Ajaimi v Giswick Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL LIST

S ECI 2021 01055

HABIB AJAIMI	Applicant
v
GISWICK PTY LTD (ACN 098 613 837)	Respondent

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JUDGE:	M Osborne J
WHERE HELD:	Melbourne
DATE OF HEARING:	25 and 26 August 2021
DATE OF JUDGMENT:	17 March 2022
CASE MAY BE CITED AS:	Ajaimi v Giswick Pty Ltd
MEDIUM NEUTRAL CITATION:	[2022] VSC 131

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PRACTICE AND PROCEDURE – Appeal to the Trial Division of the Supreme Court of Victoria from the Victorian Civil and Administrative Tribunal – Application pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic).

LANDLORD AND TENANT – Breach of various covenants in the lease – Covenant to maintain premises – Covenant for quiet enjoyment – Express covenant – Activities of third party and of landlord – Whether covenant breached by landlord’s failure to adequately remedy building defect present at the commencement of the lease – Rent abatement – Breach of s 54 of the Retail Leases Act 2003 (Vic) – Breach of s 52 of the Retail Leases Act 2003 (Vic) – Claim of misleading and deceptive conduct pursuant to s 18 of the Australian Consumer Law - Damages pursuant to s 236 of the Australian Consumer Law – Damages pursuant to s 237 of the Australian Consumer Law – Nature of appeal with respect to questions of fact.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr M Dean	JAG Lawyers
For the Respondent	Mr D Carlile	Peter Lustig

HIS HONOUR:

Introduction

The applicant, Habib Ajaimi (‘the landlord’) is the landlord of a two-storey building (‘the Building’) located at 348 Glenhuntly Road, Elsternwick. The Building comprises a ground floor shop (‘the Premises’) and an upstairs residential dwelling accessible from the rear of the building (‘the Residence’). The Residence has been occupied by various residents pursuant to residential tenancy agreements entered into with the landlord.

The Premises are leased by the landlord to Giswick Pty Ltd (‘the tenant’) who occupies the Premises pursuant to a retail lease entered into between the parties (‘the Lease’). The tenant carries on business at the Premises as a newsagent known as Mr Pickwick’s. The tenant, and its directors Mr and Mrs Browne, are experienced newsagency operators and the tenant also carries on a separate newsagency business in the nearby suburb of Gardenvale (‘the GAN’).

The Lease commenced for a term of three years on 27 June 2011 and contained options for renewal for two further terms, each five years. The tenant has exercised the first option thereby renewing the Lease and as at the date of the hearing before the Victorian Civil and Administrative Tribunal (‘the Tribunal’) remained in occupation of the Premises.

Following a five day hearing conducted remotely via zoom in August 2020 before the Tribunal as constituted by Senior Member Her Honour Judge Jenkins, the Tribunal published reasons (‘the Reasons’) and made orders on 24 March 2021 (‘the Liability and Money Orders’) as follows:

1[The landlord] is liable to [the tenant] for costs, damages and interest as set out in the Reasons.
2[The landlord] must pay [the tenant] $399,405.68 inclusive of interest on the [tenant’s] claim.

3 Liberty to apply on the question of costs.

On 2 July 2021, the Tribunal published reasons (‘the Costs Reasons’) and made further orders (‘the Costs Orders’) as follows:

1Pursuant to s 92(2)(a) of the Retail Leases Act 2003, [the landlord] must pay to [the tenant] 65% of the costs of the proceeding, including any reserved costs, such costs to be assessed by the Victorian Costs Court on a standard basis, in default of agreement, pursuant to the County Court scale applicable at the time when the costs were incurred.
2The [tenant] having substantially succeeded in its claim, the Tribunal orders the [landlord] to reimburse the [tenant] for the fees paid in this proceeding, pursuant to s 1115B(i) of the Victorian Civil and Administrative Tribunal Act 1998

The application for leave to appeal

The landlord brings this application pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (the ‘VCAT Act’) for leave to appeal against both the Liability and Money Orders and the Costs Orders.

In his application for leave to appeal, the landlord relies on a proposed further amended notice of appeal which identifies no less than 26 ‘questions of law’ (together with numerous sub-questions) and an associated 39 grounds of appeal (together with numerous sub-grounds). In effect, the landlord seeks to challenge each material legal and factual determination made by the Tribunal. The scope of the application for leave to appeal therefore necessitated seven volumes of appeal books which incorporated the entirety of the transcript and evidence before the Tribunal. With some justification, the tenant was critical of the approach taken by the landlord in its prosecution of the application.

Whilst the expansive approach taken by the landlord tended to obscure the relative importance of each ground, I do not accept that the proposed further amended notice of appeal did not identify questions of law. Having had the benefit of comprehensive written submissions including supplementary and oral submissions from both parties, I do not accept that the true substance of the issues was not made clear to the tenant, or that the landlord inappropriately raised matters not raised before the Tribunal.

Nevertheless, in the approach taken in the determination of this application, I have found it convenient to group the many grounds and deal with them in a manner which reflects their relative importance.

The principles in relation to applications for leave to appeal pursuant to s 148 of the VCAT Act have been recently summarised by Croft J in Rysze International Pty Ltd v Patrick See Yik Young (‘Rysze International’).[1] Any appeal is dependent upon first, the appeal being on a question of law and, secondly, that the court gives leave to appeal. The legislative policy underlying these provisions is that ‘VCAT decisions should not generally be disturbed where cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal.’[2] Accordingly, the court is not entitled to enter a fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal.[3]
[1][2021] VSC 786.
[2]Ibid [7].
[3]Ibid.

Relatedly, in considering applications for leave to appeal of this kind, courts have repeatedly emphasised the necessity of avoiding an ‘overly pernickety examination of the reasons’ and instead focussing on the ‘substance of the decision’.[4]
[4]Brondolino v Surf Coast Smash Masters Pty Ltd [2019] VSC 505, [12] (Croft J), citing Roncevich v Repatriation Commission (2005) 222 CLR 115, [64] (Kirby J).

Further, in Cosmopolitan Hotel (Vic) Pty Ltd & Anor v Crown Melbourne Limited (‘Cosmopolitan Hotel’),[5] the Court of Appeal of this Court observed that whilst it is imperative to identify and define a question of law, courts should ‘not read a notice of appeal narrowly so as to oust the appellate jurisdiction over a decision of [the Tribunal]’.[6] Therefore if questions of law were not sufficiently identified in the notice of appeal but were otherwise identified, the court should nevertheless address them.
[5](2014) 45 VR 771.
[6]Ibid, [48] (Warren CJ, Whelan and Santamaria JJA).

I have applied these principles in the determination of this application.

Key provisions in the Lease

Before turning to the Reasons and the proposed grounds of appeal, it is necessary to identify certain key provisions in the Lease.

The ‘permitted use’ under the Lease is defined as use as a ‘retail premises/newsagency and any other ancillary use as approved by the landlord from time to time’.

The tenant is required to pay rent without deductions in advance on a monthly basis on the 27^th day of each month, and additionally is required to pay building outgoings specified as comprising 60% of all outgoings which are not separately metered save for water usage which is to be allocated as to 20% to the tenant. Otherwise all other outgoings and services that are separately assessed to the Premises are required to be paid by the tenant. Building Outgoings are defined as including rates, levies and assessments imposed by any relevant authorities, premiums and charges for various insurance policies taken out by the landlord.

By clause 6.1 of the Lease, the landlord is required to give the tenant quiet possession of the Premises without any interruption by the landlord or anyone connected with the landlord as long as the tenant does what it is required to do under the Lease (‘the Quiet Enjoyment Term’).

Clause 6.4 requires the landlord to keep the structure (including the external faces and roof) of the building[7] and the landlord’s installations in a condition consistent with their condition at the start of the Lease, but is not responsible for repairs which are the responsibility of the tenant under the Lease.
[7]Defined as ‘any building in which the premises are located, including the landlord’s installations’.

Clause 8.1 of the Lease provides that if the Premises are damaged so that the Premises cannot be used or accessed for their permitted use, a fair proportion of the rent and buildings outgoings is to be suspended until the Premises are again wholly fit and accessible for the permitted use and the suspended proportion of the rent and building outgoings must be proportionate to the nature and extent of the damage or inaccessibility.

Clause 9.2 provides that the Lease together with the relevant disclosure statement contains the whole agreement of the parties and neither party is entitled to rely on any warranty or statement in relation to, inter alia, the Premises which is not contained in such documents.

Clause 22.07 of the Lease provides that the Premises are leased in their present state and condition as at the start of the Lease, and further provides that the tenant will assume responsibility for any repairs or replacement should they be required for its continued operation and that the tenant is obliged to keep clear and maintain the gutters and downpipes on the veranda.

Clause 22.24 of the Lease provides that the tenant acknowledges and agrees that no promise, representation, warranty or undertaking, either express or implied, has been given by or on behalf of the landlord to the tenant or has otherwise arisen in relation to:

(a) the suitability of the premises for any business to be carried on by the tenant or the permitted use or purpose for which the Premises may be lawfully used by the tenant;

(b) any consent, approval, authorisation which may be required or granted by any government agency in connection with the tenant, the tenant’s business or the permitted use;

(c) the permitted use of the Premises on the landlord or in the building (sic);

(d) the size, location or suitability of the Premises, the land or the building; or

(e) whether or not any permit is required for the use proposed by the tenant.

As the Lease is a lease of retail premises within the meaning of the Retail Leases Act 2003 (Vic) (‘the Retail Leases Act’), ss 52, 54 and 57 of the Retail Leases Act effect a statutory incorporation of further terms into the Lease.

Section 52(2) provides that the landlord is responsible for maintaining in a condition consistent with the condition of the Premises when the retail lease was entered into, the structure of and fixtures in the retail premises, plant and equipment at the retail premises and the appliances, fittings and fixtures provided under the Lease by the landlord relating to the gas, electricity, water, drainage or other services (‘the s 52 term’).

