alphaharm Pty Ltd the High Court said -
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.20
In Watson v Phipps the Privy Council said -
The function of a court of construction is to ascertain what the parties meant by the words which they have used. For this purpose the grammatical and ordinary sense of the words is to be adhered to, unless they lead to some absurdity or to some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified so as to avoid that absurdity or inconsistency, but no further.
In Ryledar Pty Ltd v Euphoric Pty Ltd the New South Wales Court of Appeal reviewed relevant authorities about the interpretation of commercial contracts. Tobias JA (with whom Mason P and Campbell JA agreed) approved this passage from the decision of the trial judge -
31. However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation.
32. When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court's task to identify which of the possible meanings represents the parties' contractual intention.
33. However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit.
[21] Further assistance can be garnered from the judgment of Muir JA in Elderslie Property Investments (No 2) Pty Ltd v Dunn:
[20] The object of contractual construction is to "ascertain and give effect to the intentions of the contracting parties." Those intentions, to be determined objectively, are "what a reasonable person would have understood [the words of the contract] to mean." And to ascertain that "normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." Such a reasonable person is one who has all the background knowledge which would reasonably have been available to the parties in the situation which they were in at the time of the contract. The Deeds, as commercial contracts, "should be given a businesslike interpretation". The interpretation of each Deed requires "attention to … the commercial circumstances which the document addresses, and the objects which it is intended to secure." Commercial contracts are to be construed with a view to making commercial sense of them.
[21] In Wickman Machine Tool Sales Ltd v L Schuler AG Lord Reid said:
The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear.
[22] In Antaios Compania Naviera SA v Salen Rederierna AB, Lord Diplock expressed stronger views concerning the imperative to make business sense of commercial contracts, stating:
If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense. [footnotes omitted]
We also note the comments of Ball J in Healthcare Australia Pty Ltd v Randstad Pty Ltd [2016] NSWSC 1407 at [17]:
If the meaning of words in a contract understood in their context is clear, then the court must give effect to them notwithstanding that that interpretation produces a capricious or uncommercial result. As Gibbs J (in dissent, but not on this issue) explained in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36:
If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, "even though the construction adopted is not the most obvious, or the most grammatically accurate" …
See also JP Morgan Australia Ltd v Consolidated Minerals Pty Ltd [2011] NSWCA 3 at [96] per Macfarlan JA with whom Campbell JA and Young JA agreed; Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114; Hohn v Mailler [2003] NSWCA 122.
In our view the words of clause 5.21 are not relevantly ambiguous, "the next rent review date" in clause 5.21 is clearly the rent review date after the relevant review date, in this case 25 January 2017.
The cases relied upon by the appellant, Domino's Pizza v Seldex and Bayclould v Dowling Investments, related to leases which were worded quite differently to the lease between the tenant and the respondent in this case and in our view are of no assistance in relation to the different wording of that lease.
We agree with the submission on the part of the appellant that the possibility that a tenant (or landlord) cannot be certain there will not be a market rent review for as long as twelve months after the rent review date would be commercially inconvenient. However we do not consider that that result would be so unreasonable, so capricious or so contrary to "business common sense" that, other things being equal, it could require what we consider to be the clear meaning of the words of clause 5.21 to be disregarded.
However, that is not the end of the analysis.
The uncommercial consequence identified by the appellant could not arise if clause 5.13 of the lease were construed as a pre-condition to the operation of the market review provisions in clauses 5.14 to 5.21. In other words, if a market review could only take place in circumstances where either the lessor or the lessee has informed the other in writing at least 60 days before the rent review date of the rent that the lessor or lessee thinks would be the current market rent at the review date, then there is no possibility that the tenant (or landlord - we note that the rent at a market review might go up or down) might be left unaware for as long as 12 months after the rent review date that the rent might change with effect from the market rent review date.
The Tribunal Member in paragraph 14 of his decision expressly found:
"It should be noted that clause 5.13 regarding either party informing the other as to what might be that party's view of the current market rent is not a strict obligation on either party to do so. It states quite clearly that either party 'can inform the other'. Therefore failure to comply with this clause or to have discussions prior to the market review date does not necessarily affect the appointment of a valuer".
The appellant did not by its Notice of Appeal challenge the Tribunal Member's finding as to the meaning of clause 5.13 and when the Appeal Panel raised this issue with Mr Brent at the hearing, he expressly disavowed any challenge to that finding.
However, the Tribunal, including an Appeal Panel, is required by s 36 of the NCAT Act to seek to give effect to the guiding principle set out in s 36(1) "to facilitate the just, quick and cheap resolution of the real issues in the proceedings".
The NCAT Act also provides in s 38:
(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:
(a) to ensure that the parties to the proceedings before it understand the nature of the proceedings, and
(b) if requested to do so - to explain to the parties any aspect of the procedure of the Tribunal, or any decision or ruling made by the Tribunal, that relates to the proceedings, and
(c) to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings.
