Covarno v Melbourne Liquidation
[2012] VCC 1599
•27 SEPTEMBER 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL
Case No.
| COVARNO NOMINEES PTY LTD (ACN 005 111 142) | Plaintiff |
| v | |
| MELBOURNE LIQUIDATION CENTRE PTY LTD (ACN 144 015 369) AND SACHA JOSEPH CALLER | Defendant |
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JUDGE: | LACAVA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 25 SEPTEMBER 2012 | |
DATE OF JUDGMENT: | 27 SEPTEMBER 2012 | |
CASE MAY BE CITED AS: | Covarno v Melbourne Liquidation & Anor | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1599 | |
REASONS FOR JUDGMENT
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Catchwords: Retail Leases Act 2003 – application for stay of proceedings in the County Court after one party brings a retail leasing dispute in the VCAT – Stay granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. M Osborne | Gadens |
| For the Defendant | Mr J Guss | Joseph Guss |
HIS HONOUR:
1 This proceeding was commenced by the plaintiff by Writ on 20 August 2012. The plaintiff claims against the first defendant arrears of rent and other moneys it claims are owing to it pursuant to the terms of a retail premises lease dated 9 August 2010. The first defendant is a company.
2 The plaintiff’s claim against the second defendant is for the same money which the second defendant is alleged to have guaranteed.
3 The writ was served and, on 5 September 2012, Joseph Guss an Australian Legal Practitioner filed a Notice of Conditional Appearance on behalf of each defendant.
4 The Notices of Conditional Appearance were filed pursuant to Order 8.08(1) of the rules. In compliance with Order 8.08(3) the defendants issued a summons dated 14 September 2012. This is the return of that summons.
5 By the terms of the summons the defendants ask that the writ be set aside and for costs. The summons was argued before me on 25 September 2012.
6 I need to summarise the background facts in order to put the argument in context.
7 By the terms of a lease dated 9 August 2010 the plaintiff as landlord leased to the first defendant as tenant the premises situate at and known as 67 Burnley St Richmond.
8 There is no dispute between the parties that the lease in question was a “retail premises lease” within sections 81 and 89 of the Retail Leases Act 2003 (“the Act”) and, the premises in question are “retail premises” within the same legislative provisions. The lease is exhibit “SJC-1” to the affidavit of Sacha Joseph Caller sworn 13 September 2012.
9 According to an affidavit of Andrew Charles Croxford sworn 24 September 2012 the first defendant fell into arrears of rent having occupied the premises from 1 September 2010 until “about August 2011”. See paragraph 7a. Mr Croxford goes on to say that after the first defendant vacated the premises the plaintiff determined the lease by re-entry and thereafter re-leased the premises to a new tenant by way of a new lease dated 13 June 2012.
10 After the writ was issued the first defendant purported to make application to the Small Business Commissioner to have that person determine a retail tenancy dispute which is alleged to have then existed between the first defendant and the plaintiff. A copy of the purported application is exhibit “SJC-2” to the affidavit of Sacha Joseph Caller sworn 13 September 2012. That document asserts a number of particulars of dispute under the heading “Dispute Details”. It is not necessary that I set them out here. In summary form they assert that the lease was invalid, that the retail premises were not fit for purpose and that the landlord breached the covenant of quiet enjoyment. The defendants seek damages. The application also asserts that if the lease is held to be valid then when it was determined the plaintiff failed to mitigate its loss.
11 There is no issue that the lease has been determined by the first defendant vacating the premises and by the plaintiff re-entering the premises and releasing them. At that point the relationship of landlord and tenant that had previously existed between the plaintiff and the first defendant ceased to exist. However, s 83 of the Retail Leases Act 2003 (“the Act”) effectively preserves the parties rights and obligations under the Act and preserves the estate relationship of Landlord and Tenant between the parties for the purposes of the Act. S.83, which did not have an equivalent in the Retail Tenancies Act 1986, overcomes the affect of decisions in Jam Factory Pty Ltd v Sunny Paradise Pty Ltd & Ors [1989] V.R.584 and Klewet Pty Ltd v Lansdown [1988] V.R. 969 and other earlier decisions which had limited the operation of what was then section 21(1) of the Retail Tenancies Act 1986.
12 Pursuant to rule 36.01 the plaintiff amended the writ on 20 September 2012. The affect of the amendment was to reduce the claim from $136,095.79 to $122,101.96 and to remove a pleading in paragraph 15 of the Statement of Claim which pleaded an allegation of indemnity against the second named defendant. The prayer for relief was also amended to remove a claim for interest. The amended claim therefore claims only unpaid rent. In my view the latter two amendments were misconceived for reasons not here relevant.
13 Mr Guss who appeared on behalf of the defendants, argued that the first defendant having lodged an application with the Small Business Commissioner to bring a retail tenancy dispute, the plaintiff’s claim is not justiciable in this court and the writ should be set aside or the claim struck out.
14 Mr Guss relies upon the provisions of s. 89(4) of the Act. Relevantly, section 89 of the Act provides as follows with my emphasis:
Part 989. Jurisdiction of Tribunal
(1) The Tribunal has jurisdiction to hear and determine an application by a landlord or tenant under a retail premises lease, or by a specialist retail valuer, seeking resolution of a retail tenancy dispute.
