Take Two Seven Pty Ltd v Hewson Properties Pty Ltd

NCAT Appeal Panel|2024-12-16

REASONS FOR DECISION

This is an application involving a lease of premises at 43 Booth Street Annandale.
The appellant, Take Two Pty Ltd (Take Two) is the lessee and operates a café from the premises. The respondent (Hewson) is the lessor.

The proceedings

The key issue between the parties is the meaning of the lease when it refers to the basement area: "Part Identifier 1/306865 being the whole of the ground floor and basement area of the building at 43 Booth Street, Annandale."
Take Two says that the lease entitles it to occupy the whole of the ground floor and the whole of the basement of the building. Hewson says only part of the basement is the subject of the lease.
Take Two filed an Application in the Tribunal on 30 August 2023 seeking various Orders to clarify the position.
On 6 August 2024 the Tribunal Member determined that the proper construction of the lease was that the reference to "basement area" was properly a reference to that part of the lower level was "depicted" as the tenant area in a colour-coded floorplan prepared as part of the Lessor Disclosure Statement under the Retail Leases Act 1994 (NSW)(RL Act). As a result, the Tribunal dismissed Take Two's application.
Take Two appeals from that decision. Take Two can appeal as of right on any question of law: s 80(2)(b) of the Civil and Administrative Tribunal 2013 (NSW) (the NCAT Act).

History of the lease of the premises

On 10 April 2018, the original lessor entered into the lease with the original lessee, for an initial term of five years, with an option to renew for a further two years.
In about June 2019, the original lessee assigned the lease to BA Parramatta Pty Ltd (BA Parramatta).
In October 2019, Hewson purchased the building from the original lessor and became the registered proprietor.
On 21 September 2022, Take Two took an assignment of the lease from BA Parramatta.

The Law

As has been covered comprehensively in the submissions of the parties, the starting point is that a lease is to be interpreted according to the ordinary strictures applicable to any commercial agreement. In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd 261 CLR 544 at [16] the High Court observed in respect of a registered lease: It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract.
In Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited 256 CLR 104 (Mount Bruce) at [46] - [48] the High Court explained the applicable legal principles as follows: The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
In relation to evidence external to the contract: … sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating. (Mount Bruce at [49]).
In Westfield Management Ltd v Perpetual Trustee Co Ltd 233 CLR 528 the High Court at [37] determined in respect of registered easements that: ... rules of evidence assisting the construction of contracts inter partes, of the nature explained by authorities such as Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 350-352, did not apply to the construction of the Easement.
Whether this applies to registered leases is unclear. However: 157. The unavailability of extrinsic evidence to construe even a grant of an easement is not complete. In Westfield v Perpetual Trustee the High Court judgment at [44] acknowledges that evidence could be admissible "… to make sense of that which the Register identifies by the terms or expressions found therein. An example would be the surveying terms and abbreviations which appear on the plan found in this case on the DP." (Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [157]). In Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 the Court of Appeal held: Westfield Management Ltd v Perpetual Trustee Company Ltd [2007] HCA 45 has since confirmed that extrinsic material apart from the physical characteristics of the tenements, is not relevant to the construction of instruments registered under the Real Property Act 1900: paras [5], [37] - [41].
In Australian Unity Retirement Living Management Pty Ltd v Karimbla Properties (No 10) Pty Limited [2019] NSWSC 635 at [96]) Slattery J held: It is difficult to give content to the rights under an easement unless some account is taken of the physical characteristics of the dominant and servient tenements, as Westfield permits. Otherwise the parties are engaged in an empty debate about the meaning of words in an instrument without reference to what is happening on the ground. The limitations of such a narrow view was emphasised by Campbell JA in Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64, (at [158]).
The issue arises in the context of whether it is open to us to refer to the colour-coded floorplan prepared as part of the Lessor Disclosure Statement under the Retail Leases Act 1994 (NSW), noting that Take Two acknowledged that it had received it when entering into the transfer of the lease on 21 September 2021.
We have taken into account the submission by Take Two that it falls outside the categories of documents permitted by the authorities we have already referred to and additional cases set out in its written submissions. However, at para 85 of those submission counsel for Take Two describes the document as objectively nothing more than a statement of how the basement was being used at the time, which had no bearing on what rights the lease gave to Take Two.
We are satisfied that we can use the document to enable us to understand the physical characteristics of the basement level, simply to show that one end was the area being used by the café as a storeroom, with the other end being the area which Hewson says was not demised to Take Two and remained a Common Area.

