Ampron Australia Pty Ltd v Quan Yang Investments Pty Ltd
[2016] VCC 1138
•10 August 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION – EXPEDITED CASES LIST | Revised Not Restricted Suitable for Publication |
Case No. CI-16-03097
| AMPRON AUSTRALIA PTY LTD (ACN 166 841 229) | Plaintiff |
| V | |
| QUAN YANG INVESTMENTS PTY LTD (ACN 195 065 385) | First Defendant |
| AND | |
| QUAN YANG LI | Second Defendant |
| AND | |
| HUI YING XIE | Third Defendant |
---
JUDGE: | HER HONOUR JUDGE COHEN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 August 2016 | |
DATE OF JUDGMENT: | 10 August 2016 | |
CASE MAY BE CITED AS: | Ampron Australia Pty Ltd v Quan Yang Investments Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1138 | |
REASONS FOR DECISION
---
SubjectJurisdiction in tenancy dispute and related dispute under contract for sale of business
Catchwords: Stay of proceedings; whether Retail Leases Act 2003 applies; whether subject matter “retail tenancy dispute”; whether alleged breach of contract for sale of business “retail tenancy dispute” within definition; whether VCAT has exclusive jurisdiction over part or all of subject of proceedings.
Legislation Cited: Retail Leases Act 2003 ss 4, 81,89, 94(2); Australian Consumer Law and Fair Trading Act 2012 s 182.
Cases Cited:Xiao v Perpetual Trustee Company Ltd and Anor [2008] VSC 412; Tucci v VCAT & Anor [2010] VSC 425; Coles Group Property Developments Ltd v Hill [2011] VCC 683; Australian Liquor Marketers v Twenty 12 Pty Ltd & Ors [2014] VCC 688
Judgment: Stay granted of whole proceeding
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr F. Lim | Francis Lim Barristers & Solicitors |
| For the Defendants | Mr J. McKay | Monaco Lawyers |
HER HONOUR:
1 The plaintiff issued this proceeding on 18 July 2016, and the same day filed a summons for interlocutory injunctive orders in line with much of the substantive relief it seeks in its Statement of Claim. The defendants, by summons dated 4 August 2016, seek orders staying or dismissing this proceeding for want of jurisdiction in this Court.
2 The essence of the application by the defendants to stay this proceeding is that the whole or greatest part of the subject matter of this proceeding is properly to be characterised as a “retail tenancy dispute” as defined in s 81(1) of the Retail Leases Act 2003 (the Act”), and as such is not justiciable except before the Victorian Civil and Administrative Tribunal (“VCAT”), by reason of ss 89 (1) and (4) of the Act.
3 The plaintiff contends that although the matters in dispute relate to premises which it leases from the first defendant, the lease is not a lease of retail premises as defined under the Act, and that the Act does not apply to the tenancy nor to any dispute related to that tenancy. Alternatively, it argues that even if the lease is a retail lease under the Act, there is another cause of action being for breach of contract for sale of a business, and that this Court’s accrued jurisdiction would enable the tenancy dispute to be heard with the sale of business dispute because of common sub-stratum of facts, and so as to avoid like or similar litigation proceeding in two different tribunals where there is a risk of different decisions as to the same facts, and through which both parties will inevitably incur extra time and costs.
4 The defendants argue that the plaintiff’s claim is essentially a retail tenancy dispute for which VCAT has exclusive jurisdiction, and that to the extent that the as yet vaguely pleaded claim of a breach of contract for sale of the business is involved, the balance of convenience and practicality should persuade the Court that it is better heard together with the tenancy dispute, by VCAT. It argues that I should be satisfied that VCAT has power to hear the sale of business dispute pursuant to s182 Australian Consumer Law and Fair Trading Act 2012 (Vic).
5 To decide this matter, some brief description of the background and how the dispute or disputes arise is necessary.
Background to disputes the subject of this proceeding
6 In March 2014, the plaintiff entered a contract to purchase a bathroom wares business from a company called Global Building Material Pty Ltd (“Global”). That company was deregistered in July 2014. The second and third defendants were shareholders and directors of that company (although the third defendant ceased to be a director in March 2014) and were guarantors of Global’s obligations under the contract for sale of the business.
7 The first defendant is another company of which the second and third defendants are both shareholders, and the second defendant is the sole current director. The first defendant owns premises known as Unit 1, 19 Jersey Road, Bayswater (“the premises”), which include a double storey building or “showroom”, and a single storey warehouse which presently contains a mezzanine floor.
