Shimden Pty Ltd v Park Pty Ltd

The terms of the lease

1. The lease was entered into between Shimden as lessor and Manildra Park Pty Ltd as lessee. Manildra Park Pty Ltd is the former name of Park. The premises the subject of the lease are described as Lot 1 of DP812895. Although the term of the lease is expressed on the front page to be 7 years, the lease had a commencement date of 1 December 2008 and a terminating date of 30 November 2014, a period of 6 years. Nothing turns on that discrepancy. Notwithstanding the length of the lease term, the lease was never registered. As already mentioned, the lease contained an option to renew for a further term of 7 years, which option was exercised by Park.
2. Payments of rent are dealt with in cl 7 of the lease which provides: 7 RENT PAYMENTS 7 The Lessee covenants to pay rent as specified in Item 11 in the Reference Schedule (a) ([sic]by an initial payment in advance on the date for commencement of rent to the ninth day of the next month and then by monthly payments in advance on the ninth day of each month, each payment being one-twelfth of the annual rent then due as fixed or varied under this Lease; (b) without demand by the Lessor; (c) by cash or cheque, or if required by the Lessor by banker's order on the Lessee's bank, or by depositing or transferring the payments into an account as directed by the Lessor; (d) to, or as direct [sic] by, the Lessor, which may be altered by the Lessor by written notice served on the Lessee. Item 11 in the Reference Schedule ("the Schedule") provides, by a combination of printed words and handwritten figures: Item 7 (cl 7) Rent is $232003.20 Payable by equal monthly installments [sic] of $19333.60 on Ninth Day of each month. It will be noticed that the figures $232,003.20 and $19,333.60 are not expressed either to be inclusive of GST, or exclusive of GST.
3. However, cl 10(4) provides: Goods and Services Tax (GST) 10(4) Notwithstanding any other provision of this lease, the Lessee agrees that, if any tax in the nature of a goods and services tax or like impost ("GST") is assessed or imposed on the Lessor in respect of anything supplied by the Lessor to the Lessee under or in connection with this Lease or in connection with the grant, assignment, or surrender of this Lease ("GST amount"), then the Lessee must pay to the Lessor an amount on account of all GST amounts at the same time as making any payments in respect of which the Lessor is liable to pay the relevant GST amount such that the net amount received by the Lessor under this Lease remains the same whether the Lessor is liable to pay GST or not. For the purposes of calculating the GST amount, any entitlements that the Lessor may receive or be entitled to receive in the nature of import tax credits or other credits or reimbursements (however described) in respect of any GST paid or payable whether arising under or in connection with this Lease or otherwise, are to be excluded. The Lessee covenants to keep the Lessor fully indemnified in respect of any GST liability arising in connection with the grant, assignment or surrender of this Lease.
4. The subject of rent review is dealt with in cl 9 of the lease. Clause 9 relevantly provides: 9 RENT REVIEW Review date 9(1) The annual rent shall be reviewed at the dates in Item 12 in the Reference Schedule (each called "Review Date"). Rent subject to CPI adjustment 9(2) The rent will be reviewed on the dates specified in Item 12. The rent payable by the tenant for the year following each date of review will be determined: (a) in the case of the first review, by multiplying the rent payable on the Commencing date of the term by a fraction of the numerator of which will be the Price Index applicable on the date of review and the denominator of which will be the Price Index applicable on the Commencing date of the term, and (b) in the case of each and every review subsequent to the first review by multiplying the rent payable for the year immediately prior to the date of review by a fraction the numerator of which will be the Price Index applicable on that date of review and the denominator of which will be the Price Index applicable on the immediately preceding date of review. The rent payable for the year following the date of review will in no case be less than the rent payable for the year immediately preceding the date of review. In this clause Price Index means the All Groups Consumer Price Index applicable to Sydney kept by the Commonwealth Statistician and in the event of such Price Index being discontinued or abolished then such Price Index as the Commonwealth Statistician substitutes for it and if no Price Index is substituted for it by the Commonwealth Statistician, then any Price Index kept by the Commonwealth or New South Wales Statistician as the landlord may in its absolute discretion select. Market Review Lessor's assessment 9(3) the Lessor shall, at a date not less than the number of days in Item 12 in the Reference Schedule prior to a Review Date, serve on the Lessee written notice of intention to increase the yearly rent from the Review Date and of the Lessor's reasonable assessment of the current market rent of the Leased Premises at the Review Date. Lessee's entitlement to have rent reviewed 9(4) If the Lessor has not served a written notice on the Lessee in accordance with clause 9(2) [sic] before a Review Date, the Lessee may serve on the Lessor written notice of the Lessee's intention to have the rent reviewed and requiring the Lessor to serve on the Lessee within thirty (30) days after service of the Lessee's notice the Lessor's reasonable assessment of the current market rent of the Lease Premises at the Review Date. Acceptance of Lessor's assessment 9(5) The Lessee may accept the Lessor's assessment and in that event the assessed amount shall be the rent from the Review Date. Determination of current market rent 9(6) (a) If the Lessee fails or refuses to accept the Lessor's assessment within thirty (30) days after service of the assessment or if the Lessor fails to provide an assessment or if they are unable to agree within that period on some other amount as the current market rent at the Review Date, the current market rent shall be determined in accordance with this clause. (b) If the parties agree on the current market rent after it shall have been referred for determination in accordance with clause 9(7), that determination shall cease and the valuer shall cease to have any further functions under this clause. … Cost of Rent determination 9(11) The parties shall bear equally the total costs of the rent determination at each Review Date including the cost of any aborted rent review. Each party shall bear its own costs of legal representation, the fees of any experts and for making valuations for the purposes of written submissions. Late rent reviews 9(12) (a) Except as provided in paragraph (b), the current market rent may be determined from a Review Date even if the review is instituted after that Review Date. (b) In the event of the parties having failed to institute a rent review to determine the rent from a Review date in any of the situations specified in this paragraph, then the existing rent shall continue to be the rent for that review period, and thereafter neither party may have the current market rent determined for that period. (i) after a later Review Date has arrived; (iii) after the expiry of the lease term, in respect of any Review Date within that term; (iv) during the last six calendar months of the lease term in respect of the last Review Date within that lease term. Rent payments 9(13) if the current market rent from a Review Date shall not be determined until after that Review Date: (a) The Lessee shall continue to pay the current installments [sic] of rent due until the new rent is determined. (b) When the rent is determined, the Lessee shall pay the additional amount (if any) due for rent from the Review Date to the date when the next monthly installment [sic] of rent is payable on the rent day next succeeding the expiration of thirty (30) days after the date when the Lessee is informed of the rent determination. (c) If the nominee determines the rent at an amount which is less than the rent that was payable immediately before the review date, then the rent payable from the review date shall be identical to the rent payable immediately before the review date, until a higher rent shall be determined at a later review date.
