Versus (Aus) Pty Ltd v ANH Nominees Pty Ltd
[2015] VSC 515
•1 October 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2014 02449
| VERSUS (AUS) PTY LTD (ACN 105 954 845) | Plaintiff |
| v | |
| A.N.H. NOMINEES PTY LTD (ACN 005 796 378) | Defendant |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1, 7 and 13 May 2015 and Written Submissions (20 July and 10 and 24 August 2015) |
DATE OF JUDGMENT: | 1 October 2015 |
CASE MAY BE CITED AS: | Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2015] VSC 515 |
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LEASES AND TENANCIES – Retail leases – Repair of leased premises – Failure to remediate leased premises – Tenant out of occupation for 22 months – Lease renewal – When a lease is “entered into” upon renewal – Whether landlord’s obligation to repair subsists in new lease term – Relationship between statutory obligations – Statutorily implied covenants – Retail Leases Act 2003, ss 7, 52, 54, 94.
CONTRACT – Repudiation – Repudiatory conduct – Reasonable person test – Laurinda Pty Ltd v Capalaba Park Shopping Centre Ltd (1989) 166 CLR 623.
ESTOPPEL – Issue estoppel – Prior finding of fact by the Victorian Civil and Administrative Tribunal – “Legally indispensable” finding – Forster v Legal Services Board (2013) 40 VR 587.
PRACTICE AND PROCEDURE – Appeal from decision of Victorian Civil and Administrative Tribunal – Victorian Civil and Administrative Tribunal Act 1998, s 148(1).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.D.S. Barber | Vincent J. Ryan |
| For the Defendant | Mr P.J. Bick QC with Mr A.T. Schlicht | Isakow Lawyers |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
The appeal........................................................................................................................................... 1
Principles applicable with respect to appeals............................................................................... 6
Factual matters.................................................................................................................................... 9
Legislative provisions...................................................................................................................... 15
Issues on appeal............................................................................................................................... 17
Question 1........................................................................................................................... 18
Question 2........................................................................................................................... 33
Question 3........................................................................................................................... 52
Question 4........................................................................................................................... 60
Question 5........................................................................................................................... 63
Questions 6(a) and (b)....................................................................................................... 64
Question 7........................................................................................................................... 67
Conclusions and orders.................................................................................................................. 69
HIS HONOUR:
Introduction
This proceeding comes to the Court by way of appeal following a decision of Judge Lacava, sitting as a Vice President of the Victorian Civil and Administrative Tribunal (“the Tribunal”) between the Plaintiff as Applicant and the Defendant as Respondent, delivered 1 December 2011 (“the Lacava decision”)[1] and a decision of Senior Member Riegler as the Tribunal delivered 22 April 2014 (“the Riegler decision”).[2]
[1]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273.
[2]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454.
As the factual background to the proceedings is set out in significant detail in the Lacava decision, it is not necessary to repeat the detail in these reasons. Nevertheless, a broad outline with reference to the Lacava decision will be of assistance, and is provided in the reasons which follow.
Pursuant to leave granted by Derham AsJ on 31 July 2014, and further leave granted by Daly AsJ on 24 February 2015, the Plaintiff appeals by Amended Notice of Appeal filed 25 February 2015 against Order 1 of final orders made by Senior Member Riegler on 22 April 2014. Order 1 of those final orders is an order that: “The … [Defendant] must pay the … [Plaintiff] $30,707.82”. The Plaintiff appeals in respect of the questions of law numbered 1 and 3 to 7, inclusive, in the Amended Notice of Appeal; questions in relation to which leave to appeal was granted. The Plaintiff now seeks leave to appeal in respect of questions of law numbered 2 in that Notice.
The appeal
The Plaintiff presses the following questions in its appeal:[3]
[3]Amended Notice of Appeal (25 February 2015).
(1)Whether the Tribunal wrongly failed to consider and apply s 54 of the Retail Leases Act 2003 (“the Act”) in the determination of the Plaintiff’s claim (“Question 1”).
(2)Whether the Tribunal wrongly failed to recognise that the parties are bound by findings of fact in the Lacava decision, in particular in paragraphs [11], [174], [211] and [287]–[313] of that decision (“Question 2”).
(3)Whether the Tribunal misapplied the doctrine of repudiation by wrongly failing to assess the question of repudiation on an entirely objective basis, or by wrongly failing to regard the Defendant’s failure to remediate the leased premises between May 2011 and April 2013 as a repudiation of the lease (“Question 3”).
(4)Whether the Tribunal wrongly treated the claim for goodwill as a unitary claim and, in dismissing that claim, wrongly failed to consider and determine whether the Plaintiff’s claim for loss of goodwill should have been upheld in part (“Question 4”).