The Demise

The description of the premises in the lease, which we have referred to as "the Demise" says: "Part identifier 1/306865 being the whole of the ground floor and basement area of the building at 43 Booth Street, Annandale".
It is common ground that the first word in the Demise, "Part", is intended to refer to the fact that it was not the whole of Lot 1 in Deposited Plan 306865 which was the subject of the lease.
Take Two says the definition of the property is unambiguous - the word "whole" applies to "the ground floor and basement area", that is, the whole of the area of the ground floor and the whole of the basement. The word "and" between the words "ground floor" and "basement area" does not mean that the word "whole" only attaches to the "ground floor". That interpretation would leave the expression "basement area" incapable of definition by reference to anything else contained in the lease. It is not a commercially sensible interpretation of the provision.
Hewson says where an apparently deliberate choice is made to use the expression "floor" in respect of the ground floor and "area" in respect of the basement, there is no principled reason not to give weight to that distinction in construing the Demise.
Hewson also submitted that the expression "whole" can only properly be understood as referring to the "ground level" of the building. Hewson relies on the disjunctive "and" which appears between "ground floor" and "basement area". There is no clue on the face of the Demise alone that the word "whole" must apply to both. Indeed, the use of the different words "floor" and "area" points to their separate treatment. If the drafters of the lease had intended the meaning which Take Two suggests, it would have been open to them to use other forms, such as:

"the whole of the ground and basement floors"; or
"the whole of the ground floor and basement areas". both of which would have plainly connoted a connection between each part of the building and the expression "whole".

Use of "area" elsewhere in the lease

Hewson submitted that, in any event, even if the word "whole" can be transposed so that the Demise is read "whole of the basement area" the word "area" has a meaning, discernible by proper construction of the lease, that accords with Hewson's position. This is because the other places in the lease where the expression "area" is used refers to a part of the building less than an entire floor: 1. The definition of Common Areas which are "parts" of the building such as walkways, entrances, passages, corridors, vestibules, halls, toilets, lifts and stairways; 2. Clause 1 of the Rules and Regulations refers to "garage areas of the building".
We accept that these provisions are consistent with Hewson's submissions as to the meaning of the word "area" in the Demise.

Items 1 and 6 in the lease

The lease provides that it incorporates the provisions or additional material in annexure "A". The annexure is comprised of 9 items. Item 1 defines the term "premises" for the purposes of cl 1.13. Item 1 relevantly says "Cafe on Ground floor and Basement". Item 6 defines the permissible use of the premises as "Cafe and Storeroom".
Hewson submitted that if the same syntactic approach was applied to Item 1 as Take Two applied to the Demise, it would read "Cafe on Ground floor and [Cafe] [in] Basement" which is an unnatural expression, inviting interrogation of the actual use of the building to determine what cafe, if any, is in the basement. Rather, consistently with Hewson's approach, Item 1 refers to the Cafe on the Ground floor and, separately, the Basement in circumstances where Hewson says the "Basement" is that part of the lower level other than the Common Area at the rear. Item 6 introduces the expression "Storeroom" which is undefined by the lease. However, it refers to a "room" in the singular and does not appear to envisage the permitted use of the whole of the lower level of the building, much of which has the physical characteristic of being a lock-up garage.
We accept that these submissions are supportive of Hewson's interpretation of the Demise.

Car parking

Clause 19.01 says that the Lessee shall … have the right to use and occupy for the parking of motor vehicles the number of spaces set out in Item 9 of the Summary of Lease Particulars within the Common areas and the spaces shall be as nominated by the Lessor from time to time…. Item 9 says "One (1) space".
Take Two says that, at its highest, clause 19.01 suggests that some part of the basement contains a parking space for Take Two, which is Common Area. It does not indicate the existence of Common Area beyond this one parking spot, it does not support Hewson's claim to exclusive occupation of some other part of the basement and it does not assist in interpreting the Demise.
Take Two says that the clause can be construed as simply giving Take Two the right to occupy a car space if one is available. It does not require Hewson to construct or otherwise make available a car space. The fact that the entirety of the basement forms part of the Demise means that there is no property from which a car space can be provided to Take Two.
Take Two, on appeal, abandoned the relief previously sought relating to Hewson's failure to provide that car space.
Take Two further submitted cl 19.01 could be read as qualifying the Demise so that the demised area was the whole of the ground floor and basement, minus one parking space, which Hewson was required to nominate and provide to Take Two. Alternatively, the initial and dominant provision was the Demise which defined the limits of the property leased and were fundamental to the lease so that Clause 19.01 gave way meaning that Hewson was only required to provide a parking space to the extent that there is Common Area from which such a parking space could be provided.
Lastly, Take Two submitted that, if there are two conflicting contractual provisions, then the later provision is rejected as repugnant to the former: Owners SP 66315 v King [2018] NSWCA 170. Thus, if cl 19.01 of the lease is read as requiring Hewson to provide a parking space, and the only way that obligation could be performed is by providing a parking space from the basement, then that would destroy the obligation created by the Demise to give possession of the whole of the basement, and cl 19.01 of the lease would be treated as repugnant.
In relation to this final submission we note that: 1. This was an observation of the dissenting member of the Court, Leeming JA. 2. The principle was qualified at [407] of that decision: … Where a contract or deed contains conflicting provisions such that a later provision "destroys altogether the obligation created by the earlier clause" (Forbes v Git [1922] 1 AC 256 at 259) the later provision will be rejected as repugnant to the former. This is a principle of last resort to which recourse may be had only when every other avenue of resolving inconsistencies has been exhausted …
Hewson says that the obligation imposed to provide a parking space in the Common Areas of the building necessarily suggests that there are Common Areas capable of being used in that manner. If it was really the case that the lease gave the whole of the lower level to Take Two then the inclusion of Clause 19.01 would be otiose.
We prefer the approach of Hewson. We do not accept that the lease should be construed in any of the ways put by Take Two. They do not give effect to the words used in the lease - which says that Take Two has a right to a car parking space. The propositions that cl 19.01 could be read as qualifying the Demise or conflicting with it, only arises if the Demise is construed as including the whole of the basement.

