Great Union Pty Ltd v Sportsgirl Pty Ltd
[2021] VSC 277
•24 May 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2020 04534
BETWEEN:
| GREAT UNION PTY LTD (ACN 053 452 387) AS TRUSTEE OF THE CENTREPOINT MELBOURNE TRUST | Plaintiff/ Defendant by Counterclaim |
| and | |
| SPORTSGIRL PTY LTD (ACN 090 049 415) | Defendant/ Plaintiff by Counterclaim |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 April 2021 |
DATE OF JUDGMENT: | 24 May 2021 |
CASE MAY BE CITED AS: | Great Union Pty Ltd v Sportsgirl Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2021] VSC 277 |
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ARBITRATION – Whether clause in lease required disputes about entitlement to rental abatement to be referred to arbitration.
PRACTICE AND PROCEDURE – Whether Court should stay non-arbitral claims pending determination by arbitrator of the arbitral claim.
PLEADING – Whether pleading of claims for rental abatement and breach of quiet enjoyment clause under lease should be struck out – Purposes of pleadings considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/ Defendant by Counterclaim | Mr P J Bick QC with Mr J P Tomlinson | SBA Law |
| For the Defendant/ Plaintiff by Counterclaim | Mr P J Jopling AM QC with Ms J Collins | Arnold Bloch Leibler |
HIS HONOUR:
By summons filed 25 March 2021, the defendant/plaintiff by counterclaim (‘Sportsgirl’) applies for:
(a) its claim for rental abatement (‘the Rent Abatement Claim’) to be referred to arbitration pursuant to cl 37 of a Deed of Renewal of Lease dated 12 December 2016 (‘the Lease’) between the plaintiff/defendant by counterclaim (‘Great Union’) and Sportsgirl; and
(b) this proceeding to be stayed pursuant to s 8 of the Commercial Arbitration Act 2011 (Vic), pending the determination of the Rent Abatement Claim.
By summons filed 5 March 2021, Great Union applies for summary judgment in respect of certain claims, or alternatively, striking out of parts of Sportsgirl’s defence and counterclaim. Great Union seeks the following orders:
1.An order under rule 22.16 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and section 62 of the Civil Procedure Act 2010 (Vic) that summary judgment be given for the defendant by counterclaim in respect of:
(a)the claim made by paragraph 13 of the defence and counterclaim dated 29 January 2021; and
(b)the claim the subject of paragraph C. of the prayer for relief to the defence and counterclaim dated 29 January 2021.
2.Alternatively, an order under rule 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) that paragraphs 4B and 13 of the defence and counterclaim dated 29 January 2021 be struck out.
Litigation history
By writ filed 9 December 2020, Great Union claims the sum of $2,307,409.09 plus interest for unpaid rent owing by Sportsgirl under the Lease.
By defence and counterclaim filed 29 January 2021, Sportsgirl denies that it has failed to pay rent in breach of the Lease and seeks the following relief by way of set-off and counterclaim:
(a)Damages for unconscionable conduct in contravention of s 22 of the Australian Consumer Law[1] and breach of an implied term of good faith under the Lease on the following bases:
(i)Great Union refused to negotiate in good faith with Sportsgirl for an appropriate temporary leasing arrangement during the COVID-19 pandemic; and
(ii)Great Union showed no regard for the National Cabinet’s Mandatory Code of Conduct ‘SME Commercial Leasing Principles during COVID-19’.
(b)Damages for breach of Great Union’s obligation under the Lease to provide quiet enjoyment (‘the Quiet Enjoyment Claim’).
(c)A declaration that the Lease was terminated by frustration arising from government regulations consequent to the COVID-19 pandemic.
(d)A stay of the proceedings pending the determination of the Rent Abatement Claim.
[1]Competition and Consumer Act 2010 (Cth) sch 2.
The Lease
By the Lease, Great Union leased approximately 900.3 square meters of commercial premises on what is known as the Centrepoint Mall in Bourke Street, Melbourne (‘the Premises’), for a term of seven years commencing 1 March 2017, and at a commencing gross rental of $2.5 million per annum plus GST. The terms of the Lease included the following relevant clauses:
(a) Clause 16, headed ‘Use and trading’:
Use
16.1The Tenant must use the Premises only for the Permitted Use in good faith and in a reputable manner.
Trading Hours
16.2Unless prohibited by law, the Tenant must during Trading Hours:
(a)trade from the Premises properly and efficiently; and
(b)keep all entrances to the Premises open.
