Club Fogolar Furlan Melbourne v Paramount Investments Group Pty Ltd
[2024] VSC 208
•2 May 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2024 00327
| CLUB FOGOLAR FURLAN MELBOURNE (ACN 004 476 724) | Applicant |
| v | |
| PARAMOUNT INVESTMENTS GROUP PTY LTD (ACN 166 550 974) | Respondent |
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JUDGE: | Croft J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 April 2024 |
DATE OF JUDGMENT: | 2 May 2024 |
CASE MAY BE CITED AS: | Club Fogolar Furlan Melbourne v Paramount Investments Group Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2024] VSC 208 |
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PRACTICE AND PROCEDURE — Appeal to the Trial Division of the Supreme Court of Victoria from the Victorian Civil and Administrative Tribunal — Must demonstrate a real prospect of success — Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 — Brondolino v Surf Coast Smash Masters Pty Ltd [2019] VSC 505 — Not a fact finding exercise on appeal — Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1 — Boucher v Dandenong Ranges Steiner School Inc (2005) 145 LGERA 21 — Whitehorse City Council v Golden Ridge Investments Pty Ltd (2005) 13 VR 275 — Hoskin v Greater Bendigo City Council (2015) 48 VR 715 (CA) — Court to avoid overly pernickety examination of reasons — Roncevich v Repatriation Commission (2005) 222 CLR 115 — Role of VCAT as a specialist tribunal not to be usurped by the Court and a decision of such a tribunal is not to be interfered with absent a vitiating error of law — Rysze International Pty Ltd v Yong [2021] VSC 786 — Victorian Civil and Administrative Tribunal Act 1998, ss 148(1), 148(2A).
LEASES AND TENANCIES — Retail leases — Forfeiture for non-payment of rent — Damaged premises — Extent to which claimed rent owing needed to be quantified — Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited [2022] VSC 766 — Primary RE Limited v Great Southern Property Holdings Ltd (Receivers and Managers Appointed) (in liq) [2011] VSC 242 — Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 — Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd (2003) 56 NSWLR 63 — Retail Leases Act 2003, ss 52, 57 and 94.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr N Andreou with Mr J V O’Halloran | AB Litigation Lawyers |
| For the Respondent | Mr L Virgona | Mr J Yianoulatos |
HIS HONOUR:
Introduction and background
This proceeding is brought pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (‘the VCAT Act’). The applicant, Club Fogolar Furlan Melbourne (‘the Applicant’ or ‘the Club’), seeks leave to appeal the orders of Deputy President E. Riegler made on 14 December 2023 in VCAT proceeding number BP1134/2023 (‘the Orders’). On 26 February 2024, the Victorian Civil and Administrative Tribunal (‘VCAT’ or ‘the Tribunal’) published reasons for the making of these Orders.[1]
[1]Paramount Investments Pty Ltd v Club Fogolar Furlan Melbourne (Building and Property) [2024] VCAT 169 (‘Tribunal Reasons’). The Tribunal had originally provided relatively detailed reasons in the written orders which were provided shortly after the hearing on 14 December 2023. However, following the lodgement of this appeal, the Tribunal provided written reasons at the request of the Applicant in this Court.
The first application in the Tribunal was brought by Paramount Investments Group Pty Ltd (‘Paramount’ or ‘the Respondent’), the landlord of premises at 1 Matisi St, Thornbury (‘the Premises’). The Respondent’s application at the Tribunal relevantly sought a declaration that a lease of the Premises dated 21 February 2021 (‘the Lease’) had been validly terminated.[2]
[2]By an amended application dated 16 November 2023, Paramount had sought a declaration that the Lease had been terminated, that it be provided vacant possession of the Premises, as well as an order that all rent and outgoings be paid. The Tribunal did not order vacant possession, or any final order in respect of rent and outgoings. However, neither of those two issues are relevant for the purposes of this appeal.
The second application before the Tribunal was brought by the Applicant, the tenant under the Lease. In that application, the Applicant relevantly sought an interlocutory injunction restraining the Respondent from re‑entering the Premises, or alternatively, for relief against forfeiture.
The Tribunal dismissed the Applicant’s, the tenant’s, application for an interlocutory injunction, finding that the Respondent had validly terminated the Lease. Nevertheless the Tribunal ordered relief against forfeiture of the Lease on the following conditions:
(a) By 12 January 2024 the Applicant pay to the Respondent 65% of the rent arrears set out in the notice of default of 5 September 2023 (‘the Notice’), being the sum of $168,244.48; and
(b) From 2 July 2023 until 14 December 2023, the Applicant pay the Respondent 80% of all rent and outgoings payable under the Lease.
(These conditions are, together, referred to as ‘the Conditions’.)
In spite of obtaining the order for relief against forfeiture, the Applicant did not pay any of the arrears of rent owing, or otherwise attempt to meet the Conditions. Instead, by proposed amended notice of appeal dated 19 March 2024 (‘the Amended Notice’), the Applicant now seeks to have overturned part of the Orders of the Tribunal (namely, Orders numbered 2, 3 and 4), insofar as they relate to the termination of the Lease. The Amended Notice states two questions of law and two related grounds of appeal, each of which are addressed in the reasons which follow.
The Respondent does accept that the proposed questions of appeal are properly viewed as questions of law for the purpose of s 148 of the VCAT Act but submits that neither question has any realistic prospects of success, and so leave to appeal should not be granted. If, however, leave to appeal were to be granted in respect of one or both of the proposed grounds, the Respondent submits that the appeal should, nevertheless, be dismissed.[3]
[3]Outline of the Respondent’s Submissions (1 April 2024) (‘Respondent’s Submissions’), [7].
Principles applicable with respect to appeals
Section 148(1) of the VCAT Act provides:
A party to a proceeding may appeal on a question of law from an order of the Tribunal in the proceeding—
(a)if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others, to the Court of Appeal with leave of the Court of Appeal; or
…
(b)in any other case, to the Trial Division of the Supreme Court with leave of the Trial Division.
It follows from this provision that any appeal is dependent upon two important qualifications. First, that the appeal be on a question of law, and secondly, that the Court gives leave to appeal. The legislative policy underlying these provisions is that “VCAT decisions should not generally be disturbed where cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal”.[4] It follows that “[t]his Court is not entitled to enter into the fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal”.[5]
[4]Commissioner of State Revenue v Frost (2011) 83 ATR 832 at 834 [5] citing Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335–6 and Myers v Medical Practitioners’ Board (Vic) (2007) 18 VR 48 at 55–6 [28].
[5]Boucher v Dandenong Ranges Steiner School Inc (2005) 145 LGERA 21 at 26 [15] citing Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1 and Whitehorse City Council v Golden Ridge Investments Pty Ltd (2005) 13 VR 275.
The leave requirement under s 148(1) of the VCAT Act is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[6]
The requirement for leave under s 148(1) of the [VCAT Act] “is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the court do found the subject matter of the appeal”.[7] It also confers a discretion about whether to grant leave[8] which an applicant must persuade the court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave.[9] It will ordinarily be necessary (in addition to a clearly articulated question of law)[10] for an applicant to make out a prima facie case[11] and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[12]
[6](2011) 83 ATR 832 at 833–4 [3].
[7]Commissioner of State Revenue (Vic) v STIC Australia Pty Ltd (2010) 81 ATR 682 at 687 [10] per Davies J.
[8]Department of Premier and Cabinet v Hulls [1999] 3 VR 331; Al‑Hakim v Monash University (unreported, Court of Appeal, Vic, No 3707 of 2003, 28 March 2003); Myers v Medical Practitioners’ Board (Vic) (2007) 18 VR 48.
[9]See Morris v The Queen (1987) 163 CLR 454 at 475; 61 ALJR 588 at 597; 28 A Crim R 48 at 63–64; 74 ALR 161 at 176–177 per Dawson J.
[10]Osland v Secretary to the Department of Justice [No 2] (2010) 241 CLR 320 at 333 [21]; 84 ALJR 528 at 536 [21]; 267 ALR 231 at 240 [21] per French CJ, Gummow and Bell JJ.
[11]Morris v The Queen (1987) 163 CLR 454 at 475; 61 ALJR 588 at 597; 28 A Crim R 48 at 63–64; 74 ALR 161 at 176–177 per Dawson J; Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335 [10]; 15 VAR 360 at 366 [10].
[12]Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335–336 [11]; 15 VAR 360 at 366 [11] per Phillips JA; Commissioner of State Revenue v Challenger Property Nominees Pty Ltd (2006) 63 ATR 65 at 69 [20] and 77 [65] per Hollingworth J.
An additional safeguard has since been imposed. Effective from 1 May 2018, the VCAT Act was amended to include s 148(2A).[13] The section provides:
The Trial Division of the Supreme Court may grant an application for leave to appeal under this section only if it is satisfied that the appeal has a real prospect of success.
[13] Justice Legislation Amendment (Court Security, Juries and Other Matters) Act 2017, s 31(3).
This amendment sees the replacement of the requirement that an applicant seeking leave to appeal from VCAT to the trial division of the Supreme Court must show that there is a real or significant argument to be put that an error below exists,[14] sometimes referred to as the Hulls test.[15] Instead, all applicants under s 148 are now subject to the same and more burdensome requirement: they must demonstrate that the appeal has a real prospect of success.[16] With respect to applications subject to the same test,[17] the Court of Appeal has said:[18]
…the test under s 63 of the Civil Procedure Act should be construed as one of whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success; that the “real chance of success” test is to some degree a more liberal test than the “hopeless” or “bound to fail” test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not “hopeless” or “bound to fail”, it does not have a real prospect of succeeding.
