Polylux Pty Ltd v Corpers (No 5) Pty Ltd

[2009] NSWADT 284

CITATION:	Polylux Pty Ltd v Corpers (No 5) Pty Ltd [2009] NSWADT 284
DIVISION:	Retail Leases Division
PARTIES:	APPLICANT Polylux Pty Ltd First RESPONDENT Corpers (No 5) Pty Ltd 2nd RESPONDENT Michael Haydon O’Brien
FILE NUMBER:	085186
HEARING DATES:	21 July 2009
SUBMISSIONS CLOSED:	21 July 2009
DATE OF DECISION:	20 November 2009
BEFORE:	Bluth D - Judicial Member
CATCHWORDS:	Leave to lodge proceedings with extended time – meaning of liability or obligation
LEGISLATION CITED:	Retail Leases Act 1994 Administrative Decisions Tribunal Act 1997 Conveyancing Act 1919
CASES CITED:	Limitation Act 1969 Bischof & Anor v Werncog Pty Ltd [2004] NSWADT 241 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 DB Reef Funds Management Ltd and P.T. v Valentino Home Fashion Pty Ltd [2009] NSW ADT 216 Heatherway Ply Ltd v Dykes & Wildie [2006] NSWADT 354 Sydney City Council v Sezegarac [I998] 43 - NSWLR 195 Western Sydney Area Health Service v Gabriel [2001] NSWCA 477 (17 December 2001)
REPRESENTATION:	APPLICANT Dr J Keogh, barrister RESPONDENT E Young, barrister
ORDERS:	1. The Applicant’s retail tenancy claim in the Application for Original Decision in proceedings may be lodged more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose 2. Proceedings 085186 are listed for directions hearing on Thursday 10 November 2009 at 10:30am.

REASONS FOR DECISION

Background

1 Polylux Pty Ltd (the Applicant) was the proprietor of a Shopping Centre at 41-43 Smart Street, Fairfield that included the subject retail premises (shops 3 and 4). Mr and Mrs Marr are the directors.

2 The Applicant ceased to be the lessor of the subject premises as a result of the sale of the Shopping Centre on 11 December 2002.

3 The First Respondent (Corpers (No 5) Pty Ltd was the lessee of the subject premises (shops 3 & 4) pursuant to a lease commencing on 1 March 1998 and terminating on 28 February 2003 (the Lease).

4 The Second Respondent (Michael Haydon O'Brien) guaranteed the performance of the Lease by the First Respondent pursuant to the Deed of Guarantee entered at the same time as the Lease and referred to in Item 15 of the Lease (Deed of Guarantee).

5 Following the sale of the Shopping Centre on 11 December 2002 a proper accounting of the rent and outgoings in respect of the subject premises revealed to the Applicant in October 2004 that there was outstanding rental and unpaid outgoings as a result of a shortfall in rent payments by the First Respondent and a miscalculation of the outgoings by the Applicant.

6 On 17 November 2004 the Applicant's solicitor Mr Steven Ackerman (Mr Ackerman) served a letter of demand on the Second Respondent seeking payment of all monies outstanding under the Lease as the Second Respondent had guaranteed the payment of all monies payable to the Lessor under the Deed of Guarantee.

7 The Deed of Guarantee inter alia required the guarantor to "pay on demand to the Lessor all moneys which the Lessee shall have failed to pay and also will make good to the Lessor on demand all losses, damages, costs and expenses thereby arising or incurred by the Lessor ...".

8 The Applicant states that the First and Second Respondent have not paid the outstanding rent and outgoings demanded by the Applicant.

9 On 22 September 2008, the Applicant lodged an Application with this Tribunal as a Retail Tenancy Claim seeking to recover monies pursuant to the Lease, having unsuccessfully attempted to resolve the dispute by a mediation convened under the provisions of the Retail Leases Act 1994 (the Act).

