Koronczyk v Victorian Small Business Commissioner

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT
COMMERCIAL AND RETAIL LEASES LIST

S ECI 2023 00605

BETWEEN:

MARK KORONCZYK	Plaintiff
v
VICTORIAN SMALL BUSINESS COMMISSIONER & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Croft J
WHERE HELD:	Melbourne
DATE OF HEARING:	25 July 2023
DATE OF JUDGMENT:	26 July 2023 (Publication of reasons 28 July 2023)
CASE MAY BE CITED AS:	Koronczyk v Victorian Small Business Commissioner & Ors
MEDIUM NEUTRAL CITATION:	[2023] VSC 431

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RETAIL LEASES — Dispute resolution — Role of Small Business Commissioner with respect to mediation and alternative dispute resolution — Meaning of “mediation” — Challenge to certificate as to the failure of mediation to resolve dispute — Effect of any failure to comply with statutory provisions with respect to issuing of certificate — Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 — Ko v Hall [2020] VSCA 224 — Davis v R (2016) 55 VR 1 — Retail Leases Act 2003, ss 84(1), 85, 86(3), 87(1) and (3) and 92(1), (2) — Small Business Commission Act 2017, ss 3 and 10.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Aleksov	Gladwin Legal Pty Ltd
For the First and Second Defendants	Mr L Virgona	Victorian Government Solicitor’s Office
For the Third, Fourth and Fifth Defendants	Mr N Dragojlovic	BD Legal

HIS HONOUR:

Introduction

In this proceeding, commenced by way of Originating Motion for judicial review dated 14 February 2023 (‘Originating Motion’), the plaintiff, Mr Mark Koronczyk, seeks the following orders:

(a) an order, mandatory in nature, compelling the Victorian Small Business Commission (‘VSBC’) to comply with s 86(3) of the Retail Leases Act 2003 (‘RLA’ or ‘RL Act’);

(b) an order quashing the certificate purportedly issued by the VSBC on 25 January 2023 in relation to the retail tenancy dispute between the third to fifth defendants and the plaintiff;

(c) costs together any order needed to do justice.

On 17 May 2023, the first and second defendants (collectively referred to as ‘the VSBC Parties’) filed a summons (‘Summons’), pursuant to which they seek:

(a) an order pursuant to s 62 of the Civil Procedure Act 2010 (‘the CPA’) and rule 22.16 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) that summary judgment be entered for the VSBC Parties; or, alternatively,

(b) an order pursuant to rule 23.01 of the Rules that the plaintiff’s Originating Motion be dismissed; and

(c) Costs on an indemnity or standard basis and further orders as determined by the Court.

Under orders of the Court made on 9 June 2023 (‘the Orders’), the Originating Motion and Summons were heard together. Pursuant to the Orders the Summons was amended (Amended Summons dated 14 June 2023); but not amended with respect to the orders sought.

In support of the Originating Motion, the plaintiff affirmed affidavits on 14 February 2023 (‘the First Koronczyk Affidavit’) and 18 July 2023 (‘the Second Koronczyk Affidavit’). No affidavit material has been filed by the plaintiff in response to the Summons.

The VSBC Parties rely on the affidavit of Mark Robert Schramm sworn on 17 May 2023 (‘the Schramm Affidavit’).

The third, fourth and fifth defendants rely on the affidavit of Christopher James Drenen sworn on 11 July 2023 (‘the Drenen Affidavit’).

Positions of the parties
Originating Motion

The grounds relied upon by the plaintiff in support of the claims he makes in the Originating Motion are as follows:

[1]Under Part 10 of the RL Act, there is created a regime for ‘dispute resolution’ of a ‘retail tenancy dispute’, with the involvement and assistance of the SBC.
[2]By s 84(1)(a) of the RL Act, one function of the SBC is to make arrangements to facilitate the resolution by mediation, or by another appropriate form of alternative dispute resolution, of retail tenancy disputes (whether or not a dispute has been formally referred under this Act to the Commission).
[3]Under s 86 of the RL Act, parties to a retail tenancy dispute may refer the dispute to the SBC for mediation or other alternative dispute resolution.
[4]By s 86(3) of the RL Act, the SBC must arrange for the retail tenancy dispute to be the subject of mediation or another form of alternative dispute resolution.
[5]Section 87(1) of the RL Act provides that a retail tenancy dispute may only be the subject of a proceeding in the Victoria Civil and Administrative Tribunal if the SBC has certified in writing that mediation or another appropriate form of alternative dispute resolution under Pt 10 of the RL Act has failed, or is unlikely, to resolve it.
[6]The third to fifth defendants have a retail tenancy dispute with Lord of the Fries Property Pty Ltd (the company), over unpaid rent.
[7]The plaintiff is listed as a guarantor in relation to the retail lease underlying this dispute.
[8]There is a separate and distinct retail tenancy dispute between the third to fifth defendants, and the plaintiff, in relation to a guarantee under a retail lease.
[9]The SBC has arranged for mediation to occur between the third to fifth defendants, and the company.
[10]The SBC has not arranged for mediation, or any other alternative dispute resolution, to occur as between the plaintiff and the third to fifth defendants.
[11]The SBC has purportedly issued a certificate under s 87(1) of the RL Act that ‘mediation or another appropriate form of alternative dispute resolution under this Part has failed, or is unlikely, to resolve it’ in relation to the retail tenancy dispute between the third to fifth defendants, and the plaintiff.
[12]The third to fifth defendants have commenced proceedings in the Tribunal in relation to the retail tenancy despite between them and the plaintiff.

On the basis of these grounds as articulated the plaintiff contends that:

[13]In the above circumstances, in relation to the retail tenancy dispute between the third to fifth defendants, and the plaintiff:
(a)the SBC has failed to comply with s 86(3) of the RL Act;
(b)the certificate purportedly issued under s 87(1) is not valid, because on the proper construction of s 87(1), the SBC cannot issue a valid certificate without first having complied with s 86(3) or without first having attempted to convene a mediation or another form of alternative dispute resolution;
(c)the proceedings in the Tribunal that have been initiated by the third to fifth defendants against the plaintiff were initiated in contravention of s 87(1) of the RL Act.