[14]Myers v Medical Practitioners’ Board of Victoria (2007) 18 VR 48 at 55 [28], citing Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335.
[15]See Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 7th ed, 2022) at 965-7.
[16]The same requirement is imposed upon applicants for leave to appeal a VCAT decision before the Court of Appeal under s 148(1)(a) of the VCAT Act with the additional requirement to such an application set out at s 14C of the Supreme Court Act 1986; see Emrys Nekvapil, Pizer’s Annotated VCAT Act (Thomson Reuters, 7th ed, 2022) at 950–4.
[17]Section 63(1) of the Civil Procedure Act 2010 empowers a court to give summary judgment in a civil proceeding if the defence, inter alia, has “no real prospect of success”.
[18]Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 at 39 [29]. See also Kennedy v Shire of Campaspe [2005] VSCA 47 at [3]–[14].
The new requirement of s 148(2A) makes express the restraint this Court ought exercise when reviewing decisions of VCAT, a restraint long and more generally recognised in case authority. In considering applications of this nature, courts have been concerned to respect the role entrusted by the legislature to the particular tribunal and not, in effect, subvert this position by seeking out error. Thus, Kirby J in Roncevich v Repatriation Commission said:[19]
[19](2005) 222 CLR 115 at 136 [64].
Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[20] The focus of attention is on the substance of the decision and whether it has addressed the “real issue” presented by the contest between the parties.
Similarly, in Vegas Nominees Pty Ltd v Werribee Sports & Community Club Inc, Ashley J said:[21]
This Court has said more than once that it should not examine briefly stated reasons by an expert Tribunal in an over‑legalistic manner or by the over‑zealous drawing of inferences in order to disclose some supposed error; although where unambiguous language is used, the user should be taken to mean what the words say. I should add that the Court is not entitled to interfere with the Tribunal’s decision unless it is satisfied that there was in fact a vitiating error of law. It is not enough for the appellant to show that the Tribunal’s reasons for its decision are so expressed as to suggest the possibility that it proceeded upon a wrong view of the law. In support of the several propositions that I have just stated I refer to Portland Properties Pty Ltd v Melbourne & Metropolitan Board of Works,[22] Michaelis Bayley (Vic) Pty Ltd v Melbourne & Metropolitan Board of Works[23] and Teston Investments Pty Ltd v Melbourne & Metropolitan Board of Works.[24]
Additionally, “[o]n appeal this Court must recognise the forensic realities of the way in which the case was put to the Tribunal. It is these realities to which a Tribunal must respond in its reasons”.[25]
[20]Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575, 597; cf Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 348 [74].
[21](Unreported, Supreme Court of Victoria, Ashley J, 21 December 1994) at 13.
[22](1971) 38 LGRA 6 at 18.
[23](1980) 44 LGRA 65 at 67–8.
[24](1985) 62 LGRA 346 at 349–50.
[25]The Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442 at [59].
In terms of the parties’ submissions, it is clear from the authorities to which reference has been made that the role of a specialist tribunal, such as VCAT, is not to be usurped by the Court and that a decision of such a tribunal is not to be interfered with absent a vitiating error of law.
Moreover, the authorities also indicate and emphasise that it is not the function of the Court on an application under s 148 of the VCAT Act to substitute its own views on the evidence which is before the Tribunal, its relevance, significance and any inferences that might be drawn from it. Thus, the Court of Appeal in Hoskin v Greater Bendigo City Council[26] said, with respect to an appeal pursuant to s 148 of the VCAT Act:[27]
9.Such an appeal is limited to an appeal on questions of law.[28]
10.It is not open to this Court to entertain further debate as to the merits of the Tribunal’s decision on the facts. It is only if a conclusion on the facts was not open to it that an error with respect to factual matters will involve a question of law.[29]
11.This Court’s function is limited to the exercise of a supervisory jurisdiction intended to ensure that the merits review which the Tribunal carried out was undertaken in accordance with its statutory obligations.
[26](2015) 48 VR 715.
[27](2015) 48 VR 715 at 720 [9]–[11]; and see Karakatsanis v Racing Victoria Ltd (2013) 42 VR 176 at 186 [22] (CA); Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 782 [41] and 805 [162] and [165] (CA); and Maund v Racing Victoria Ltd [2016] VSCA 132 at [67].
[28]Transport Accident Commission v Hoffman [1989] VR 197 at 199; Myers v Medical Practitioners’ Board of Victoria (2007) 18 VR 48 at 59 [44].
[29]S v Crimes Compensation Tribunal [1998] 1 VR 83 at 88–93; Myers v Medical Practitioners’ Board of Victoria (2007) 18 VR 48 at 59 [44].
For the reasons which follow, I am not satisfied that the Applicant has established any proper basis upon which leave to appeal should be granted on the proposed grounds. Moreover, as these reasons indicate, an appeal on these proposed grounds has no real prospect of success and would, in my view, have failed in any event, even if leave to appeal were to have been granted.
The appeal
Leave to appeal is sought with respect to the following questions of law as put by the Applicant in the Amended Notice:
(1)Whether section 57(1)(b) Retail Leases Act 2003 (Vic) (‘RLA’) operates to reduce the tenant’s liability for rent where the premises, or part of the premises, were damaged, and whether, as a consequence, the Respondent’s notice (‘Notice’) under s. 146(1) Property Law Act 1958 (Vic) (‘PLA’) was invalid because it failed to specify the particular breach complained of, and/or require the tenant to make reasonable compensation for the breach, having regard to the tenant’s reduced liability for rent.
(2)Whether the ‘serious question to be tried’ in the Appellant’s injunction application pursuant to s. 123 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) was misidentified, specifically, whether the Tribunal misidentified the question as whether the Landlord induced the Tenant’s breach, rather than whether the Landlord was entitled to terminate for breach under the Lease in circumstances where the Landlord was not an innocent party ready and willing to perform its obligations under the Lease.
The two grounds relied upon in support of the Appeal are as follows:
(1)GROUND ONE - The learned Deputy President erred in finding and declaring pursuant to order two (2) of the Orders that the Lease dated 22 February 2021 between the parties (‘Lease’) was lawfully forfeited. The learned Deputy President should have found that the Respondent was not entitled to forfeiture because its Notice under s. 146(1) PLA was invalid.
PARTICULARS
a. Section 57(1)(b) Retail Leases Act 2003 (Vic) (RLA) operates to reduce the tenant’s liability for rent where the premises, or part of the premises, are damaged.
b. The Tribunal found (at [J]) that 70% of the Premises were unable to be used for 50% of the period covered by the Notice.
c. The Notice sought payment of full rent, despite the tenant’s reduced liability for rent pursuant to s 57 of the RLA.
d. Accordingly, the Notice failed to comply with s 146(1) PLA by specifying the particular breach complained of, and/or requiring reasonable compensation for the breach.
e. Consequently, the Notice was invalid and the Respondent was not entitled to forfeit the Lease.
(2)GROUND TWO - The learned Deputy President misconceived the serious question to be tried as whether the Respondent induced the Applicant’s breach. The learned Deputy President should have found that there is a serious question to be tried as to whether the Landlord was not entitled to terminate the Lease as it was not an innocent party who was ready and willing to perform its concurrent obligations under the Lease.
Legislative and Lease provisions
The critical provisions of the Retail Leases Act 2003 (‘the RLA’) are ss 52, 57 and 94, which are:
52 Landlord’s liability for repairs
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into—
(a)the structure of, and fixtures in, the retail premises; and
(b)plant and equipment at the retail premises; and
(c)the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.
(3)However, the landlord is not responsible for maintaining those things if—
(a)the need for the repair arises out of misuse by the tenant; or
(b)the tenant is entitled or required to remove the thing at the end of the lease.
(4)The tenant may arrange for urgent repairs (for which the landlord is responsible under this section or under the terms and conditions of the lease) to be carried out to those things if—
(a)the repairs are necessary to fix or remedy a fault or damage that has or causes a substantial effect on or to the tenant's business at the premises; and
(b)the tenant is unable to get the landlord or the landlord's agent to carry out the repairs despite having taken reasonable steps to arrange for the landlord or agent to do so.
(5)If the tenant carries out those repairs—
(a)the tenant must give the landlord written notice of the repairs and the cost within 14 days after the repairs are carried out; and
(b)the landlord is liable to reimburse the tenant for the reasonable cost of the repairs and may not recover that cost or any part of it as an outgoing.
Note
Section 39 regulates the ability of the landlord to recover outgoings (including the cost of repairs). Section 41 provides that capital costs are not recoverable from a tenant.
(6)The tenant may agree with the landlord to carry out, or cause to be carried out, repairs or maintenance work in respect of an essential safety measure on behalf of the landlord.
(7)If the tenant carries out, or causes to be carried out, any work or thing in respect of an essential safety measure on behalf of the landlord, that work or thing done does not affect any obligation of the landlord as an owner of the building to comply with any requirement under the Building Act 1993 or regulations made under that Act.
(8)This section does not limit any obligation of a tenant under a retail premises lease to contribute to outgoings for repairs or maintenance work in respect of an essential safety measure.
