APlus Capital Pty Ltd v Kontomichalos

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

S ECI 2023 00613

APLUS CAPITAL PTY LTD & ORS (according to the attached Schedule)	Appellants
v
JOHN KONTOMICHALOS & ORS (according to the attached Schedule)	Respondents

JUDGE:	Ginnane J
WHERE HELD:	Melbourne
DATE OF HEARING:	21 March 2024
DATE OF JUDGMENT:	6 September 2024
CASE MAY BE CITED AS:	APlus Capital Pty Ltd v Kontomichalos
MEDIUM NEUTRAL CITATION:	[2024] VSC 546

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GUARANTEE – Guarantees of tenant’s obligation under leases – Leases ended by acceptance of repudiation – Monthly tenancies thereafter – Whether guarantees applied to obligations under monthly tenancies.

APPEAL – Orders of VCAT – Application for leave to appeal on questions of law – Whether new questions of law should be permitted on appeal – Questions turning on legal issues only – New questions allowed – Victorian Civil and Administrative Tribunal Act 1998 s 148.

JUDGMENTS AND ORDERS – Form of order appropriate when multiple landlords succeed in rent claims against tenant – Aggregate order inappropriate – Orders required in respect of each successful landlord.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr A Panna KC	Canann Lawyers
For the Respondents	Mr L Virgona	KCL Law

HIS HONOUR:

Background

This proceeding is an application for leave to appeal orders of the Victorian Civil and Administrative Tribunal (VCAT or the Tribunal) dated 29 November 2022. Those orders arose from a dispute between the 22 respondents, the Landlords and the Tenant and its guarantors, for the payment of rent and charges for serviced apartments in a complex in Kew. The Landlords owned separate apartments in the complex.

The first appellant, APlus Capital Pty Ltd (APlus), was the Tenant under Leases of apartments in the complex owned by the respondent Landlords that were transferred to APlus in 2017. The guarantors of the Tenant were the second and third appellants, who were respectively a director and secretary of APlus.

APlus operated a business offering short and long term accommodation using approximately 50 apartments in the Kew complex. In response to a dispute with the Landlords regarding the repair of bathrooms in the apartments, APlus withheld rent. The Landlords commenced the VCAT proceeding against APlus, the guarantors, and others to claim outstanding rent and charges. APlus counterclaimed seeking damages and a declaration that APlus was entitled to deduct or withhold the rent claimed by the Landlords, or such portion thereof as the Tribunal determined. APlus argued that it had the right to withhold rent and other charges because the Landlords had not paid for the repair works and, as a result, the apartments could not be used, or only used to a limited extent.

In this Court, but not in the Tribunal, the guarantors argued that their guarantees applied only to obligations under the Leases transferred to APlus in 2017, and not obligations under the monthly tenancies that the Senior Member of the Tribunal hearing the proceeding found commenced on 3 September 2018 when the Landlords accepted APlus’s repudiation of the Leases constituted by its non-payment of rent.

On 20 September 2022, the Senior Member found and declared that:[1]
[1]Reasons in VCAT proceeding Kontomichalos v APlus Capital Pty Ltd [2022] VCAT 1092 (“Reasons”).

(a) the Tenant, APlus, did not have the right to offset rent against the cost of proposed bathroom renovation work; and repudiated the Leases by its conduct prior to 3 September 2018 in withholding rent;

(b) the Tenant occupied the premises after 3 September 2018 pursuant to monthly tenancies; and

(c) the guarantors were liable for the amounts payable by APlus to the Landlords.

The Senior Member made the following finding in respect of the guarantees:

The parties agree that Ms Zhao and Mr Dunstan guaranteed the Tenants’ obligation under the Leases.
I find that Ms Zhao and Mr Dunstan are liable to the Landlords for the amount payable to them by the Tenant.

This finding appears to have been based on paragraph 7 of the parties’ Statement of Agreed Facts and Circumstances which stated:

Between about January and August 2017, the leases were assigned from BKH to APlus. The Third Respondent (‘Ms Zhao’) and the Fourth Respondent (‘Mr Dunstan’) guaranteed APlus’s obligations under the leases.

On 29 November 2022, the Senior Member ordered that the present appellants, the Tenant, and the Tenant’s guarantors, pay to the Landlords the amount of $209,395.67, comprising:

(a) rent of $138,686.47 payable under monthly tenancies commencing on 3 September 2018 until January 2019, when APlus, the Tenant, ceased to control the premises;

(b) interest on the rent in the amount of $68,950.80;

(c) repairs and cleaning costs of apartments of $1,290.60 required when APlus ceased to have possession of the apartments;

(d) interest on the repairs and cleaning costs of $467.80.

The Senior Member dismissed APlus’s counterclaim.

The Tribunal’s orders were made on the basis that APlus owed sums totalling $209,395.67 for rent, repairs, and interest to the Landlords; and that the guarantors were liable to pay those sums pursuant to guarantees that they had given to the Landlords. The guarantors seek leave to appeal those orders as they dispute that their guarantees obliged them to pay those amounts, as they were claimed under the monthly tenancies which commenced on 3 September 2018 and not under the prior Leases to which the guarantees applied. This argument was not put to the Tribunal.

All appellants seek leave to appeal against the Tribunal’s first order, which directed them to pay to the Landlords the amount of $209,395.67 as an aggregate sum. The appellants contend that if, contrary to their arguments, they were obliged to pay any sum to the Landlords, such sums should be expressed as the amount owing to each Landlord, rather than as an aggregate amount payable to all 22 Landlords.

I heard the appellants’ application for leave to appeal, together with the submissions on which they would rely if leave were granted. The appellants required an extension of time to commence their applications and, as that extension was not opposed by the respondents, I will grant it.

Summary of conclusions

I have decided to allow the appellants to argue the new questions or grounds that the guarantees did not apply to the Tenant’s obligations under the monthly tenancies. However, I do not accept that argument and consider that the guarantees did apply to obligations under the monthly tenancies. I accept the appellants’ questions and grounds challenging the aggregate form of the Tribunal’s orders and will substitute orders specifying the amounts that the appellants are to pay to each of the respondent Landlords.

The facts[2]

[2]A number of these facts are taken from a Statement of Agreed Facts and Circumstances dated 25 January 2022 filed in the VCAT proceeding.

The Landlords, the respondents, owned separate lots on a Plan of Subdivision. Each lot consisted of a serviced apartment situated in a complex located in Kew (the apartment or apartments). Each respondent owns one such apartment and they were leased to occupants.

In 2005, each apartment was leased to Quest Studley Park Pty Ltd (QSP) until 30 April 2010. The Leases provided an option for four further terms of five years each.

Between about May and July 2010, QSP and each apartment owner entered into Deeds of Renewal of Lease, by which they recorded that the first option for a further term had been exercised, and that variations had been made to the Leases.

On about 1 July 2014, the Leases were transferred from QSP to Beaumont Kew Hotel Pty Ltd (BKH).

Between about August and September 2015, BKH and each of the apartment owners entered into Deeds of Renewal of Lease, by which they recorded that the option for a further term of the Leases had been exercised. Pursuant to Deeds of Renewal of Lease, each of the Leases was renewed in 2015 for a five-year term commencing on 1 May 2015 and expiring on 30 April 2020.

In about December 2016, BKH sold its interest in the apartments to APlus, the Tenant, and sought the owners’, the Landlords’, consents to the assignment of the Leases. The consents were provided.

Between about January and August 2017, the Leases for the apartments were transferred by BKH to APlus by Transfer of Deeds of Renewal of Leases (the Transfer Deeds). The second and third appellants, the director and secretary of APlus respectively, signed the Transfer Deeds in those capacities and as APlus’s guarantors. The Transfers took effect from 16 January 2017.[3]
[3]Affidavit of Xi Henry Lin 24 February 2023 [44].

The main issue in this proceeding was the extent of the guarantors’ obligations under the guarantees. As mentioned, the parties agreed that:

The Third Respondent (“Ms Zhao”) and the Fourth Respondent (“Mr Dunstan”) guaranteed APlus’s obligations under the leases.

However, the guarantors did not admit that they had guaranteed the Tenant’s obligations under the monthly tenancies, under which they contended the Landlords’ claims against the Tenant and the guarantors were made.

