RELEVANT PROVISIONS OF THE RETAIL LEASES ACT 2003

1. Section 21(1) of the RLA provides:

The term of a retail premises lease, including any further term or terms provided for by an option for the tenant to renew the lease, must be at least 5 years or, if the term remaining under any head lease under which the landlord holds the retail premises is 5 years or less, the length of that remaining term less one day.

1. Section 12(1) of the RLA excludes the operation of the RLA to any retail premises lease of less than 12 months duration, but s 12(2) then goes on to provide:

However, if the term of a retail premises lease is less than one year and as a result of either or both of the following -

(a) the lease being renewed (one or more times);

(b) the lease being continued -

the tenant is continuously in possession of the retail premises for one year or more under the lease after the commencement of this section, this Act applies to the lease on and from the day on which the tenant has continuously been in possession of the retail premises for one year after that commencement.

DOES THE APPLICANT OCCUPY THE PREMISES PURSUANT TO A PERIODIC TENANCY?

1. In 2012, Fairbank Grange Property Ptd Ltd ('FGP') occupied the premises pursuant to a 152 page sub lease from the respondent and operated a fitness gymnasium named The Melbourne Gym. The applicant managed and operated the gym on behalf of FGP. The FGP lease was surrendered on 12 December 2022.
2. The applicant had intended to purchase the gym business of FGP. It made enquires of the respondent's managing agent in June 2022 about a potential lease of the premises between the applicant and respondent pending the surrender of the FGP lease.
3. Following a request by the applicant, on 4 July 2022 the respondent sent a letter to the applicant which set out the potential terms for a lease which the respondent indicated it may agree to ('July 2022 Letter'). The July 2022 Letter

(a) contemplated that the rent amount payable under any new lease would be $83,242.50 (plus GST) per annum commencing 13 December 2022; and

(b) expressly stated that the July 2022 Letter did not constitute the commencement of the formal lease negotiation, and was provided only at the applicant's request for an early indication of terms available.

1. The July 2022 Letter attached a document entitled "Acceptance of "In-principal Lease Offer". On 30 March 2023, the applicant emailed a copy of the signed Acceptance which was dated 1 February 2023 to the managing agent.
2. The parties are largely in agreement that between July 2022 until around 12 December 2022 when the FGP lease was surrendered, the parties and the representatives of FGP held various discussions about a potential lease of the premises between the respondent and the applicant, as well as in respect of the substantial amounts owing under the FGP Lease.
3. On 17 October 2022, the applicant sent a further email to the managing agent stating:

Regarding the letter of offer going forward from CHP - we have reviewed

this and have two requests we'd like to put forward for consideration:

1. Are we able to determine annual rent increases at CPI, capped at

5%; rather than a fixed 5% rent increase each year please?

2. Would [the respondent] consider a 25% discount to the proposed

rent for the first 6 months of the agreement please? The Gym is in a

very strong position compared to last year, however is still in

recovery mode following the significant lockdowns, and with the

substantial outlay for the debts that accrued through COVID, cash

flows are going to be tight as we continue to invest in our members

and the RCH community to grow further, hence this support from

[the respondent] would be really valuable in being able to provide

this service.

1. As at 17 October 2022, the only "letter of offer" which had been sent to the applicant was the July 2022 Letter.
2. On 24 October 2022, the managing agent replied to the applicant's request for a reduced rent from the terms contained in the July 2022 Letter in an email to the applicant, noting that:

Unfortunately, until such agreement between FGP and TGM with regards to the Sale Contract and Deed of Release is made, we will not proceed with negotiation of any terms and a final Letter of Offer will not be forwarded until such time of agreement, however I have passed on your request above for their consideration in the meantime. I would presume the Sale of Contract has to be put in place as CHP will expect FGP to remain in place to guarantee payout of the balloon payment - so virtually if they remain "on the hook", then FGP would also need such guarantees

1. On 13 December 2022, the managing agent sent an email to the applicant which again confirmed that, among other things, until such time as the respondent received confirmation that the applicant and FGP had "signed off on your contract of sale", the respondent would not make any formal lease offers "even in Draft format".
2. The applicant remained in possession of the premises after the FGP lease was surrendered on 12 December 2022 and continued to operate the gym business. There was no written agreement in relation to the applicant's occupancy.
3. By 21 December 2022, the applicant and FGP had still not entered into a contract of sale for the gym. The managing agent sent an email to the applicant stating " we have to provide an agreement confirming that you are currently occupying the premises". The email included a "Letter of Agreement".
4. The Letter of Agreement stated, among other things:

Further to our previous correspondence with regards to your tenancy at Royal Children's Hospital, we have been requested to communicate with you regarding a Letter of Agreement to outline the terms and conditions of the use of the Premises whilst [the respondent] is waiting on confirmation that the Contract of Sale between Fairbank Grange Property (FGP) and [the applicant] has been finalised.