(5)Whether the Tribunal wrongly failed to assess compensation (whether for a breach of s 54 of the Act or otherwise) on the basis of a loss of opportunity to expand the business of the Plaintiff by establishing another store or stores (“Question 5”).
(6)Whether:
(a)it was open to the Tribunal on the evidence and material before it to find that there was no evidence as to whether stock preview items, also referred to as promotional items, would continue to be provided or whether they would continue to be provided at such a reduced cost (“Question 6(a)”);
(b)the Tribunal was obliged to have regard to evidence that stock preview items, also referred to as promotional items, would continue to be provided or would continue to be provided at such reduced cost (“Question 6(b)”).
(7)Whether the Tribunal’s exercise of its jurisdiction failed or miscarried, actually or constructively, due to the Defendant’s failure to comply fully with its obligation to give discovery of documents (“Question 7”).
The grounds of appeal relied upon by the Plaintiff are as follows:[4]
[4]Amended Notice of Appeal (25 February 2015).
(1)Failing to recognise that the Plaintiff’s claim was brought under (inter alia) s 54 of the Act, failing to apply that section and failing to decide the claim made by the Plaintiff under that section;
(2)Misconstruing or misunderstanding the reasons delivered by Judge Lacava in the Lacava decision, in that the Tribunal failed to recognise that Judge Lacava’s award of damages was made for (inter alia) breach of s 54 of the Act in respect of the mould infestation at the leased premises, which contributed to the Tribunal’s erring in the manner identified at (1) above;
(3)Failing to recognise that the parties were bound by the finding of fact by Judge Lacava in the Lacava decision at [174], [211], that the leased premises could not be occupied until the mould was properly treated, and by order 2 made by Judge Lacava to similar effect;
(4)Misdescribing, misunderstanding and misapplying the doctrine of repudiation in that the Tribunal treated the doctrine as depending solely on the subjective, alternatively actual, intention of the party in breach, when in law:
(a)intention is to be assessed objectively and need not be actual; and
(b)intention is not necessarily relevant at all if the party in breach proves unable to perform the contract within a reasonable time or at all,
and failing to recognise that the defendant landlord’s failure from May 2011 until at least April 2013 to remove, properly or at all, mould from the surfaces and air at the leased premises, thus for the whole of that period rendering the premises unable to be occupied and preventing the plaintiff tenant from occupying the leased premises, constituted a repudiation of the lease which the Plaintiff had accepted by its letter of 27 March 2013;
(5)By reason of the above errors, arriving at the perverse conclusion that, despite keeping the plaintiff tenant out of occupation by its failure to remove mould from the leased premises from May 2011 until at least April 2013, the defendant landlord had not repudiated the lease;
(6)In consequence of (4) and further, or alternatively, in consequence of (5), assessing damages on the basis that the parties had abandoned the lease on 9 April 2013, when the true legal analysis was that the plaintiff tenant had accepted the defendant landlord’s repudiation, such that damages ought to have been awarded to the end of the lease;
(7)Failing to recognise that the parties were bound by the finding of fact by Judge Lacava in the Lacava decision at [11] that it was because of the crippling of the plaintiff tenant’s business by the issue that gave rise to the retail tenancy dispute that the Plaintiff’s plan to establish another retail outlet in Sydney had not eventuated, and to assess damages, including for loss of opportunity, on that basis;
(8)Failing to consider whether being deprived of the use of the leased premises for the period from May 2011 until March 2013, alternatively January 2012 to March 2013, during which period, as the Tribunal found at [166], the plaintiff tenant was unable to operate its business, would result in partial loss of the Plaintiff’s goodwill, instead deciding only that it would not result in total loss of goodwill, and in consequence failing to recognise that it would result in at least a partial loss of goodwill and failing to assess damages accordingly;
(9)Finding, contrary to the evidence,[5] that there was no evidence that preview items would continue to be provided or would continue to be provided at such reduced cost;
(10)Failing to have regard to evidence that preview items would continue to be provided or would continue to be provided at such reduced cost;[6]
(11)The Tribunal’s exercise of its jurisdiction failed or miscarried or was vitiated, actually or constructively, due to the Defendant’s failure to comply fully with its obligation to give discovery of documents.
[5]Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273 (Victorian Civil and Administrative Tribunal, R187/2010, Judge Lacava, 31 October, 2–4, 7–11, 14, 16 November 2011) 49–57, 69–74, 535–8.
