Tok Holdings Pty Ltd v Marchionna
[2025] VCC 539
•6 May 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-22-05123
| TOK HOLDINGS PTY LTD (ACN 006 559 066) | Plaintiff |
| v | |
| RICHARD MARCHIONNA | Defendant |
---
JUDGE: | JUDICIAL REGISTRAR BENNETT | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 July 2024, 18 November 2024 and 4 February 2025 | |
DATE OF JUDGMENT: | 6 May 2025 | |
CASE MAY BE CITED AS: | TOK HOLDINGS PTY LTD v MARCHIONNA | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 539 | |
REASONS FOR JUDGMENT
---
Subject:LANDLORD AND TENANT
Catchwords: Retail tenancies – exercise of option – validity of exercise
Retail tenancies – holding over after expiry of term – unpaid rent – guarantee of tenant’s obligations
Legislation Cited: Retail Leases Act 2003 (Vic), s 17, s 26, s 81(1A), s 89(4)
Cases Cited:Lolly Pops (Harbourside) Pty Ltd v Wencog Pty Ltd (1998) 9 BPR 16,361; Vered Nominees Pty Ltd v Scalex Pty Ltd [2002] VCAT 392; Kavia Holdings Pty Ltd v Suntrack Holdings Pty Ltd [2011] NSWSC 716; Quadling v Robinson (1976) 137 CLR 192; Astor Theatre WA Pty Ltd v Zimmermann Investments Pty Ltd [2014] WASC 329; P G Kazis Nominees Pty Ltd v Bakers II Pty Ltd [2018] SADC 48; AZW International Pty Ltd v N J Agius Pty Ltd [2018] VCAT 1281; Sea One North Pty Ltd v Ignazia Pty Ltd [2024] NSWSC 343; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | S Weinberg | Tisher Liner FC Law |
| For the Defendant | The Defendant appeared in person |
JUDICIAL REGISTRAR:
1This proceeding concerns shop 10-16, Ground Floor, Trak Centre, 443-449 Toorak Road, Toorak (“Premises”) and an associated carpark space (“Carpark”). The plaintiff is the landlord of the Premises. The tenant is Jorimar Solutions Pty Ltd (“Jorimar”), which has for some years operated an eatery known as “Funkies” from the Premises. The defendant, Mr Richard Marchionna, is the sole director of Jorimar and runs the eatery. He is also the guarantor of Jorimar’s obligations under the lease and licence entered into by Jorimar in respect of the Premises and Carpark.
2The plaintiff sues the defendant for unpaid rent in relation to the Premises and unpaid licence fees in relation to the Carpark, plus associated legal costs. The central issue for determination in this proceeding is the legal basis upon which Jorimar has been occupying the Premises since 1 April 2020.
A. The lease and licence – overview
3On 31 March 2011, Jorimar entered into a lease of the Premises with Paisley Ridge Pty Ltd, the former registered proprietor of the Premises (“Lease”). The Lease was for a term of 5 years from 1 April 2011 to 31 March 2016 and included a licence in respect of the Carpark. The defendant guaranteed Jorimar’s obligations under the Lease. He signed the Lease both as guarantor and as the sole director and secretary of Jorimar.
4On 4 September 2015, a Deed of Variation of Lease was entered into between Paisley Ridge Pty Ltd, Jorimar and the defendant (“Variation Deed”). The Variation Deed varied the Lease in certain respects and extended the term for 4 years, from 1 April 2016 to 31 March 2020. The Lease, as varied by the Variation Deed (the “Varied Lease”) contained an option, exercisable by the tenant, to renew for a further term of 3 years from 1 April 2020 to 31 March 2023 (“Option Term”). The central issue to which I have referred in paragraph 2 above turns upon the question of whether Jorimar exercised this option. The Varied Lease also contained overholding provisions to address circumstances where the tenant remained in possession of the Premises without objection by the landlord after the end of the term.
5On 17 December 2018, the plaintiff became the registered proprietor of the Premises. It was not in dispute that, since that time, the plaintiff has been entitled to the benefit of the covenants made by Jorimar and the defendant under the Varied Lease.
6It was also not in dispute that the Retail Leases Act 2003 (Vic) (“RLA”) applied to the Varied Lease. This proceeding is not, however, a dispute in respect of which the Victorian Civil and Administrative Tribunal has exclusive jurisdiction under s 89(4) of the RLA, because the proceeding falls within the carveout in s 89(4)(c). That carveout applies to a retail tenancy dispute referred to in s 81(1A), namely, a dispute between a landlord and a guarantor of a tenant’s obligations.
B. The parties’ cases
B.1 Plaintiff’s case
7The plaintiff relies upon an amended statement of claim dated 28 August 2024. Its primary case is that, by a letter dated 26 September 2019 (“September Letter”), Jorimar exercised the option to renew for the Option Term. Given that no formal documentation was ever entered into in respect of the Option Term, the plaintiff contends that the exercise of the option gave rise to a lease in equity, pursuant to which Jorimar occupied the Premises and Carpark during the Option Term.[1] The plaintiff further contends that thereafter, from 1 April 2023 onwards, Jorimar has occupied the Premises as a monthly tenant pursuant to the overholding provisions in the equitable lease.
[1]The plaintiff cited Croft, Hay and Virgona, Commercial Tenancy Law (5th ed, 2024) at [14.5].
8The plaintiff’s alternative case is that, if Jorimar did not exercise the option by the September Letter, it has occupied the Premises as a monthly tenant since 1 April 2020 pursuant to the overholding provisions in clause 10.1 of the Varied Lease.
9The plaintiff contends that, in breach of its obligations, Jorimar has failed to pay all of the rent and licence fees due, plus associated legal costs incurred by the plaintiff. It contends that the defendant is liable as guarantor for these unpaid amounts.
10The plaintiff quantifies its claim by reference to a ledger printout from the software maintained in respect of the Premises by the plaintiff’s managing agent, to which I will refer later in more detail (“Ledger Printout”). Whilst the plaintiff puts its case on the two alternative legal bases referred to above, the dollar amount claimed is the same under each scenario.
B.2 Defendant’s case
11The defendant, who is self-represented, relies upon a further amended defence dated 9 October 2024 (“FAD”). Because the FAD was unclear in some respects, and because the defendant’s written and oral opening submissions appeared to travel beyond the FAD’s bounds, I endeavoured during the defendant’s opening to identify with greater precision the matters upon which he sought to rely. This culminated in the defendant agreeing[2] that the following distillation covered the points upon which he relied by way of defence:
[2]T59-62.
(a) Point 1: Jorimar’s exercise of the option by the September Letter was conditional upon the rental being reduced to $1,500.00 per week and upon the granting of a further lease term beyond the Option Term. Because an option cannot be exercised conditionally, it follows that the option was not exercised.[3]
[3]This point is contained in paragraph 7 of the FAD.
(b) Point 2: The plaintiff is not entitled to rely upon any equitable lease because its own conduct was not equitable.[4] (I understood this in effect to be an invocation of the “clean hands” principle.) The inequitable conduct of the plaintiff was as follows:
[4]This point is contained in paragraph 8 of the FAD.
(i)The plaintiff failed to follow the compulsory market review mechanism in clause 11 of the Varied Lease at the start of the Option Term;
(ii)The plaintiff did not negotiate with Jorimar in good faith in relation to the rent payable during the Option Term, because of the plaintiff’s reliance upon the 11 May 2022 and 8 June 2022 rent review letters (as discussed at paragraphs 78-80 below); and
(iii)The plaintiff misled Jorimar because its 8 June 2022 letter falsely stated that the plaintiff’s determination of the new rental was in accordance with the terms of the Varied Lease.
(c) Point 3: The plaintiff’s failure to follow the compulsory market review mechanism in clause 11 of the Varied Lease at the start of the Option Term means that it cannot enforce the guarantee and “renders its claim fatally flawed and justifies dismissal” of the plaintiff’s claim.[5]
(d) Point 4: The particulars of the amount claimed by the plaintiff do not correctly state the amount owing by Jorimar, and the defendant is therefore not obliged to pay the debt claimed.[6] The incorrectness relied upon is:
(i)The plaintiff only belatedly factored into its claim Jorimar’s weekly rent payments of $500.00;
(ii)Relatedly, Jorimar’s weekly payments of $500.00 represented an “interim agreement during Covid” and were made with a view to arriving at a reasonable rental reflecting changed business conditions;
(iii)The plaintiff withdrew from the parties’ negotiations following mediation by submitting an invalid market appraisal in May/June 2022, which the plaintiff falsely claimed had been made in accordance with the Varied Lease; and
(iv)Relatedly, the plaintiff produced the May/June 2022 market appraisal to “boost the amount of its claim” by increasing the rental from May 2022 onwards to an amount which was 4 per cent above that which was payable immediately prior to the beginning of the Option Term.
[5]This point is contained in the defendant’s amended outline of written opening submissions dated 11 November 2024.
[6]This point is contained in paragraph 10 of the FAD.
(e) Point 5: Contrary to the plaintiff’s alternative case that Jorimar remained in occupation from 1 April 2020 as a monthly tenant under the overholding provisions in the Varied Lease, the true position is that Jorimar remained in possession at the plaintiff’s request, made at a meeting on 13 March 2020, pending agreement on a new rental.[7]
(f) Point 6: The plaintiff did not object to Jorimar’s continued occupancy after the end of the three-year Option Term on 31 March 2023, which reinforced the defendant’s belief that the Varied Lease had expired and that a new arrangement would be negotiated.
(g) Point 7: Regardless of whether or not the option was exercised, the Varied Lease ceased to have effect after the expiry of the second four-year term on 31 March 2020 and there was therefore no guarantee in place rendering the defendant liable for Jorimar’s obligations from 1 April 2020 onwards.
[7]This point is contained in paragraphs 19 and 20 of the FAD.
12Accordingly, and whilst not all of these points were contained in the FAD, the trial proceeded upon the basis that these were to be treated as the points of defence upon which the defendant relied. The plaintiff did not object to that course.[8]
[8]T64.
13I should record at this point that there are two matters which do not need to be resolved by the Court. First, Jorimar was already in arrears in its payment of rent and licence fees as at the expiry of the second four-year term on 31 March 2020. The Ledger Printout records that these arrears totalled $42,948.86 and Ms Weinberg confirmed during closing submissions that this is the amount which the plaintiff claims in respect of the period up to and including 31 March 2020.[9] The defendant accepted in closing submissions that he is liable for this amount.[10] That was an appropriate concession.
[9]T158.
[10]T205.
14Secondly, Ms Weinberg informed me during closing submissions that the plaintiff does not press its claim for unpaid licence fees in respect of the Carpark for the period from 1 April 2020 onwards. Accordingly, for that period, the plaintiff sues only for unpaid rent and legal costs.[11]
[11]T152, 157-158.