The VSBC Parties submit that the plaintiff’s position as put in the Originating Motion is fundamentally flawed in that it fails to properly consider the powers and functions which the VSBC has (and those which it does not have) under the RLA. It is contended that that the Originating Motion proceedings are a delaying tactic to prevent the Landlords, the third to fifth defendants, from prosecuting their claim in the Victorian Civil and Administrative Tribunal (‘the Tribunal’ or ‘VCAT’).

The third, fourth and fifth defendants support the VSBC Parties’ application for summary judgment against the plaintiff and/or the summary dismissal of the plaintiff’s claim in this proceeding.[1] They also adopt and otherwise support the submissions of the VSBC Parties.[2]
[1]Outline of Submissions for the Third, Fourth and Fifth Defendants (11 July 2023), [2].
[2]Outline of Submissions for the Third, Fourth and Fifth Defendants (11 July 2023), [4].

Summons

The VSBC Parties bring their application for summary judgment under s 62 of the CPA:

62Defendant may apply for summary judgment in proceeding
A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff’s claim or part of that claim has no real prospect of success.

These provisions should be read in the context of the definition of ‘civil proceeding’ as appears in s 3 of the CPA:
civil proceeding means any proceeding in a court other than a criminal proceeding or quasi‑criminal proceeding;

In light of these provisions, there is no doubt that the Originating Motion proceeding as brought by the plaintiff is amenable to the operation of these provisions in spite of the fact that it might, depending upon the particular circumstances, otherwise be expected to be the subject of proceedings pursuant to s 148 of the Victorian Civil and Administrative Tribunal Act 1998 or more generally.[3] With respect to the operation of these provisions the VSBC Parties cite the decision of the High Court in Trkulja v Google LLC where it was observed that the power to dismiss an action summarily is not lightly to be exercised, but the test in s 62 of the CPA permits of the possibility of cases in which the plaintiff’s case is not ‘hopeless’ or ‘bound to fail’ but does not have a real prospect of succeeding.[4]

[3]As to the nature of proceedings of s 148 of the Victorian Civil and Administrative Tribunal Act 1998, see for example, Rysze International Pty Ltd v Yong [2021] VSC 786.

[4](2018) 263 CLR 149; [2018] HCA 25, [23]; and see Boom Parts and Repairs Pty Ltd v Allied Pinnacle NSW Pty Ltd [2023] VSC 340, [51]–[55].

In the alternative, the VSBC Parties submit that the Originating Motion is scandalous, frivolous and vexatious and is an abuse of process of the Court which ought be dismissed under rule 23.01 of the Rules.

With reference to the terms ‘scandalous’ and ‘frivolous or vexatious’ reference was made to the judgment of Derham AsJ in Hoh v Frosthollow.[5]
[5][2014] VSC 77, [12]; and see Brown v Corrections Victoria & Ors [2022] VSC 217.

The question of when a proceeding will be stayed or summarily dismissed as an abuse of process was considered by the High Court in Victoria International Container Terminal Ltd v Lunt,[6] from which, it is submitted by the VSBC Parties, the following relevant principles emerge:
[6][2021] HCA 11 (7 April 2021).

(a) the Court has power to stay or summarily dismiss a proceeding in order to prevent injustice where a party has abused the Court’s processes;

(b) the Court’s power is limited to protecting the integrity of its own processes and to taking action only insofar as is necessary to ‘safeguard the administration of justice’;

(c) where a proceeding is brought for an ‘improper purpose’ it is liable to be an abuse of process.

The plaintiff contends that there is no basis for such an assertion.

In general terms, the VSBC Parties contend that it is open to the Court to find that this proceeding, commenced as it was by Originating Motion, has been commenced as a collateral attack on the jurisdiction of the Victorian Civil and Administrative Tribunal (‘the Tribunal’) and for the purpose of delaying proceedings in the Tribunal.

Background

The plaintiff was the sole director of Lord of the Fries Pty Ltd (‘the Tenant’) which was the tenant under a retail lease of premises at Shop B/348 in the Chadstone Shopping Centre under a lease by the third, fourth and fifth defendants (‘the Landlords’) for a term of six years commencing on 13 October 2016 (‘the Lease’). The plaintiff is the sole guarantor of the obligations of the Tenant under the Lease.

In or around May 2021, the Landlords issued an application with the VSBC in relation to the Tenant’s failure to pay the rent owing under the Lease.[7] The Landlords’ application at the VSBC listed the plaintiff, together with his brother Mr Sam Koronczyk, as the Tenant’s contacts.[8] This application was the subject of a mediation which was conducted on 12 July 2021 and, on 13 July 2021, the VSBC issued a certificate under s 87(1) of the RLA which stated that the mediation between the Landlords and the Tenant had failed.[9] Mr Sam Koronczyk, said to be a de facto director of the Tenant company and the person responsible for the day‑to‑day management of the company’s portfolio of leases, did attend this mediation, together with Mr Richard McDonnell, a property consultant engaged by the Tenant.[10] The plaintiff did not attend the mediation.
[7]Affidavit of Mark Robert Schramm sworn 17 May 2023 (‘Schramm Affidavit’), [15].
[8]Schramm Affidavit, [16].
[9]Schramm Affidavit, [19]; Exhibit MRS-1 to the Schramm Affidavit (‘Schramm Exhibit’), 42.
[10]Second Koronczyk Affidavit, [3], [4], [9] and [10].

On or about 18 October 2021, the Landlords terminated the Lease and, on 9 December 2021, the third and fourth defendants commenced proceedings in the Tribunal against both the Tenant and the plaintiff as guarantor (‘the VCAT Proceeding’).[11] Although the VSBC Parties have not had any part in the VCAT Proceeding it is understood that the proceeding relates to a claim for substantial arrears of rent.[12]
[11]First Koronczyk Affidavit, [13]–[14].
[12]Second Koronczyk Affidavit, [8].

