Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd

Cooma Clothing Pty Ltd, the tenant under a retail premises lease, sought to appeal against a decision of the Victorian Civil and Administrative Tribunal (VCAT) concerning the lease’s renewal, assignment, and associated guarantees. The primary respondent, Create Invest Develop Pty Ltd, was the purchaser of the reversion under an uncompleted contract of sale, intending to enter into a new lease with the tenant upon the existing lease’s expiration. The dispute centred on whether the contract between the tenant and the purchaser constituted a valid ‘renewal’ under the Retail Leases Act 2003 (Vic) and whether the executory contract remained enforceable if it did not qualify as a renewal. Additionally, the assignment of the tenant’s interest to a new tenant and the enforceability of guarantees provided by the assignee were contentious issues.

The legal issues encompassed the interpretation of the term ‘renewal’ within the Retail Leases Act 2003 (Vic) and whether the executory contract could be deemed enforceable despite not meeting the statutory definition. Furthermore, the validity of the assignment of both the lease and the executory contract to the assignee, and the extent of the guarantor’s obligations, were pivotal. The court examined whether the guarantor’s obligations extended to the assignee’s responsibilities under the executory contract and if such obligations were enforceable as a covenant running with the land. Relevant legislation included the Retail Leases Act 2003 (Vic), Property Law Act 1958 (Vic), and Transfer of Land Act 1958 (Vic).

The court found that the executory contract did not constitute a ‘renewal’ under the Retail Leases Act 2003 (Vic), but it was still a valid and enforceable agreement. The assignment of both the lease and the executory contract to the assignee was deemed effective, transferring both the benefit and burden of the executory contract. However, the purchaser of the reversion was entitled to enforce the executory contract against the assignee upon the completion of the contract of sale of the reversion. The court also ruled that the guarantee provided by the assignee did not extend to the assignee’s obligations under the executory contract for the new lease, distinguishing it from the principle in Chan v Cresdon Pty Ltd (1989) 168 CLR 242. The appeal was dismissed due to the lack of a compelling reason for the delay in filing the application for leave to appeal, despite the application being granted under the Victorian Civil and Administrative Tribunal Act 1998 (Vic).