10 At a Directions Hearing before the Tribunal on 20 November 2008 the Tribunal directed the Applicant to file and serve any evidence supporting the making of an Order under s71B(1) of the Act.

11 Section 71B of the Act provides:

71B Lodging of Claim After 3 Years

(1) A retail tenancy claim may be lodged more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose, if the Tribunal orders that the claim may be lodged with the Tribunal.

(2) An unconscionable conduct claim may be lodged more than 3 years but no later than 6 years after the alleged unconscionable conduct occurred, if the Tribunal orders that the claim may be lodged with the Tribunal.

(3) The Tribunal may make an order under this section:

(a) on application by the party or former party concerned, and

(b) after hearing such of the persons likely to be affected by the application as it sees fit, and

(c) if the applicant satisfies the Tribunal that it is just and reasonable to make the order.

12 Through the discretionary powers given to the Tribunal in s71B(1) of the Act the Tribunal may permit a Retail Tenancy Claim to be lodged with the Tribunal "more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose" if the Tribunal is satisfied "that it is just and reasonable to make the order" (s71B(3)(c) of the Act).

13 Consequently, the question before this Tribunal is whether it is just and reasonable to make an order extending the time for the applicant to lodge a Retail Tenancy Claim pursuant to S71B(1) of the Act.

Applicability of s117 of the Conveyancing Act 1919

14 Prior to considering the issues raised under S71B of the Act, at the Hearing of the matter on 24 April 2009 given that the Shopping Centre was sold, I requested that on the next occasion before this Tribunal the parties consider the applicability of s117 of the Conveyancing Act 1919 to this matter.

I section out the section:

117 Rent and benefit of lessees' covenants to run with reversion

(1) Rent reserved by a lease and the benefit of every covenant or provision therein contained having reference to the subject-matter thereof and on the lessee's part to be observed or performed, and every condition of re-entry and other condition therein contained shall be annexed and incident to, and shall go with the reversionary estate in the land or in any part thereof immediately expectant on the term granted by the lease, notwithstanding severance of that reversionary estate, and shall be capable of being recovered, received, enforced, and taken advantage of by the person from time to time entitled, subject to the term, to the income of the whole or any part as the case may require of the land leased.

This subsection extends to a covenant to do some act relating to the land, notwithstanding that the subject-matter may not be in existence when the covenant is made.

(2) The benefit of every condition of re-entry or forfeiture for a breach of any covenant or condition contained in a lease shall be capable of being enforced and taken advantage of by the person from time to time entitled, subject to the term, to the income of the whole or any part, as the case may require, of the land leased, although that person became, by conveyance or otherwise, so entitled after the condition of re-entry or forfeiture had become enforceable.

(3) This section shall not render enforceable any condition of re-entry or other condition waived or released before the person became entitled as aforesaid.

(4) This section applies to:

(a) leases made after the commencement of this Act, and

(b) leases made before the commencement of this Act,

but with respect only to rent accruing due after the commencement of this Act and to the benefit of a condition of re-entry or forfeiture for a breach committed after the commencement of this Act of any covenant, condition, or provision contained in the lease.

15 At the hearing on 24 April 2009, the Applicant submitted that the Applicant/lessor as the vendor of the Shopping Centre expressly contracted with the purchaser of the Shopping Centre to ensure that the Applicant's right to recover outstanding rent and outgoings were preserved after completion.

16 The Contract for the Sale of Land (the Contract) was produced and the relevant clause relating to unpaid rent, other monies and the applicability of s117 of the Conveyancing Act 1919 is found in special conditions 43.5.1 and 43.6 which stated:

43.5.1 The Parties agree that the following conditions will apply:

(i) The Vendor will be entitled to rent up to and including the date of completion of the Contract;

(ii) if rent has been paid to the Vendor in respect of the period expiring after the date of completion, the proportion of that money applicable to the period after the date of completion will be allowed to the Purchaser;

(iii) if after the date of completion the Purchaser receives any rent in respect of the period before or up to the date of completion, the Purchaser must procure the payment of that money to the Vendor;

(iv) if any rent is in arrears as at the date of completion:

(a) insofar as the unpaid rent is in respect of a period comprising or forming part of the month in which completion of this contract occurs, the purchaser will pay the Vendor the amount of that unpaid rent;

(b) insofar as the unpaid rent is respect of a period prior to the period referred to in sub-paragraph the purchaser assigns the debt in respect of unpaid rent to the Vendor on completion.