...

Commencing Rental: The same rental rate will be invoiced at the time of the expiry of the Agreement between FGP & [the applicant] [being the FGP Lease] plus Outgoings & Deferred Rent repayments. This rate will be adjusted to the Commercial Rate offered to TGM by [the respondent] in the Letter of Offer dated 22nd November 2022 and will commence (and be backdated to) 13th December 2022[the respondent] gives [the applicant] the exclusive right to occupy the Premises from 13th December 2022 until 14th January 2023. At the expiry of this term (so by 15th December 2023), [the respondent] must receive confirmation that agreement between FGP & [the applicant]has been

finalised.

1. The applicant responded by email to the agent on the same day inquiring about the possibility of an alternate tenancy location and stating among other things:

Thanks for that Billie - get right on to it and get back to you.

1. Correspondence was exchanged in January 2023 about the contract of sale between FGP and the applicant and certain bathroom works.
2. On 26 March 2024, the managing agent sent the applicant a draft proposed lease consistent with the July 2022 Letter although with a commencement date of 1 April 2024. After a number of follow up emails the applicant responded on 2 August 2024 with a number of proposed amendments. The agent responded on 22 August 2024.
3. Further follow up emails and voice messages were sent to the applicant's solicitors without response.
4. On 6 December 2024, the applicant's solicitors sent an email disputing the proposed rental, and seeking amendments to the commencement date.
5. Further correspondence was exchanged between the parties' solicitors on 9 December 2024 before the Termination Notice was served on the applicant on 13 December 2024.
6. The applicant says it has been in occupancy of the premises under a monthly periodic tenancy since 15 January 2023. It says the occupancy granted by the 21 December 2022 letter was not a licence because it had exclusive possession. Instead it was a short term lease or a monthly tenancy and after its expiration the parties entered into an over holding monthly tenancy.
7. In support of this assertion, the applicant says:
   1. the respondent's conduct in issuing a notice of termination with one month's notice is consistent with a monthly tenancy. If there was a tenancy at will, the respondent would have terminated the tenancy immediately as there is no requirement to give a month's notice;
   2. it took exclusive possession of the premises on 13 December 2022; and
   3. it received monthly invoices from the managing agent and paid the monthly rental pursuant to those invoices.
8. The applicant says the only matter not agreed was the duration of the tenancy.
9. The applicant also relies upon the fact that there were no negotiations for the first 14 months of occupancy in relation to lease terms in support of there being a monthly tenancy rather than a tenancy at will.
10. There were however other negotiations outside of lease arrangements between January 2023 and March 2024. These included discussions concerning the applicant's purchase of the former tenant's business, issues with outstanding rent owed by the former tenant and bathroom repairs works.
11. The respondent's evidence, which I accept based on the correspondence between July 2022 and 13 December 2022, is that it was made clear to the applicant that no lease would be entered into with the applicant unless and until FGP and the applicant entered into a business sale agreement in respect of the gym or agreement that the applicant owns the gym and equipment and the applicant had the right to operate the gym.
12. It is not in dispute that as at 13 December 2022 the applicant had not entered into any contract of sale of business with FGP.
13. Both parties referred me to the English Court of Appeal decision in Javad v Aquil.[2] The case turned on the distinction between a tenancy at will and a periodic tenancy. A tenancy at will exists where either party may terminate at any time. A periodic tenancy continues from period to period until determined by proper notice.[3]
14. Nicholls LJ accepted that "failing more" if a landlord allows another party into possession of premises on payment of rent of a set amount for an identified period the inference can be drawn that the parties intended that there be a periodic tenancy. He emphasis the "failing more" aspect noting that the simple situation is unlikely to happen often because there will normally be other surrounding circumstances.[4]
15. In this case the applicant was let into possession of the premises without having agreed to the terms of a long term lease. The extent of the applicant's right to possession granted and accepted depends primarily upon the intention of the parties.[5]
16. If the applicant was granted a periodic tenancy, the effect of s 12 and s 21 of the RLA is that the applicant has a 5 year lease with rent remaining the same for the entire term with no increases. There would be no maintenance obligations or any deed of guarantee.
17. The payment of a monthly fee or "rent" does not of itself create a periodic tenancy.[6]
18. I find that the parties cannot sensibly have agreed, using the words of Nicholls LJ, to have a periodic tenancy with all the consequences flowing from that at a time when they had not agreed all the terms of the applicant's occupancy.
19. The permission given by the respondent to the applicant to remain in occupation, considering the surrounding circumstances as set out in correspondence and discussions between the parties between July 2022 and 12 January 2023, displace any inference that a periodic tenancy was granted and agreed.
20. It was made clear through correspondence and discussions to the applicant before it was allowed to remain in occupation after the FGP lease had been surrendered that it would not be granted a lease without it having a right to operate FGP's gym business. Any lease was conditional upon that requirement.
21. The basis of any lease was set out in the July 22 Letter. There was no meeting of minds on 13 December 2022 or 13 January 2023 that the applicant occupy the premises as a monthly tenant.
22. It is clear from the correspondence that the applicant was granted occupation while other matters relating to the former tenant were to be resolved following which a long term lease was to be offered on terms reflective of the content of the July 2022 Letter.
23. The rendering of monthly invoices and the giving of a month's notice of termination is not determinative of a monthly periodic tenancy given the circumstances surrounding the occupancy as set out in these reasons.
24. For the reasons stated, I find that the applicant did not occupy the premises pursuant to a periodic tenancy.