On 29 April 2022, the Tribunal ordered that the VCAT Proceeding be struck out with a right of reinstatement as a result of the Tenant being placed into administration.[13]
[13]First Koronczyk Affidavit, [16].

Early the following year, on 18 January 2023, following a request from the Landlords, the VSBC issued an amended certificate which stated that mediation had failed between the Landlords, and the Tenant, and the plaintiff.[14] Following the issue of the amended certificate, the solicitors for the plaintiff sought the revocation of that amended certificate on the basis that the plaintiff had not attended the mediation which had been the subject of the earlier certificate.[15] On 20 January 2023, the Landlords’ solicitors emailed the VSBC asking that the amended certificate not be revoked, on the basis that the plaintiff had at all times been aware of the earlier mediation on 12 July 2021 and attached a number of emails on which the Landlords relied in support its claim that the plaintiff was, at all times, apprised of the earlier mediation.[16]
[14]Schramm Affidavit, [21]; Schramm Exhibit, 44.
[15]Schramm Affidavit, [22].
[16]Schramm Affidavit, [23], [24].

A number of telephone conversations followed in January 2023 which has some significance in the present context. On 24 January 2023, Mr Schramm of the VSBC telephoned the solicitor for the Landlords. The purpose of the phone conversation was, Mr Schramm deposes, to ask whether the Landlords would be prepared to attend a further mediation session with Mr Mark Koronczyk and the Tenant, to discuss the contents of his email of 20 January 2023. The Landlords’ solicitor told Mr Schramm that the Landlord parties would not agree to attend a further mediation; Mr Schramm responding that he told the Landlords’ solicitor that in that case his clients could apply for a fresh certificate.[17]
[17]Schramm Affidavit, [25].

Following that phone conversation, Mr Schramm then telephoned the plaintiff’s solicitor, advising him that the Landlords were not prepared to attend another mediation, that the VSBC did not have the power to compel a party to attend a mediation, and on that basis the VSBC would issue a certificate under s 87(1) of the RLA.[18]
[18]Schramm Affidavit, [26].

In light of these matters, the VSBC Parties contend that they have done all they are required to do and, indeed, in the face of the Landlords’ position regarding a further mediation, all that the VSBC Parties could in fact do.

Legislative Provisions

Critical to the present proceedings are a variety of provisions contained in Part 10 of the RLA, provisions relating to Dispute Resolution. The relevant provisions are s 84(1)(a), s 85, s 86(3), s 87(1) and (3) and s 92 as follows:

84Functions of Small Business Commission
(1)The Small Business Commission has the following functions under this Act—
(a)to make arrangements to facilitate the resolution by mediation, or by another appropriate form of alternative dispute resolution, of retail tenancy disputes (whether or not a dispute has been formally referred under this Act to the Commission);

…
(3) This section does not affect the validity of any decision made by the Tribunal.

85What mediation and other alternative dispute resolution covers
Mediation and other forms of alternative dispute resolution under this Part are not limited to formal mediation procedures but extend to preliminary assistance in dispute resolution, such as the giving of advice designed to ensure that—
(a)the parties are fully aware of their rights and obligations; and
(b)there is full and open communication between the parties concerning the matter.

86Referral of retail tenancy disputes for alternative dispute resolution
…
(3)The Commission must arrange for each retail tenancy dispute referred in accordance with this section to be the subject of—
(a)mediation by a mediator; or
(b)another appropriate form of alternative dispute resolution by a suitably qualified person.

…
87Retail tenancy disputes must first be referred for alternative dispute resolution
(1)A retail tenancy dispute may only be the subject of proceedings before the Tribunal (whether under this Act, the Fair Trading Act 1999 or any other Act) if the Small Business Commission has certified in writing that mediation or another appropriate form of alternative dispute resolution under this Part has failed, or is unlikely, to resolve it.

…
(3) This section does not affect the validity of any decision made by the Tribunal.

92Each party bears its own costs
(1)Despite anything to the contrary in Division 8 of Part 4 of the Victorian Civil and Administrative Tribunal Act 1998, each party to a proceeding before the Tribunal under this Part is to bear its own costs in the proceeding.
(2)However, at any time the Tribunal may make an order that a party pay all or a specified part of the costs of another party in the proceeding but only if the Tribunal is satisfied that it is fair to do so because—
(a)the party conducted the proceeding in a vexatious way that unnecessarily disadvantaged the other party to the proceeding; or
(b)the party refused to take part in or withdrew from mediation or other form of alternative dispute resolution under this Part.

(3) In this section, costs includes fees, charges and disbursements.

It should be observed, in relation to these provisions, that sub‑s 87(1) of the RLA which requires that retail tenancy disputes must first be referred for alternative dispute resolution has two elements to it. The first is that any mediation or other appropriate form of alternative dispute resolution has failed or, alternatively, that mediation or other appropriate form of alternative dispute resolution is unlikely to resolve the dispute. Mediation as the relevant process in the present context is, by its nature, a consensual process. Clearly, being mindful of this the legislature provided by way of sanction for refusal to take part or withdraw from the mediation the possibility of costs sanctions in any subsequent proceeding in the Tribunal under the provisions of s 92(2)(b).

Submissions of the parties
Koronczyk submissions

The plaintiff addresses a variety of issues in this proceeding in its submissions:[19]
[19]Submissions of Mr Koronczyk (21 July 2023), [11]–[26].

The simplicity of the plaintiff’s case
11.A “retail tenancy dispute” between a landlord and tenant is a different “retail tenancy dispute” to that between landlord and a guarantor of a tenant’s obligations (see ss 81(1), 81(1A); and ss 86(1A), 89(1)(b)). This appears to be accepted by the Commission.
12.With this in mind, the relevant facts are straightforward: the plaintiff as guarantor of a tenant’s obligation is party to a retail tenancy dispute with the tenant’s landlord (the private defendants). The tenant and landlords have mediated. The plaintiff and the landlords have not. The retail tenancy dispute to which the plaintiff is a party, thus, has not been mediated or subject to other ADR.

