CITATION: Cheeky Tiger Pty Ltd -v- Peterson [2003] NSWADT 70 DIVISION: Retail Leases Division APPLICANT PARTIES: Cheeky Tiger Pty Ltd RESPONDENTS Christopher Peterson and Maria Stella Peterson FILE NUMBER: 035021 HEARING DATES: 20/03/2003, 02/04/2003 SUBMISSIONS CLOSED: 04/02/2003 DATE OF DECISION: 04/07/2003 BEFORE: Hogan A - ADCJ (Deputy President); Fairweather R - Member; Owens B - Member APPLICATION: Claim for declaration of rights, obligations and liabilities under a lease - Interim order MATTER FOR DECISION: Principal matter LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: APPLICANT REPRESENTATION: D Murr SC, Barrister with J Conomy, Barrister RESPONDENT R Legg, solicitor ORDERS: 1. Application dismissed 1 This is an application under the Retail Leases Act 1994, seeking Declarations and an Order relating to the right of the tenant to a renewal of the lease pursuant to an option to renew. 2 There was also filed an application for urgent interim relief, which was adjourned until the hearing to enable the matter to be referred to the Registrar for mediation. The mediation did not result in a settlement of the matter. 3 By Lease Dated 31 July 2000 the Applicant leased shop premises at Manly from the Respondents for a term of two years, expressed in the lease to commence on 31 July 2000, and to terminate on 30 July 2002. 4 The lease was in the standard Law Society Lease form. It provided for two options to renew, each for a period of two years, set out in clause 4. 5 Clause 4 provided 4.1 This lease is for the period as stated in item 1 in the schedule, commences on the date stated in item 2 in the schedule and ends on the date stated in item 3 in the schedule. 4.2 If a further period, commencing when this lease ends, is stated in item 11A in the schedule then the tenant has the option to renew this lease for that period. 4.3 The tenant can renew this lease more than once if that is stated in item 11B in the schedule. However the period of tenancy under this lease and under any renewal(s) is, in total, not longer than the maximum period stated in item 11C in the schedule. 4.4 The tenant can exercise the option only if 4.4.1 the tenant serves on the landlord a notice of exercise of option not earlier than the first day stated in item 11D in the schedule and not later than the last day stated in item 11E in the schedule; 4.4.2 there is at the time of service no rent or outgoing that is overdue for payment; and 4.4.3 at the time of service all the other obligations of the tenant have been complied with or fully remedied in accordance with the terms of any notice to remedy given by the landlord. 6 Item 11 in the schedule, headed Option to renew, provided A. Further period of two years from 31.7.2002 to 31.7.2004 B. Further period of two years from 31.7.2004 to 31.7.2006 C. Maximum period of tenancy under this lease and permitted renewals: 6 years D. First day option for renewal can be exercised: 30.4.2002 E. Last day option for renewal can be exercised: 30.5.2002 7 It is common ground between the parties that, as a matter of construction, the Notice of Exercise of Option required by clause 4 was to be a written notice. It is also common ground that no such written notice was given, either within the period specified or at all. 8 The director of the applicant company, who conducted all its affairs and gave evidence, is Susan Gabrielle O'Connor. It was Mr Peterson who conducted the affairs and gave evidence on behalf of the respondent lessors. 9 The lessors acquired the shop premises in December 1999, financing the purchase with an interest only loan from a bank. 10 Attempts to let the premises were not successful in the months following the purchase. In mid-year Ms O'Connor responded to an advertisement placed by Mr Peterson, and on 6 July 2000 wrote to him about the terms on which her company was prepared to take a lease. 11 She had already consulted a solicitor, who had advised her about the terms she should negotiate. One provision that she sought, which the lessors agreed to, was an initial 14 weeks rent free period. 12 After the lease had been registered, in February 2001, Mr Peterson's solicitor wrote to him to remind him that the termination date of the lease was 30 July 2002, and that if the tenant wished to take up the option to renew, "she must give you written notice sometime between 30 April and 31 May 2002." 13 The initial arrangement between the parties was that rent was to be paid into the lessors' bank account at the rate of $1100 per fortnight. 14 On 30 April 2001 Ms O'Connor wrote to Mr Peterson asking for a reduction in the rent for a number of reasons which she set out in the letter. She stated that current economic conditions were causing her difficulties. Shortly thereafter he told her that he was prepared to reduce the rent to $400 a week plus GST but that he wanted her to continue to pay the agreed outgoings. 15 Rental was paid at the reduced rate over the balance of 2001. Early in 2002 Mr Peterson asked that the rent increase again, which it did for a short time, only to be reduced again shortly thereafter. The witnesses do not agree about the details of the variations, or about the conversations about them, but those differences do not affect the case to any great extent. The fact that is clear is that early in 2002 it was not yet obvious that the tenant's business venture was certain to flourish. 16 Ms O'Connor deposed that in or about April 2002, Mr Peterson called at the shop and they had a discussion. He asked how trading was, and whether she was going to stay in the business. She says that she replied, "Trading is good. I fully intend to stay the full 6 years of the lease and possibly further if I am still interested in the business then." 17 Mr Peterson concedes that there was a conversation about that time. He said that she did not say that trading was good, but that she might have said that trading was OK. He did not recall her saying that she fully intended to stay the full 6 years of the lease. We accept the evidence of Ms O'Connor on this point. 18 The period within which notice of the exercise of the option was to be given was from 30 April 2002 to 31 May 2002. 19 Ms O'Connor further deposed that early in May 2002 Mr Peterson came into the shop and there was a conversation to the following effect: Mr Peterson: "Your first two years are nearly up. Are you going to be able to continue the lease for a further two years? Ms O'Connor: Yes. And then the next two years. And if I am still interested and able then I will stay for longer. Can I assure you by showing you my spreadsheets? Mr Peterson: "No that's OK. That should be alright Sue." 20 Mr Peterson denied that the conversation took place in the terms alleged. He said that it was his impression that the lease had commenced in October 2000 as that is when the rent commenced to be paid. Again, we prefer the version given by Ms O'Connor. 