New South Wales Supreme Court CITATION : Balyck v Rail Corporation NSW [2005] NSWSC 809 HEARING DATE(S) : 9 August 2005 JUDGMENT DATE : 9 August 2005 JURISDICTION : Equity Division JUDGMENT OF : McDougall J at [1] DECISION : See paras [25] to [27] of judgment CATCHWORDS : CONTRACT - whether purported notice of termination of lease valid - meaning of "alteration" - whether proposed work constituted alteration of Retail Complex - no question of principle CASES CITED : Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 Peter Balyck (Plaintiff) PARTIES : Rail Corporation NSW (Defendant) FILE NUMBER(S) : SC 3529/05 V V Bedrossian (Plaintiff) COUNSEL : G K J Rich (Defendant) Horowitz & Bilinsky (Plaintiff) SOLICITORS : Clayton Utz (Defendant) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION McDOUGALL J 9 August 2005 Ex tempore (revised 9 August 2005) 3529/05 PETER BALYCK v RAIL CORPORATION NSW JUDGMENT 1 HIS HONOUR: The plaintiff is the lessee from the defendant (a statutory successor to the original lessor) of shop 18 within Town Hall station. The term of the lease is 12 years from 16 June 1994. The lease incorporates memorandum registered number Z 842960. Clause 12(3) of that memorandum entitles the defendant to terminate the lease by notice if it "intends to carry out alterations renovations or extensions to the Retail Complex" of which shop 18 forms part "and shall for the purpose of carrying out such alterations renovations or extensions require" vacant possession of shop 18. The question for decision is whether a notice given by the defendant to the plaintiff dated 24 November 2004 is a valid notice for the purposes of cl 12(3). If it is, the lease will terminate on 31 August 2005. 2 The plaintiff accepted that, if cl 12(3) were engaged, the notice was valid. There was no issue as to its form or terms; or as to the intention of the defendant to carry out the works; or as to whether vacant possession was required for the purpose of carrying out those works. 3 It was common ground that the Retail Leases Act 1994 did not apply to the lease. Relevant terms of the lease 4 Clause 2 of the memorandum contained a number of relevant definitions: "" Land " means the land described in Item 1 of the Reference Schedule and includes any additional land which the Lessor owns develops controls or uses in conjunction with the Land." "" Railway Station " means the improvements erected on the Land which the Lessor manages and operates as a railway station." "" Retail Complex " means that part of the Railway Station and the improvements (including all plant, machinery, equipment and fittings) from time to time existing on the Land and which the Lessor manages and operates as a retail complex or for any other commercial uses excluding any improvements on the land which the Lessor may from time to time exclude from the Retail Complex." 5 The "Land" is that comprised in folio identifier 4/804215. The parties called it, as I shall do, lot 4. 6 Clauses 6(4), 9 and 12(2), (3) of the memorandum deal, in different ways and for different purposes, with works on the land. They read: " Repair by Lessor by Requirement of Authority or Otherwise 6(4) If at any time during the term any Authority having jurisdiction or authority over or in respect of the Retail Complex, the Premises or the user thereof requests requires notifies or orders any structural alterations additions conversions improvements or other works to be made to the Retail Complex or the Premises which the Lessor elects to do or if the Lessor otherwise elects to carry out any repairs renovations maintenance or alterations thereto and for which the Lessee is not liable under its covenants herein contained the Lessor its architects contractors workmen servants and others and the servants and workmen of any of its contractors may enter into and on the Premises at all times for the purpose of making any such structural alterations additional conversions improvements or other works or any of them as aforesaid PROVIDED ALWAYS that in the exercise of any such power under this Clause the Lessor shall cause no more inconvenience to the business of the Lessee than is reasonably necessary." " PART 9 – REDEVELOPMENT AND RE-LOCATION Relocation 9(1) The Lessor shall be entitled at any time during the term of this Lease to re-locate the business conducted by the Lessee upon the Premises to alternative Premises (the "New Premises") within the Complex PROVIDED ALWAYS :- (a) The Premises are required by the Lessor for extension, or for renovation, re-furbishment or re-development of an area within the existing Complex (either alone or in conjunction with other Premises in the Complex). (b) The New Premises shall comprise an area not more than 10% greater than nor 10% less than the area of the Premises. … ". " Alterations or Additions to the Retail Complex 12(2) The Lessor expressly reserves the right from time to time to effect alterations or additions to the Retail Complex (other than the Premises) or to increase or reduce the area of Land from time to time comprising the Retail Complex or to sell transfer lease or otherwise deal with any of the Land from time to time comprising the Retail Complex and in particular but without in any way limiting the generality of the foregoing employ or use the air space above any part of the car park or the Common Areas or erect additional floors above or below any part of the Retail Complex or change the location of the Common Areas or the nature or location of the facilities therein or change the direction area or level of any walkways pathways or driveways or the traffic patterns therein or relocate the vehicular entrances and exits to and from the Retail Complex and in so doing may temporarily interrupt the water gas electrical air conditioning or other services to the Premises PROVIDED ALWAYS THAT in so doing any of the foregoing (except temporarily during the course of works) the means of ingress to and egress from the Premises by foot or by motor vehicle from and to public streets shall be no less adequate than those prevailing at the Date of Commencement and provided further that in exercising any such rights the Lessor will endeavour to cause as little inconvenience to the Lessee as is practicable in the circumstances and will not unreasonably interfere with the conduct of the Lessee's business and the estate or interest of the Lessee under this Lease shall be subject to all such reservations. Termination by Lessor 12(3) If the Lessor intends to carry out alterations renovations or extensions to the Retail Complex during the term of this Lease and shall for the purpose of carrying out such alterations renovations or extensions require the Premises then the Lessor shall have the right to terminate this Lease without compensation by giving the Lessee not less than three (3) months notice in writing which notice shall not be served within 9 months of the Date of Commencement." The defendant's works 7 The works to be carried out by the defendant were described in a letter of 23 November 2004 under cover of which the notice (dated the following day) was served, as follows: "… Over the next decade improvements will be undertaken [within Town Hall Station] to station platforms, stairs and escalators and areas where large passenger movements occur. The initial stage of the project will see removal of all retail tenancies on the concourse and demolition of all existing concourse shops. In the future there will be no retail on the concourse areas, so that passenger flows can be optimised. …". 