5. Item 12 in the Schedule identifies the Review Dates for the purposes of cl 9(1) as: CPI Review on each anniversary of date of commencement. Item 12 also includes the following: Service of Lessor's intention for rent review, not before Sixty (60) days; (cl 9(2)) The reference to cl 9(2) would appear to be erroneous. It is cl 9(3) that provides for service of a lessor's notice of intention, not cl 9(2).
6. I note that the lease also provides for the rent for a renewed lease to be determined in accordance with the procedure that is set forth in cl 6(6)(b) of the lease. Further, cl 6(7)(a) provides that after the option is exercised and until the rent for the option term is determined, the lessee must continue to pay the rent and outgoings as and when payable under the lease at the rate at which they are payable during the last year of the lease term.
7. Outgoings are dealt with in cll 10(1) to 10(3), which provide: Lessee's contributions to rates, taxes and insurance 10(1) (a) The Lessee shall pay to the Lessor the Lessee's percentage of rates, taxes and insurance (called "outgoings") specified in Item 13 in the Reference Schedule for the term of this Lease. (b) The amount of outgoings shall be assessed by the Lessor for each annual period ending on the day in Item 13 in the Reference Schedule (called "annual period"). (c) The proportion attributable to parts of an annual period shall be calculated on the basis of the Lessor's assessment of outgoings for the annual period and is payable by monthly installments [sic]. (d) The lessee will be paying 80% of the rates, taxes and insurance in addition to the rent payment. Rates, taxes and insurance 10(2) (a) In this clause "rates and taxes" means all rates, taxes, charges and impositions, currently and in the future, payable to any local government, statutory or public authority or corporation, in respect of the property, the Building or the Leased Premises including (i) municipal, local and other rates and charges payable to a local authority; (ii) rates and charges for the supply, reticulation or discharge of water (including excess water), sewerage, drainage and removal of waste; (b) In this clause "insurance" means the insurance costs and charges paid by the Lessor in respect of risks to or in connection with the property and the Building and its use, control and management, which the Lessor reasonably considers necessary to cover by Insurance. Payment of Lessee's contribution 10(3) (a) At least thirty (30) days before the commencement of an annual period the Lessor shall provide to the Lessee an itemised estimate of the outgoings payable during or attributable to the next annual period, and calculations of the Lessee's percentage and the monthly installments [sic] payable by the Lessee. (b) When during an annual period some additional rate or tax is charged, the Lessor may reassess the Lessee's contribution and require the Lessee to pay it by monthly installments [sic] during the appropriate annual periods. (c) The Lessee's contributions to outgoings are payable monthly together with the rent. (d) Within the number of days an Item 13 in the Reference Schedule after the end of an annual period the Lessor shall provide to the Lessee an itemised statement of the total outgoings paid by the Lessor during or attributed to that annual period, verified as correct by the Lessor's accountant or auditor. (e) The Lessor's itemised statement is prima facie evidence of the outgoings during an annual period. (f) Within thirty (30) days after the receipt by the Lessee of an itemised statement, the parties shall adjust the contributions for the previous annual period and pay any balance due from the Lessee or refund for overpayment due from the Lessor. Item 13 in the Schedule provides that the lessee's percentage of outgoings is 80%. It further provides that the "annual period" is a period ending on 30 June in each year, and that the lessor's itemised statement of total outgoings is to be provided by 30 June in each year.
8. It should also be noted that the lease contains restrictions upon assignment of the lease and upon sub-letting. Clause 39 relevantly provides: PART 8 - ASSIGNMENT AND SUBLETTING 39 Prohibition against assignment, subletting and mortgage over lease Prohibition of dealings 39(1) During the continuance of this Lease, in respect of whole or part of this Lease or the Leased Premises, the Lessee shall not: (a) assign, transfer, sublet, deal with, hold on trust, or grant any interest in, this Lease; (b) mortgage, charge or encumber this Lease; (c) part with possession of whole or any part of the Leased Premises; (d) grant any licence, or share the right of occupation or possession, in respect of whole or part of the Leased Premises; (e) grant any franchise or concession over the Lessee's business conducted at the Leased Premises which would entitle any other person to use, occupy or trade from whole or part of the Leased Premises. Consent to assignment 39(2) The Lessee may apply to the Lessor for consent to the assignment of this Lease, which shall not be unreasonably withheld if the following conditions precedent are satisfied: …
9. The lease was executed by Mr Demian on behalf of Shimden. It was executed by Mr Nicholas Fletcher (the brother of Brett Fletcher) on behalf of Park. Nicholas Fletcher was then a director of Park. He died in June 2019. Brett Fletcher became a director of Park in July 2019.

