Gekeva P/L v AGF P/L [2000] NSWSC 1199

Reported Decision : [2001] NSW ConvR 55-975

New South Wales Supreme Court

CITATION : Gekeva P/L v AGF P/L [2000] NSWSC 1199 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 20488 of 1999 HEARING DATE(S) : 09/03/2000 JUDGMENT DATE : 22 December 2000

PARTIES : Gekeva Pty Limited (plaintiff) AGF Pty Limited (defendant) JUDGMENT OF : Hidden J at 1

COUNSEL : N A Confos (plaintiff) Dr J G Renwick (defendant) SOLICITORS : Conomos & Spinak (plaintiff) Back Schwartz Vaughan (defendant) CATCHWORDS : LANDLORD & TENANT: Proceedings for possession - motions by plaintiff for summary judgment, by defendant for transfer to Administrative Decisions Tribunal under Retail Leases Act - whether tenancy governed by the Act. LEGISLATION CITED : Retail Leases Act 1994 Conveyancing Act 1919 Cathay Development Pty Ltd v Laser Entertainment Pty Ltd (Young J unreported 25 March 1998) CASES CITED : El Cheikh v Gratsis (Hamilton J unreported 4 July 1997) Wykes v Samilk Pty Ltd (1998) NSW ConvR 55-871 General Steel Industries Inc v Commisioner for Railways (NSW) (1964) 112 CLR 125 DECISION : Both motions dismissed

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

HIDDEN J Friday 22 December 2000 20488 of 1999 Gekeva Pty Limited v AGF Pty Limited Reasons for judgment

1 HIS HONOUR: The defendant, AGF Pty Limited, operates a bargain variety shop known as "All Sortz of Treasure". Its sole director and shareholder is Mr Alden Fitzgerald. In March 1996 Mr Fitzgerald entered into negotiations with the real estate agent of the plaintiff, Gekeva Pty Limited, for the lease of premises in Anzac Parade, Maroubra for the purpose of the business. His final proposal, which he conveyed by fax to the agent, was a lease for eighteen months with a three year option. He proposed a rent free period of two months, followed by rent of $600 per week for the next six months and $700 per week thereafter. 2 The agent telephoned Mr Fitzgerald to say that this was acceptable to the plaintiff and that a lease would be prepared. He suggested that Mr Fitzgerald "start paying $450 per week", saying that that figure could be adjusted when a formal lease was signed. He added, "This is approximately the correct amount after adjusting for the rent free period less our lease preparation charges." He said that Mr Fitzgerald could move in at the end of the month. 3 On 30 March 1996 Mr Fitzgerald collected a key from the agent and he made the first rental payment on the following day. Over the next two weeks he installed fixtures and transferred stock to the premises, and the company commenced trading on 19 April. In the meantime, the agent sent him a form of written lease which specified a term of sixteen months, to commence on 8 May 1996, with an option for eighteen months. A monthly rent of a little over $1,700 was specified for the first six months, allowing for a two month rent free period, increasing to a little over $3,000 per month thereafter. 4 Mr Fitzgerald telephoned the agent to say that the written lease was different from what had been agreed at the time he moved into the premises and its terms were not acceptable to him. The agent told him to "leave it for the moment" and continue to pay the rent of $450 per week. He did so. About two months later the agent telephoned him to say that the rent needed to be adjusted. Mr Fitzgerald said that he would prefer to maintain it at the existing rate, as the business was still establishing itself. 5 Thereafter the defendant continued to pay the rent and there was no further discussion about the lease. However, on 30 August 1999 the agent forwarded to the defendant a notice to quit, requiring vacant possession in one month's time. The defendant remained in possession and there was correspondence between the parties' solicitors. On 29 October 1999 the plaintiff filed a statement of claim in this Court, seeking possession of the property and other relief. The defendant filed a statement of defence, asserting that the parties had entered into a lease governed by the Retail Leases Act 1994 which, by virtue of that Act, was still in force and the terms of which had been observed. 6 Before me are motions by the plaintiff for summary judgment for possession, and by the defendant for an order under s75(1) of the Retail Leases Act 1994 that the proceedings be transferred to the Administrative Decisions Tribunal. 7 Before turning to the competing arguments of the parties, it is necessary to refer to some provisions of the Retail Leases Act. The definition of "retail shop" in s3 includes premises used for the purpose of carrying on one of the businesses specified in Schedule 1. Among the businesses set out in that Schedule are "Variety stores", an apt description of the defendant's enterprise. Section 3 also defines "retail shop lease" or "lease" as any agreement by which any person grants to another for value the right to occupy premises for use as a retail shop, whether the agreement is express or implied, oral or in writing, or partly oral and partly in writing. 8 However, s6 sets out certain leases of retail shops to which the Act does not apply. Relevantly for present purposes, they include leases for a term of less than six months without an option to renew: s6(1)(a). As will be seen, it is the plaintiff's contention that the subject lease falls into that category. 9 As to leases to which the Act does apply, s7 provides that any term of a lease or of any agreement or arrangement between the parties is void to the extent that it is inconsistent with a provision of the Act. By s8(1), a retail shop lease is considered to have been entered into when the lessee enters into possession of the premises or begins to pay rent (whichever happens first). Section 16 is pivotal to the defendant's case. It is sufficient to set out the first three subsections: 16 Minimum 5 year term (1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into. (2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section. Note. For example, if a lease is entered into for a term of 3 years, its term is extended by 2 years to 5 years. If a lease is entered into for a term of 2 years with an option for a further 1 year after that initial 2 years, the term of the lease is extended to 4 years (with the option for a further 1 year after that initial 4 years).

