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Retail Shop Leases in Queensland

 – pitfalls for tenants exercising options to extend or renew


Those that that rent their business premises typically invest substantial capital and resources in establishing themselves in that particular location. This includes the costs of the store fit out, in addition to as branding and other marketing activities. In order to ensure this investment is not lost upon the initial lease term expiring, tenants will often negotiate one or more options to extend the lease beyond the initial term.

 

Exercise of option

 

Where a Queensland Retail Shop Lease contains an option to renew or extend the lease, section 46 of the Retail Shop Leases Act 1994 (Qld) (RSLA) requires the landlord to give the tenant written notice of that option date. This notice must be given at least two months before the option date, but not more than six months prior to the option date.

Whilst this obligation is clearly stated in the RSLA, a landlord’s failure to comply with the obligation, whilst potentially exposing the landlord to a fine of up to 40 penalty units ($5,046 as at 1 July 2017), this will not excuse the tenant’s failure to comply with the option exercise procedure contained in the lease. If the option date is missed, regardless of whether the landlord failed to give the required notice, the tenant will lose their ability to exercise any right to renew or extend the lease.

This can potentially result in very significant consequences for the tenant, as the tenant can be being forced to vacate the leased premises on short notice, regardless of the resources invested to establish their business at the leased premises.

 

Where the lease does not contain an option

 

Where a Queensland Retail Shop Leases does not contain an option to renew, section 46AA of the RSLA requires the landlord to give the tenant written notice offering to either renew or extend the lease, or alternatively advise the tenant that a renewal or extension is not to be offered. This notice must be given to the tenant at least three months but not more than six months before the lease expires, or for leases of over one year, at least six months but not more than one year before the lease expires.

If the landlord fails to give this notice, the tenant may, by submitting an extension request to the landlord in writing prior to the expiry of the lease, automatically extend the lease until six months after the landlord gives the required notice. However, this will only apply if the tenant submits the extension request prior to the lease expiring, failing which the opportunity to do so will be lost.

 

What should tenants do?

 

Tenants should ensure that they are familiar with their rights and obligations under any lease and must not rely on the landlord to remind them of any important dates, as ignorance of those rights is not a valid excuse.

In order to ensure any options to extend are not lost, it is imperative that tenants put adequate procedures in place to diarise important dates so that they are not missed. If there is any uncertainty, legal advice should be sought at the earliest opportunity.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 06 July 17

Defamation in Queensland

 The law of defamation provides protection to a person who has had their reputation wrongfully harmed by another. Whilst actions in defamation are typically pursued by natural persons, in certain circumstances corporations may also have an action in defamation. For more information on when a corporation can pursue an action in defamation, see our article here.

To be successful in establishing a cause of action in defamation, the aggrieved needs to establish three elements, specifically that the allegedly defamatory statement:

  1. identifies them;
  2. has been published; and
  3. is defamatory, that is, it carries a defamatory meaning.

Identification

In order for a person to be defamed they must be sufficiently identified. Sometimes this will be a simple matter, for example, where the aggrieved person has been directly referred to by name. In other situations identification may prove more tricky, such as where the person has not been directly referred to or the defamatory statement relates to a particular group with a number of members, for example a committee or association.

Publication

Defamation only protects a person's reputation from harm in the minds of other persons. It is therefore essential to show that the defamatory matter complained of has been published (whether verbally, visually or in writing) to at least one person other than the aggrieved.

Some examples of how a defamatory statement can be published include:

  1. over the telephone or during a face to face conversation;
  2. a television or radio broadcast;
  3. a letter or written report;
  4. a post on Twitter or Facebook;
  5. a post or comment on a forum or website article.

Defamatory meaning

A statement will be found to carry a defamatory meaning where:

  1. it exposes the person to hatred, contempt or ridicule;
  2. it causes people to shun and avoid them; or
  3. it lowers that person’s estimation by right minded members of the public.

There are three ways that a defamatory meaning can arise, that is:

  1. on the natural and ordinary meaning of the word (where the words themselves, without more, convey a defamatory meaning);
  2. by way of false innuendo (where the defamatory meaning arises from reading between the lines of the words);
  3. by way of true innuendo (where a natural reading of the words give rise to a defamatory meaning to persons who are aware of other matters not in the publication).