Summary of salient events following commencement of the lease

1. It seems to be common ground that after the lease commenced and until about October 2017, Shimden or agents acting on its behalf issued monthly invoices to Park in respect of rent. Some but not all of the invoices were adduced in evidence. It also seems to be common ground that all of the invoices contained requests for payment of rent in the amount of $19,333.60 inclusive of GST. Mr Demian gave evidence to the effect that in this respect the invoices were mistaken. Mr Demian also gave evidence that, by oversight, Shimden failed to claim increases in rent each year according to movements in the CPI.
2. An example of an invoice issued to Park is the tax invoice dated 1 August 2009, issued by Merchant Project Marketing Pty Ltd as agent for Shimden. The invoice included the following: Description of rental: Amount Rental Invoice for Property - Convenience Store 2 Rawson Rd, Granville Workshop Rent for Period 1st June 2009 - 30th June 2009 $3,000.00 Rent for Period 1st August 2009 - 30th August 2009 $14,576.00 GST: $1,757.60 Total Inc GST: $19,333.60 Payment due date: Amount Applied: $0.00 1st August 2009 Balance Due: $19,333.60

1. Park commenced, and continued, to pay rent in the amounts referred to in the invoices.
2. Brett Fletcher deposed that in his position as Operations Manager his duties included managing the service station, reviewing leases and sub-leases, and dealing with sub-lessees. He deposed that he read the lease at or around the time it was signed, and became aware of its provisions. He agreed in cross-examination that he read the lease for the purpose of trying to understand its terms, including as to what had to be paid. He later agreed that when he read the lease he became aware of cl 7, which stated that rent was payable without demand by the lessor, and also cl 9, which provided for yearly rent increases in accordance with the CPI. He said that when he read the Schedule he saw that the rent was a yearly amount of $232,003.20, payable by monthly instalments of $19,333.60. Brett Fletcher did not accept that he had to determine at that stage whether the amount was "plus or minus GST". He said, in effect, that Park "knew it was including GST" and that this was "confirmed" when the first invoice was sent. He said that the first invoice was "as we expected" and "that continued". Later, Brett Fletcher agreed that he read the lease "as being GST included". He gave a number of answers to the effect that this understanding was derived (at least to some extent) from conversations he had with his brother.
3. Brett Fletcher gave evidence that, from 2008, Park received Council rate notices directly from the Council, and water rate notices directly from Sydney Water, and that these rates were fully paid by Park.
4. Mr Demian agreed in cross-examination that during the first year of the lease he became aware that Sydney Water and the Council began sending rate notices directly to Park. Mr Demian suggested that as far as Sydney Water is concerned, this was the result of a request made by Park, and as far as the Council is concerned, it came about somehow in the course of correspondence between Park and the Council about environmental issues at the site. In any event, Shimden took no steps to alter the situation. Park continued to meet the Council and water rates. There is no evidence that Shimden ever issued itemised estimates of outgoings, or itemised statements of outgoings, as contemplated by cl 9 of the lease.
5. On 18 November 2011, Nicholas Fletcher sent an email to Mr Demian in the following terms: Could you please confirm in writing you give us permission for the following two points; 1/ We can sub lease the Grandville [sic] work shop to a mechanic. 2/ We can sub lease the Grandville [sic] service station.
6. Mr Demian responded by email later that day in the following terms: As per lease terms, I authorize the sub-leasing of the Work Shop and Service Station as requested. For clarity you will remain the head lessee and will enforce all compliances as per terms of lease agreement.
7. There is no evidence of any further communications between the parties about a sub-lease.
8. However, Brett Fletcher gave evidence that Park sub-leased part of the premises to J & R Nader Pty Ltd ("Nader") during the period from August 2012 to October 2016. He agreed in cross-examination that he had no part to play in the negotiation of this sub-lease. An unexecuted form of sub-lease is in evidence. It provided for a sub-lease of part of Lot 1 in DP812895 for an annual rent of $171,312 plus GST. That amount is equivalent to $188,443.20, or $15,703.60 per month. The plan annexed to the sub-lease indicates that the sub-demise was of the whole of the premises except for a workshop and associated areas. Brett Fletcher deposed that the rent was calculated on the rent payable under the headlease (which he understood to be $232,003.20 inclusive of GST) by reference to that part of the premises sub-leased to Nader. Brett Fletcher further deposed that at some point Nader began paying rent of $3,360 per month for the workshop in addition to the $15,703.60 paid for the service station. That makes a total of $19,063.60 per month (not the $19,333.60 as calculated by Brett Fletcher and as referred to in his affidavit).
9. By cl 2.1 of the sub-lease, the sub-lessee was obliged to observe those terms of the headlease relating to the lessee (Park) which are not inconsistent with the terms of the sub-lease. Amongst other things, the sub-lease provided for annual reviews of rent to CPI, and for the sub-lessee to pay 80% of outgoings payable by the sub-lessor. Brett Fletcher deposed that Nader made payments to Park for the Council rates and water rates for the premises.