Section 54(2) of the Retail Leases Act (‘the s 54 term’) provides that the landlord is liable to pay the tenant reasonable compensation for loss and damage (other than nominal damage) suffered by the tenant because the landlord or a person acting on the landlord’s behalf:

(a) Substantially inhibits the tenant’s access to the retail premises; or
(b)Unreasonably takes action that substantially inhibits or alters the flow of customers to the retail premises; or
(c)Unreasonably takes action that causes significant disruption to the lessee’s trading at the retail premises; or
(d)Fails to take reasonable steps to prevent or stop significant disruption within the lessor’s control to the tenant’s trading at the retail premises; or
(e)Fails to rectify as soon as practicable:
…
(ii)any defect in the retail premises or in the building, other than a defect due to a condition that would have been reasonably apparent to the tenant when entering into or renewing the Lease or when the tenant accepted assignment of the Lease;

(f)Neglects adequately to clean, maintain or repair the building in which the retail premises are located (but not the retail premises themselves).

Section 57 of the Retail Leases Act provides that if the retail premises are damaged (except where the tenant caused the damage), the tenant is not liable to pay rent, or any amount in respect of outgoings or other charges, that is attributable to any period during which the Premises cannot be used under the Lease or are inaccessible due to that damage (‘the s 57 term’).

The s 52 term covers much the same ground as clause 6.4 of the Lease, whist the s 57 term covers much the same ground as clause 8.1 of the Lease. For convenience therefore, and save where necessary I have not distinguished between the provisions written in the Lease and those incorporated by statute, I shall refer to the s 52 term and clause 6.4 of the Lease as ‘the Maintenance Term’ and the s 57 term and clause 8.1 of the lease as ‘the Abatement Term’. The s 54 term arguably introduces a different obligation and will be considered separately.

The VCAT proceeding

Claims advanced by the tenant and the landlord’s response

The VCAT proceeding was commenced on 18 March 2019 and was heard before the Tribunal between 25 and 31 August 2020. During the course of the hearing, but before closing submissions, the Tribunal gave leave to the tenant to file and serve an amended points of claim so as to accord with the evidence led at the hearing.

In the amended points of claim, the tenant alleged a breach of clause 6.1 of the Lease (‘the Quiet Enjoyment Term’); it alternatively relied upon clause 8.1 of the Lease arising from no less than 48[8] separate events of water and sewage ingress into the Premises covering a period from 5 October 2011 to 25 June 2020. With minor exception, each instance of water and sewage ingress was particularised by emails from representatives of the tenant to representatives of the landlord.
[8]There were five instances alleged of sewage ingress with the balance comprising water ingress.

In the alternative, the tenant claimed an entitlement to damages and/or an abatement of rent and outgoings in the same amount by reason of the landlord’s breach of the Maintenance Term[9] and the landlord’s breach of the s 54 term.
[9]The tenant made reference only to the s 52 term and not clause 6.4 of the Lease.

Additionally, the tenant claimed damages pursuant to s 236 or compensation pursuant to s 237 of the Australian Consumer Law (‘the ACL Claim’) as a consequence of an alleged breach of s 18 by the landlord in failing to disclose to the tenant prior to the tenant entering into the Lease that the building leaked or was not watertight.

The tenant’s asserted claims made no clear delineation between the entitlement to damages or an abatement of rent. Further, the tenant alleged and made submissions to the Tribunal that the same monetary consequence followed regardless of the nature of the breach or other entitlement alleged, including that which arose pursuant to the ACL Claim.

As a consequence of the water and sewage ingress and the consequential damage to the Premises, the tenant claimed an entitlement to damages or an abatement of rent and outgoings pursuant to the Abatement Term in the sum of $266,546.66 calculated by reference to an assessed value of the Premises said to be non-usable over the course of the occupation of the Premises. This amount was said to be equivalent to 54.23% of the annual rental each year. A like claim was made in relation to the outgoings. The outgoings claim totalled $28,647.21 which represented 54.23% of the total outgoings over the relevant period (identified as January 2012 to December 2019) of $52,825.39.[10]
[10]These figures include interest more accurately described as damages representing the loss of use of the moneys paid by way of outgoings calculated at the interest rates alleged charged by the bank to the tenant.

In addition, the tenant claimed the following amounts:

(a) Loss of stock damaged by water - $9,314.14;

(b) Loss of wages (spent in cleaning, attending meetings, counting damaged stock, clearing it, restocking and travelling) - $2,212.50;

(c) Cleaning costs incurred following the water and sewage ingresses - $759.35;

(d) Fixture repair - $1,920.00;

(e) Loss of management time - $4,500 calculated at the rate of $60 per hour for an average of 10 hours per year for 7.5 years from 1 January 2012 to 31 December 2018 and 1 January 2020 to 1 July 2020;

(f) The loss of the opportunity of deriving sales from a number of additional services that would have been offered at the Premises but were not able to be due to the repeated water and sewage ingress issues:

(i) Loss of the opportunity to earn income from the deployment of a parcel collection service for Hubbed - $6807 plus damages representing the loss of use of that money in the amount of $1,413.72;[11]
[11]See footnote 10.

(ii) Loss of the opportunity of deriving profit on consequential sales to customers who would have attended at the Premises to utilise the Hubbed parcel collection service - $9,236.40 plus damages representing the loss of use of that money in the sum of $1,967.24;

(iii) Loss of opportunity to earn income from the deployment of a parcel collection service for Parcel Connect - $2,733 plus damages representing the loss of use of that money in the sum of $141.75;

(iv) Loss of the opportunity of deriving profit from consequential sales to customers who would have attended at the Premises to utilise the Parcel Connect collection service - $13,529 plus damages representing the loss of use of that money in the sum of $701.63;

(v) Loss of the opportunity of deriving commission from the inability to set up a Western Union money transfer service - $17,254.93 plus damages representing the loss of use of that money in the amount of $4,235.15; and

(g) The inability to sell high quality cards, wrap and magazines in the retail area affected by the water leakage comprising a loss of anticipated profit on cards and wrap - $14,227, and loss of anticipated profit on magazines - $17,963.

The principal matters raised by the landlord in his defence, were that there was water and sewage ingress events on the dates alleged in the particulars subjoined to paragraph 4 of the amended points of claim but the tenant was entitled to an abatement of rental paid for no more than one day in respect of the ingress that occurred on 2 October 2013; that the claims for damages and abatement which arose prior to 3 December 2012 were statute barred by reason of s 5 of the Limitation of Actions Act 1958 (Vic) (‘the LA Act’);[12] that the abatement or damages entitlement insofar as it was based on the deployment of the 54.23% percentage of total rent paid was misconceived including because the Premises were not unusable; that the Quiet Enjoyment Term and the Maintenance Term had not been breached in essence because the defects in the structure of Premises which caused the water and sewage ingresses were present from the date on which the lease commenced and as such there was no failure to maintain the premises in a condition which was consistent as at the Lease’s inception; and that the s 54 term had not been breached because the relevant defect in the Premises was reasonably apparent at the time of the 2014 renewal of the Lease. Further, and in relation to the ACL Claim, the landlord asserted that in defence of such a claim it was entitled to rely upon clauses 22.07 and 22.24 of the Lease.[13]

The evidence at the Tribunal

[12]Which establishes a limitation period of six years for claims in contracts and torts.

[13]At [21]–[22] above.

At the hearing, the tenant called evidence from its directors, Tony Browne (‘Mr Browne’) and Louise Browne (‘Mrs Browne’), as well as expert evidence from a certified practising valuer Russell Parrington (‘Mr Parrington’) and a building engineer Andrew Smith (‘Mr Smith’). The landlord called no evidence.

In the Reasons, the Tribunal set out a comprehensive chronology of events taken from the evidence given by Mr and Mrs Browne, referring to documented written interactions between the parties or their respective agents which provided ‘a vivid and contemporaneous account of the series of water and/or sewage ingresses, ongoing damage to the Premises and stock, ongoing business disruptions which also affected the operation of another newsagency business operated by the tenant, and the landlord’s apparent failure or refusal to permanently rectify building defects and/or defects within the [Residence]’ and ongoing assurances by the landlord that the causes of the ingresses had been fixed.

The Tribunal then summarised the expert evidence given by Mr Smith who had provided a forensic engineering and building report in which he provided a detailed description of the building of which the Premises formed part. Mr Smith’s report stated that the Premises were in an ‘appalling state’; that the constant leaking of the shower from the Residence had resulted in mould and the rotting of structural elements above the false ceiling in the Premises; that the east side of the Building could not be used to due to water intrusion; and that the false ceiling in the Premises had been discoloured with water stain.

Mr Smith concluded that the water damage to the Premises came from three sources, being water from a constantly leaking shower base and laundry in the Residence located above the Premises; water seeping through the eastern side of the Building caused by the lack of a water membrane to the walkway located on the first floor of the Building; and an overflowing of the sewage relief vent located at the rear of the Building which should have been modified during building extension works, and which caused the sewage ingresses into the Premises.

The Tribunal then summarised Mr Parrington’s evidence. Mr Parrington was engaged by the tenant to:

(a) calculate the non-usable areas of the Premises; and

(b) assess a current market rental value (being 2019) of the non-usable areas.

Mr Parrington undertook an assessment of the market value of the non-usable areas which he assessed at $39,050 per annum and then divided that amount by the total rent for 2019 of $72,000. The resultant percentage was 54.23%.

The Tribunal then summarised the claims made by the tenant in the proceeding - the breach of the Quiet Enjoyment Term; the claim for abatement of rent and outgoings pursuant to the Abatement Term; the claim for damages for breach of the Maintenance Term; [14] the breach of the s 54 term; and the ACL Claim. The Tribunal also noted the competing arguments with respect to the question of whether any of the tenant’s claims were statute barred before concluding, and following a concession by the tenant that any claim for losses suffered prior to 14 August 2012 was statute barred. In so doing, the Tribunal rejected the landlord’s submission that claims for losses suffered prior to 3 December 2012 were statute barred.

The Tribunal’s findings

[14]In the recitation of the claims brought in its Reasons, the Tribunal only referred to the s 52 term, not cl 6.4.