C. Relevant lease terms
15Because nothing turns on the Lease in its original form, I will consider here the relevant provisions of the Varied Lease. The Variation Deed extended the lease term for a further 4 years, commencing on 1 April 2016 and expiring on 31 March 2020. The Variation Deed also varied the Lease in other respects, including by substituting a new schedule (the “Substituted Schedule”).[12] It also provided in clause 5 that “Subject to the variations to the Lease under this document, the provisions of the Lease continue in full force and effect.”
[12]The new schedule was substituted by clause 3(a) of the Variation Deed.
16The Varied Lease begins by recording that “The landlord leases the premises to the tenant for the term and at the rent and on the conditions set out in this lease together with all necessary access over any common areas” and that “The guarantor, if any, agrees to be bound by the guarantor’s obligations set out in this lease.” The terms in bold type are defined terms. It is not in dispute that the plaintiff is the “landlord”, Jorimar is the “tenant”, the defendant is the “guarantor”, and the Premises are the “premises”.
17Clause 2.1 concerns the tenant’s payment obligations, and provides:
“The tenant must –
2.1.1pay the rent without any deductions to the landlord on the days and in the way stated in item 9 without the need for a formal demand. … The rent is reviewed on each review date specified in item 16 –
(a)on a market review date, the rent is reviewed in accordance with clause 11,
(b)on a CPI review date, the rent is reviewed in accordance with clause 18, and
(c)on a fixed review date, the rent is either increased by the fixed percentage or changed by or to the fixed amount, in either case as specified in item 16 in respect of that fixed review date.
…
2.1.7pay within 7 days of a request interest at the rate stated in item 14 on any rent or other money which the tenant has not paid within 7 days of the due date. Interest is to be calculated daily from the due date, continues until the overdue money is paid and is capitalised monthly.
2.1.8pay within 7 days of a request the landlord’s reasonable expenses and legal costs in respect of –
…
(f)any breach of this lease by the tenant, or
(g)the exercise or attempted exercise by the landlord of any right or remedy against the tenant,
but, if the Act applies, only to the extent to which the Act permits recovery.”[13]
[13]References in the Varied Lease to the “Act” are references to the RLA.
18It is relevant here to mention some of the “items” referred to in clause 2.1, which are contained in the Substituted Schedule:
(a) Item 9 provides that rent is to be paid “[b]y equal consecutive weekly instalments on the first day of each week always in advance (with proportionate payments for broken periods)”.
(b) Item 16 sets out the review dates. In respect of the “Further Term(s)”:
(i)the “market review date” is stated to be “the Commencement Date of the Further Term”. It was not in dispute that this date was 1 April 2020 in relation to the three-year Option Term.
(ii)the “CPI review date” is stated to be “not applicable”.
(iii)the “fixed review date” is stated to be “on every anniversary of the Commencement Date the Rent will increase by 3.25%”.
(c) Item 14 provides that the interest rate on overdue money is “2% per annum more than the rate from time to time fixed by the Penalty Interest Rates Act 1983”.
19The word “rent” is defined in clause 1 to mean “the amount in item 6, as varied in accordance with this lease”. Item 6 of the Substituted Schedule provides that the rent for the year commencing 1 April 2015 is $131,212.12 per annum plus GST. Clause 3(b) of the Variation Deed also varied the Lease to provide, by way of clarification, that the rent for the year commencing 1 April 2016 is $135,476.51 plus GST, and that the rent for the year commencing 1 April 2017 and for each successive year of the extended term will be increased by 3.25 per cent per annum. I did not understand it to be disputed that, by the final year of the four-year term expiring on 31 March 2020, the rental was $13,669.35 per month or $164,032.20 per year (inclusive of GST).
20Clause 12, headed “FURTHER TERM(S)”, conferred the option and provides:
“12.1The tenant has an option to renew this lease for the further term or terms stated in item 18 and the landlord must renew this lease for that further term or those further terms if –
12.1.1there is no unremedied breach of this lease by the tenant of which the landlord has given the tenant written notice,
12.1.2the tenant has not persistently committed breaches of this lease of which the landlord has given written notice during the term, and
12.1.3the tenant has requested the renewal in writing not more than 6 months nor less than 3 months before the end of the term. The latest date for exercising the option is stated in item 19.[14]
[14]I note that item 22 of the Substituted Schedule incorporated, by reference, items 22 to 24 of the original schedule to the Lease. Item 24 provides that clause 12.1.3 “is varied to provide that the Tenant must request the renewal of this Lease not later than 6 months before the end of the Term.” Consistent with this, item 19 of the Substituted Schedule states that the latest date for exercising the option for renewal is 30 September 2019. In any event, it was the position of both parties that there was no issue concerning the timing of the September Letter.
12.2The renewed lease –
12.2.1starts on the date this lease ends,
12.2.2has a starting rent determined in accordance with clause 11, and
12.2.3must contain the same terms as this lease but with no option for renewal after the last option for a further term stated in item 18 has been exercised.
12.3If the tenant is a corporation and was required to provide directors’ guarantees for this lease, the tenant must provide guarantees of its obligations under the renewed lease by its directors in the terms of clause 15.”
21Item 18 of the Substituted Schedule identified the “Further term(s)” as “3 years (commencing as from 1 April 2020)”. Relatedly, clause 3(d) of the Variation Deed varied the Lease to provide that “the option for renewal contained in the Lease will remain available for the Tenant (as described in the Schedule to this deed) for the Further Term of 3 years (which, if exercised, would now commence from 1 April 2020).”
22Clause 11, entitled “RENT REVIEWS TO MARKET”, was relied upon heavily by the defendant. It provides:
“11.1In this clause ‘review period’ means the period following each market review date until the next review date or the end of this lease.
The review procedure on each market review date is –
11.1.1each review of rent may be initiated by either party unless item 17 states otherwise but, if the Act applies, review is compulsory.
11.1.2a party may initiate a review by giving the other party a written notice stating the current market rent which it proposes as the rent for the review period. Unless the Act applies, if the party receiving the notice does not object in writing to the proposed rent within 14 days, it becomes the rent for the review period.
11.1.3If –
(a)the Act does not apply …
(b)the Act applies and the parties do not agree on what the rent is to be for the review period,
the parties must appoint a valuer to determine the current market rent.
… If the Act applies, the valuer is to be appointed by agreement of the parties, or failing agreement, by the Small Business Commissioner.
[Clauses 11.1.4, 11.1.5 and 11.1.6 deal with the valuation process and steps to be taken by the valuer.]
11.2The valuer’s determination binds both parties.
11.3…
11.4Until the determination is made by the valuer, the tenant must continue to pay the same rent as before the market review date. Within 7 days of being informed of the valuer’s determination, the parties must make any necessary adjustments.
11.5If the Act does not apply, a delay in starting a market review does not prevent the review from taking place and being effective from the market review date but if the market review is started more than 12 months after the market review date, the review takes effect only from the date on which it is started.”
23I have already noted in paragraph 18 above that, by virtue of item 16 of the Substituted Schedule, the market review date in respect of the Option Term was 1 April 2020. Item 16 also records that no market review date applies during the four-year term commencing on 1 April 2016. Item 16 does not indicate that any market review date applies during any overholding period. Whilst item 17 of the Substituted Schedule specifies that a market review may be initiated by the landlord, s 35(5) of the RLA provides that, if the landlord has not initiated the review within 90 days of the time provided by the lease, the tenant may initiate the review.
24Clause 10.1 concerns overholding and is relevant to the plaintiff’s primary claim in respect of the period from 1 April 2023 onwards and to the plaintiff’s alternative claim in respect of the period from 1 April 2020 onwards. It provides:
“10.1If the tenant remains in possession of the premises without objection by the landlord after the end of the term –
10.1.1the tenant, without any need for written notice of any kind, is a monthly tenant on the conditions in this lease, modified so as to apply to a monthly tenancy,
10.1.2either party may end the tenancy by giving one month’s written notice to the other which may expire on any day of the month,
10.1.3the monthly rent starts at one-twelfth of the annual rent which the tenant was paying immediately before the term ended unless a different rent has been agreed, and
10.1.4the landlord may increase the monthly rent by giving the tenant one month’s written notice.”
25Clause 15 contains the guarantee and indemnity relied upon by the plaintiff. Clause 15.1 provides:
“15.1The guarantor in consideration of the landlord having entered into this lease at the guarantor’s request –
15.1.1guarantees that the tenant will perform all its obligations under this lease for the term and any renewed term or terms and during any period of overholding after the end of the term,
15.1.2must pay on demand any amount which the landlord is entitled to recover from the tenant under this lease whether in respect of the term, any further term or further terms or any period of overholding, and
15.1.3indemnifies the landlord against all loss resulting from the landlord’s having entered into this lease whether from the tenant’s failure to perform its obligations under it or from this lease being or becoming unenforceable against the tenant and whether in respect of the term, any renewed term or terms or any period of overholding.”
26Relatedly, clause 7 of the Variation Deed provides:
“The Guarantor agrees that:
(a)the Tenant’s obligations under the Lease (as varied by this document) are subject to the Guarantee and form part of the moneys and obligations the payment and performance of which are guaranteed to the Landlord by the Guarantor under the Guarantee; and
(b)if the Tenant defaults in the performance or observance of any of the Tenant’s obligations under the Lease (as varied by this document) the Guarantee will apply in respect of that default as if the terms of the Guarantee were incorporated in and repeated in the Lease at the Variation Date.”
27The word “Guarantee” is defined in recital B of the Variation Deed as meaning the “guarantee and indemnity on the terms set out in clause 15 of the Lease for the purpose of guaranteeing the obligations of the Tenant under the Lease.”
Witnesses
28The oral evidence at trial was relatively brief. The plaintiff called two witnesses. The first was Mr Jeremy Walker, who works for Limestreet Asset Management Pty Ltd (“Limestreet”) in the role of “Director – Property”. Mr Walker has occupied that role with Limestreet and its predecessor for around 16 years. Mr Walker explained that Limestreet manages the property affairs of the plaintiff and that Limestreet appointed Jones Lang Lasalle (“JLL”) to be the day-to-day managing agent of the Premises on behalf of the plaintiff.
29Whilst the defendant challenged Mr Walker in cross-examination in relation to certain topics, it could not be said that there was a challenge to Mr Walker’s overall credit as a witness. I consider Mr Walker to have been a satisfactory witness who did his best to answer questions which were at times difficult, given the defendant’s understandable lack of experience as a cross-examiner. It was also apparent that Mr Walker was not involved in all of the day-to-day communication which passed between JLL on behalf of the plaintiff and Mr Marchionna on behalf of Jorimar. This limited his ability to answer some of the questions asked of him in cross-examination. I will refer to the relevant substance of Mr Walker’s evidence in the following part of these reasons.