(b) Clause 17 headed ‘Tenant’s additional obligations’:
Obligations
17.1The Tenant must:
(a)subject to clause 19, comply on time with all laws (including obtaining all necessary planning and building permits) and the requirements of authorities caused or arising out of the Tenant’s particular use of the Premises (including the Permitted Use) …
Prohibitions
17.2The Tenant must not:
…
(c)do anything in or around the Building which in the Landlord’s reasonable opinion may be a nuisance, dangerous or offensive …
(c) Clause 18 headed ‘Cleaning’:
The Tenant must:
(a)keep the Premises and everything in them (including pipes, wires and other installations from the points where they enter the Premises or meters serving the Premises) clean and free of refuse, pests, vermin and infectious illnesses by the use of contractors approved by the Landlord and comply with the Landlord’s reasonable directions in that regard …
(d) Clause 22 headed ‘Quiet enjoyment’:
22.1 While the Tenant complies with its obligations under this lease, it may occupy the Premises during the Term without interference by the Landlord or any person claiming by or through the Landlord. The Landlord must endeavour not to do anything which unreasonably hinders access to or the view of the Premises.
(e) Clause 37 headed ‘Damage to Building’:
Landlord’s notice
37.1Subject to the Landlord’s obligations under clauses 22 and 23, if the Building is damaged or the means of access altered so that:
(a)all or part of the Premises are unfit for the Lessee’s occupation; or
(b)the Premises are completely or substantially inaccessible;
then the Landlord must give the Tenant a notice within 6 months after the damage or restriction of access occurs either:
(c)terminating this lease on a date not less than one month after the date the Landlord gives the notice; or
(d)stating that the Landlord intends to make the Premises accessible to and fit for the Tenant’s use.
Nothing in this clause 37 obliges the Landlord to restore or reinstate the Building or the Premises.
Tenant’s notices
37.2
(a)Subject to clause 37.4, if the Landlord fails to give a notice on time under the previous clause, the Tenant may give the Landlord a notice terminating this lease on a date not less than one month after the date the Tenant gives the notice.
(b)If the Landlord has given a notice under clause 37.1, but does not make the Premises fully accessible to and wholly fit for the Tenant’s use within a reasonable time, the Tenant may give the Landlord a notice stating that the lease will terminate on the date which is one month after the date the Tenant gives the notice if the Landlord does not make the Premises fully accessible and wholly fit within that time.
Abatement of payments
37.3(a)The Tenant may reduce its payment of Base Rent under this lease for the period from and including the date the damage or interference with access occurs to and including the date this lease is terminated or to but excluding the date the Premises are made fully accessible to and wholly fit for the Tenant’s use. Any reduction must be proportionate to the loss of amenity caused by the damage or interference with access.
(b)If the parties do not agree on the reduction to apply under the previous clause, within seven days after the damage or interference with access occurs, then the proportion must be decided under the Commercial Arbitration Act 1984.
(c)On the first day of the month after the proportion is agreed or decided, the Landlord must credit the Tenant with any difference between what the Tenant has paid under this lease and what the Tenant should have paid for the period from and including the date the damage or interference with access occurs to but excluding that day.
Limitation of Tenant’s rights
37.4The Tenant may not terminate this lease or reduce payments under this clause 37 if:
(a)the damage is caused or substantially contributed to by; or
(b)rights under an insurance policy in connection with the Building are prejudiced or a policy is cancelled or payment of a premium or a claim is refused by the insurer because of
the act, negligence or default of the Tenant or of the Tenant’s Employees and Agents. This clause 37.4 does not affect rights the Landlord may have in connection with the events specified in this clause 37.4.
Extension of Term
37.5If the Premises are made fully accessible to and wholly fit for the Tenant’s use, the Landlord may elect by notice given to the tenant to extend the Term by the time expired between the date the damage occurred to but excluding the date the Premises are made fully accessible to and wholly fit for the Tenant’s use.
Compensation
37.6Except for abatement of payments, the Tenant is not entitled to receive compensation from the Landlord for loss, cost, damage, liability or other detriment arising from damage to the Premises or interference with access, unless the Landlord is proven to have deliberately or negligently caused such detriment.
Issues
The issues to be determined by the Court are as follows:
(a) Whether the Rent Abatement Claim is ‘a matter which is the subject of an arbitration agreement’ and must be referred to arbitration pursuant to s 8(1) of the Commercial Arbitration Act 2011 (Vic). Section 8(1) provides:
A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when submitting the party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
(b) If yes to question (a), whether the balance of the claims in this proceeding should be stayed pending the determination of the Rent Abatement Claim.