13.The words of s 86(3) are clear; “The Commission must arrange for each retail tenancy dispute … “ to be referred to mediation or ADR.
14.The Commission did not comply with s 86(3) in relation to the retail tenancy dispute involving the plaintiff.
15.On one view, that is the end of this case. It is a very simple argument.
The Commission’s reason for not convening mediation, and the public interest
16.It is necessary to divert from the legal arguments to address the Commission’s reasons for not convening mediation.
a.The Commission says that a party to the retail lease dispute did not wish to mediate, and therefore, the dispute was “unlikely to be resolved” by mediation or ADR. This view is based on communications with a solicitor, not the party to the dispute.
b.It appears to be based in the distracting notion that the Commission lacks power to compel a party to attend mediation; it is true there is no legally coercive power to force a party to mediation. However, the Commission might indicate to a party that, unless and until it has participated in mediation or ADR, the Commission might not be prepared to issue a certificate for the purpose of s 87(1).
c.That possibility incentivises participation in mediation.
d.That is power, in one sense.

17.There is also an obvious and glaring omission from the Commission’s submissions.
18.If the Commission’s position is correct, the whole scheme for mediation may be rendered ineffective by the simple expedient of a party stating to the Commission that it refuses to mediate. At least in the case of a party wishing to initiate litigation, this situation cannot be countenanced. Parliament has imposed the burden of the procedure under Pt 10 on those wishing to initiate litigation, in the public interest. The Commission has the capacity to withhold a certificate if a party wishing to litigate has not even attempted mediation or ADR. The decisions made by Parliament, in the overall public interest, cannot be questioned in this Court.
19.To put it bluntly, the Commission’s position destroys the careful choice made by Parliament to impose real and meaningful burdens, by way of a compulsory procedure of mediation or ADR, on a party before it litigates a retail tenancy dispute. The Commission’s position would obliterate the intended impact of Parliament’s choice to impose of that burden.
20.This observation calls to mind an old wisdom: “[T]he path of the law is strewn with examples of open and shut cases which, somehow, were not; … of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.”[20]
[20]John v Rees [1970] Ch 345, 402.
21.As every barrister knows, many cases that were “never going to settle at mediation”, somehow, settled at mediation.
Argument
22.The strongest point is that the requirement of s 86(3) is expressed in “mandatory” terms.
23.Section 87(1) fortifies the clarity of s 86(3). The words “failed, or is unlikely to resolve” assume an attempt has been made at mediation or ADR, and stand against the Commission’s case. The attempt requires, at least, that mediation or ADR be convened.
24.On the facts, the only thing that the Commission did was to ask the landlords’ solicitor whether they were prepared to mediate. That is well short of the requirement of s 86(3).
a.The words “mediator” in s 86(3)(a) and “suitably qualified person” in s 86(3)(b) imply that a human being (perhaps, soon, AI) has been engaged to attempt to resolve the dispute. This is an indicium of the level of effort required – a person attempting to resolve the dispute. Here, all that occurred is that the Commission asked whether a party was prepared to engage in ADR and did not attempt to assist in resolving the dispute.
b.Accepting a party’s representation that they are not prepared to mediate or engage in ADR is not the same as convening mediation or ADR.

25.Section 85 does not assist the Commission. Mediation is not the only form of ADR and a mediation might not be required for a certificate to issue, but some process directed to “dispute resolution” of the “retail tenancy dispute” must be convened. That is, a process directed to the resolution of the dispute must at least be scheduled to occur, with invitations to the required parties for their attendance (howsoever that is done).
26.The only conceivable indicium against the plaintiff’s straightforward argument is s 92(2)(b).
a.This provision contemplates that costs might be awarded by VCAT in any litigation if a party has “refused to take part in” mediation.
b.This provision is plainly subordinate to ss 86(3) and 87(1) – its subject matter is a potential costs order at the end of VCAT litigation, whereas ss 86 and 87 are concerned with an exercise of public power before litigation commences.
c.Indeed, s 92(2)(b) has nothing at all to say about the content of the Commission’s duty under s 86(3) – s 92(2)(b) presupposes that whatever be that duty, it has been fulfilled, and one of the parties that should have attended mediation or ADR (it having been convened) refused to do so.

VSBC Parties submissions

The VSBC Parties rely on two principal submissions. First, given the background of the dispute between the Landlords and the Tenant and the plaintiff, the VSBC has taken all appropriate and available steps to facilitate the resolution of the disputes between all of the parties. Secondly, even if the Court finds that not to be the case any ‘breach’ of the requirements under these provisions of the RLA does not invalidate the VSBC’s decision to issue the Certificate.

The VSBC has already taken appropriate steps to facilitate the resolution of the dispute by mediation

The VSBC Parties’ primary submission is that the relevant provisions of the RLA have been complied with in that the VSBC Parties have discharged their obligations with respect to making arrangements to resolve the dispute by mediation. That being so, it is contended that no question arises concerning the validity of the Certificate.

More particularly, the VSBC Parties submit that the proper interpretation of the various provisions of the RLA to which reference has been made support its primary submission. As to the proper approach to statutory construction reference is made to the statement of the High Court in Federal Commissioner of Taxation v Consolidated Media Holdings Ltd[21] that:

‘This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory text]’. So must the task of statutory construction end.

Moreover, as the High Court also emphasised in Project Blue Sky Inc v Australian Broadcasting Authority[22] a statutory provision should be construed so that it is consistent with the language and purpose of all of the provisions of the statute, so that the meaning of the particular provisions in dispute must be determined by reference to the statute viewed as a whole.

[21](2012) 250 CLR 503, at 519 [39], quoting Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, at 46 [47].

[22](1998) 194 CLR 355, at 381 [69] (McHugh, Gummow, Kirby and Hayne JJ).