10. On 3 November 2014, Park sent a letter to Shimden in relation to the option to renew. The letter was in the following terms: Please be advised that I would like to exercise the seven year lease option for the above property. Could you please reply by return confirming acceptance and acknowledgement.
11. There is no evidence that any written confirmation of acceptance and acknowledgement was provided by Shimden as requested. Nor is there any evidence that the parties took any steps towards the issuing of a new lease, including by determining the rent for the new lease in accordance with cl 6(6)(b).
12. On 1 November 2016, Park entered into a sub-lease of the premises (the whole of Lot 1 in DP812895) to JJW Petroleum Pty Ltd ("JJW") for a term commencing on 1 November 2016 and terminating on 30 November 2021. The rent under the sub-lease was $210,912 plus GST. That amount is equivalent to $232,003.20, or $19,333.60 per month. The amount accords with what Brett Fletcher says he understood the rent to be under the lease from Shimden (i.e. $232,003.20 including GST). He deposed that the rent under the sub-lease was calculated on that basis.
13. This sub-lease also provided, by cl 2.1, that the sub-lessee was obliged to observe those terms of the headlease relating to the lessee (Park) which are not inconsistent with the terms of the sub-lease. The sub-lease further provided for annual reviews of rent to CPI, and for the sub-lessee to pay 100% of outgoings payable by the sub-lessor.
14. Mr Demian deposed that shortly before 7 October 2017 he conducted a review of the lease and became aware that Park had not been paying the correct rent and outgoings. He says that he caused a letter that canvassed the issue, dated 7 October 2017, to be sent to Park. Mr Demian gave further evidence about this letter in the witness box. Park denies receiving the letter. Notwithstanding Mr Demian's evidence about approving the letter and giving an instruction for it to be sent by email, I am not satisfied that it was actually sent. The copy of the letter is not signed, and no electronic data has been adduced in evidence to suggest that it was sent by email.
15. In any event, it seems likely that another letter that canvassed the issue was sent by email to Park on 6 February 2018. Park also denies receiving that letter, but the electronic data evidence (at Exhibit A1 page 361 and Exhibit B) indicates that it was sent by email to an address used by Park. The likelihood is that the letter was received.
16. Before setting out parts of the letter, I note in passing that on about 22 November 2017 Park received a notice from the Australian Taxation Office ("ATO") which stated that, because Shimden owed a very substantial amount to the ATO, Park was required to make payment of amounts it owed to Shimden directly to the ATO. Park thereafter continued to make monthly payments of rent in the amount of $19,333.60, but paid the money to the ATO in accordance with the notice.
17. The 6 February 2018 letter sent by Shimden to Park included the following: We have conducted a review of the lease and have determined that the current rental being paid is below the correct rent as calculated under the lease dated 1 December 2008. 1. GST As per Clause 10, part 4 of the lease, the Lessee is required to pay to the Lessor GST at the same time as making any payments. The rent in Item 11 of the Schedule, being $232,003.20 per annum, is exclusive of GST. Since the commencement of the lease, the Lessee has failed to pay the GST. 2. Reviews. As per Clause 9 of the lease, the annual rent shall be reviewed as per Item 12 in the Schedule. We note that annual reviews consisted of CPI increases on each anniversary date, as follows: Lease year Calculation of rent with CPI Rent Ex.GST GST Rent incl.GST Monthly rent incl GST 01/12/2008-30/11/2009 232,003.20 23,200.32 255,203.52 21,266.96 01/12/2009-30/11/2010 $232,003.2093.9/92.4 235,769.49 23,576.95 259,346.43 21,612.20 … … … … … … 01/12/2017-30/11/2018 $277,198.63112.5/110.4 282,471.43 28,247.14 310,718.57 25,893.21

… 3. Outgoings We note that as per Clause 10 in the lease, and Item 13 of the Schedule, the Lessee is required to pay 80% of all outgoings. We list here all outgoings for the property, for the last four years, that have not been recovered from the Lessee. We also attach copies of the outgoings for your reference. … Outgoings recoverable for 4 years ended on 30/06/17 (Ex GST) 29,845.08 … Furthermore, as per Clause 10, this year's outgoings, for the period 1/7/2017 to 30/6/2018, is as follows: … Actual outgoing recoverable for year ended 30/06/18 (Ex GST) 11,179.89 … Actual outgoings/month from 01/07/17 1,024.82 Therefore an amount of $1,024.82 is to be added to the monthly rental amount. Total Outstanding Rental, GST and outgoings We set out below a summary of the total outstanding rental due, which is due to outstanding GST, outstanding recoverable outgoings and annual rent reviews. Total Receivable as at 1/02/2018 Rent shortfall receivable for period 1/12/2008 - 30/11/2017 438,044.14 Rent shortfall year to date 1/12/2017-31/01/2018 13,119.23 Outgoings recoverable for past 4 years from 01/07/13-30/06/17 32,829.58 Outgoings recoverable from 01/07/17-31/01/18 ($l,024.82/month*7 months) 7,173.74 Total Receivable as at 1/02/2018 491,166.69 We attach supporting documentation, including land tax notices and insurance premiums, as well as an excel spreadsheet…

1. Park did not accept that it had underpaid any rent or outgoings due under the lease. It continued to pay rent (to the ATO) at the monthly rate of $19,333.60, and continued to meet the Council and water rates.