…
57Damaged premises
(1)A retail premises lease is taken to provide the following if the retail premises, or the building in which the premises are located, is damaged—
(a)except where the tenant caused the damage, the tenant is not liable to pay rent, or any amount in respect of outgoings or other charges, that is attributable to any period during which the premises cannot be used under the lease or are inaccessible due to that damage; and
(b)except where the tenant caused the damage, if the premises can be used under the lease but that use is reduced to some extent by the damage, the tenant's liability for rent, and any amount in respect of outgoings or other charges, that is attributable to any period during which the use is reduced is decreased to the same extent; and
(c)if the landlord reasonably considers that the extent of damage makes its repair impracticable or undesirable and notifies the tenant in writing of that, the landlord or tenant may terminate the lease by giving not less than 7 days’ written notice of termination to the other party; and
(d)if the landlord fails to repair the damage within a reasonable time after the tenant asks the landlord in writing to do so, the tenant may terminate the lease by giving not less than 7 days’ written notice of termination to the landlord; and
(e)this subsection does not affect any right of the landlord to recover damages from the tenant in respect of any damage covered by this subsection.
(2)A provision of a retail premises lease is void to the extent that it has the effect of limiting the liability of a party to the lease to pay compensation to another party to the lease in respect of damage to the retail premises or the building in which the premises are located.
(3)Nothing in this section prevents the parties to a lease from terminating the lease by agreement if the retail premises or the building in which the premises are located is damaged or destroyed.
…
94The Act prevails over retail premises leases, agreements etc.
(1)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it is contrary to or inconsistent with anything in this Act (including anything that the lease is taken to include or provide because of a provision of this Act).
(2)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it purports—
(a)to exclude the application of a provision of this Act; or
(b)to limit the right of a party to the lease to seek resolution of a retail tenancy dispute under Part 10 or otherwise to limit the application of that Part.
(3)A provision contained in any other agreement or arrangement (whether or not between parties to a retail premises lease) is void if that provision would be void under this Act if it were contained in a retail premises lease.
The effect of s 94 is, in the present context, to preclude abrogation or modification of the provisions of s 52 or s 57 of the RLA by the provisions of the Lease.
Deputy President Riegler identified critical provisions of the Lease, as follows:[30]
[30]Reasons, [9] and [10].
9.The Landlord contends that it has lawfully terminated on 21 September 2023 in reliance upon the Default Notice. The Default Notice alleges that the Tenant has failed to pay rent (including GST) over the period January 2022 to July 2023 (‘the Relevant Period’) in the amount of $258,837.67. The relevant parts of the Lease relied upon and referred to in the Default Notice state:
2.1 The tenant must –
2.1.1 pay the rent without any set-off (legal or equitable) or deduction whatever to the landlord on the days and in the way stated in item 9 without the need for a formal demand...
17. GST
...
17.3 The recipient of a taxable supply made under or in respect of this lease must pay to the supplier, at the time payment for the supply is due, the GST payable in respect of the supply....
22.3 No Deductions from Tenants Payments under the Lease
In respect of any amount payable, or reimbursable by the tenant, to the landlord under this lease whether by way of direct payment or indemnity, the amount must be paid by the tenant to the landlord without deduction or set-off (including equitable set-off).
10.Also relevant is clause 7 of the Lease, which states, in part:
7.1 The landlord may terminate this lease, by re-entry or notice of termination, if –
7.1.1 the rent is unpaid after the day on which it falls due for payment.
...
7.5 Before terminating this lease for repudiation (including repudiation consisting of the non-payment of rent), or for an event to which section 146 (1) of the Property Law Act 1958 (Vic) does not extend, the landlord must give the tenant written notice of the breach and a period of 14 days in which to remedy it (if it is capable of remedy) and to pay reasonable compensation for it. A notice given in respect of a breach amounting to repudiation is not an affirmation of the lease.
Ground 1 — The validity of the Notice
The Applicant’s submissions
The Notice, to which reference has been made, is a notice of breach or default, purportedly given pursuant to s 146 of the Property Law Act 1958 (‘the PLA’). The Tribunal found and declared (as order 2 of the Orders) that the Lease was lawfully forfeited by the Notice of Termination dated 21 September 2023 in reliance upon the Notice. The Applicant contends that this finding is erroneous and that the Tribunal should have found that the Respondent, as Landlord, was not entitled to forfeiture of the Lease because the Notice was not valid in accordance with the requirements of s 146 of the PLA.
The Applicant submits that the purpose of a notice under s 146 of the PLA is to give a tenant an opportunity to remedy any alleged breaches before the landlord exercises its right of forfeiture.[31] Thus, it is contended that a proper opportunity is not afforded to the tenant unless it is alerted to the particular breaches upon which the landlord proposes to rely and what the landlord requires in accordance to bring about a position where termination would not occur.[32] The breach of the Lease relied upon in the Notice is failure on the part of the Applicant, as tenant, to pay rent, specifying as it does the amount payable by way of rent under the terms of the Lease as at the date of the Notice. The Applicant says that this is insufficient having regard to the operation of s 57 of the RLA.
[31]Primary RE Limited v Great Southern Property Holdings Ltd [2011] VSC 242 [105].
[32]Ibid.
In relation to s 57 of the RLA, the Applicant observes that sub-s 57(1)(b) provides that where retail premises are damaged and the damage was not caused by the tenant, the tenant’s liability for rent, outgoings, or other charges that are “attributable to any period during which the use is reduced is decreased to the same extent”. It is said that this is not the same as a set‑off provision and, rather, operates to prevent the liability to pay rent from being generated or, alternatively, imposed on the tenant. In other words, that s 57 operates to reduce the tenant’s liability for rent and outgoings in proportion to the extent of any damage to the premises. This is said to be confirmed by the Explanatory Memorandum to the RLA, which states that:
Clause 57 provides that the tenant does not have to pay rent if damage to the building results in their premises not being able to be used and makes other provision with respect to reduction in outgoings, termination and payment of compensation.[33]
Moreover, it is said, such abatement of rent is prospective, not retrospective, and “it is not open to a party seeking an abatement of rental to pay the rent but after payment has been made to assert an entitlement to abatement”.[34]
[33]Explanatory Memorandum, Retail Leases Bill 2003 (Vic) cl 57.
[34]Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited [2022] VSC 766 [87].
Having regard to the position as put by the Applicant, it is said that in the context of a notice pursuant to s 146 of the PLA, it is significant that s 57(1)(b) of the RLA allows an abatement of the tenant’s liability for rent, rather than an equitable set‑off or a subsequent right of compensation. So it is said that in order for the notice to alert a tenant sufficiently to the particular breaches complained of, the notice must specify the particulars of breach, having regard to the fact that, in this case, it is said that the Applicant, the tenant, had a prospective right to abatement of rent. It follows, it is said, that a failure of a s 146 notice to correctly reflect an abatement of rent provision precludes a tenant’s ability to redress the breach complained of; as the prospective nature of the right under s 57 of the RLA means a tenant is unable to pay the rent and subsequently assert an entitlement to abatement. Concluding in this vein, it is said that for a s 146 notice to allow a genuine opportunity to a tenant to redress the breaches complained of by a landlord, it must particularise the rent due and payable in a way that accounts for any abatement under s 57.
The Applicant seeks to emphasise the necessity for a notice under s 146 of the PLA to be quite specific in relation to the extent of the obligation, the breach of which a landlord seeks to rely upon.[35] In support of the proposition that such specificity is required to enable a tenant to comply with the notice and to be afforded procedural fairness, reference is made to the application of “the orthodox method of interpretation” of its provisions according to the principle enunciated in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; though this is a very general proposition. Reference is also made to other provisions of the PLA, namely ss 140, 141, 145 and 147, references which I take to be in support of the proposition that the relevant legislative provisions of s 146 of the PLA are intended to afford procedural fairness.
[35]See Applicant’s Outline of Submissions (22 March 2024), [20]–[27].
As indicated in the authorities to which reference has been made in the reasons which follow it is, indeed, the position that s 146 may be traced back to its origins in the Conveyancing and Law of Property Act 1881 (Eng), s 14(1). These provisions were intended to provide something in the nature of procedural fairness to a tenant where the landlord was contemplating forfeiture for breach of lease provisions so that an opportunity was provided to address the claimed breach and, or alternatively, to take proceedings to maintain the tenancy.[36] However, it does not follow in my view that the degree of specificity required of the provisions of a s 146 notice contended for by the Applicant follows on this basis. Reference is made in this respect to the decision in Xue v Hantang International Pty Ltd where it was said:[37]
[to] … set out the breach complained of with enough specificity for the tenant to identify that breach. The tenant must be given a proper opportunity to consider its position. Where the notice particularises multiple breaches, the notice is not invalidated merely because the court or tribunal later finds that it contained breaches which were not committed.
[36]See T. Carson and H. Bompas, Carson’s Real Property Statutes (2nd ed; Sweet and Maxwell, London, 1910), 575-8.
[37](Building and Property) [2024] VCAT 112, [12] (Senior Member Forde).
More generally, it is submitted that s 146 of the PLA must be read as requiring the landlord to specify the breach that the landlord is relying upon and not some breach that “could never have occurred”.[38] By way of analogy, it is said that if 95% of a premises were damaged, a notice for 100% of the rent must be defective because it cannot be said that the landlord would be specifying “the particular breach”.[39] For the reasons which follow I entirely reject that contention as not in accordance with the authorities with respect to the operation of s 146 of the PLA and the requirements with respect to notices under those provisions.