As the VSBC Parties observe, section 84(1)(a) of the RLA empowers the VSBC to make arrangements to facilitate mediation whether or not a dispute has been formally referred to it. Thus, once the VSBC is aware of a dispute between the relevant parties, it is already able to begin its task of making arrangements with respect to a mediation. Significantly, there is no requirement to wait for a formal application for a mediation to be made, and so where — as is the case here — a party complains that the VSBC has not taken steps to arrange a mediation, the Court is entitled to look at circumstances which may have arisen before any formal application was before the VSBC with respect to a specific retail tenancy dispute.

Critically, as the VSBC Parties emphasise, s 85 of the RLA provides that mediation (or other forms of alternative dispute resolution) is not limited, hence restricted, in its coverage to what may be termed the ‘traditional method of mediation’, whereby parties meet in the same room (or online platform) with a mediator and attempt to resolve the dispute through joint and private sessions. In other words, and relevantly in the present context, an actual mediation. Rather, it is submitted, and in my view correctly, the powers which the VSBC is given under the RLA with respect to the form that a mediation or alternative dispute resolution may take is made far more expansive by the wording of s 85; a position which, in my view is also reflected in the broad functions of the VSBC as set out in s 84(1) of the RLA. This position is further reinforced by the provisions of s 10(1) of the Small Business Commission Act 2017 which provides:

10Commission's alternative dispute resolution function
(1) In performing its alternative dispute resolution function under this Act, the Commission may determine the form of alternative dispute resolution to be used in the dispute.

On their own these provisions would be expansive and reinforcing in the present context, but their breadth is expanded further by the definition of “alternative dispute resolution” in s 3 of that Act as including “mediation and preliminary assistance”. Clearly the legislature intended the role of the VSBC to be facilitative and flexible with respect to all species of alternative dispute resolution, mediation or otherwise.

Specifically, in terms of the RLA, under s 85, mediation is taken to include preliminary assistance in dispute resolution, and can include both informal and formal means of communications between the VSBC and the parties to ascertain the utility and desire for a mediation. It follows, it is submitted and in my view quite correctly, that once the VSBC is aware of a dispute between the parties it is entitled to begin informal discussions with the parties with a view to providing preliminary assistance in dispute resolution with a view to resolving that dispute without the need for formal mediation or other dispute resolution processes. This is entirely consistent with, what might be termed, the flexible and facilitative approach to expeditions and cost effective dispute resolution evident in Part 10 of the RLA.[23]
[23]And see the “main purpose” of the RLA as set out in s 1, as follows:
1 Main purpose
The main purpose of this Act is to replace the scheme in the Retail Tenancies Reform Act 1998 with a new scheme to enhance—
(a)the certainty and fairness of retail leasing arrangements between landlords and tenants; and
(b)the mechanisms available to resolve disputes concerning leases of retail premises.

Although s 86(3) of the RLA provides that the VSBC “must arrange” a mediation, precisely what that entails must, it is submitted, be informed by reference to the RLA read as a whole, particularly provisions of Part 10. In my view these provisions could not be construed without regard to their immediate legislative context in Part 10 of the RLA and so could not properly be construed as mandating an actual mediation in all circumstances. Such an interpretation would ignore the expansive provisions of s 85 with respect to the meaning of “mediation”, would ignore the nature of consensual dispute resolution and would, more generally, be at odds with the proper approach to statutory interpretation as stated by the High Court.

A failure to conduct a mediation does not invalidate a certificate under s 87(1)

In the alternative, the VSBC Parties submit that even if the Court does not accept that the VSBC Parties took steps to facilitate the resolution of the dispute between the parties, particularly having regard to the provision of s 86(3) of the RLA, a question arises as to whether there are any consequences of a failure to comply with those obligations and, if so, what are the consequences.

In this context, the VSBC Parties make reference to a number of authorities on the effect of the acts or omissions as a result of non‑compliance with statutory provisions of the nature under consideration.

Non-compliance with statutory provisions was considered by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority, where the plurality stated that:[24]

An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition.

Their Honours then went on to observe:[25]
A better test for determining the issue of validity is to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid … In determining the question of purpose, regard must be had to ‘the language of the relevant provision and the scope and object of the whole statute’.[26]

[24](1998) 194 CLR 355, at 388–9 [91] (McHugh, Gummow, Kirby and Hayne JJ).

[25](1998) 194 CLR 355, at 390–1 [93].

[26]Tasker v Fullwood [1978] 1 NSWLR 20, 24.

In Ko v Hall, the Court of Appeal referred to this issue of whether an act done in breach of a condition regulating the exercise of a statutory power is invalid as ‘the Project Blue Sky question’ before stating:[27]

As Maxwell P pointed out in Ian Street Developer Pty Ltd v Arrow International Pty Ltd,[28] a question of this kind arises only where the provisions imposing the relevant condition are silent about the consequences of non-compliance with it. As a result, the interpreting court must examine the statutory scheme in question in order to decide
where there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition.[29]

Put another way, the task of interpretation requires the court ‘to divine the legislative intention with respect to a matter about which the legislature has said nothing’. As this case further illustrates, the inevitable result is a high degree of interpretive uncertainty, and unpredictability of outcome.

[27][2020] VSCA 224, [38] (Maxwell P and Beach JA).

[28][2018] VSCA 294, [44].

[29]Project Blue SkyInc v Australian Broadcasting Authority (1998) 194 CLR 355, 388–9 [91].

The Court of Appeal in Davis v R identified a identified a number of factors which may fall for consideration of what was referred to there as the ‘Project Blue Sky approach’, those factors being:[30]

. . .
(1) whether the statutory requirement merely regulates the exercise of a function already conferred or is, rather, an ‘essential preliminary’ to the exercise of the function; (2) the nature of the requirement, and, in particular, whether it has a ‘rule-like quality’ that can easily be identified and applied; (3) the public inconvenience that would result if non-compliance means that the decision was invalid; (4) whether there are any other means of giving effect to the relevant requirement, other than by invalidating a decision that does not comply with that requirement; and (5) the extent and consequences of the non‑compliance in the particular case.
[30](2016) 55 VR 1, at 23 [88] (Priest and Santamaria JJA and Cavanough AJA); with reference to Graeme Hill, ‘Applying “Project Blue Sky” – When Does Breach of a Statutory Requirement Affect the Validity of an Administrative Decision?’ (2015) 80 AIAL Forum 54.