[6]Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273 (Victorian Civil and Administrative Tribunal, R187/2010, Judge Lacava, 31 October, 2–4, 7–11, 14, 16 November 2011) 49–57, 69–74, 535–8.
The orders sought by the Plaintiff, as set out in the Amended Notice of Appeal, are as follows:[7]
(1)The appeal be allowed.
(2)Order 1 of the orders made by the Tribunal on 22 April 2014 be set aside.
(3)The proceeding be referred to the Victorian Civil and Administrative Tribunal for assessment of damages in accordance with the reasons of this honourable Court.
(4)The Defendant pay the Plaintiff’s costs of this proceeding.
(5)Such further or other relief as to this honourable Court deems fit.
[7]Amended Notice of Appeal (25 February 2015).
Following the hearing of this matter, the parties were invited to make submissions on a number of issues not addressed at the hearing:[8]
It is uncontroversial that, where a lease is renewed, the state of the premises for the purposes of a landlord’s obligations regarding the maintenance of the condition of the premises is generally taken to be the condition as at the date of the renewal. A question may arise, however, in relation to a landlord’s liability under ss 52 and/or 54 of the Act where any deterioration of the premises subsequent to the commencement of the lease, but prior to the commencement of the renewal term, is due to a landlord’s failure to maintain the premises in the condition required by s 52 of the Act.
In the event that his Honour finds that any of these provisions of the Act are applicable, it may be that issues arise in relation to the proper application of s 52 or other provisions of the Act regarding the state of the premises or renewal of the lease term, where there are issues in relation to compliance with these provisions with respect to the immediately prior lease term (in the lease term preceding the renewed term).
The parties are also invited to consider the possible effect of s 94 of the Act in this context.
The parties are invited to indicate whether they wish to make any submissions in relation to any or all of these issues, and, if so, in what form.
[8]Email from Luke Virgona and Martin John, Associates to Croft J, to P.J Bick QC, J.D.S Barber, V.J. Ryan, and Isakow Lawyers, representatives of the parties, 25 June 2015.
The parties made written submissions in response, but no request was made to re-open the hearing for the purpose of making submissions in relation to these issues.[9]
[9]Plaintiff’s Supplementary Submission (20 July 2015); Supplementary Submissions of the Defendant (10 August 2015); Plaintiff’s Supplementary Submission in Reply (24 August 2015).
Principles applicable with respect to appeals
Section 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (“the VCAT Act”) provides:
(1)A party to a proceeding may appeal on a question of law from an order of the Tribunal in the proceeding—
(a)if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others, to the Court of Appeal with leave of the Court of Appeal; or
(b)in any other case, to the Trial Division of the Supreme Court with leave of the Trial Division.
It follows from these provisions that any appeal is dependent upon two important qualifications. First, that the appeal be on a question of law and second, that the Court gives leave to appeal. The legislative policy underlying these provisions is that:[10]
VCAT decisions should not generally be disturbed where cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal.
It follows that “[t]his Court is not entitled to enter into the fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal.”[11]
[10]Commissioner of State Revenue v Frost (2011) 83 ATR 832 at 834 [5], referring to Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335–6; Myers v Medical Practitioners Board (Vic) [2007] VSCA 163, [28].
[11]Boucher v Dandenong Ranges Steiner School Inc (2005) 145 LGERA 21 at 26 [15], referring to Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1; Whitehorse City Council v Golden Ridge Investments Pty Ltd [2005] VSCA 198.
The leave requirement under s 148(1) is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[12]
The requirement for leave under s 148(1) of the VCAT Act “is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the Court do found the subject matter of the appeal.”[13] It also confers a discretion about whether to grant leave[14] which an applicant must persuade the Court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave.[15] It will ordinarily be necessary (in addition to a clearly articulated question of law)[16] for an applicant to make out a prima facie case[17] and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[18]
[12](2011) 83 ATR 832 at 833–4 [3].
[13]Commissioner of State Revenue v STIC (Australia) Pty Ltd (2010) 81 ATR 682 at 687 [10].
[14]Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331; Al-Hakim v Monash University (Unreported, Victorian Supreme Court of Appeal, 28 March 2003); Myers v Medical Practitioners Board (Vic) [2007] VSCA 163.
[15]See Morris v The Queen (1987) 163 CLR 454 at 475.
[16]Osland v Secretary to the Department of Justice (2010) 241 CLR 320 at 333 [21].
[17]Morris v The Queen (1987) 163 CLR 454 at 475; Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335.
[18]Secretary to the Department of Premier and Cabinet v Hulls [1999] 3 VR 331 at 335–6; Commissioner of State Revenue v Challenger Property Nominees Pty Ltd (2006) 63 ATR 65 at 69 [20], at 77 [65].