The VCAT hearing on 29 November 2022

After VCAT delivered its decision on 20 September 2022, the appellants’ solicitor wrote to VCAT on 21 October 2022, stating:

Our clients acknowledge that it is a finding in paragraph 195 of the reasons dated 20 September 2022 that the parties agreed that Ms Zhao and Mr Dunstan guaranteed the Tenant’s obligation under the Leases which was defined in paragraph 1. However, it is our humble opinion that there is no finding or reasoning regarding that Ms Zhao and Mr Dunstan guaranteed the monthly Leases as was found thereof. Therefore, alternatively, we seek that Senior Member Forde makes orders that the parties make further submissions regarded whether Ms Zhao and Mr Dunstan guaranteed the monthly leases.[4]

[4]Email of Henry (Xi) Lin, dated 21 October 2024; Court book, 190.

The proceeding was relisted before the Senior Member on 29 November 2022. At a telephone hearing that day, the appellants’ solicitor sought orders that the parties be permitted to make submissions about the guarantors’ obligations under the monthly tenancies because the Senior Member’s reasons had not fully addressed her finding that the two individual guarantors guaranteed the monthly tenancies. He submitted that the Senior Member’s statement in paragraph 195 of her reasons, that the parties agreed that Ms Zhao and Mr Dunstan, the second and third appellants, guaranteed the Tenant’s obligation under the Leases, was incorrect because no such agreement had been made about the obligations under the monthly tenancies. No submissions about that issue had been made to the Tribunal. The solicitor suggested that further submissions would enable the Tribunal to rethink its decision. The solicitor contended that Tribunal’s reasons did not explain why the guarantees continued after the original Leases were terminated.

Counsel for the Landlords submitted that the guarantors were seeking to relitigate an issue which had been in dispute before the Tribunal and to run an appeal through the Tribunal because they were not content with the decision or how they ran the case. He contended that the Landlords’ claims in the Tribunal sought all their losses and damages from the guarantors, including all outstanding rent. It was inappropriate for the guarantors to seek to reopen the case after reasons had been delivered. They had an opportunity to make submissions during the Tribunal proceeding.

The Senior Member stated that there had been no submission about the guarantors’ liability if there were monthly leases and how that liability might extend after the Leases ended. She rejected the application to reopen her decision or reconsider issues about the guarantees. She described the issue raised by the appellants’ solicitor as a matter for appeal. The Senior Member issued final orders on that day, 29 November 2022.

The Transfer of Deed of Renewal of Leases

The Transfer Deeds, which transferred the Leases to APlus, were in substantially the same form.[5] They referred to the Deeds of Renewal of Lease, named the Landlords, named the old Tenant, BKH, named the new Tenant, APlus, gave the transfer dates, stated the per annum rental, and named the old Tenant’s guarantors and the new Tenant’s guarantors.
[5]The Transfer of Lease of one apartment contained one immaterial difference.

Clause 1 of the Transfer Deeds provided:

1. TRANSFER
1.1 The old Tenant transfers the lease to the new Tenant with all options. The new Tenant will hold the lease from the transfer date.
1.2 If the old Tenant is not the tenant named in the lease, the old Tenant promises that it has become the tenant by previous valid transfers of the lease.

Clauses 3 and 8 of the Transfer Deeds are of particular importance, and provided:

3. ASSIGNEE ACCEPTS OBLIGATIONS

The new Tenant must pay the Rent and do everything else required by the lease for the remainder of the lease and during any period it stays in possession after it ends.
8. GUARANTEE AND INDEMNITY
The new Tenant’s guarantor –
8.1 Guarantees to the landlord and to the old Tenant that the new Tenant will pay the rent promptly and will do everything the lease requires.
8.2 Agrees that this guarantee is to a continuing guarantee which will not be affected by –
- part-payment,
- part-performance,
- extension of time given by the landlord, or
- non-registration of the lease.
8.3 Must indemnify the landlord and the old Tenant so that they suffer no harm from breaches of the lease by the new Tenant, including losses resulting from the insolvency or winding-up of the new Tenant.

Clauses 4, 5, 6, 9, 13 and 15 of the Transfer Deeds are also relevant and provide:

4. INDEMNITY BY ASSIGNEE

The new Tenant indemnifies the old Tenant so that the old Tenant will not be responsible for breaches of the lease by the new Tenant.
5. ASSIGNOR STILL LIABLE
Unless s62(2) of the Retail Leases Act 2003 ("the Act") applies this transfer does not end the obligations of the old Tenant under the Lease; those obligations continue until the end of the lease, but do not continue into any period of overholding after this Lease ends, nor into any renewed term.
6. ASSIGNOR'S GUARANTOR STILL LIABLE
Unless s62(2) of the Act applies, this transfer does not end the obligations of the old Tenant's Guarantor under any guarantee or indemnity; those obligations continue until the end of the Lease, but do not continue into any period of overholding after the Lease ends, nor unto any renewed term.
9. ACKNOWLEDGEMENT BY ASSIGNOR'S GUARANTOR
The old Tenant's guarantor by signing this transfer acknowledges that its obligations to guarantee the old Tenant continue, except to the extent required by Section 62 of the Retail Leases Act 2003 or any guarantee or indemnity given by the old Tenant
13. CONSENTS
The old Tenant must obtain the necessary consents to the transfer, and must get the landlord to sign it. It must do so at its own expense.
15. OBLIGATIONS JOINT AND SEVERABLE
If any person named on page one is made up of more than one individual or corporation, they must all perform their obligations under this transfer jointly and each individual must also perform them.

The term ‘Rent’ is not defined in the Transfer Deeds, but ‘Rental’ is defined as $16,991.04 per annum.

The Tribunal’s findings that the Tenant had repudiated the Leases

I next set out the basis on which the Tribunal found that the Leases transferred by the Transfer Deeds ended and that monthly tenancies commenced. In 2018, APlus claimed to be entitled under the Leases to conduct a substantial refurbishment of the apartment bathrooms. A dispute arose between APlus and the Landlords over APlus’s entitlement to do so. APlus claimed that the cost was $12,438.77 or $13,238.77 per apartment depending on their size. The Landlords refused to pay for the requested refurbishments and, in response, APlus withheld the rent payable under the Leases.

Before the Tribunal, the Landlords and Tenant both contended that the other had repudiated the Leases and claim to have terminated the Leases by accepting the other’s repudiation. The Landlords relied on the Tenant’s express statement that it had no intention of paying any rent until its demands in relation to bathroom renovations were met as being clear evidence that the Tenant no longer intended to be bound by the terms of the Leases. The Tenant contended that a reasonable person would conclude that the Landlords did not intend to perform their obligations under the Leases.

The Tenant submitted that until the bathroom repairs were carried out, it could not utilise the apartments and stopped doing so in July 2018. However, the Tribunal found that the Tenant failed to establish that it was more likely than not that the apartments were not able to be used because of damage to them. Accordingly, no right to an abatement of rent arose under s 57 of the Retail Leases Act 2003 (RLA).

On 3 September 2018, the Landlords’ lawyers wrote to APlus’s lawyers stating that:

In light of Aplus’ failure:
1. to respond to our above letter;
2. failure to rectify the breaches the subject of the default notices sent by our Clients’ managing agent to your client;
3. its continuing failure to pay rent to our Clients in breach of the obligation to do so in in the leases between our respective clients (“the Leases”),

it is apparent that Aplus [your] client has repudiated the Leases.

Accordingly, we are instructed as follows:

1. Our Clients hereby accept the repudiation thereby bringing the Leases to an end;
2. As an interim arrangement, our Clients are willing to permit Aplus to remain in the premises on a month-to-month basis on the same terms as set out in the Leases but modified as necessary for month-to-month purposes; and
3. To refer this dispute to the Office of the Small Business Commissioner (“OSBC”) for an urgent mediation.

You will no doubt hear from the OSBC shortly in respect of mediation arrangements.
We also act for the Owners Corporation at the above property (“the OC”).
We are instructed that Aplus is using part of the common property in the absence of any licence between it and the OC and is also failing to pay a licence fee in respect of same.
This is not a permitted use of the common property and the OC reserves its rights in respect of same. We are instructed that the OC will join with our Clients and refer this issue to the OSBC for urgent mediation.
Please note that unless the above disputes are resolved through the apprehended mediation, we anticipate that the month-to-month lease arrangement will be terminated and our Clients and the OC will take possession of their lots and/or the common property (as the case may be) and commence immediate proceedings against Aplus for recovery of arrears of rent as well as seek an order for damages.[6]

[6]Letter of KCL Law dated 3 September 2018; Court Book, 1436–1437.

The terms of the Landlords’ offer, that APlus could remain in possession of the property, reflected the terms of the overholding clause in the Leases (cl 10).

