MARKOTIS INVESTMENT HOLDINGS PTY LTD ATFT MARKOTIS FAMILY SUPERANNUATION FUND and J&J PAN GROUP PTY LTD

[2024] WASAT 10

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)

CITATION:   MARKOTIS INVESTMENT HOLDINGS PTY LTD ATFT MARKOTIS FAMILY SUPERANNUATION FUND and J&J PAN GROUP PTY LTD [2024] WASAT 10

MEMBER:   MS N EAGLING, MEMBER

HEARD:   DETERMINED ON THE DOCUMENTS

DELIVERED          :   23 FEBRUARY 2024

FILE NO/S:   CC 39 of 2024

BETWEEN:   MARKOTIS INVESTMENT HOLDINGS PTY LTD ATFT MARKOTIS FAMILY SUPERANNUATION FUND

Applicant

AND

J&J PAN GROUP PTY LTD

Respondent

Catchwords:

Retail shop commercial tenancy - Requirements for special circumstances for early termination of lease - Damage and destruction

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 13, s 13(1), s 13(7)

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Applicant	:	N/A
Respondent	:	N/A

Solicitors:

Applicant	:	Cullen Macleod Lawyers
Respondent	:	N/A

Case(s) referred to in decision(s):

Hazcom Ptd Ltd and Mihaere [2023] WASAT 126

Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

1. The applicant is the landlord (Landlord), and the respondent is the tenant (Tenant) in relation to a lease of retail premises located at Shop 13, Bunbury City Plaza Shopping Centre (Lease).

2. On 19 January 2024 the Landlord made an application to the Tribunal pursuant to s 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Act) for inclusion in the Lease of clause 45.1, allowing for early termination of the lease due to special circumstances.  Clause 45.1 states:

   45.1Major rebuilding required

   If the Building or any part of the Building is so destroyed or damaged:

   (a)as to require major rebuilding of the Building;

   (b)that the Premises are unfit for occupation and use by the Tenant;

   (c)as to inhibit access to the Premises by the Tenant or the customers of the Tenant's Business in any substantial manner; or

   (d)as to cause significant disruption to the Tenant's Business;

   the Landlord;

   (e)may within three (3) months of the destruction or damage terminate the Term with immediate effect by notice to the Tenant;

   (f)will not be obliged to rebuild the Building or that part damaged; and

   (g)unless the Landlord has terminated the Term, must within three (3) months of the destruction or damage give notice to the Tenant advising it:

   (i)whether or not it intends to rebuild; and

   (ii)if it intends to rebuild, how long that rebuilding is estimated to take[.]

3. The Landlord's solicitor confirmed that a copy of this letter was forwarded to the Tenant prior to lodgement of the Application with the Tribunal.

4. The Application was accompanied by a letter from the Landlord's solicitor which set out the terms of the proposed clause 45.1 which included a statement that:

   We request permission for inclusion of clause 45.1 on the grounds that in the event that a substantial part of the Building is destroyed, then the owners may not be able to or may not wish to reinstate the Building to its original design[.]

5. By orders made on 7 February 2024 the Tribunal notified the parties the application did not sufficiently address the criteria in the case of Synicast Pty Ltd and Showroom X Pty Ltd [2023] WASAT 47 (Synicast) in that it did not make any submissions as to the current or future existence of special circumstances by reason of which approval of the application ought to be given, nor to the evidence required to support those submissions.  The Tribunal ordered that the applicant had until 21 February 2024 either to file amended submissions relating to the special circumstances by reason of which approval of the application ought to be given, together with evidence of service of the amended submissions on the respondent, or to withdraw the application.  The Tribunal also ordered that the matter be dealt with on the documents unless otherwise ordered by the Tribunal.

6. On 12 February 2024, the Applicant stated in a letter from its solicitors as follows:

   …

   The special circumstances for the inclusion of clause 45.1 (Major Rebuilding required) are as follows:

   •the Lease is for Premises within a building (Building);

   •there is a possibility, although we consider it would be minor, that the Building could be damaged or destroyed, whether by natural occurrences, such as weather events or by non-natural occurrences, such as accidental fire; and

   •in the event that the Premises or the Building is destroyed or damaged to an extent so as to be unfit for occupation and use, it may not be commercially realistic for the Landlord to re-instate the Premises.

   We consider the above circumstances are special circumstances for the purposes of Section 13(7) of the Commercial Tenancy (Retail Shops) Agreements Act 1985[.]

7. The letter of 12 February 2024 also confirmed that a copy of the letter was forwarded to the Tenant's solicitors before being filed with the Tribunal.

Legislation

1. Section 13(1) of the Act confers on tenants an option to renew a retail shop lease giving them the benefit of a minimum tenancy of 5 years.[1]  As has been previously observed by the Tribunal, this is an important and valuable right to a tenant such that a landlord may only terminate the lease prior to the ending of the 5 year term in limited circumstances.[2] One of those circumstances is where the Tribunal approves, pursuant to s 13(7) of the Act, the inclusion in the lease of an early termination clause.

   [1] See Synicast at [21(b)] and s 13(1) of the Act, which has the effect that the option to renew in s 13(1) is subject to the terms of s 13 of the Act.

   [2] See Hazcom Ptd Ltd and Mihaere [2023] WASAT 126 at [3].

2. Section 13(7) provides as follows:

   The Tribunal may, upon application made to it by the landlord, notice of which has been given to the tenant, approve of the inclusion in a retail shop lease of a provision under which the landlord may determine the lease (other than under subsection (6)(a), (b) or (da)) before the day set out in subsection (6)(aa) or (ab), as is relevant, if it is satisfied that special circumstances exist by reason of which such approval ought to be given.

Tribunal's consideration

1. The criterion of 'special circumstances' gives the Tribunal a broad, but not unfettered, discretion as to whether or not to make the order sought by the applicant.[3]

   [3] Synicast at [27].

2. The meaning of 'special circumstances' in s 13(7) of the Act was considered in the Synicast decision.  Her Honour President Pritchard stated:[4]

   … at the time of a landlord's application to the Tribunal under s 13(7) of the Act, the special circumstances must have actually come into existence, or there must be an 'objective intention' that the special circumstances will arise during the term of the lease[.]

   (Footnote omitted)

   [4] Synicast at [30].

3. The applicant has submitted that the events described in clause 45.1 constitute 'special circumstances' within the meaning of s 13(7), despite the submission by their solicitor that the possibility of the building being damaged or destroyed is 'minor'.

4. In this case I am not satisfied that special circumstances exist. There is no evidence that the circumstances referred to in clause 45.1 currently exist or are intended to come into existence during the term of the lease. The applicant's own submission is that there is merely a minor possibility of the events occurring. In my view, the mere possibility of the events occurring in the future does not satisfy the criterion of special circumstances under s 13(7) of the Act.

5. I will consequently decline to grant approval of the inclusion in the Lease of clause 45.1 and will dismiss the application.

Orders

The Tribunal orders:

1.The application for the approval of the inclusion of clause 45.1 in the lease between the parties relating to Shop 13, Bunbury City Plaza Shopping Centre, is dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

MS N EAGLING, MEMBER

23 FEBRUARY 2024