…
Section 53 of the NCAT Act provides:
(1) The Tribunal may, in any proceedings, make any amendments to any document (for example, an application or appeal) filed in connection with the proceedings that the Tribunal considers to be necessary in the interests of justice.
(2) Any such amendment may be made:
(a) at any stage of the proceedings, and
(b) on such terms as the Tribunal thinks fit,
but may only be made after giving notice to the party to whom the amendment relates.
…
As an Appeal Panel held in Cominos v Di Rico [2016] NSWCATAP 5 at [12]-[13]:
12 The Appeal Panel must give effect to the guiding principle when exercising functions under the CAT Act, which is to "facilitate the just, quick and cheap resolution of the real issues in the proceedings" (s 36(1)). This is reinforced by s 38(4) which provides that the Tribunal is required 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."
13 It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice."
Although the parties in this appeal are legally represented, we consider that the guiding principle and the requirements of s 38 warrant the Appeal Panel considering whether the Tribunal Member's finding in paragraph 14 is correct.
Accordingly the Appeal Panel made directions for the filing of submissions concerning two issues:
(1) Whether the Tribunal Member's conclusion in paragraph 14 of the Member's decision of 20 July 2016 is correct, or whether notification by one party, at least 60 days prior to the rent review date, of the rent that that party thinks will be the current market rent at the review date, in accordance with clause 5.13 of the Lease between the parties, is a precondition to the operation of the subsequent provisions of the Lease, including clause 5.16; and
(2) Whether there is any reason why the Appeal Panel should not address that issue.
The respondent filed submissions on 16 January 2017. The appellant filed submissions in response on 27 January 2017.
The respondent submitted that the Member's conclusion in paragraph 14 was correct. The respondent's submissions placed emphasis upon the use of the word "can" in clause 5.13 of the lease. The respondent contrasted clause 5.13 with other clauses in the lease, such as [emphasis added]:
Clause 5.1, which provides:
"the lessee must pay to the lessor or as the lessor directs";
Clause 5.3, which provides:
"a payment under clause 5.1.2 must be paid on the next rent day after a request for payment is made by the lessor. A request for payment can be made…";
Clause 5.5, which provides:
"The lessee must continue to pay rent at the old rate until the new rate is known"; and
Clause 5.15, which is set out in paragraph 3 above.
The respondent submitted:
"At least within clause 5, unless the context clearly demands otherwise, the meanings of both 'can' and 'must' should be consistent.
The use of the word 'can' in clause 5.3 and 5.13 should therefore be distinguished from the use of 'must' in clauses 5.1 and 5.3 and 5.5".
The respondent relied upon the decision of the Full Court of the Federal Court in Myers v Pioneer Concrete [1997] ANZ ConvR 331; (1997) V ConvR 54-363 which held that the use of the terms "shall" and "will" in a rent review clause imposed an obligation upon the landlord to initiate a market rent review. The respondent noted that, in Myers, Lockhart J had:
"distinguished the case of AMP Society v National Mutual Life Assurance of Australia Limited [1995] NZLR 581 … where the use of the word 'may' demonstrated that the rent review regime was not compulsory. Specifically it was distinguished on the basis that there was no specific use of an imperative within the clause."
The respondent submitted:
"The rent review regime being considered in these proceedings allows either party to initiate the process"
and
"Clause 5.13 is a permissive though not obligatory regime. There is no pre-condition to the operation of clause 5.16 included within clause 5.13."
In respect of the second issue upon which the Appeal Panel sought submissions the respondent submitted:
"The respondent contends that in the absence of the appellant having challenged the conclusion at paragraph 14 of the Member's decision there is no need for the Appeal Panel to consider the first question."
The appellant, in response, submitted that:
"the Tribunal Member's conclusion in paragraph 14 of the Member's decision of 20 July 2016 is incorrect".
The appellant submitted:
"The process in 5.13, 5.14 and 5.15, is preparation for negotiations 60 days and 30 days before rent review date on the 25 January 2016.
It clearly states in 5.15: 'If the lessor and lessee do not agree on the new rent 30 days before the rent review, the current market rent will be decided by a valuer'."
The appellant's submissions otherwise generally repeated her submissions at the hearing which were directed to the proper interpretation of clause 5.21.
As we have recorded above, we do not consider that the Tribunal Member erred in his construction of clause 5.21. However, we do consider that the Tribunal Member's conclusion regarding clause 5.13 was incorrect.
It is correct to say, as the respondent submits, that there is no obligation on either the landlord or the tenant to notify what they believe will be the market rent at least 60 days prior to the market rent review date. But it does not follow that, in circumstances where neither the landlord nor the tenant does notify a proposed market rent, the subsequent provisions relating to market review should be operative.