The Tribunal then set out the following findings on liability:

(a) that the landlord knew of the issues with water leakage in a prior tenancy;

(b) the tenant had reasonable grounds to rely upon the apparent condition of the Premises being watertight immediately prior to the commencement of the Lease reinforced by the fact that the tenant had no access to the upstairs tenancy either internally or externally;

(c) at the commencement of the Lease the Premises were watertight and not otherwise subject to ingresses by water or sewage;

(d) alternatively, if they were not watertight (and sewage-tight) that was a fact and circumstance which was deliberately withheld by the landlord and by reason of which the tenant was induced to enter into the Lease;

(e) there has been repeated water and sewage ingresses into the Premises;

(f) the effect of the repeated ingresses was that the tenant was unable to use significant portions of the Premises in a manner that was permitted by the Lease due to the substantial risk of damage to stock, product, goods and potential injury to staff and customers;

(g) the tenant repeatedly and reasonably gave notice to the landlord that ingresses by sewage or water occurred and that the ingresses affected the tenant’s ability to use the Premises in the manner permitted by the Lease and intended by the tenant;

(h) the landlord made promises to rectify the defects which were causing the ingresses of sewage or water, but failed to do so either adequately or at all;

(i) in addition to the loss, damage and business disruption caused to the Premises by reason of the ingresses of water and sewage, the tenant also suffered business disruptions at the GAN; and

(j) the landlord had breached the ACL both before the Lease was entered into and on renewal by reason that:

(vi) there was a representation by the conduct and silence of the landlord immediately prior to the commencement of the Lease that the Premises were watertight;

(vii) the tenant reasonably relied upon such representation in entering into the Lease;

(viii) at the time of the exercise of the option for renewal the landlord either directly or through its agents represented that the Premises had repaired to a watertight and sewage-tight state; and

(ix)the tenant relied upon such representations in exercising the option to renew the Lease.

In light of the factual findings, the Tribunal held that the landlord had breached the Quiet Enjoyment Term, the Maintenance Term and the s 54 term, and was accordingly liable to compensate the tenant for loss and damage suffered.[15]
[15]Here the Tribunal referred to both the s 52 term and cl 6.4 of the Lease. See Reasons at [297].

The Tribunal concluded that if the tenant was entitled to damages and compensation as claimed, the basis for assessment of such damages or compensation was the same in each case.

The Tribunal then, under the subheading ‘Claims for damages/compensation’ referenced various objections made by the landlord to the manner in which the tenant had calculated the various heads of damage and loss and the tenant’s claim for abatement of rent and outgoings based on the Abatement Term, noting among other things that the tenant claimed an abatement of rent of 54.23% for each year from 30 June 2012 to 30 June 2020 inclusive.

The Tribunal accepted the evidence of Mr and Mrs Browne on behalf of the Tenant that the repeated water and sewage ingresses meant that the Premises could not be utilised in accordance with the terms of the Lease, and that they could not risk utilising certain areas or fully utilise other areas in light of the risk of further ingresses, damage, disruption to their business, or unacceptable exposure to the public.

The Tribunal rejected the submission of the landlord that there was no evidence as to the floor area of the retail section of the Premises effected by each ingress and considered that such a submission failed to acknowledge the manner in which a newsagency business was necessarily conducted observing that the tenant’s evidence readily demonstrated that the damage and disruption to the tenant’s business was not limited either in area to the precise spread of the ingresses or as to duration to the precise timeframe of the ingresses and clean-up.

The Tribunal found that Tenant’s business stocked predominantly moisture-sensitive paper-based products such as cards, wraps, low and high end stationery, magazines and gifts with cardboard packaging, and in particular that usage in the rear area of the Premises was particularly problematic. Specifically, the Tribunal found that the repeated entry of water to the storage areas at the rear of the Premises meant that the tenant could not store stock at the rear of the Premises, nor use the area for the storage of parcels due to the real and significant threat of damage to stock.

In relation to the ‘calculation for the abatement of rent’, the Tribunal recited the submissions of the landlord that the basis for the tenant’s claim of rent abatement calculated at 54.23% was misconceived because it was based on an unstated assumption by Mr Parrington that the floor area of the retail section of the Premises directly below stained ceiling panels was unusable when there was no such instruction or evidence given by either Mr or Mrs Browne to that effect.

Further, the Tribunal recorded the submission of the landlord that the value of the unusable area of the Premises is irrelevant and that abatement of rent is referable to abatement of rent paid historically and not the value of the subject area not able to be used at a specific point in time.

The Tribunal also referred to the landlord’s submission that Mr Parrington had overstated the unusable area of the Premises when compared to the evidence of the engineer, Mr Smith:

Parrington calculated the non-usable area of the premises as 72 square metres for the retail area and 41 square metres for the rear storage area.
Smith calculated the non-usable area of the premises as 49 square metres for the retail area and 25.18 square metres for the rear storage area. Smith did not agree with Parrington’s diagram depicting the damaged ceiling area of the retail space which he described as ‘simplistic’, ‘not particularly accurate’.

The Tribunal then referred to the landlord’s submission that the evidence of stained ceiling tiles was not supported by evidence that the corresponding area in the front retail area was either unusable between 2012 to 2018 or quarantined off and not used nor restocked with items for sale. Relatedly, the Tribunal referred to the landlord’s submission that the tenant had continued to operate its business from the Premises continually between 2012 and 2020 save for 2 October 2013 and 31 October 2016.

The Tribunal then concluded that ‘abatement of rent clearly relates to the rent, or part thereof which has actually been paid’ before then expressing a preference for the evidence of Mr Parrington and therefore accepting the appropriateness of the deployment of the 54.23% methodology. The Tribunal noted that Mr Parrington had been cross-examined extensively in regard to his methodology and conclusions and ‘gave credible consistent evidence which has not been challenged by any other expert evidence’.

Next, the Tribunal referred to the tenant’s calculation of abatement of outgoings recording the landlord’s submission that there was no evidence that any outgoings were wasted or lost by the ingresses giving rise to an entitlement to abatement, nor that the insurance paid by the tenant was wasted or lost.

The Tribunal concluded that the tenant was entitled to claim an abatement of the total outgoings payable referable to the proportion of the Premises which was not available to be utilised as intended, concluding that such a rebate was consistent with the tenant not being able to derive income from utilising the whole leased area and accordingly should not be liable for the corresponding expense.

The Tribunal then noted the comprehensive evidence given by Mr and Mrs Browne in respect of the various consequential loss claims which was ‘consistently modest in its calculation’.

The Tribunal then turned to the tenant’s claim for loss of profit by reason of its inability to sell a full range of goods and the loss of the opportunity to commence a Western Union money transfer service and offer parcel collection services for Hubbed and Parcel Connect.

The Tribunal recited the evidence of the tenant’s director Mr Browne, that he had calculated the losses claimed by using the sales derived at the GAN as the base and further that Mr Browne had given evidence as to the customer base at the GAN and how it correlated with the services proposed to be offered at Mr Pickwick’s.

The Tribunal noted Mr Browne’s evidence of an explosion in demand for parcel collection services and the associated advantage of bringing extra customers into the store who then made additional purchases. In the case of the Hubbed parcel collection, the Tribunal referred to Mr Browne’s evidence that Hubbed became available in late 2014, and was initially sponsored by the Australian Newsagency Federation[16] (‘ANF’) of which Mr Browne was the elected Victorian director. The Tribunal referred to Mr Browne’s evidence that he had been involved in the initial discussions regarding ANF sponsorship of the Hubbed service which the ANF considered had the potential to both generate revenue and bring new customers into newsagencies. The Tribunal accepted Mr Browne’s evidence that without the use of a dry storage area at the Premises, the tenant would not be able to satisfactorily meet Hubbed’s service requirements. The Tribunal noted Mr Browne’s evidence that he was placed in the embarrassing position of taking up the Hubbed service at the GAN but having to decline it at Mr Pickwick’s due to the water entering the intended storage and delivery area.
[16]Now called the Australian Lotteries and Newsagencies Association.

In the case of N Parcel, the Tribunal referred to Mr Browne’s evidence that N Parcel had been introduced to the Premises in 2015 because N Parcel, unlike Hubbed, had limited parcel delivery storage requirements because it engaged two carriers, TNT and Toll. As a result, the tenant was able to accommodate N Parcel’s storage in cupboards behind the retail counter at the Premises with couriers agreeing to drop any larger parcels at the GAN in lieu of Mr Pickwick’s.

In the case of Parcel Connect, the Tribunal referred to the approach by Parcel Connect to the tenant in late 2018 in its request that the tenant establish a pick-up service at both of its newsagencies. In the result, the tenant established the service at the GAN but was unable to take up the offer for Mr Pickwick’s due to the absence of reliable dry storage area.

The Tribunal also referred to Mr Browne’s evidence that the tenant had established a Western Union money transfer agency at the GAN in 2001 and that it was its intention to offer a similar service in the office area at Mr Pickwick’s. Western Union is an international money transfer service offered under the ANF. The intention to utilise the office area at the Premises arose because the Western Union service required customer privacy and often involved the receipt or provision of significant sums of money.

Mr Browne gave evidence that owing to the repeated ingresses of both water and sewage in the corridor between the retail area of the agency and the office area and the concomitant occupational health and safety dangers to staff and customers, the plan to introduce the Western Union service had to be abandoned. Mr Browne gave evidence, referred to and evidently accepted by the Tribunal, that the only reason that the Western Union service was not offered at Mr Pickwick’s was because of the continued water and sewage ingresses and that a Western Union agency had since been established by another party across the road from the Premises.

In relation to the lost opportunities of deriving income from Hubbed, Parcel Connect and Western Union, the Tribunal noted the submission by the landlord that the tenant had not relied upon expert evidence and had not proven that an agreement would have been entered into with either of those service providers or the anticipated sales that would have resulted as a consequence.

The Tribunal rejected that submission, finding the tenant had demonstrated expertise in assessing the quantum of claims for their lost business opportunities; that the business established at the Premises was not Mr and Mrs Browne’s first newsagency; that they were both experienced and successful newsagency operators; they had a detailed knowledge of the area and customer base; they had prepared a detailed business plan, and they already had a close business relationship with the various parcel collection services as well as Western Union. The Tribunal was accordingly satisfied that the tenant had given a credible account of how the sales experience at the GAN could be translated to the Mr Pickwick’s business at the Premises.