30The second witness was Ms Louise Hurley, whose role is Senior Centre Manager with JLL. Much of the correspondence between the plaintiff and Jorimar in relation to the Premises was sent by or to JLL on behalf of the plaintiff. Until 1 November 2024, Ms Hurley was in charge of JLL’s file for the Premises. Ms Hurley’s evidence was confined to an explanation of what I have referred to above as the Ledger Printout. Ms Hurley’s evidence was that the Ledger Printout was created by Selena Kristoffer, the current Centre Manager who took over from Ms Hurley on 1 November 2024, and that it was compiled using a financial system used by JLL called “MRI”.[15] Ms Hurley was asked just two questions in cross-examination by Mr Marchionna. There was no challenge to her credit as a witness and I accept her evidence.
[15]T93.
31The only witness in the defendant’s case was Mr Marchionna. Whilst Ms Weinberg challenged Mr Marchionna on certain aspects of his evidence, it could not be said that there a challenge to his overall credit. It was apparent that Mr Marchionna’s evidence was influenced by a general sense of injustice regarding the way in which he has been treated by the plaintiff. He was at times unresponsive to the questions asked of him in cross-examination, instead making sometimes lengthy statements about other matters. Some of his evidence, as is common with lay witnesses, was of his assumptions or beliefs rather than of direct facts. All of that said, I consider Mr Marchionna generally to have been an honest witness. I will refer to the relevant substance of his evidence in the following part of these reasons.
E. Relevant facts
32Aside from the earlier entry into the Lease and Variation Deed, and Jorimar’s occupation of the Premises and Carpark thereunder, the factual chronology relevant to this proceeding commences in September 2019. Unless otherwise indicated, the matters set out in this part of my reasons constitute findings of fact. Where I refer to oral evidence given by a witness, I accept that evidence unless otherwise indicated.
E.1 The September Letter
33On 26 September 2019, Jorimar sent the September Letter to Ms Donna Grusauskas of JLL, signed by Mr Marchionna as director. Given the significance of the September Letter, I will set it out in full:
“Dear Donna
Re: Notification of exercise of option for Shops 10-16 Ground Floor Level, Trak Centre
I am writing to advise that I am exercising the option that I am entitled to for the further period of three years.
I am also advising that I would be receptive to a new lease for a minimum of 5 years.
Business conditions have turned sharply down over the last 12 months and the level of rent that the business can sustain needs to be reviewed sharply down. Sales are currently running at a level that to make the rent it takes 2 days sales which is not sustainable. The cause of the reduction in sales, according to my observations and discussions with other traders in the village, is not due to competitive activity. In fact another establishment has recently shut down because of a lack of general activity in the area.
I therefore request that for the new period the rent be $1500/week incl GST and outgoings.
I have, as you know, been here in the village at Funkies for over 17 years and have never before experienced worse trading conditions or seen as many empty shops.”
34JLL did not respond to the September Letter. On 2 December 2019, Mr Marchionna sent an email to Mr Neill Ogge, a solicitor assisting him at the time. The email attached a copy of the September Letter and stated:
“Hi Neill
I notified the landlords in September (copy of letter attached) that I would be exercising my option for the 3 years specified on the lease and I requested a rent reduction given the lack of activity in the Village. As I had not had a reply to my letter, I asked for a follow up.
Below is the prompt response I got this morning:
‘Hi Richard
Thank you for exercising your option for a further term of three years from 1 April 2020 to 31 March 2023.
I refer to the points raised in your letter dated 26 September 2019 and the Landlord is not initiating a market review and subsequently your rent for the first one-year period of the new lease term will remain the same as you are currently paying.
In addition the option term will remain as three years.
Many thanks.
Kind regards
Donna Grusauskas’
I am tempted to respond that under the circumstances I shall be taking steps to find an alternative location in the village and should I find one I wont [sic] be requiring the option.
What do you advise?”
35There is no evidence of Mr Marchionna having provided any response to Ms Grusauskas’ 2 December 2019 response. I note that it is clear from Ms Grusauskas’ response that the position of the plaintiff, as conveyed to Mr Marchionna, was that the option had been exercised. It is also clear from that response that the plaintiff had rejected Mr Marchionna’s request for a reduced rental.
E.2 Jorimar falls behind in payments
36By January 2020, issues had arisen in respect of Jorimar’s failure to pay the full rental due. On 13 January 2020, Ms Grusauskas sent an email to Mr Marchionna notifying him that $26,014.63 was owing to the end of January 2020. She asked Mr Marchionna to let her know whether he was “able to catch up over the next week before the Solicitors send a Section 146 Default Notice”. Mr Marchionna responded, accepting that he had missed some rent payments but taking issue with the amount claimed by the plaintiff. He suggested that the landlord “hold back any unreasonable people [sic] action particularly when I have made clear the cause of the cashflow problems”.
37On or about 21 January 2020, Jorimar was sent a default notice pursuant to s 146 of the Property Law Act 1958 (Vic). The notice was signed by Arnold Bloch Leibler (“ABL”), who were described in the notice as lawyers and agents for the plaintiff. The notice stated that Jorimar had breached clause 2.1 of the Varied Lease by not paying the rent due and clause 25 by not paying the licence fee. The notice required the default to be remedied within 14 days by the payment of $14,985.57, plus payment of $933.68 “being the legal costs incurred by the Landlord in relation to the preparation and service of this Notice”. The notice attached a “Tenant Statement as of 20 Jan 2020” recording that, as of 20 January 2020, the “Total Default Amount” was $14,985.57. That statement also indicated that the monthly rental payable at that time was $13,669.35 and the monthly licence fee was $184.76, both of which amounts appear to be inclusive of GST.
38Mr Marchionna responded to the default notice by email to Ms Grusauskas on 29 January 2020. His email referred to cash flow problems arising from poor business conditions and stated that, while being unable to meet the demand for the full amount immediately, he proposed a payment plan “for making up the shortfall in rent”. The plan was stated to be: “Feb 4: $2500 then weekly payments of $300 until amount outstanding is extinguished”.
39Ms Grusauskas responded on 14 February 2020, seeking clarification of Mr Marchionna’s payment plan. On 17 February 2020, Mr Marchionna responded by clarifying: “The proposal is for an initial payment of 2500 in week one followed by weekly payments starting I [sic] week 2 of 300 to address the arrears once you accept the proposal”. Ms Grusauskas responded on 21 February 2020, neither accepting nor rejecting Mr Marchionna’s proposal, but stating: “Please pay as much rent as possible to clear the debt. I have a meeting with the owner’s [sic] on Monday 24 February, and will let you know the outcome.”
40By email sent to Mr Marchionna on 24 February 2020 at 6.38pm, presumably following the foreshadowed meeting with the landlord, Ms Grusauskas stated:
“I wish to advise that the Landlord has rejected your offer below of $2500 + $300 per week repayment plan.
On another matter, you said today that when you exercised your option for a further term of three years it was conditional upon the landlord reducing the rent for the new term. Legally you have exercised your option pursuant to the lease as I understand you wanted to sell the business.
The first paragraph of your formal Notification of Exercise of Option is as follows:
‘I am writing to advise that I am exercising the option that I am entitled to for the further period of three years.’
We will discuss the next step once the outstanding rent is paid in full.”
41There is no evidence that Mr Marchionna responded to this email.
42On 4 March 2020, Ms Grusauskas sent an email to Mr Marchionna stating:
“Upon checking your account I see that you have only been paying $1088.28 + GST each week. You mentioned in an earlier email offer that you could pay $2800 per week, and I asked for you to pay as much as you can, as the Landlord rejected that offer.
Please pay more weekly, ie at least the minimum amount you offered? It’s approximately one third less than what you were paying every week without fail.
Thanks, please let me know.”
43I note that the second sentence of Ms Grusauskas’ email misrepresents the previous offer made by Mr Marchionna, which was that he would make a one-off payment of $2500.00, followed by weekly payments of $300.00 per week.
E.3 The 13 March 2020 meeting
44On the afternoon of 13 March 2020, a meeting took place between Mr Marchionna, Ms Grusauskas and Mr Walker. Mr Marchionna’s evidence was that the meeting was called by the plaintiff.[16] Ms Grusauskas made a file note of the meeting, which she later emailed to Mr Walker and others on 17 March 2020, together with a “first draft letter” to be sent to Mr Marchionna “to consider and further discuss”. Her file note relevantly stated:
[16]T103.
“Meeting between Jeremy Walker, Richard Marchionna & Donna Grusauskas
· 2018 – takings were approx. $15,000 per week which RM said was OK ($780,000 pa approx.)
· 2019 – takings gradually decreased during year – down to approx. $13,000 per week ($676,000 pa approx.) which was just ok
· Managed by dipping into his personal reserves which he now can’t continue as there is none
· December was unusually ‘soft’ and January as well, now Feb/March CV-19
· His recent P&L is a bit rubbery
· Restaurant provides for home
· Richard to email his repayment plan
· Would like to renew as family business
· JW & DG confirmed he has exercised his option & not conditional upon asking rent
· Potential to assign lease with a longer tenure
· 5 years or plus term ‘without prejudice’ to our position
· Richard to review and increase his repayment plan, however, given the events unfolding at the time, and worsened considerably since the meeting he has not provided any details”.
45Mr Walker’s evidence[17] was that the file note reflected his recollection of what occurred at the meeting, but it became apparent during the course of his evidence that his recollection was not particularly strong. He gave evidence about some of the bullet points in the file note:
(a) As to the “repayment plan”, his recollection[18] was that Jorimar was not paying the full rental, and Ms Grusauskas was trying to push Mr Marchionna for a repayment plan; and
(b) As to assignment of the lease, Mr Walker’s recollection[19] was that “[Mr Marchionna] was raising or we were talking about if there’s any – if there’s any renegotiation it would – would need to be a longer – a longer lease presumably to secure his business and/or have something to sell, the exact – the exact detail I can’t recall”.
[17]T72.
[18]T73.
[19]T73.
46The draft letter attached to Ms Grusauskas’ 17 March 2020 email was addressed to “Dear Richard”. Above this salutation, the page was headed “TO DISCUSS – I recommend we put on hold given the current environment” . Mr Walker’s evidence was that he did not think the letter was sent, but he did not recall specifically. Having regard to that evidence, the contents of the documents, and the absence of any suggestion that the letter was in fact sent, I find that the letter was not sent to Mr Marchionna. It is nonetheless still necessary to refer to some of the contents of the letter, given that they were put to Mr Walker.
47The draft letter referred to the 13 March 2020 meeting and began by stating that there were two separate matters: rental arrears and new lease term. Under the heading “New Lease”, the draft letter stated amongst other things:
“During our discussion last Friday you advised you may consider selling the business and would prefer to have a five year (plus) term.
Jeremy advised ‘without prejudice’ that a longer term may be considered if a mutually rewarding rental was to be agreed between the parties.”
48As to the final paragraph, Mr Walker’s evidence was that he recalled some general discussion that, if there was something that suited both parties, “we could discuss altering terms”. Mr Walker did not recall any discussion about Jorimar paying a particular rental sum.