The VSBC Parties contend that a consideration of each of these factors provides further comfort that the plaintiff’s case is fundamentally flawed, and ought not to be entertained.
Analysis

In my view, the interpretation of the provisions of the RLA to which reference has been made as contended for by the VSBC Parties must be accepted, based on the language used in these provisions and also having regard to the context of provisions in which they are to be found; for the reasons indicated in the course of considering those submissions and for the reasons which follow. Moreover, provisions such as s 86(3) of the RLA must, in my view, be interpreted as being in the nature of a procedural provision rather than a mandatory provision as the plaintiff contends; in spite of the use of the word “must” in respect of arranging a mediation. This, in my view, follows from the broad conferral of power on the VSBC with respect to dispute resolution in Part 10 of the legislation and regard for what must, ultimately, be the voluntary nature of “mediation”, whether in a broad or narrow sense.[31] Were s 86(3) to be interpreted as a mandatory provision it would follow that the process provided for in the provisions of Part 10 to which reference has been made could be stymied by a party simply refusing to take part in a mediation in which case it would either be pointless or impossible for the VSBC to ‘arrange’ a mediation for the purpose of the provisions of s 86(3), or otherwise.
[31]And see s 85 of the RLA.

Turning now to the particular history and background of this dispute it is clear, in my view, that the construction of these statutory provisions as contended for by the VSBC Parties does facilitate and give effect to the mediation and other dispute resolution provisions of Part 10 of the RLA in the present circumstances. A contrary, more restrictive, approach mandating a formal mediation in all circumstances as contended for by the plaintiff would not have this effect and would be contrary to the evidently facilitative approach of the legislation in the Part 10 provisions, and the RLA more generally.

The first mediation in relation of the underlying dispute between the Landlords and the Tenant, as well as the plaintiff, took place on 12 July 2021. VCAT proceedings were subsequently issued on 9 December 2021 and the parties, including the plaintiff, have been engaged in a drawn‑out and often delayed proceedings in the Tribunal since that time. As a result, by the time the plaintiff’s solicitors sought to have the VCAT Proceeding struck out, the parties have been in disputation in one form or another for more than 18 months. In that context, the Landlords’ solicitor emailed the VSBC on 20 January 2023, attaching the correspondence referred to previously.[32] While the plaintiff now seeks to rely on the fact that it was his brother who was receiving communications from the VSBC leading up to the first mediation, as well as the fact that he did not execute a mediation agreement or confidentiality agreement, the plaintiff has not gone so far in his affidavit to suggest that he was not aware of that first mediation. In light of the communications provided to the VSBC on 20 January 2023, the fact that the plaintiff was the director of the Tenant which attended the first mediation, and the fact that the company of which he was a director was represented at the time of the first mediation, it is understandable why such an assertion is not made in the Koronczyk affidavit as it would be untenable given Mr Sam Koronczyk’s attendance at the mediation and his then role in the Tenant company.[33]
[32]See above, [20].
[33]See above, [17].

Following the receipt of the Landlords’ solicitor’s email on 20 January 2023, the VSBC (through Mr Schramm) contacted the solicitors for both the Landlords and the plaintiff, for the purposes of discussing the matter in general, and to make arrangements to facilitate the resolution of the dispute by mediation. It was during this phone conversation that the Landlords’ solicitors made it clear to Mr Schramm that, given the history of the dispute, the Landlords would not be attending a further mediation.[34]
[34]Mr Koronczyk asserts that he understood, based on an email from Ms Gilbert, a Dispute Resolution Officer at the VSBC, that the Landlords required a payment to them of $59,188 before they would participate in a mediation to resolve the Tenants’ rent relief request (see Second Koronczyk Affidavit [7] and [12]). This position is, however, not reflected in the email from Ms Gilbert which is relied upon for this assertion and, in any event, the material before the Court does not establish any relevance of this assertion to the matters presently in issue.

Having regard to the position that the VSBC has no power to compel a party to attend a mediation, and the fact that the solicitor for the Landlords had told Mr Schramm on behalf of the VSBC that they would not be attending a mediation, I accept that it is very difficult to see what further steps were open to the VSBC. It follows, as submitted by the VSBC, that in accordance with the functions conferred on the VSBC under s 84(1) of the RLA, and the expansive definition of mediation (or other form of alternative dispute resolution) under s 85 of the RLA, that the VSBC has discharged its obligations under s 84(1) of the RLA to undertake making arrangements to facilitate the resolution of the dispute between the parties. No other steps were available to it and in all the circumstances it follows that by simply convening a mediation with the knowledge one party would not attend would be entirely futile and an unnecessarily costly and delay generating exercise. As indicated previously, a proper approach to statutory construction would not produce this result with respect to the operation of Part 10 of the RLA.

Moreover I do not accept, as the plaintiff contends, that the VSBC is effectively able to compel mediation by withholding a certificate until a recalcitrant party cooperates. This assumes that cooperation would be forthcoming in response to this approach rather than, as indicated previously, merely a means of preventing dispute resolution proceeding under Part 10 of the RLA in VCAT or otherwise in accordance with its provisions operating as indicated previously. Moreover, it was conceded by the plaintiff at the hearing of this matter that VCAT has no jurisdictional or other bar to proceeding with hearing and determining a retail lease dispute in spite of the lack of a certificate as a result of s 87(3) of the RLA.

Consequently, having regard to the matters to which reference has been made I am of the view that the VSBC Parties have fulfilled their obligations and that the plaintiff’s position in this respect fails; and would, in any event, have no prospect of success (for the purposes of s 62 of the CPA).