(c) Whether summary judgment should be granted in favour of Great Union with respect to the Quiet Enjoyment Claim, or alternatively, whether the Quiet Enjoyment Claim or the Rent Abatement Claim should be struck out.
Whether the Rent Abatement Claim must be referred to arbitration?
Submissions
Sportsgirl’s submissions
Sportsgirl submitted that, on the proper construction of cl 37 of the Lease, the matter which was the subject of the arbitration agreement included both:
(a) the issue of the proportion of the rent to be abated (‘the Quantification Issue’); and
(b) the issue of whether Sportsgirl is entitled to rental abatement (‘the Entitlement Issue’) on the basis that the Premises were damaged or the means of access altered within the meaning of the Lease, such that:
(i) all or part of the Premises were unfit for Sportsgirl’s occupation; or
(ii) the Premises were completely or substantially inaccessible,
(‘Relevant Damage or Interference with Access’).
Sportsgirl submitted that the above construction was the only sensible construction of cl 37 for the following reasons:
(a) For the purpose of determining the Quantification Issue, the arbitrator must determine the extent of any loss of amenity caused by the Relevant Damage or Interference with Access. If the arbitrator has the power to decide the extent of any loss of amenity, the arbitrator must then have the power to decide whether there is a relevant loss of amenity for the purposes of determining the Entitlement Issue.
(b) The narrow interpretation put by Great Union (being that only the Quantification Issue is the subject of the arbitration agreement) would cause a fragmented process whereby the Court would determine the Entitlement Issue only, and then the dispute would be referred to arbitration for determination of the Quantification Issue.
(c) There was a prospect of inconsistent decisions if the Court heard all the evidence and decided that there was Relevant Damage or Interference with Access; but then the arbitrator heard the evidence and formed a different view.
In light of the above reasons, Sportsgirl submitted that Great Union’s construction was commercially unsound.
Great Union’s submissions
Great Union contended that where ‘the language used in an arbitration agreement is such as to limit the scope of matters to be arbitrated, then the court is charged with the responsibility to determine the threshold issue of applicability of the agreement’.
Great Union submitted that the arbitration agreement did not relate to the Entitlement Issue, for the following reasons:
(a) Clause 37.3(b) is predicated on there already being an accepted entitlement to reduced rent under cl 37.3(a) because of some accepted ’alteration of access’, and where the dispute only relates to the appropriate ’proportion‘ of abatement.
(b) Objectively, the parties did not agree to have the Entitlement Issue determined by arbitration.
Principles of construction
Dispute resolution clauses are construed using the same principles that apply to other commercial contracts.[2] To determine the meaning of the terms of a commercial contract, the Court will ask the question: ‘What would a reasonable businessperson have understood those terms to mean?’[3] For the purpose of answering that question, ‘the reasonable businessperson [is] placed in the position of the parties’,[4] and the Court applies the following principles:
[2]ACD Tridon Inc v Tridon Australia Pty Ltd [2002] NSWSC 896, [112]-[136] (Austin J); Hancock Prospecting Pty Ltd v Rinehart (2017) 257 FCR 442, 488 [163] (Allsop CJ, Besanko and O’Callaghan JJ); Rinehart v Hancock Prospecting Pty Ltd (2019) 366 ALR 635, 645 [44] (Kiefel CJ, Gageler, Nettle and Gordon JJ).
[3]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan and Kiefel JJ) (‘Electricity Generation’); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [47] (French CJ, Nettle and Gordon JJ).
[4]Ecosse Property Holdings Pty td v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544, 551 [16] (Kiefel, Bell and Gordon JJ) (‘Ecosse’).
(a) The terms are construed objectively, and the subjective intentions of the parties are irrelevant.[5] A court ‘cannot receive … evidence from one party as to its intentions and construe the contract by reference to those intentions’.[6]
[5]Ibid.
[6]DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, 429 (Stephen, Mason and Jacobs JJ).
(b) The Court will consider not only the text and the ordinary meaning but also:
(iii) the context, being the entire text of the contract including matters referred to in the text of the contract; and
(iv) the commercial purpose and object of the contract.[7]
[7]Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95, [45]–[47] (Santamaria, Ferguson and McLeish JJA).