43.5.3 The Vendor may recover from and institute legal proceedings against tenants and guarantors after completion of the Contract in respect of unpaid rent (if any) referred to in Special Condition 43.5(iv)(b).

43.6 The Vendor and Purchaser intend that Special Condition 43.5 applies despite Section 117 of the Conveyancing Act, 1919. If that does not preserve the Vendor's rights, then if asked by the Vendor, the Purchaser must assign to the Vendor the right to recover money owed to the Vendor under Leases.

17 Special condition 43.5.1(iv)(b) of the Contract expressly provided that "the purchaser assigns the debt in respect of unpaid rent to the Vendor on completion." The subparagraph refers to rent for any period prior to the month of completion.

18 Although the effect of s117(1) of the Conveyancing Act 1919 would indicate that the assignor (vendor) of the reversion loses all right to sue the tenant for breaches of covenant and the assignee (purchaser) alone is entitled to sue, even for breaches that occurred before the assignment, Professor Peter Butt in his Land Law, Fifth Edition (2006), noted at [15163],

“it seems that the assignee and assignor may effectively reverse this result, by the assignee assigning to the assignor the right to sue on breaches that preceded the assignment. Alternatively, it may be possible for the parties to oust s117 altogether by agreeing that the benefit of covenants should not pass to the assignee." (see Holt v Heathersfield Trust Ltd [I9421 KB 1 at 4 ; Ashmore Developments Pty Ltd v Eaton [I9921 2 Qd R 1 ; Kataria v Safeland plc [I9981 1 EGLR 39 ; IRC v John Lewis Properties plc [2002] 1 WLR 35 at 41 (affirmed on different grounds, [2002] EWCA 1869). If the tenant is to be bound, notice of the assignment must be given to the tenant, or in a suit against the tenant the vendor must join the purchaser as a party (as a plaintiff if the purchaser consents, or as a defendant if the purchaser does not consent). Re King [I9631 Ch 459 at 488 ; Dalegrove Pty Ltd v Isles Parking Station Pty Ltd (1988) 12 NSWLR 546 at 555 ; Ashmore Developments Pty Ltd v Eaton [I9921 2 Qd R 1 per Bryne J )”.

19 I am satisfied that the Contract specifically preserved the Applicant's entitlement to sue for breaches in respect of unpaid rents and other monies owing up to the month in which completion of the contract took place, but not for the actual month in which completion took place.

Statutory limitation preventing a claim against the First Respondent

20 Counsel for the Respondents submitted:

1. The maximum period which the Tribunal can extend time under s.71B of the Act is up to 6 years. This period of time has already passed with respect to the First Respondent.

2. The last date that any liability or obligation could possibly have arisen for the First Respondent was 31 December 2002, which was the last day of the Lease.

3. It is submitted that, properly construed, the Lease in fact provided for one months rent in advance, so the last date of liability or obligation was in fact 1 December 2002.

4. However, whatever is the actual date that the obligation or liability of the First Respondent last arose, s.71B of the Act, in unequivocal terms, expressly prohibits a claim from being lodged at any time after 6 years from that date, and that date elapsed in December 2008.

5. In other words, it was put that s.71B of the Act provides an absolute bar to proceedings in the Tribunal after 6 years from the date that the obligation or liability arose, and that such a bar applies to the claim against the First Respondent.