By letter from Spencer Reyner to KCL Law dated 10 September 2018, the Tenant denied that it repudiated the Leases and stated that the Tenant would offset rent against the upgrade works.[7]
[7]Letter of Spencer Reyner to KCL Law, dated 10 September 2018.

The Senior Member described her task as to decide whether either party validly terminated the Leases and the consequences that followed if they had. She found that the Tenant did not comply with the Leases as it had no right to demand the cost of the Landlords’ upgrade works except at the end of the five year term. The Tenant failed to prove that the Landlords were obliged under s 52 of the RLA to pay for the proposed works, and, accordingly, the Tenant was not entitled to offset repair costs against rent due.

The Senior Member accepted the Landlords’ submissions that the Tenant’s actions, taken together, amounted to repudiatory conduct, demonstrating that it had no intention of complying with its obligations to pay rent when it fell due. As at 3 September 2018, the Tenant had failed to pay the rent due on 1 July, 1 August and 1 September 2018.[8] The Senior Member found that the Landlords validly terminated the Leases on 3 September 2018, on the basis of APlus’s repudiation.
[8]Reasons [132].

In summary, the Senior Member found that:[9]

a.the Tenant did not have a right to offset rent against the cost of the proposed works;
b.the Tenant repudiated the Leases by its conduct prior to 3 September 2018.
c.the Landlords validly terminated the Leases for repudiation on or about 3 September 2018.

[9]Ibid [134]-[135].

The Landlords contended that, as the Tenant was not entitled to possession of the apartments after 3 September 2018, the most reasonable inference was that it occupied them under monthly tenancies.[10] The Tenant submitted that there was no evidence that it accepted the offer of monthly tenancies either in writing, by performance or by paying rent.[11]
[10]Ibid, [137].
[11]Ibid [138].

The Senior Member accepted the Landlords’ submission. She found that the consequence of the Landlords’ termination of the Leases on 3 September 2018 was that APlus remained in possession on monthly tenancies. She considered that APlus’s conduct after 3 September 2018 supported this finding because it:[12]

a.remained in possession of the premises;
b.issued letters dated 13 October 2018 and 27 November 2018 and notices of breach to the landlords; and
c.participated in a mediation in at the Office of the Small Business Commissioner which mediation was suggested by KCL Law in its 3 September 2018 letter in which it offered monthly tenancies.

[12]Ibid [151].

The Senior Member found that the Tenant’s monthly tenancies of the apartments were on the same terms as the leases, but modified to monthly arrangements. She stated:

The actions of the Tenant were consistent with the existence of a lease. The Leases were terminated on 3 September 2018. At that time the Tenant was offered monthly leases. Notwithstanding its denial of any repudiation of the Leases, the tenant remained in possession and the arrangement between the Landlords and Tenant after that date viewed objectively is consistent with the existence of monthly tenancies on the same terms as the Leases.[13]

[13]Ibid [154].

By letter dated 27 November 2018 to the Landlords, the Tenant gave notice of termination of the Lease of each of the Landlords’ apartments as of 5:00pm on 2 December 2018. The Tenant claimed in its Points of Defence that the termination was on account of the Landlords’ repudiation of the Leases. On 29 November 2018, the Landlords’ solicitors sent a letter to the Tenant’s solicitors stating that the Tenant had repudiated the monthly tenancies by, amongst other things, purporting to terminate the Leases.[14]
[14]Ibid [149]-[150].

The Senior Member accepted the Landlords’ contention that the Tenant, by purporting to terminate the Leases effective on 2 December 2018 and failing to pay rent, had repudiated the monthly tenancies as the Tenant had evinced a clear indication to no longer be bound by the monthly tenancies.[15] The Senior Member accepted the Landlords’ entitlement to claim rent, or an amount equivalent to rent, up to 2 January 2019 due to the Tenant’s failure to return possession of the premises before that date.[16] The existence of the repair works did not entitle the Tenant to terminate the monthly tenancies as the Landlords had not repudiated the monthly tenancies.[17] The Senior Member found that the repairs required, for the most part, were not substantial and appeared to be cosmetic or cleaning works.[18] Clause 5.1 of the Leases required the Tenant to return possession of the premises in a clean and repaired condition. The Senior Member accepted evidence that some additional cleaning was required after the Tenant vacated the premises in addition to the cleaning undertaken by the Tenant.[19] She accepted as evidence of the cost of the general cleaning and minor repair works that were required, invoices totalling $1290.60, and ordered the appellants to pay that sum to the Landlords. As mentioned, she ordered the appellants, including the guarantors, to pay to the Landlords the aggregate amount of $209,395.67, the details of which I have set out above.
[15]Ibid [156].
[16]Ibid [159].
[17]Ibid [162], [164].
[18]Ibid [169].
[19]Ibid [185].

The parties did not dispute in this Court that the Landlords validly terminated the Leases by acceptance of APlus’s repudiation and that thereafter APlus remained in possession under monthly tenancies until January 2019. However, the guarantors disputed that they acted as guarantors of APlus’s obligations under the monthly tenancies that commenced on 3 September 2018 and therefore disputed that they were liable to pay the Landlords the amounts that the Tribunal ordered.

The Appellants’ Questions of Law

The Appellants’ questions of law in summary were:

(i)Whether the Tribunal erred in law in holding that the guarantors were liable under their guarantees to pay the Landlords the sum of $209,395.67 (question of law one);
(ii)Whether the Tribunal erred in law in finding that the guarantors’ obligations under the Leases extended to obligations incurred by APlus under the monthly tenancies subsequent to the Landlords’ termination of the Leases (questions of law one, two and three);
(iii)Whether the Tribunal erred in law in refusing APlus’s request on 29 November 2022 to permit the parties to make submissions regarding whether the guarantors guaranteed the monthly tenancies, when they drew the Tribunal’s attention to the fact that its reasons contained no findings or reasoning as to why the guarantors were liable under the guarantees in respect of the periodic monthly tenancies (question of law four);
(iv)Whether the Tribunal erred in law in failing to give proper and adequate reasons as to why the guarantors were liable to the Landlords pursuant to the guarantees in respect of APlus’s obligations under the Leases, when the Landlords had terminated them on 3 September 2018 and APlus continued in occupation of the Landlords’ premises under periodic monthly tenancies (question of law five); and
(v)Whether the Tribunal erred in law in ordering the appellants to pay the Landlords the sum of $209,395.67 as an aggregate amount and in not specifying the amounts awarded to the individual Landlords in respect of the damage for rent, repairs, cleaning costs and interest (questions of law six and seven).

Questions of law one, two and three (proposed grounds of appeal one, two, three, five and seven): did the guarantees apply to the Tenant’s obligations under the monthly tenancies?

The first issue raised in respect of these questions of law was whether the guarantors should be permitted to rely on its arguments that the guarantees did not apply to the monthly tenancies that commenced on 3 September 2018.

Proposed ground of appeal three stated:

The Tribunal erred in law in finding that the parties agreed that the Second and Third Appellants guaranteed the First Appellant’s obligation under the Leases, when in fact the Respondents’ claims were not in respect of the First Appellant’s obligations under the Leases, but in respect of the First Appellant’s obligations under periodic monthly tenancies.

Proposed ground of appeal seven contends that the Tribunal erred in law in proceeding on the assumption that the parties agreed that the guarantors guaranteed APlus’s obligation under the Leases and that the guarantees extended to guaranteeing APlus’s obligations after the terminations of the Leases on 3 September 2018, and in respect of APlus’s obligations under the periodic monthly tenancies.

The guarantors contended that the Tribunal’s attention was not drawn to the fact that the debts claimed by the Landlords were in respect of liabilities incurred by APlus as a Tenant subsequent to the termination of the Leases. Nor was its attention drawn to the fact that the guarantors did not admit those liabilities. As a result, the Tribunal did not consider whether the guarantees extended to APlus’s obligations under the periodic monthly tenancies. The guarantors contended that the Tribunal wrongly assumed that the question of whether their guarantees extended to APlus’s obligations to the Landlords under the monthly tenancies was not in issue. While the guarantors accepted that they had not raised the issue with the Tribunal, they argued that they had not conceded any liability for amounts due under the monthly tenancies and had raised that issue soon after the Tribunal delivered its decision. Rather than seeking to rely on a new argument on appeal, they were relying on the Tribunal’s failure to address a crucial matter pivotal to determining their liability for rent due under the monthly tenancies. The Landlords should have lost below and should lose now. The guarantors would suffer an injustice if the orders against them were not set aside.