The stairwell

In April 2019, the Lease was varied to replace the existing cl 7.14 with the following: 7.14 ACCESS TO BUILDING The Lessee shall permit the Lessor, other tenants occupants and visitors to the Building to access to Levels 1 and 2 of the Building via the stairwell located within the Premises. The Lessor shall be entitled to install and maintain a security key system outside of the Building and at the foot of the stairwell so that the said tenants occupants and visitors can access levels 1 and 2 when the Premises are not open for business. The Lessee agrees to permit such access and the Lessee acknowledges that access via the Premises to the stairwell both before and after trading hours is permitted notwithstanding that the Premises shall be closed.
The parties informed us that there is more than one stairwell in the building. There is no evidence before us as to the details of the stairwells.
Take Two relies on clause 7.14 only providing access to the stairwell leading upstairs. It says that the failure to include access to the stairwell to the basement is consistent with the entirety of the basement having been demised to Take Two because there was no reason for persons other than Take Two and its invitees to be there.
Hewson says that Take Two's submission is based on a false premise. The stairwell to the basement leads to the Common Area and thus Hewson did not need the permission of Take Two to access it. Clause 7.14 had been included to permit access to Hewson to the ground floor (all of which had been leased to Take Two) to the stairs leading upstairs.
We consider that this only becomes an issue if Take Two's construction is accepted. If the staircase leads to a common area there is no need for access to that staircase to be mentioned in clause 7.14.

Outcome

We agree with Hewson's primary submission which was that a distinction should be given to the use of the words "floor" to describe the ground floor and "area" to describe the basement area so that the word "whole" only applies to the ground floor. This approach is consistent with the language used throughout the lease for the Reasons we have given.
We accordingly decline to find that the subject of the lease is the whole of the ground floor and the whole of the basement area.

Orders

In its application filed on 30 August 2023 Take Two sought the following orders and declaratory relief: 1. Declaration pursuant to s72(1)(f)(iii) of the Retail Leases Act 1994 (NSW) (the RL Act) that Take Two is entitled to the use and occupation of the whole of the basement area of the premises. 2. Order, pursuant to s 72(1)(c) of the RL Act that Hewson, at its own cost reinstate the area of the basement occupied by Hewson, its servants or agents and yield up possession of that area to Take Two. 3. Order, pursuant to s 72(1)(a) of the RL Act that there be an adjustment, by way of refund of rent, in favour of Take Two by reason of Hewson's occupation of part of the basement from 22nd September 2022 to the date of this order. 4. Order, pursuant to s 72(1)(a) of the RL Act that there be an adjustment, by way of refund to Take Two, of Take Two's contributions to outgoings for that part of the basement occupied by Hewson from 22 September 2022 to the date of this order. 5. Order, pursuant to s 72(AA)(1)) of the RL Act that compensation be paid by Hewson to Take Two for deprivation by Hewson of Take Two's use of the whole of the basement and for the harm to Take Two's quiet enjoyment by reason of nuisance (including the noise of power tools and creation of dust) generated by the use by Hewson, its servants or agents of the basement area and the blocking of Take Two's loading dock by work vehicles of Hewson. 6. Declaration pursuant to s 72(1)(f)(iii) of the RL Act that Take Two is entitled to use and occupy a car space to be nominated by Hewson on a common area. 7. Declaration pursuant to s 72(1)(f)(iii) of the RL Act that Hewson has failed to provide a car space as required by the lease. 8. Order pursuant to s 72(1)(a) of the RL Act that, by way of damages, there be a permanent adjustment of rent in favour of Take Two because of Hewson's failure to provide a car space. 9. Order pursuant to s 72(1)(a) of the RL Act that there be a permanent adjustment of Take Two's contribution to outgoings by reason of Hewson's failure to provide a car space. 10. Order that an expert valuer be appointed by the Tribunal (at the cost of Hewson) for the purposes of conducting such rental or other valuations as the Honourable Tribunal may deem necessary or expedient to effect these orders.
In our view the Tribunal correctly dismissed that application, although we accept that in doing so it had regard to impermissible parole evidence. Given our conclusion that the Tribunal's conclusions were correct, notwithstanding that error, we will dismiss the appeal.
We make the following Order: 1. Appeal dismissed.

Costs

Hewson did not press its application for costs.

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

Amendments 11 February 2025 - Coversheet: Respondents Counsel Amended DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 February 2025

At a glance

Court

Decision date

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Judgment (14 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (6)