21 There were further conversations between the end of June and October 2002. On a number of occasions Ms O'Connor stated her intention to stay on for another two years at least. In June 2002 there were discussions about the consequences of an increase in the strata levies imposed on the lessors. Ms O'Connor drafted a letter for Mr Peterson to send to the strata managers about the matter. There was an agreement that the rent should increase to $990 per fortnight from 24 June 2002. 22 About the beginning of December 2002 Ms O'Connor told Mr Peterson that she had heard that the premises were on the market. He said that he was simply inquiring about the market value, as the levies seemed rather high. She says, and he denies, that she added, "If you are going to sell you will need to sell with the lease intact." She did not allege that he acquiesced in that proposition. 23 On 26 February 2003 Ms O'Connor telephoned Mr Peterson. Again they differ about the terms of the conversation. On either version he informed her that he was selling the shop. He expressed the view that she was merely a tenant from month-to-month. She asserted that any sale should be subject to her tenancy. She alleges that she said, "Why didn't you give me an option to sign if something had to be done like that?" She said that he replied, "Because I forgot." We think that it is inherently improbable that he said anything of the kind. 24 On 27 February 2003 Mr Peterson entered into a contract to sell the premises. 25 On 28 February 2003 her solicitor wrote to the lessors, noting Mr Peterson's statement that the option to renew had not been exercised, and that the tenancy was then on a month-to-month basis. The letter continued, "This recent statement by Mr Peterson is in direct conflict to previous statements. We note that the recent statement has been made in a context where, we understand, the sale of the premises is being negotiated to a third party. We note from Sue O'Connor that in May 2002 in response to an inquiry by Mr Peterson, Ms O'Connor stated that our client wished to renew the lease for the further period of two years under the first of the two options granted in the lease. On subsequent inquiry of Mr Peterson whether anything further was required for the exercise of the option, such as the signing of further documents, she was assured that there was no further requirement. Our client acted on the representation made by Mr Peterson in ordering stock and other shop equipment, full details of which can be supplied if required. We have advised our client that in the above circumstances it currently is a tenant pursuant to the exercised option for a term which expires on 30 July 2004. 26 The application that was originally filed was based upon an allegation of unconscionable conduct of the part of the part of the lessors. That ground is no longer relied upon. What is alleged is that the lessors either waived the requirement for written notice, or alternatively that they are estopped from denying the grant of a new lease pursuant to the option to renew. 27 There is no evidence of any express waiver. It was argued that it is to be inferred from Mr Peterson's acceptance in May 2002 of the sufficiency of oral notice. 28 We are not persuaded that that conversation, even followed as it was by the continued occupation and payment of rent and further intimations of the tenant's intention to stay on, in fact gives rise to that inference. 29 We do not accept Ms O'Connor's evidence that she was not aware of the requirement in the lease for written notice. When entering into the lease she was advised by a solicitor. She agreed that he took her through the provisions of the lease. She said that she did not remember his saying anything about the need for written notice. That is inherently improbable. It is one of the most significant details in the whole document, which would be highlighted by any competent solicitor. 30 In May 2002 it was not yet obvious that the lessee's business was certain to flourish. If she gave written notice to exercise the option, she would be entering into a legal obligation to remain in the premises for a further two years, and to pay rent determined in accordance with the provisions of the lease. 31 There were obvious advantages for her to continue to occupy the premises, from month-to-month, with the flexibility that such an arrangement provided for adjustment of the rent from time to time, as had already happened, and was to happen in the future. 32 There were also advantages for the lessor in the continuation of that less formal arrangement. The premises were let, and rent was being paid in line with the commercial realities in existence at that time and place. 33 It was quite consistent with that situation that from time to time he sought, and she gave, indications that it was her then intention to continue in the premises for two or more years. It is also consistent with the evidence that she gave that in late October 2002 Mr Peterson asked her to give him six months notice if she was planning to leave at any stage. 34 In the circumstances it was at least consistent with the interests of both parties that the option to renew pursuant to the lease be left in abeyance. Mr Peterson's failure to insist on it, or even to mention it, did not amount to a waiver of the requirement for it if what the tenant wanted was a further fixed term pursuant to the lease. 35 We are also not persuaded that the circumstances gave rise to any estoppel. 36 It is to be noted that Ms O'Connor did not give evidence that accords with the statements made by her solicitor in his letter dated 28 February 2003. Her evidence was that in answer to Mr Paterson's question, "Are you going to be able to continue the lease for a further two years?" She replied, "Yes. And then the next two years. And if I am still interested and able then I will stay longer." That is not the same thing as saying that she "wished to renew the lease for the further period of two years under the first of the two options granted in the lease." Further, the making of that statement by her, even followed by his silence, does not in the circumstances amount to a representation by him. 37 The other representation referred to in the solicitor's letter was that, "On subsequent inquiry of Mr Peterson whether anything further was required for the exercise of the option, such as the signing of further documents, she was assured that there was no further requirement." Ms O'Connor simply does not give any evidence of such an assurance by him. 38 For the reasons set out in paragraphs 27 to 32 above, we are not persuaded that Ms O'Connor's expressed intention to stay on in the premises, and Mr Peterson's awareness of that intention, gave rise to any duty on his part to warn her that she needed to give written notice to secure her right to a further fixed term, or that his failure to do so constituted a representation or conduct giving rise to any estoppel. 39 The application is dismissed. There was no application for costs, and there are no special circumstances that would justify the making of an order for costs. 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. 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