The Senior Member stated that ‘[t]he parties agree that Ms Zhao and Mr Dunstan guaranteed the Tenant’s obligation under the Leases’.[20] While that statement was correct insofar as the original Leases were concerned, it was not otherwise correct because the Landlords were suing for the outstanding rent and charges under the monthly tenancies. The Senior Member made a fundamental error in failing to distinguish between the guarantors’ acceptance of obligations under the original Leases, and their liability for the Landlords’ claims for rent under monthly tenancies while the Tenant was in occupation of the apartments.
[20]Reasons [195] (citations omitted).

The guarantors only became aware of the Tribunal’s misapprehension and misunderstanding of the basis of their defence to the Landlords’ claims under the guarantees when the Tribunal gave its decision. They then promptly brought the misapprehension to the Tribunal’s attention and sought leave to re-open their case to make further submissions on the point, but the Tribunal refused leave. There was no further evidence that the Landlords could have called about the circumstances in which the Transfer Deeds were executed and the Leases were terminated by the Landlords, and the basis upon which the Tenant continued in occupation of the premises. Evidence of a party’s intention in entering into a contract was not relevant to its construction.

The guarantors contended that if their argument that the guarantees did not apply to the obligations under the monthly tenancies was new, then it would be in the interests of justice to allow them to rely on it. The Landlords had obtained a decision based on the Tribunal’s misconception as to what the issues were before it, and on a legal basis that provided no ground for the order made against the guarantors.

The Court of Appeal in Medical Practitioners Board of Victoria v Lal,[21] speaking of the principles to be applied in determining whether to permit a party appeal on a ground not raised in a court or tribunal at first instance, stated:[22]
[21](2009) 23 VR 702.
[22]Ibid [41] (citations omitted).

(a) the substantial issues between the parties are ordinarily settled at the trial;

(b) where, had the issue been raised below, evidence could have been given which possibly could have prevented the point from succeeding, the point cannot be taken afterwards;

(c) where all the facts have been established beyond controversy or where the new point is one of construction or of law, it may be expedient and in the interests of justice for an appellate court to entertain the point;

(d) even when no question of further evidence arises, it may still not be in the interests of justice to allow a new point to be raised on appeal;

(e) where a tribunal is bound to take into account a matter that is material to its decision, but does not do so, that failure may be raised on appeal as a question of law even if it was wrongly conceded before the tribunal that the matter was not relevant and no submissions were directed to the point.

The Landlords opposed the guarantors being granted leave to rely on the additional argument and submitted that their liability for the unpaid rent was an issue in the Tribunal proceeding. The Landlords’ claims were for rent owing after the termination of the Leases on 3 September 2018. They made clear in their points of claim and opening submissions that they claimed against the guarantors under the guarantees contained in the Transfer Deeds for rent due under the monthly tenancies. The guarantors chose not to argue the point about the application of the guarantees that they now sought to rely upon. The Tribunal did not err in its decision about the guarantors’ liabilities because the point now raised was not put to it, and the guarantors did not dispute that their guarantees extended to liabilities under the monthly tenancies. By the point that the Tribunal delivered its decision, the parties had incurred costs associated with a five day trial, which had commenced in February 2022 and resumed in June 2022. The guarantors had had ample time to raise this new argument. The importance of the finality of litigation and the interests of justice required that the guarantors not be permitted to raise this new ground. In any event, there would be no practical consequence if the guarantors succeeded on the new ground as their company, APlus, would remain liable for the amounts that the Tribunal had ordered to be paid.

The Landlords also argued that, if the guarantors had raised the new point at the Tribunal, they might have led evidence of negotiations and discussions preceding the entry into the Transfer Deeds and the surrounding circumstances known to the parties that might have thrown light on the intended operation of the guarantees.[23] The Transfer Deeds had taken time to put together. If they had known that the new point was being relied on, they might have decided to call evidence arising from the protracted litigation that had occurred at VCAT between APlus and BKH concerning the sale of BKH’s business and the transfer of leases to APlus.[24] However, because the guarantors’ new argument was not put to the Tribunal, the Landlords did not call evidence that might have provided the context in which the guarantees were given. They would therefore suffer prejudice if the point was now permitted to be raised.
[23]Transcript of Proceedings, APlus Capital Pty Ltd v Kontomichalos (Supreme Court of Victoria, S ECI 2023 00613, Ginnane J, 21 March 2024) (“T”), 95-6.
[24]Beaumont Kew Hotel Pty Ltd v APlus Capital Pty Ltd [2019] VCAT 2006.

Conclusion about new appeal ground

An initial question that needs to be mentioned at this point is whether the Landlords’ claims in VCAT were made under the monthly tenancies or under the Leases transferred under the Transfer Deeds. In my opinion, those alternatives are not mutually exclusive, in that, the Landlords claimed that the guarantees in the Leases under which their claims against the guarantors were brought applied to amounts due under the monthly tenancies. In my opinion, the Landlords’ claims were made under the guarantees for amounts due under the monthly tenancies. This is clear from paragraphs 4(d), 14, 19, 20 and 21 and the relief sought in paragraphs A and B of their amended points of claim. In dispute were amounts claimed to be owing for the Tenant’s occupancy of the apartments after the termination of the Leases and the Landlords sued the guarantors under the guarantees for rent due under the monthly tenancies. In opening submissions to the Tribunal, the Landlords’ counsel stated that they were suing under a guarantee contained in the Transfer Deeds.[25] The Landlords contended that the guarantees applied to the obligations created by the monthly tenancies.
[25]Court Book, 212.

I accept, however, that the argument that the guarantees did not apply to the obligations arising under the monthly tenancies was not put to the Tribunal and that the guarantors did not concede that they were liable for those obligations. The appellants in paragraph 12(b) of their points of defence did not accept that the Leases were converted into monthly tenancies as the Tribunal found occurred.

I consider that the Senior Member would not have been correct if her statement in paragraph 195 of her reasons that the parties agreed that the guarantors ‘guaranteed the Tenant’s obligation under the Leases’ was intended to include obligations under the monthly tenancies. However, I doubt that the Senior Member intended to convey any more than that her understanding was that the appellants had not disputed that the guarantees applied to the amounts that she had decided were owed by the Tenant to APlus. This appears to have been because the applicability of the guarantees to obligations under the monthly tenancies was not a matter discussed during the Tribunal hearing, although the guarantors did not expressly concede the point.

The circumstances in which a new argument will be allowed on appeal were stated by the High Court in Water Board v Moustakas,[26] as follows:

More than once it has been held by this Court that a point cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below. Where all the facts have been established beyond controversy or where the point is one of construction or of law, then a court of appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied.[27]

[26](1988) 180 CLR 491; see also Coulton v Holcombe (1986) 162 CLR 1.

[27]Ibid, 497 [13].

A trial or Tribunal hearing is not to be regarded as ‘little more than a preliminary skirmish’.[28] Nevertheless, the Court may allow new grounds to be advanced on appeal when they involve questions of construction of legal documents or of law only, and there is no relevant evidence that could have been called at first instance in opposition, if the point had then been raised or relied on.
[28]Beerens v Bluescope Distribution Pty Ltd (2012) 39 VR 1 at 47 [202] (Tate JA); see also Lanshan Pty Ltd v F3 Distributions Pty Ltd [2024] VSCA 59 and Medical Practitioners Board of Victoria v Lal (2009) 23 VR 702. The Landlords relied on Daida Mama Pty Ltd v Wang [2021] VSC 330.

An example of such a case is Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liquidation),[29] where the High Court allowed a notice of appeal to be amended to raise an issue that had not been argued in the Federal Court, although it had been ‘open at both stages in the Federal Court’.[30] The ground concerned whether the taxpayer could carry forward allowable taxation deductions after it, and its holding company, were wound up. The majority stated:

The respondent taxpayer did not, in opposition to the amendment, deny that all the relevant facts had been established or deny that the point is one of construction and law. It is expedient and in the interests of justice to allow the amendment and to entertain the issue it raises.[31]

[29](2005) 220 CLR 592.

[30]Ibid, 619 [80].

[31]Ibid.

McHugh J stated that:

Moreover, it does not appear that Linter Textiles would suffer any evidentiary prejudice if leave to amend were granted. The s 80A(3) issue in relation to Linter Group is predominantly a question of law involving matters of statutory construction. The facts are not in dispute and the parties' agreement before the primary judge seems to remove any dispute about procedural issues (such as whether an election had occurred). In the absence of such prejudice, and given that the issue was before the Full Court and was fully argued before this Court, it would seem to be in the interests of the administration of justice to grant leave to amend. Accordingly, I would grant the Commissioner leave to amend his notice of appeal.^[32]

[32]Ibid, 639 [143].