The Applicant's s71B Claim under the Retail Leases Act

21 My attention was drawn by Counsel for the Respondents to the public interest considerations, in the context of the Act giving jurisdiction to this Tribunal. The objects are contained in s.3 of the Administrative Decisions Tribunal Act 1997 (NSW) (“ADT Act”), which provides as follows:

3 Objects of Act

The objects of this Act are as follows:
…
(b) to ensure that the Tribunal is accessible, its proceedings are efficient and effective and its decisions are fair,

(c) to enable proceedings before the Tribunal to be determined in an informal and expeditious manner,
…

22 Both Counsel noted that there are significant public interest considerations in the enforcement of time limits. These were discussed at length by McHugh J (in the majority) in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541, in which he said (at 555):

“The discretion to extend time must be exercised in the context of the rationales for the existence of limitation periods. For nearly 400 years, the policy of the law has been to fix definite time limits (usually six but often three years) for prosecuting civil claims. The enactment of time limitations has been driven by the general perception that “[w]here there is delay the whole quality of justice deteriorates.” Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists. As the United States Supreme Court pointed out in Barker v Wingo, “what has been forgotten can rarely be shown”. So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now “knowing” that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance because its relationship to the cause of action is no longer as apparent as it was when the cause of action arose. A verdict may appear well based on the evidence given in the proceedings, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.

Even before the passing of the Limitation Act 1623 (Imp), many civil actions were the subject of time limitations. Moreover, the right of the citizen to a speedy hearing of an action that had been commenced was acknowledged by Magna Carta itself. Thus for many centuries the law has recognised the need to commence actions promptly and to prosecute them promptly once commenced. As a result, courts exercising supervisory jurisdiction over other courts and tribunals in their jurisdictions have power to stay proceedings as abuses of process if they are satisfied that, by reason of delay or other matter, the commencement or continuation of the proceedings would involve injustice or unfairness to one of the parties.

The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even “cruel’, to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period. As the New South Wales Law Reform Commission has pointed out:

“The potential defendant is thus able to make the most productive use of his or her resources and the disruptive effect of unsettled claims on commercial intercourse is thereby avoided. To that extent the public interest is also served.”

23 In addition to the public interest considerations, Counsel for the Respondents submitted the following reasons as to why the Tribunal should not make an order under s71B of the Act.

(a) The Applicant had known of the circumstances the Applicant believes give rise to its claim against the Respondents since at least some (unspecified) time in 2003.

(b) In 2003 the Respondents would have been in a far better position to meet the claim and attempt to resolve it, as it was shortly after the termination of the Lease (31 December 2002).

(c) The applicant was at all relevant times legally represented, and in fact issued a letter of demand through its lawyers on 14 November 2004, and again on 29 May 2006.

(d) Since at least 14 November 2004, Mr Ackerman acting for the Applicant was aware of the claims that the Applicant company alleged against the Respondents. It may be inferred that Mr Ackerman could have (and probably did) discuss these with the Applicant’s directors at any or various times since at least that time.

(e) None of the directors of the Applicant gave evidence about the delay, although an affidavit was sworn by Mr Ackerman. The basic thrust of Mr Ackerman’s evidence was that one of the applicant’s directors, William Marr, was too sick or too busy running the company’s business to provide Mr Ackerman with instructions to commence proceedings.

(f) However, there are two directors of the applicant company. William Marr is one director, and Emilie Marr is the other director. Emilie Marr is also the company secretary, and has been so since 1977.

(g) Mr Ackerman’s evidence was indirect and vague about significant aspects of the alleged illness of Mr Marr and no details were provided.

(h) The fact that a company does not provide instructions to solicitors to commence proceedings does not suspend the running of time for the purposes of a limitation period. It is clear that the applicant formed a belief that it was owed amounts in 2003, and it could have brought these proceedings either itself or through solicitors at any time since then, but did not do so.

Prejudice to the respondents caused by the delay

(i) A significant amount of time has elapsed causing the Respondents some difficulty in defending themselves.