49Mr Marchionna’s evidence in chief[20] was that he told the plaintiff’s representatives during the 13 March 2020 meeting that he needed the lower rental because the previous rate was unsustainable, that the additional lease term was also essential for the business to go on, and that “[o]ne without the other wasn’t going to work”. Mr Marchionna’s evidence that was that he was given a “glimmer of hope” by Mr Walker telling him, as he was leaving the meeting, to “make another offer”.[21] According to Mr Marchionna, this gave him “the comfort that we could work something out”.[22]
[20]T104.
[21]T104.
[22]T104-105.
50Mr Walker’s evidence was that, whilst he did not recall doing so, it was possible that he could have said to Mr Marchionna: “make another offer”.[23] Further, Mr Marchionna recorded, in the document by which he commenced a mediation before the Victorian Small Business Commission (“VSBC”), that “Jeremy Walker at the conclusion of the meeting said to me that I should think about making an offer.” Having regard to the evidence, I consider it more likely than not that Mr Walker did say something to Mr Marchionna at the meeting to the effect of “make another offer”.
[23]T74.
E.4 Events following the 13 March 2020 meeting
51The first COVID-19 lockdown occurred in Melbourne at the end of March 2020, coinciding almost exactly with the end of the second lease term of 4 years.
52It is relevant to note at this point the rental applicable as at the conclusion of that lease term on 31 March 2020. As I have recorded in paragraph 37 above, the statement served with the default notice on 21 January 2020 indicated that the monthly rental was $13,669.35, which amount appears to be inclusive of GST. This sum is also reflected in the Ledger Printout, and is consistent with the result arrived at by applying the formula in clause 3(b) of the Variation Deed.
53In May 2020, Mr Marchionna met Mr Pearse Coleman, who had become involved as the main contact at JLL in lieu of Ms Grusauskas. According to Mr Marchionna,[24] he told Mr Coleman at around this time that they needed to get together and have a discussion because they had an issue to resolve, in that the option had not been accepted. It appears that they met on 31 August 2020 (see paragraph 55 below).
[24]T105.
54From June 2020, Jorimar began making weekly payments of $500.00. Mr Marchionna’s evidence[25] was that he initiated the weekly payments of $500.00 after the onset of the COVID-19 pandemic “in order to keep the wheels moving”, at a time when the other tenants in the building had stopped paying rent completely. The bank statements in evidence for the period 1 June 2020 to 7 March 2023 record that the first such payment was made on 3 June 2020 and that payments of $500.00 were made thereafter by Jorimar every week, save for a missed payment in early December 2021, a missed payment in early April 2022 and a missed payment in October 2022. The Ledger Printout shows that the $500.00 payments continued to be made weekly throughout the first half of 2023, but became more sporadic in the second half of 2023 and first half of 2024, with a number of missed payments. In May 2024, Jorimar stopped making payments entirely (see paragraph 91 below).
[25]T112.
55Mr Marchionna gave evidence[26] that, together with Mr Ron Courtney and a Mr Blair who were both assisting him, he had a meeting with Mr Coleman. A subsequent letter authored by Mr Courtney (see paragraph 62 below) indicates that the meeting took place on 31 August 2020. Mr Marchionna’s evidence was that Mr Courtney did the talking for him at the meeting, that Mr Courtney made an offer at the meeting that the rental be around $3000.00 per month, and that Mr Courtney thereafter confirmed this offer in writing to Mr Coleman. It appears from the 9 September 2020 letter from Mr Coleman (see paragraph 56 below) that Mr Courtney conveyed the offer by email on 7 September 2020, although that email was not in evidence.
[26]T105-106.
56On 9 September 2020, Mr Coleman sent Mr Marchionna a letter headed “Re: Exercise of Option – Shop – 10-16 TRAK Centre”. The letter stated:
“We refer to the above matter and your representative Ron Courtenay’s [sic] email of 7th September 2020.
Please see attached letter on the Exercise of Option which will expire on 31st March 2023 and is self-explanatory.”
The landlord rejects your request for a new lease of 5 years with 5 x 5year options.
We refer to our previous offer of relief that will be assessed in accordance with the Legislation provisions of the Covid-19 code.
We also request prompt payment of all arrears up to 29th March 2020 and your obligation to adhere to the provisions of your lease.”
57A number of communications are referred to in this letter. Mr Courtney’s email of 7 September 2020 was not in evidence. Nor was there any evidence of a request by Mr Marchionna for a new lease of 5 years with 5 five-year options. Nor was there any evidence of the “previous offer of relief” in respect of COVID-19. The “attached letter on the Exercise of Option” was in evidence. It was a letter of advice from ABL to Mr Coleman dated 9 September 2020, apparently sent in response to a document prepared on behalf of Jorimar, which I infer was Mr Courtney’s 7 September 2020 email. ABL’s 9 September 2020 letter relevantly stated:
“The circumstances are not as simple and straightforward as the tenant’s representatives [sic] note would have you believe. With respect, their interpretation of the Retail Leases Act 2003 is not correct and the tenant presently continues to be bound by the agreement for the further term (following its exercise of the option for renewal) on the conditions specified in its lease. Section 17 of the Retail Leases Act 2003 does not apply to a renewal of lease.”
E.5 The September 2020 deed of renewal and disclosure statement
58Mr Marchionna’s evidence[27] was that he found a letter from Mr Coleman dated 11 September 2020 delivered to the door of the Premises by express post shortly after that date. The letter was brief, stating:
“Re: Exercise of Option - Shop 10-16 TRAK Centre
Please find enclosed:
· Deed of Renewal and
· Disclosure Statement
in triplicate for your execution and return.
Should you have any queries please contact me.”
[27]T107-108.
59It was not in dispute that Mr Marchionna did not execute and return the “Deed of Renewal” or “Disclosure Statement”. For reasons which were not explained, the deed was not in evidence. It may be inferred that it was a deed in respect of the renewal of the Varied Lease for the Option Term. The enclosed “Disclosure Statement” was in evidence, and was dated 11 September 2020 and signed by Mr Coleman for the plaintiff. Part 1.1 of the Disclosure Statement recorded that the “[d]ate on which the option to renew the lease agreement for the premises was exercised” was 26 September 2019. The Disclosure Statement itself stated:
“This statement is to be completed by the Landlord for renewed leases under section 26(1) of the Retail Leases Act 2003.
If the Tenant has exercised or is entitled to exercise an option to renew a retail premises lease, the Landlord is required to provide this statement to the Tenant at last [sic] 21 days before the end of the current term.
In the situation where all of the parties to a retail premises lease enter into an agreement to renew the lease, the Landlord is required to provide this statement to the Tenant no later than 14 days after the entering into of the agreement.”
60This statement reflected the requirements of s 26(1) of the RLA. Clearly, if the option had been validly exercised by the September Letter (as the plaintiff was then, and is now, maintaining), the plaintiff failed to comply with those requirements. Given that the four-year term of the Varied Lease expired on 31 March 2020, the disclosure statement should have been provided by 10 March 2020. The plaintiff, by its agent JLL, failed to provide the Disclosure Statement until mid-September 2020, almost 6 months later than required by the RLA. No explanation was provided for this failure. Further, it may be inferred that the sending of the Disclosure Statement, albeit late, only came about because of the contents of Mr Courtney’s 7 September 2020 email and/or statements made by him at the 31 August 2020 meeting.
61Be that as it may, the late provision of the Disclosure Statement does not have a bearing upon the outcome of this proceeding. First, it was not relied upon as constituting part of the defence. Secondly, while a landlord’s failure to give a disclosure statement within the requisite time provides a tenant with certain rights under ss 26(3) and (4) of the RLA, there was nothing to suggest that Jorimar availed itself of those rights in the present case. Thirdly, the authors of Retail Leases Victoria[28] state that the consequences of non-compliance with ss 17 and 26 “do not include invalidity of the lease”. Fourthly, and perhaps most significantly, given my conclusion later in these reasons that the option was not exercised, a disclosure statement was not required.
[28]Croft, Hay and Virgona, Retail Leases Victoria, at [40,110], citing Wei Hong Fang v Main Street Shopping Centre Pty Ltd (VCAT; Deputy President Macnamara; 16 October 2007; unreported) at [62].
E.6 Negotiations from late September 2020
62Mr Courtney sent a letter to Mr Coleman dated 30 September 2020,[29] stating:
“Richard Marchionna, on behalf of the tenant company, has forwarded a copy of your letter dated 9th September 2020 together with the letter of advice from Arnold Bloch Leibler Solicitors. Clearly, our reference to Section 17 of RLA was in error; the appropriate section being Section 27(1)[30]. You must have been aware of our error at the time of our meeting in that you recently delivered such a notice to the premises.
Richard held a meeting with Donna Grusauskas and Jeremy Walker from your company on 13 March 2020. We are instructed that Richard confirmed that, inter alia, any exercising of the option was conditional upon acceptance of the level of rent set out in the letter of 26th September 2019. We have a copy of a draft letter (not sent) dated 20th April and confirming the discussions at that meeting and forwarded to his solicitor Neil Ogge for perusal. We have attached a copy.
Nonetheless, we believe that the letter of 26th September 2019 (conditional upon the landlord company’s acceptance of the rental offered) was not accepted and a further term not agreed. If you still believe that the further term was taken up (a fact that we dispute) the appropriate notice was not provided to the tenant company at least 21 days prior to the end of the term that expired on 31st March 2020. In fact, you have only recently delivered a notice subsequent to our meeting on 31st August.
Pearse, we are concerned also with the reference to ‘centre outgoings to be paid as per normal’ (para 4) in the letter from Donna Grusauskas to Richard dated 4th May 2020. Item 10 of the Deed of Variation of Lease Schedule confirms that there are ‘nil’ building outgoings to be paid by the tenant.
It appears to us that there are still several issues to be resolved and we ask that you reconsider the matters discussed at our recent meeting. In the event that we cannot reach a jointly satisfactory outcome we will recommend to Richard that he seeks mediation through the VSBC’s office.
We look forward to receiving your further advice.”
[29]An unsigned draft of the letter, almost identical in content but dated 24 September 2020 and formatted differently, was also in evidence. It appears from later correspondence that it was the 30 September version which was sent. Mr Marchionna in his evidence (T107) accepted that that was likely to have been the case, and neither party contended otherwise.
[30]It appears that Mr Courtney’s reference to s 27(1) is erroneous and that he instead intended to refer to s 26(1) of the RLA, which is the analogue of s 17 where a lease is renewed rather than entered into.
63It is apparent from this letter that there continued to be a live dispute between the parties, a year after the September Letter was sent, as to whether or not the option had been exercised.
64In around early October 2020, Jorimar initiated the process for mediation before the VSBC by lodging an “Application for Referral of a Dispute”.[31] In the application document, Mr Marchionna set out a brief outline of the dispute.
[31]Section 86(1) of the RLA provides that any party to a retail premises lease may refer a retail tenancy dispute to the VSBC for mediation.