8 The letter enclosed two plans, one showing the existing layout of the "retail concourse" (within which shop 18 is located) and the other showing the layout after the completion of the stage 1 works. 9 Other evidence makes it clear that the works of which those involving the Retail Complex form part are intended to improve both the safety and the amenity of Town Hall Station for the benefit of the many thousands of commuters who use it daily. The parties' submissions 10 The plaintiff submitted that: (1) It was an essential part of the definition of Retail Complex that the relevant area be used for retail purposes, as part of a "retail complex". Thus, the definition looked to, and incorporated, that use or function. (2) The proposed works would have the result that there was no retail complex, so that there was not just alteration but destruction. 11 The defendant submitted to the contrary. In addition, it submitted that: (1) There would still be a retail complex after completion of the works. (2) In any event, injunctive relief should be refused, and the plaintiff should be left to his remedy in damages. The construction of "Retail Complex" 12 The Retail Complex is part of the Railway Station - that is, the improvements erected on the Land which the defendant manages and operates as a railway station - and other improvements from time to time on the Land. 13 Further, it is that part that is managed and used as a retail complex or for other commercial purposes. Thus, the relevance of use is to enable the Retail Complex - the part of the improvements on the land used at any time for retail or commercial purposes - to be identified. 14 It is implicit in that definition, and made explicit by (for example) cl 12(2), that the actual area or space occupied by the Retail Complex may change from time to time. It is to accommodate any such change that the concept of use is relevant to the definition of Retail Complex. It does not follow that the definition should be taken to imply a requirement of continued active use. The construction of clause 12(3) 15 It was common ground that "alterations" to a thing do not extend to its total destruction. 16 The plaintiff relied on a number of authorities, but the question is one that requires attention to context and purpose. In my view, although the authorities give valuable guidance on the general principles to be applied, they are of little use where the context and purpose vary. 17 That having been said, I think that the concept of "alteration" is sufficiently explained by the judgment of Kirby P in Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541. His Honour said at 551 that the meaning of the word "alteration" depended on its context, and that it is a word that incorporates "notions of degree of change." He said, however, that at some stage along the range of meanings that may be comprehended by the concept of "alteration", "a point will be reached where an "alteration" of the thing being altered is so radical as to create a new thing and to destroy that upon which the "alteration" was attempted". The concept of alteration thus explained necessarily requires attention to be directed to the "thing" that is the subject of the alterations (or purported alterations). 18 In the case of cl 12(3) the "thing" to which attention is directed is "the Retail Complex." 19 What cl 12(3) authorises is the performance of alterations, renovations or extensions (the last two concepts were not addressed by the parties, and may be ignored) to that part of the Railway Station defined as the Retail Complex, even though the performance of those alterations requires the vacant possession of shop 18. Clause 12(3) deals with physical works to a particular part of lot 4, that part being defined as the area at the relevant time existing on the land and managed and used as a retail complex or for other commercial uses (to read into the words "Retail Complex" a somewhat paraphrased version of their definition). 20 It follows that if the defendant intends to carry out works of alteration to that part of the land, and if it needs vacant possession of shop 18 to do so, it may terminate the lease on notice in conformity with cl 12(3). 21 Whether what is to be carried out can be classified as alterations (or, in an appropriate case, renovations or extensions) is a question of fact. But it is a question of fact to be addressed by reference to the physical space, not by reference to the impact of the works on the present use of that space. Present use is relevant to the question, whether the physical space is, or is part of, the Retail Complex. Once that question is answered "yes", present uses cease to have any continuing relevance. The nature of the proposed works 22 The works proposed constituted alterations to the space that is presently, because of its use, the Retail Complex (or to part of that space). They therefore fall within cl 12(3). And they do not fall out of it because (assuming the point for present purposes but not deciding it) there will be no retail complex within that space after the works are complete. 23 The space or area will remain. Its external boundaries will be unchanged. Walls that separate it from the concourse, and walls that separate individual tenancies, will be removed. That is, there will be alterations to the space that is defined as the Retail Complex. The use of the space will change, and in a fundamental way. But the space itself will remain. 24 If the plaintiff's contentions were correct, then his space could be required, and his lease properly terminated, for minor alterations involving it alone; but not for major works involving the whole Retail Complex. Why the parties (conflating the defendant with its predecessors) should have so contracted is hard to fathom. Again, under cl 12(2) all but the plaintiff's shop can be abolished; but cl 12(3) could then not apply to his shop. Again, it is hard to fathom why the parties should have so contracted. The defendant's analysis involves no such anomalous consequences. Conclusion 25 What I have said is sufficient to dispose of the plaintiff's claim. I do not propose to deal with the other issues. The relevant facts were based on evidence that was not in substance disputed. The parties' oral submissions were recorded; and they will be transcribed and, with the written submissions, they will remain with the papers. 26 I order that the summons be dismissed. 27 I order the plaintiff to pay the defendant's costs. I order that the exhibits remain with the papers for 28 days and that they thereafter be held or disposed of in accordance with the Rules. ****** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.