The identification of the commercial purpose and object of a contract ‘presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating’.[8] For this purpose, the Court may have regard to the surrounding circumstances known to the parties.[9]
[8]Reardon Smith Line Ltd v Hansen-Tangen [1976] 3 All ER 570, 574 (Lord Wilberforce), cited with approval in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, 350 (Mason J), which in turn was cited in Royal Botanical Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45, 52–3 [10] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ); Electricity Generation (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan, and Kiefel JJ).
[9]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).
A court is entitled to assume ‘that the parties intended to produce a commercial result’,[10] and will avoid a construction that renders it ‘commercial nonsense or working commercial inconvenience’.[11] Although it does not rise to the level of a legal presumption, an application of this principle in the construction of arbitration agreements is that:
[A]rbitration clauses should be read against the sensible presumption (in effect a rational assumption of reasonable people) that the parties do not intend the inconvenience of having possible disputes being heard in two places.[12]
[10]Ecosse (2017) 261 CLR 544, 551 [17] (Kiefel, Bell and Gordon JJ).
[11]Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530, 559 [82] (Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ), cited with approval in Electricity Generation (2014) 251 CLR 640, 656-7 [35] (French CJ, Hayne, Crennan and Kiefel JJ); Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85, 111 [78] (Gageler, Nettle and Gordon JJ).
[12]Hancock Prospecting v Rinehart (2017) 257 FCR 442, 489 [166] (Allsop CJ, Besanko and O’Callaghan JJ). See also TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2009] VSC 553, [10]-[20] (Hargrave J) and the cases referred to therein.
Consideration
The scheme of cl 37 of the Lease is, in summary, as follows:
(a)Under cl 37.1, if there is Relevant Damage or Interference with Access, the landlord must give the tenant a notice either:
(i) terminating the Lease; or
(ii) stating that the landlord intends to reinstate the access.
(b)Under cl 37.2, if the landlord does not give the notice or reinstate the access, the tenant may terminate the Lease.
(c)Under cl 37.3(a), the tenant has a stand-alone right to reduce the rent payable under the Lease, proportionate to the loss of amenity caused by the Relevant Damage or Interference with Access, from the date of the damage or interference up to the date the Lease is terminated or the access is reinstated (‘the Rent Abatement Clause’).
(d)Clause 37.3(b) is the arbitration clause that expressly relates to the Rent Abatement Clause, and provides as follows:
If the parties do not agree on the reduction to apply under the previous clause, within seven days after the damage or interference with access occurs, then the proportion must be decided under the Commercial Arbitration Act 1984.
In my opinion, the constructional choice presented by cl 37.3 is whether a reasonable businessperson would understand the parties to have intended that:
(a)after the Entitlement Issue was established by agreement or determination by a court, the Quantification Issue only would be referred to arbitration; or
(b)the Entitlement Issue and the Quantification Issue would both be referred to arbitration.
In my opinion, cl 37.3(b) demonstrates an intention to refer all issues arising under the Rent Abatement Clause (including both the Quantification Issue and the Entitlement Issue) to arbitration, for the following reasons:
(a) It is inherently unlikely that the parties to the Lease would have intended for the resolution of disputes with respect to rights under the Rent Abatement Clause to be bifurcated by:
(v) a court determining the Entitlement Issue; and only then
(vi) an arbitrator determining the Quantification Issue.
Such fragmentation would cause significant delays and additional costs to the resolution of disputes.
(b) Clause 37.3(b) provides for a reference to arbitration ‘[i]f the parties do not agree on the reduction to apply under [the Rent Abatement Clause]’. In my opinion, a reasonable businessperson would understand the expression ‘if the parties do not agree on the reduction’ to include disputes where the landlord contended that there should be no abatement because there was no Relevant Damage or Interference with Access.
(c) On Great Union’s narrow construction, for the proportion to be determined under the Rent Abatement Clause, it would usually be necessary for:
(i)a court to make a determination as to whether there was Relevant Damage or Interference with Access (i.e. the Entitlement Issue), which would require it to consider all of the evidence in relation to the alleged Relevant Damage or Interference with Access; and then
(ii)the arbitrator to consider the same evidence for the purpose of determining the Quantification Issue.
Issues may arise where the arbitrator comes to different conclusions to the court. For example, where the arbitrator finds no Relevant Damage or Interference with Access and assesses the appropriate proportion of rental abatement as nil. In my opinion, it is unlikely that the parties would have intended the inconvenience associated with the narrow construction.
Great Union submitted that, on this application, it was necessary for the Court to be satisfied that it was arguable on the evidence filed in support of the stay application that Sportsgirl was entitled to rental abatement under cl 37. Great Union further submitted that the Court should not be so satisfied for the following reasons:
(a)The Relevant Damage or Interference with Access was related to physical interference and not an interference caused by a general government regulation (as in this case).
