Australian Liquor Marketers Pty Ltd v Twenty 12 Pty Ltd

[2014] VCC 688

IN THE COUNTY COURT OF VICTORIA Revised
Not Restricted
Suitable for Publication

AT MELBOURNE

CIVIL DIVISION

Case No. CI-14-00636

AUSTRALIAN LIQUOR MARKETERS PTY LTD

Plaintiff

v

TWENTY 12 PTY LTD

MR BULLOCK

MRS BULLOCK

First Defendant

Second Defendant

Third Defendant

---

JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	14 May 2014
DATE OF JUDGMENT:	14 May 2014
CASE MAY BE CITED AS:	Australian Liquor Marketers Pty Ltd v Twenty 12 Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2014] VCC 688

REASONS FOR JUDGMENT
---

Subject:  Commercial - Retail Tenancy

Catchwords: Claim under alleged loan agreement for funding fit out of retail premises; whether a `retail tenancy dispute’ and within inclusive jurisdiction of Victorian Civil and Administrative Tribunal; Retail Leases Act 2003 sections 81 and 89.

Legislation Cited: Retail Leases Act 2003; Australian Consumer Law and Fair Trading Act 2012

Cases Cited:Perlman v Perlman (1984) 155 CLR 474; Exford Pines Pty Ltd v Vlado’s Pty Ltd [1992] 2 VR 449; Covarno Nominees Pty Ltd v Melbourne Liquidation Centre Pty Ltd [2012] VCC 1599; Tucci v Victorian Civil and Administrative Tribunal [2010] VSC 425; Burd & Cooper Pty Ltd v C & P Cooper Pty Ltd [2011] VCAT 1416

Judgment: The dispute concerning the loan agreement between the plaintiff and the first defendant is a `retail tenancy dispute’ within the meaning of s81 of the Retail Leases Act 2003. Proceedings in County Court against defendants stayed until further order. The victorious defendants should have their costs of this stay application, but those costs should be on a party/party basis and the costs of the proceeding, generally, should be reserved.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Agardy	Meltzer Green
For the Defendant	Mr R Hay	Aughtersons

HIS HONOUR:

1       This proceeding relates to what might, in broad terms, be described as a franchise arrangement.  The plaintiff, Australian Liquor Marketers Pty Ltd, was the lessee of certain premises which it let under a sub-lease to the first defendant, Twenty 12 Pty Ltd, to enable that company to trade there, as I understand it, in a business which could be described as that of a bottle shop.  The other defendants in this proceedings, Mr and Mrs Bullock, the owners and directors of Twenty 12 Pty Ltd, are signatories to a document addressed to a number of companies in a corporate group, including the plaintiff, rendering them liable as guarantors for amounts relative to goods and services supplied by the plaintiff to Australian Liquor Marketers Pty Ltd.

2       It is common ground that that sub-lease is within the definition of a retail tenancies lease under the Retail Leases Act 2003 (“the Act”) of the State of Victoria. That statute makes certain special provisions relative to retail premises leases and, more pertinently for present purposes, establishes a special and exclusive jurisdiction in the Victorian Civil and Administrative Tribunal to deal, subject to certain exceptions, with what the Act defines in s81 as `retail tenancy disputes’. There are, moreover, provisions which, again subject to exceptions, require that retail tenancy disputes are referred, first, for the purposes of alternative dispute resolution to the Small Business Commissioner. The defendants now apply to the Court under Order 23 Rule 1 or under the Court’s inherent jurisdiction for orders dismissing or staying the proceeding upon the footing that it is a proceeding which may be brought only before the Victorian Civil and Administrative Tribunal.

3       If the defendants are right, of course, there is a further step involved in the hearing and determination of such a dispute; namely, the exhaustion of the processes of alternative dispute resolution before the Small Business Commissioner.  In fact, the defendants have applied to the Small Business Commissioner for those processes to be set in train, but the Commissioner has stood down his processes to abide the outcome of the application to the Court which I am now considering. 

4       Australian Liquor Marketers Pty Ltd has brought this proceeding in reliance upon the instrument of guarantee, to which I made reference earlier, and what is said to be an oral agreement between it and the first defendant, Twenty 12 Pty Ltd, relative to the cost of fit out.  The sub-lease does not directly deal with who is to pay for the fit out of the premises.  It is common ground that the premises, at the outset of the sub-lease, were an empty shell.  To enable Twenty 12 to trade, a substantial fit out operation was required.  The sub-lease, in its definition provisions and in clauses 8.1 and 8.2, makes provision for obligations relative to what the lease defines as “Sublessor’s Fitout”.  The definition, to which I need not go now, describes a “sublessor’s fitout” in the present tense, implying, as Mr Agardy, counsel for the plaintiff, has, I think rightly, submitted that the definition applies to fit out which exists at the time of the commencement of the lease.  The operative provisions oblige the sub-lessee first defendant to respect and acknowledge the sub-lessor’s ownership of that fit out and to maintain the fit out during the term of the lease.

