Bevendale Pty. Ltd. v Rasul, Sahil

[2009] VCC 1562

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE

CIVIL DIVISION

Case No. CI-09-00163

Bevendale Pty. Ltd.	Plaintiff
v
Sahil Rasul	Defendant

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JUDGE:	Lewitan
WHERE HELD:	Melbourne
DATE OF HEARING:	18 August 2009
DATE OF JUDGMENT:	3 September 2009
CASE MAY BE CITED AS:	Bevendale Pty. Ltd. v Rasul, Sahil
MEDIUM NEUTRAL CITATION:	[2009] VCC 1562

REASONS FOR JUDGMENT

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Catchwords: Application for a stay; Retail Leases Act 2003; Jurisdiction of the Victorian

Civil and Administrative Tribunal.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	T. L. Evans	Pryles & Co
For the Defendant	G.L. Rice	S. Winter
HER HONOUR:

1          On 8 October 2007 the plaintiff entered into a lease (“the lease”) with Amin Enterprises Pty. Ltd. (“Amin Enterprises”) of shop 256 Epping Plaza Shopping Centre (“the premises”) for a period of 5 years and 8 months commencing on 1 February 2008. The defendant, Sahil Rasul (“Rasul”), guaranteed the obligations of Amin Enterprises under the lease (“the guarantee”). Rasul has made an application to stay the proceedings instituted by the plaintiff against him in this court.

2          The question is whether the court should exercise its discretion to stay the proceeding against Rasul. The defendant submits that the proceeding should be stayed because the plaintiff’s claim essentially involves a dispute between a landlord and tenant. The plaintiff submits that the Court should not exercise its discretion to order a stay because of the defendant’s delay in making an application to the Victorian Civil and Administrative Tribunal (“VCAT”). The plaintiff also submits that the proceedings against Rasul were properly instituted in this court, that the defendant now claims (for the first time) that the guarantee is void ab initio, and that Rasul may raise any defences that Amin Enterprises has against the plaintiff.

3          It is alleged that Amin Enterprises entered into the lease on 8 October 2007. It is common ground that the premises were “retail premises” to which the Retail Leases Act 2003 (“the Act”) applies. The premises are situated in the Epping Plaza Shopping Centre and were used for the retail sale of shoes. The lease commenced on 1 February 2008. Amin Enterprises conducted its business under the trading name of “Scarpe Shoes”.

4          Amin Enterprises failed to make payments of base rent, variable contributions, rates, promotion contribution and legal costs as required by the lease. Amin Enterprises subsequently discontinued the business conducted on the premises and left the premises unattended.

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5          On 9 May 2008 the solicitors for the plaintiff wrote to Rasul demanding the payment of $16,627.51 for outstanding rent and $22,000 for failing to provide a bank guarantee.

6          On 19 June 2008 the plaintiff issued proceedings in the Magistrates Court claiming loss of rent of $18,447.05. On 25 July 2008 Rasul filed a defence in the Magistrates Court claiming that the plaintiff had placed a caveat on his property which prevented him from obtaining a bank guarantee.

7          On 6 August 2008 Rasul filed a complaint with the Office of the Victorian Small Business Commissioner claiming that the plaintiff had illegally placed a caveat on Rasul’s family home making it impossible for Rasul to arrange a bank guarantee or finance to support his business.

8          On 8 August 2008 the solicitors for the plaintiff responded to that claim stating that the Small Business Commissioner had no jurisdiction as Rasul’s claim did not arise out of a dispute between a landlord and tenant. On 25 August 2008 the solicitors then acting for Rasul withdrew Rasul’s application.

9          The matter went to a pre-hearing conference in the Magistrates Court on 22 September 2008.

10        On 16 January 2009 the case was transferred from the Magistrates Court to the County Court (“the County Court proceeding”).

11        On 16 February 2009 Judge Anderson gave the plaintiff leave to amend its statement of claim. The County Court proceeding was set down for trial on 12 May 2009 as a cause before a Judge sitting alone.

12        On 27 February 2009, the plaintiff amended its claim to include a claim for the reimbursement of an advertising subsidy of $29,500 (clause 12(b)). On 16 March 2009, Rasul filed his defence admitting the lease and the provisions of the lease which the plaintiff pleaded in its Statement of Claim as amended. The defence contained straight denials that Rasul was indebted to the plaintiff

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as a result of the failure of Amin Enterprises to comply with the terms of the
lease.

