Seacrest Pty Ltd & Anor v Apriaden Pty Ltd [2000] VSCA 75

Seacrest Pty Ltd & Anor v Apriaden Pty Ltd [2000] VSCA 75 - VSCA 2000 case summary — Zoe

[8]

The argument put forward by the tenant was founded on the fact that the notice required by sub-s.(3) was never given to it by the landlord. To simplify matters it can be assumed - since the validity of the assumption will not affect the outcome of the arbitration or the litigation - that the date after which the option was no longer exercisable was 31, not 30, January 1998. On this assumption sub-s.(3) required the landlord to give the notice mentioned in it at least three months before 31 January 1998. This was not done: in fact, as I have said, no notice was ever given under sub-s.(3). The argument put by the tenant in support of its contention that the arbitrator had jurisdiction to determine the matters which it wanted determined was that, the landlord having failed to notify the tenant as required by sub-s.(3), the effect of sub-s.(4) was to extend the term of the lease, so that it was still on foot. The arbitrator having rejected this argument, the tenant applied under s.38(4) of the Commercial Arbitration Act 1984 for leave to appeal under s.38(2) on what was said by it to be three questions of law arising out of the interim award. Leave was granted in respect of the first two questions but refused in respect of the third. The judge disposed of the appeal at the same time as the application for leave, allowing the appeal and setting aside the arbitrator's declaration that the lease terminated by effluxion of time on 30 April 1998 and his decision that he had no jurisdiction under the Retail Tenancies Act to determine any other disputed matter save the matter of costs and fees, and remitting the proceeding to the arbitrator, to be determined according to law. Section 38(3) empowers the Court, on the determination of an appeal under sub-s.(2), to confirm, vary or set aside the award or to remit the award, together with the Court's opinion on the question of law, to the arbitrator for reconsideration; where the award is remitted the arbitrator is required, unless the order otherwise directs, to make the award within three months. Here the order varies the award and remits "the proceeding" to the arbitrator for determination according to law. Neither the notice of appeal nor the landlords' outline of submissions raises any question about the form of the order made by the judge. The three month period allowed by s.38(3) expired a considerable time ago.

[16]

"In my view, the clear intent and operation of sub-sections 14(3) and (4) is to require, with a sanction, the tenants be notified effectively of the last date for the exercise of an option to renew. The sanction for failing to give a proper notice is provided for in sub-section 14(4), the sanction being that the lease term continues to run on and then will only terminate as a result of the giving by the landlord of the notice required under sub-section 14(3). When this notice is given the lease continues until 3 months after the required notice is given (sub-section 14(4)). Clearly the intention of these provisions is to enable a tenant to consider its position with respect to renewal, to have three months to do so and in order to accommodate this position the lease term continues. However, there is no express provision in section 14 to deal with the situation where a tenant, which has not been provided with a notice as required under sub-section 14(3), nevertheless exercises the option to renew within the time limited by the lease. In my view, it would be absurd to regard sub-sections 14(3) and (4) as continuing the lease term until a formal notice as required by sub-section 14(3) had been given regardless of the fact that the particular tenant was perfectly well aware of the last date for the exercise of the option, arranged its affairs on this basis, and ultimately did exercise the option to renew. None of the evils to which this ameliorating provision is apparently directed would arise. The lease has been renewed and, in these circumstances, there is no warrant to apply the provisions of sub-sections 14(3) and (4) for to do so achieves nothing in terms of the purpose of these provisions. Further, there is a difficulty if the exercise of the option by a tenant in the absence of a notice under sub-section 14(3) does not render these provisions superfluous. This position can be tested by considering the situation which follows the exercise of an option to renew. In general terms, the effect is to create a new lease and a new lease term commencing from the expiry date of the Lease which is being renewed (see Gerraty v. McGavin[5]; see also Commercial Tenancy Law in Australia 14.1). If it were the position that even on the exercise of an option to renew in the absence of any notice having been given as required by sub-section 14(3) of the Act sub-section 14(4) would operate to extend the lease term the result would be more than one lease term subsisting; as a result of the combined effect or operation of the exercise of the option to renew and sub-section 14(4) of the Act. For all these reasons, it follows, in my view, that once an option to renew is exercised the operation of sub-sections 14(3) and (4) is complete in the sense that they have no further work to do. Further, the actual exercise by a tenant of an option to renew, and within time, clearly indicates that the tenant does have actual knowledge of its entitlement to renew the lease under the option provision and of the time limitations on that right. The objectives of the statute have been achieved and there is nothing further to be gained, in terms of the objectives of the Act, for their operation to continue. On the basis of the above I am of the opinion that although the Tenant did not receive a notice under sub-section 14(3) of the Act at any time there ceased to be any requirement to provide such notice, or sanction for failing to provide such notice, as soon as the Tenant exercised, or purported to exercise, the option to renew on 29 January 1998."