Accordingly, I turn now to the alternative submissions by the VSBC Parties as to the consequences in the present context in the event of a finding that there had been a failure to comply with legislative provisions to which reference has been made. More particularly, I turn to the factors identified in Davis v R[35] in relation to which the VSBC Parties made submissions and the various authorities to which reference has been made.
[35](2016) 55 VR 1, at 23 [88] (Priest and Santamaria JJA and Cavanough AJA); with reference to Graeme Hill, ‘Applying “Project Blue Sky” – When Does Breach of a Statutory Requirement Affect the Validity of an Administrative Decision?’ (2015) 80 AIAL Forum 54.

First, it is submitted that the particular power which is here under consideration is the VSBC’s power to issue a certificate under s 87(1) of the RLA. Despite what is contained in s 86(3) of the RLA, the act or event which enlivens the jurisdiction of the Tribunal under s 87(1) is not the conduct of a mediation, nor any steps taken by the VSBC to ‘arrange’ for such a mediation. Rather, the act or event which enables a party under a retail premises lease to commence proceeding in the Tribunal, under s 87(1) of the RLA, is the procurement by that party of a certificate from the VSBC which relevantly states that a mediation has failed or, critically, is unlikely to resolve the dispute.[36] If it had been the case that a party to a retail premises lease was only able to commence proceedings at the Tribunal after a mediation had been conducted (rather than after it had obtained a certificate), it is reasonable to expect that Parliament would have included such a requirement in express language in s 87(1); and, particularly, having regard to the provisions of s 85, expanding as it does, the meaning of “mediation” and the generally facilitative approach to dispute resolution in Part 10 of the Act.[37] Further, there is nothing in any of the other provisions of Part 10 of the RLA which restricts the VSBC’s power to issue a certificate under s 87(1) until such time as an actual mediation has been conducted. It follows that no “essential preliminary” is identifiable in these provisions in terms of the Davis factors.
[36]Noting, however, that Tribunal proceedings are not affected in terms of their validity due to non‑compliance with s 87(1): see s 87(3); and above [45].
[37]See above, [31].

In my view these submissions must be accepted and also the further submissions that they are supported further by the language of s 87(1); in particular the two prescribed options that VSBC has when deciding whether to issue a certificate. The first of those options, being a certification that a mediation has failed to resolve the dispute, can plainly only be accurately recorded on a certificate after a mediation has in fact been conducted. The second of the certification options, that a mediation is unlikely to resolve the dispute, can only be recorded on a certificate if the VSBC has formed the view that a mediation is unlikely to resolve the issues between the parties and, implicitly, that any such mediation would be futile. If an actual mediation was first required, then the second of the options would be entirely otiose, as a mediation would have already been conducted and had failed. Accordingly, whether or not an actual mediation had been conducted is not determinative of — and indeed at odds with — the matters which the VSBC can take into account when issuing a certificate under the second option contained in s 87(1) of the RLA.

Turning now to the second factor identified in Davis, what might be required from the VSBC to facilitate the resolution of any particular dispute by mediation is not set out with any particularity in the RLA, and indeed may vary from case to case. For example, in many instances, parties may readily agree to a mediation which requires little (if anything) by way of ‘facilitation’ by the VSBC. In other circumstances — such as the present — one or both parties may be reluctant or outright refuse to take part in a mediation. At that point of time, the question arises what is required by the VSBC to continue its ‘facilitation’. In light of these matters I accept that it cannot be said that the nature of the requirement has a “rule‑like” quality. Thus the second factor identified in Davis equally tells in favour of a conclusion that the absence of a mediation does not invalidate a certification under s 87(1).

As to the third factor identified in Davis, it is submitted that substantial public inconvenience would result if parties could not commence proceedings at the Tribunal until such time as an actual mediation had been conducted, or even convened. Under the RLA, the Tribunal has exclusive jurisdiction for any retail tenancy dispute (as defined by the RLA). As a result, parties have no option but to litigate their disputes under a retail premises lease at the Tribunal. If it were the case that both parties were required to participate in an actual mediation before a certificate was issued, a recalcitrant landlord (or tenant) could simply refuse to participate as a means of preventing the other side from ever obtaining a certificate, and therefore ever issuing proceedings in the Tribunal. Needless to say, such an interpretation of Part 10 of the RLA produces an absurd result which is at odds with the proper approach to statutory interpretation, and could not be thought to be a result intended by the legislature.

Similar considerations apply in respect of the VSBC’s obligation to facilitate a mediation. It is not in dispute in this proceeding that the VSBC held discussions and there were communications with both parties in respect of the dispute between the Landlords and the plaintiff. It was during these discussions and communications, to which reference has been made, that the Landlords’ solicitors made it clear that it would not be engaging in a mediation. In my view under Part 10 of the Act the VSBC was not required to go beyond those discussions and communications in the face of the flat refusal to participate by the Landlords, through their solicitor, to participate in an actual mediation before it could be said to have fulfilled its obligation to ‘facilitate’ the resolution of the dispute pursuant to those provisions. Moreover, again the Landlords’ refusal to mediate would, on the plaintiff’s case, mean that no certificate could be provided by the VSBC and, consequently, neither party could ever issue proceedings in the Tribunal in respect of this dispute. Again, for the preceding reasons, no proper interpretation of Part 10 of the RLA could support such a submission.

As to the fourth factor identified in Davis the gravamen of the plaintiff’s complaint is that it was not afforded a mediation in respect of its obligations as guarantor under the Lease. That dispute has been the subject of a proceeding at the Tribunal since December 2021. Seemingly largely due to the plaintiff’s own actions, that proceeding has not advanced in any meaningful way. If it is the case that the plaintiff is genuinely concerned about not having the opportunity to mediate the dispute, then it is telling that there no evidence before the Court that the plaintiff has requested such a mediation or other form of alternative dispute resolution at the Tribunal. It is likely that the Tribunal would readily accommodate such a request, and any actual mediation sought by the plaintiff would then be ordered.[38] Nevertheless, the plaintiff has taken no steps to progress the VCAT proceedings and has not even now filed a defence; though well out of time in this respect under the Tribunal’s orders. Neither has the plaintiff communicated any inkling of its defence to the Landlords; and counsel appearing for the plaintiff in these proceedings had no instructions or knowledge as to what the plaintiff’s defence is or may be.
[38]See VCAT Act s 88 (also applied with respect to retail lease disputes under Part 10 of the RLA by s 91(1)(e) of that Act; and see Jeffery v Corrections Victoria (2004) 21 VAR 196; [2004] VCAT 1211 at [24], where Morris J observed (as VCAT President) observed that VCAT has been “in the vanguard of promoting mediation as a means of resolving disputes.