8 As at February 2013, Global ran two businesses from the premises, including the bathroom wares business which it sold in 2014 to the plaintiff. The other business was a building supplies business which it sold in about March 2013 to Mitre Australia Ltd, which company leased part of the premises but moved out of the premises in or by March 2016.
9 It was a term of the contract of sale of business to the plaintiff that the first defendant would grant a lease to the plaintiff of those parts of the premises which had been used by Global for the bathroom wares business. The plaintiff alleges that there were a number of representations made by the second defendant, some relating to the profitability of the business and its use of the premises, and some relating to the area which the first defendant would lease, which are alleged to have induced the plaintiff to enter both the contract to purchase the business and the lease.
10 On or about 2 April 2014, the plaintiff and first defendant entered into a lease, for a term of 3 years, the lease documentation being drawn by solicitors acting for both parties to it[1]. There was a document apparently signed by both proposed landlord and proposed tenant (first defendant and plaintiff respectively) dated 21/3/14, which was in a Law Institute of Victoria form and is headed “Disclosure Statement by the Landlord under the Retail Leases Act 2003”.
[1]That legal firm no longer represents any of the parties.
11 However, the lease document itself sets out in Item 15 in its schedule –
“Permitted use: Wholesale and showroom of bathroom accessories, toilet and tap ware.
Application of Act: No
Reason why Act does not apply: The permitted use is not wholly or predominantly for retail purposes.”
12 The plaintiff settled and paid the substantial full purchase price for the business and stock in early April 2014, and shortly afterwards paid approximately $7,000 for beams and materials ordered by or on behalf of the defendants to reinforce the strength of the mezzanine structure at the warehouse. In the course of carrying on its business at the premises it has used the mezzanine of the warehouse to store stock, although when that commenced and how much of the mezzanine it has so used is in dispute.
13 In approximately March 2016, a dispute arose between the parties, after Mitre had vacated the portion of the premises it had leased. The first defendant’s solicitor notified the plaintiff that the plaintiff was occupying more of the premises than was subject of its lease, and specifically that the mezzanine did not form part of the lease. It also notified that it intended to remove the mezzanine structure and to divide the warehouse with partitioning.
14 At or since that time it has also emerged that the mezzanine was erected without a building permit from the local Council, and has been assessed by an engineer as unsafe. When that first became known to the defendants or the plaintiff is unclear to me, but the second defendant says that he did not know at the time the lease to the plaintiff was entered.
Subject of this proceeding
15 In this proceeding the plaintiff alleges that there were implied terms both of the contract of sale of the business and of the lease that:
(a)the mezzanine floor at the warehouse was lawfully erected by the landlord with the requisite building permit from the appropriate local council;
(b)the bathroom wares business could lawfully and safety store its goods on the mezzanine floor; and
(c)the plaintiff could lawfully conduct its bathroom wares business using the mezzanine floor of the warehouse.
16 The plaintiff alleges breach by the first defendant of the terms of the lease including those implied terms, and a breach by Global of the contract of sale for which breach the second and third defendants are liable as guarantors. It seeks restraining orders to prevent the first defendant from removing the mezzanine floor at the warehouse or partitioning the warehouse until expiration of the term of the lease, and orders requiring the first defendant to take all reasonable steps to make the mezzanine safe and compliant with regulations and to obtain from the local council an appropriate permit for its erection.
17 There is also a claim for damages, the amount to be assessed. There is no particularisation of whether such damages are claimed in respect of breach of the contract of sale (for which the second and third defendants are alleged to be liable as guarantors) or for breach of the lease by the first defendant, or both. As presently pleaded, the only claim against the second and third defendants could be under or related to the contract of sale of the business.
Current applications
18 When both the plaintiff’s and defendants’ summonses came on for hearing on 8 August before me, it was accepted that the defendants’ summons to stay or dismiss the proceeding needed to be determined first, as it raised a jurisdictional argument which, if successful, would preclude this Court from proceeding with the orders which the plaintiff sought.
19 The plaintiff relied on an affidavit sworn by Li Li, a shareholder and director of the plaintiff, which set out various of the background circumstances as to the entering into the contract to purchase the business, and the lease, and the events in relation to use of the mezzanine of the warehouse and proposed demolition of it.
20 Insofar as it related to alleged representations by the second defendant before the contract for the business or the lease were entered into by the plaintiff, these were hearsay because she says it was her husband who was present at those discussions and related them to her. An affidavit in opposition from the second defendant denies that many of those representations were made. I make no finding on any of those allegations as it would be impossible on the present evidence before me.