[21]

A little earlier I set out the arbitrator's conclusion that "there ceased to be any requirement to provide such notice, or sanction for failing to provide such notice, as soon as the Tenant exercised, or purported to exercise, the option to renew on 29 January 1998". The arbitrator did not state in precise terms what implication was in his view to be made, as a matter of statutory construction, by way of limiting the operation of sub-s.(3) or sub-s.(4). It is in this case unnecessary to decide what effect, if any, there might be, as a matter of implication, on the operation of sub-ss.(3) and (4) if a tenant gave notice of exercise of option at a time when the landlord had not given notice under sub-s.(3) and at a time when the last day for the giving of such a notice by the landlord had not yet arrived. It is also unnecessary to decide whether, on that hypothesis, any distinction should be drawn between exercises of option which were good both in manner and form and in substance and exercises of option which were ineffectual for one reason or another. For the present case is not one in which any notice of exercise of option was given before the last day on which the landlords could comply with their obligation under sub-s.(3). It is clear that they did not comply with that obligation or, putting the matter another way, it is clear that the case is one in which, to use the words of the clause by which sub-s.(4) is introduced, a landlord had failed to notify a tenant as required by sub-s.(3). Those introductory words state the only express condition of the operation of sub-s.(4). In the present case, the only express condition of the operation of sub-s.(4) having been fulfilled, the sub-section is to operate according to its tenor unless it can be said that some event has occurred which, on the proper construction of the section, is by implication to have some effect that can be precisely stated by way of cutting down the operation of the sub-section: Mills v. Meeking[6]; Bermingham v. Corrective Services Commission of New South Wales[7].

[22]

Sub-section (4) operates in two ways. By what I might call its first branch, it operates, in effect, by way of varying of the provisions of the lease: the lease is to be taken to provide that the last day for the exercise of the option is the day that is three months after the landlord gives the notice required by sub-section (3). The second branch of sub-section (4) does its work, not by way of varying the provisions of the lease, but by way of providing what the operation or effect of the lease is to be: if the date which the lease is to be taken to fix as the last day for exercising the option is later than the date of the expiry of the term of the lease, the lease is to continue until that date unless the tenant determines it pursuant to sub-s.(9). As regards the first branch of sub-s.(4), I find it extremely difficult to see how it could be said that, by implication from the suggested purpose of the section, some subsequent event is to affect the reforming of the lease which has already occurred by force of sub-s.(4): the lease is to be taken to make a certain provision, and I should have thought that it must be taken to continue to make that provision notwithstanding later events. I am not sure whether the arbitrator, in speaking of the sanction for failing to give the notice required by sub-s.(3), had in mind the first branch of sub-s.(4), or the second, or both branches. As regards the second branch of sub-s.(4), what is the suggested event upon the occurrence of which the operation of sub-s.(4) is, by implication, to be affected, and in precisely what way is the operation to be affected? As to the second question (how is the operation of sub-s.(4) affected?), is the term of the lease to expire immediately upon the occurrence of the event (assuming that it would already, but for sub-s.(4), have expired)? As to the first question, what is the event which it is suggested in this case has affected the operation of sub-s.(4)? It is certainly not the effectual exercise of the option of renewal, for on the unchallenged determination of the arbitrator the purported exercise, although good in manner and form, was ineffectual by reason of breaches of covenant.

At a glance

Court

Decision date

Before

Source

Judgment (47 paragraphs)

Parties

Cases Cited (1)