[38]Applicant’s Outline of Submissions (6 October 2023), [22].
[39]Ibid (emphasis omitted).
In its reply submissions with respect to the validity of the Notice, the Applicant says that, contrary to the Respondent’s Submissions[40] that the evidence before VCAT “refers only to claim for lost profits and makes no mention whatsoever of an abatement claim”, there was substantial material before the Tribunal which showed that the landlord was on notice as to the issues giving rise to a claim of rent abatement including:[41]
[40]At [31].
[41]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (9 April 2024), [8], citations omitted.
a.A letter dated 24 May 2022 from the Club’s solicitor to Paramount setting out a number of repairs requiring Paramount’s prompt attention;
b.A list of defects sent by the Club to the landlord on 30 August 2022, which the landlord had agreed to remedy at previous in‑person meetings with the Club;
c.An email from Club to Paramount on 27 September 2022, seeking repairs and rectification to fire equipment at the premises;
d.The “Response to Notice of Purported Breach” dated 12 May 2023, in which the Club contested the validity of the notice of breach issued by the landlord on 21 April 2023. The response further cited cl 8 and s 57 of the RLA (at [10]), noting substantial damage and repairs required, and annexing an attachment which sets out the amount of rent apportioned to each area of damage;
e.An email responding to a second amended s.146 notice 5 September 2023 from Ms Corelli on behalf of the Club setting out in further detail damages to the premises, in particular to the carpark; and
f.Emails attaching photographs of substantial water leaks around the Property on 13 July 2022, 19 August 2022, 9 September 2022, 20 September 2022, 27 September 2022, 7 October 2022, 13 October 2022, 25 October 2022, 15 November 2022, 15 May 2023, and a collapsed ceiling on 20 April 2023; and
g.Various emails to Paramount about repairs required at the car park of the Property from as early as 24 May 2022.
Thus, it is said that since as early as May 2022, the Respondent has been aware of the issue giving rise to a claim for abatement, including the Applicant’s express reliance on s 57 of the RLA since around May 2023. Moreover, it is said that, notwithstanding these protestations, the Respondent elected to issue a notice claiming all rent as if there were no conceivable abatement claim, as if it had no notice of any issues, and as if there was nothing wrong with the premises. In those circumstances, it is said, that issuing a notice under s 146 claiming all rent capable of being charged pursuant to the Lease did not satisfy the purpose of the statute and a notice under s 146, “[t]he true purpose of [a] notice [being to] give to the [tenant] an opportunity to consider its position and give a response”.[42]
[42]Primary RE Ltd v Great Southern Property Holdings Ltd [2011] VSC 242, [147].
Further reference is made in these reply submissions to what, in substance is being put, that it was unreasonable for the Respondent to ignore the abatement claim under s 57 and to seek to rely upon non‑payment of rent as specified, unreduced, in the Notice. More particularly, the Applicant submits:[43]
(12)Further, any criticism that the Club failed to pay rent in response to the three notices of breach issued by the landlord has to be considered in the context of the Club having – on each and every occasion – responded to the notice of breach setting out its inability to the use the premises due to substantial damage and contested the validity of the notice of breach.
(13)Further, as Osborne J found in Vincent Cold Storage Pty Ltd, “[i]t is not open to a party seeking an abatement of rental to pay the rent but after payment has been made to assert an entitlement to abatement.”[44]
(14)In circumstances where the tenant is seeking to assert a prospective entitlement to abatement, a notice that fails to set out with particularity the breaches relied upon by the landlord, including accounting for reasonable abatement of rent for damaged premises, places the tenant in an impossible position where payment of rent forecloses its ability to seek abatement, while non-payment places the lease at risk of termination. For this reason, a notice under s.146 must reasonably account for abatement so that it is capable of rectification by a tenant without unfairly forcing the tenant foreclose its option of claiming rental abatement.
[43]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (9 April 2024), [12]–[14].
[44]Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited [2022] VSC 766, [87].
For the reasons which follow I am of the opinion that the reference to the judgment of Osborne J in Vincent Cold Storage Pty Ltd is, with respect to these submissions, taken out of the context of the reasons for judgment in that case and does not stand for the proposition which the Applicant seeks to rely upon as indicating that were it to comply with the claim for rent arrears as specified in the Notice it would necessarily be precluded from redress in terms of its abatement claim under s 57 of the RLA.
Respondent’s submissions
As indicated previously, the proposed first ground relied upon by the Applicant is whether the Notice was invalid by reason of the operation of s 57 of the RLA having regard to what it says is the prospective nature of s 57 and to argue that a notice under s 146 of the PLA must take into account any claim for abatement of rent because a failure to correctly apply an abatement of rent “precludes a Tenant’s ability to address the breach complained of, as the prospective nature of the right under s 57 means a Tenant is unable to pay the rent and subsequently assert an entitlement to abatement”.[45] The Respondent contends that such a submission ignores the function and purpose of a notice under s 146 of the PLA, and seeks to cast upon a landlord obligations which are not made out on either the wording of s 146 or in authorities with respect to the requirements of notices under those provisions, authorities which were considered in detail by the Tribunal. It is to these authorities and the manner in which the Respondent seeks to rely upon them to which attention is now directed.
[45]Applicant’s Outline of Submissions (22 March 2024), [15].
The first of these cases referred to is the decision of Judd J in Primary RE Ltd v Great Southern Property Holdings Ltd[46] where his Honour said:[47]
The true purpose of the notice is to give to the tenant an opportunity to consider its position and give a response. If the breach is capable of remedy, that response may be to admit the breach and propose a course of remediation. If compensation is sought, that response may involve agreement to pay reasonable compensation to be assessed. If the breach is not admitted, or the landlord rejected a proposal for remediation, the tenant may then apply for relief against forfeiture. In the present case, having received the notices of default, a sufficient response from the tenant to avoid forfeiture, re‑entry or termination, would have been to recommence management of the plantations in compliance with its obligations under each lease and forestry agreement, coupled with a proposal to pay reasonable compensation for any injury to the reversion. In my view it would not have been necessary for the tenant to do more in order to avoid the risk of termination, provided the tenant had the capacity and communicated a genuine intention to do as proposed. Nothing of the kind was communicated by the tenant to any of the landlords. The fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond.
Of particular relevance is said to be a passage in that case where Judd J went on to find that the tenant did not have the financial and other resources to remedy the breaches set out in the notice, that the tenant had failed to respond to the notice, and that the failure to respond satisfied the precondition to the landlord’s right to terminate.[48]
[46][2011] VSC 242 (‘Primary RE Ltd’). Referred to in detail in the Reasons at [32] and following.
[47]Ibid, [147].
[48]At [148].
Another decision referred to by both the Tribunal in the Reasons, and at length by Judd J in Primary RE Ltd, was the case of Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service,[49] a decision on the New South Wales equivalent of s 146 of the PLA (namely s 129 of the Conveyancing Act 1919 (NSW)). In that case, Hodgson JA (with whom Allsop P and Macfarlan JA agreed) said:[50]
A s 129 notice is not invalidated if the lessor includes in it specification of breaches that a court later finds were not committed. In my opinion, it would follow from this that an otherwise valid s 129 notice is not invalidated just because the lessor requires the lessee to remedy a breach that has not in fact occurred, or to pay an amount in compensation that is more than what is reasonable. In such cases, if the lessee does not wish to comply with requirements in the notice to the extent that the lessee considers them excessive, the lessee may take the risk of not complying fully with the lessor’s requirements; and if the lessor then purports to forfeit the lease and the matter comes to litigation, the lessee may or may not be successful. But in such a case, at least the lessee is given information as to what the lessor requires and can be confident that if these things are done there will be no forfeiture. The notices in this case did not perform that function.
[49][2010] NSWCA 268; (2010) 383 ALR 577 (‘Macquarie International Health’).
[50][2010] NSWCA 268, [327]; (2010) 383 ALR 577, 674 [327].
The Tribunal, having considered both Primary RE Ltd and Macquarie International Health, made findings on the validity of the Notice, as follows:[51]
I accept that notice to remedy a breach of lease may be held to be invalid if is to too vague in specifying the actual breach or what is required to remedy it. That is not the case here. The breach complained of is clear; namely, the failure to pay rent, which is admitted. The only issue raised by the Tenant goes to the quantum of arrears claimed. However, even on the Tenant’s own contention, and leaving aside questions of set-off, some rent is due and payable under the Default Notice. This is not a situation where, absent the set-off claim, it is contended that the right to abatement of rent wholly extinguishes the amount claimed in the Default Notice. This is not a situation where a tenant is left wondering what is required to remedy the breach, albeit that there may be an argument as to how much arrears of rent is to be paid in answer to the Default Notice. In this case, nothing was paid.
Consequently, I am not persuaded that the Default Notice can be impugned if it is ultimately found that the amount claimed is more than what is owed. If the Tenant believed that a lesser amount of rent is in arrears, then the amount that is not in dispute should have been paid in answer to the Default Notice. That would have left the ‘disputed amount’ as a serious question for trial.
However, to deny the validity of the Default Notice in circumstances where the Tenant admits the breach but does nothing to avoid the risk of termination, left the Tenant in a precarious position.
[51]Reasons, [34]–[36].