In relation to the associated consequential loss of ancillary sales from customers who would have otherwise attended at Mr Pickwick’s for the purposes of utilising the Hubbed and Parcel Connect facilities in respect of which the tenant made claims for $9,236.40 and $13,529 respectively, the Tribunal found that Mr Browne had given credible evidence of his experience and understanding of the additional sales generated by the parcel services including the information that he had derived from the employment of a special purpose ‘hot key’ on the GAN register which identified sales made at the GAN to those customers who had attended at the premises for parcel collection. The Tribunal found that the resultant figures were then quite heavily discounted to arrive at an estimate of sales foregone at the Premises.

In relation to the claim for loss of profit on cards and wrap of $14,227 and magazines of $17,963, the Tribunal referenced Mr Browne’s evidence of calculating an aggregate loss of profit for cards and wrap and for magazines for the period 2014 to 2015 by using a baseline figure of 2013 sales, when there were infrequent sewage and water ingresses, to calculate the lost 2014 and 2015 sales, and his use of the baseline figure of 2019 (when again the ingresses were minor) for the purpose of calculating the loss of sales for 2016, 2017 and 2018 loss of sales. The Tribunal then concluded that Mr Browne’s evidence was both credible and meticulous, including in relation to the reasons why he selected the two baselines for different periods. The Tribunal further found that Mr Browne’s calculations of the total aggregate figures were deliberately modest.

In relation to the claim for loss of commissions from the lost opportunity of establishing a Western Union service sought in the sum of $17,254.93, the Tribunal noted the landlord’s submission that there is no evidence that an agreement with Western Union would have been secured or what the volume of business or likely commissions generated would have been.

The Tribunal found that Mr Browne gave detailed evidence as to the basis of his expectations and calculations, including credible evidence as to his reasonable expectation that a Western Union service at Mr Pickwick’s would be more profitable than that conducted at the GAN. The Tribunal found that the tenant had tested the market, knew their customer base and had a sound basis for expecting that such service would be established. Further, the Tribunal noted that the fact that a competitor had established such a service nearby in the meantime was also indicative of the demand for such a service.

In relation to the tenant’s interest calculations, the Tribunal made reference to Mr Browne’s evidence that the calculations were made ‘by reference to the amount the [tenant] paid on borrowings’, but then noted that ‘no evidence was produced to verify such borrowing rates’. The Tribunal then recorded the landlord’s submission that the tenant did not tender any bank statements to prove its rates of interest paid on borrowings but rejected the submission that this meant that the tenant had not adequately proved its case, noting that the landlord did not call for such evidence either before or after the hearing.

The concluding paragraph of the Reasons reads:

The Tribunal finds that, for the reasons outlined above:
(a)the lessor breached the Lease and the renewal of the Lease by in each case contravening:
(i) clause 6 – the covenant of quiet enjoyment;
(ii) clause 6.4 – covenant to maintain the structure of the Premises;
(iii) sections 52(2) and 54(2) of the [Retail Leases Act].

(b) Alternatively that the [landlord] breached section 18 of the ACL.
(c)In consequence of the breaches, the [tenant] had suffered direct and consequential loss and damage.
(d)The [tenant] has proven an entitlement to be compensated for the following damages and losses:
Rent and outgoings    $290,732.87
Loss of profits           $90,209.82
Direct losses              $18,462.99
Total losses                $399,405.68

The Costs Orders and Costs Reasons

The Costs Orders were made by the Tribunal in favour of the tenant notwithstanding s 92 of the Retail Leases Act.

Section 92 provides that:

92 Each party bears its own costs
(1)Despite anything to the contrary in Division 8 of Part 4 of the Victorian Civil and Administrative Tribunal Act 1998, each party to a proceeding before the Tribunal under this Part is to bear its own costs in the proceeding.
(2)However at any time, the Tribunal may make an order that a party pay or all or a specified part of the cost of another party in the proceeding but only if the Tribunal is satisfied that it is fair to do so because –
(a)the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or
(b)the party refused to take part in or withdrew from mediation or other form of alternative dispute resolution under this Part.

The landlord argued that no order for costs should be made because s 92(2) expressly excluded such an entitlement, submitting that s 92 applied to the ACL claim.

The Tribunal rejected that submission considering that s 92(2) only applied where a claim had been made and judgment given under the Retail Leases Act alone. Nevertheless, the Tribunal assessed the entitlement to costs by reference to s 92 of the Retail Leases Act.[17]
[17]Although it did not matter given that the Tribunal then determined the matter through the prism of s 92, I consider with respect that it is erroneous to conclude that s 92 only applies where the claim is brought under the Retail Leases Act alone.

In support of its costs application, the tenant submitted that s 92(2)(a) was enlivened in that the landlord had conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding, which was accepted by the Tribunal.

The Costs Reasons discloses that the Tribunal considered that the landlord’s conduct of the proceeding showed ‘baseless resistance and objections’ and that ‘the landlord had been wholly unsuccessful in its defence save in respect of the limitations issue which was the subject of a partial concession by the tenant in any event’.

A fair reading of the Costs Reasons shows that the Tribunal was influenced by three matters in particular. First, the landlord’s failure to accept an offer of compromise made on 20 July 2020 in the amount of $199,998 and its non-acceptance of an earlier offer of $95,000 on 31 July 2019 which was rejected on 1 August 2019. The amount recovered by the tenant at the Tribunal substantially exceeded both the offer of compromise and the earlier offer. Secondly, the Tribunal had regard to what it considered was the landlord’s disputation that there were water and sewage ingresses into the Premises; a fact it disputed in its points of defence filed 3 May 2019, the amended points of defence filed 13 July 2020 and the notice of dispute filed 3 August 2020, and that it only conceded on the first day of hearing. Thirdly, the Tribunal considered that the landlord’s defence was baseless and apparently beset by a lack of clarity and many objections and points of opposition which lacked merit, exacerbated by the fact that the landlord had not called any evidence of its own, expert or otherwise.

Accordingly, the Tribunal found that the landlord had conducted the proceeding in a vexatious way that unnecessarily disadvantaged the tenant albeit that the circumstances of the case did not place the landlord’s conduct into the ‘worst case category’. On that basis, the Tribunal found that it was ‘fair’ to make an award in favour of the tenant for 65% of its costs on a ‘standard basis’.

Approach to the determination of the application

As noted above, the many grounds of appeal including their overlapping nature tended to obscure the substance and relative importance of the landlord’s contentions. I have therefore grouped the various grounds and considered them in a manner which reflected the manner in which the application was argued and their relative importance.

The rent damages/abatement allowance of $262,543.88[18]

[18]Grounds 1, 2, 3, 4, 5, 6 and 7.

The principal issue which emerged in argument on the application concerned the Tribunal’s finding that the tenant was entitled to damages and/or compensation and/or an abatement for the period between 14 August 2012 and 30 June 2019 in the sum of $262,543.88 and outgoings (including interest) for the period between 17 February 2012 and 31 December 2019 in the sum of $28,188.99.

A fair reading of the Tribunal’s reasons suggests that these amounts were awarded both by way of damages for the breaches of the Quiet Enjoyment Term, the Maintenance Term, the s 54 term and pursuant to the Abatement Term. This is not surprising as the tenant submitted that the same measure of monetary relief arose in each case. For present purposes, I shall assume that the findings of breach and the entitlement to abatement relief at least in general terms remains intact.

While the grounds relied upon by the landlord in relation to the rent damages overlapped with those which related to the amounts awarded in connection with the outgoings, the landlord relied on some additional matters in respect of the outgoings. Accordingly, I shall first consider the manner which the Tribunal assessed the tenant’s entitlements with respect to rental damages.

The amount of $262,543.88 was calculated by reference to an amount equivalent to 54.23% of all rent paid by the tenant for the period 14 August 2012 to 30 June 2019.[19]
[19]The same methodology was deployed in relation to the outgoings calculation, with the same and the same percentage being used against the outgoings paid by the tenant for the period 17 February 2012 to 31 December 2019.

This percentage calculation in turn was derived from the evidence given by Mr Parrington. Having regard to the importance of the issue, it is necessary to return to Mr Parrington’s evidence in greater detail. Mr Parrington was retained by the tenant’s solicitor, who provided Mr Parrington with, inter alia, a copy of the original points of claim; a copy of the solicitor’s letter to the landlord dated 27 June 2018; various photographs; and an email containing a link to a video showing water leaking from the ceiling. The letter of instruction asserted that the repeated leaking of water into the Premises and also at times sewage had led to a diminution of the usable area, and in particular that the rear of the Premises was generally unusable whilst parts of the front suffered frequent water incursion. The letter of instruction requested that Mr Parrington provide his opinion as to:

(a) the non-usable area of the property; and

(b) the fair market rent of the non-usable area of the property.

Mr Parrington then assessed a current market rental for the ‘non-usable areas’ of the subject property as at the date of inspection and valuation being 15 November 2019. First, Mr Parrington identified as the ‘non-usable area’ as parts of the ‘retail area’ comprising 14 square metres in the card rack area and 58 square metres in the water stained ceiling area. The card rack area is explicable enough and refers to that area of the Premises where the tenant stocked birthday cards and the like for sale; the water stained ceiling area referred to another section of the Premises which was underneath a section of the ceiling which had experienced numerous water leaks, and which had as a consequence stained the ceiling tiles. Next, Mr Parrington identified additional areas in the ‘other commercial’ section of the Premises viz the ‘sewage area’ of 11 square metres and the parcel pick up/storage area of 30 square metres.

Secondly, Mr Parrington determined a current market rental for the ‘card rack area’ in the retail section of the Premises in the amount $5,600 per annum and a current market rental for the ‘water stained ceiling area’ in the amount of $23,200 per annum.

Mr Parrington also determined a current market rental for the sewage area and parcel pickup/storage area of $2,750 per annum and $7,500 per annum respectively.

Thus, the current market rental value of those areas of the Premises in total amounted to $39,050 which in turn amounted to 54.23% of the then current rental payable under the Lease.

The tenant then applied that percentage to the rent paid by the tenant to the landlord since 14 August 2012.

In my view, that basis of assessment whether it be as an abatement entitlement or damages suffers from a number of flaws and cannot be sustained.