(4) Subject to section 23(4) (key-money and goodwill payments prohibited), a retail tenancy dispute other than-
(a) an application for relief against forfeiture; or
Evidence (Miscellaneous Provisions) Act 1958(b) a claim under (Unconscionable Conduct)-
is not justiciable before any other tribunal or a court or person acting judicially within the meaning of the .
15 What is meant by the expression ‘retail tenancy dispute’ is set out in s 81. Relevantly it provides as follows:
81. Meaning of retail tenancy dispute
(1) In this Part, retail tenancy dispute means a dispute between a landlord and tenant-
(a) arising under or in relation to a retail premises lease to which-
(c) arising under a lease that provides for the occupation of retail
premises in Victoria to which none of those Acts apply or applied-(2) However, retail tenancy dispute does not include a dispute solely relating to the payment of rent or a dispute that is capable of being determined by a specialist retail valuer under section 34, 35 or 37 of this Act or under section 12A or 13A of the Retail Tenancies Reform Act 1998 or section 10 or 11A of the Retail Tenancies Act 1986.
16 The argument before me focused on the issue as to whether the claim brought in the writ was a claim “solely relating to the payment of rent” and the parties addressed extensive arguments to that issue.
17 Mr Guss relies upon the decision of Nathan J in Zambelis v Nahas (1991) V Conv R at 54-396 and the decision of Justice Kaye in 536 Swanston St Pty Ltd v Harbrut Pty Ltd & Ors 1988 V Con R 54-323. He argues the legislation is clear, namely, except where the claim by the landlord relates solely to unpaid rent, any retail tenancy dispute must be heard in the VCAT.
18 Mr Guss submitted that even though the claim by the plaintiff against the second named defendant was on the guarantee of the lease it is dependent upon the plaintiff having enforceable rights under the lease against the tenant namely, the first defendant. Whether or not that is so depends upon the outcome of the hearing of the retail tenancy dispute.
19 Mr Osborne who appeared on behalf of the plaintiff set out his arguments in a written outline which he spoke to. He sought to distinguish the decision in Zambelis arguing there the claim and counterclaim were consolidated. I do not consider that the be a proper basis for distinguishing that case such that I should not follow it.
20 Mr Osborne submitted the proceeding in this court as amended is a claim solely relating to unpaid rent. That may be so on the pleadings as they presently exist. But the first defendant, having filed an application bringing a retail tenancy dispute in accordance with the Act, is entitled to have that dispute determined in accordance with the provisions of the Act. It would be an absurd result in my view were the defendants to be forced to litigate in this court when the litigation may be affected by a determination of the VCAT which the legislation clearly intends be seized with jurisdiction over retail tenancy disputes.
21 If I were to dismiss the summons that would have the result of forcing the defendants to defend in this court and seek relief by way of counterclaim presumably in the form of a declaration that the lease is invalid or for damages for loss of quiet enjoyment. Again that would lead to an absurd position where it could not be said that the proceeding in this court relates solely to a claim by the landlord/plaintiff for unpaid rent. Such a result would in my view run contrary to the clearly expressed intention of the Act.
22 Mr Osborne relied upon the principle in Oceanic Life Ltd & Anor v Chief Commissioner of Stamp Duties (1999) 168 ALR 211 which in summary form says a court should not lightly refuse to hear a case thereby shutting out a plaintiff. In this instance in finding for the defendants on the summons I am conscious of that principle. But I am bound by the decision in Zambelis (supra) and a decision of Kaye J in 536 Swanston St Pty Ltd (supra). I am also bound by the provisions of the Act which in my view are clear.
23 It would also be wrong in my opinion to allow the plaintiff to proceed against the second defendant alone. That proceeding, whilst based on the guarantee of the lease and not the lease itself, is nonetheless dependent upon an assumption of the validity of the lease. It would again be an absurd result were the plaintiff to succeed in this court against the second named defendant alone on the guarantee and the VCAT subsequently held the lease to be invalid.
24 Mr Osborne submitted that the particulars of the retail tenancy dispute were vague and unlikely to succeed and that there was no evidentiary basis for them before the court. All of that maybe so. In my view in deciding the questions raised by the summons it is not necessary that I have to decide the strength or otherwise of the retail tenancy dispute application lodged properly by the first defendant. That may ultimately be for the VCAT to decide in accordance with the Act.
25 Finally I referred earlier to Jam Factory Pty Ltd v Sunny Paradise Pty Ltd & Ors [1989] V.R.584 and Klewet Pty Ltd v Lansdown [1988] V.R. 969 and other earlier decisions which had limited the operation of what was then section 21(1) of the Retail Tenancies Act 1986. Those cases found that where the relationship of Landlord and Tenant had come to an end section 21(1) of the Retail Tenancies Act 1986 did not operate to preclude the Supreme Court from hearing those cases. Those decisions were overcome by the insertion of s 83 into the Act, which replaced the repealed Retail Tenancies Act 1986. The fact parliament chose to do that in my view reinforces in clear terms the intention of the parliament that where both parties bring proceedings of the kind present here then those kind of proceedings are to be dealt with in the VCAT as a retail tenancy dispute and not in the courts.
26 Accordingly I find that because of the operation of sections 81, 83 and 89 of the Act and, there being on foot a retail tenancy dispute initiated by the first defendant which puts into question the validity of the lease, that the proceeding brought by the plaintiff is not justiciable in this court.
27 For these reasons the defendants succeed on the summons dated 14 September 2012. The proceeding against both defendants is stayed.
28 I will hear the parties on the question of costs.
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