(j) Whilst the Second Respondent as the director of the First Respondent) has a general recollection of various events which took place many years ago, he now does possess a precise recollection of various conversations which would be important in establishing the defences of the Respondents.

(k) This difficulty for the Respondents would not have arisen if the Applicant had commenced proceedings within the 3 year time limit.

(l) The Respondents do not now have the financial records that relate to the period of the Applicant’s proposed claim.

24 A forceful argument on behalf of the Second Respondent was that the Act does not permit lessors to make claims against persons who are not parties to a lease.

Who may be the subject of a “retail tenancy claim” under the Act

25 The meaning of a retail tenancy claim” in ss.71 and 71 B of the Act is contained in s.70 of the Act as follows:

70 Definitions

In this Division:

retail tenancy claim means any of the following:

a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being:

a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund),

…

26 In turn, a “retail tenancy dispute” is defined in s.63 of the Act as follows:

63 Interpretation
(1) In this Part:

retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates, and (without limiting the generality of the foregoing) includes a dispute about a security bond, but does not include a dispute of the kind referred to in section 19 (1) (b) or 31 (1) (b) as to the rent payable under a retail shop lease (where the rent is to be current market rent for the shop).

27 It was submitted by Counsel for the Respondents that a retail tenancy dispute under the Act may only be with respect to the liabilities or obligations of a party to a retail shop lease and that the Second Respondent was not a party to the former retail shop lease.

28 The Second Respondent was a party to a separately constituted document under which he arguably guaranteed or indemnified the rent payments of the First Respondent (“Deed”).

29 The Deed was referred to in the lease, but not incorporated into it. Clause 25.7 of the Lease makes clear that the Deed is an entirely separate document to the Lease and that its significance to the Lease was merely with respect to representations in relation to the Lease.

30 By contrast, in Heatherway Ply Ltd v Dykes & Wildie [2006] NSWADT 354, this Tribunal ruled on a guarantee that was incorporated into and formed part of the retail lease and the guarantor was therefore a party to the lease and the dispute was within the definition in s.63 of the Act.

31 Counsel for the Respondents submitted that it is clear from the legislative scheme contained in Part 8 of the Act, and in particular the specific definition in s.63 of the Act referred to above, that the jurisdiction of this Tribunal was not intended to be at large or to bind third parties, but was specifically intended to resolve retail tenancy disputes between the parties to retail leases. This is supported by the long title to the Act itself:

“An Act to make provision with respect to the leasing of certain retail shops and the rights and obligations of lessors and lessees of those shops, and for other purposes.”

Time has expired in relation to the Second Respondent

32 Counsel further submitted that the limitation periods referred to above also apply to the Second Respondent, in that the ability of the Applicant to claim against the Second Respondent expired in December 2008.

33 Even if this Tribunal finds that it has jurisdiction to enforce deeds in addition to retail leases, it was submitted by Counsel that under s.71 B of the Act the “liability” of the Second Respondent under the Deed arose simultaneously with the date the First Respondent was due to pay rent, even though the “obligation” to make good on that guarantee or indemnity may have arisen only upon that demand being made on the Second Respondent on 17 November 2004.

34 It was submitted that the use of the word “or” in s.71 B of the Act indicates a disjunctive use of the concepts of “liability” and “obligation”, which in turn requires that the time limitation commences on the happening of the earlier of the two.

35 It was put that the substantive difference between “liability” and “obligation” is the difference between a legal liability arising and the enforcement of that liability. For example, a party in breach of a contract is liable from the date of breach, but there is no obligation to pay damages until a court orders such payment.

36 In this case, if the Deed is enforceable and gave rise to any “liability” by the Second Respondent, it would be when the First Respondent failed to make a rent payment under the lease; the “obligation” to make good such payment only arose on 17 November 2004 when a demand was made. However, relevantly, the time limit as against the Second Respondent expired on 1 December 2008 (or 31 December 2008) at the latest.