Thus, it is submitted that the Tribunal, on the basis of the authorities referred to, correctly identified that the primary purpose of the Notice was simply to put the Applicant on notice regarding the arrears which were being claimed by the Respondent. So it is said that s 146 of the PLA does not require a landlord to undertake a detailed consideration (or, indeed, any consideration) of what rights a tenant may have to abate the rent and then effectively grant a tenant — in the absence of any application by the tenant to a court or tribunal — such abatement by only including in a breach notice a consequently reduced amount of rent. Thus it is contended that any insistence that this would be the appropriate manner in which to interpret and apply s 146 of the PLA misconceives the obligations or requirements imposed by those provisions. Rather — and again, as submitted, it is correctly identified by the Tribunal and on the basis of established authority — if a tenant has any complaint about whether it has to pay the full amount of rent being claimed in a s 146 notice, it is open for a tenant to pay only the amount it considers appropriate, and argue “a serious question” as to the balance of the rent claimed by the landlord in an appropriate court or tribunal.
As observed by the Respondent the Applicant does not deny that there was an obligation to pay some rent and does not (and the Respondent says cannot) argue that the Premises were ever wholly unusable. In spite of this it chose not to pay even a minimal amount of the claimed amount of rent specified in the Notice. Rather, it simply chose not to pay any rent at all despite repeated undertakings to make payments into the Court or as directed by the Tribunal and still has not paid the Respondent any of the rent claimed in the Notice. In support of its submission in this vein the Respondent seeks support in a recent decision of Osborne J in Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited.[52]
[52][2022] VSC 766 (‘Vincent Cold Storage’).
The Applicant has sought to distinguish Vincent Cold Storage on two bases,[53] where it contended:
17Vincent Cold Storage was not wrongly decided, but it is distinguishable. That is because:
(a)in Vincent the first time that the landlord became aware of any abatement claim was in material filed with the Tribunal. However, on the factual material before the Tribunal, the Landlord was aware of significant issues with the premises which founded an abatement claim. It would be difficult, if not impossible, for the Landlord to observe its requirements under s. 146 PLA in circumstances where the Tenant does not make known to the Landlord its consternation with paying the full rent by virtue of s. 57 RLA; and
(b)the material supporting any s. 57 RLA claim in Vincent was “… so broad lacking in specificity and at odds with the inferences available from objective facts disclosed by communications by or on behalf of the Tenants that the Tenants fall short of establishing a significant likelihood of success in the proceeding…”. With respect, that was an extreme finding and not the case here.
[53]Applicant’s Outline of Submissions (6 October 2023), [17].
In response, the Respondent submits that although Vincent Cold Storage was dealing with a commercial, rather than retail, lease the relevant rent abatement clause adopted similar language to that contained in s 57 of the RLA.[54] The Applicant in seeking to distinguish Vincent Cold Storage relies, in substance, on the particular circumstances in that case which do not, in my view, detract from the matters of principle with respect to the operation of notices under s 146 of the PLA. In rejecting the tenant’s application for interlocutory relief, Osborne J did note the deficiency in the Tenants’ materials but then made a number of statements which, in my view, are properly to be seen as statements of general application to cases dealing with default notices and issues of alleged abatement.
[54]Vincent Cold Storage, [15].
In addition to the passages in Vincent Cold Storage relied upon by the Respondent in its written submissions, reference was made to the statement of Osborne J in Vincent Cold Storage in more general terms, as follows:[55]
In oral argument and in their written outline, the Tenants submitted that an overstatement of the amounts said to be owing in the October Default Notice renders the notice invalid because the amount of rent claimed to be owing was not due and owing. The Tenants therefore argued that because were entitled to an abatement of 50%, the October Default Notice was invalid because it claimed the full amount of the rent and outgoings when only 50% of the rent and outgoings were payable. This would be a surprising outcome, as it would invalidate a notice if the amount claimed was overstated, even by a small amount, or if some but not all defaults alleged were made out.
Before considering any further aspects of the Vincent Cold Storage decision, I am of the view that this general statement more than illustrates the fallacy in the Applicant’s contentions with respect to the requirements of a notice under s 146 of the PLA. With respect, I entirely agree with the statement of Osborne J and his Honour’s highlighting the “surprising outcome” which would follow if a notice overstated the amount claimed. The converse also applies, of course, with respect to any clear accommodation of an abatement of rent. Perhaps on a more practical level, one might ask how a landlord in the position of needing to give a s 146 notice in circumstances where an abatement of rent is claimed would calculate the abatement sum. Given the likely circumstances of the issue of such a notice it is most unlikely that the parties would have agreed the quantum of the abatement of rent and in these circumstances what, asked rhetorically, is the landlord to do? If the landlord’s estimate of the abatement were wrong it would follow on the position put by the Applicant that the notice would be invalid. So pending determination of any abatement of rent by a court or tribunal, is a landlord, in seeking to ensure a valid notice under s 146, in effect, to bid against itself by seeking to overstate the abatement; and at its possible cost? Clearly not as this would significantly compromise the operation of provisions such as s 146 and is a position neither supported by the legislative provisions nor authority.
[55]Vincent Cold Storage, [75].
The Respondent made particular reference to the judgment of Osborne J in Vincent Cold Storage where, after considering Primary RE Ltd and Macquarie International Health, his Honour said:[56]
83The October Default Notice sufficiently made clear to the Tenants what it was that the Landlord required to be remedied, failing which the Landlord would exercise its right to re-enter. The Tenants could be confident that if they remedied the matters specified in the October Default Notice, there would be no forfeiture.[57] The Tenants were therefore given the opportunity of considering whether they should admit the breach and remedy it or undertake any lesser remedial step. The Tenants could have chosen to pay the outgoings and half the rental prior to the expiry of the period referred to in the October Default Notice and then argued that there was no default because the effect of the abatement provision was such as to reduce the rent by 50%.
84In the present case, the Tenants considered the breach and resolved to pay nothing, even where they have never asserted that they were not obliged to pay the outgoings.
On any view of things therefore, as at the date of the service of the Termination and Re-entry Notice the Tenants were in default of the Lease within the meaning of clause 16.1 of the Lease. Accordingly, unless the October 2022 Default Notice was invalid, the Landlord was entitled to give notice terminating the Lease and re-entering and taking possession of the Premises including by force, which it did by the service of the Termination and Re-entry Notice. In doing so, it effected a forfeiture of the Tenants’ interest under the Lease.
85Even if I were to accept that the evidence is such as to give rise to a prima facie case for abatement of rent for 50% for the period July 2022 to 31 October 2022 the Tenants were still in breach and as such have no answer to the termination of the Lease and forfeiture of the Tenant’s interest under the Lease which occurred on 27 October 2022.
[56]Vincent Cold Storage, [83]–[85].
[57]See Macquarie International Health, [327].
Referring, more particularly, to the manner in which the Applicant sought to distinguish Vincent Cold Storage the Respondent submits that unlike in Vincent Cold Storage, the Respondent here was “aware of significant issues with the premises which founded an abatement claim”, before submitting “[i]t would be difficult, if not impossible, for the Landlord to observe its requirements under s.146 PLA in circumstances where the Tenant does make known to the Landlord its consternation with paying the full rent by virtue of s. 57 RLA”.[58] In response the Respondent says that in circumstances where the Applicant’s submissions do not refer exactly, or at all, to what material or evidence the Applicant is referring to which is said to have put the Respondent on notice of the details of the s 57 of the RLA claim, it is difficult to know the precise nature of the Applicant’s submission. However, in my view, as indicated previously, this would not change the position with respect to the question whether the Notice complied with s 146 of the PLA. This is because unless the Applicant and the Respondent had an agreed position on the extent of the rent abatement the Respondent is in the impossible position, to which reference has been made; namely that a mistake in quantification of the abatement amount would result in the invalidity of the Notice. This cannot be the position, as I have indicated in the preceding reasons, and would effectively negate the operation of s 146 of the PLA as it would be almost inevitable that any quantification in circumstances such as the present would be challenged and, in any event, without agreement or determination would likely be wrong. Moreover, the Respondent notes that the only affidavit filed in the Tribunal proceedings of the termination of the Lease was the affidavit of Patricia Corelli affirmed 11 July 2022, which refers only to a claim for lost profits and makes no mention whatsoever of any rental abatement claim.
[58]Applicant’s Outline of Submissions (6 October 2023), [17].
The second ground relied upon by the Applicant for the purpose of seeking to distinguish Vincent Cold Storage appears to be on the basis that the evidence produced by the Applicant in the VCAT proceedings was more compelling than that before Osborne J. Again, it is said that it is not clear from the Applicant’s submissions what evidence it was referring to but, in any event, the findings in Vincent Cold Storage explicitly refer to accepting, for argument’s sake, a prima facie entitlement to an abatement — a matter which had no bearing on his Honour’s ultimate findings.
Further, as indicated previously, the Applicant appears to be asserting, perhaps in consistently having sought to distinguish Vincent Cold Storage the failure to specify rent owing which takes into account rental abatement rights under s 57 in the s 146 Notice necessarily invalidates the notice because an entitlement to abatement is prospective not retrospective. Reliance is sought to be placed on the following statements in the judgment in Vincent Cold Storage:[59]
[87]For completion, I will briefly address three ancillary aspects of the Tenants’ submissions with respect to the prima facie case. First, insofar as the Tenants rely upon an abatement entitlement for the period from 1 January 2021 to 30 June 2022 (being for the period prior to that period relevant to the October Default Notice), I consider that they have not established a prima facie case. An entitlement to abatement is prospective, not retrospective. It is not open to a party seeking an abatement of rental to pay the rent but after payment has been made to assert an entitlement to abatement.[60]
[59]At [87].