Kirby J stated:

Appeals on new legal points: This Court, and other courts of high authority, have acknowledged many times the permissibility (and sometimes the obligation) for an appellate court, including an ultimate court of appeal, to determine a question of law that is raised belatedly and presented for resolution and that involves “the construction of a document, or [a decision] upon facts either admitted or proved beyond controversy” where such resolution is “expedient in the interests of justice”. In effect, this is no more than the acknowledgment of the duty of a court to the rule of law which lies at the heart of Australia's constitutional arrangements.
There are times when justice as between the parties will demand the determination of an appeal otherwise than as the law, properly construed, would oblige when applied to the entirety of the facts. Thus, there are times when considerations of procedural fairness demand that a party, with an apparently good legal argument, be prevented from relying on it, with adverse consequences as the result. Such instances should, in my view, be regarded as exceptional. At least this should be so where all that is involved is the application of a legal text to facts found or admitted.[33]

[33]Ibid, 655, [200]–[201](citations omitted).

In Anderson v Stonnington City Council,[34] the Court of Appeal accepted that the fact that arguments sought to be raised on appeal had been abandoned before the Tribunal did not prevent the Court from entertaining them provided it was in the interests of justice to do so. The Court stated that, although the appeal had to be brought on questions of law, there was no jurisdictional difficulty in permitting another question of law to be raised for the first time on appeal.
[34](2020) 61 VR 147, 160 [54].

The authorities suggest that the appellants, who bear the onus of satisfying the Court that they should be permitted to argue a new ground, must satisfy the Court that that allowing the new ground would not cause injustice to the other party.[35]
[35]Daida Mama Pty Ltd v Wang [2021] VSC 330 [34]; Zanjani v Sutcliffe [2002] VSC 282 [6] referring to Batt J in City of Greater Geelong v Herd (1997) 20 AATR 293.

In assessing where the interests of justice lie, I take into account the expenses that the Landlords have incurred and the time that they have spent in bringing the VCAT proceeding. I also take into account that the guarantors offered no explanation of why the new issue was not raised before the Tribunal. I have also considered whether the Court should refuse the appellants leave to appeal as the Senior Member was never asked to decide the new ground and did not have the opportunity to consider it. I also take into account that a significant portion of the Tribunal’s reasons dealt with the claim and counterclaim concerning the repudiation of the Leases, matters which were not raised in this appeal proceeding. I consider that the application of the guarantees to the obligations under the monthly tenancies turns on the construction of the guarantees and that it is unlikely that any evidence about the context in which the parties entered into the guarantees would assist in their construction. It seems unlikely that the parties would have foreseen circumstances in which, although the Tenant repudiated the Leases and the Landlords had accepted the repudiations, they had permitted it to remain in possession of the apartments under monthly tenancies. The construction of the guarantees must primarily focus on the words contained in them.

Having considered all those matters, I am satisfied that the interests of justice lie in allowing the new ground to be argued. The guarantors are subject to an order that they pay the Landlords the sum of $209,395.67 which they contend they are not obliged by law to pay. While they may have been the authors of their own misfortune, I do conclude, as the point has now been raised, that it is in the interests of justice that the guarantors be permitted to rely on it. So I next turn to it.

The appellants’ submissions about the application of the guarantees

The appellants’ case is that they are not liable to the Landlords for the amount of their claims for rent, cleaning and repair bills and interest under the monthly tenancies. The guarantees were provided to guarantee the Tenant’s obligations under the Leases that were transferred under the Transfer Deeds and not any other obligations for rent payable by the Tenant. The Leases did not require anything or impose any obligations after they ended. Therefore, once the Leases transferred by the Transfer Deeds were terminated by the Landlords’ acceptance of the Tenant’s repudiation on 3 September 2018, the guarantors had no obligation to pay rent, cleaning and repair bills and interest associated with the Tenant’s continued possession of the apartments. The termination of the Leases severed the guarantors’ liabilities for payment of the rent and other charges due thereafter, because those liabilities accrued on the different legal basis of monthly tenancies. The guarantees did not apply to obligations under the monthly tenancies, which constituted a fresh demise.

The guarantors emphasised the importance of distinguishing between the guarantees of the Tenant’s obligations under the Leases and any guarantee of the Tenant’s obligations under the periodic monthly tenancies.

The appellants argued that ‘The rent’ referred to in cl 3 of the Transfer Deeds was the rent payable under the Leases transferred by the Deeds. The words ‘pay rent promptly’ in the second part of cl 8.1 of the Transfer Deeds referred to the rent due under the Leases transferred under those Deeds that terminated on 3 September 2018. The Tenant’s obligation to pay rent was tied to the terms of the Leases, which were the subject of the Transfer Deeds.

Clause 8.1 of the Transfer Deeds did not state that the guarantors guaranteed that the Tenant would pay ‘any rent’ promptly, nor did they guarantee that the Tenant would pay rent due under a different legal or equitable basis for the occupation of the apartments. Clause 8.1 contained a composite obligation that the Tenant would pay the rent promptly and would do everything the Leases required. Effect can be given to both parts of the composite obligation. The requirement to ‘pay the rent promptly’ would not refer to any lease other than the Leases that had been transferred.

Unlike the appellants’ construction of the guarantees, the Landlords’ construction created uncertainty as the guarantors would not know, when giving the guarantees, the limit of their obligations and liabilities, which might be indeterminate as to quantum and length of term. The guarantee contained in cl 8.1 was not expressed to be a continuing guarantee, save in the specified respects mentioned in cl 8.2, that are not relevant to the current proceeding, and did not render the guarantors liable for an indeterminate period of time, as the Landlords’ construction of the guarantees would.

The Tribunal should have found that, on the proper construction of the guarantees and indemnities, they did not extend to cover the Tenant’s obligations under the monthly tenancies. If there were any doubts about the guarantors’ construction of cl 8.1, they were removed by the requirements to construe the guarantees strictissimi juris and contra proferentum.

Landlords’ submissions on the construction of the guarantees

The Landlords contended that their claims were brought under the guarantees contained in the Transfer Deeds and that those guarantees applied to rent and charges owing under the monthly tenancies that commenced on 3 September 2018.[36]
[36]T61 L5.

The Landlords submitted that the Transfer Deeds should be read as a whole with no part being treated as irrelevant or otiose. In that respect, they relied on the following statement in Fitzgerald v Masters:[37]

It is trite law that an instrument must be construed as a whole. Indeed, it is the only method by which inconsistencies of expression may be reconciled and it is in this natural and common sense approach to problems of construction that justification is to be found for the rejection of the repugnant words, the transposition of words and the supplying of admitted words. Many illustrations may be given of the circumstances in which these processes have been followed but to do so would add nothing to the rule that the intention of the parties is to be ascertained from the instrument as a whole and that this intention when ascertained will govern its construction.

[37](1956) 95 CLR 420 at 437.

Accordingly, cl 8 of the Transfer Deeds was to be read with cl 3, which required the Tenant to pay rent under the Leases and for any period that the Tenant stayed in possession after the Leases ended. The obligation to pay rent was not limited to the Tenant’s possession of apartments under the Leases transferred under the Transfer Deeds, but extended to periods of possession when the Tenant stayed in possession lawfully, including under the monthly tenancies which commenced on 3 September 2018.

Clause 8.1 was to be construed in a manner that gave a role to both obligations contained in it. If the guarantee of the payment of rent was only the rent due ‘under the lease’, that obligation would arise in any event under the second limb of cl 8.1 — being the obligation to do everything the lease required. The wording of cl 8.1 did not create mutually exclusive obligations. On the appellants’ interpretation of cl 8.1, the reference to the prompt payment of rent would be otiose and such an interpretation should be avoided. The express wording of cl 3 contemplates that the obligation to pay rent could continue beyond the end of the Lease for any period during which the Tenant stayed in possession of the apartments. When cl 8 was read in conjunction with cl 3, it was clear that the guarantors guaranteed the Tenant’s obligation to pay rent and charges for whatever period the Tenant occupied the apartments. The words ‘pay the rent’ included the obligation to pay rent for occupation of the apartments after the Leases that had been transferred had ended.

