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).