65On 14 October 2020, Jorimar sent a letter to JLL formally requesting rent relief under the Commercial Tenancy Relief Scheme introduced by the Victorian Government in response to the COVID-19 pandemic (“Scheme”). As to the reduced rent to be paid under the Scheme, the letter stated: “Given that we have not yet negotiated a suitable rent for my current tenancy it is not possible to calculate the reduction sought nor to calculate the appropriate monthly repayments”.
66JLL responded to the request for relief by letter dated 22 October 2020. The letter stated that the plaintiff “will offer you a once off 40% net rent and carpark waiver from April 2020 to September 2020. There are outstanding matters and refer [sic] you to our previous correspondence and advice in relation to the lease renewal which has not been returned (copy attached).” Attached to the letter was a copy of the 9 September 2020 letter from JLL and the 9 September 2020 letter from ABL. The letter went on: “The renewal reflects the passing rental and await return of signed documents.”
67The 22 October 2020 letter also contained a table setting out what purported to be the monthly “Net Rent & Carpark” amounts for the months of April 2020 to September 2020, both before and after the application of the proposed 40 per cent waiver. The monthly amounts prior to application of the Scheme waiver are stated to be $12,426.68.[32] The table headings were slightly incorrect, in that those amounts reflected the rent only and did not include the Carpark licence fee. Be that as it may, it is apparent from the letter that the plaintiff’s position was that the rental for the period from 1 April 2020 onwards (before application of the Scheme waiver) was the same as that which had been payable immediately prior thereto.
[32]Adding 10 per cent GST to this figure results in a figure of $13,669.35, which is the amount charged in the final year of the four-year lease term ended 31 March 2020.
68The 22 October 2020 letter concluded by asking Mr Marchionna to sign the letter to acknowledge his acceptance of the agreement in respect of the Scheme waiver “so we may seek final landlord approval and adjust the rental account”. The offer was stated to be open for 14 days. It was not in dispute that Mr Marchionna did not sign the letter.
69On 4 November 2020, Mr Coleman wrote to Mr Courtney in response to his 30 September 2020 letter. Amongst other things, Mr Coleman wrote:
“We advise we have been corresponding directly with Richard Marchionna in respect of various lease matters.
In respect of the matters you have raised we advise that the exercise of the option was exercised in accordance with the Act and the lease remains on foot and we are awaiting signed documents.
The outgoings lease clause does state there are no outgoings payable only car parking.
We are far apart with respect to the rental level on the lease renewal.
Please advise an acceptable rental to your client for consideration by the landlord, as currently your proposal is unacceptable.
We await your advice.”
E.7 April 2021 mediation and subsequent negotiations
70In around April 2021, the parties participated in the VSBC mediation. The matter did not resolve at the mediation, but the parties continued to negotiate thereafter.
71On 7 June 2021, Mr Coleman of JLL sent an email to Mr Marchionna which appears to have followed a meeting on Thursday 3 June 2021. The email stated:
“Thanks for meeting with me last Thursday.
Hopefully we can reach a realistic solution for both parties.
For the sake of clarity I have outlined the proposal for the three years 2020 to 2023.
The landlord is unable to commit [sic] a further option period.
You might recall we discussed an attempt to compartmentalise the relief on an annual basis.
20/21 - year was affected by Covid 19 relief measures
· If we adopted this method you would be disadvantaged as it provides for 50% relief and 50% deferred to be repaid.
· The landlord therefore is proposing a rent of $60k with a rebate of $89K.
21/22 - The landlord is proposing a rent of $75k with a rebate of $74k.
22/23 - The landlord is proposing a rent of $100k with a rebate of $49k.
We await your advice on the above proposal.”
72Later correspondence (see paragraph 74 below) suggests that this email was sent in response to an offer which had been made by Mr Marchionna at the meeting on 3 June 2021. My understanding of the email is that the plaintiff was proposing that a varying rebate would be applied each year to an annual rental of $149,000.00, rather than the annual headline rental itself being reduced. I note that $149,000.00 per annum (exclusive of GST) equates to the rental which had been payable at the conclusion of the four-year lease term on 31 March 2020.
73By letter to JLL dated 23 September 2021, Jorimar sought further rent relief pursuant to the Scheme, in respect of the rent payable between 28 July 2021 and 15 January 2022. The letter concluded that, pending JLL’s response, Jorimar would “continue the payments of $500.00 I have been making on a weekly basis as a gesture of good faith”.
74Jorimar sent a letter to JLL dated 29 November 2021 headed “Re: Response to your June counter offer”. It is apparent that the “June counter offer” is Mr Coleman’s 7 June 2021 email referred to in paragraph 71 above. The letter stated, amongst other things:
“Unfortunately, I cannot agree to your current proposal.
Unless you are prepared to offer an extension beyond 2022 the result will be the loss of any goodwill that I have developed over the last 19 years.
The number of disruptions that the business has suffered over 6 lockdowns has had a catastrophic effect on turnover and on the prospect of recovering anywhere near the previous trading levels in the foreseeable future.
The drop in tenancy in the centre over the last 18 months, exacerbated by the now permanent absence of the NAB branch next door, has further eroded the value of the business. With no prospect of a further period beyond 2023 to restore some value in the business, the value of the tenancy has been rendered almost worthless.
…
[The letter went on to set out and discuss recent weekly sales figures.]
Since your response to my original proposal (reproduced below) we have gone through another extended period of disruption and the way forward is likely to be very gradual improvement (hopefully). This has made your offer look even more unachievable.
[The letter then reproduced the contents of Mr Coleman’s 7 June 2021 email.]
My proposal in response is as follows:
·For the period April 1 [2020] to March 31 2021 I offer $40,000 net rent including GST and outgoings and car park with appropriate rebate.
·For the period April 1 [2021] to March 31 2022 I offer $45,000 net rent including GST and outgoings and car park with appropriate rebate.
·For the period April 1 2023 [sic] and onwards I offer $17,000 net rent including GST and outgoings and car park for each three month period of tenancy with appropriate rebate.
·Rent will be paid on a weekly basis as has been the practice for the last 19 and a half years.
·All rent that I have been paying during the pandemic will be counted as part of the rent offered above.
·Pearse, needless to say, I don’t have the money to pay any arrears.
(The current midweek sales are at below breakeven levels with the rent proposed by me above. Hopefully they will improve.)
I also request that any arrears up to March 31, 2020, relating to the end of the expired lease, be waived as token [sic] of compensation to the loss of my goodwill by virtue of the landlord’s refusal to extend my tenancy.
I hope that my proposal meets with your approval, and I look forward to continuing our discussions with a view to a mutually satisfactory resolution.”
75I make a number of observations in relation to this letter. First, it appears that the year specified in the third bullet point is incorrect and that the final period should be 1 April 2022 onwards rather than 1 April 2023 onwards. Secondly, the letter illustrates that the parties remained far apart as to the rental to be paid by Jorimar. This is consistent with Mr Walker’s evidence[33] of his recollection that the parties “were never close to actually agreeing”. The amounts proposed by Jorimar in respect of each year equate to approximately 60 per cent of the amounts proposed by the plaintiff. Jorimar was also seeking an unquantified “appropriate rebate” in respect of the amounts it proposed to pay. Thirdly, Jorimar was also seeking a waiver of its arrears in respect of the four-year period ending 31 March 2020.
[33]T90.
76Jorimar received no response to the 29 November 2021 letter. Mr Marchionna’s evidence[34] was that “I waited and waited and waited. And no response.”
[34]T115, 136.
77It is clear from the evidence referred to above that the parties’ negotiations in relation to the rental for the Option Term never resulted in any agreement. This is confirmed by Mr Walker’s evidence[35] that no agreement about a change in the rental was ever concluded at any point after 1 April 2020. Furthermore, I did not understand either party to contend otherwise.
[35]T89.
E.8 May/June 2022: the 2022 Review
78The next piece of correspondence in evidence is an email dated 11 May 2022 from Ms Shelley Rochford of JLL to Mr Marchionna. The subject line of the email was “Rent review communication” and the body of the email stated: “Please see attached notification regarding your Market rent review”. Attached to the email was a letter from Ms Rochford to Jorimar headed “Landlord’s Notice of Current Market Rental”. Mr Marchionna’s evidence[36] was that this communication came “out of the blue”. The letter was relatively brief, stating:
“In accordance with Clause 2.1.1(a) and Clause 11 of the above lease, we hereby advise that the Landlord has determined that the market rental for the above premises should be set at a net rental of $150,000 per annum, exclusive of GST at the review date.
Clause 11.1.2 of the lease states that you must send a written response (Notice) within 14 days, confirming your agreement or otherwise to this review.”
[36]T115.
79The letter attached a rental valuation of the Premises dated 5 April 2022 prepared by Savills Valuations Pty Ltd. The valuation commenced by stipulating “Review Date: 1 April 2020” and concluded by stating that the advice therein “represents our opinion of the Market Rent at the date of renewal noted as 1 April 2020.” The valuation expressed the view that “a market rental of $150,000.00 per annum gross is reasonable for the subject premises, equating to $595/m2 per annum gross (excluding GST).” I note that this proposed rental of $150,000.00 per annum (excluding GST) was only fractionally higher than the annual rental of $149,120.16 (excluding GST) which was payable in the final year of the four-year term ending on 31 March 2020. That said, it was significantly higher than the amount for which Mr Marchionna had been advocating.
80Jorimar did not respond to JLL’s 11 May 2022 letter.[37] On 8 June 2022, a related letter was sent by Ms Rochford to Jorimar, headed “Landlord’s Notice of Current Market Rental”. That letter simply stated:
“Further to our communication to you dated May 11th 2022 regarding the current Market Rental for your premises of Shop 10-16 of the Trak Centre, we herby [sic] notify you that your new rental figure is $150,000 plus GST annually.
The start date for this new base rental amount is May 25th 2022.
Could you kindly provide us with a repayment plan for the arrears.”
[37]T118.
81I will hereafter refer to the action purportedly undertaken by the 11 May and 8 June 2022 JLL letters as the “2022 Review”. In its amended opening submissions dated 8 November 2024, the plaintiff conceded that the 2022 Review was invalid and stated that it had reversed the effect of the 2022 Review in JLL’s property management software.
82On 15 November 2022, the solicitors on the record in this proceeding for the plaintiff, Tisher Liner FC Law, sent a letter to Mr Marchionna in his capacity as guarantor of Jorimar’s lease obligations. Amongst other things, the letter stated:
“We enclose herewith a statement of account relating to the above Lease and Licence. You will note that a waiver of 45% of the rent has been applied in respect of February 2021, and the period 1 May 2021 to 15 March 2022. We are instructed that a payment of $500 has been received since the statement was issued.
We hereby make demand on behalf of the landlord under the Guarantees incorporated in the Lease and in the Licence that you pay the sum of $367,105.43 to our client forthwith.
If payment is not received within 7 days, our client will issue proceedings against you in the County Court of Victoria to recover the sum due plus interest calculated under the lease, and costs.”