The guarantors’ authorities

The guarantors relied on cases in which the rent owing by a Tenant was found to be not owing under the lease in respect of which the guarantees were given, but under a subsequent lease, equitable lease or agreement for a lease. They relied on Chan v Cresdon,[38] in which the majority of the High Court held that the lessee’s obligation to pay rent, in respect of which a guarantee had been given, arose not under the original lease, but under a subsequent common law tenancy to which the guarantee did not apply. The majority stated:

The word 'under', in the context in which it appears, refers to an obligation created by, in accordance with, pursuant to or under the authority of, the lease. The obligation which arose under the common law tenancy at will does not answer this description. Nor, for that matter, would the obligation have been a covenant or condition 'contained or implied in the lease', to use the language of the indemnity.

[38](1989) 168 CLR 243, 256.

In Cao v Baccello Pty Ltd,[39] the Western Australian Court of Appeal held that the guarantee did not apply to the tenant’s obligations under a further lease that was entered into after the original lease had ended. The Court applied the following principles of construction:

The principal issue in the appeal (ground 4) concerns the proper construction of the guarantee and whether it applied to Ms Chen's obligations under the 2011 lease agreement. The guarantee is contained in cl 19 of the 2006 lease agreement. The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. The instrument must be read as a whole. Further, if there is a doubt as to the proper construction of a provision in a guarantee or an indemnity, it should be resolved in favour of the surety or indemnifier. A doubt may arise not only from the uncertain meaning of a particular expression, but from its apparent width of possible application. However, it remains necessary for the contractual language to present a constructional choice that is fairly open by reason of the application of the other rules of construction.[40]

[39][2020] WASCA 82.

[40][54] (citations omitted).

In that case, Bacello Pty Ltd was the landlord, Ms Chen was the trustee of the Cao Family Trust, which was the tenant, and Mr Cao, who was married to Ms Chen, was the guarantor. The initial 2006 lease was not in a registrable form and was not registered, so it took effect as an agreement for lease. The word ‘Term’ was defined as five years from 1 July 2006 to 30 June 2011, including ‘any extension or renewal of it’. The tenant was given the right to renew the term for further five year terms commencing on 1 July 2011 and 1 July 2016, but it did not comply with the requirements for renewal when it sought to do so in 2011. The trial judge found that an agreement for a lease had been entered into in 2011, that the tenant was liable for the breaches alleged of non-payment of rent and that Mr Cao was liable as guarantor. The 2011 agreement provided that, if the tenant, with the express or implied consent of the landlord, remained in occupation after the expiration of the Term, then the tenant ‘will do so as a monthly tenant, the tenancy of which may be determined by either party on one month’s written notice’.

The guarantee and indemnity provided in relevant parts:

19.1.1 In consideration of the Landlord entering into this lease at the request of the Guarantor (which request is testified by the Guarantor’s execution of this lease) the Guarantor JOINTLY AND SEVERALLY:
19.1.1.1 GUARANTEES to the Landlord the due performance and observance by the Tenant of all singular terms, covenants, agreements and stipulations contained or implied in this Lease on the part of the Tenant to be performed or observed (‘the Secured Obligations’) including the due payment on demand of the whole of all Rent costs and other moneys payable by the Tenant to the Landlord under this lease (‘the Secured Moneys’).
…

19.1.3 A reference in this Clause to ‘this Lease’ means a reference to any tenancy or other rights whether legal equitable or otherwise under which the Tenant occupies or is entitled to occupy the Leased Premises including a tenancy for a fixed term, a periodic tenancy, a tenancy at will as a tenancy at sufferance or whilst holding an equitable interest over the Leased Premises under an agreement for lease.

The Court of Appeal allowed the appeal deciding that the guarantee given in 2006 did not apply to obligations under the 2011 lease agreement, because:

…[T]he 2011 lease agreement was a fresh agreement for lease, and not merely an 'extension' of the term of the 2006 lease agreement. Similar observations apply to the guarantee in respect of other express obligations in the 2006 lease agreement which are imposed with respect to the 'Term' (as defined).[41]
Moreover, prima facie, it would be an odd result if the guarantee were intended (objectively) to refer to the Tenant’s obligations of any kind, including financial obligations to any degree, under any tenancy, occupation or rights of occupation at any point in the future whatsoever.[42]
The better view is that the guarantee does not apply to obligations arising from fresh executory agreements for leases entered into at any time in the future. The possibility that such a future executory agreement may be made on the same terms as the 2006 lease agreement or the fact that it transpires that the parties subsequently entered into a fresh executory agreement on those terms, do not bear upon the true meaning of cl 19.1.1.1 which is to be judged as at the date that the guarantee is given.[43]

[41]Ibid [65].

[42]Ibid [76].

[43]Ibid [79].

The Court considered that cl 19.1.3, which gave a wide definition of ‘Lease’, was adopted out of an ‘abundance of caution’ to ensure that the guarantee applied to the tenant’s obligations under any tenancy, even if there was ‘an imperfection in the 2006 lease as a legal instrument’ and did not mean that the guarantee in cl 19.1.1.1 applied to a subsequent occupation of the premises after the expiry of the 2006 lease agreement.[44]
[44]Ibid [80].

In my opinion, the circumstances in Cao’s case are distinguishable from those in the present case. The Court of Appeal found that the guarantee did not apply as the 2011 agreement was a fresh agreement for lease and not merely an extension of the 2006 agreement. The Court inferred that the principal objective of the guarantee was to secure the performance of the tenant’s obligations under the 2006 lease agreement. The Court noted that the guarantee was not a continuing guarantee and concluded that the better view was that the guarantee did not apply to obligations arising from fresh executory agreements for lease entered into in the future. The guarantee did not encompass a subsequent occupation of the premises pursuant to a separate agreement for lease after the expiry of the 2006 lease agreement.

In White v Cariste Pty Ltd,[45] the New South Wales Court of Appeal held that upon the termination of the lease under consideration, the tenant occupied the premises pursuant to a periodic tenancy. The guarantors had guaranteed:[46]

…[T]he due performance by the lessee of all the terms and conditions hereof and covenants that they will upon demand pay to the lessor all moneys which may become due to the lessor herein and remain unpaid for a period of seven (7) days and will be responsible for the due compliance by the lessee with all the terms and conditions hereof in the same manner and to the same extent as if they were parties hereto and covenanted jointly and severally as lessee…

[45][2004] NSWCA 460.

[46]Ibid [5].

After the lease expired, the tenant remained in occupation and the holding-over clause applied. Some 18 months later, discussions occurred about a new lease, however, no new lease was signed, although the tenant remained in possession of the premises.[47] After the tenant fell into arrears in rent in 1992, it informed, the landlord that:[48]

We would also like to confirm that we are renting the above named premises from you on a monthly basis of $1,486.33/month plus $190.00/month for outgoings. We further acknowledge that the conditions of our lease are as defined in the original lease documents but at rates as set out above.

[47]The parts of the premises occupied may have altered.

[48]Ibid [19].

The tenant remained in occupation of part of the property until 1997, when it surrendered possession. During that period of approximately 67 months, rent payments for about 34 months were made.

The Court held that the amounts the landlord claimed from the tenants were not obligations under the original lease’s holding-over provisions, but arose under an agreement between the parties which displaced the holding-over provisions. The guarantee did not apply to this new agreement. The Court applied Chan v Cresdon noting that the guarantee was to be strictly construed and that any ambiguity was to be resolved in favour of the guarantors. Hodgson JA stated:[49]

In my opinion, the obligation to pay rent at the rate of $1,486.33 per month and outgoings at the rate of $190.00 per month were plainly not terms and conditions of the lease, nor were the moneys in question moneys which became due to Cariste under the lease; and accordingly, in my opinion the guarantee had no application to these obligations. For the reasons I have already given, those obligations were the relevant obligations as between the parties from about March 1992 onwards, and displaced the obligations as to rent and outgoings under the holding-over provisions. In my opinion it is entirely unrealistic to regard the situation as one in which the rights of the parties continued to be as provided by the holding-over clause under the lease, while Cariste as lessor simply made some unilateral and non-binding and immediately revocable concession. As I have said, in my view that is in any event inconsistent with one of the agreed facts.

[49][46]; Ipp JA agreed with Hodgson JA. Bryson JA agreed that the appeal should be allowed.

In this case, the Landlords argued that the appellants’ authorities were distinguishable from the present case in which the guarantee applied to rent for occupation under an agreement commencing after the initial lease had ended.

The obligation to which a guarantee applies depends on the wording of the guarantee, and, in some cases, the circumstances in which it has been entered into. None of the authorities I have discussed concerned leases and guarantees that contained wording similar to that in the Transfer Deeds. While those authorities discuss the principles governing the construction of guarantees, they are distinguishable from the present case, where the Transfer Deeds contained obligations for the payments of rent and other charges both during the ‘remainder of the lease’ and during any period that the Tenant stayed in possession after its end.

