For the reasons stated, I find that the 2004 Lease ceased to be a retail premises lease in the penultimate year of the lease. It did not at any time revert back to being a retail premises lease during its term.
[2]
ISSUE 4 - IS VERRATY ENTITLED TO RECOVER LAND TAX FROM RFC FOR ALL OR ANY OF THE PERIOD FROM 7 MAY 2016 TO 6 MAY 2018?
[3]
Having found that the 2004 Lease ceased to be a retail premises lease from 7 May 2016, I must now determine the legal effect of provisions in the lease made void by reason of the RLA.
Clause 5.2(b) of the 2004 Lease required RFC to pay land tax. The clause was deemed void by reason of s 50 of the RLA to the extent that it made RFC liable to pay land tax.
RFC contends that once a provision in the lease is made void, the contract is fixed and there is no requirement for the continued operation of the RLA. RFC contend that once a provision is deemed void, it cannot be resurrected.
Verraty submits that if this were correct, where a retail premises lease ceases to be such a lease, the lease would be bereft of terms; there would be few clauses left. Verraty draws support from s 94 of the RLA which says that a provision is void only "to the extent that it is contrary to or inconsistent with anything in this Act..."
In my view, once the 2004 Lease ceases to be a retail premises lease the RLA has no operation over or effect on the lease. This is made clear by the words used in s 11(2) of the RLA. Clause 5.2(b) of the 2004 Lease (which purported to make RFC liable to pay land tax) was made void to the extent that the 2004 Lease was a retail premises lease and covered by the RLA.
RFC relies upon the Tribunal's statement in Richmond Football Club Limited v Verraty Pty Ltd[18] where is was held that clause 5.2(b) "is effectively excised from the lease, as if there never was a contractual obligation to reimburse land tax. It is as if the parties had never agreed that RFC was liable to reimburse the landlord for its land tax liability."
I agree with the statement in the 2010 decision but note that the Tribunal was not commenting upon the effect on terms in a lease once the RLA ceased to apply.
Once the 2004 Lease is no longer a retail premises lease, s 50 of the RLA can have no ongoing effect. Once s 50 of the RLA has no effect on the 2004 Lease, clause 5.2(b) of the 2004 Lease is no longer void. The voiding provisions of s 50 do not have the effect of deleting or voiding for all time clause 5.2(b) of the 2004 Lease. The effect of s 50 of the RLA is to prevent the operation of clauses like clause 5.2(b) of the 2004 Lease for so long as the RLA applies to the lease.
To interpret the effect of the voiding provisions as having permanent effect even if the RLA ceased to apply, means there would be no point of the leases ceasing to be a retail premises lease. As submitted by Verraty such an interpretation would mean the tenant retains the same benefits and the landlord the same obligations as when the lease was a retail premises lease. Such an interpretation goes against the very purpose of the RLA to create certainty and fairness.
Accordingly, for the reasons given, I find that Verraty is entitled to recover land tax from RFC from 6 May 2016.
[4]
ISSUE 5 - IS THE RENT FOR THE FIRST YEAR OF THE RENEWED LEASE THAT COMMENCED ON 7 MAY 2018 SUBJECT TO A PROVISION THAT IT MUST NOT BE LESS THAN THE RENT PAID DURING THE FINAL YEAR OF THE 2004 LEASE?
[5]
For the same reasoning as applied to the previous issue, I find that the proviso to clause 15(b)(i) of the 2004 Lease ceases to be void once the lease falls outside of the operation of the RLA.
Accordingly, I find that the annual rent for the first year of the further Term unless agreed, shall not be less than the rental paid by RFC immediately prior to the rent review date plus 4 per centum.
[6]
The applicant (Verraty) and the respondent (RFC) are both corporations and are capable of suing and being sued.
Verraty is the registered proprietor of the property at 354-364 Stud Road, Wantirna (Premises).
By a lease (1998 Lease) between Verraty as landlord and RFC as tenant entered into on about 26 August 1998, Verraty leased the Premises to RFC for ten years commencing on 7 May 1998 [TB 30-134]. The Lease contained one option to renew for a term of 10 years.