(3) This section does not apply to a lease if a lawyer, or a licensed conveyancer, not acting for the lessor certifies in writing that he or she has, at the request of the prospective lessee, explained the effect of subsections (1) and (2) to the prospective lessee and that the giving of the certificate will result in this section not applying to the lease.

Subsection 3 has no application here, as Mr Fitzgerald did not consult a lawyer or a licensed conveyancer at any time during his dealings with the plaintiff's agent. 10 Part 8 deals with the resolution of disputes. Section 64 establishes a Registrar of Retail Tenancy Disputes and s65 sets out that person's functions. Sections 66-69 provide for mediation, and by s68 disputes may not be pursued in any court unless mediation has been attempted or the court is satisfied that it is unlikely to resolve the dispute. 11 Division 3 of Part 8 provides for the determination by the Administrative Decisions Tribunal of "retail tenancy claims". That expression is defined in s70 broadly enough to embrace the claim for possession and the ancillary claims which the plaintiff makes in this Court. Sections 72 and 72A vest in the Tribunal jurisdiction to grant all the relief which the plaintiff seeks in this court. By s74, the Tribunal must use its best endeavours to bring the parties to a claim to a settlement and, for that purpose, it may refer the dispute to the registrar for mediation under the sections to which I have previously referred. 12 Section 75 is the provision upon which the defendant relies in its motion. Again, it is sufficient to set out the first three subsections: 75 Removal of court proceedings to Tribunal (1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that: (a) the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal, and (b) the interests of justice do not require that the matter be dealt with by the court. (2) In determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a court is to have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court. (3) Proceedings are taken to involve a retail tenancy dispute if any issue in dispute in the proceedings involves a liability or obligation with which a retail tenancy dispute is concerned. 13 As I have said, the plaintiff contends that the lease in the present case is excluded from the operation of the Retail Leases Act because of s6(1)(a), as it was for a term of less than six months with no option to renew it. Council for the plaintiff argued that there was never more than a month to month tenancy. He relied upon s127(1) of the Conveyancing Act 1919, which provides: No tenancy from year to year shall, after the commencement of this Act, be implied by payment of rent; if there is tenancy, and no agreement as to its duration, then such tenancy shall be deemed to be a tenancy determinable at the will of either of the parties by one month's notice in writing expiring at any time. 14 The common law background to this provision was explained by Sheller JA in Wykes v Samilk Pty Ltd (1998) NSW ConvR 55-871 at 56,827-8, drawing upon the observations of Jordan CJ in Dockrill v Cavanagh (1944) 45 SR (NSW) 78 at 82-4. Counsel for the plaintiff submitted that, on the evidence summarised at pars 1-4 of these reasons, there was no agreement as to the duration of a lease such as that asserted by the defendant, so that the sub-section was applicable. Reliance was placed on Cathay Developments Pty Ltd v Laser Entertainment Pty Ltd (Young J, unreported, 25 March 1998), in which a tenancy which otherwise met the requirements of the Act was held for the same reason to be excluded by s6(1)(a). 15 In addition, counsel argued that there was no agreement as to the rent for any such lease, noting that no amount for rent is pleaded in the statement of defence to which I have referred. It is accepted that, where rent is payable, there cannot be a valid lease unless there is agreement about the amount of the rent or, at least, about a method of computation whereby the rent is ascertainable with certainty. Counsel relied upon the fact that the rent which had been paid ($450 per week) was different from the $600-$700 per week proposed by the plaintiff after the rent free period, and that the plaintiff's agent had told Mr Fitzgerald about two months after the defendant had occupied the premises that the rent needed to be adjusted. Accordingly, it was argued, there was no lease other than a month to month tenancy and there was no binding agreement for a lease such as might be embraced by the definition of "retail shop lease" in s3 of the Retail Leases Act: cf El Cheikh v Gratsis (Hamilton J, unreported, 4 July 1997). 16 Counsel for the defendant submitted that there was agreement as to the duration of the lease, so that s127 of the Conveyancing Act was not applicable. Through its agent, the plaintiff had accepted Mr Fitzgerald's proposal of a lease for eighteen months with a three year option and had given the defendant occupation of the premises upon that basis. The fact that the plaintiff was prepared to accept rent of $450 per week until later adjusted, it was argued, might be explained in a number of ways: for example, as a variation of the term as to rent or as to the method of payment of rent (averaging out the rent free period and adding on costs), or a waiver. However that may be, the defendant's case is that the tenancy amounted to a lease for a term in excess of six months and, accordingly, was governed by the Retail Leases Act. By s16 of that Act, that term was effectively for five years. 17 I can see the force of the arguments of both parties. As counsel for the defendant rightly pointed out, his client has an arguable case and, applying the familiar principles enunciated by Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, the plaintiff is not entitled to summary judgment. On the other hand, the fact that there is a triable issue whether the defendant had a lease governed by the Retail Leases Act does not entitle it to the order which it seeks, that is, an order under s75(1) of the Act that these proceedings be transferred to the Administrative Decisions Tribunal. 18 To make such an order I would have to be satisfied that the proceedings involve a "retail tenancy dispute". That expression is defined in s63 of the Act as "any dispute concerning the liabilities or obligations… of a party or former party to a retail shop lease or former lease…". The central question in this litigation is whether the defendant had the benefit of a retail shop lease to which the Act applies and that is not a matter which I could, or should, resolve at this early stage. The pleadings are not closed, discovery has not taken place, and the only evidence before me is the untested affidavit of Mr Fitzgerald.

Both motions must be dismissed. I shall hear the parties on costs. **********

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