83The enclosed JLL “Tenant Statement” dated 8 November 2022 in respect of the Premises shows that, before the application of any waivers, the monthly rental charged from the beginning of the statement period on 1 May 2020 through to 31 July 2022 was $13,669.35 per month (apparently inclusive of GST). Thus, the rent being charged by the plaintiff for the May 2020 to July 2022 period was the same as that which was being charged at the conclusion of the four-year lease term.
84There are several aspects of the Tenant Statement which require comment. The first is that, as I discuss below, the Tenant Statement purported to reflect the 2022 Review, which at that point in time the plaintiff had not yet disavowed.
85The second is that the Tenant Statement records 3 additional amounts charged on 1 July 2022, totalling $11,253.84 and bearing the description “Rate Change”. There was no evidence about the basis upon which these additional amounts were charged, and it appears to me that, having regard to their magnitude, they could not have been a consequence solely of the slight rental increase implemented due to the 2022 Review. That is to say, even if the 2022 Review had been valid, these amounts do not appear properly to reflect it.
86The third is that the monthly rental stipulated by the Tenant Statement from 1 August 2022 onwards is the sum of $14,658.27 ($988.92 more than the $13,669.35 previously being charged each month). Again, it appears to me that, having regard to the magnitude of this increase in the monthly rental, it could not have been a consequence solely of the slight increase implemented due to the 2022 Review.
87When I asked Ms Weinberg about the second and third issues above during closing address, she informed me, after seeking instructions, that the increased amounts reflected not only the 2022 Review, but also the implementation of the automatic annual fixed percentage rental increases provided for by the Varied Lease.[38]
[38]T212-213.
88The fourth aspect of the Tenant Statement requiring comment is that on its face it appears not to account for a significant number of payments, with a significant dollar value, made by Jorimar. The Tenant Statement includes a column headed “Receipts”, which contains “0.00” entries for every month save for a receipt of $3,916.85 recorded against the date 1 May 2020. (The 15 November letter also referred to one later receipt of $500.00, which the bank statements reveal was paid on 9 November 2022.) Despite this, Jorimar’s bank statements show that it made 124 weekly rental payments of $500.00, totalling $62,000.00 during the 1 May 2020 to 8 November 2022 period covered by the Tenant Statement. There was no dispute that these payments were in fact made. Again, in response to my questions during closing address, Ms Weinberg advised me that her instructions were that the $500.00 payments were in fact reflected in the total figure showing the rental arrears, despite their absence from the “Receipts” column.[39] In looking at the document, I have some difficulty in seeing that that is so.
[39]T213-214.
89I digress briefly to note that, when this proceeding was commenced on 1 December 2022, the original statement of claim – which I note did not bear the name of counsel – pleaded the 15 November 2022 letter as constituting “a letter of demand to the Defendant demanding payment of the amount then owing”. The statement of claim went on to allege that the current debt owing by Jorimar, and thus the defendant, was $383,248.36. That amount appears to have been derived from an updated version of the Tenant Statement, dated 29 November 2022, which was also subject to the 4 issues which I have identified above in respect of its predecessor. The original statement of claim was the pleading which the plaintiff took to trial. After I raised other pleading deficiencies with counsel during the plaintiff’s opening address on 31 July 2024, the plaintiff successfully applied to adjourn the trial and filed an amended statement of claim on 28 August 2024.
90In respect of the first 3 issues to which I have referred above, I note that the plaintiff has since disavowed reliance upon the 2022 Review and the automatic annual fixed percentage rental increases. It thus no longer seeks to rely upon the 1 July 2022 amounts totalling $11,253.84, or the $988.92 increase in the monthly charges from 1 August 2022 onwards.
91Returning to the factual chronology, the last rental payment made by Jorimar was on or about 17 May 2024, in the sum of $350.00. This is reflected in the Ledger Printout and was confirmed by Ms Hurley in her oral evidence. Mr Marchionna’s evidence[40] was that in May 2024 it “dawned on me, the $500 that it [sic] was taking out of my pocket to give to them, I needed. Right? And I chose not to pay any further, because it was just a ridiculous situation. A sense of justice, shall we say”. I understand the “ridiculous situation” to have been that the rental expected by the plaintiff was, in Mr Marchionna’s view, too high compared with Jorimar’s takings.[41]
[40]T115.
[41]T114-115.
92It was not in dispute that, as at the conclusion of the trial, Jorimar continued to remain in possession of the Premises without the plaintiff’s objection.
F. Was the option exercised?
93There was no suggestion by either party that the relevant preconditions for the exercise of the option had not been satisfied. Rather, the sole issue was whether Jorimar had, by the September Letter, exercised the option.
94The plaintiff’s position is that, by the September Letter, Jorimar clearly and unequivocally manifested an election to enter into a lease for the renewed term (that is, the Option Term) in accordance with the option contained in the Varied Lease.
95The defendant’s position, as encapsulated in defence point 1 set out in paragraph 11(a) above, is that the exercise of the option was conditional upon the rental being reduced to $1,500.00 per week and the granting of a further lease term beyond the Option Term. Accordingly, the option was not exercised.
F.1 Plaintiff’s contentions
96The plaintiff submitted that a reasonable recipient of the September Letter would understand the option to have been exercised. It relied upon the subject line of the letter: “Re: Notification of exercise of option for Shops 10-16 Ground Floor Level, Trak Centre”. It also submitted that the language of the first paragraph of the September Letter was clear and unambiguous: “I am writing to advise that I am exercising the option that I am entitled to for the further period of three years”. The plaintiff stressed that that sentence did not use words suggesting conditionality, such as “subject to”, or “conditional on”, or “only if”.
97The plaintiff submitted that the remaining paragraphs of the September Letter did not detract from this position. It adopted the observation of his Honour Judge Macnamara, made during the parties’ submissions at an earlier interlocutory hearing, that Mr Marchionna on behalf of Jorimar “wrote a letter saying ‘I’m exercising the option’ and then added what, if I may respectfully call it, a bit of a sob story as a postscript.” The plaintiff submitted that, at their highest, the remaining paragraphs of the September Letter amounted to an offer to vary the terms of the lease for the Option Term, which offer was distinct and separate from the exercise of the option. This was said to be evident from the use of the word “request” in the penultimate paragraph.
98Thus, the plaintiff submitted, the September letter did two separate things: first, it accepted or exercised the option, and secondly, it made a fresh offer as to the rental for the Option Term. Unless and until that offer or request was acceded to by the plaintiff, the parties’ legal relationship was governed by Jorimar’s exercise of the option. The plaintiff further observed that it was not obliged to accept that offer or request, and that it never did so.
F.2 Defendant’s contentions
99The defendant contended that the September Letter did not constitute an unconditional exercise of the option. Rather, it proposed new terms, making it a counter-offer. It was said that the September Letter clearly tied Jorimar’s exercise of the option to specific conditions: namely, a reduced rental of $1,500.00 per week and the granting of a five-year lease term. The nexus between these two conditions and the exercise of the option was said to be evidenced by the use of the phrase “I therefore request” in the penultimate paragraph.
100Accordingly, submitted the defendant, in circumstances where the plaintiff did not accept the conditions to which the purported exercise of the option was subject, there was no valid exercise of the option. The September Letter therefore had no binding legal effect.
F.3 Consideration
101There was no substantial dispute between the parties as to the applicable legal principles concerning the exercise of an option. The plaintiff submitted, by reference to a number of authorities, that the “cardinal rule” is that a notice purportedly exercising an option must be clear and unequivocal, and that the exercise of the option must be absolute and unqualified.[42] This proposition is uncontroversial and the defendant took no issue with it. Relatedly, both parties agreed that an option cannot be exercised conditionally or, put another way, that a purported conditional exercise of an option is not a valid exercise of an option.
[42]The plaintiff cited Croft, Hay and Virgona, Commercial Tenancy Law (5th ed, 2024) at 450 [14.8] and the authorities cited therein.
102The plaintiff further submitted that a notice purporting to exercise an option is to be construed objectively in the way it would be understood by a reasonable recipient, and that evidence of the parties’ subjective understanding of the effect of the notice is inadmissible.[43] These propositions are well-settled and they were not challenged by the defendant. I have accordingly disregarded the oral evidence given by Mr Walker and Mr Marchionna as to their understanding of what was being conveyed by the September Letter.
[43]The plaintiff cited Croft, Hay and Virgona, Commercial Tenancy Law (5th ed, 2024) at 450 [14.8] and the authorities cited therein.
103The real issue in the present case is whether the September Letter would have been fairly understood by a recipient in the position of the plaintiff as involving an absolute and unqualified exercise of the option conferred by clause 12.1 of the Varied Lease.[44] In determining that issue, the Court must read the September Letter as a whole.[45] It is also relevant to read the letter against the background of the objectively known surrounding circumstances, including the dealings between the parties.[46] That said, neither party contended that there were any antecedent communications or other objective circumstances against the background of which the September Letter fell to be considered.
[44]Cf Sea One North Pty Ltd v Ignazia Pty Ltd [2024] NSWSC 343 at [18].
[45]Sea One North Pty Ltd v Ignazia Pty Ltd [2024] NSWSC 343 at [19].
[46]See eg Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 at [33]-[34].
104Clause 12.1 of the Varied Lease provides that the tenant has an option to renew the lease for the further term and that the landlord must renew the lease for the further term if, amongst other things, “the tenant has requested the renewal in writing” within the specified time. Accordingly, the question posed by the Varied Lease is whether Jorimar, by the September Letter, “requested” the renewal the subject of the option. It is also relevant to note that clauses 12.2.2 and 12.2.3 provided, respectively, that the renewed lease has a starting rent determined in accordance with clause 11 (that is, pursuant to the market review procedure) and must contain the same terms as the Varied Lease (save for the option for renewal).
105Whilst each case must turn upon its own unique facts and circumstances, it is useful to consider some authorities involving correspondence which might be seen as sharing some broad similarities with the September Letter. I will address the cases in chronological order.
106In Lolly Pops (Harbourside) Pty Ltd v Wencog Pty Ltd,[47] the plaintiff tenant contended that it had validly exercised an option for a further lease term by delivering to the landlord a covering letter from its controlling director and an enclosed notice.[48] The covering letter made various complaints in the first two paragraphs, before going on to state:
“The enclosed lease renewal notice is therefore subject to me knowing precisely what is likely to happen over the short to medium term, what is the plans in terms of merchandising mix and how is [the tenant] to be affected any more than it is already.
…
What really irks me is that I am still being asked to pay for rental on a property that is obviously in trouble and as far as I am concerned I am renewing my lease oblivious to the future. Please contact me at the earliest possible time.”
[47](1998) 9 BPR 16,361; [1998] NSWSC 304.
[48]See (1998) 9 BPR 16,361 at 16,365.