13        On 18 May 2009 Judge Kennedy made further orders granting the plaintiff leave to further amend its statement of claim. The trial listed for 12 May 2009 was vacated and the proceeding was refixed for trial on 18 August 2009.

14         A further amended statement of claim was filed to include a claim for damages for the repudiation of the lease. Rasul filed a defence to the further amended statement which again admitted the lease and the provisions of the lease pleaded in the further amended statement of claim. Once again the defence contained bare denials of liability.

15        On 14 August 2009 Amin Enterprises made an application to VCAT claiming, for the first time, that the plaintiff had engaged in conduct that was misleading or deceptive and unconscionable contrary to sections 9 and section 7 of the Fair Trading Act 1999. In that application Amin Enterprises sought a declaration that the lease is void ab initio and that the guarantee is void ab initio. VCAT refused to accept the application by Amin Enterprises as Amin Enterprises had failed to refer the dispute to the Small Business Commissioner in accordance with the statutory scheme. Section 87 of the Act provides that a retail tenancy dispute can only be the subject of proceedings in VCAT if the Small Business Commissioner has certified in writing that mediation or alternative dispute resolution has failed or is unlikely to resolve the dispute.

16 On 17 August 2009 Amin Enterprises referred its dispute with the plaintiff to the Small Business Commissioner in accordance with the dispute provisions of the Act.

The jurisdiction of VCAT

17        Counsel for the defendant, Mr. Rice, submitted that Amin Enterprises has a retail tenancy dispute with the plaintiff. “Retail tenancy dispute” is defined as

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a dispute between a landlord and tenant under a retail premises lease but does not include a dispute relating solely to the payment of rent.[1] Section 89 of the Act provides that, subject to a couple of exceptions, a retail tenancy dispute can only be heard by the tribunal.[2]

[1] Section 82 of the Act.

[2] Section 89(4) of the Act

18        Mr. Rice submitted that a substantial part of the claim currently made by the plaintiff in the County Court is not a claim for rent but a claim for damages and accordingly would not be capable of being dealt with by the County Court.[3]

[3] Section 81(2) of the Act.

19 Mr Rice submitted that the plaintiff has elected to sue the guarantor alone (without suing the principal debtor), and accordingly Amin Enterprises is not a party to this proceeding. This dispute is in reality a retail tenancy matter arising out of a retail tenancy lease and the guarantee which forms part of the lease. The claim against the defendant is wholly dependent on the plaintiff establishing breaches of the tenant’s covenants under the lease. The clear intention of Parliament and the Act is that retail tenancy disputes are not justiciable in a Court and should be dealt with by VCAT.

20 Mr. Rice submitted that the plaintiff has circumvented the restrictions of the Act by suing the guarantor directly.

21        Mr. Rice submitted that the plaintiff’s present claim should be stayed so that all matters can be dealt with at the one time by the tribunal which is decreed by Parliament as the appropriate venue for dealing with retail tenancy disputes and having jurisdiction to do so. As stated by Rasul in paragraph 13 of his affidavit sworn 14 August 2009 “they arise out of the same set of facts and circumstances and involve common issues.”

22        Mr. Rice referred to Zambelis v Nahas[4]. However the facts in this case are different from the facts in Zambelis v Nahas. Unlike the facts in that case, in this case the plaintiff sued the guarantor in this court. The plaintiff’s case against the guarantor is properly before this Court. As stated by Nathan J.

[4]             Unreported, 22 January 1991,Supreme Court of Victoria, Nathan J.

courts should be hesitant to divest themselves of jurisdiction unless the

legislation is plain (see Halsbury fourth edition Volume 44, paragraph 907) viz:

“Unless by express words or necessary implication statutes should not
be construed so as to take away the jurisdiction of superior courts.[5]

[5]             Ibid, pages 4-5.

23        Clause 3(e) of the guarantee provides that “the lessor may at any time…exercise any of its rights and powers against …the guarantor “ without exercising any such rights against the lessee. Clause 3(f)(iv) provides that the guarantee shall at all times be valid and enforceable against the guarantor and may be enforced by the lessor notwithstanding that “no steps or proceedings have been taken against the lessee.”