5 In accordance with the Act, a disclosure statement was provided by the plaintiff sub-lessor to the first defendant sub-lessee, Twenty 12 Pty Ltd. That disclosure statement, which is, by its nature, an information statement and not a document which creates obligations of its own force, places the responsibility for fitting out the premises, converting the empty shell to something fit to trade as a bottle shop, upon the sub-lessee, Twenty 12 Pty Ltd.

6       The statement of claim in this proceeding alleges that the plaintiff, Australian Liquor Marketers Pty Ltd, and Twenty 12 Pty Ltd entered into an oral agreement whereby the plaintiff, Australian Liquor Marketers Pty Ltd, would fund the carrying out of the fit out works, but that Twenty 12 Pty Ltd was obliged to reimburse it when Twenty 12 Pty Ltd was able to do so, in particular by obtaining finance from a leasing company relative to the fit out. 

7       The case of Twenty 12 Pty Ltd and the Bullocks, though it does not appear in direct terms in the defence, appears to be as disclosed in their description of dispute lodged with the Small Business Commissioner, that there was an oral agreement; but the agreement was that, contrary to the terms of the disclosure statement, Australian Liquor Marketers Pty Ltd would pay for the fit out with no entitlement to reimbursement from Twenty 12 Pty Ltd or the Bullocks.

8 Mr Hay, counsel for the defendants, now submits that, on the basis of these pleadings and other material, the Court is being asked to exercise jurisdiction over what is a retail tenancy dispute within the meaning of s81 of the Act. The significance of this is to be seen in light of s89(4) of the Act which provides:

“Subject to section 23(4) (key-money and goodwill payments prohibited), a retail tenancy dispute other than ―

(a)an application for relief against forfeiture, or

(b)a claim under Part 9 (Unconscionable Conduct) ―

is not justiciable before any other tribunal or a court or person acting judicially within the meaning of the Evidence (Miscellaneous Provisions) Act 1958.”

Subsection (1) grants general jurisdiction over these disputes to what it describes as “the Tribunal”; that is, the Victorian Civil and Administrative Tribunal.  Hence, says Mr Hay, this Court is being asked to exercise a jurisdiction which it does not have.  He submits that the dispute falls plainly within the definition of retail tenancy dispute.

9 Section 81(1) of the Act, to which definition I now turn, provides:

“In this Part, ‘retail tenancy dispute’ means a dispute between a landlord and tenant ―

(a)arising under or in relation to a retail premises lease to which ―

(i)     this Act applies…”

I omit certain words.

“…despite anything to the contrary in this Act (apart from subsection(2) and section 119(2)).

Subsection (2) provides, however, a retail tenancy dispute does not include a dispute solely relating to the payment of rent or a dispute that is capable of being determined by a specialist retail valuer under s34, 35 or 37 of this Act, or under s12A or s13A of the Retail Tenancies Reform Act 1998 or s10 or s11A of the Retail Tenancies Act 1986.

10      It is not in dispute that there is a retail premises lease in force; namely, the sub-lease between the plaintiff and the first defendant.  The question is whether, in the circumstances, the dispute which I have described is to be regarded as one arising under or in relation to it.

11      Mr Hay, in support of his application, placed in the forefront of his submissions reliance upon the expression “in relation to” in the definition of “retail tenancy dispute”.  He referred to a statement by Mason J, as he then was, in Perlman v Perlman (1984) 155 CLR 474 at p489 where his Honour said:

“The expression ‘in relation to’ is one of wide and general import and should not be read down in the absence of some compelling reason for so doing.”