21 The defendants rely on an affidavit by the second defendant. I find some of the second defendant’s statements in his affidavit about use of the mezzanine of the warehouse inconsistent, in particular that it was never part of the area leased to the plaintiff, but was used by Global for storage of goods. However, the affidavit was made through an interpreter and without hearing further explanation or cross-examination I make no specific findings about those issues.
22 Without further evidence or cross-examination of deponents, and as the wording of much of the affidavits seemed to me to be language drafted by lawyers, and most unlikely to have been used by the deponents, it was not possible for me to form clear impressions as to the reliability of the assertions of either deponent when they gave different versions or disputed facts.
Is the Lease a Retail Premises Lease to which the Act applies?
23 A provision of a retail premises lease or of an agreement is void to the extent that it purports either to exclude the application of a provision of the Act, or to limit the right of a party to the lease to seek resolution of a retail tenancy dispute under Part 10 of the Act[2]. Therefore, notwithstanding the terms of Item 15 in the Schedule to the lease between the plaintiff and first defendant, I must decide whether the lease is in fact one to which the Act applies.
[2]Section 94(2)
24 Section 4 of the Act defines “retail premises” as meaning (relevantly to the present case) premises that under the terms of the lease relating to the premises are used, or are to be used, wholly or predominantly for the sale of goods by retail.
25 Under s 81 of the Act, “retail tenancy dispute” is a dispute between a landlord and tenant arising under or in relation to a retail premises lease to which the Act applies, or arising under a lease that provides for the occupation of retail premises in Victoria to which that Act (or its predecessors) do not apply.
26 Although the definition in section 4 is based on the use of the leased premises as described under the terms of the lease, having regard to section 94 (2) which renders void provisions of a lease that purport to exclude application of the Act, I consider that the Court must look at evidence as to the actual use or intended use of the premises, and not merely the use described in the terms of the lease.
27 The use described in Item 15 of the schedule is “Wholesale and showroom of bathroom accessories, toilet and tap ware”. While the initial word wholesale is certainly not referring to retail sales, the description “showroom” could be for either retail or wholesale sales. If there were no other evidence of the intended use, I would interpret the description in the lease as not wholly or predominantly for retail sales.
28 However, there is other evidence on this issue, and bearing in mind section 94 of the Act, I must consider it to determine whether the true use of the premises is wholly or predominantly for retail sales.
29 While I have some hesitation in accepting as totally reliable what is set out in the second defendant’s affidavit, relevant to this issue there is part which is uncontradicted by the plaintiff’s affidavit or any other evidence before me, and indeed supported by some other more objective evidence.
30 The second defendant states[3] that the vast majority of Global’s bathroom wares business consisted of retail sales to the general public and building contractors. He also says that the nature of the business has not changed since being purchased by the plaintiff. He does not set out the source of his knowledge or belief about the content of sales since the sale of business, and as the leased area (whether or not it includes any of the mezzanine in the warehouse) ought to have been in the exclusive possession of the plaintiff, and even if other parts of the premises have been accessible by the defendants, I do not rely on the second defendant’s purported evidence of knowledge of the plaintiff’s business over the last two years.
[3]Para 28 of Affidavit made 4/8/16
31 However, there is other evidence of considerable weight on this issue. In particular, there is a letter to the defendant’s solicitors from JK Lawyers dated 7 April 2016[4], at that time lawyers acting for the plaintiff. That letter included relevantly a section headed “Application of Retail Leases Act 2003 (Vic)”. It argued that the landlord was aware that the Global bathroom business is predominantly a retail business, as 80 per cent of the sales made comprise of retail sales to the public, yet the lease was prepared to exclude the operation of the Retail Leases Act 2003, and described the permitted use as wholesale and showroom of bathroom accessories, toilet and tap ware. The letter points out that it is not possible for the parties to contract out of the Retail Leases Act 2003 if the premises are indeed covered by the Act. It also notes the Disclosure Document that was prepared for the lease and is a requirement of the Retail Leases Act, arguing that that is presumably an acknowledgment by the landlord that the lease is covered by the Retail Leases Act.
[4]Exhibit QYL 4
32 The Disclosure statement for the lease is in evidence before me, and is another piece of evidence significant in indicating that at the time the lease was entered into, and notwithstanding the description of permitted use in the schedule, there was recognition by the lawyer[5] acting for both parties at the time that the lease was in fact for a retail sales business.
[5]Not JK Lawyers, and not acting for any of the parties now.