I next deal with the construction of the guarantees.

Analysis of the construction of the guarantees

A creditor’s rights against a guarantor depend on the terms of the guarantee and the nature of the obligation, performance of which is guaranteed.[50] As the High Court stated in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd:[51]

At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety. The doctrine of strictissimi juris provides a counterpoise to the law's preference for a construction that reads a provision otherwise than as a condition. A doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety…[52]

[50]Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245, 255 (Mason CJ).

[51](1987) 162 CLR 549.

[52]Ibid, 561 [21].

The context in which a guarantee was entered into may be relevant to its construction. In Electricity Generation Corporation v Woodside Energy Ltd,[53] French CJ, Hayne, Crennan and Kiefel JJ stated: [54]

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

[53](2014) 251 CLR 640.

[54]Ibid, 656-7 [35] (citations omitted).

The same principles apply to the construction of guarantees. However, evidence of the surrounding circumstances, when relied on for the purpose of the construction of a commercial agreement, must be restricted to the factual background known to both parties,[55] including evidence of the aim of the transaction.
[55](2004) 218 CLR 415 at [22].

In the Privy Council decision in Coghlan v S H Lock (Australia) Ltd,[56] Lord Oliver said of guarantees:[57]

Such a document falls to be construed strictly; it is to be read contra proferentem; and, in case of ambiguity, it is to be construed in favour of the surety. But these principles do not, of course, mean that where parties to such a document have deliberately chosen to adopt wording of the widest possible import that wording is to be ignored. Nor do they oust the principle that where wording is susceptible of more than one meaning regard may be had to the circumstances surrounding the execution of the document as an aid to construction.

[56](1987) 8 NSWLR 88.

[57]Ibid, 92; see also Hyundai Shipbuilding & Heavy Industries Co Ltd v Pournaras [1978] 2 Lloyd’s Rep 502, 506.

The meaning of a guarantee is to be determined at the date that it was given. The terms of the guarantee will determine whether the liability of the surety survives for the future after the forfeiture of the lease, or the expiry of a fixed term, or the release of the principal debtor. Normally, a guarantor of obligations under a lease, upon expiry of an initial term, has the right to decide whether to execute a new and different document which extends its liability as a guarantor.[58]
[58]Verdi La Fontana Pty Ltd v Mabrouk Pty Ltd (1992) 5 BPR 11,557 at 11,566 (Kirby P).

The Senior Member found that APlus occupied the apartments on monthly tenancies after 3 September 2018, on the same terms as the Leases that were transferred by the Transfer Deeds.[59] The Senior Member also found that the Landlords terminated the monthly tenancies effective 2 December 2018,[60] with rent payable until January 2019. She said:[61]

If not pursuant to monthly tenancies, it is unclear on what basis the Tenant could have remained in possession of the premises after 3 September 2018. The Tenant had otherwise forfeited the Leases and not sought relief from forfeiture from the Tribunal.

[59]Reasons [136]-[152].

[60]Ibid [172].

[61]Ibid [152].

The Landlords’ solicitors’ letter of 3 September 2018 offered a monthly tenancy ‘on the same terms as set out in the Leases but modified as necessary for month-to-month purposes’. Although the Tenant did not accept that offer, the Senior Member found that tenancies on those terms commenced on 3 September 2018. This finding was not challenged.

The parties deleted the guarantees in the standard form leases of the apartments and instead included guarantees in the Transfer Deeds. The purpose of the guarantees was to guarantee obligations that arose upon, and as a result of, the Transfer of Leases. The Transfer Deeds also provided for the new Tenant to assume the rights and obligations of the old Tenant under the Leases with the new Tenant’s obligations guaranteed by new guarantors, who were a director and secretary of the new Tenant. At the time they signed the Transfer Deeds, the guarantors must have known that they were guaranteeing obligations under Leases for the remainder of the five year term and that cl 3 of the Transfer Deeds provides for the Tenant’s obligations to continue if they stayed in possession of the leased premises after the Leases ended. Clause 3 does not distinguish between continued possession of the leased premises under a monthly tenancy or otherwise. The Transfer Deeds did contemplate that the Tenant might stay in possession after the Leases transferred had ended. The potential liability of the new Tenant for rent under the Leases transferred by the Transfer Deeds was at least from the date of the transfer, 16 January 2017, until 30 April 2020, which was the end of the then current term, although there were options of three further terms of five years. As events transpired, the Landlords’ claims against the guarantors for rent, cleaning and repair costs, which the Tribunal accepted, were only until January 2018, which was well within the term of the Leases which commenced in 2015.

A reasonable business person considering or construing the guarantees would have taken into account that the parties contemplated that the Tenant might continue in possession after the Leases ended and would then be obliged to pay the rent and do everything else required by the Leases, even though they had ended.

Clause 3 of the Transfer Deeds deals with the Tenant’s obligation to pay the rent and do everything else required by the Leases until they ended and during any period thereafter that the Tenant stayed in possession. The clause throws light on the way the term ‘rent’ is used in the Transfer Deeds. The Tenant who remained in possession after the Leases ended was obliged to continue to pay rent at the rate payable before the Leases ended, and to continue do everything else that the Leases had required before they ended. In that way, the Tenant’s obligations under the Leases were continued and applied to the Tenant’s occupation of the apartments after the Leases ended on whatever basis that occupation occurred. The Senior Member found that the Leases ended with the Landlords’ acceptance of APlus’s repudiation on 3 September 2018. Thereafter, APlus’s possession of the apartments was not pursuant to the Leases, but ‘on a month-to-month basis on the same terms as set out in the Leases but modified as necessary for month-to-month purposes’.

Clause 8.1 of the Transfer Deeds contains a guarantee of rent and everything the Leases required. It did not specify the duration of the guarantees. As stated, cl 3 does not limit the Tenant’s obligations to pay the rent and do everything else required by the Leases to the term of the Leases, but extends those obligations ‘during any period it stays in possession after [the lease] ends.’ Clauses 3 and 8.1 contains some similar wording and must be read together. They both require the payment of the rent and the doing of everything else required by the Leases in the case of cl 3, and doing everything required by the Leases in the case of cl 8.

Important to the interpretation of the guarantee in cl 8.1 is its requirement that the Tenant ‘pay the rent promptly’ which can only mean the rent which cl 3 of the Transfer Deeds required to be paid. That rent was the rent required by the Leases to be paid for the remainder of their terms and during any period that the Tenant stayed in possession after they ended. As mentioned, cl 8 does not specify the duration of the guarantees and does not contain the words as in cl 3, that ‘everything else required by the lease for the remainder of the lease and during any period it stays in possession after it ends’. However, the key to the interpretation of cl 8 is its requirement to ‘pay the rent’, which can only mean the rent required by the Lease to be paid for the remainder of the Lease and during any period that the Tenant stayed in possession after the Lease ended.

Clause 8.1 is not limited to a guarantee of rent payable under the Leases, but contains the obligations to pay rent promptly ‘and do everything that the lease requires’. I do not consider that the reference to ‘the lease’ in cl 8.1 means that the provision only applies during the term of the Leases. Rather, like cl 3, cl 8.1 uses the words ‘the lease’ to impose obligations both for occupation of the apartments prior to the end of the Leases and during any period of post-lease occupancy by the Tenant. The guarantees, by containing the obligation to do ‘everything the lease requires’, extends the guarantee to rent and charges for any period that the Tenant remained in possession. In that context, the obligation in cl 8 to pay the rent promptly must mean the rent obliged to paid under cl 3, which was the rent payable both while the Leases were in existence and after they ended and while the Tenant stayed in possession. Although, cl 8 refers to ‘everything the lease required’ and not ‘everything else the lease required’, there is no reason to read cl 3 and cl 8.1 with different meanings. In my opinion, under cl 8.1, the guarantors guaranteed the Tenant’s obligation to pay the rent and do everything the Leases required regardless of the legal character of the Tenant’s occupation of the apartments. The guarantees were of rent payable under the Transfer Deeds and of ‘everything the lease requires’, which extended to rent for any period that the Tenant stayed in possession after the Leases ended.

The guarantees were continuing guarantees: cl 8.2, although that does not necessarily extend the guarantors’ obligations to other and unspecified transactions.[62]
[62]Trade Credits Ltd v Burnes [1979] 1 NSWLR 630, 637; reversed on other grounds in Burnes v Trade Credits Ltd [1981] 1 NSWLR 93 (Privy Council).