107The enclosed notice was headed “Notice of Lease Renewal” and commenced by stating: “Pursuant to the terms of the lease be advised that [the tenant] hereby elects forthwith to continue with the second further term and exercises the option to renew the lease of shop 283 Festival Market Place at Darling Harbour.”
108Amongst other things, Young J was required to consider whether the documents constituted an exercise of the option or were merely a conditional acceptance. In concluding that the tenant had exercised the option, his Honour stated:[49]
“It is not every acceptance which appears to have a condition attached to it that should be classed as a qualified acceptance. There may be an acceptance which asks for matters to be reviewed so long as it is clear from the whole of the context that if the request is refused, the acceptor is prepared to carry out the original contract. Furthermore, there may be an acceptance coupled with an offer to enter into a further collateral contract.
It seems to me that the ‘subject to’ matters referred to in the [covering letter] are in the category of a general request for consideration in view of all the problems that the lessee has been experiencing through the renovation works of the lessor and should not be taken to be a condition qualifying the acceptance.” (emphasis added)
[49](1998) 9 BPR 16,361 at 16,373.
109In Vered Nominees Pty Ltd v Scalex Pty Ltd,[50] the tenant asserted that it had not exercised an option to renew a lease, whereas the landlord asserted that the tenant had done so. The purported notice was contained in a letter from the tenant’s solicitors headed “Option for Renewal of lease – 14-18 Cremorne Street” and stated:
“We refer to the above matter and advise that we act on behalf of Scalex Pty Ltd the Lessee of the above premises. Our client has forwarded to us a copy of your letter dated 8 November 1999 and we advise that our client wishes to exercise the Option contained in the Lease.
As per the terms of the lease, the rent for the first year will be the same as the current rent, our client would prefer this rent to remain the same for the second year, but will be prepared to negotiate a reasonable variation.”
167For these reasons, I do not accept defence point 6.
G.3 Conclusion
168For the reasons given above, I accept the plaintiff’s alternative case that, from 1 April 2020, Jorimar was a monthly tenant pursuant to the overholding provisions in clause 10.1 of the Varied Lease. I do not accept the defendant’s various challenges to that position.
H. Jorimar’s liability from 1 April 2020
169Having concluded that Jorimar was overholding as a monthly tenant pursuant to clause 10.1 from 1 April 2020, it is necessary to consider its liability under that scenario.
H.1 Plaintiff’s contentions
170The plaintiff relevantly contends that Jorimar has breached clause 2.1.1 of the Varied Lease by failing to pay all of the applicable rent (including GST thereon), clause 2.1.8(f) by failing to pay the plaintiff’s reasonable expenses and legal costs in respect of Jorimar’s breaches of the Varied Lease, and clause 2.1.8(g) by failing to pay the plaintiff’s reasonable expenses and legal costs in respect of the exercise or attempted exercise by the plaintiff of any right or remedy against Jorimar.
171As I have observed above, clause 10.1.3 provides that the monthly rental during the overholding period starts at one-twelfth of the annual rental payable immediately before the overholding period, unless a different rental has been agreed. The plaintiff contends that, because there was no such agreement, the monthly rental remained at the same level as in the final year of the four-year term ending on 31 March 2020. As I have already recorded, that monthly rental was $13,669.35 per month inclusive of GST. On the plaintiff’s case, therefore, this was the rental for the overholding period. (It was not suggested that the plaintiff had increased the monthly rental by giving one month’s written notice under clause 10.1.4.)
172The plaintiff accepts that the total amount payable by Jorimar is subject to the waiver applied by it in respect of certain periods due to COVID-19.[87]
[87]As to the effects of COVID-19, neither party contended that it was necessary for me to consider the operation of the Scheme and whether or not it had been complied with.
173In terms of the total amount payable by Jorimar, the plaintiff relied, both in respect of its primary claim and its alternative claim, upon the Ledger Printout. The Ledger Printout covers the period 1 April 2019 to 1 November 2024 and recorded a total amount outstanding of $719,600.16 as at the latter date. This sum reflects not only the rent and licence fees charged by the plaintiff during that period, but also legal costs. As I have observed elsewhere, the plaintiff no longer presses its claim to licence fees from 1 April 2020 onwards.
174The plaintiff also claims interest on the sums outstanding. Clause 2.1.7 provides for the tenant to pay interest calculated daily from the due date at the rate specified in item 14 of the schedule, which was 2 per cent per annum more than the rate from time to time fixed under the Penalty Interest Rates Act 1983 (Vic). As Ms Weinberg observed during her oral opening submissions,[88] the Ledger Printout does not incorporate any amounts in respect of interest payable. The proposed orders proffered by the plaintiff suggest that it is content instead to seek interest calculated on the amount claimed in the writ (being $383,248.36) from the date of the writ (being 1 December 2022) to the date of judgment at the rate fixed under the Penalty Interest Rates Act. I note that that is a basis more favourable to Mr Marchionna than that which would be payable under clause 2.1.7. However, I also note that the amount of $383,248.36 includes amounts which the plaintiff no longer claims and amounts which – for the reasons discussed below – I am not prepared to allow. Accordingly, that figure will need to be revised before calculating any interest based upon it. I will return to this below.
[88]T29.
H.2 Defendant’s contentions
175The defendant disputed the quantum of the plaintiff’s claim. In his primary closing submissions, he submitted that “[t]he plaintiff’s claim for arrears, totalling $716,600.16 [scil: $719,600.16], is inflated and unsupported, particularly in the absence of a valid market review”.
176As to the amounts paid by Jorimar, it was not disputed that the defendant ceased to make any payments at all after May 2024. The defendant’s primary written closing submissions contended that this cessation was “due to the absence of enforceable terms, as the Plaintiff’s failure to conduct the mandatory market review left the lease incomplete”. It was also contended that the cessation was “a reasonable and proportional response to the plaintiff’s failure to finalize terms” and “also reflected the tenant’s significant financial strain” and “cashflow challenges”.
177Defence point 4 is set out in paragraph 11(d) above. It involves the proposition that, because the plaintiff’s particulars of the amount claimed do not correctly state the amount owing by Jorimar, the defendant is not obliged to pay the debt claimed. Four matters are advanced in support of this.
178The first matter relied upon was that the plaintiff belatedly factored into its claim Jorimar’s weekly rental payments of $500.00. This is a reference to what is said to be the omission of those payments from the 15 November 2022 letter of demand and enclosed Tenant Statement and the original statement of claim.
179The second matter relied upon is that Jorimar’s payments of $500.00 per week represented an “interim agreement during Covid” and were made with a view to arriving at a reasonable rental reflecting changed business conditions. As to this matter, Mr Marchionna submitted[89] that the plaintiff’s continued acceptance of weekly amounts of $500.00 “would lead anyone to believe, ‘Well maybe that’s what they want as a rent’, because there were no terms … negotiated”.
[89]T44.
180The third matter is that the plaintiff submitted an invalid market appraisal in May/June 2022, which the plaintiff falsely claimed had been made in accordance with the Varied Lease.
181The fourth and final matter is that the plaintiff produced the May/June 2022 market appraisal to “boost the amount of its claim” by increasing the rental from May 2022 onwards to an amount which was 4 per cent above the rental which was payable immediately prior to the beginning of the Option Term.
H.3 Consideration
H.3.1 Rental
182I accept the plaintiff’s submissions as to the rental payable from 1 April 2020 onwards. Those submissions correctly reflect the applicable regime under clause 10.1 of the Varied Lease. The monthly rental was $13,669.35 inclusive of GST.
183I do not accept the defendant’s submissions challenging the rental. As to the submission recorded in paragraph 175 above, the absence of a market review is beside the point in circumstances where the tenant was overholding under clause 10.1. The defendant provided no explanation of any other basis upon which it was said that the amount claimed by the plaintiff was “inflated and unsupported”.
184Contrary to the submissions recorded in paragraph 176 above, there was no legally justifiable basis for the tenant to cease paying any rent after May 2024. Again, the absence of the market review is beside the point. For reasons which I have explained earlier, the defendant is incorrect in contending that there was an absence of enforceable terms; rather, clause 10.1 of the Varied Lease governed the parties’ legal relationship – and the rental payable – during the period of overholding. Whilst financial strain may well be challenging for a tenant, it does not constitute a legal justification for a tenant to cease paying rent on premises which it continues to occupy. I also note that the submissions in paragraph 176 do not sit entirely squarely with Mr Marchionna’s evidence which I have recorded at paragraph 91 above as to the reason for Jorimar’s cessation of rent payments.
185Defence point 4 relied upon 4 matters. The first, third and fourth such matters are historical relics. There is no reason to believe that the amount now claimed by the plaintiff in respect of rent does not correctly reflect the amount owing by Jorimar. Even if it were the case that the 8 November 2022 Tenant Statement and the original statement of claim had failed to reflect the tenant’s weekly payments of $500.00 commencing in June 2020, the plaintiff has now ensured, through the Ledger Printout, that those payments are reflected in the calculation of the amount owing. The defendant has accepted that this is so, including in the very language in which defence point 4 was expressed. As to the effects of the 2022 Review, as I have already recorded, that review has been disavowed by the plaintiff and is not reflected in the Ledger Printout.
186The second matter raised in defence point 4 was the plaintiff’s alleged agreement to accept a weekly rental of $500.00.
187As to the plaintiff’s alleged agreement, the highest Mr Marchionna’s evidence[90] rose was that the plaintiff was silent, did not acknowledge the payments, and did not protest that Jorimar was not paying more. He said that this, combined with the $500.00 payments not being reflected in earlier versions of the plaintiff’s accounts, made him suspect that the plaintiff was “ignoring it and hopefully not making it look as if it is an agreement”.[91] I note that, as I have recorded earlier, Mr Marchionna accepted in cross-examination that Mr Walker did not tell him that Jorimar could stay on at the Premises for a rental of $500.00 per week.
[90]T113.
[91]T113.
188The plaintiff acknowledged that, whilst silence cannot constitute acceptance of an offer, acceptance may be inferred from conduct.[92] However, I do not consider Mr Marchionna’s evidence to reflect accurately the plaintiff’s outwardly manifested conduct in respect of the rental. The $500.00 payments commenced in June 2020. There are a number of communications from the plaintiff after that date which are inconsistent with any implicit agreement on its part to accept only $500.00 per week. The plaintiff’s conduct in sending those communications provides no support for the agreement alleged and, to the contrary, positively belies the existence of any such agreement.
[92]The plaintiff cited Farmers’ Mercantile Union and Chaff Mills Ltd v Coade (1921) 30 CLR 113.
189First, as the plaintiff points out in its written closing submissions, Mr Coleman’s letter of 9 September 2020 (paragraph 56 above) “request[ed] prompt payment of all arrears up to 29th March 2020 and your obligation to adhere to the provisions of your lease”.