2. Shimden's solicitors sent a letter to Park dated 13 June 2019 which contained an updated demand for payment of the claimed amounts. Park's solicitors sent a letter in response (on 28 June 2019) in which the allegations of unpaid rent and outgoings were disputed.
3. On 20 June 2019 Shimden entered into a contract for the sale of Lot 1 in DP812895 to Milperra Petroleum Pty Ltd. The contract was completed in August 2019. Shimden's claims for recovery of rent and outgoings are made in respect of the period from 1 December 2008 when the lease commenced, to the date Shimden ceased to be the owner of the premises.

Determination

1. I will first deal with Shimden's claim for outstanding rent. The first issue to consider here is whether, on the true construction of the lease, the rent payable at the commencement of the lease was an annual amount of $232,003.20 plus GST (as contended by Shimden), or $232,003.20 inclusive of GST (as contended by Park). This question is to be determined in accordance with the well-established principles that apply to the construction of written commercial agreements, as set forth by the High Court in cases such as Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[52]; and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16].
2. The rent is primarily determined under the cl 7, which contains a covenant by Park to pay rent as specified in Item 11 in the Schedule. The rent is to be paid by monthly payments in advance, each payment being one-twelfth of the annual rent then due as fixed or varied under the lease. The rent is expressed to be payable without demand by the lessor.
3. As already observed, the figures contained in Item 11 are not expressed to be either inclusive or exclusive of GST. The rent is simply specified as $232,003.20 payable by equal monthly instalments of $19,333.60.
4. It is common ground, however, that the supply made by Shimden to Park under the lease is a taxable supply on which GST is payable. The supply is made for consideration which includes the rent. The consideration for the supply thus includes an amount of money. That amount of money is included in the "price" for the purposes of s 9-75 of A New Tax System (Goods and Services Tax) Act 1999 (Cth), and it follows that the value of the taxable supply for the purposes of s 9-75 is ten elevenths of that amount. So, if the amount of rent is $232,003.20, the value of the taxable supply is $210,912. Section 9-70 of that Act would then operate so that the amount of GST on the taxable supply is 10% of the value of the taxable supply, or $21,091.20.
5. However, cl 10(4) of the lease, which is expressed to apply notwithstanding any other provisions of the lease, operates if GST is imposed on Shimden in respect of anything supplied by Shimden to Park under or in connection with the lease. In that situation, cl 10(4) provides that Park must pay to Shimden "an amount on account of all GST amounts at the same time as making any payments in respect of which the Lessor is liable to pay the relevant GST amount such that the net amount received by the Lessor under the Lease remains the same whether the Lessor is liable to pay GST or not".
6. Clause 10(4) thus appears to provide that Park must, at the same time as it makes any payment of rent (being payments in respect of which Shimden is liable to pay GST), pay an amount to Shimden so that the net amount received by Shimden is the same, whether it is liable to pay GST or not.
7. If the rent is $232,003.20 and GST of $21,091.20 is payable, the net amount received by Shimden would be $210,912. If, however, the rent is $232,003.20 and there was no liability to pay GST, the net amount received by Shimden would be $232,003.20. In these circumstances, it seems to me that cl 10(4) would operate so as to require Park to pay a further amount to Shimden in addition to the specified rent of $232,003.20 so that the net amount received by Shimden after payment of GST would remain $232,003.20.
8. In my opinion, that further amount would be $23,200.32. If that amount were paid, the total amount received by Shimden would be $255,203.52 and the net amount received after payment of GST would be $232,003.20. (The "price" of the taxable supply would become $255,203.52, and the value of the taxable supply would be $232,003.20. The amount of GST payable would be 10% of that value - i.e. $23,200.32.) The net amount received by Shimden after payment of GST would be the same as the amount it would receive if there was no liability to pay GST.
9. In my view, that is the meaning of the language employed by the parties in cl 10(4), read in the context of the lease as a whole, and having regard to the legislative background, notably the GST legislation.
10. So understood, cl 10(4) operates in practical terms to make the total annual rent at the commencement of the lease an amount that is equivalent to $232,003.20 plus GST (or $19,333.60 plus GST per month). This issue is thus resolved in a manner favourable to Shimden. The payments of rent made by Park in the monthly amounts of $19,333.20 inclusive of GST were less than the amounts required to be paid under the terms of the lease.
11. Park seeks to avoid the consequences of that conclusion by raising an estoppel against Shimden.
12. In paragraph 21A to 21F of the Amended Defence, Park assets that the invoices issued by Shimden were issued in accordance with an assumed position or state of affairs that from 1 December 2008 the rent payable under the lease was $232,003.20 p.a. inclusive of GST (or $19,333.60 per month inclusive of GST). The estoppel itself (which is also relevant to Shimden's claims for rent based on CPI increases and Shimden's claims for outgoings) is pleaded in paragraphs 27 to 58 of the Amended Defence. Park says that throughout the term of the lease Shimden only ever invoiced Park for monthly rent of $19,333.60 inclusive of GST, and Park only ever paid that amount. Park further says that Shimden never reviewed and increased the rent in accordance with movements in the CPI, and never provided Park with estimates of outgoings or statements of outgoings. Park says that it only ever paid Council rates and water rates. Park refers to the sub-leases it entered into, in particular their terms concerning rent and outgoings, the fact that Park did not seek to increase the rent in accordance with movements in the CPI, and the fact that the sub-lessees were only ever asked to make payments for Council rates and water rates.