12      Next, Mr Hay took me to the judgment of Tadgell J, then a trial judge in the Supreme Court, of Exford Pines Pty Ltd v Vlado’s Pty Ltd [1992] 2 VR 449 at pages 451–455. In that case, His Honour was considering whether, under the Retail Tenancies Act 1986, a predecessor of the Retail Leases Act 2003, which vested a similar exclusive jurisdiction in statutory arbitrators, the dispute which was before him then, which related to alleged pre-lease misrepresentations and misleading and deceptive conduct, was a matter in the exclusive jurisdiction of the statutory arbitrators as arising under a retail premises lease and between the landlord and tenant. The words “in relation to” did not appear in the 1986 statute with which His Honour was concerned. Mr Hay took me to the passages where his Honour was at pains to examine a host of authorities relative to commercial arbitration which found that words such as “in relation to” had the broad import to which Mason J referred in Perlman v Perlman and that the word “under” was relatively confining and certainly did not extend to alleged pre-contractual misrepresentations or misleading and deceptive conduct.

13      Mr Hay’s submission was that, in the circumstances here, even if one might say that the dispute and the contract or arrangement being sued on was not under the relevant retail premises lease, it was one in relation to it.  It touched and concerned the provisions of the lease because it pertained to the condition of the premises and on matters which were at least obliquely dealt with in the lease, mainly issues of fit out.

14      He took me next to a ruling of Judge Lacava in this Court in Covarno Nominees Pty Ltd v Melbourne Liquidation Centre Pty Ltd [2012] VCC 1599, where His Honour granted a stay based on jurisdictional issues under the Act, in circumstances where the claim made by the plaintiff landlord had been confined solely to arrears of rent, thereby apparently taking the dispute outside the statutory definition and jurisdictional restriction. His Honour nevertheless granted the stay because the foreshadowed defence or counter claim raised issues attacking, for instance, the validity of the lease itself. This, said Mr Hay, was indicative of the approach which should be taken in circumstances such as the present.

15      Insofar as the claim was brought against the second and third defendants as guarantors, Mr Hay submitted that the danger of conflicting findings between this Court and VCAT made it appropriate to make a similar ruling relative to the claim against the guarantors, the Bullocks.  He said that VCAT would have jurisdiction to deal with a claim against the guarantors.  He referred to a judgment of Cavanough J in Tucci v Victorian Civil and Administrative Tribunal [2010] VSC 425. He referred also to the Tribunal’s jurisdiction over consumer and trader disputes, under the Fair Trading Act 1999 in Tucci’s case and now under the Australian Consumer Law and Fair Trading Act 2012, which gives statutory effect in Victoria to the Australian Consumer Law as a matter of State rather than merely Federal law, and continues the consumer and trader dispute jurisdiction held by the Victorian Civil and Administrative Tribunal and considered by Cavanough J in Tucci’s case.

16      In response, Mr Agardy submitted that the first investigation required to determine today’s application pertained to the nature of the dispute which was being brought before the Court.  He said that, whilst one could look at the pleadings and certain affidavits, it remained far from clear what the dispute was.  He took me to the description of dispute which had been placed before the Small Business Commissioner in the circumstances which I originally described.  He said this was the best evidence of what the dispute might be.  A proper analysis of matters would show that, what the plaintiff was seeking to enforce was not a retail premises lease at all but, rather, a separate arrangement by way of loan relative to the fit out.  The distinction between the two could be illustrated, he said, by a decision of Senior Member Riegler in the Retail Tenancies List at VCAT in the matter of Burd & Cooper Pty Ltd v C & P Cooper Pty Ltd [2011] VCAT 1416. There, the learned senior member drew a distinction between claims which were brought under a retail premises lease, on the one hand, and claims which were brought under a loan agreement, on the other.

17 Mr Riegler considered that the first class of matters fell within the statutory definition of “retail tenancy dispute” and were therefore subject to the provisions of the Act and, in particular, the restrictions on the order of costs in the Tribunal under s92 of that Act, whereas the loan agreement was justiciable in the Tribunal only by virtue of the consumer/trader dispute jurisdiction which I described a few moments ago. Mr Agardy said the same distinction should be drawn here and it was not to the point that VCAT could entertain a claim under the alleged loan agreement. The question was whether there was any bar to this Court’s exercise in jurisdiction over the dispute. He submitted there was none and therefore this proceeding should be permitted to go forward.

18      Jurisdictional disputes such as the present can be very difficult.  Ultimately, however, it is the obligation of this Court and the Tribunal to make a determination one way or the other.  Matters are either black or white and cannot be compromised to grey.  The matter is either within jurisdiction or it is not.  I must confess that I find this particular matter a difficult one to determine.  The closest analogy to it is to be found in the determination of Mr Riegler in the grant for the Burd & Cooper case and therefore it is necessary to look with some greater particularity as to the nature of that dispute and what Mr Riegler determined.