First, the disclosed premise of Mr Parrington’s report was that the relevant areas in the retail and commercial spaces of the Premises were unusable and that the inability to use those parts of the Premises throughout the period of occupancy was constant. There was no evidence to support this premise aside from sections of the rear area in the commercial spaces which are considered below; the evidence was to the contrary. Both the video evidence and Mr Browne’s evidence before the Tribunal showed that the retail parts of the Premises which formed the largest component of Mr Parrington’s assessment as ‘non-usable’ in fact, with minor exception, remained in use throughout the period of the Lease. Mr Browne’s evidence was that the risk of an incidence of water ingress to the Premises meant that he had to operate the business in a different manner to how he otherwise would have operated. For example, Mr Browne gave evidence that he would stock lesser quality product in areas which were the subject of frequent water ingresses so as to minimise stock losses which would inevitably follow from the regular water leakages. He gave evidence that he was unable to implement or store high quality cards and magazines which he otherwise would have located in various areas of the Premises. Such evidence was not challenged and accords with obvious good sense. There was a substantial body of evidence to the effect that some of the space in the retail section of the Premises could only be used in a sub-optimal manner. However, one thing that it clearly does not amount to is evidence that those parts of the Premises could not be used at all, much less over the entirety of the period of occupancy.

On the hearing of the application, it was submitted by the tenant that what Mr Parrington regarded as non-usable in fact meant not able to be used in accordance with the highest and best use permitted under the Lease. Mr Parrington then proceeded to assess the current market rental for those areas on the premise that those areas could be utilised consistent with the permitted use under the Lease in accordance with the highest and best use thereunder. Whilst that may be so, the concept of highest and best use and the associated current market value are valuation concepts with no relevance to the enquiry required here.

First, and turning to the question of abatement, the analysis requires a rental adjustment or allowance calculated by reference to the non-usable space as a proportion of the total space multiplied by the rent paid or payable. Questions of market rental or space able to be used but not in accordance with its highest and best use play no or only a limited role in the analysis.

Secondly, and insofar as the matter is considered from the perspective of an award of damages, as opposed to abatement, the object of an award of damages for breach of a contractual term is to place the innocent party, so far as money can do so, in the same position as it would have been in had the contract been performed.[20] The proper measure of damages therefore is to place the tenant in the same position that it would have been in had the relevant covenants in the Lease not been breached.
[20]See, inter alia G & A Lanteri Nominees Pty Ltd v Fishers Stores Consolidated Pty Ltd [2007] VSCA 4, [8] (Callaway JA).

There was no evidence before the Tribunal, and the Tribunal did not purport to undertake any assessment, to the effect that had the Lease terms (both contained in the Lease itself and those imposed by statute) been performed the tenant would have derived additional revenue (or perhaps more appropriately profits) equivalent to the ‘rent damages’ awarded of $262,543.88. In contrast, that exercise was the subject of the consequential claims for loss and damage which are referred to below.

It follows therefore that the basis upon which rent damages and/or abatement was calculated cannot be sustained and that part of the Orders must be set aside. The fact that the only evidence before the Tribunal on this question was Mr Parrington’s does not mean that the Tribunal’s finding is unimpeachable. Although the assessment involved factual matters in part, the error complained of involved the deployment of a flawed methodology to the calculation of an abatement entitlement and damages, and in any event there was no evidence to support the premise underpinning the flawed methodology. These are questions of law.

It is tolerably clear, however, that the Tribunal also awarded the tenant compensation in the same amount arising as a result of the tenant’s asserted entitlement to an abatement of rent and outgoings whether pursuant to clause 8.1 of the Lease or s 57 of the Retail Leases Act. The former entitles the tenant to the suspension of ‘a fair proportion of the rent and building’s outgoings until the premises are wholly fit and accessible for the permitted use’. The latter effectively incorporates within the Lease a provision to the effect that the tenant is not liable to pay rent or any amount in respect of outgoings or other charges that are attributable to any period during which the Premises cannot be used under the Lease or are inaccessible due to that damage; or if the Premises can be used under the Lease but that use is reduced to some extent by the damage, the tenant’s liability for rent in any amount in respect of outgoings or other charges is decreased proportionate to the decrease in useability during the relevant period.

In my view, there is no material difference in the application of the abatement clause contained in clause 8.1 or the entitlements under the s 57 term.

Further, it is also clear, and the landlord does not now raise as a ground of appeal, found that parts of the Premises were in fact unable to be used. There was evidence from Mr Browne, uncontradicted, that part of the rear of the Premises was unusable from 1 October 2013. Specifically Mr Browne gave evidence that the tenant stopped storing parcels in the non-retail area from October 2013.

In his report, Mr Parrington determined that the total area of the Premises was 190 square metres and that the unusable non-retail area of the Premises was 41 square metres. This is the part of the premises at the rear which was unusable from October 2013. Accordingly, the tenant is entitled to an abatement of rental for the period between 1 October 2013 and 30 June 2020 calculated by application of the proportion of the non-usable area (21.57%) to the actual rent paid in that period. That amount in turn equates to $90,845.[21]
[21]This figure is based on calculations provided by the parties to the Court at the request of the Court made during the hearing of the application.

The landlord also quantified an equivalent entitlement to abatement with respect to the retail part of the Premises but referable only to each day on which a water ingress occurred. The landlord submits and I accept, that such a calculation is on one view favourable to the tenant, there being no evidence that the retail area was unusable for the entire day on which the ingress occurred, the evidence being that each ingress was cleaned up on the same day that it occurred. On that basis, the tenant is entitled to a further rental abatement of $5,310 resulting in a total rental abatement entitlement of $96,155.

The outgoings damages/abatement entitlement of $28,188.99[22]

[22]This amount includes the interest component.

As the Tribunal’s assessment of outgoings whether by way of damages and/or abatement proceeded by reference in part to the same methodology, this too cannot be sustained. However there remains the question of whether it is appropriate to allow in the circumstances a rental abatement of 21.57% consistent with the reasoning above in relation to the outgoings paid.

The landlord argues that it is not appropriate to allow for an abatement of the outgoings by reference to the application of the 21.57% percentage to the outgoings paid. The landlord advanced as separate grounds of appeal three additional matters challenging the Tribunal’s approach to the outgoings. The landlord argued first, that the interest component should not be allowed as there was no evidence of the interest rate incurred by the tenant; secondly, that some component of the amount awarded was statute barred; thirdly, that there was no evidence before the Tribunal of the amount paid for outgoings; and fourthly, that there was no evidence that the amount paid by the tenant for outgoings was wasted or otherwise did not accord any benefit to the tenant.

I shall deal with the latter ground first as it most clearly raises a proper question of law and it is the only ground which has any significant monetary consequence, noting that the entirety of the amount in issue is $11,394.44.[23]
[23]21.57% of the total outgoings paid.

In my view, this ground should be rejected. The outgoings were relevantly paid by the tenant pursuant to the Lease and were referable to the tenant’s right to occupy and use the entirety of the Premises in accordance with its permitted use. The outgoings in fact comprised the landlord’s outgoings in respect of which a relevant proportion was required to be paid by the tenant.

In other words, the amount payable by the tenant for outgoings under the Lease was not an amount calculated on some sort of user pay basis but rather was a payment made in consideration of the right to occupy and use the Premises as a whole in accordance with its permitted use.

Given that the tenant was unable to use at least part of the Premises from October 2013 onwards in accordance with the permitted use, it is appropriate for the tenant to be entitled to an abatement in respect to outgoings calculated essentially on the same basis as that set out above.

Unlike with respect to the rental abatement, I was not provided with calculations which quantify such amounts.

However, in my view it is preferable that I endeavour to undertake such calculation based on the evidence before the Tribunal and the submissions made before me rather than either convene a further hearing or alternatively remit the matter to the Tribunal for its determination.

This course is consistent with the Civil Procedure Act 2010 (Vic), and whilst requiring some estimation on my behalf, it does not, in my view, give rise to any injustice to any of the parties. Taking the outgoings awarded by the Tribunal in the amount of $28,188.99 as a starting point, the Tribunal arrived at that figure by adding the total outgoings paid from 14 August 2012 onwards, adding an amount of interest over that period found to have been referable to the interest incurred by the tenant, and then applying the 54.23% calculation before arriving at the figure $28,188.99.

As the landlord raises a separate ground of appeal with respect to interest, I will for present purposes put that matter to one side.[24] I shall also put aside the amount of outgoings claimed with respect to the calendar year 2012 of $3,915.91, both on the grounds that I consider that the landlord should succeed on its appeal on the limitation question,[25] and because the evidence disclosed that the rear of the Premises was unusable from October 2013 thus rendering irrelevant the outgoings paid prior to that point.
[24]The amounts below would require recalculations if the appeal on the interest ground is allowed.
[25]See [168]–[184] below.

The relevant outgoings paid (including the interest component) were:

(a) $1,623.92 for the period between October to December 2013;[26]
[26]One quarter of the calendar year.

(b) $7,395.25 in 2014;

(c) $6,442.06 in 2015;

(d) $7,060.50in 2016;

(e) $7,085.90 in 2017;

(f) $6,252.08 in 2018; and

(g) $4,668.14 in 2019.

The total from October 2013 to end of 2019 is therefore $41,528.35.

The equivalent entitlement to abatement with respect to the outgoings can be arrived at in much the same way as that which arose in relation to the entitlement to rent abatement in respect of the non-retail areas by applying the 21.67% calculation, and multiplying that amount by $41,528.35. The resultant amount is $8,999.19.

Given that the inability to use the retail section of the Premises was de minimis, the application of equivalent methodology to the outgoings with respect to the inability to use the retail part of the Premises of the days of ingress should be put to one side.

Thus, in addition to the entitlement to abatement with respect to rental in the amount of $96,155, the tenant is entitled to an abatement of outgoings in the sum of $8,999.19.[27]
[27]Assuming the interest component is allowed; if it is not, the sum is $7,488.40.