[60]Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd (2003) 56 NSWLR 63, [25]–[30] (Hodgson JA).
This reference by Osborne J to prospective and retrospective entitlements must, however, be read in the context of the judgment in Vincent Cold Storage and also in the context of the passage from the judgment of Hodgson JA in Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd[61] where his Honour (with whom Beazley and Heydon JJA agreed) said:
[61][2003] NSWCA 8; (2003) 56 NSWLR 63, 69–70.
25Dealing first with the case of rent that has already been paid in full, in discharge of a liability for rent that has actually arisen, it would in my opinion be a most unreasonable result if the tenant could claim a refund of that rent or part of it, at least unless the tenant had made a claim for abatement of the rent and had paid the rent under protest or otherwise provisionally pending resolution of that claim. Otherwise, a landlord having no reason to suppose that anything was wrong would be deprived of the option of repairing the damage or terminating the lease under cl.8.2.4, and may be liable to make very substantial refunds of rent. I think it most unlikely that that result could have been intended.
26There are at least three possible ways in which that result could be avoided.
27First, it could be avoided by way of implication from the actual language used in cl.8.2. Clause 8.2 relates to adjustment of liability to pay rent or outgoings, and it is implicit in the wording of the clause that some claim for that abatement must be made. Since the adjustment is to liability, it could be understood that the claim for abatement has to be made at a time when the liability exists, or before it arises; so that when there is no liability because the liability has arisen and been discharged, there is nothing to which a claim for abatement can relate.
28A second way in which the result might be avoided is in terms of non-availability of restitutionary relief, where a payment has been made voluntarily and, by reason of the payment and lack of notification of a claim for abatement, the landlord has lost the opportunity to either repair or terminate the lease. It could well be that in such situation the change in position of the landlord would be enough to deny a restitutionary remedy, even if it could be said that the tenant’s payment was relevantly induced by a mistake.
29The third possible way in which the result could be avoided would be the implication of a term on the basis of business efficacy. If it be the case that neither of the first two alternatives were considered valid, the requirements for implication of a term for business efficacy set out in BP Refinery (Westernport) Pty. Ltd. v. Shire of Hastings (1977) 180 CLR 266 at 283 could be satisfied. The implication would in those circumstances be reasonable and equitable; it would be necessary to give business efficacy, in the sense of avoiding a wholly unreasonable result, and would I think go without saying; it would be capable of clear expression and would not be contradicted by express terms of the contract.
30It is not necessary to express a final view on which of these three approaches is correct. I propose that leave to appeal be refused in relation to the claim for a refund.
Additionally, reference was made by Hodgson JA to a claim for a refund of rent and outgoings actually paid depending upon whether they were voluntary payments fairly regarded as induced by a mistake.[62]
[62]Edex International Holdings Pty Ltd v Marmalade Films Pty Ltd [2003] NSWCA 8; (2003) 56 NSWLR 63, 69 [23] (referring to J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108, 124 and David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 373–374).
Consequently, any reference in Vincent Cold Storage to prospective or retrospective claims to rent abatement is, in my view, to be viewed in the context of the preceding passages in that judgment, set out previously,[63] and does not assist the Applicant’s position. Rather, as the Respondent contends, Osborne J effectively provides a guide for a tenant in the Applicant’s position as to how to respond to a s 146 notice such as the present Notice and in the circumstances in which it claims to be.
[63]See above, [37] and [40].
Thus, the Respondent contends that the critical indisputable facts are that the Applicant admits that it is in breach of the Lease by reason of non‑payment of rent and that it did nothing to remedy the situation in the face of the Notice. As was made clear in Primary RE Ltd, Macquarie International Health, and Vincent Cold Storage, the fact that there may be an argument that a landlord is not entitled to the full amount of rent it claims in a default notice under s 146 of the PLA does not invalidate the notice.
Analysis and conclusions
As indicated in the preceding discussion of the submissions by the Applicant and by the Respondent, I accept the matters put on the bases upon which those matters are put in the submissions of the Respondent and accordingly Ground 1 of the proposed appeal is not made out.
Ground 2 — The “Wrong” Serious Question
Preliminary
At the outset in considering this proposed ground of appeal, it is necessary to identify clearly the nature of the applications before the Tribunal. Deputy Riegler identified these applications:[64]
[64]Reasons, [3]–[7].
3. In the Landlord’s amended application,[65] the Landlord sought:
[65]The Landlord amended its original application dated 11 July 2023 by an amended application dated 16 November 2023. The applications heard and determined on 14 December 2023 proceeded on the basis of the amended application dated 16 November 2023.
(a) an order in the form of a declaration that the Lease was terminated by notice dated 21 September 2023 and in reliance upon a notice of breach of lease dated 5 September 2023 (‘the Default Notice’);
(b) an order that the Tenant deliver up possession of the Premises; and
(c) an order that all rent and outgoings in arrears be paid.
4. In the Tenant’s application, the Tenant sought:
(a) an order in the form of an interlocutory injunction restraining the Landlord from re-entering or taking possession of the Premises; or alternatively,
(b) an order that it be relieved from forfeiture of the Lease; and
(c) an order in the form of a declaration as to the proper amount of rent due and payable, having regard to any entitlement to abatement of rent and outgoings pursuant to s 57 of the Retail Leases Act 2003 (Vic).
5. After considering the voluminous material filed by the parties,[66] including written submissions, together with further oral submissions made by each party’s legal representative, I dismissed the Tenant’s application for an interlocutory injunction, found that the Landlord had lawfully terminated the Lease and made a declaration to that effect (‘the Orders’). However, I further ordered that the Tenant be relieved from forfeiture of the Lease, subject to certain conditions being fulfilled.
6. The Tenant subsequently filed an application with the Supreme Court of Victoria seeking leave to appeal the Orders. By further order of this Tribunal, the Orders (and the order that the Tenant be relieved from forfeiture) have been stayed, pending the outcome of the leave to appeal application. The Tenant has, however, requested written reasons of the Orders, which now follow.
7. I observe that the order dismissing the Tenant’s interlocutory injunction application would ordinarily not require the Tribunal to provide written reasons, given that it is in the form of an interim order.[67] However, the dismissal of that interlocutory application is interrelated with the Landlord’s application for final relief (in the form of a declaration that it lawfully terminated the Lease). Given that it is impossible to separate the two orders, it is appropriate that written reasons be provided. Further, the orders granting relief from forfeiture of the lease are also final orders and again, require the Tribunal to provide written reasons.[68] This is notwithstanding that the Orders (and the orders giving relief from forfeiture) were supplemented by short findings.
It is, in my view, particularly important to have regard to the observations of the Deputy President as to the interrelationship between the dismissal of the Applicant’s (‘the Tenant’s’) interlocutory injunction application and the Respondent’s (‘the Landlord’s’) application for final relief in the form of a declaration that it lawfully terminated the Lease.[69]
[66]The Tribunal Book 1,277 pages.
[67]Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 117(1).
[68]Pelicana Leasing Pty Ltd v Shayher Properties Pty Ltd (Building and Property) [2024] VCAT 86, [2].
[69]See Reasons, [7] (as set out above).
In this context, the Tribunal addressed the question whether there was a serious question to be tried. In relation to this question, the Deputy President discussed three aspects of the proceedings. The first was whether the Respondent (the Landlord) had induced the Applicant’s (the Tenant’s) breach of the Lease; secondly, the timing and legitimacy of the Notice under s 146(1) of the PLA; and, thirdly, whether the Applicant (the Tenant) had a right to set-off.[70] The Tribunal found that none of these grounds gave rise to a serious question for trial.
[70]Reasons, [13]–[24].
The Applicant’s submissions
In support of this proposed ground, the Applicant observes that in finding that there was no serious question to be tried, the Tribunal considered its submissions that the Lease had not been validly terminated because the non-payment of rent was precipitated by the Respondent’s (the Landlord’s) material breaches of an intermediate term of the Lease.[71] The Tribunal found, as the Applicant observes, that this contention was premised wholly on injunctive or equitable relief, whereas, it contends, the Respondent, the Landlord, had sought a declaration that the Notice was valid and that it was entitled to terminate the lease in reliance on that Notice. The Tribunal did, as indicated by the Applicant, find that “determining whether such a declaration is to be made does not involve the exercise of a discretion whether to give equitable relief”.[72] The Applicant contends that this reasoning of the Tribunal is erroneous as it treats the Respondent (as Landlord) as having a right to terminate for breach regardless of whether the Respondent was an innocent party, and regardless of whether the Respondent had, through its actions, ”intimated to the Tenant that the Landlord itself was not ready and willing to perform its part of the contract”.[73]
[71]Reasons, [13].
[72]Referring to Reasons, [15].
[73]Applicant’s Outline of Submissions, (22 March 2024), [30].