190Secondly, in response to Jorimar’s request for rent relief under the Scheme, Mr Coleman sent a letter dated 22 October 2020 (paragraph 66 above). As I explained in paragraph 67 above, that letter identified the pre-waiver rental for the months April to September 2020 as $12,426.68. After application of the 40 per cent Scheme waiver proposed by the plaintiff, the monthly rental for that period was proposed to be $7,456.01.[93]
[93]It is apparent that all of the dollar sums in the letter are expressed on a GST-exclusive basis.
191Thirdly, the 2022 Review occurred in May and June 2022, culminating in a letter from JLL on 8 June 2022 (paragraph 80 above) stating that a new annual rental of $150,000.00 plus GST would commence from 25 May 2022 and requesting “a repayment plan for the arrears”. Irrespective of the validity or otherwise of the 2022 Review, the sending of this letter is conduct on the plaintiff’s part which belies any suggestion that it had agreed to accept a weekly rental of $500.00.
192Fourthly, in mid-November 2022, as I have recorded in paragraphs 82 and 83 above, the plaintiff’s solicitors sent the defendant a letter of demand and the attached Tenant Statement. The Tenant Statement recorded the rental payable for the period 1 May 2020 through to 31 July 2022 as $13,669.35 per month (inclusive of GST) and an increased amount thereafter.
193I therefore do not accept that there was any agreement by the plaintiff, whether express or implied, to accept a weekly rental of $500.00 from June 2020 onward. Rather, the true position in respect of the rental remained as prescribed by clause 10.1.
194Accordingly, for the reasons given above, I do not accept that defence point 4 provides the defendant with a defence in respect of the quantum of unpaid rent claimed by the plaintiff.
H.3.2 Legal costs
195As to legal costs, the plaintiff relies upon clauses 2.1.8(f) and (g). The defendant did not specifically address the claim for legal costs in his submissions.
196Whilst the Ledger Printout contains some amounts which bear the relevant numerical code (being 309) for legal costs, there is otherwise no evidence in relation to these costs.[94] There is consequently no means by which the Court can ascertain what each item of legal costs in the Ledger Printout relates to and thus whether those costs fall within the descriptions in clauses 2.1.8(f) and (g), whether they are reasonable (as required by clause 2.1.8), whether and when a “request” was made for payment of those costs (as required by clause 2.1.8), or whether the Ledger Printout correctly records those costs.
[94]I raised this matter with counsel during opening submissions and closing submissions.
197My concern regarding the lack of evidence of legal costs is heightened by the fact that a number of entries in the Ledger Printout bearing the code 309 appear to be receipts rather than amounts charged as legal costs, and some such entries appear to be reversals. This was all unexplained.
198Accordingly, in light of the absence of evidence about the legal costs, I do not consider the plaintiff to have discharged its onus of satisfying me that the amounts recorded in the Ledger Printout as legal costs from 1 April 2020 onwards are properly owing by Jorimar.
H.3.3 Quantum of Jorimar’s liability: conclusion
199Ms Hurley gave evidence[95] that the figure of $719,600.16 on the final page of the Ledger Printout represents the total amount which remains outstanding for the period from 1 April 2019 to 1 November 2024 and that this figure takes into account the payments received from Jorimar and any credits applied to the account. She confirmed[96] that the Ledger Printout does not reflect the effect of the 2022 Review, upon which the plaintiff no longer relies. She also explained[97] that the Ledger Printout reflects, under numerical code 118, credits applied to the lease in respect of waivers or abatements under the Scheme.
[95]T97.
[96]T93, 97.
[97]T94-95, 98.
200I also note that the Ledger Printout reflects the charging of the licence fee for the Carpark during the overholding period which, as I recorded in paragraph 14 above, the plaintiff no longer claims. Further, the Ledger Printout reflects legal costs which I have concluded the plaintiff should not be awarded. Accordingly, these amounts will need to be backed out of the Ledger Printout to arrive at the amount which Jorimar owes the plaintiff.
201Accordingly, it will be necessary for the parties to seek to reach agreement, following their consideration of these reasons, upon the precise dollar amount which Jorimar owes, consistent with these reasons. At a conceptual level, that amount should:
(a) include the sum of $42,948.86 owed for the period up to and including 31 March 2020 (in respect of which the defendant did not dispute liability);
(b) include rent calculated at $13,669.35 per month (inclusive of GST) from 1 April 2020 onwards;
(c) exclude legal costs from 1 April 2020 onwards;
(d) exclude the licence fee from 1 April 2020 onwards;
(e) reflect all payments received by the plaintiff from Jorimar from 1 April 2020 onwards; and
(f) reflect the Scheme waivers applied by the plaintiff.
202I also note that, as I foreshadowed above, in calculating any interest from the date of the writ, the principal sum of $383,248.36 will need to be reduced, consistent with what I have stated in the preceding paragraph.
I. Defendant’s liability for Jorimar’s obligations
203The present proceeding involves a claim by a landlord against a guarantor, not a claim against a tenant. Accordingly, my decision as to the amount owed by Jorimar does not conclude the matter. It is necessary to go on to consider whether the defendant is liable for Jorimar’s obligations from 1 April 2020 onwards. (As I have observed earlier, the defendant did not dispute his liability for Jorimar’s arrears up to and including 31 March 2020.)
I.1 Plaintiff’s contentions
204Insofar as the defendant’s liability is concerned, the plaintiff relies upon clause 15.1 of the Varied Lease, which provides inter alia that the guarantee and indemnity given by the defendant extends to any period of overholding after the end of the lease term – that is to say, after 31 March 2020.
I.2 Defendant’s contentions
205The defendant disputes his liability for the period from 1 April 2020. Defence points 3 and 7 fall for consideration here.
206Defence point 3 alleges that the plaintiff’s failure to follow the compulsory market review mechanism in clause 11 of the Varied Lease at the start of the Option Term means that it cannot enforce the guarantee and “renders its claim fatally flawed and justifies dismissal” of the claim.
207Defence point 7 alleges that, regardless of whether the option was exercised, the Varied Lease ceased to have effect from 31 March 2020 and there was therefore no guarantee in place from that date.
208I further note that, in the context of discussing the validity of the underlying lease, the defendant cited Ankar Pty Ltd v National Westminster Finance (Australia) Ltd[98] for the propositions that guarantees must be strictly construed and that “ambiguous or uncertain obligations cannot be enforced against a guarantor, particularly when the underlying lease renewal is invalid.” In a later part of his submissions, he similarly contended that “Ambiguities in Clause 15 must be interpreted in favour of the guarantor”. The defendant did not, however, identify any respect in which clause 15 was said to be ambiguous.
[98](1987) 162 CLR 549.
I.3 Consideration
209I accept the plaintiff’s submission. Clause 15.1 is clear and unambiguous. The defendant’s guarantee applies in respect of Jorimar’s obligations during the period of overholding which commenced on 1 April 2020.
210As to defence point 3, I have already discussed at length the absence of a market review. As I have previously observed, no market review was required where Jorimar was overholding pursuant to clause 10.1 from 1 April 2020. Accordingly, the absence of a market review does not render the clause 15.1 guarantee unenforceable or mean that the plaintiff’s claim should be dismissed.
211Defence point 7 ignores the combined operation of clauses 10.1 and 15.1 and suffers from the same conceptual flaws as the defendant’s submissions regarding an alleged absence of lease terms after 31 March 2020, which I have addressed in paragraphs 151-153 above.
212The defendant’s reliance upon Ankar does not advance his position. Whilst it may be accepted that a guarantee is ordinarily to be construed strictly,[99] the defendant pointed to nothing which was said to be ambiguous or uncertain about the guarantee in clause 15. It is clearly expressed as applying, inter alia, “during any period of overholding after the end of the term”. Further, the defendant is incorrect insofar as his submissions implicitly suggest that Ankar concerned the unenforceability of a guarantee “particularly when the underlying lease renewal is invalid”. That case did not concern an invalid lease renewal.
[99](1987) 162 CLR 549 at 561.
213Accordingly, the defendant is liable under the clause 15.1 guarantee for the obligations of Jorimar to which I have referred in paragraph 201.
J. Further matters
214Section 8 of the defendant’s primary written closing submissions was headed “Public Policy Implications” and section 9 was headed “Personal and Financial Harm”. In those sections, the defendant made submissions which travelled well beyond his points of defence and well beyond the statement of issues settled for the purposes of the trial. Despite this, I have read and had regard to the submissions contained in sections 8 and 9. It is unnecessary to set them out here. It is sufficient to state that, even if the defendant were to be permitted to rely upon those submissions, there is nothing in them which would affect the conclusions which I have otherwise reached.
215Finally, I note that it was clear from his evidence and submissions that Mr Marchionna feels strongly that he has been poorly treated by the plaintiff. Having regard to the factual chronology, it seems to me that that feeling is not without justification. Despite being represented by JLL, a well-known property company which one might assume should be aware of the relevant legal and statutory obligations of its lessor clients, the plaintiff’s conduct during the period in question was far from satisfactory. Amongst other things, the plaintiff:
(a) failed to respond in a timely way to the September Letter;
(b) having taken the position that Jorimar had exercised the option:
(i)failed to provide a disclosure statement under s 26 of the RLA until 6 months after the required date – which, if the option had been exercised, would have constituted a clear contravention of the RLA;
(ii)failed to provide a deed of renewal for the new lease term until some 5 months after the beginning of that term;
(iii)failed to carry out a market review which would have been mandated by the Varied Lease if the option had been exercised;
(iv)two years later, implemented the 2022 Review which was stated at the time to have been carried out pursuant to the Varied Lease, but which the plaintiff now accepts was invalid; and
(v)furnished Jorimar with tenant statements which were at best unclear and misleading and at worst incorrect, and used those statements as the basis of a letter of demand threatening legal proceedings.
216Unfortunately for the defendant, unsatisfactory as this conduct may have been, it does not – for the reasons which I have explained – afford him a legal defence to the claim made against him in this proceeding based upon the Varied Lease.
Conclusion
217There will be judgment for the plaintiff against the defendant in a sum to be calculated on the basis of what I have stated in paragraphs 201-202 above. The parties should seek to reach agreement upon that sum.
218As to the question of costs, unless there is a basis for some other order, costs should follow the event and the defendant should be ordered to pay the plaintiff’s costs on the standard basis. As I stated during closing submissions, I am inclined to exclude the costs of the first day of the trial on 31 July 2024, given that the need for an adjournment that day arose primarily because of the plaintiff’s significantly deficient pleading of its claim. If the plaintiff contends for a different position, it should provide a brief submission to that effect.
219The parties are directed to provide my associate, within 14 days of the delivery of these reasons, with an agreed draft order disposing of the proceeding consistent with these reasons or, if agreement cannot be reached, their competing draft orders. Depending upon what is received from the parties, I will then consider the necessary next steps to finalise the matter.
---
Certificate
I certify that these 70 pages are a true copy of the judgment of Judicial Registrar Bennett delivered on 6 May 2025.
Dated: 6 May 2025
Tae Fabricato
Associate to Judicial Registrar Bennett
7
0