News

Update on a Landlords’ ability to recover outgoings under the Commercial Tenancy (Retail Shops) Agreement Act 1985 (WA)

The Court of Appeal in Western Australia has finally settled an ongoing tension between landlords and tenants regarding the obligations to pay operating expenses1

As a result of the Court of Appeal’s recent decision in Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2022] WASCA 29, the current law can be broadly summarised as follows:

  1. A landlord must provide the Annual Estimate of operating expenses to the tenant during the accounting year set by the lease agreement, otherwise the tenant’s obligation to pay operating expenses for that year will be suspended permanently.
  2. A landlord cannot issue an Operating Expenses Statement unless an Annual Estimate has already been provided.
  3. A landlord can recover any unpaid operating expenses from its tenant, even if the three month period following the end of the lease year has passed.2

Trimat Holdings Pty Ltd v Investment Club Pty Ltd

Between 2011 and 2017, Trimat, the tenant of premises in O’Connor, paid monthly operating expenses based on a set periodic amount. The landlord, Investment Club Pty Ltd didn’t provide Trimat with Annual Estimates or Operating Expenses Statements.

The case came first before the District Court where Judge Goetze held that an Operating Expense Statement must be issued by a landlord prior to claiming recovery of those expenses from a tenant. Trimat lost its appeal on this point with the Court of Appeal; however, the Court determined that a tenant’s obligation to pay operating expenses can be suspended if the landlord has failed to issue an Annual Estimate within the lease year.3

The case was remitted back to the District Court by the Court of Appeal to determine if there were other defences available to Trimat. The District Court held that Trimat’s payments were made under a mistake of law, however, since Investment Club provided good consideration for the mistaken payment (i.e. by discharging the debt), it did not need to refund the payments.4 Trimat appealed this decision.

In this second appeal,5 the Court of Appeal reiterated its comments made in the first appeal characterising the relevant provisions of the Act:

‘as a self-help mechanism enabling the tenant in effect to enforce the landlord’s obligation to provide an operating expense statement’.6 The failure to comply with these conditions only suspends the tenant’s obligation to pay operating expenses and does not extinguish it.7

The Court of Appeal’s interpretation of this section indicates a much broader and more flexible approach which seems to favour the landlords.

Settled Position

Landlords can now be confident of the scope of the legislative requirements regarding recovery of operating expenses.

If you have any questions, or wish to speak to one of our lawyers, please contact Colette Davies or Sinead Spencer on (08) 6316 2200.

For more information, please contact the authors:
Colette Davies | Principal Associate
Sinead Spencer | Solicitor

This article was also co-authored by Andrew Filing.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.

Footnotes

  1. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2022] WASCA 29. Earlier this year, we published an article on Trimat Holdings Pty Ltd and landlords’ obligations under the Act.
  2. For the legislative requirement, see Commercial Tenancy (Retail Shops) Agreement Acts 1985 (WA) section 12(1a)(a) (Act).
  3. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2020] WASCA 63.
  4. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [No 2] [2021] WADC 26.
  5. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2022] WASCA 29
  6. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2022] WASCA 29 at [27].
  7. Trimat Holdings Pty Ltd v Investment Club Pty Ltd [2022] WASCA 29 at [75].

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