In considering an application of this nature, courts have been concerned to respect the role entrusted by the legislature to the particular tribunal and not, in effect, subvert this position by seeking out error. Thus, Kirby J in Roncevich v Repatriation Commission, said:[19]
[19](2005) 222 CLR 115 at 136 [64].
Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[20] The focus of attention is on the substance of the decision and whether it has addressed the “real issue” presented by the contest between the parties.
Similarly, in Vegas Nominees Pty Ltd v Werribee Sports & Community Club Inc, Ashley J said:[21]
This Court has said more than once that it should not examine briefly stated reasons by an expert Tribunal in an over-legalistic manner or by the over-zealous drawing of inferences in order to disclose some supposed error; although where unambiguous language is used, the user should be taken to mean what the words say. I should add that the Court is not entitled to interfere with the Tribunal’s decision unless it is satisfied that there was in fact a vitiating error of law. It is not enough for the appellant to show that the Tribunal’s reasons for its decision are so expressed as to suggest the possibility that it proceeded upon a wrong view of the law. In support of the several propositions that I have just stated I refer to Portland Properties Pty Ltd v Melbourne & Metropolitan Board of Works,[22] Michaelis Bayley (Vic) Pty Ltd v Melbourne & Metropolitan Board of Works[23] and Teston Investments Pty Ltd v Melbourne & Metropolitan Board of Works.[24]
Additionally, “[o]n appeal this court must recognise the forensic realities of the way in which the case was put to the tribunal. It is these realities to which a tribunal must respond in its reasons.”[25]
[20]Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575, 597. Cf Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 348 [74].
[21](Unreported, Supreme Court of Victoria, Ashley J, 21 December 1994) at 13.
[22](1971) 38 LGRA 6 at 18.
[23](1980) 44 LGRA 65 at 67–8.
[24](1985) 62 LGRA 346 at 349–50.
[25]Gombac Group Pty Ltd v Vero Insurance Ltd (2005) 23 VAR 460 at 470 [59].
Mere want of logic in the reasons given by a tribunal does not, of itself, establish an error of law. Thus, Mason CJ said in Australian Broadcasting Tribunal v Bond (“Bond”):[26]
[26](1990) 170 CLR 321 at 356 (emphasis in original), referred to with approval by Osborn J in Lucas v Transport Accident Commission [2003] VSC 97, [10].
But it is said that “[t]here is no error of law simply in making a wrong finding of fact.”[27] Similarly, Menzies J observed in R v District Court of the Metropolitan District Holden at Sydney; Ex parte White:[28]
[27]Waterford v Commonwealth (1987) 163 CLR 54 at 77.
[28](1966) 116 CLR 644 at 654.
Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (eg illogical) inference of fact would not disclose an error of law.
Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference — in other words, the particular inference is reasonably open—even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.
In the same vein, Batt J, in Roads Corporation v Dacakis, said:[29]
[29][1995] 2 VR 508 at 520 (emphasis in original).
[A] finding of fact will only be open to challenge as erroneous in law if there is no probative evidence to support it (and not also if it is not reasonably open on the evidence), whilst an inference will be open to challenge as being erroneous in law if it was not reasonably open on the facts.
Batt J continued:[30]
But, as the statement of Mason CJ … [in Bond[31]] shows, there is virtually no difference between the tests.
Batt J continued, quoting the passage from the judgment of Mason CJ in Bond which is set out above, and—after comprehensive review of the authorities in relation to the nature of a question of law or error of law—concluded:[32]
For the reasons I have given, I consider that I should take that passage as stating the law which I must apply. The ascription of value to a parcel of land or a chattel is, or at least will frequently involve, an inference of a fact. Accordingly, a want of logic in drawing that inference will not by itself constitute error of law. But it may, I consider, sound a warning note and put one on enquiry whether there was indeed any basis for the inference.
[30][1995] 2 VR 508 at 520.
[31](1990) 170 CLR 321 at 360.
[32][1995] 2 VR 508 at 520. See also Tisdall v Webber (2011) 193 FCR 260 at 270–1 [31]–[32], at 296 [126].
In the present circumstances, leave to appeal having been granted previously on all but Question 2, the focus with respect to the remaining questions is on whether the Plaintiff has established an error of law in the Riegler decision which would support its appeal. Moreover, in order to be successful in its appeal, the Plaintiff must establish an error of law which would, had it not been made, have affected the outcome of the proceedings before the Tribunal. With respect to Question 2, I am satisfied, for the reasons which follow, that there are matters raised in the Amended Notice of Appeal which constitute vitiating errors of law on the part of the Tribunal such as would warrant the grant of leave to appeal. Accordingly, I grant leave to appeal with respect to Question 2.