37 Counsel for the Respondents observed that the Applicant’s submission that the time limit for the Second Respondent only commenced when demand was made of him on 17 November 2004 cannot be sustained. If such reasoning were used, a party could easily circumvent the time limits clearly and expressly specified in the legislation, and effectively have an unlimited time to make demand, and the self evident purpose of the time limit in the Act and the public interest considerations referred to above, would be defeated.

(a) The Applicant contended that the "liability or obligation" of the Lessee and guarantor "arose" not earlier than 11 December 2002 in the case of the First Respondent (Lessee) and on 17 November 2004 in the case of the Second Respondent (O'Brien) with the service of the letter of demand upon the Second Respondent.

(b) In considering the relevant circumstances the Applicant submitted that the Tribunal should consider the physical disabilities of the Applicant's directors as a result of their declining health. Mr Marr’s disabilities were described in some detail in affidavits sworn by Mr Ackerman.

(c) It is arguable that the nature of the disabilities suffered by Mr Marr are such that they would enable the Applicant to extend the limitation period in which to commence a cause of action by virtue of s52 and s11(3)(b)(i) of the Limitation Act 1969 .

(d) The provisions of s71B(1) of the Act are meant to be broadly applied.

(e) In the Limitation Act the maximum period of six years within which an action may be brought runs "from the date on which the cause of action first accrues": s14

(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims ...

(f) If the legislators in drafting the the amendment to S71B of the Act had wished to align the relevant commencement of action date in s71B(1) with the Limitation Act it would have been relatively simple to have drafted the s71B(1) provision to read "no later than six years running from the date on which the cause of action first accrues" rather than "no later than six years after the liability or obligation ... arose".

(g) Consequently, as s71B(1) of the Act is currently expressed, the legislature intended to leave to the Tribunal a broad discretion to determine issues related to "liability or obligation".

(h) The Deed of Guarantee was a separate document annexed to the lease and executed by the Second Respondent as the guarantor. The Applicant submitted that the "liability or obligation" under the Deed did not arise until a demand for payment was made upon the Second Respondent on 17 November 2004.

(i) The Deed of Guarantee expressly required the guarantor being the Second Respondent to "pay on demand to the Lessor all moneys which the Lessee shall have failed to pay ..." and the Applicant's letter of demand to the Second Respondent dated 17 November 2004, it was submitted by the Applicant fulfilled the requirements of a demand in the formal sense.

(j) Two recent cases of the Tribunal have dealt with the issue of "liability" and "obligation" and the limitation periods that arise under s71(2) and s71B(1) of the Act.

(k) In Bischof & Anor v Werncog Pty Ltd [2004] NSWADT 241 the Tribunal pointed out that in the context of a retail tenancy claim a 'liability' may arise later than the 'obligation' from which the liability is derived and that in some situations it will be sufficient under s71(2) for the party lodging the claim to do so within the three years after the 'liability' arose. When Bischof was decided the Act had not been amended to include s71B(1) and had the same set of facts existed post s71B(1) the Applicant submitted that, with the consent of the Tribunal, the relevant period of time would have fallen within the six year period established by s71B(1).

(l) In Heatherway Pty Ltd v Dykes & Wildie [2006] NSWADT 354 the Tribunal was in a position to examine the position of the parties in respect of liabilities and obligations arising from a guarantee. Whilst the Tribunal in Bischof had considered liabilities and obligations pursuant to s71 of the Act in 2004, the Tribunal in Heatherway which was decided on 14 December 2006 had the opportunity to consider such questions in the light of the amendment that introduced s71B into the Act on 1 January 2006.

38 The Tribunal's discussion on the status of the guarantee relevant to s71(2) and s71B(1) of the Act is contained in paragraphs 125-133 of the Decision.