In my opinion, neither the strict rule of construction of guarantees nor their construction contra proferentem would lead to the conclusion that the guarantees did not apply to the obligations contained in the Leases transferred under the Transfer Deeds to the occupancy of the apartments by the Tenant after the Leases ended. Those obligations applied to the payment of rent and other charges by the Tenant for the occupancy of the apartments under the monthly tenancies that commenced on 3 September 2018.

I do not accept that the Landlords’ argument exposes the guarantors to an indeterminate rent for an indeterminate time as the guarantors, being the director and secretary of APlus, could have given notice to end the monthly tenancies.

The effect of the Tenant’s submissions would be that the guarantors’ obligations, which had been given for the remainder of the five year term, would end, because the Tenant company, of which they were director and secretary, repudiated the Leases during that term, even though, the Landlords, having accepted the Tenant’s repudiation allowed it to remain in possession on monthly tenancies.

Although not critical to the determination of this case, it is worth noting that a guarantor does not escape responsibility because the lease, the lessee’s performance of which they guaranteed, ends as a result of the lessee’s repudiation. A guarantor of the due performance by the lessee of the terms of the lease continues to be liable on the guarantee, notwithstanding that the lease comes to an end by the lessor’s acceptance of the lessee’s wrongful repudiation of the lease.[63] Acceptance of repudiation does not release the guarantor in respect of the indebtedness accrued or future liabilities. The liability of the guarantor remains in damages resulting from the lessee’s repudiation.
[63]Nangus Pty Ltd v Charles Donovan Pty Ltd (in liq) [1989] VR 184, 193, relying on the decision of the House of Lords in Moschi v Lep Air Services Ltd [1973] AC 331. See also Tebb v Filsee Pty Ltd [2010] VSCA 311.

One feature of cl 8.1 that was not the subject of any detailed submission is that it contains guarantees by the guarantors to both the Landlords and to the old Tenant, BKH, that the new Tenant, APlus, will pay the rent promptly and will do everything the Lease requires.[64] Clause 6 provides that the transfer of the Leases, i.e. from BKH to APlus, ‘does not end the obligations of the old Tenant’s Guarantor under any guarantee or indemnity; those obligations continue until the end of the Lease, but do not continue into any period of overholding after the Lease ends, nor unto any renewed term’. Clause 9 of the Transfer Deed contains an acknowledgement by the old Tenant’s (assignor’s) guarantor that:

The old Tenant’s guarantor by signing this transfer acknowledges that its obligations to guarantee the old Tenant continue, except to the extent required by Section 62 of the Retail Leases Act 2003 or any guarantee or indemnity given by the old Tenant

[64]The Old Tenant, Beaumont Kew Hotel Pty Ltd, and the old Tenant’s guarantors were originally listed as respondents in the VCAT proceeding, but were removed as parties.

The effect of these provisions is that the obligations of the old Tenant’s guarantors ended when the Leases transferred ended, but not the obligations of the new Tenant’s guarantors which continued while the new Tenant stayed in possession of the apartments. That difference reflects the additional obligations imposed on the new Tenant and its guarantors when they stayed in possession of the apartments after the Leases ended.

Question of law four (proposed ground of appeal six): the Tribunal’s refusal to permit the guarantors to present their argument on 29 November 2022

The guarantors submitted that the Senior Member had erred in her exercise of discretion by not allowing them to make submissions about the new ground during the hearing on 29 November 2022 or thereafter. They contended that the Senior Members’ refusal to permit submissions on this point was misconceived and involved an improper exercise of her discretion. They were not given any opportunity to make submissions on a critical matter of liability which had only been revealed in the Senior Member’s reasons.

The Landlords argued that all parties had been given ample opportunity to make submissions about the issues in dispute.

In my opinion, this ground is not established. The Senior Member permitted the solicitor for the guarantors to raise the question of their liability at the hearing on 29 November 2022. The solicitor sought leave to file further submissions about the issue. Having heard both sides, the Senior Member decided that it was not appropriate to reconsider the guarantors’ liability. She reached that conclusion following the Landlords’ submissions that they had sued on the guarantees and that the liability of the guarantors had never been challenged. The Senior Member stated that the new argument sought to be raised was a matter for appeal.

Question of law five (proposed ground of appeal four): adequacy of reasons

The appellants argued that the Senior Member’s reasons were inadequate on the issue of whether the guarantees applied to the Tenant’s obligations under the monthly tenancies. They contended that the absence of reasons on this point was a critical failure because it indicated that the Senior Member failed to apprehend the real issue in dispute about the guarantors’ liability for the Landlords’ claims.

The Landlords submitted that the Tribunal's limited reasons about the liability of the guarantors was due to the manner in which the proceeding was conducted and the issues that were raised. As the guarantors did not advance argument about their liability under the monthly tenancies, orally or in their written submissions, the Tribunal was not obliged to provide detailed findings or reasons about that issue.

I accept that the Senior Member’s reasons were adequate in dealing with the issues raised and argued in the Tribunal. The Senior Member’s reasons cannot be criticised for not dealing with an issue that was not raised before her.

The adequacy of reasons grounds is not established.

Questions of law six and seven (proposed grounds 8 to 11): aggregate amount orders

Finally, in grounds 8-11, the appellants argued that the Tribunal had erred in awarding aggregate amounts of damages for rent, interest for rent, repairs and cleaning costs and interest on repairs and costs without specifying the amounts awarded to individual Landlords.

The Tenant and the guarantors argued that, as each Landlord made an individual or specific claim for loss and damage against the Tenant, the Tribunal could only order an amount for loss and damage in respect of each such specific claim. There was no legal basis for making an order for the appellants to pay an aggregate amount.

The Landlords argued that it was in the interests of resolving the proceeding in the most concise and expedient way possible that the Tribunal award an aggregate sum, the underlying figure of which was not being challenged. In any event, s 148(7) of the VCAT Act conferred a discretion on this Court in determining an appeal to make any order that it thinks appropriate. The Landlords provided a table to the Court showing the amount payable to each of the Landlords based on the Senior Member’s conclusions.

Conclusion about aggregate order grounds

I consider that the grounds are established and that separate orders should be made in respect of the appellants’ liability to each Landlord. On its face, the Tribunal’s order does not state what amount each Landlord is entitled to. I grant leave to appeal on questions of law six and seven and the associated grounds and will allow the appeal to that extent and will replace order one with an order that specifies the amount that the appellants are obliged to pay each Landlord.

Conclusion

I will extend the time for the appellants to commence this proceeding until 17 February 2023. I grant the appellants leave to appeal on questions of law six and seven, and allow the appeal to that extent. I will replace the Tribunal’s first order with an order that the specifies the amount that the appellants are obliged to pay each Landlord. I otherwise refuse the appellants leave to appeal.

I will hear the parties about the terms of the orders required to give effect to this judgment and about costs.
SCHEDULE

BETWEEN:
APLUS CAPITAL PTY LTD	First Applicant
XIMENG ZHAO	Second Applicant
ROBERT IAN DUNSTAN	Third Applicant
AND
JOHN KONTOMICHALOS	First Respondent
VINCENZA INVESTMENTS PTY LTD (ACN: 091 323 376)	Second Respondent
ANTHONY POLIDANO	Third Respondent
MARGARET POLIDANO	Fourth Respondent
LUCY TING	Fifth Respondent
CANDIDA BASKCOMB	Sixth Respondent
SINHA SUPRIYO (AS TRUSTEE FOR BANERJEE FAMILY TRUST)	Seventh Respondent
JENOX PTY LTD (ACN: 164 669 087) (T/AS THE OXLEY FAMILY TRUST)	Eighth Respondent
KRYSTYNA BOLKUNOWICZ	Ninth Respondent
WEST FAMILY FUND ENTERPRISES PTY LTD (ACN: 165 212 984)	Tenth Respondent
MILAN BELIC	Eleventh Respondent
VASILLE ALEKSOSKI	Twelfth Respondent
CHANG CHUNG HU	Thirteenth Respondent
ELENA ALEKSOKA	Fourteenth Respondent
PO CHU CHAN	Fifteenth Respondent
EDWARD JAPUTRA	Sixteenth Respondent
KIN ON JAP	Seventeenth Respondent
MICHELLE RUSSELL	Eighteenth Respondent
SHENGJIN ZHANG	Nineteenth Respondent
RONFGU SUN	Twentieth Respondent
STAN GOLDYN	Twenty-first Respondent
IRENE GOLDYN	Twenty-second Respondent

[2024] VSC 546

6 September 2024