FEDERAL COURT OF AUSTRALIA

Lin v State Rail Authority of New South Wales [2005] FCA 1137

SARAH LIN v STATE RAIL AUTHORITY OF NEW SOUTH WALES

NSD 1996 of 2003

NSD 1491 of 2003

WILCOX J

5 AUGUST 2005

SYDNEY

THE COURT ORDERS THAT:

1.         The preliminary question be answered in the affirmative.

2.         The proceeding be dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

WILCOX J:

1                     There is an issue in this case as to the application of the Retail Leases Act 1994 (NSW) (‘the Act’).  On 8 July 2005, I made a direction that this issue be determined as a preliminary question.  The precise form of the question is:

‘Whether, in all the circumstances, the lease between the parties in respect of the commercial premises on platform no. 1 at Waverton Railway Station falls within  the exclusion of section 6(1)(a) of the Retail Leases Act 1994 (NSW).’

2                     Section 6(1)(a) reads as follows:

‘(1)      This Act does not apply to any of the following leases of retail shops:

(a)          leases for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise), and for this purpose a provision for holding over by the lessee at the end of the term of the lease is not considered to confer a right on the lessee to extend the lease if it operates effectively at the discretion of the lessor.’

3                     In October 1998, the respondent, State Rail Authority of New South Wales (‘State Rail’), entered into a tenancy agreement with the applicant, Sarah Lin.

4                     The agreement was in these terms:

‘AGREEMENT( in pursuance of the Conveyancing Act, 1919) between the State Rail Authority of New South Wales, a corporation constituted by the Transport Administration Act, 1998 (hereinafter referred to as the Lessor) of the one part and the Lessee described in Item 1 of the Reference Schedule (Schedule B attached) of the other part.   NOW this agreement witnesses that the Lessor demises to Lessee the premises described in Item 2 of the Reference Schedule hereinafter called the demised premises for a term described in Item 3 of the Reference Schedule commencing on the date indicated in Item 4 of the Reference Schedule and thereafter for the period mentioned in Item 5 of the Reference Schedule at the rent described in Item 6 of the Reference Schedule (and at the same rate for any portion thereof) payable in advance to the Lessor's Finance Manager, Rail Estate by equal payments described in Item 7 of the Reference Schedule, with the first of such payment due and payable on the commencement date and subject to the terms and conditions contained in Item 9 of the Reference Schedule and in Schedule A.’

5                     Schedule A to the agreement contains terms and conditions.  It is unnecessary to refer to that schedule except to note one matter, relevant because of one argument put by Ms Lin.

6                     There is on file, at the Office of the Registrar-General, a memorandum registered number U994824A dealing with standard terms and conditions of leases granted by State Rail.  This memorandum was filed at the office of the Registrar-General on 7 February 1995, prior to the tenancy agreement between the present parties.  The opening words of the memorandum are as follows:

‘The Applicant State Rail Authority of New South Wales requests the Registrar General to record this memorandum, comprising 41 pages (excluding this page), which contains provisions deemed to be incorporated in any instrument which refers to it.’

It will be noted these standard conditions apply to an instrument which refers to the memorandum.  The relevant point about schedule A of the tenancy agreement between the present parties is that it makes no reference to memorandum U994824A.  Nor is there such a reference elsewhere in the tenancy agreement.

7                     Item 1 of Schedule B of the tenancy agreement identifies Ms Lin as the lessee.  Item 2 identifies the demised premises.  Item 3 defines the term of the lease:  ‘One (1) month’.  The commencement date is given as 10 October 1998.  Item 5, which deals with the holding-over period, reads ‘Month to Month’.  It is not necessary to set out the material behind the other item references.

8                     The tenancy agreement operated as a demise by State Rail to Ms Lin of the identified premises for a term of one month, with provision for her to hold-over in the premises on a month to month basis.  The holding-over period was not specified to terminate on any particular date.  There was provision for re-entry and termination in the event of various defaults but those provisions are not presently material.

9                     After the expiration of the term of the lease, Ms Lin continued in occupation of the premises for some years.  On 14 June 2002, real estate agents acting on behalf of State Rail sent Ms Lin a letter in which they advised that State Rail ‘is prepared to offer a new lease over the above premises on the following basis’.  Particulars were set out.  The proposed term was for five years.  A rental was stipulated, with provision for annual rent review.  The letter went on:

‘Please note that this constitutes an offer to lease only, and is subject to our client's final acceptance and approval.  No contractual relationship shall be deemed to have been created as a result of this offer and no lease will be deemed to be entered into until such time as our client's final acceptance is received, all lease documentation has been signed, and all moneys due and payable up to the date of signing of the lease have been paid.’