33 The plaintiff relies nevertheless on the content of the lease, and argues that it is a “commercial” lease. It was also said, but without evidence to this effect, that reference to 80 per cent of the sales being retail was a reference to the types of circumstances where owners of premises being renovated attend to choose a variety of goods and then have them purchased through the owner’s builder. As I said during the hearing, situations where building owners attend to choose items and those items are ordered through builders for the owners, are capable of being retail or wholesale sales, depending on what has been agreed between the seller and the builders. No person on behalf of the plaintiff has sworn an affidavit contradicting that 80 per cent, or indeed a predominant portion, of the business, is retail sales.
34 In light in particular of the letter sent on behalf of the plaintiff by its then lawyers only three months ago, which I must infer was based on instructions from the plaintiff, and to a lesser extent the disclosure statement for the lease, I am satisfied on the balance of probabilities that the business conducted at the leased premises is in fact predominantly retail sales.
35 It follows that the dispute between the parties in this proceeding, insofar as it relates to whether or not the mezzanine floor of the warehouse was part of the leased premises, and whether representations were made as to its safety and legal compliance, are issues which fall within the definition under s81(1) of a “retail tenancy dispute” being a dispute between a landlord and tenant arising under or in relation to a retail premises lease.
Are parts of the subject of the proceeding not a “retail tenancy dispute”?
36 The definition of a retail tenancy dispute under s 81 of the Act includes not only a dispute arising under a retail premises lease, which under previous legislation was held to be limited, but also in relation to such a lease which is clearly much wider. In the present case the defendants argue that insofar as there is a cause of action alleged in the proceeding to be a breach of the contract of sale of the business, it is based on the same alleged implied terms into that contract as are alleged to be included in the lease, and the dispute under that is inextricably one in relation to the lease.
37 As to the width of a dispute arising in relation to a retail premises lease, the defendant relies on decisions of her Honour Judge Kennedy in the case of Coles Group Property Developments Ltd v Hill [2011] VCC 683, and the analysis of his Honour Judge Macnamara in Australian Liquor Marketers v Twenty 12 Pty Ltd & Ors [2014] VCC 688. In the latter, his Honour described the issue as “there being so close a relationship between the alleged loan agreement or fit out agreement and the retail premises lease that one should be regarded as relating to the other and a dispute as to one should be regarded as in relation to the other”.
38 The defendants’ counsel also relied on the Coles Group case, and on the decision of Cavanagh J in Tucci v VCAT & Anor[6], as support for there being jurisdiction in the Tribunal to hear and determine the cause of action under the sale of business agreement. This was to the effect that the definition of a “consumer and trader dispute” under s182 of the Australian Consumer Law and Fair Trading Act 2012 is wide enough to include the claim in the present case as a dispute arising between a purchaser of services, being the business of selling bathroom wares, and further of including the claims under the guarantees against the second and third defendants. For reasons which will emerge, I have not found it necessary to make a finding on that issue in this case.
[6][2010]VSC425
39 The plaintiff argues that the alleged breach of the contract of sale agreement should be characterised as judiciable in this Court. Mr Lim, appearing on behalf of the Plaintiff, concedes that the condition of the grant of the lease was an important part of that agreement, at least to the extent that the Contract would not have been entered into by the plaintiff if there had not been the promise of the lease. He further concedes that the representations in relation to the legal compliance and safety of the mezzanine floor alleged to have been implied into both the lease and the contract of sale are effectively identical, and that there is no other specific breach alleged of the contract of sale than the same matters which arise under the dispute relating to the lease. He said that he envisaged some amendment of the statement of claim, but there being no specific amendments for which leave was sought, I must proceed on the basis of the present statement of claim. Finally, and relevant in my view, is Mr Lim’s acknowledgement that the claim for damages for breach of contract, being the only basis of a claim against the second and third defendants under their guarantees of the sale, must await the outcome of the disputed issues relating to the lease, and cannot be fully (or perhaps even further) particularised before those issues are determined.
Decision
40 As already explained, on the evidence before me I am satisfied that notwithstanding the content of Item 15 in the schedule to the Lease in question, it was a lease of retail premises and the Act applies. It follows that the subject matter of this proceeding insofar as it relates to that lease is a retail tenancy dispute as defined in s 81 of the Act, and pursuant to s 89(4) is only justiciable before the Tribunal – VCAT.
41 As presently pleaded, I consider the cause of action under the sale of business contract to be confined to allegations which are inextricably connected with the allegations of breach of the lease. Moreover, at present the predominant dispute is under the lease. The injunctive relief sought, being the first and clearly more urgent focus of the claim, could only be against the first defendant as landlord. The claim for damages, to the extent that it is against the second and third defendants as guarantors of the contract of sale of the business, cannot proceed or be fully formulated until the disputes under the lease are determined. For all of these reasons, I am satisfied that the dispute under the contract for sale of the business is currently properly described as “relating to the retail premises lease”, so falls within the definition of a retail tenancy dispute and therefore is only justiciable at VCAT.