(b)In any event, the government regulations as pleaded were general and were not sufficiently related to the Premises to bring their consequences within cl 37.
(c)Clause 16 demonstrated that risks arising from legal prohibition rested with the tenant.
As I have decided that both the Entitlement Issue and the Quantification Issue must be referred to arbitration, I do not accept that it is appropriate for the Court to examine, on a summary basis, whether Sportsgirl’s argument for rental abatement is so weak that it does not constitute a sustainable argument.
It is not for the Court to usurp the role of the arbitrator. The following statement of the Full Federal Court in Hancock Prospecting Pty Ltd v Rinehart, with respect to the primary judge’s reference to the need for a sustainable argument as to the existence of a matter the subject of the arbitration agreement, is instructive:
There is a further difficulty in the approach of the primary judge insofar as it proceeded beyond a characterisation of the nature of the matter and whether it fell within the arbitration agreement. The requirement of an assessment as to whether there was a ‘sustainable argument’ that the matter falls within the arbitration agreement has its dangers. Of course, if there is no sustainable argument that a matter of dispute can be characterised as falling within the agreement, it should not be referred to arbitration. But difficulties arise if this enquiry becomes one directed to the strength of the case raised by the issue or matter. … It is sufficient to say at this point that it would generally be wrong for the Court to examine an argument in a form of summary disposal application, and, if it were thought that an asserted case, in terms otherwise falling within the scope of the agreement, was sufficiently weak not to be ‘sustainable’, not to refer the matter to arbitration. That would be to usurp the role of the arbitrator. The Court’s role in s 8 is not to act as a court of summary disposal filtering the matters that are suitable for arbitration.[13]
[13](2017) 257 FCR 442, 483 [149] (Allsop CJ, Besanko and O’Callaghan JJ).
Accordingly, I propose to order a stay of the Rent Abatement Claim, as contained in paragraph 4B of Sportsgirl’s defence and counterclaim.
Whether the balance of the claims in this proceeding should be stayed pending the determination of the Rent Abatement Claim?
Sportsgirl conceded that, save for the Rent Abatement Claim, Great Union’s claim and the defences raised by Sportsgirl were for determination by the Court, not an arbitrator. However, Sportsgirl contended that the whole proceeding should be stayed pending determination of the arbitration, for the following reasons:
(a)If Sportsgirl is successful in the Rent Abatement Claim, it is likely to resolve most or all of the issues in the proceeding because it would defeat or offset Great Union’s claim.
(b)The Rent Abatement Claim is likely to inform other claims advanced by Sportsgirl in its defence and counterclaim. For example:
(i)the question of whether the Lease was frustrated by the COVID-19 pandemic; and
(ii)the question of whether Great Union’s refusal to negotiate an appropriate temporary leasing arrangement with Sportsgirl during the COVID-19 pandemic was unconscionable.
(c)If Sportsgirl is ultimately successful in the arbitration and the balance of the claims in the proceeding are resolved, costs incurred in the proceeding generally while the arbitration was ongoing would be wasted.
The discretion to stay the non-arbitral parts of the proceeding arises as part of the exercise of a court’s general power to control its own proceedings. In Recyclers of Australia Pty Ltd v Hettinga Equipment Inc, Merkel J said as follows:
In the event that a proceeding includes matters that are not capable of being referred to arbitration, but the determination of which is dependent upon the determination of the matters required to be submitted to arbitration, a court may, in the exercise of its discretion, stay the whole proceeding. A court may also exercise a discretion to impose terms that the arbitration of the arbitrable claims not proceed prior to the determination of the non-arbitrable claims where the arbitrable claims are seen to be subsidiary to or significantly less substantial than, but overlapping with, the non-arbitrable claims. The discretion may also be exercised to stay the proceeding where the non-arbitrable claims are the ancillary claims.
The broad discretion arises as part of the exercise of a court’s general power to control its own proceedings. The basis for the discretion is that the spectre of two separate proceedings — one curial, one arbitral — proceeding in different places with the risk of inconsistent findings on largely overlapping facts, is undesirable.[14]
[14](2000) 100 FCR 420, 434-5 [65]-[66] (citations omitted).
In my opinion, the question of whether the balance of the proceeding should be stayed pending determination of the arbitration is determined by weighing:
(a)the prospect of wasted costs if Sportsgirl is successful in the arbitration; against
(b)the potential delay of the final resolution of this proceeding if progress of the non-arbitral claims are stayed pending the resolution of the arbitration.