24 Counsel for the plaintiff, Mr. Evans, submitted that this proceeding could not have been instituted in VCAT by reason of the operation of s.89(1) of the Act. Section 89(1) of the Act provides that “the tribunal has jurisdiction to hear and determine an application by a landlord or tenant under a retail premises lease…seeking resolution of a retail tenancy dispute.” Section 81(1) of the Act provides that “retail tenancy dispute” means a dispute between a landlord and tenant. The present claim is a claim for debt under a guarantee.

25        Mr. Evans submitted that in the present case there exists a valid claim brought by the plaintiff against the defendant pursuant to the terms of the guarantee which, unless another proceeding is issued in VCAT, is not justiciable before VCAT.

26        Mr. Evans referred to the statement by Acting Deputy Russell Byard in O’Bryan v Wannon Region Water Authority[6] that:

[6] [2006] VCAT 795.

The Tribunal is created by an Act of Parliament. It has only the jurisdiction granted to it by that or other Acts of parliament. It cannot endow itself with jurisdiction by any other means. It cannot take jurisdiction because it might be thought to be convenient in the interests of doing justice, and it cannot acquire jurisdiction by the consent of the parties.

…

In short, the O’Bryans seek an order from the Tribunal that the Authority pay them a sum of money. This appears to be on the basis that they allege that the Authority owes them money. This appears as an action for the recovery of a debt. However, that would be a matter to be pursued in court. The Tribunal has no jurisdiction to make an order of the type sought.

The claim for unconscionable conduct

27 In the proposed application to VCAT, Amin Enterprises seeks a declaration that the plaintiff’s conduct constituted unconscionable conduct in breach of section 77 of the Act. Section 89(4) of the Act specifically provides that a retail tenancy dispute other than a claim under “Part 9 (Unconscionable Conduct)” is not justiciable before any other tribunal or court. Accordingly the claim by Amin Enterprises for unconscionable conduct is justiciable before this Court.

28        Mr. Evans submitted that the Court has jurisdiction to hear and determine the dispute between the plaintiff and Amin Enterprises because Amin Enterprises claims that the plaintiff has engaged in unconscionable conduct. Mr. Evans referred to the following passage by Vickery J in Xiao v Perpetual Trustee

Company Limited [7]:

[7] [2008] VSC 412, para 13. See also Re Wakim; Ex Parte McNally (1989) 198 CLR 511.

Further, once the Court is properly seized of jurisdiction in relation to the claim for relief against forfeiture, the Court has jurisdiction to entertain the other related claims made by the plaintiff and grant the relief sought on any of the other claims, should it be found that any of them have been established. The principle of accrued jurisdiction confers jurisdiction on a Court to deal with matters incidental to but relevantly connected with the claim in respect of which the Court has jurisdiction directly conferred upon it, by entertaining all of the matters which are linked in the controversy between the parties and making such remedial orders within its power as may be necessary or convenient.

29 In this case the dispute between the plaintiff and the guarantor is properly before the court. Further, the jurisdiction of this Court to entertain a claim by Amin Enterprises against the plaintiff for unconscionable conduct is expressly sanctioned by s.89(4)(b) of the Act. I am satisfied that the dispute between the parties is founded upon a common transaction and a common substratum of facts.[8] As stated by Mr. Rice in his submissions[9]:

[8]             Xiao v Perpetual Trustee Company Limited [2008] VSC 412, per Vickery J. para 14.

[9]             Transcript p 17.

the proceedings in my submission are a single dispute involving the landlord,
the tenant and the guarantor.

30        Similarly the claim by Rasul that the guarantee is void ab initio is justiciable in this court.

The tenant is not a party to these proceedings

31        Mr. Rice submitted that the defendant would suffer prejudice unless the County Courty proceeding is stayed because the claims made by the tenant are not justiciable in this court and that proceedings involving a single dispute would not be heard by a single tribunal.

32        Mr. Rice submitted that the case of Indrisie v General Credits Ltd.[10] makes it plain that there are serious problems for the guarantor in raising the matters which are open to the principal debtor against the plaintiff’s claim. However the facts in Indrisie v General Credits Ltd. are different from the facts in this case. In that case the guarantor was a stranger “to the contract breach of which the company is asserting has conferred on it a claim for unliquidated damages.” In this case Rasul is a party to the lease and has signed the lease as guarantor.

[10] [1985] VR 251.