19      The present dispute is about liquor.  The Burd & Cooper case was about a brothel and Mr Riegler said that it was the final chapter in a long dispute.  He considered the various matters which were the subject of the claims before him and which provided the factum on which the costs application operated.  They included a large number of claims which were clearly matters arising under a retail premises lease.  In addition, there was a claim made under a loan agreement.  Mr Riegler’s determination does not give us much detail on the background of the loan agreement.  At paragraph 17 he says, “A copy of the loan agreement is exhibited as EJBH to the second affidavit of Barry Burd dated 5 October 2010.  Clause 6 of the agreement states…”, and I will not bother reading that.  It is a not a terribly well drawn covenant to pay.  At paragraph 19, he noted that:

“Mr Nugent submitted that the terms of the Loan Agreement were subsumed into the Second Lease by incorporation.  He submitted that the terms of the Second Lease placed an obligation on the tenant to repay the Loan Agreement.”

20      Mr Riegler considered that there was no process of subsuming and that the loan agreement stayed as an independent obligation.  It was on that basis that he reached the decision that he did.  Based on the reasons as they are before me, I cannot exclude the possibility that the loan agreement considered by Mr Riegler had something to do with the fit out of the brothel premises.  We just do not know one way or another.

21      Mr Hay’s submissions today, however, are that the link between the alleged loan agreement and the fit out renders the alleged agreement so closely associated with the lease itself that it should be regarded as being in relation to it.  It was as closely related as the alleged misrepresentations or misleading and deceptive conduct in Vlado’s case were to the retail premises lease there so that they would have been regarded as in relation to it, had that been the test which Tadgell J had to apply for jurisdictional purposes in that case.

22      Ultimately, it is difficult to escape the view that this is something of a matter of impression.  The issue of fit out is a matter so closely associated with retail premises leases that it is a subject matter dealt with in statutory disclosure statements under that Act and there are special provisions relative to fit out in the lease itself that is before us here, albeit that I agree with Mr Agardy that those provisions are not engaged in the present circumstances having regard to the order in which events occurred and the fact that the premises were an empty shell at the commencement of the lease.

23      Nevertheless, those considerations, to my mind, lead to the conclusion that there is 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. Certainly, the principal obligation here is the sub-lease. The loan agreement is, if you will, appurtenant to it; a dispute under the appurtenant agreement, albeit a separate and distinct one, in my view, should be regarded as in relation to the retail premises lease. Therefore, the dispute that is before the Court now falls within the inclusive terms of the definition of `retail tenancy dispute’ in s81 and it is not suggested that any of the specific exclusions relates to it.

24      In those circumstances, I believe it is appropriate for me to accede to Mr Hay’s application.

[Submissions as to costs and consequential orders]

25      I have given my reasons for making an order staying this proceeding.  The parties are agreed, in the circumstances, that the effect of my reasons is that the Court does not have jurisdiction to deal with the claim as made against the first defendant.  This is a matter which is subject to completion of alternative dispute resolution processes of the Small Business Commissioner within the exclusive jurisdiction of the Victorian Civil and Administrative Tribunal.  The Court does, however, have jurisdiction to deal with the claims against the second and third defendants, alleged guarantors of the obligations of the first defendant.  In those circumstances, the appropriate order to give effect to the jurisdictional conclusions and avoid the possibility of inconsistent findings by the Court, on the hand, and VCAT, on the other, is to stay this proceeding generally, but not perpetually and only until further order.  One can conceive circumstances in which this proceeding in the Court may be reinstated and proceed solely against the second and third defendants.

26      In those circumstances, Mr Hay submits that the costs of the proceeding,  generally, should be reserved, but that his clients should have their costs on a full indemnity basis from and after a letter which their solicitors wrote raising jurisdictional issues on 6 March this year.

27      Mr Agardy submits that there should be no order for costs against his client at all.  He said it has been difficult to characterise the dispute which is before the Court and therefore difficult to reach a confident conclusion on the jurisdictional issues.  His client and his instructors were therefore placed in a difficult situation.  At any rate, he opposes the ordering of any indemnity costs.

28      Given that, as I expressed it in my principal reasons, this has been a difficult matter to determine, albeit that, on the jurisdiction issue, one must ultimately come to a clear black or white conclusion, I believe it would be quite wrong to consider ordering indemnity costs.  Nevertheless, there has been a dispute.  The defendants have won today and the plaintiff has lost.  The maxim that guides the Court on costs issues is that costs follow the event.  In my view, the victorious defendants should have their costs of this stay application, but those costs should be on a party/party basis and the costs of the proceeding,  generally, should be reserved.