125. With reference to Bischof v Werncog, Mr Zipser observed that the Tribunal there was dealing with a situation where a failure to perform an act gave rise to separate causes of action on each day when the act was done. In this situation, he said, there may be a distinction between the concepts of 'liability' and 'obligation'. He drew attention to discussions of this situation in Hawkins v Clayton (1988) 167 CLR 539 at 589 and Sheldon v McBeath (1993) ATR 81-209. But this was not the situation, he maintained, under clause 13 of the Lease.

126. In view of the Tribunal's conclusion that the period of limitations applicable to Heatherway's claim is six years, not three years, it strictly does not have to determine whether or not a demand for payment was a pre-requisite to Dykes and Wildie becoming liable under the guarantee. It will, however, express an opinion on this matter.

127. It is well established that while an indemnity involves the assumption of primary liability by the indemnifier, a guarantor undertakes secondary liability only. His or her liability arises only if the principal debtor has defaulted and is liable to the creditor. The terminology of clause 13 suggests clearly that a guarantee, not an indemnity;-was intended. This follows from the use of the words 'guarantee' and 'guarantor' throughout and from the fact that in clauses 13.3 and 13.4 the guarantor's liability is expressed to arise 'if the tenant does not' pay rent or perform an obligation.

128. The fact that clause 13 appears properly to be characterised as a guarantee does not lead to the conclusion that the liability of the two guarantors is dependent on a demand having been made. The question whether a demand is necessary must instead be resolved by construction of the whole agreement between the parties (see for example the Federal Court decision in Re Taylor; Ex parte Century 21 Real Estate Corporation [I9951 FCA 1335; (1995) 130 ALR 723 at 727-728; Benson-Brown v Smith [I9991 VSC208 at [133]).

129. Accordingly, it cannot be said, as Mr Zipser argued, that the opening words of clause 13.2 are sufficient to indicate that no demand was required to give rise to liability under clause 13. Instead, the succeeding provisions of clause 13 - notably clauses 13.3 and 13.4 -must be interpreted alongside clause 13.2.

130. The provision that specifically deals with the liability of Dykes and Wildie as 'guarantor' is clause 13.3. It covers the situation where the tenant, NCF, 'does not pay any money due under this lease'. It expressly states that in such event 'the guarantor must pay that money to the landlord on demand ...'.

131. This indication that a demand was necessary is weakened by clause 13.4. It is of broader scope, covering any failure by the tenant to perform any of the tenant's obligations under the lease ...' It states that the guarantor must 'compensate the landlord' without suggesting expressly or by implication that a prior demand is necessary. This clause, standing alone, would clearly extend to a tenant's failure to perform the obligation to pay rent and would not require any prior demand.

132. The Tribunal's conclusion regarding the true interpretation of these contradictory provisions is that the guarantor's liability when rent is unpaid should be taken to be governed by the provision that more specifically purports to deal with this situation. This provision is clause 13.3, which does require that a demand be made.

133. For these reasons, the Tribunal is inclined to the view that the 'liability' of Dykes and Wildie under clause 13 did not arise until (at the earliest) payment of the outstanding rent was demanded from Dykes in the letter of 17 June 2003. So far as Wildie at least is concerned, the date of demand would appear to have been as late as 17 May 2004. If these conclusions are correct, Heatherway's proceedings were instituted within the three-year period that would have been required under 5 7112) of the RL Act if that subsection were applicable.

39 In Heatherway it was accepted that the date of demand under the guarantee was "as late as 17 May 2004". As Heatherway had filed an amended Statement of Claim in the Tribunal on 23 November 2005 the Tribunal reached the conclusion that the claim was made within the three year period prescribed by s71(2) of the Act and the claim under the guarantee was upheld.