The 1998 Lease contained:
(a) Clause 15.1(b)(i), which provided that the rent for the first year of the renewed term of the Lease would be determined by a market review (in the absence of agreement). Clause 15.1(b)(i) concluded with the following proviso: 'provided that such Annual Rental shall not be less than the Rental paid by the Lessee immediately prior to the rent review date plus four per centum'; and
(b) clause 5.2(b), which provided that RFC covenanted and agreed to pay or reimburse Verraty for all state land tax (assessed on a single holding basis) assessed against the Premises.
By written deed of variation dated 30 January 2004 (Variation), Verraty and RFC agreed to vary the 1998 Lease by extending its term to 20 years commencing on 7 May 1998 and to other variations as set out in the deed [TB 136-142].
In proceeding R203/2010, the Victorian Civil and Administrative Tribunal found that:
(a) the 1998 Lease was surrendered by operation of law upon the entry into of the Variation;
(b) the Variation effected a grant of a new lease on the terms of the Lease as varied by the Variation; and
(c) the Lease effected by the Variation was a retail premises lease subject to the Retail Leases Act 2003 (Act) (hereinafter referred to as the 2004 Lease).
[7]
The penultimate year of the initial term of the 2004 Lease commenced on 7 May 2016.
The rent RFC was liable to pay under the 2004 Lease for the penultimate year was $957,012 (excluding GST).
By email on 5 May 2016, Mario Abbotto, on behalf of Verraty, sent Lou Guzzardi of Leebridge Chartered Accountants copies of various water accounts and council rates for his records for the Premises [TB 147-157].
Some time between 5 May 2016 and 12 May 2016, Verraty estimated the outgoings to which RFC was liable to contribute under the Lease for the 12 months commencing 7 May 2016 to be $58,000 made up of $32,000 for council rates and $26,000 for water (all excluding GST).
By email on 12 May 2016, Lou Guzzardi, on behalf of Verraty, sent RFC a document headed 'Section 46 Estimate of Outgoings' estimating that for Verraty's accounting period commencing 7 May 2016 RFC would be liable to contribute $32,000 for council rates and $26,000 for water (all excluding GST) [TB 158-159].
The following water accounts and council rates notice for the Premises were issued to Verraty:
(a) South East Water account issued 14 July 2016 addressed to Verraty at the Premises [TB 160-161];
(b) Council rates notice issued 11 August 2016 addressed to Verraty at the Premises [TB 162-165];
(c) South East Water account issued 14 October 2016 addressed to Verraty at the Premises [TB 166-167];
(d) South East Water account issued 16 January 2017 addressed to Verraty at the Premises [TB 168-169]; and
(e) South East Water account issued 16 April 2017 addressed to Verraty at the Premises [TB 171-172].
By letter to Verraty dated 20 April 2017, RFC exercised the option to renew the 2004 Lease for 10 years from 7 May 2018 [TB 173].
By email on 1 May 2017, Mario Abbotto, on behalf of Verraty, to RFC, acknowledged receipt of RFC's letter of 20 April 2017 exercising the option to renew and stated that Verraty would propose a commencing rent for the renewed term shortly [TB 174].
The final year of the initial term of the 2004 Lease commenced on 7 May 2017.
The rent RFC was liable to pay under the 2004 Lease for that final year was $980,893 (excluding GST).
On 3 May 2017, Verraty estimated the outgoings to which RFC was liable to contribute under the 2004 Lease for the 12 months commencing 7 May 2017 to be $70,000 made up of $45,000 for council rates and $25,000 for water (all excluding GST) [TB 175]. Verraty did not give that estimate to RFC in writing or verbally.
By letter dated 29 June 2017 to Brendon Gale of RFC, Verraty proposed that the rent for the first year of the renewed Lease be the rent RFC was paying (in the final year of the initial Lease term), plus CPI, plus GST [TB 176]. RFC did not respond to that letter.
By email on 5 April 2018, Mario Abbotto of Verraty stated to Michael Stahl of RFC that as RFC had not communicated with Verraty further, Verraty would instruct lawyers to prepare the necessary documents to record the renewed Lease, and the rent to be applied would be pursuant to Verraty's letter to Brendan Gale of 29 June 2017 [TB 177].
Under cover of a letter dated 9 April 2018, RFC sent Verraty a market rent assessment for the Premises from Charter Keck Cramer of even date [TB 178-193]. The assessment was that rent would be between $635,000 to $655,000 (excluding GST).