13. It is alleged, in paragraph 53, that Shimden and Park mutually assumed and operated under the position, fact or state of affairs that from 1 December 2008: 1. the rent for the premises was $232,003.20 inclusive of GST p.a. or $19,333.60 inclusive of GST per month; 2. the rent would not be reviewed or increased for adjustments to the CPI; and 3. Park's contribution to outgoings was limited to the payment of Council rates and water rates.
14. In paragraphs 54 and 55 it is alleged by Park: 1. that if Shimden is permitted to withdraw from the assumed position, fact or state of affairs, Park will suffer detriment; and 2. Shimden is thus estopped from denying and departing from it. This estoppel is in the nature of an estoppel by convention.
15. It is then alleged, in paragraphs 56 to 58: 1. that Shimden by its conduct made representations to the same effect as the alleged assumed state of affairs; 2. that acting in reliance on those representations, Park did not seek greater rent under the sub-leases or increases in rent under the sub-leases, or contribution from its sub-lessees to outgoings other than for Council rates and water rates; and 3. that Shimden is thus estopped from departing from the representations. This estoppel is in the nature of an estoppel by representation.
16. I will deal first with the estoppel by convention. In Moratic Pty Ltd v Gordon (2007) NSW Conv R 56-172; [2007] NSWSC 5 at [32] Brereton J (as his Honour then was) stated that to establish a conventional estoppel it was necessary for a plaintiff (in this case Park) to establish: 1. that the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant; 2. that the defendant has adopted the same assumption; 3. that both parties have conducted their relationship on the basis of that mutual assumption; 4. that each party knew or intended that the other act on that basis; and 5. that departure from the assumption will occasion detriment to the plaintiff. That statement of the principles to be applied was approved by Tobias JA (with whom Mason P and Campbell JA agreed) in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [200].
17. Insofar as rent under the lease is concerned, the assumption said to have been adopted in the present case is that from 1 December 2008 (i.e. from the commencement of the lease) the rent under the lease was $232,003.20 p.a. inclusive of GST and that it would not be increased for adjustments to the CPI.
18. Brett Fletcher deposed (in paragraphs 59 and 60 of his affidavit of 31 May 2021) as follows: 59 Based on the Lease, the invoices for rent from Shimden and the payment of rent, council rates and water rates by Park for the Premises, at all times: a. I believed and understood that the rent payable under the Lease was $232,003.20 inclusive of GST per annum ($210,912.00 plus GST) or $19,333.60 inclusive of GST per month ($17,576.00 plus GST); and b. Shimden would not vary or increase the rent; c. Park was only liable for council rates and water rates for the Premises and would not be charged any other outgoings for the Premises. 60 I gained this understanding and belief from the Lease and invoices from Shimden, which I had read, the fact that Park paid for council rates and water rates for the Premises and never charged [sic] any other outgoings for the Premises, which I was aware of from my ongoing review of the records of Park from the commencement of the Lease.
19. I have already referred to Brett Fletcher's evidence about having read the lease, and seeing that it provided for a yearly annual amount of rent of $232,003.20, payable by monthly instalments of $19,333.60. He said that Park knew those figures were inclusive of GST. He said that this was confirmed by the first invoice, and that continued.
20. The evidence given by Brett Fletcher has to be understood in light of the fact that he held the position of Operations Manager and was not a director of Park until 2019. Nonetheless, I am prepared to accept that, at around the time the lease was entered into, Park (through at least Nicholas Fletcher, who was a director) held an understanding that the rent amounts stated in the lease were inclusive of GST. I am further prepared to accept that the invoices issued to it may have reinforced that understanding.
21. The content of the invoices suggests that Shimden may have shared that understanding. The invoices clearly contain claims for rent that are consistent with such an understanding. However, the evidence of Mr Demian, the sole director of Shimden, is to the effect that the invoices were incorrect (his understanding being that the stated rent amounts were exclusive of GST), and that he did not become aware of the error until he reviewed the lease in about October 2017. Mr Demian explained that he had given the task of invoicing Park for the rent under the lease to an experienced bookkeeper employed by Shimden. Mr Demian's evidence on these matters was not directly challenged and I see no reason not to accept it. The invoices, by mistake, sought payment of incorrect amounts of rent. In these circumstances, I am not satisfied that Shimden can be taken to have shared the understanding that the rent amounts stated in the lease were inclusive of GST, let alone that it assumed that the rent payable by Park under the lease was $232,003.20 p.a. inclusive of GST and that such rent would not be increased in accordance with movements in the CPI.
22. Nor am I satisfied that both Shimden and Park conducted their relationship on the basis of a mutual assumption to that effect. The parties executed a lease and thereby became bound by its terms according to its true construction. There is no evidence that after the execution of the lease the parties engaged in any discussion about how the lease should be interpreted, whether in relation to the rent provisions, or otherwise. There is no suggestion of any discussion about departing from the terms of the lease as the foundation of the respective rights and obligations of the parties. I appreciate that advertence to the terms of the lease is not necessary for an estoppel of this type to arise, but the absence of such remains relevant. The invoices may well have indicated to Park that Shimden shared its understanding that the rent amounts stated in the lease were inclusive of GST, but they do not go so far as to suggest that Shimden would not or could not change its position in that regard and seek to recover additional amounts of rent if to do so was in accordance with the lease. That is so in relation to each invoice, even those issued well after the commencement of the lease. As for rent increases in accordance with movements in the CPI, the terms of the lease are clear that there will be a CPI review on each anniversary of the date of commencement of the lease. It is not a procedure that has to be instigated by either party, although the determination of the new rent requires a calculation to be performed to identify the determined amount of rent. The parties should be taken to have been aware of those provisions. In periods where the level of prices is generally increasing, it would be expected that an invoice, issued after an anniversary, would claim an adjusted amount of rent. If such an invoice failed to do so, it would indicate that the rent had not been correctly claimed. I do not think that it suggests that the rent would never be adjusted in accordance with the lease or that Shimden would not seek to recover the rent as adjusted. For the above reasons, I do not think that the mutual conduct of the parties in issuing and paying the invoices can be said to be based on a mutual assumption to the effect that the rent payable under the lease was $232,003.20 p.a. inclusive of GST and that such rent would not be increased for adjustments to the CPI.