In our view the notification by either party of a market rent in accordance with clause 5.13 is the trigger for and an essential pre-condition to the operation of the subsequent market rent review provisions. It would in our view be quite incongruous, and contrary to commercial or business common sense, that a market rent review taking effect from the rent review date may be triggered by the service of a request for the nomination or appointment of a valuer by one party without any prior notification or warning, as long as 364 days after the rent review date.
There is nothing in the wording of clause 5 which requires that it be so interpreted. There is nothing in either of the decisions relied upon by the respondent, Myers v Pioneer Concrete and AMP v National Mutual which requires clause 5 be so interpreted. The use of the word "can" in clause 5.13 is clearly intended to indicate that neither party is obliged to initiate a market rent review but that either party may do so. That conclusion is consistent with both of those decisions.
As the appellant pointed out, it is not reasonable that a tenant (or landlord) should not know for as long as 12 months after the market review date, whether their rent is likely to change with effect from the market review date. The requirement for a formal triggering of a market rent review via the clause 5.13 mechanism ensures that both parties know a market rent review will occur and provides incentive to the parties to expedite the process in order to obtain certainty as to the rent. If the parties fail to expedite the process, clause 5.21.1 is a back-stop to ensure that the entitlement to a rent review will lapse if neither party has sought the appointment of a valuer after 12 months.
Contrary to the Member's conclusion in paragraph 14 of his decision, we do not agree that the use of the word "can" in clause 5.13 has the effect that the giving of notice pursuant to clause 5.13 is not an essential step in the process if either party does seek a market rent review.
The consequence of the foregoing conclusion is, on the agreed facts before the Tribunal at first instance (reflected at [4] of the decision under appeal), that, neither party having notified a market rent in accordance with clause 5.13 at least 60 days before the rent review date on 25 January 2016, there should be no market rent review at 25 January 2016.
Although the issue which we find determinative of the appeal in the appellant's favour is not an issue raised by the Notice of Appeal and was disavowed by the appellant's solicitor at the hearing, the appellant now seeks to rely upon it. The respondent submitted that the Appeal Panel should not consider the issue, but did not point to any respect, beyond its impact on the outcome of the appeal, in which the consideration of the issue would prejudice the respondent.
As McColl JA, with whom Ward JA and Tobias AJA agreed, held in Mamo v Surace (2014) 86 NSWLR 275 at 289:
[75] A party is bound by the conduct of his or her case. It has long been the law that, except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him or her, to raise on appeal (even one by way of rehearing) a new argument which, whether deliberately or by inadvertence, he or she failed to put during the hearing when there was an opportunity to do so: Coulton v Holcombe (1986) 162 CLR 1 at 7-8 per Gibbs CJ, Wilson, Brennan and Dawson JJ; approving University of Wollongong v Metwally (No 2)(1985) 59 ALJR 481 at 483; Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598.
[76] There are recognised exceptions to the principle that a party is bound by the conduct of his or her case. Thus, there are cases which recognise that when a question of law is raised for the first time in an ultimate court of appeal (as well as an intermediate court of appeal), as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided: O'Brien v Komesaroff (1982) 150 CLR 310 at 319 per Mason J; Coulton v Holcombe at 8. This exception will not apply where, if the new ground could possibly have been met by calling evidence at the hearing or if, had the ground been raised below, the respondent might have conducted the case differently at trial: Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645 per Mason P (Gleeson CJ and Priestley JA agreeing).
[77] The particular circumstances of each case must be considered,"with due recognition that mistakes occur, that second thoughts are sometimes good thoughts, and that the appellant is entitled to justice; but extending justice to an appellant who has failed to take a point at the trial may work an unacceptable injustice on the respondent": Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 at [18] per Giles JA (Mason P and Priestley JA agreeing).
Having regard to the guiding principle and the provisions of s 38 of the NCAT Act, we consider that we should permit the issue to be raised. It is a pure point of law, being one of construction of the lease. Further, in light of the agreed facts before the Tribunal at first instance, there could be no evidence led to meet the point.
The lease in question is a standard form lease. It appears to us that it would be inappropriate that the appeal should be determined on a basis which reflects an erroneous interpretation of the lease and we consider that it is "expedient in the interests of justice" that the question should be decided. It cannot be said that the appellant "failed to take the point at trial" or that the issue could have been met by calling evidence.
We will therefore allow the appeal and set aside the order for the appointment of a valuer.
The orders which should be made are:
1. Appeal allowed.
2. Order 1 made by the Tribunal in proceedings COM 16/19034 and COM 16/23621 is set aside.
3. Order instead:
1. In proceedings 16/19034: Application dismissed.
2. In proceedings 16/23621: Declare that the monthly rent payable in respect of Shops 4 and 5, 30 Paringa Avenue, Davistown NSW will remain unchanged at the rent review date 25 January 2016.
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
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Decision last updated: 28 February 2017