On 19 April 2018, Verraty wrote to RFC and stated that the Act did not apply to the 2004 Lease, that Verraty was willing to accept rent increased at 4% for the first year of the renewed Lease, and that Verraty's solicitors would prepare the renewed Lease and send it to RFC for signing [TB 194-196].
BSP Lawyers responded on behalf RFC by letter to Verraty dated 2 May 2018. In the letter, BSP Lawyers stated that the Act applied to the 2004 Lease [TB 197-198].
Under cover of a letter dated 10 May 2018, Millens Lawyers, on behalf of Verraty, sent BSP Lawyers, on behalf of RFC, a Deed of Renewal of Lease recording that RFC had renewed the Lease for the further term of 10 years commencing on 7 May 2018 [TB 199-206].
The Deed of Renewal included an amended schedule to the Lease. Item 7 of the amended schedule provided that RFC would pay Verraty rent of $1,020,128.72 (excluding GST) for the first year of the renewed term (7 May 2018 to 6 May 2019). That amount was 4% more than the rent RFC was paying in the final year of the initial term of the 2004 Lease being $980,893 (excluding GST).
BSP Lawyers responded by letter to Millens Lawyers dated 15 May 2018. In the letter, BSP Lawyers stated that Act did apply to the 2004 Lease and that the rent for the renewed term was to be determined by a rent review conducted in accordance with the Act [TB 207].
Millens Lawyers responded by letter dated 21 May 2018. In the letter, Millens Lawyers repeated that the Act had ceased to apply to the 2004 Lease [TB 208].
RFC has not signed the Deed of Renewal.
The State Revenue Office assessed land tax against the Premises for the year ending 31 December 2016 at $41,850. Verraty received that land tax assessment notice and has paid the assessed amount [TB 212]. Of that amount, $27,328.28 was referable to the period between 7 May 2016 to 31 December 2016.
The State Revenue Office assessed land tax against the Premises for the year ending 31 December 2017 at $62,100 [TB 213]. Verraty received that land tax assessment notice and has paid the assessed amount. Of that amount:
(a) $21,437.26 was referable to the period between 1 January 2017 to 6 May 2017; and
(b) $40,662.74 for the period between 7 May 2017 to 31 December 2017.
The State Revenue Office assessed land tax against the Premises for the year ending 31 December 2018 at $62,100 [TB 214]. Verraty received that land tax assessment notice and has paid the assessed amount. Of that amount:
(a) $21,437.26 was referable to the period between 1 January 2018 to 6 May 2018; and
(b) $40,662.74 for the period between 7 May 2018 to 31 December 2018.
Under cover of an email from Ross Millen of Millens Lawyers to Andrew Heale of BSP Lawyers on 28 May 2018, Millens Lawyers, on behalf of Verraty, served on BSP, on behalf of RFC, notices to tenant dated 28 May 2018 under which Verraty demanded, inter alia, that RFC reimburse Verraty for the following amounts of land tax that Verraty had paid:
(a) $27,403.15 for the period between 7 May 2016 to 31 December 2016;
(b) $21,437.26 for the period between 1 January 2017 to 6 May 2017;
(c) $40,662.74 for the period between 7 May 2017 to 31 December 2017; and
(d) $21,437.26 for the period between 1 January 2018 to 6 May 2018;
[8]
The amount of land tax for the period between 7 May 2016 and 31 December 2016 should have been $27,328.28. Verraty has not provided a tax invoice to RFC in respect of any of the amounts claimed for land tax as required by clause 23(5) of the 2004 Lease [TB 140].
RFC has not reimbursed Verraty for the land tax set out in the paragraph 31 and has not paid the GST set out in that paragraph.
Under cover of a letter dated 28 March 2019, Verraty received from Knight Frank a market rent assessment for the Premises of even date [TB 242-245]. The assessment was that rent was $950,000 (excluding GST).
[13] Being the date of the commencement of s 11 of the RLA.
[20]
[14] S (4)(2) provides for premises which are not to be included in the definition of retail premises including premises determined by Ministerial Determinations as not being retail premises.
[21]
[16] One deducts the outgoings applicable to the 5 day period from the outgoings for the entire year. Rent and outgoings still exceed $1,000,000.