33        In Doherty v Murphy[11] the Full Court of the Supreme Court of Victoria permitted the guarantor to rely on an equitable set-off as a defence to the creditor’s summary judgment application. The Full Court held:

[11] [1996] 2 VR 553, 566.

There should be added as a condition of the grant of leave to defend a requirement that the appellants with due expedition apply for an order that Edmar be joined as a defendant to the proceeding and for appropriate consequential orders.

34        The requirement to join the principal debtor was also acknowledged by the Full court in Indrisie v General Credits Ltd.[12]

[12] [1985] VR 251, 254.

35        I accept Mr Evans submission that the defendant will not suffer any prejudice if the Court refuses to stay the VCAT proceedings because the defendant will be able to raise the defences claimed by the principal debtor provided that it joins Amin Enterprises as a party to the County Court proceedings.

The Delay

36        Mr. Evans submitted that it is reasonable to allow the plaintiff to proceed with its claim in this Court as the proceeding against the defendant was instituted on 18 June 2008 and it was not until almost 14 months later, some four days before the trial was set down for hearing, that Amin Enterprises indicated its intention to pursue this matter at VCAT.

37        Mr. Evans submitted that there is nothing in the material to suggest that any of the matters which the defence now relies upon have ever been raised. The defendant failed to take or foreshadow any defences whatsoever until four days before trial.

38        Mr. Evans submitted that it may take months to secure a mediation from the small business commissioner, not a matter of weeks. A hearing before VCAT would not occur for at least some months after the application is made. If a stay is granted, it may be that there would be a 12 month delay before the matter proceeds to judgment. Such a delay is unacceptable.

39        In this case the defendant did not issue an application before VCAT or its stay application despite the fact that there had been two directions hearings and the defendant had consented to the making of directions and the listing of these proceedings for trial. The defendant had twice signed a defence and not foreshadowed its intention of amending its defence. The defendant’s supporting affidavit material did not raise any factual matters which had not been known to the defendant for over a year and there was no new material which justified a late application.

40        The defendant was unable to give a reasonable explanation of the reasons for the delay in instituting proceedings at VCAT.[13] As stated by Hollingworth J. in Development One (Australia) Pty. Ltd. v Christian Cooper[14], “the tenant’s own conduct has resulted in the present situation.”

[13]           Transcript p 60.

[14] [2005] VSC 181.

Conclusion

41        In these circumstances I refuse the defendant’s application to stay the County Court proceedings. I do not accept Mr. Rice’s submissions that any claims that Amin Enterprises has against the plaintiff are not justiciable in this Court for the reasons which I have outlined. In exercising the Court’s discretion, I also take into account the defendant’s delay in issuing proceedings in VCAT and its failure to make an application for a stay. The defendant was unable to give a reasonable explanation of the reasons for the delay.

Defendant’s application to amend its defence

42        In the alternative, the defendant made an application to adjourn the trial to enable the defendant to amend its defence.

43        Mr. Evans submitted that the defendant’s application ought to be refused because of the manner in which the defendant had conducted these proceedings. He referred to Aon Risk Services Australia Limited v Australian National University[15]. In paragraph 102 of that case the High Court held that:

[15] [2009] HCA 27.

It is the extent of the delay and the costs associated with it, together with the prejudice which might reasonably be assumed to follow and that which is shown, which are to be weighed against the grant of permission to a party to alter its case. Much may depend upon the point the litigation has reached relative to a trial when the application to amend is made. There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates. Rule 21 makes it plain that the extent and the effect of delay and costs are to be regarded as important considerations in the exercise of the court’s discretion. Invariably the exercise of that discretion will require an explanation to be given where there is delay in applying for amendment.[16]

[16]           Para 102

The fact that an explanation has been offered for the delay in raising the defence was regarded as a relevant consideration in JL Holdings.[17] Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court’s attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case.

[17]           Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 152.

44        On 19 August 2009 the court made the following orders:

(1)	That the defendant’s application for a stay of proceedings is refused.
(2)	That the matter be listed for directions on Thurday, 3 September 2009.
(3)	That the defendant file any application to amend its defence, including the proposed amended defence, on or before 4pm on Wednesday 2 September 2009.
(4)	That the defendant file and serve any application to join Amin Enterprises as a party to the County Court proceedings on or before 4pm on Wednesday 2 September 2009.
(5)	That the costs of this application be reserved until 3 September 2009.

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