I cannot exclude that there may ultimately be some residual part of that cause of action which with amendment would not be solely justiciable at VCAT, but I can only consider the claim as presently pleaded.
42 Finally, I note that even if I had not found the cause of action for breach of sale of business to be a retail tenancy dispute, the parties in this dispute acknowledge that the current case is one where the alleged breach of contract of sale of the business and of the lease issues should be determined by the same court or tribunal. In my view not only the balance of convenience, and efficient adjudication with least time and costs to the parties support that, but also the proper administration of justice, as these disputes are based on the same factual circumstances, and should be decided consistently.
43 Mr Lim on behalf of the plaintiff submitted that the appropriate forum for the hearing of both of the disputes is in fact the County Court rather than VCAT. This submission is based on the approach taken by Vickery,J. in Xiao v Perpetual Trustee Company Ltd and Anor.[7], in which a tenant under what was conceded by both parties to be a lease of retail premises, applied in the Supreme Court for a declaratory order that he had duly exercised his option to renew a lease, specific performance of the granting of remewal of the lease, and alternatively for relief against forfeiture. In that case, the claim for relief against forfeiture was able to be heard in the Supreme Court, being a specific exception to VCAT’s exclusive jurisdiction under the previous legislative version of the current s89(4). Once that part of the claim was before the Court, His Honour held that the Court’s accrued jurisdiction enabled the balance of the claims to be heard there too.
[7][2008] VSC 412
44 Mr Lim submitted that in the present case I should adopt the same approach, and on finding that the contract of sale is judiciable in the County Court, should decide that the dispute under the lease should also be heard here pursuant to the Court’s accrued jurisdiction, and applying the balance of convenience and so as not to risk fragmented findings on the same factual issues.
45 Even had I not decided that the contract of sale cause of action as presently pleaded falls within the definition of a retail tenancy dispute under s 81 of the Act, on considering the substance of the cause of action alleged under the contract of sale of the business, the relief sought in the writ and indeed in the summons before me issued by the plaintiff, and that further consideration of the breach of contract claim will need to await determination of the lease dispute, I am satisfied that this proceeding is centred on a dispute under the lease. Although I accept that the two disputes, that is, under the contract for purchase of the business and under the lease, are based on the same substratum of facts and ought in the interests of justice to be tried and decided in the same forum, I am satisfied that that should not be the County Court in light of the exclusive jurisdiction of VCAT in relation to retail tenancy disputes.
46 I am therefore satisfied that I should stay the further hearing of this proceeding in this Court.
47 I am not, however, satisfied that I should at this stage dismiss the claim entirely because, to the extent that there is a residual dispute under the contract for purchase of the business, it could potentially be outside the jurisdiction of VCAT under a consumer and trader dispute.
Further matters
48 As I understand the position of both plaintiff and defendants, the lease continues and there is an ongoing landlord and tenant relationship between the plaintiff and first defendant for the balance of at least the current three year term, which will not expire until 31 March next year. In the meantime, there is apparently a mezzanine floor which has been relied upon as an area for storage by the tenant, and which is currently assessed as unsafe and has not been granted an appropriate building permit by the local Council, although I am told that the Council is open to an application for such approval if made by 23 August 2016.
49 The Retail Leases Act requires referral of a dispute for mediation through the Small Business Commission prior to its being heard at VCAT, although as was pointed out by defence counsel, there is power at VCAT to make orders on urgent applications where necessary pending referral of a matter for mediation. The plaintiff would therefore be able to make such an application and if it satisfies the Tribunal of the merits, obtain the same interim orders as were being sought from this Court under the summons dated 18 July 2016.
50 Further, on my expressing concern at what might happen in the meantime, the defendants have offered an undertaking through their counsel to not demolish or otherwise alter the mezzanine structure at the premises nor erect partitioning in any part of the premises, until the plaintiff has applied to VCAT for urgent injunctive relief in respect of the matters forming the subject of this proceeding, and the Tribunal has heard and determined the application for such urgent interlocutory relief.
51 Accordingly, I propose to order that the proceeding be stayed on the giving of an undertaking to the effect foreshadowed.
52 I shall hear arguments in relation to any costs orders resulting from this decision or otherwise on these applications.
- - -
4
0