23. As for the estoppel by representation, for similar reasons, I am unable to conclude that Shimden, by its conduct (essentially in issuing the invoices and receiving payments in accordance with them) represented that the rent payable under the lease was $232,003.20 p.a. inclusive of GST and that such rent would not be increased for adjustments to the CPI. Whilst the invoices made claims for monthly rental at that rate, I do not think that the invoices convey a representation that Shimden would not or could not change its position in that regard and seek to recover additional amounts of rent if to do so was in accordance with the lease.
24. Whilst the invoices play a role as part of the administration of the payment of rent, they are not documents that have any particular contractual significance in and of themselves. Under the lease, the rent is payable without demand. I think that it would be reading too much into the invoices to regard them as definitive statements of what the rent actually is under the lease. The invoices should not be seen as conveying a representation that the rights and obligations of the parties in respect of rent are to be based on the content of the invoices (even if mistaken), rather than the lease itself.
25. Further, I do not think that Shimden represented that the rent would not be increased for adjustments to the CPI. As already mentioned, if an invoice, issued after an anniversary, failed to claim an adjusted amount of rent, it would indicate that the rent had not been correctly claimed. It could not reasonably be regarded as an abandonment of the right to claim the rent at the adjusted rate in accordance with the lease.
26. It follows from the conclusions stated above that neither an estoppel by convention, nor an estoppel by representation, operates to preclude Shimden from seeking to recover rent from Park in accordance with the terms of the lease in amounts greater than those claimed in the invoices that were issued. In my opinion, it remains open to Shimden to seek to recover rent on the basis that cl 7, in conjunction with cl 10(4), provided for the annual rent at the commencement of the lease to be an amount equivalent to $232,003.20 plus GST. It is also open to Shimden to recover rent on the basis that it was thereafter increased annually, in accordance with movements in the CPI, pursuant to cl 9(2) of the lease.
27. The annual increases in rent pursuant to cl 9(2) occurred on 1 December in each year from 2009 to 2013. However, in circumstances where the option to renew was exercised in November 2014, cl 6(6)(a) provides that the rent for the new lease is to be determined in accordance with cl 6(6)(b). No such determination has ever occurred. In this situation, cl 6(7)(a) provides: After exercise of this option, until the rent for the option term is determined, the Lessee will continue to pay the rent and outgoings as and when payable under this Lease at the rate at which they are payable during the last year of the lease term.
28. It therefore seems to me that the rent from 1 December 2014 (following the expiry of the term on 30 November 2014) remained at the same rate it was payable in the period from 1 December 2013 to 30 November 2014. That is, there were no further increases in rent after the CPI Review that occurred on 1 December 2013. The amount of rent now sought to be recovered by Shimden needs to be reduced to take this into account.
29. The claim for outstanding rent is also affected by the operation of s 14(1) of the Limitation Act. Under the terms of the lease, an amount of rent becomes payable on the 9th day of each month without demand by Shimden. The cause of action to recover the amount of rent accrues if the amount is not paid by the time it is required to be paid under the lease. Clause 7 of the lease, read with cl 44(a), appears to provide that amounts of rent are to be paid no later than 14 days after the due date for each monthly payment. That is, by no later than the 23rd day of each month. These proceedings were commenced on 24 July 2019. It therefore seems to me that insofar as Shimden's claim concerns amounts of rent required to be paid on or before 23 July 2013, the claim is not maintainable. The amount of Shimden's claim needs to be further reduced to take this into account.
30. Before leaving the topic of rent, I should record that, contrary to the submissions of Park, I do not agree that Park is significantly prejudiced by now being faced with a substantial claim for outstanding rent. Park has in fact enjoyed the benefit of paying rent at an erroneously low rate over many years. Further, Shimden has no entitlement under cl 14 of the lease for interest on any outstanding rent, as no rate of interest is specified for the purposes of the clause. (Schedule J to the Supreme Court Rules, referred to in Item 14 of the Schedule, has not contained any mention of a rate of interest since 2005.) There is no evidence that Park has so arranged its financial affairs on the faith of the invoices that it would now face difficulty in paying the amount of the underpayment. The only detriment pointed to in this regard arises from the terms of the sub-leases, which provide for rents seemingly derived by reference to the amount of rent under the lease from Shimden (believed by Park to be an amount that is inclusive of GST). Park may have relied upon the content of the invoices issued by Shimden in this process. However, as I have already said, I do not consider it reasonable to regard the invoices as conveying a representation that the rights and obligations of the parties in respect of rent are to be based on the content of the invoices (even if mistaken), rather than the lease itself.