I reject the ground of appeal that there was no evidence at all before the Tribunal as to the payment of the outgoings. Mr Browne gave evidence that the outgoings claimed had been paid and the tenant tendered in evidence before the Tribunal a bundle of invoices which were for the most part generally sent by the landlord’s agent to the tenant. The landlord submitted on this application that the bundle did not add up to the amount claimed. The task of the Court in hearing applications for leave to appeal and appeals against findings of fact is considered in more detail below but for present purposes is it sufficient to state by way of rejection of this ground that the attack is more one on the adequacy or cogency of the evidence than one of their being no evidence at all.

The ACL claim[28]

[28]Grounds 29, 30 and 31.

The landlord complains of the Tribunal’s findings that the landlord had engaged in misleading or deceptive conduct contrary to s 18(1) of the ACL, and the further conclusion that as a consequence of the misleading and deceptive conduct the tenant was entitled to damages equivalent to the damages arising with respect to the contractual claims. Both grounds succeed.

Section 18(1) of the ACL provides that ‘[a] person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’. Conduct is misleading or deceptive if it is likely to mislead or deceive or has a tendency to lead into error.[29]
[29]Oliana Foods Pty Ltd v Culinary Co Pty Ltd (in liq) [2020] VSC 693 [529] (Connock J).

The conduct argued to have breached s 18(1) was that the landlord misrepresented by his silence that the Premises were watertight at the commencement of the Lease and at the time of each renewal, and further that the landlord made subsequent statements to the effect that the water and sewage ingress problem had been fixed or would be fixed.

The Tribunal found that if the tenant had known that the Premises had leaked as they have done (whether through water or sewage), the tenant would not have entered into the Lease. As a consequence, the tenant submitted that it was entitled to recover damages of an amount calculated on the same basis as those which arose for the breach of the contractual obligations imposed upon the landlord under the Lease.

A fair reading of the Tribunal’s reasons discloses that the Tribunal found that the landlord had breached s 18 of the ACL by reason of the landlord’s failure to inform the tenant prior to the tenant entering into the Lease that the building leaked, and further by various representations made after the tenant had entered into the Premises to the effect that the landlord would fix or had fixed the problem.

The Tribunal found that the landlord had engaged in misleading and deceptive conduct either expressly or by implication through failing to inform the tenant of the prior history of leakage to the Premises and as a consequence of the landlord’s failure to fix the problems as it promised the tenant.

Turning first to the claim by silence, silence may constitute misleading or deceptive conduct ‘where it embodies a false representation or where there is a reasonable expectation that a relevant fact will be disclosed’.[30] The essential question is whether, having regard to the circumstances constituted by acts, omissions, statements or silence, there has been conduct likely to mislead or deceive.[31] It is clear that silence alone cannot give rise to a breach of s 18 of the ACL.[32] In Addenbrooke Pty Ltd v Duncan (No 2),[33] Gilmour and White JJ summarised the principles relevant to cases of silence:[34]
[30]Ibid, [533].
[31]Miller & Assocs Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 537 (French CJ and Kiefel J); Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 (Black CJ, Gummow and Cooper JJ); Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77 (Bowen CJ, Lockhart and Jackson JJ).
[32]But must be considered in context and in the circumstances of a particular case.
[33](2017) 348 ALR 1.
[34]Ibid [482].

(a)conduct involving silence or nondisclosure may, in some circumstances, constitute misleading or deceptive conduct;
(b) in considering whether conduct is misleading or deceptive, silence or nondisclosure is to be assessed as a circumstance like any other;
(c) mere silence is unlikely to constitute misleading or deceptive conduct. However, remaining silent will constitute misleading or deceptive conduct if the circumstances give rise to a reasonable expectation that, if some relevant fact does exist, it will be disclosed;
(d) the existence or otherwise of such a reasonable expectation is to be determined objectively;
(e) it is not possible to categorise all of the circumstances in which a reasonable expectation of disclosure may arise. Such circumstances may exist, for instance when either the law or equity imposes a duty of disclosure, when a statement conveying a half-truth only is made, when the respondent has undertaken a duty to advise, when a representation with continuing effect, although correct at the time it was made, has subsequently become incorrect, and when the respondent has made an implied representation.
(f) in commercial dealings, in assessing whether there is a reasonable expectation that a fact, if it exists, will be disclosed, it will often be the case that one party to a commercial dealing has more knowledge about a relevant matter than the other but will not, in accordance with ordinary commercial expectations, be guilty of misleading or deceptive conduct by failing to make that knowledge known to the other party.

(citations omitted)

It is clear from the above that the landlord’s silence alone is unlikely to constitute misleading or deceptive conduct. Further, the silence has to be assessed as a circumstance amongst many others, which relevantly in the present case includes a provision in the Lease that the Premises were leased in their present state and condition.[35] It is not the case that, without more, a prospective landlord of premises must positively disclose defects in the premises to a prospective tenant such that if it does not, the landlord will be liable under the ACL for the failure to disclose that matter.[36]
[35]Clause 3.1.
[36]The disclosures required to be given by a prospective landlord to a prospective tenant contain a statement by the landlord that it has not knowingly withheld information which is likely to have an impact on the tenant’s business. Some of the findings made by the Tribunal point to that being the case, but such a basis for a finding of breach by reason of that statement was not alleged either in submissions or in the amended points of claim, so I consider it appropriate to put to one side a possible case based on the landlord’s breach of that express statement.

Further and insofar as the ACL claim succeeded on the basis of the landlord’s subsequent statements to the effect that the problem had been fixed or would be fixed, it is tolerably clear that such a statement is either one with respect to a present state of mind (such as the belief that the problem had been fixed) or was with respect to a future event, namely that the problem would not arise in the future. The mere fact that the state of mind proves mistaken or that the event does not come to pass does not give of itself give rise to a contravention under the ACL.[37] Liability only attaches if the claimant can establish that the representor had no honest belief as to the state of affairs when the statement was made or, alternatively, had no reasonable ground to believe that the future event would come to pass.
[37]Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 (Bowen CJ, Lockhart and Fitzgerald JJ).

In each case it is necessary to examine exactly what was said or written and to categorise the statements written or oral in context to determine what representation is conveyed by the relevant conduct.[38] Neither the submissions made by the tenant below or nor the Reasons condescend to those particularities.
[38]See, inter alia, Watson v Foxman (1995) 49 NSWLR 315, 318–19 (McLelland CJ); DSE (Holdings) Pty Ltd v InterTAN Inc (2004) 135 FCR 151 (Allsop J).

Further, and in any event, having found that the landlord had engaged in misleading and deceptive conduct contrary to s 18 of the ACL, the Tribunal then proceeded to accede to the tenant’s submissions that the measure of damages as a result of such contravention equated to the same measure of damages arising in respect of the contractual claims.

In this respect too the Tribunal erred. The measure of damages for breach of s 18 of the ACL in most if not all cases is the measure of damages representing the prejudice or disadvantage suffered in consequence of the party having altered their position under the inducement of the relevant representation which in broad terms is analogous to tortious damages. This involves an analysis of the difference in the position as induced and the relevant counterfactual position.

In oral submissions the tenant relied upon Marks v GIO Australia Holdings Limited (‘GIO Australia Holdings Limited’).[39] Marks is of no assistance to the tenant; in that case, the measure of damages in dollar terms as a result of the misleading and deceptive conduct was equivalent to the amount of damages had they been assessed on a loss of bargain basis but only because the claimant in that case was able to point to an alternative transaction which it would have entered into which would have given it the same benefits as those that were represented but not provided. That is not the case in this matter.
[39](1998) 196 CLR 494 (Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ).

In my view therefore, the Tribunal’s findings and conclusions with respect to both the ACL claim and the damages resulting therefrom cannot stand.

Breaches of other terms of the Lease and resultant damages

The landlord’s grounds of appeal also challenge the Tribunal’s conclusions with respect to the breaches of the Maintenance Term, the Quiet Enjoyment Term and the s 54 term, as well as the resultant loss and damage awarded as a result of those breaches.

The Maintenance Term[40]

[40]Grounds 11, 12 and 13.

The Maintenance Term is made up of both a term in the Lease itself (clause 6.4) and imposed by statute (s 52(2) of the Retail Leases Act).[41] The former requires the landlord to keep the structure of the Building and the landlord’s installations in a condition consistent with their condition at the start of the Lease; the latter imposes an obligation on the landlord to maintain, inter alia, the structure of and fixtures in the Premises in a condition consistent with when the Lease commenced. For the purposes of these grounds, there is no material difference between the two sources of the term.
[41]The landlord also raises as a separate ground that the Tribunal denied him procedural fairness in finding such a breach when it was not pleaded or addressed in submissions. Given the landlord’s success on the grounds generally which relate to this matter, it is not necessary to deal expressly with this ground. Given that the landlord does not point to any material difference in the context of s 52 and cl 6.4, I doubt the ground has much merit.

In each case, the landlord submits that the Tribunal erred in concluding that the term had been breached.

The landlord submits that a conclusion that the term has been breached involves a comparison between the condition of the structure of the Building (or if it matters, the Premises) at the start of the Lease, and at the commencement of each renewed term ie, 27 June 2014, and then again on 27 June 2019 with that which occurred at the time of each instance of breach (the various dates of ingress).

The landlord submits that the Reasons disclose no such consideration. Further, and in any event, the landlord notes that the Reasons accept that at the time of entering into the Lease on 27 June 2011, there was ‘a material risk of water ingress.’ Further, the landlord points to evidence before and accepted by the Tribunal that the previous occupant of the Premises had experienced numerous instances of water leakage down the walls in the storage area and water entering the Premises through the roof and light fittings, and the fact that the real estate agent for the Residence informed the landlord that water ingress through the roof had been ongoing for years. Further, the landlord points to the evidence from the expert report of Mr Smith, to the effect that the cause of the water leakage into the Premises was a lack of weatherproofing in the open breezeway on the first floor of the Building, previous damage to the ceiling of the Premises, and a lack of a water membrane between the shower and the laundry in the Residence. Mr Smith’s assessment was that these together caused the flow of water into the Premises and damaged the ceiling, and these issues all resulted from a result of poor initial construction of the Building some 30 years ago.