In this context, the Applicant contends that where a party claims to be entitled to terminate an executory contract on account of the other party’s breach, the first party must show not only the other’s breach, but his own readiness and willingness up to the time of termination to perform his essential obligations under the contract.[74] It is said that the common sense meaning of such an averment of readiness and willingness must be that the non-completion of the contract was not the fault of the plaintiffs, and that they were disposed to and able to complete it if it had not been renounced by the defendants.[75] More particularly, the Applicant submits that the Respondent was on notice since as early as 24 May 2022 that there was substantial damage to the Premises affecting its use.[76] As such, since as early as May 2022, it is said that the Respondent (as Landlord) was in breach of its concurrent obligation to keep the Premises, its structure and installations in a condition consistent with their condition at the start of the Lease; an obligation said to be implied in the Lease by the virtue of s 52 of the RLA. Moreover, it is said that the Tribunal accepted that the Respondent was in breach on a prima facie basis in finding that 70% of the Premises were unable to be used for 50% of the period spanning the Notice;[77] including the sports pavilion, function areas, side lounge and car park areas of the Premises. The Tribunal further found that the Applicant was, prima facie, entitled to abate rent and outgoings by 20% from 2 July 2023[78] as there remained further unusable areas of the Premises even after repairs were carried out to the carpark.
[74]Foran v Wight (1989) 168 CLR 385.
[75]Ibid per Brennan J at 418, citing Cort v The Ambergate Rly Co. (1851) 17 Q.B. 127 [117 E.R. 1229].
[76]Affidavit of Patricia Corelli dated 10 July 2023 [11], CB505.
[77]Referring to Reasons, [42].
[78]Referring to Reasons, [42].
Thus, it is said that, having reached this finding on an interlocutory basis, the Tribunal should have found that as at the time of termination, the Respondent (as Landlord) was not an innocent party which was ready and willing to perform its obligations under the Lease. The practical consequence of this is said to be that the Tribunal should have found there was a serious question to be tried as to whether the Respondent was not in fact entitled to terminate the lease for breach given its own default of concurrent obligations under the Lease. So it is said that had the Tribunal correctly identified that there was a serious question to be tried in relation to the Respondent’s entitlement, as Landlord, to terminate the Lease, the Tribunal would have been obliged to proceed to consider the balance of convenience, which it did not do.[79]
[79]Referring to Reasons, [39]–[40].
The Applicant, in its reply submissions,[80] responds in substance with respect to the operation of s 52 of the RLA and the extent to which a landlord’s obligations under s 52 and the provisions of s 57 entitling a tenant to abatement are to be regarded as concurrent. There remains, however, as indicated in the reasons which follow, the question whether, even if these obligations were concurrent, the operation of these provisions interrelates with the lease covenant to pay rent.[81]
[80]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024).
[81]See above, [18].
In relation to the s 52 issue, it was contended that the submission by the Respondent that no evidence of the condition of the premises at the start of the Lease was adduced by the Applicant is not to the point. First, it is said that no issue was taken with this course in any of the correspondence passing between the parties prior to the injunction hearing and that the Respondent did not adduce any evidence to suggest that the issues were always in existence. Moreover, it is said that the Respondent sought a declaration that the Lease was going to be terminated and therefore, on its own submission, ought to have adduced evidence demonstrating that there was no deterioration of the premises such that a declaration that the Lease was validly terminated could be made. It was also said that the Tribunal did not take issue with the state of the evidence of the condition of the premises, and that this was not an operative factor in its decision-making. Secondly, it is submitted that there was substantial evidence which annexed contemporaneous photographs and notifications to the Respondent from mid-2022 to early 2023 about water leakages, and consequential damage to the carpet and plaster. Thus it is said that any suggestion that the Applicant had failed to adduce evidence of the state of the Premises at the time of the commencement of the Lease is ‘misconceived and facetious’.[82] In spite of these submissions the position is as the Respondent contends, as discussed subsequently in these reasons.
[82]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024), [20].
In relation to the issue of concurrent obligations, reference was made to the Respondent’s submission that ‘[w]hile the obligations under s 52 are implied into every retail lease, there is nothing in the wording of that provision which could be said to lead to a conclusion it was intended to be interdependent with a Club’s obligation to pay rent’.[83] That provision, the Applicant says, stands in contradistinction to ss 17(3) and 46(4) of the RLA. Those provisions are, however, concerned with the withholding and payment of rent where the tenant has not been given a disclosure statement and the liability of a tenant to contribute to outgoings where an estimate of outgoings has not been provided by the Landlord, respectively. These provisions do not, in my view, assist the Applicant’s position having regard to the language used and their clear, unqualified and independent operation in the circumstances in which they apply as distinct and apart from any other provisions of the RLA or the provisions of a particular lease.
[83]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024), [21], referring to Respondent’s Submissions, [41].
In support of its concurrent obligations argument, the Applicant says that in the context of a retail lease, the strongest support for the proposition that the obligation of a landlord to make repairs is concurrent with the obligation of the tenant to pay rent is found in s 57 of the RLA, which allows the tenant to abate rent proportionately to the extent of the damage. Thus it is contended that in the context of the RLA, the obligation of a landlord to make repairs is closely linked and interdependent with the obligation on the tenant to pay rent by virtue of ss 57 and 52 of the Act. It is said that the fact that the Lease did not permit set-off is irrelevant, as s 57 is a prospective right, which reduces liability to pay rent as opposed to facilitating a set-off of competing liabilities. Reference was also made to Kay v Playup Australia Pty Ltd,[84] which is said to be of limited assistance because that case did not involve a retail lease and hence does not have regard to the statutory regime of the RLA. Again, in my view, as discussed in further detail in the reasons which follow, the Applicant, in arguing the point on concurrent obligations, fails to have regard to the continued liability for rent, even as a result of abatement under s 57, a liability left for the operation of the rent covenant in the Lease.[85]
[84][2020] NSWCA 33.
[85]See above, [18].
The other aspect of the concurrent obligations argument advanced by the Applicant is, in effect, the proposition that a landlord’s entitlement to recover rent is circumscribed in circumstances where it is not ready and willing to perform repair and maintenance obligations under express covenant or statutorily imposed repair and maintenance covenant of the kind provided for in s 52 of the RLA. The Applicant relied upon Willis v Crosland[86] for the proposition that whether one party was ready, willing and able to perform its contractual obligations is ‘of course relevant to the mutual or reciprocal performance of obligations. Party A cannot insist on performance by party B unless party A is in a position to perform’.[87] The Respondent, on the other hand, relied upon this decision for the proposition that readiness to perform is irrelevant where a party to a contract is entitled by an express provision of that contract to terminate for breach and where that party did not wish to perform or seek the other party’s performance.[88] As discussed in the reasons which follow, I am of the view that this is, as the Respondent contends, the proposition of relevance in Willis v Crosland in the present context.
[86]Willis v Crosland [2021] VSC 320; 65 VR 1.
[87]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024), [25], citing Willis v Crosland [2021] VSC 320; 65 VR 1 [58].
[88]Willis v Crosland (2021) 65 VR 1, [58]-[60]; and see Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57; Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329.
In terms of the serious question to be tried issue, the Applicant also raises the appropriateness of declaratory relief which was granted in favour of the Respondent landlord, in this case, declaring valid termination of the Lease.[89] In this context, the Applicant observes that a declaration is a final, rather than an interlocutory remedy;[90] and thus is not in the nature of a quia timet remedy. Thus, it is said, there is no going back from an order of the Tribunal that the Lease is declared to have been validly terminated unless set aside by the Court. Reference is also made in this context to the judgment of Gummow and Hayne JJ in Graham Barclay Oysters Pty Ltd v Ryan[91] apparently suggesting that the making of a declaratory order in a case such as the present obscures questions which are present and should have been considered. It is said that the findings of the Tribunal stand in juxtaposition and are irreconcilable:[92]
Firstly, the notice – which claimed 100% of the rent – was valid, but as the learned Deputy President explained: “I found, prima facie and for the purpose of determining an appropriate precondition to the granting of relief from forfeiture of the Lease, that, on a best-case scenario for the Tenant, 70 percent of the Premises were unable to be used for 50 percent of the time spanning the Relevant Period.” (R[26]).
Secondly, notwithstanding the preservation of the above question for trial (which neither the Appellant nor Respondent can actually identify what the preserved serious question is), the learned Deputy President said that: “the reasons for making the declaration that the Landlord was entitled to terminate the Leasing in reliance upon the Default Notice mirror my reasons for finding that there is no serious question for trial. In essence, I do not accept that in circumstances where I have found; and indeed, the Tenant admits, that there is rent owing, that the Default Notice, which only raises rent in arrears as constituting the breach relied upon, is ineffective.” (R[44]);
Moreover, it is contended that the Tribunal has created the difficulty identified in Graham Barclays Oysters, in the sense of obscuring what is said to be the interplay between ss 52 and 57 of the RLA which ‘should have applied and destroyed the Notice’ and that for the Lease to be validly terminated, the Respondent (as Landlord) must not have been in breach of the Lease and must have been ready, willing and able to perform.[93]
[89]See Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024) [27]–[34].
[90]Bond v Sulan (1990) 98 ALR 121 [32].
[91](2002) 211 CLR 540 [128], (‘Graham Barclay Oysters’).
[92]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024) [31] and [32] (emphasis original).
[93]Applicant’s Outline of Submissions in Reply to the Respondent’s Submissions (8 April 2024) [33].
In my view, the matters raised by the Applicant in relation to the granting of declaratory relief take matters no further than the previous arguments in relation to the interrelationship between ss 52 and 57 of the RLA, and the readiness and the ability to perform on the part of the Respondent, as Landlord, which have already been considered. In my view, as discussed further in these reasons, the Applicant’s submissions fail to have regard to the interrelationship, not merely between ss 52 and 57 of the RLA, but the separate operation and effect of the rent covenant under the Lease and the position that there is no suggestion or evidence that any abatement of rent under s 57 of the RLA had the effect of extinguishing any liability on the part of the Applicant, as tenant, to pay rent; hence the operation of the rent covenant under the Lease.