The fifth factor identified in Davis looks to the extent and consequences of non‑compliance in a particular case. In this respect, the VSBC Parties submit that the extent of any ‘breach’ in this particular case is minimal, given the history of the disputation between the Landlords and the Tenant (and the plaintiff) to which reference has been made. It is difficult to accept that as the sole director of the Tenant, the plaintiff would not have been entirely aware of the Tenant’s solvency position and the likelihood, if not the certainty, of the Landlords pursuing him (the plaintiff); as well the fact that the dispute between the Landlords and the Tenant was to be the subject of a mediation at the VSBC. There was nothing to prevent the plaintiff from attending that mediation, and plaintiff's claim now, about having been kept out of a mediation does, as the VSBC Parties submit, ring hollow; and particularly as Mr Sam Koronczyk attended as he had responsibilities with respect to the Tenant’s leases.[39]
[39]See above, [17].

For these reasons, the fact that the VSBC did not “arrange” or seek to “arrange” a formal mediation or to take any further steps in that direction after the phone conversations on 24 January 2023 had no effect on the plaintiff’s rights, nor did it invalidate the Certificate.

Futility

The plaintiff seeks relief in the form of an order quashing the certificate issued by the VSBC on 25 January 2023 and compelling the VSBC Parties to ‘comply’ with s 86(3) of the RLA. Thus the question, as identified by the VSBC Parties, arises as to how would such relief, if granted, quell any controversy between the parties or do justice as between them in any meaningful way? The plaintiff has already had ample opportunity to put himself in a mediation with the Landlords and continues to have that opportunity in the proceedings before the Tribunal. The real dispute here is between the Landlords and the plaintiff, as guarantor to the subject lease. The Tribunal is fully seized of that dispute.

As observed by the VSBC Parties, s 87(3) of the RLA leaves the Tribunal free to deal with the dispute between the Landlord parties and the plaintiff guarantor. The relief sought by the plaintiff in this proceeding can in no way constitute a necessary prerequisite to the Tribunal dealing with the dispute of which it is seized and in that sense the relief sought by the plaintiff cannot do any justice as between any of the parties.

Conclusion and Orders

For the preceding reasons, I find that the whole of the plaintiff’s claims the subject of the Originating Motion have no real prospect of success for the purposes of s 62 of the CPA. Moreover, I find for the purposes of s 64 of the CPA, that it is not in the interests of justice for this civil proceeding to be disposed of other than summarily under the provisions of s 62 of the CPA. These findings do, in the circumstances, transcend any need to make findings with respect to other bases upon which it has been contended that this proceeding should be summarily disposed of though, as I have indicated, there are good grounds for so doing.

In light of the importance of some of the issues raised in this proceeding in relation to the operation of the Small Business Commissioner’s Office with respect to proceedings under the RLA, I am of the view that it has been appropriate to consider these matters in some detail and to provide detailed reasons where this may have been unnecessary in an application for summary judgment in other contexts. Having done so, and on the basis of the preceding reasons, I am of the view that were the summary judgment application not granted, or not made, the plaintiff would have failed in all its claims the subject of the Originating Motion in any event.

Having regard to these matters, and for the preceding reasons, I am of the view that this proceeding does amount to an unmeritorious attempt by the plaintiff to mount a collateral attack on the jurisdiction of the Tribunal and in circumstances where any such challenge to its jurisdiction should properly have been made or be made in the Tribunal. I accept that it is telling that the plaintiff has chosen not to follow this course. The attempt by the plaintiff in the present proceeding to agitate a collateral attack on the Tribunal’s jurisdiction in this Court has exposed the parties to this proceeding to unnecessary costs and, in the case of the Landlords, to unnecessary delay. This attempt must be regarded as ‘scandalous’ and ‘vexatious’, in the sense that those terms are applied in the circumstances such as the present, for at least those reasons.[40] It follows that the Originating Motion would also have been dismissed on this basis.[41]
[40]See above, [12].
[41]See above, [12].

Accordingly, on the delivery of brief oral reasons on 26 July 2023[42] an order was made that summary judgment be entered for the VSBC Parties (“the 26 July Order”). Following the making of this order the parties were given the opportunity to make submissions addressing the issue of costs. The principal issue between them was not that costs should not follow the event but, rather, whether the costs should be payable on a standard or indemnity basis. This issue was resolved by agreement between the parties, as now reflected in the 26 July Orders.
[42]The oral reasons for the purpose of providing some context to the 26 July Order being, in substance, above [57]–[59].

SCHEDULE OF PARTIES

S ECI 2023 00605
BETWEEN:
MARK KORONCZYK	Plaintiff
v
VICTORIAN SMALL BUSINESS COMMISSIONER	First Defendant
VICTORIAN SMALL BUSINESS COMMISSION	Second Defendant
PERPETUAL LIMITED (ACN 000 431 827) IN ITS CAPACITY AS CUSTODIAN OF THE VICINITY NVN TRUST	Third Defendant
VICINITY FUNDS RE LIMITED (ACN 084 098 180) AS TRUSTEE FOR VICINITY NVN TRUST	Fourth Defendant
BRIDGEHEAD PROPRIETARY LIMITED (ACN 006 082 515)	Fifth Defendant

Citations

Koronczyk v Victorian Small Business Commissioner [2023] VSC 431

Cases Citing This Decision

0

Cases Cited

4

Statutory Material Cited

0

Hoh v Frosthollow Pty Ltd [2014] VSC 77

Brown v Corrections Victoria [2022] VSC 217

Victoria International Container Terminal Ltd v Lunt [2021] HCA 11

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[2023] VSC 431

26 July 2023 (Publication of reasons 28 July 2023)