DOES THE APPLICANT OCCUPY THE PREMISES PURSUANT TO A TENANCY AT WILL TENANCY?

1. Having found there is no periodic tenancy, I accept the respondent's contention that the applicant occupied the premises pursuant to a tenancy at will.
2. In Commonwealth Life (Amalgamated) Assurance Ltd v Anderson[7] Jordan CJ said of tenancies at will:

A tenancy at will exists whenever, by virtue of an express or implied agreement between the land-owner and another person, the other is in exclusive possession of the land, otherwise than as servant or agent of the owner, for an estate which is not of freehold or for a term. A tenancy at will is subject to many inconveniences. It is necessarily terminable at the will of either party by demand of possession, express or implied. It differs in this respect, as in others, from a licence: Minister of Health v Bellotti, in that no period of notice is necessary for its termination; although, on termination by the owner, the tenant has a reasonable time to enter and remove his goods, but not a right to exclusive possession for the purpose The applicant remained in possession under a tenancy at will while the parties were negotiating the terms of a proposed lease and while matters concerning the former tenant were resolved.

1. The applicant's occupation is properly described as a tenancy at will.

1. The RLA only applies to a "retail premises lease".[8]
2. "Lease" is defined in s 3 of the RLA to mean "a lease, sub-lease, or an agreement for a lease or sub-lease, whether or not in writing."
3. The essential aspect of a lease is that it creates an estate or interest in land.
4. The applicant says a tenancy at will is a lease for the purpose of the RLA.
5. In support of its contention, the applicant relies upon statements made by Tate J in Chan v Chan.[9] In particular where he said that a tenancy at will is a form of leasehold interest and described the position of a tenant at will being somewhere between a lessee and a licensee.[10]
6. It is important to read the full decision of Tate J. He was considering whether the occupants of a unit were tenants at will or licensees. He was not determining whether a tenant at will held an estate or interest in land. In particular he stated

It may also be accepted that a tenancy at will is a form of leasehold

interest albeit that, '[a]rguably, a tenancy at will should not be classified as a leasehold estate since it has no defined duration, although conventionally it is classified in this way'.[11]

1. Chan v Chan is not authority that a tenancy at will creates an estate or interest in land.
2. The Queensland Court of Appeal in Sorrento Medical Service Pty Ltd v Chief Executive, Dept of Main Roads described a tenancy at will in the following terms[12]

A tenancy at will confers no estate or interest in the land. It is merely a personal right or relationship between owner and occupier by which the latter may remain in possession during the will of the former.

1. It is well established that a tenancy at will does not create an estate or interest in land.
2. There is no basis to expand the definition of lease for the purpose of the RLA to include a tenancy at will.
3. The purpose of the RLA is to "enhance the certainty and fairness of retail leasing arrangements between landlords and tenants".[13]
4. The former tenant occupied the premises pursuant to a well documented 157 page lease. If the applicant was found to have a lease for the purpose of the RLA, it would have the effect of allowing the applicant to remain in possession of premises for a period of five years with a fixed rent with no increases and no other obligations placed on the applicant. The arrangement would not be subject to any guarantee.
5. I find that a tenancy at will is not a "lease" within the meaning of the RLA. The RLA does not apply to the applicant's tenancy at will.

[1] Section 21 provides that the term of a retail premises lease must be a least 5 years.

[2] [1990] EWCA Civ 1; [1991] 1 W.L.R 1007; [1991] a1 All E.R. 243.

[3] Ibid at page 244. This passage was cited with approval by the Victorian Court of Appeal in Kellow-Falkiner Motors Pty Ltd v Nimorkiotakis (2000) V ConvR 54-620 at 64,443-4.

[7] [1945] NSWStRp 31; (1946) 46 SR (NSW) 47.

[8] Section 11 RLA.

[11] Above 8 at page 25 paragraph [74].

[12] [2007] 2 Qd R 373 at [75].

[13] Section 1 of the RLA.