Defences

Once an action in defamation has been established, the defendant may attempt to raise defences to the claim. The possible defences available will be discussed in a separate article.

Damages

The maximum amount of general damages in Queensland for a single cause of action for non-economic loss is $355,000 (current as of 1 July 2014, indexed annually).

Limitation period

Unlike most causes of action which typically have a three or six year limitation period, defamation has an extremely short one (1) year limitation period. The limitation period commences on the date of publication of the defamatory statement.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 12 May 16

When Can a Corporation Sue for Defamation in Queensland?

The recent Queensland Supreme Court decision of Jones v Aussie Networks Pty Ltd [2014] QSC 126 provides guidance on whether a corporation can be defamed when its share capital is owned by another corporation in a fiduciary capacity, namely as trustee for a trust.

It is a common misconception that corporations are unable to sue for defamation. Whilst it is true that large corporations are generally prohibited from bringing an action for defamation in Queensland, a corporation will be entitled to bring an action in defamation if they are an ‘excluded corporation’.

Section 9 of the Defamation Act 2005 (Qld) provides that a corporation will be an excluded corporation if:

  • the objects of the corporation do not include obtaining a financial gain for its members; or
  • it employs fewer than 10 persons and is not related to another corporation.

The decision in Jones concerned an application by the plaintiff (“Jones”) to join a corporation (Australian Shareholder Centre Pty Ltd (“ASC”)) as a co-plaintiff on the basis that it too had been defamed by the defendants. All of ASC’s 100 ordinary shares were held by another company, Torque Securities Pty Ltd (“Torque”). Importantly those shares were held by Torque in its capacity as trustee for the Jinx Trust.

Jones’s application was opposed by the defendants on the basis that ASC was not an excluded corporation because, whilst ASC appeared to have less than 10 employees (although this had not been conclusively proved), ASC was related to its sole shareholder, Torque.

To determine whether or not a corporation is related to another corporation, the Defamation Act 2005 adopts the definition of related bodies corporate contained in the Corporations Act 2001. On this basis, a corporation will be related to another where the corporation is:

  1. a holding company of another corporation;
  2. a subsidiary of another corporation;
  3. a subsidiary of a holding company of another corporation.

There was no suggestion that ASC was a holding company of another corporation. In order to determine whether ASC was a subsidiary of Torque, it is necessary to consider various provisions of the Corporations Act 2001.

Section 46 of the Corporations Act 2001 provides that the first body (ASC) will be a subsidiary of another body (Torque) if:

  • the other body:
    • controls the composition of the first body’s board; or
    • is in a position to cast, or control the casting of, more than one-half of the maximum number of votes that might be cast at a general meeting of the first body; or
    • holds more than one-half of the issued share capital of the first body (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); or
  • the first body is a subsidiary of a subsidiary of the other body.

Whilst (b) would have had no application (a subsidiary of a subsidiary), a casual reading of the Defamation Act 2005 and the Corporations Act 2001 would suggest that the defendants were correct, that ASC was indeed a subsidiary of Torque, as ASC triggered each of the sub-paragraphs to (a) because Torque, as the sole shareholder of ASC:

  1. controlled the composition of ASC’s board;
  2. was in a position to cast and control more than 50% of the votes at any general meeting of ASC; and
  3. held more than 50% of the issued capital in ASC.

However, as was submitted by the applicant Jones (and as was ultimately accepted by the Court), section 48(2) of the Corporations Act 2001 contained an important qualification that any shares held, or power exercisable, by the other body [Torque] in a fiduciary capacity are treated as not held or exercisable by it. Further, it was specifically acknowledged that section 48 applied when determining whether a body corporate is a subsidiary of another.

In applying section 48 of the Corporations Act 2001, the Court acknowledged that Torque held the ASC shares as trustee and therefore in a fiduciary capacity. The resulting determination was that Torque’s shareholding of ASC must be disregarded when determining whether ASC was its subsidiary. Accordingly, ASC was not a subsidiary of, or related to, another corporation, and therefore satisfied the definition of ‘excluded corporation’.

The information contained in this article is general in nature only and should not be relied on. You should always seek legal advice about your individual circumstances.

Posted in: Commercial Litigation News at 10 May 16