31. I turn now to Shimden's claim for outstanding outgoings. Here, Shimden seeks to recover 80% of its land tax and insurance costs from the commencement of the lease. It relies upon cl 10 of the lease, in particular cll 10(1) to 10(3), which are set out above at [14]. Park's primary defence to this claim is that Shimden has no entitlement to claim amounts under those provisions because it has never followed the procedure laid down therein. That is, Shimden has never provided an itemised estimate of outgoings payable during or attributable to the next annual period (as provided for in cl 10(3)(a)), or an itemised statement of the total outgoings paid during or attributed to that annual period (as provided for in cl 10(3)(d)).
32. It is correct to say that Shimden has never proceeded in accordance with the regime set out in cl 10(3), even after it notified Park of its claims in February 2018. However, Shimden counters that it is not too late to claim outgoings pursuant to cl 10(3) as its provisions as to time are not to be regarded as of the essence. In that regard, reference was made in submissions to the decision of the House of Lords in United Scientific Holdings Ltd v Burnley Borough Council [1978] AC 904 and to the decision of the Court of Appeal in GR Mailman & Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 where the principles espoused in the United Scientific Holdings case were adopted and applied (see, in particular, at pages 88-9).
33. In my opinion, it is not now open to Shimden to seek to recover 80% of its land tax and insurance costs from the commencement of the lease pursuant to cl 10(3). Under the regime contained within that clause, the lessee's contribution to outgoings is "payable monthly together with the rent". The monthly amount payable is calculated by reference to the lessor's itemised estimate of outgoings that is to be provided before the commencement of the relevant annual period (ending on 30 June). The total amount payable in respect of an annual period is then subject to adjustment in accordance with the lessor's itemised statement of actual outgoings that is to be provided on 30 June each year.
34. It is not possible to invoke that regime after the commencement of the relevant annual period because it is not possible for the lessor to do what is required to calculate the monthly instalments and thus trigger the obligation to make the monthly payments "together with the rent" throughout that period. In my opinion, to allow the lessor to claim a contribution to outgoings from the lessee in an entirely different fashion, after the relevant annual period has expired, would be to engage in an impermissible re-writing of the terms of the lease. It would involve the imposition of a liability in a manner not contemplated by the terms of the lease. It is thus not merely a question of whether the provisions as to time within cl 10(3) are to be regarded as of the essence. However, it is my view that the terms of cl 10(3), by providing a comprehensive regime for the imposition of a liability to contribute to outgoings, at least exhibit an intention that the regime cannot be invoked after the expiry of the relevant annual period.
35. Had I not reached the above conclusion that it is not now open to recover a contribution to its land tax and insurance costs, I would have concluded that the manner in which outgoings were in fact dealt with by the parties from about the first year of the lease term gave rise to an estoppel by convention that would preclude such recovery.
36. It is clear that by about the end of the first year of the lease term Shimden, through Mr Demian, had become aware that Council and Sydney Water rate notices were being sent directly to Park. It can be inferred that Shimden became aware that these rates were thereafter being paid, in full, by Park. Mr Demian agreed that at no time were requests made to Park to cease making those payments. Also, as discussed above, at no time did Shimden take steps to instigate the procedure laid down in cl 10(3).
37. In my view, by their course of dealings in this regard, both parties can be taken to have conducted their relationship on the basis of a mutual assumption to the effect that the only contribution to outgoings to be made by Park would be its payment, in full, of the Council and water rates. That is, instead of dealing with outgoings in accordance with the provisions of the lease, the parties adopted a different regime for dealing with them. Only Council and water rates were involved in this regime, but Park's contribution was 100% instead of the 80% provided for under cl 10(3). Moreover, I think that in the circumstances, each party should be taken to have intended the other to act on that basis. In effect, there was a tacit agreement between them that outgoings would be dealt with in a manner different from that provided for in the lease. Finally, I consider that Park would suffer some detriment if Shimden was now able to depart from the mutual assumption. I accept the evidence of Brett Fletcher to the effect that had Shimden claimed a contribution to the outgoings as now claimed, Park would have sought to make a claim for such outgoings under the sub-leases with Nader and JJW. There is evidence that Nader has been re-registered as a company. The financial position of JJW is not known. The ability of Park to effectively pass on the outgoings claim now made to those sub-lessees appears to have been lost in relation to Nader and is uncertain in relation to JJW. These circumstances establish, in my opinion, that Park would suffer detriment if Shimden was permitted to depart from the mutual assumption.
38. For the above reasons, Shimden's claim for outstanding outgoings fails.

Conclusion

1. Shimden is entitled to recover outstanding rent from Park on the basis that: 1. clause 7 of the lease, in conjunction with cl 10(4) of the lease, provided that the annual rent at the commencement of the lease was an amount equivalent to $232,003.20 plus GST; 2. the rent was increased on 1 December in each year from 2009 to 2013 for movements in the CPI in accordance with cl 9(2) of the lease; 3. after the expiry of the term on 30 November 2014, the rent remained at the same rate it was payable in the period from 1 December 2013 to 30 November 2014; and 4. the claim is not maintainable in respect of amounts of rent required under the terms of the lease to be paid on or before 23 July 2013.
2. Shimden is not entitled to recover any further contribution to outgoings from Park.
3. I direct the parties to confer as to the calculation of the amount of outstanding rent Shimden is entitled to claim, in accordance with these reasons, and provide a calculation of the amount to my Associate within 14 days. Prima facie, Shimden is entitled to judgment in that amount, together with interest under s 100 of the Civil Procedure Act 2005 (NSW) from the date of the commencement of the proceedings. The parties should also provide an interest calculation.
4. There seems to be no reason why costs should not follow the event, so an order for costs in favour of Shimden should also be made.

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