I do not consider that a stay should be granted on the non-arbitral claims in the proceeding pending resolution of the arbitration, for the following reasons:
(a)The prospects of Sportsgirl succeeding in the arbitration to such an extent that it would resolve the balance of the proceeding is speculative.
(b)Great Union claims, and Sportsgirl does not deny, that rent otherwise payable under the Lease of $257,781.34 per month plus GST has not been paid from 1 April 2020.
(c)The parties are entitled to have their rights with respect to rent payable under the Lease determined at the earliest opportunity.
(d)The parties are substantial corporations. Neither party submitted that it was not capable of meeting the costs of preparing both the arbitral and non-arbitral claims at the same time. Further, I consider there may well be cost advantages in the parties performing work with respect to all claims at the same time rather than in a fragmented manner.
Accordingly, I do not propose to order a stay of the non-arbitral claims in the proceeding.
Whether summary judgment should be granted in respect of the Quiet Enjoyment Claim, or alternatively, whether the Rent Abatement Claim or the Quiet Enjoyment Claim should be struck out?
Rent Abatement Claim - paragraph 4B
Great Union submitted that the Rent Abatement Claim, pleaded in paragraph 4B of Sportsgirl’s defence and counterclaim, should be struck out for the following reasons:
(a)The claim for rental abatement is pleaded as ‘further or alternatively’ to the claim that the Lease has been frustrated. However, these claims are mutually exclusive and can only be alternative.
(b)Paragraph 4B does not plead the basis for the allegation that accessing the Premises would have been ‘unlawful’. Particulars are necessary to demonstrate the statutory or regulatory basis for Sportsgirl’s contention that access to the Premises was altered. Great Union should not be required to sort through the allegations contained in paragraph 4B of the defence or the 148 items contained in Annexure 1 to the proposed amended defence and counterclaim to ascertain the basis of the allegation of illegality.
The purposes of pleadings are to:
(a) give fair notice to other parties about the case they must meet; and
(b) determine what evidence is relevant at trial.[15]
[15]Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd (2018) 56 VR 557, 578 [50] (Riordan J). See also Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77, [1]–[2] (Harper J).
Sportsgirl’s claim for rental abatement on the basis that a Relevant Damage or Interference with Access has occurred principally relies on the allegation that the effects of the COVID-19 regulations imposed by the Victorian government, which restricted people’s movements, constituted the Relevant Damage or Interference with Access under cl 37.1 of the Lease. The effects of the government’s COVID-19 regulations are notorious and I consider that the issue raised by paragraph 4B and its particulars give fair notice to Great Union about the case it must meet.
In any event, the issue with respect to the adequacy of the pleading of the Rent Abatement Claim in paragraph 4B of Sportsgirl’s defence and counterclaim is moot because I will refer the Rate Abatement Claim to the arbitrator for determination.
Quiet Enjoyment Claim - paragraph 13
Great Union submitted that summary judgment should be entered in respect of the Quiet Enjoyment Claim, pleaded in paragraph 13 of Sportsgirl’s defence and counterclaim, or alternatively, that the pleading should be struck out. In particular, Great Union submitted that the conclusion that there had been a breach of Sportsgirl’s right to quiet enjoyment on the basis of its obligations to comply with cls 17 and 18 of the Lease is embarrassing.
In the course of argument, counsel for Sportsgirl stated that the breach by Great Union was constituted by the inclusion of the pleaded obligations in cls 17.1, 17.2(c) and 18(a) of the Lease.[16]
[16]Clauses 17.1, 17.2(c) and 18(a) of the Lease are extracted in paragraph 5 above.
It is difficult to understand how a landlord could breach its obligation to allow quiet enjoyment by the inclusion of such terms. However, in any event, paragraph 13 of the counterclaim presently does not include such an allegation. On that basis alone, I consider that paragraph 13 is embarrassing and should be struck out.
Orders
Accordingly, I propose to order as follows:
(a) The claim of the defendant/plaintiff by counterclaim contained in paragraph 4B of the defence and counterclaim is referred to arbitration pursuant to s 8(1) of the Commercial Arbitration Act 2011 (Vic).
(b) Paragraph 13 of the counterclaim is struck out. The defendant/plaintiff by counterclaim has leave to replead paragraph 13, and otherwise file and serve an amended defence and counterclaim substantially in the form provided to the Court and dated 22 April 2021.
I will hear the parties on the form of orders and costs.
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