Emhill Pty Ltd v Bonsoc Pty Ltd - [2001] VSC 179

SUPREME COURT OF VICTORIA	Not Restricted
COMMON LAW DIVISION

No. 4802 of 2000

EMHILL PTY LTD (ACN 006 551 177) and BRIAN ARTHUR COOK	Appellants
v
BONSOC PTY LTD (ACN 005 234 382)	Respondent

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JUDGE:	Balmford J
WHERE HELD:	Melbourne
DATE OF HEARING:	10 and 11 May 2001
DATE OF JUDGMENT:	4 June 2001
CASE MAY BE CITED AS:	Emhill v Bonsoc
MEDIUM NEUTRAL CITATION:	[2001] VSC 179

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RETAIL PREMISES LEASE – whether a tenant in breach of a lease can seek redress against the landlord for non-compliance with section 14(3) Retail Tenancies Act 1986 – whether the landlord’s failure to provide notification to the tenant under section 14(3) provides a defence to the tenant’s breach – whether a “principal debtor” clause instils an obligation to make demand before pursuing a claim.

Magistrates’ Court Act 1989, section 109.
Retail Tenancies Act 1986, sections 3(4), 4, 14.
Retail Tenancies Reform Act 1998, section 50, 52(1).

Alroth Pty Ltd v Forty Fourth Proposal Pty Ltd (unreported, decided on 29 October 1986).
Apriaden Pty Ltd v Seacrest Pty Ltd (1999) V Conv R 54-598.
Benson-Brown v Smith [1999] VSC 208.
Esso Petroleum Co Ltd v Alstonbridge Properties Ltd [1975] 1 WLR 1474.
MS Fashions Ltd & Ors v Bank of Credit and Commerce International SA (in liquidation) & Ors [1993] Ch 425.
Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723.
Seacrest Pty Ltd v Apriaden (2000) 1 VR 567.
Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr CA Connor	Lewis & Weir
For the Respondent	Mr GD Bloch	Holding Redlich

HER HONOUR:

Introduction

This is an appeal pursuant to section 109 of the Magistrates’ Court Act 1989, which provides that a party to a civil proceeding in the Magistrates’ Court may appeal to this Court, on a question of law, from a final order of the Magistrates’ Court in that proceeding.

This matter arises out of the lease by the respondent (“Bonsoc”) to the firstnamed appellant (“Emhill”) of three adjoining units in Gladstone Street, South Melbourne. The lease of Unit 1 (“the Unit 1 lease”) was for a term of three years commencing on 1 November 1993. The lease of Unit 2 (“the Unit 2 lease”) was for a term of two years commencing on 1 November 1994. The lease of Unit 3 (“the Unit 3 lease”) was for a two year term commencing on 22 January 1996. The secondnamed appellant (“Mr Cook”) executed guarantees for the performance of the obligations of Emhill under all three leases.

In November 1998 Bonsoc filed a Complaint in the Magistrates’ Court claiming from Emhill arrears of rent and outgoings in respect of all three leases and damages, being the cost of reinstatement of the premises. A similar claim was made against Mr Cook under the terms of the guarantees.

In its Amended Counterclaim filed on 13 August 1999 Emhill claimed damages for wrongful termination…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2001] VSC 179
Decision Date: 4 June 2001

CaseChat Overview and Summary

Emhill Pty Ltd, a tenant, filed a case against Bonsoc Pty Ltd, the landlord, in the Magistrates’ Court of Victoria, alleging that Bonsoc failed to comply with section 14(3) of the Retail Tenancies Act 1986. The dispute centred on whether the landlord's non-compliance with the statutory notification requirement provided a defence to the tenant's breach of the lease. Additionally, Emhill sought to determine if a "principal debtor" clause in their lease agreement required them to make a demand before pursuing their claim against Bonsoc. The court was required to interpret and apply the relevant sections of the Retail Tenancies Act 1986, the Retail Tenancies Reform Act 1998, and relevant case law in resolving the dispute.

The court examined whether the landlord's failure to provide the statutory notice under section 14(3) constituted a valid defence to the tenant's breach of the lease. The court also had to consider the effect of the "principal debtor" clause on the tenant's right to pursue a claim against the landlord. The court reviewed relevant case law, including Alroth Pty Ltd v Forty Fourth Proposal Pty Ltd, Apriaden Pty Ltd v Seacrest Pty Ltd, Benson-Brown v Smith, Esso Petroleum Co Ltd v Alstonbridge Properties Ltd, MS Fashions Ltd & Ors v Bank of Credit and Commerce International SA, Re Taylor; Ex parte Century 21 Real Estate Corporation, Seacrest Pty Ltd v Apriaden, and Spurling v Development Underwriting (Vic) Pty Ltd, to assist in its interpretation of the statutory provisions and the lease agreement.

The court concluded that the landlord's failure to provide the statutory notice under section 14(3) did not constitute a valid defence to the tenant's breach of the lease. The court found that the "principal debtor" clause in the lease agreement did not require the tenant to make a demand before pursuing a claim against the landlord. The court held that the tenant was entitled to seek redress against the landlord for the landlord's non-compliance with the statutory notice requirement. The court ordered that the landlord pay the tenant's legal costs of the proceeding.

The court ordered that Bonsoc Pty Ltd pay Emhill Pty Ltd's costs of the proceeding. The court did not award any damages or relief to Emhill Pty Ltd, as the court found that the landlord's failure to provide the statutory notice did not constitute a valid defence to the tenant's breach of the lease. The court's decision provides clarity on the effect of a landlord's non-compliance with the statutory notice requirement and the operation of "principal debtor" clauses in retail tenancy leases.

Orders