In my view, the landlord’s grounds are made out; on the evidence and having regard to the findings in the Reasons, it is clear that the Building in which the Premises were located were subject to a not insubstantial defect which existed from inception. Indeed, that defect and the failure to disclose it was a foundation in part of the tenant’s success in its ACL claim.

Accordingly, I would uphold these grounds of appeal.

The Quiet Enjoyment Term[42]

[42]Grounds 8 and 9.

The landlord then seeks to build on the above ground by arguing that this necessarily means that the tenant’s claim for breach of the Quiet Enjoyment Term cannot succeed.

That term , as noted above, obliges the landlord to give the tenant quiet possession of the Premises ‘without any interruption by the landlord or anyone connected with the landlord’ as long as the tenant does what it must under the Lease.

The landlord submits that the numerous instances of water and sewage ingress to the Premises and the damage to the Premises was the product of the (defective) structure of the Building, that his had been present from lease inception and as a result there could be no breach of the Quiet Enjoyment Term insofar as the tenant’s quiet possession had been interfered with as a result of the pre-existing defects in the structure of the Building.

Whilst I accept that covenants for quiet enjoyment are not to be equated with covenants for fitness, and further that such covenants do not apply to things done before, or the state of affairs at the grant, such that the tenant takes the Premises in the condition in which it was at the date of the grant,[43] a landlord may still be liable for acts of another where the landlord fails to take steps to eliminate or prevent an action where that action subsequently interferes with the tenant’s use of the premises.[44]
[43]Byrnes v Jokona Pty Ltd [2002] FCA 41, [65] (Allsop J)
[44]Ibid, [66].

To an extent, the landlord conflates the content of the Quiet Enjoyment Term with the Maintenance Term. The conduct giving rise to each alleged breach may or may not be the same. In this case, the defective condition of the Building plainly played a key part of the asserted breach of the Quiet Enjoyment Term, which was founded upon the numerous ingresses to the Premises, in the sense that the defective condition of the Premises was a necessary condition of, and enabled those breaches. However, the terms impose different obligations on the landlord; to illustrate the potentially different application, it could hardly be doubted that the landlord would be in breach of the Quiet Enjoyment Term if he deliberately left the shower and laundry taps on in the Residence knowing that the defective condition of the Building would result in water ingresses into the Premises. In such a case, the separate act of the landlord in leaving the shower and laundry taps on and the resultant effect on the tenant’s enjoyment of the Premises are the matters giving rise to the breach of the term. The defective condition of the Building enables the deleterious effect on the tenant’s enjoyment but it is the landlord’s antecedent and separate acts, not the failure to maintain the Premises, which establishes the breach.

In Martins Camera Corner Pty Ltd v Hotel Mayfair Limited (‘Martins Camera Store’),[45] Yeldham J of the Supreme Court of New South Wales held that a lessor had breached the covenant of quiet enjoyment in circumstances where water ingresses had entered the lessee’s premises following heavy rain which caused the downpipes to overflow and water seep into the shop premises occupied by the lessee, and which caused damage to the lessee’s stock.
[45][1976] 2 NSWLR 15.

His Honour held that the covenant for quiet enjoyment entitled the lessee not merely to possession but to the enjoyment of the premises and that there would be a breach of this covenant if the lessee’s ordinary and lawful enjoyment of the premises were substantially interfered with by the negligent acts or omissions of the lessor. The shop premises were located next to a number of other lockup shops also owned by the lessor. His Honour found that the roof area above the premises was not at any relevant time let to anyone but was retained by and remained in the possession of the lessor, and the relevant damage to premises had resulted from the blockage of drains in the roof area which caused water to build up and enter the shop below. On that basis, his Honour found that the lessor had breached the covenant of quiet enjoyment.

Similarly, in Aussie Traveller v Marklea,[46] the Court of Appeal of the Supreme Court of Queensland held that where there was a substantial interference with a tenant’s occupation of the leased premises due to the conduct of another of the landlord’s tenants and the landlord, through lease provisions, was capable of correcting or terminating that conduct but failed to do so, the landlord was in breach of its implied obligation to the first tenant not to derogate from its grant. The Court of Appeal inferred that a similar analysis would apply to the question of a breach of the implied covenant of quiet enjoyment. In the facts under consideration in that case, the activities of an adjoining tenant of the landlord interfered with the tenant’s ability to use the premises for its permitted use.
[46](1998) 1 Qd R 1 (Fitzgerald P, McPherson JA and Thomas J).

The loss of the ability to derive revenue income as a result of the establishment of a Western Union International money transfer service, and parcel collection services: with Hubbed and Parcel Connect[58]

[58]Grounds 16, 17, 18, 19 and 20.

The Tribunal accepted Mr Browne’s evidence that the tenant planned to establish parcel collection services at the Premises with Hubbed and Parcel Connect and a money transfer service with Western Union. Each of those services was either in place or was also introduced at the GAN.

Mr Browne gave evidence which was accepted by the Tribunal that the tenant was unable to do so at the Premises because each of those services involved the use of storage facilities at the rear of the Premises which were subject to repeated instances of water ingress and on occasions sewage ingress.

The tenant’s Mr Browne gave evidence of approaches made by each of those entities to him to set up such a facility at the Premises, and gave oral evidence of the takings from those services derived at the GAN. He also gave evidence as to the basis on which he considered that the earnings derived at the GAN were comparable to those that would have been derived at the Premises. This evidence was accepted by the Tribunal; the Reasons refer to the tenant’s ‘detailed evidence which demonstrated expertise in assessing the quantum of claim for the lost business opportunities’. The Tribunal noted that Mr Pickwick’s newsagency established at the Premises was not Mr and Mrs Browne’s first newsagency, that Mr and Mrs Browne were both experienced and successful newsagency proprietors who had demonstrated a detailed knowledge of the area and customer base, had prepared a detailed business plan and already had a close business relationship with the various parcel collection services as well as Western Union.

Before the Tribunal, the landlord objected to the receipt of such evidence on the basis that it ought to have been the subject of expert evidence including evidence of a statistical nature which set out the demographic characteristics, and evidence of comparative consumer behaviour of residents of the Elsternwick area as opposed to the Gardenvale area.

The Tribunal accepted Mr Browne’s evidence and, in my view it was clearly open for it to do so. With respect, the Tribunal’s rejection of the proposition that the only way in which such a claim could be established was via some form of expert evidence which itself would no doubt be the product of assumptions and instructions, was more than open. One can hardly conceive of more probative evidence than that obtained from a newsagency operated by the same proprietor in a nearby suburb. On the face of the services offered – parcel collection and money exchange – they are most unlikely to be the subject of materially different consumer behaviour between the good residents of these adjacent, or near adjacent suburbs.

The landlord argued on a second ground of appeal with respect to the Tribunal’s award of damages that the tenant had wrongly claimed the loss of the anticipated income as opposed to the loss of profit lost as a result of an inability to offer those services at the Premises.

Whilst I accept that it would be appropriate for a party claiming such loss to bring to account expenses that would have been incurred in deriving the additional income foregone, it by no means follows that the addition of those services would have resulted in the incurring of additional costs that needed to be brought to account. Plainly, the bulk of the expenses that were incurred by the tenant in operating Mr Pickwick’s at the Premises (wages, rent, etc) were unaffected by the establishment of these additional revenue streams. Further, in the case of the Western Union money transfer service, the claim was advanced as a claim for lost commission.

In the result, there was ample evidence before the Tribunal which justified the findings. I am unable to conclude that the findings were not open.

Loss of consequential sales of newsagency products that otherwise would have been made to those utilising the parcel collection services and the money exchange facility[59]

[59]Grounds 16, 17, 18, 19 and 20.

The tenant advanced a further head of damage for the loss of profit from sales that would have been made to customers utilising the Hubbed and Parcel Connect services.

The gist of this claim was that customers who utilised the parcel collection services came into the store and when present in the store effected purchases of other products sold at the newsagency.

In support of the amount claimed, Mr Browne gave evidence of the installation of a key on the sales register at the GAN which specifically identified those customers who had made a purchase who had attended the premises for the purposes of utilising the parcel collection services. Whilst the landlord argued with some validity that the relevant period chosen was demonstrably short (some five business days), Mr Browne gave evidence to the effect that he regarded this as a representative, if not conservative period. He further pointed to the comparability between the customer base attending the GAN in Gardenvale and Mr Pickwick’s in Elsternwick. This is not a case where there was no evidence before the Tribunal; in truth, the landlord’s attack on this appeal is a challenge based upon the sufficiency of the evidence adduced.

In my view, it cannot be said that the evidence before the Tribunal was such that the finding was not open. Accordingly, this ground fails.

Loss of wages[60]

[60]Ground 23.

The Tribunal accepted the tenant’s claim for $2,212.50 representing the wages paid to staff for time spent by those staff members in cleaning, attending meetings, counting damaged stock, clearing it, restocking and travelling, covering the period from 2011 to 2018. The sum sought and awarded by the Tribunal was calculated at an average rate of $22.50 per hour over that period which was then applied to the estimated number of hours linked in turn to the specific ingress events.

The landlord’s ground of appeal is founded upon an asserted lack of clarity between the claim for damages for wages of $2,212.50 for the period 2011 to 2018, where the tenant’s claim for damages was statute barred for the period prior to 14 August 2012 (or as found by the Tribunal, 3 December 2012).

The landlord argues that because there was no evidence as to particular amount paid for wages paid in any particular year, the amount paid after 14 August 2012 was not capable of determination on the evidence.

This ground lacks all merit. First, it relates to a trivial amount. Secondly, whilst it is true that the claim of $2,212.50 covered the period 2011 to 2018 and thus necessarily covered part of the period in respect of which the claims were statute barred, only a moment’s consideration is necessary to observe that only two water ingress events occurred in 2011 and 2012. Accordingly, and noting that the claim arose with respect to staff time spent in cleaning up after water ingress, it was fairly open to the Tribunal to consider that the time spent by the staff members in effecting the necessary clean-up occurred with reference to the remaining 46 events rather than those two that were statute barred. The tenant’s directors gave evidence of the manner of calculation and it was open to the Tribunal to consider that this head of damages was made out. Accordingly this ground fails.

Fixture repair[61]

[61]Ground 24.

