Australia: Retail lease disputes: should parties access the NSW Civil and Administrative Tribunal or the Supreme Court?

Last Updated: 9 April 2014
Article by Gary Newton and Jackie Cheung

In brief - Tenant ordered to deliver possession of pharmacy premises

On 4 February 2014, the New South Wales Supreme Court handed down its decision in Anka (Civic Center) Pty Ltd v Sahyoun [2014] NSWSC 17, which considered whether the plaintiff lessor could repossess leased premises and claim relief in the said court where proceedings had already commenced in NSW Civil and Administrative Tribunal.

Tenant enters three year lease commencing May 2009

The plaintiff, Anka (Civic Center) Pty Ltd is the registered proprietor of a shopping centre at 23 Lindfield Avenue, Lindfield, known as the Lindfield Arcade, in which the defendant, Monique Sahyoun, leased retail premises to operate a pharmacy.

In April 2009, Ms Sahyoun entered into a three-year lease with the previous proprietors of the shopping centre for the pharmacy premises. The lease commenced on 31 May 2009 and did not confer an option to renew. Subsequently, in November 2010, Anka became the registered proprietor of the shopping centre and sought to redevelop the site at some point in time.

Landlord announces intention to redevelop site after expiry of lease

Prior to the expiry of the lease on 31 May 2012, Mr Stringer, a representative from Anka, indicated that it intended to "leave [her] on a month to month basis on the same terms and conditions as the original lease", terminable upon one month's notice.

At a meeting on 8 October 2013, Mr Stringer announced that Anka was proceeding with the redevelopment of the site, which required Ms Sahyoun to vacate in early January.

On 4 December 2013, a letter purporting to give notice that the tenancy would terminate on 6 January 2014 was delivered to the pharmacy and emailed to Ms Sahyoun.

Tenant asserts that termination notice invalid and landlord commences Supreme Court proceedings

On 11 December 2013, Ms Sahyoun's solicitor issued a letter to Anka asserting the following:

By 6 January 2014, Ms Sahyoun had not vacated the premises and remained in occupation. Anka had issued a notice specifying the relevant breach of the lease was the failure to vacate by the required date in accordance with section 129(1).

On 15 January 2014, Anka brought proceedings in the Supreme Court, seeking repossession of the pharmacy premises. On the following day, Ms Sahyoun commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) for relief.

Could the Supreme Court hear the matter? Could the tenant claim relief?

In the present proceedings, the court considered a number of arguments advanced by Ms Sahyoun's representatives. However, of particular importance was the court's determination of the following matters:

  • Whether the Supreme Court could hear the matter by reason of section 68 and section 75 of the Retail Leases Act 1994 (NSW)
  • Whether Ms Sahyoun could claim relief under section 129 of the Conveyancing Act on the grounds that a valid notice was not provided

Necessity for mediation under section 68 of the Retail Leases Act

Pursuant to section 68 of the Retail Leases Act, a retail tenancy dispute may not be the subject of proceedings before any court unless and until the Registrar has certified in writing that mediation under this Part has failed to resolve the dispute or matter, or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter.

In this case, Beech-Jones J determined that mediation under Part 8 was unlikely to resolve the dispute in circumstances where both parties had engaged lawyers for over six weeks, had commenced litigation against each other, had attended informal mediation and had not reached agreement.

Notwithstanding the fact that mediation under Part 8 of the Retail Leases Act would have had the benefit of a mediator, the court was still not persuaded that mediation would have resolved the issue between the parties. Therefore in light of the ongoing dispute, Ms Sahyoun could not rely upon section 68(1) to prevent the court from hearing the matter, which commenced without the dispute being submitted to mediation.

Transfer of proceedings to the NSW Civil and Administrative Tribunal under section 75 of the Retail Leases Act

Under section 75 of the Retail Leases Act, retail tenancy disputes must, on the application of any party, be transferred to the NCAT if the court is satisfied that:

  • the dispute 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
  • the interests of justice do not require that the matter be dealt with by the court.

Although section 75(2) further indicates that retail tenancy disputes are intended to be conducted with informality, the court considered a number of factors in finding that it was in the interests of justice for the matter to proceed in the said court.

Due to the commercial urgency of the matter and in particular, the fact that the NCAT could not offer the parties an earlier hearing, the court found that the removal of current proceedings from the court would have the effect of depriving both parties of a fair hearing of the case by the passing of time.

However, in refusing to transfer proceedings to the NCAT, it is also important to note that Beech-Jones J expressly stated that in the ordinary course, matters will generally be heard in the NCAT as opposed to the courts as contemplated by section 75(2).

Notice under section 129 of the Conveyancing Act

Section 129 of the Conveyancing Act governs the restrictions on and relief against forfeiture of a lease that requires a lessor to serve on the lessee a notice in accordance with section 129(1). However, the protection of this section expressly does not extend to leases under section 129(6) and namely, any lease or tenancy for a term of one year or less (section 129(6)(a)).

In considering the judgment of Easy Buy International Pty Limited v Macquarie Goodman Property Services Pty Limited and Ors [2006] NSWSC 148, the court accepted the reasoning that a lessee holding over on a month to month tenancy was still entitled to the protection of section 129, as the period of the original lease should be included in the assessment of the length of its term for the purposes of applying section 129(6)(a).

Although this reasoning favoured Ms Sahyoun, the court remained of the view that she could not claim relief by operation of this section, as the subject lease had expired on the giving of the requisite notice and that expiry was not a direct consequence of any alleged breach of a "covenant or agreement, express or implied in the lease" which was governed by section 129.

Court finds in favour of landlord; tenant ordered to vacate premises

In rejecting the claims adduced by Ms Sahyoun's representative, the court found in favour of Anka and ordered Ms Sahyoun to deliver possession of the pharmacy premises. The decision of this case emphasises the intended operation of the court system and NCAT in dealing with retail tenancy disputes, with the latter having jurisdiction to hear such matters ordinarily.

Further, the consideration of section 129 of the Conveyancing Act reveals that its operation has the ability to protect lessees who are holding over pursuant to a month to month tenancy. However, it will only afford relief in circumstances of an invalid notice provided there has been a breach of any covenant, condition or agreement.

Gary Newton Jackie Cheung
Leasing - commercial and retail
CBP Lawyers

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Gary Newton
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