10                  Ms Lin did not accept the offer.  In argument today, she referred to the fact that the offer was made.  She suggested this indicates she had a right to extend or renew the lease, thus avoiding the exclusion effected by para (a) of s 6(1) of the Act.  That argument cannot be sustained.  The fact that the offer was not accepted means its terms are irrelevant to the present problem.  The offer does not improve Ms Lin’s position.  Likewise, the fact that the offer was made does not adversely affect Ms Lin's previous rights, such as they were.  The legal position continued as if no offer had been made.

11                  Similarly, as it seems to me, the memorandum registered with the Registrar General as U994824A is irrelevant to the present problem.  The instrument that governs the relationship between the present parties does not refer to the memorandum.

12                  This brings me back to the terms of the tenancy agreement itself.  It seems to me the position is clear.  Ms Lin had the benefit of a holding-over clause, which would confer an expectation that she might be able to continue in occupation of the demised premises after the expiration of the term of one month.  However, this expectation arose out of an agreement for holding-over from month to month.  Such a holding-over means either party can terminate the tenancy by giving one months’ notice to the other party. 

13                  It is not necessary, for present purposes, to discuss the form or expiry date of the required notice.  It is sufficient to say that either party – that, of course, includes the lessor – could, at any time, have brought the tenancy to an end by giving one months’ notice.  State Rail could have terminated the lease before Ms Lin had been in occupation of the premises for six months.

14                  Section 6(1)(a) of the Act poses a practical test.  The test is the right of the lessee to extend the lease.  That means a legal right.  It is not sufficient, as Ms Lin seems to think, that there was a possibility of an extension beyond six months.  In order to avoid the exclusion of s 6(1)(a), she needs to show there was a legal right.  The paragraph makes plain that a provision for holding-over is not enough to confer a right, for the purposes of the paragraph, ‘if it operates effectively at the discretion of the lessor’.  The right to extend beyond six months effectively operates at the lessor’s discretion in a case where the lessor can prevent the continuation.

15                  The word ‘effectively’ is important.  It requires the reader to look at the practical position.  So it is necessary, in the present case, to ask whether State Rail could have prevented the lease from extending beyond six months from the date when Ms Lin first went into occupation.  There can be only one answer to a question posed in those terms: ‘yes’.  It seems to me both elements of para (a) are satisfied in the present case. 

16                  I am reinforced in the view I have expressed by a decision given by Young J, of the Supreme Court of New South Wales, Cathay Developments Pty Ltd v Laser Entertainment Pty Ltd, unreported, 25 March 1998.  His Honour was there considering s 6(1)(a) of the Act. He did so in the context of a lease at will terminable by a month’s notice under s 127 of the Conveyancing Act 1919 (NSW); that is, effectively, a lease from month to month.  His Honour stated he was not aware of any judicial decision on the application of that paragraph to a holding-over clause.  It was necessary for him to decide the point.  He said:

‘There was, and indeed, still is an amended form legislation protecting agricultural tenancies and existing short term agricultural leases to tenancies for two years. The point has arisen more than once in cases dealing with that line of territory as to whether a tenancy at will or a tenancy from month to month qualifies.  It seems to me that the way in which almost invariably this litigation has been determined is that a tenancy from month to month or at will is not a tenancy to which such legislation attaches.’

His Honour cited authority for that view and went on:

‘The definition in the Agricultural Holdings Act 1941 which was considered in both those cases seems stronger than the definition in the instant case especially because of the proviso of section 6(1)(a) that I think a fortiori the same result must follow.  Accordingly, in my view the Retail Leases Act does not apply to the present lease or licence.’

17                  I respectfully adopt the approach taken by Young J.  It reinforces the view that, in any event, I would have reached by studying the terms of s 6(1)(a). 

18                  The preliminary question should be answered ‘yes’.  It follows that Ms Lin’s claim for relief under the Act against State Rail must fail.  The provisions of the Act are not available to her.

19                  As the application of the Act is the only outstanding basis of claim in this proceeding, the appropriate order is that the proceeding be dismissed.

20                  I therefore order that the preliminary question be answered in the affirmative and the proceeding be dismissed with costs.

Associate:

Dated:              22 August 2005