The tenant claimed the sum of $1,920 for fixture repair. The Tribunal accepted that the amount claimed should be reduced by the GST component of $174. It would appear to be the case that in the resultant damages calculation the Tribunal did not deduct the GST. The landlord appeals accordingly in relation to the sum of $174.

More substantially, the landlord complains that the claim relates to fixtures that had previously been purchased by the tenant and which were in use at the GAN, which were then installed in the Premises to replace the fixtures that were damaged by the water ingresses.

The landlord submitted that the items had not been purchased as a result of any water ingress to the Premises because they were already owned by the tenant and hence were not properly recoverable as damages.

The Tribunal rejected that argument holding that sourcing a replacement from existing stock at the GAN which was a separate business did not eliminate the cost for Mr Pickwick’s.

In this rather limited respect, I consider the Tribunal erred; the claim was brought by the tenant. The same entity operated both Mr Pickwick’s and the GAN. There was no cost incurred by the tenant to replace the damaged fixtures. Whilst it would have been open for the tenant to claim the written down value of those fixtures which were damaged or alternatively to claim the cost of replacement fixtures acquired to replace the GAN fixtures moved to Mr Pickwick’s, there was no evidence that established these matters.

Given the trifling nature of the amount in question, it is difficult to see why the leave requirements are met notwithstanding the error. Clearly, had this been the only matter in issue leave would not be granted.

It is somewhat tempting to refuse leave lest it encourage applications of a nature which involve multiple grounds challenging all factual findings in respect of incidental amounts.

Nevertheless, with some reluctance, noting the landlord’s not insignificant success on more weighty grounds and given the error, leave will be granted and the ground is upheld. The damages awarded will be reduced by $1,920.

The claim for loss of management time[62]

[62]Ground 25.

Separately but related to the claim for loss of wages of $2,212.50 was a claim advanced by the tenant for the loss of management time of $4,500.

As was the case with respect to the claim for wages paid to the staff who were required to effect a clean-up, the tenant additionally claimed an amount with respect to management time.

Whilst there was evidence of the time spent by Mr and Mrs Browne, there was no evidence before the Tribunal that Mr and Mrs Browne had been paid the sum of $60 per hour which was used in the calculation of the head of damage. In contrast, the evidence was that Mr and Mrs Browne derived their income by way of a distribution made by the tenant to the beneficiaries of a trust.

Accordingly, I accept that there was no evidence before the Tribunal at all that the tenant had incurred expenses or otherwise could recover as damages an amount referable to the cost of management time whether in the sum of $4,500 or any other amount. Accordingly, and subject to the same caveat that is the subject of the previous ground, this ground succeeds and the amount to which the tenant was entitled needs to be reduced by the sum of $4,500.

Interest[63]

[63]Grounds 32 and 33.

The tenant also advanced a claim for interest by way of damages representing the loss of use of money, which was in turn referable to the loss of income or loss of profit on lost consequential sales, as well as the outgoings paid that were the subject of the outgoings component of the damages claim. In the case of the interest incurred or foregone in relation to the lost Hubbed sales and lost profit, the tenant claimed the sum of $1,413.72 and $1,967.24 respectively. The claim with respect to Parcel Connect was a mere $141.75, whilst the interest claim in connection with the loss of profit on the consequential sales to Parcel Connect customers was $701.63. The amount claimed with respect to the loss of use of the Western Union commissions totalled $4,235.15. Further, the interest component of the total outgoings was $9,159.97 (with the associated damages claimed 54.23% of that amount ie., $4,967.45).

In support of those claims, when Mr Browne was in the witness box, he was shown a copy of a document apparently identifying those rates and gave evidence that the amounts used in that document were the amounts charged to the tenant by the bank. Although the transcript of the hearing before the Tribunal does not identify the document with any specificity, it seems probable enough that it was the tenant’s further and better particulars dated 18 June 2020 which identifies some 11 rates over specific time periods.

In addition, there was a significant volume of bank statements tendered which allegedly supported those rates.

Both before the Tribunal and on this application, the landlord submitted that there was no evidence which supported the rates utilised for the purposes of the interest claim and that the bank statements did not corroborate the rates used. It is in that context that the reference in the Reasons to there being no evidence to verify the rates is to be understood.

Even if that were to be the case, and I have not gone through each of the bank statements tendered in evidence, there was direct evidence from Mr Browne to the effect that the rates used in the points of claim were those charged by the bank to the tenant. Again therefore the ground is not so much one of there being no evidence but that the evidence is of insufficient cogency to sustain the finding. This misapprehends the task of the Court in determining applications of this nature. There was evidence before the Tribunal which supported that finding. This ground is not made out.

The Costs Orders

As noted above, the Tribunal made costs orders in favour of the tenant notwithstanding the content of s 92 of the Retail Leases Act. The Costs Reasons show that the Tribunal was alive to the fact that the jurisdiction to order costs under s 92 could only be enlivened if the Tribunal was satisfied that a party had conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding.

It is clear enough that the Tribunal considered that this was made out in the instant case essentially on three grounds; first, that the landlord had put in issue the fact of water and sewage ingresses from the period of commencing the proceeding until the first day of hearing; secondly, that the landlord’s defence was confusing in some instances and untenable in other respects, made numerous objections which lacked merit, and that the landlord chose to call no evidence, expert or otherwise; and thirdly, that the landlord had not accepted an offer of compromise made by the tenant on 20 July 2020 in the amount of $199,998 having also rejected an earlier offer of $95,000 on 31 July 2019 that was rejected on 1 August 2019.

Clearly, in circumstances where I have determined that the appeal should succeed at least in part and necessarily that aspects of the submissions advanced by the landlord before the Tribunal should have been accepted, I do not accept that the landlord’s defence was untenable or confusing. Moreover, neither the landlord’s failure to call evidence or the making of objections successful or otherwise, is unlikely and did not here, come anything close to conduct, that was vexatious such as to enliven the jurisdiction to make a costs order under s 92 of the Retail Leases Act.

It is unlikely without more for it to be vexatious for a party to vigorously contest the claims of another. That said, it seems clear enough here that the consequence of the landlord taking multiple points was that the substantive points raised by the landlord were somewhat clouded by points which were either or both of less monetary significance or less merit.

In relation to the offer of compromise, the net result here is that the landlord will be obliged to pay a little more, but not much more than the offer of compromise. It seems doubtful in the extreme whether the mere failure to accept an offer of compromise could give rise to vexatious conduct.

Given that at least one of the key pillars on which the Tribunal awarded costs have been removed, and the other is to be assessed in a different light, the Costs Orders must be set aside.

The landlord’s failure to admit that water and sewage ingresses had occurred, including the service of a notice of dispute which, among other things, disputed correspondence that passed between the tenant and the landlord and its agent, is arguably capable of being cast in a different hue, and could potentially be regarded as vexatious.

The fact of ingresses was conceded by the landlord via his counsel during the running of the case on the first day. This concession was appropriate and commendable. The landlord should have made that concession earlier. Had this occurred, it no doubt would have sharpened the parties focus on the real issues in dispute. This would have been to the parties benefit and made the Tribunal’s task easier.

The question then becomes what should happen in relation to the question of the costs before the Tribunal. As noted above, the approach taken by the landlord to the fact of water and sewage ingresses was regrettable. It is perhaps conceivable that this conduct might justify an order for costs albeit on a substantially lesser basis than that ordered by the Tribunal.

One alternative is to remit the matter to the Tribunal for its determination as to costs having regard to these reasons.

Given various matters including the likely delay in any resolution before the Tribunal, this is not particularly desirable.

My tentative view is that I should invite submissions from the parties as to the question of the costs at the Tribunal and then exercise the discretion myself afresh. The orders I make will invite submissions from the parties.

Disposition

In the result, the landlord has succeeded in relation to a number of grounds. A number of other matters were not, however, made out and insofar as those matters condescended to factual questions, the landlord failed and the prosecution of those matters added to the complexity of the matters before the Court and no doubt the time spent by the parties in determining and preparing for the application. Whilst a number of matters raised were inapt for an application of this nature, given the landlord’s success on a number of material matters, there is limited utility in differentiating between the individual grounds for the purposes of determining leave to appeal. I will grant leave to appeal, and allow the appeal.

Having regard to the landlord’s success, my tentative view is the landlord is entitled to its costs of this application for leave to appeal and the appeal, although it may be appropriate to discount the costs given the mixed success.

In the circumstances and having regard to the matters set out above, the orders of the Court will be as follows:

1. Grant leave to appeal generally and allow the appeal.

2. Set aside the orders made by the Tribunal on 24 March 2021 and in lieu thereof order that the landlord pay to the tenant the sum of $207,650.[64]
[64]$207,650 is calculated as follows:
Rent in the sum of $96,155.00 (see [103] above).
Outgoings in the sum of $8,999.19 (see [118] above).
Stock in the sum of $9,314.14 (see [193] above).
Loss of profit on sales of cards, wraps in the sum of $14,227.00 (see [194] above).
Magazines in the sum of $17,963.00 (see [194] above).
Western Union services in the sum of $21,490.08 (see Reasons).
Hubbed parcel services in the sum of $8,220.72 (see Reasons).
Hubbed consequential sales in the sum of $11,203.64 (see Reasons).
Parcel Connect services in the sum of $2,874.75 (see Reasons).
Parcel Connect consequential sales in the sum of $14,230.63
Wages in the sum of $2,212.50 (see [210] above).
Cleaning costs in the sum of $759.35 (see Reasons).
Totalling $207,650.

3. Set aside the orders made by the Tribunal on 2 July 2021.

4. Direct that the parties file and serve submissions as to whether the question of the costs of the proceeding before the Tribunal should be remitted to the Tribunal for further determination, alternatively should be determined by the Court, and making submissions to the Court as to what costs orders in respect of the proceeding at the Tribunal should be made.

5. Direct that the parties file and serve submissions as to the appropriate order for costs with respect to the application for leave to appeal and the appeal.

6. Direct that the costs submissions referred to in orders 4 and 5 not exceed 10 pages and 5 pages respectively and be filed and served within seven days, and that the matter the subject of those submissions be determined by the Court on the papers.

[2022] VSC 131

17 March 2022