40 In any event, I believe this matter is finally determined by the recent decision of the Tribunal in DB Reef Funds Management Ltd and P.T. v Valentino Home Fashion Pty Ltd [2009] NSW ADT 216 on 17 August 2009 when Tribunal Member Callaghan SC at [22] stated:

“In my opinion, I should follow the approach dictated by Bischof and Heatherway. A retail tenancy claim may ultimately be found by the Tribunal to contain, in respect of a particular Order sought, either a relevant “liability” or a relevant “obligation” such as to warrant an order under s72 of the RL Act. That is not an issue to be determined in an interlocutory application such as this. This application is for the discretionary grant of extensions of time/or leave to proceed; it is not akin to one which may give rise to summary determination of the proceedings (cf Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 533”

Tribunal appropriate forum to determine issues

41 The Applicant contends that on a just and reasonable basis the Tribunal should grant the Order allowing the Applicant to proceed to a Hearing before the Tribunal.

42 Section 71B of the Act does not preclude the claim from being brought in a court. Section 75(2) provides:

(2) In determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a court is to have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court.

43 The Applicant submitted that it would not be just or reasonable to allow the parties to incur further time and expense (in addition to the costs already incurred in bringing the application in the Tribunal) in requiring the application to be brought in a court when it could be dealt with by this Tribunal which is invested with specialist knowledge in retail lease matters.

44 The primary test for determination as to whether or not an extension of time should be granted is "whether there can be a fair trial of the issues between the parties"; see Brisbane South Regional Health Service v Taylor [I961] 186 CLR 541 and – South Western Sydney Area Health Service v Gabriel [2001] NSWCA 477 (17 December 2001). In other words, whether there is prejudice to be suffered by the defendant if the extension is granted; Sydney City Council v Sezegarac [I998] 43 - NSWLR 195.

45 The Applicant's claim is for unpaid rent and outgoings, for a specified period, pursuant to a lease. The claim against the Second Respondent relates to a Deed of Guarantee. The Lease and Deed of Guarantee are in evidence. The calculation of the amount claimed is a mathematical exercise based upon the rent payable under the lease and the invoices for outgoings after subtracting from that amount the payments made by the First Respondent.

46 There is no dispute between the parties as to the payments made by the First Respondent who has provided a list of the payments with which the Applicant agrees. I am informed that the Applicant's bank records confirming those payments are available. The Respondents have been aware of the totality of the claim since at least November 2004 and there have been considerable communications and correspondence between the parties since that time regarding the claim. Further, the parties have undertaken mediation in a genuine attempt to resolve the dispute.

47 Conclusion

In relation to the delays, I take note of the evidence of Mr Ackerman regarding the physical and mental limitations on the directors of the Applicant to conduct their affairs and in particular I have noted from a company search of the Applicant that the relevant statutory returns have not been filed (so the search shows) for a number of years with ASIC. This indicates to me that the directors have not been able to fully conduct themselves in the management of the Applicant and this is also evident from the Ackerman affidavit.

Further, this is basically a dispute about the quantum of rent being paid and the financial records would not be hard to be reproduced, so I do not believe there is any prejudice against the Respondents in the delay nor am I persuaded that the Respondents will suffer any significant forensic disadvantage.

Following the approach in Heatherway and Bischof as determined recently by this Tribunal in the DB Reef Funds case, the relevant liability or obligation was at the time of demand and in this case in relation to the Second Respondent 17 November 2004. Such claim is a retail tenancy dispute within s63 of the Act being liabilities or obligations arising under a retail lease through a collateral deed of guarantee.

Ultimately, I am mindful of the public interest as I was directed by both Counsel to the decision of McHugh J in Brisbane South Regional Health Authority Case and it is a balancing act weighing up the advantages and disadvantages to the parties.

Accordingly, I am of the view that it is just and reasonable to grant the relief sought.

1. The Applicant’s retail tenancy claim in the Application for Original Decision in proceedings may be lodged more than 3 years but no later than 6 years after the liability or obligation that is the subject of the claim arose.

2. Proceedings 085186 are listed for directions hearing on Thursday 10 December 2009 at 10:30am.