Australia: Rectification of Retail Leases in NSW: Sidestepping Consent

A court may order that a lease be "rectified", even without the parties’ consent, if the lease fails to properly record the common intention of the parties, is absurd or is obviously wrong. However, when the Administrative Decisions Tribunal (ADT) hears a retail lease dispute, the situation is different. The ADT’s power to rectify the lease is somewhat limited. This update looks at two cases which indicate that the significance of this limit is diminishing.

The Retail Leases Act 1994 (Act) in NSW provides the ADT with the jurisdiction to hear retail tenancy claims, including a "claim regarding rectification of the lease". Section 72 sets out the ADT’s wide powers relating to retail tenancy claims, including the power to "make an order by consent of the parties, requiring the parties to the proceedings to rectify a lease".

The consent requirement was imposed at a time when the ADT was an administrative dispute resolution organ. It had no track record in commercial dispute resolution so some brakes were applied to its jurisdiction, apparently to appease those advising a cautious approach.

The consent requirement raises the following questions:

• Does the ADT have jurisdiction to hear a retail tenancy claim regarding rectification of a lease, where a party does not consent to an order for rectification?

• Does the ADT have power to make an order rectifying a lease where a party does not consent?

In Prasad & Anor v Fairfield City Council [2000] (Prasad), the landlord objected to the ADT’s jurisdiction to determine the application in which, amongst other orders, the applicant sought a rectification order. The ADT overruled the landlord’s objections regarding jurisdiction and ordered that the matter proceed to hearing. In making this order, the ADT commented that section 70 granted it "ample power" to determine claims for rectification, and noted that it had power to award damages and make declarations or other orders, after all of the evidence concerning a rectification claim had been heard. Although an order to rectify the lease could not be made without the consent of the parties, those other remedies enabled the ADT, in theory at least, to put the "wronged" party in the same financial position as if rectification had been ordered.

In Trustees of the Pious Society of St Charles v Vodap Pty Ltd & Ors [2004] (Pious Society case), the landlord sought an order for rectification, and for the tenant to pay rent arrears, interest and legal fees which would be outstanding if the lease were rectified. The landlord asserted that the lease contained an error in its rent review provisions in that the lease provided for CPI rent reviews only after the first year of the second and third terms of the lease. The landlord also argued that the ADT could hear and determine a rectification claim, and sought an order that the lease be rectified to reflect the common intention of the parties that there be an annual CPI rent review.

The tenant relied on the decision in Prasad as authority for the principle that the ADT is unable to rectify a lease where the parties have not agreed that the ADT has jurisdiction to do so. The tenant conceded that the ADT had the power to hear evidence in relation to a claim for rectification, but argued that there is a difference between the power to hear evidence and the power to make an order for relief in the nature of rectification.

Consistent with recent proclamations that the ADT should have a degree of exclusivity in determining retail lease disputes, the ADT noted the tenant’s concession and that the provisions of s75 of the Act "underline the general approach that retail tenancy disputes should be dealt with by the Tribunal rather than the Courts", and proceeded to hear evidence. Prior to finding that the evidence showed that there was no agreement between the parties, the ADT commented that:

Having confirmed its powers to hear evidence in relation to a rectification claim in Prasad, the Pious Society case is a further indication of the ADT’s willingness to work around the consent restriction, achieving an equivalent financial outcome without altering the terms of the lease.

The limit on the power to order rectification is an anachronism. Given the push to have all retail tenancy disputes resolved in the specialist ADT jurisdiction, and the trend to expand the scope of the ADT’s powers, it seems only a matter of time before the consent requirement is repealed.
By Daniel Fitzpatrick and Robert Riddell

This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.