The Respondent’s submissions
As the Respondent observes, the second proposed ground of appeal alleges that the Tribunal misidentified the “serious question to be tried”, and fell into error of law by approaching the issue of whether the Applicant was entitled to injunctive relief by considering the question whether the Respondent induced the breaches, rather than considering the question whether the Respondent was entitled to terminate the Lease when it was itself in breach of its obligations under the Lease. Particularly, it contends that this proposed ground relies, in effect, on three concepts, each of which is fundamentally flawed. It is to these I now turn.
First, the apparent breach on which the Applicant appears to base its argument that the Respondent could not terminate the Lease is the maintenance obligation under s 52 of the RLA; being the provision which requires a landlord to maintain the premises in the same condition as it was at the time the lease commenced. Despite this reliance on s 52, no evidence whatsoever was adduced before the Tribunal by the Applicant as to the state of the Premises at the time the Lease commenced, a matter which is said to be fatal to any claim under s 52 of the RLA. In my view, this position clearly follows from the express terms of s 52.
Secondly, it is contended that even if the Applicant was able to convince the Court, or the Tribunal, that there was a serious question as to whether the Respondent was in breach of its obligations under s 52 of the RLA, the obligation on the Applicant to pay rent is not concurrent with any obligation it may have under s 52.
It is submitted that considerations relevant to whether contractual obligations are to be treated as concurrent or independent were addressed by Brereton JA in Kay v Playup Australia Pty Ltd, where his Honour said:[94]
Of course, “whether obligations are dependent or independent depends upon the intention of the parties”.[95] In ascertaining that intention, “the more closely the obligations are linked to the rights, the easier it will be to construe the instrument as granting merely qualified rights”.[96] Relevant considerations include the express provisions of the contract in respect of interdependence, the extent of any connection between the obligations, whether the respective covenants go to the whole consideration, whether breach of the obligation goes to the root of the contract, or whether breach may be compensated by damages.[97]
His Honour added further:[98]
The question of interdependency has often arisen in the context of leases, where it has consistently been held that, absent express provision, the lessee’s obligation to pay rent is not interdependent with any obligation of the lessor to repair.[99] In Bishop v Moy,[100] Ferguson J held that two covenants in a lease, one by the landlord (to repair the fencing within 24 months of the date of the lease), and one by the tenant (to pay an increased rent, being 150% of the initial rent, after the end of the second year of the lease), which appeared in different parts of the lease and contained no reference to one another, were not interdependent, regardless of whether there was some co-incidence in the dates referred to in each.
[94](2020) 19 BPR 40,037 at 40,050, [62].
[95]Burton v Palmer [1980] 2 NSWLR 878 at 895.
[96]Tito v Waddell (No 2) [1977] Ch 106 at 297; [1977] 3 All ER 129 per Megarry V-C.
[97]See Huntoon Co v Kolynos (Inc) [1930] 1 Ch 528 at 548–9, 557–9, 563–4; Highfield Property Investments Pty Ltd v Commercial & Residential Developments (SA) Pty Ltd [2012] SASC 165 at [213]; Masters Home Improvement Aust Pty Ltd v Aventus Cranbourne Thompsons Road Pty Ltd [2019] VSC 428 at [96].
[98](2020) 19 BPR 40,037 at 40,051, [64].
[99]Hart v Rogers [1916] 1 KB 646 at 651; Taylor v Webb [1937] 2 KB 283 at 289–90; [1937] 1 All ER 590; Chatfield v Elmstone Resthouse Ltd [1975] 2 NZLR 269 at 275; Yorkbrook Investments Ltd v Batten (1986) 18 HLR 25; [1985] 2 EGLR 100.
[100][1963] NSWR 468.
While the obligations under s 52 upon which they rely are, as the Respondent observed, implied into every retail lease, there is nothing in the wording of that provision which could be said to lead to a conclusion it was intended to be interdependent with a tenant’s obligations to pay rent. Rather, the only stated monetary “remedy” in the wording of the section is contained in s 52(5), which makes a landlord liable to reimburse a tenant for the costs of any urgent repairs a tenant was forced to undertake. The wording of this section may, as observed by the Respondent, be compared with other sections in the RLA, such as s 17(3) and s 46(4), which explicitly provide that a tenant can withhold certain payments under the RLA until such time as a landlord has complied with its obligations under the Lease. I accept that there is a relevantly different approach applied in provisions such as these where specific provision is made enabling the withholding of payments. In contrast, these provisions confer specific rights in this respect, rather than including provisions in the nature of ss 52 and 57 in the lease terms themselves and leaving them to operate, as a matter of construction (though subject to s 94 of the RLA), as terms of the same document; in the relevant sense. Nevertheless, there is nothing in those provisions to support the nature of the interdependence for which the Applicant contends.
As the Respondent contends, perhaps even more critically, the Lease itself explicitly states that there is no set-off against the rent obligations; an express provision which makes any argument the parties could have intended to make that the obligation to pay rent is interdependent with repair and maintenance obligations on the part of the Respondent, as landlord, entirely unsustainable, whether such obligations were express terms or implied by the provisions of the RLA. The independence of rent covenants in leases is a position well understood at common law and is a position commonly reinforced by express “no set-off” provisions in the rent covenant, such as the rent covenant contained in the Lease.[101] No suggestion was made that the provisions of the RLA intend to abrogate this position, either generally or with respect to the operation of ss 52 and 57 of that Act.
[101]See above, [18].
The Respondent also contends that this proposed ground suffers from one final, fatal, misconception insofar as it relies on the submission that:[102]
[w]here a party claims to be entitled to terminate an executory contract on account of the other party’s breach, the first party must show not only the other’s breach but his readiness and willingness up to the time of termination to perform his essential obligations under the contract.
The case relied upon for this submission is the High Court decision in Foran v Wight,[103] which is a well-known decision dealing primarily with anticipatory breach and related questions of repudiation. The principle relied upon by the Applicant has no application where the right to terminate relied upon is an express contractual right, as was made clear by the Court of Appeal in Willis v Crosland.[104] In that case, the Court held that readiness to perform is irrelevant where a party to a contract is entitled by an express provision of that contract to terminate for breach and where that party did not wish to perform or seek the other party’s performance.[105]
[102]Applicant’s Outline of Submissions (6 October 2023), [31].
[103](1989) 168 CLR 385.
[104](2021) 65 VR 1.
[105]At [58]–[60]; and see Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57; Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329.
In overturning the primary judge’s determination that a vendor under a contract for the sale of land could not terminate the contract due to the vendor itself being in breach of its obligations under the contract, the Court of Appeal in Willis v Crosland said:[106]
The effect of the authorities is summarised by Parker J in Inlon Pty Ltd v Celli SpA [[2017] NSWSC 569, [97]]:
[I]f [the terminating party] Celli were seeking to obtain damages for loss of the contract, or orders against Inlon for the specific performance of the Distribution Agreement, it would be necessary for Celli to show that it was ready, willing and able to comply with its own obligations. But all Celli is seeking to do is terminate the Agreement and escape from the obligations thereunder. Even in a case of common law termination, I am not sure that Celli would be debarred by a lack of readiness and willingness from doing so. But in a case of contractual termination, the Full Federal Court has held that a lack of readiness and willingness, on its own, does not prevent the contractual right of termination from being exercised.[107]
As Professor Carter notes, ‘[t]here is a fundamental distinction between a promisee who calls for performance by the promisor and a promisee who seeks to justify a decision to terminate performance of the contract’.[108] In the case of the latter, ‘it is not an element of proof of valid termination that the promisee was ready and willing to perform the contract at the time of termination. So much is obvious where the promisee terminates prior to the time for its performance’.[109] Thus, to the extent that the judge relied on this reason for concluding that the purchaser was in default at the time she served the notice of termination, his Honour erred.
[106](2021) 65 VR 1 at 16, [59]—[60].
[107]Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57, 69–72 [55]–[76].
[108]J W Carter, Carter’s Breach of Contract (LexisNexis Butterworths, 2nd ed, 2018) [7–28].
[109]Ibid.
In the present circumstances, the Respondent has an express contractual right under the terms of the Lease to terminate for non-payment of rent. The pre-conditions to the exercise of this right, being the service of the Notice, were met, and so it cannot now be said that there is any argument that there was a breach on the part of the Respondent of s 52 of the RLA invalidates that act of termination.
Concluding, the Respondent submits that the Tribunal correctly approached the issue of whether there was a serious question to be tried, but even if it did not, whatever approach the Tribunal took does not matter in the present context. The obligations of the Applicant to pay the rent were not concurrent with any maintenance obligations the Respondent had, so in circumstances where the Applicant does admit it owes some rent, the termination of the Lease was valid unless the Notice can be set aside. For the preceding reasons, I accept that this correctly states the position and that there is, in my view, no basis to set the Notice aside.
Analysis and conclusions
As indicated in the preceding discussion of the submissions by the Applicant and by the Respondent, I accept the matters put on the bases upon which those matters are put in the submissions of the Respondent and, accordingly, Ground 2 of the proposed appeal is not made out.
Orders
For the preceding reasons, leave to appeal is refused.
I reserve the question of costs and will hear the parties as necessary on this issue.
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