A late 2014 decision from Queensland's Court of Appeal has created uncertainty concerning the application of section 182 of the Land Title Act 1994 (Qld) and has implications for all retail shop leases.
The compulsory acquisition
Mekpine Pty Limited v Moreton Bay Regional Council  QCA 317 is a compulsory acquisition of land case which has wider implications.
Mekpine entered into a retail shop lease in March 1999 over part of Lot 6. In 2006, the lessors purchased adjacent land, which was subsequently amalgamated with Lot 6 to create Lot 1. Consistent with usual practice, Mekpine's lease was noted on the back of the survey plan for Lot 1 and it was registered.
In November 2008, Moreton Bay Regional Council compulsorily acquired part of Lot 1, which was entirely within the land purchased in 2006.
Did Mekpine have an interest in the resumed land?
It is general industry practice that in a shopping centre lease the definition of "centre" is expressed to include "any other leasehold or freehold land used with them or added to them as part of the Centre". This allows for additional land to be included in the centre for issues such as recovering rates and other costs associated with the additional area and to ensure the tenant has rights of access over the additional area as part of its enjoyment of the centre.
This definition is used because prior to the Mekpine decision it was considered that, in the absence of clear intent, additional areas of land would not be included in the definition of "Centre" in a retail shop lease.
The Mekpine lease did not include this broad definition of "centre". However, the Court of Appeal found that due to the operation of section 182 of the Land Title Act, Mekpine had an interest in the resumed land (which was outside the original Lot 6), because it formed part of the common area of Mekpine's lease. The impact of the Court of Appeal's finding is that lessors no longer have discretion to limit common areas where two or more lots have been amalgamated and a new survey plan registered in relation to the amalgamated lot.
Can a reference on a survey plan create an interest in land?
The Mekpine lease defined common area by reference to Lot 6. Council argued that Mekpine’s interests over Lot 1 extended only to the area that was previously Lot 6.
Section 182 of the Land Title Act provides that on registration of an instrument that is expressed to transfer or create an interest in a lot, the interest is transferred or created and is registered.
The majority of the Court of Appeal held that the reference to "instrument" in section 182 of the Land Title Act was a reference to the survey plan amalgamating the lots (with Mekpine's lease noted on it) and that by virtue of the registration of the survey plan, the reference to Lot 6 in the Mekpine lease became a reference to Lot 1, thereby including the resumed area of Lot 1 within Mekpine's common area.
Each judge in the majority gave separate reasons. One judge relied partly on the fact that the survey plan required the consent of each "registered proprietor" whose interests are affected by the plan. The definition of "registered proprietor" includes a lessee. However, in Queensland the Land Title Practice Manual states that the consent of the lessee (or holder of an easement or statutory covenant) is not required if the new plan solely relates to the amalgamation of lots.
The wider consequences of the Court's interpretation of section 182 of the Land Title Act 1994
The effect of the Mekpine decision is that registration of a survey plan, being an instrument, transfers every existing interest referred to in it, with the effect of unilaterally altering terms of an agreement between parties, even if the interest holder has not consented.
The case raises issues about the impact that registration of a survey plan has on other interests in land, such as easements and statutory covenants.
Two examples of applying the Mekpine decision may be:
- an easement could be taken to benefit the whole of a new lot where the original benefitted lot is amalgamated and a survey plan noting the easement is registered in respect of that amalgamated lot; and
- if land is burdened with a statutory covenant relating to the use of a lot and the lot is amalgamated then the whole of the new land may be burdened.
Retail Shop Leases Act 1994 definition of "common areas" held to have substantive effect
Even though it was unnecessary for the Court of Appeal to decide, it stated that the wider definition of common areas in section 6 of the Retail Shop Lease Act 1994 (Qld) should be incorporated into the Mekpine lease. The Court considered that sections 18 to 20 of the Retail Shop Lease Act showed a clear legislative intent to replace any inconsistent definition of common areas with the definition in section 6 of the RSL Act.
This is totally inconsistent with the way industry has interpreted and administered the Act since the original Act in 1984.
Prior to Mekpine, section 6 of the Retail Shop Lease Act was only considered as a definition section to assist with the interpretation of other expressions in the Act, including the meaning of "retail shopping area". This is reflected in practice, where many practitioners draft retail shop leases incorporating definitions of "common areas" that differ from the definition in the Retail Shop Lease Act.
Mekpine may remove the ability for lessors (and lessees) to exercise discretion in defining common areas under a lease and opens the door for other definition clauses in the Retail Shop Lease Act to be held to have a substantive effect and implied into retail shop leases. The decision in relation to this point is not binding, but may be adopted by lower courts.
The message for constructing authorities and persons with an interest in land
The Council has made an application to the High Court of Australia for special leave to appeal, but the application does not have a hearing date.
There are some significant issues at stake so it would be disappointing if leave was not granted.
For now the take-home messages are:
- constructing authorities and people with an interest in land should be aware of the impact that an amalgamation of lots will have on registered interests in respect of the land; and
- lessors and lessees should be aware that the definition of "common areas" (and perhaps other definitions) in the Retail Shop Lease Act may be deemed to apply to a retail shop lease regardless of what the parties have agreed.
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