Factual matters
I turn now to a broad outline of the factual matters relevant to the present appeal. As indicated above, the Lacava decision provides a detailed factual background.
Prior to November 2005, the Plaintiff acquired the rights to import from Italy and market in Australia certain brands of high quality women’s lingerie.[33] The Plaintiff planned to open a retail outlet in Brighton and then to repeat the exercise in Sydney.[34]
[33]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [8].
[34]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [9], [11].
In November 2006, the Plaintiff took a transfer by novation of a lease of premises at 17 Church Street, Brighton (“the premises”), and purchased the business of the existing tenant.[35] The landlord of the premises is, and was at all relevant times, the Defendant. The term of the lease was five years commencing on 18 May 2006,[36] together with an option to renew that lease for a further five years, an option which was exercisable no later than 17 February 2011.[37]
[35]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [28].
[36]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [29].
[37]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [31].
Upon taking occupation of the premises, the Plaintiff complained about a wet wall in the premises, a malfunctioning toilet, and an inoperative tap that meant there was no drinking water at the premises.[38] The Defendant took remedial action, but only when it was forced to do so—in the case of the toilet, after more than four years; and in the case of the tap, after three and a half years.[39] In any event, the Plaintiff traded successfully in 2007, though it made a net loss due to its having invested heavily in stock.[40]
[38]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [40]–[43], [46] [148].
[39]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [47], [190], [148]. See also [135].
[40]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [58].
In February 2008, construction works commenced on the property at 19 Church Street, Brighton, next door to the premises. These works involved the erection of scaffolding in the rear yard of the premises and on the roof of the premises.[41] In the course of the work, noise was generated, dust and objects were dropped onto the roof of the premises, concrete was poured down the drain at the rear of the premises, damage was done to the roof of the premises, and spouting and drains were blocked with concrete remnants.[42] The Plaintiff’s business dropped away significantly after the construction work began, and never recovered.[43]
[41]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [67], [68].
[42]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [68], [71]–[72].
[43]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [74].
The Defendant agreed to the construction work being carried out in the manner in which it was carried out without any regard to the rights of the Plaintiff as a tenant and without a proper plan to protect the premises.[44] Judge Lacava found this to be a breach of the covenant for quiet enjoyment, entitling the Plaintiff to compensation under s 54(2) of the Act.[45]
[44]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [85], [88].
[45]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [95].
As time went on, matters did not improve. In March 2010, the premises were flooded three times.[46] The flooding was caused by the blocking of the drain at the rear of the premises with concrete that had not been cleared by the Defendant.[47] The flooding caused damage to stock and, following the flooding, the Plaintiff complained about the smell.[48]
[46]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [108], [110], [115].
[47]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [112], [118], [142], [204].
[48]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [112], [219], [257].
On 23 April 2010, Mr Lepp, on behalf of the Defendant, emailed the managing agent instructions to rectify the problems at the premises.[49] Nevertheless, in November 2010, there was further flooding of the premises, this time through the ceiling.[50] On 4 and 5 February 2011, water again entered the premises and damaged stock.[51]
[49]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [146].
[50]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [184], [204].
[51]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [188], [204].
On 16 February 2011, the Plaintiff advised the Defendant’s agent that it was exercising its option to renew the lease for a further term of five years.[52]
[52]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [324], [327].
Nevertheless, in May 2011, the Plaintiff had to vacate the premises to accommodate the Defendant’s request to repair and refurbish the premises.[53] Also, in May 2011, a building biologist engaged by the Plaintiff found surface and airborne mould in the premises in high to very high levels, constituting a potential health risk.[54] The same problem prevailed on 21 October 2011, ten days before the commencement of the trial before Judge Lacava in the Tribunal.[55] The mould was prolific and the chances of the levels of mould found in the premises affecting human health were high.[56] Because of the mould, the premises were not safe, were not fit for occupation, and could not be occupied until the mould was properly treated.[57] It appears that the mould had been present at the premises since March or April 2010.[58]
[53]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [191], [301], [310].
[54]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [205], [284].
[55]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [210].
[56]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [215].
[57]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [211], [215], [222], [310], [334].
[58]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [219].
Judge Lacava found that the Plaintiff was entitled, among other things, to compensation under s 54(2) of the Act because of the construction work and subsequent flooding events of 2010 and 2011, and to loss of profits for the period from May 2008 until 31 December 2011 during which the Plaintiff was unable to return to occupation because of the mould.[59] This period was selected and applied on the assumption that the premises would be ready for the Plaintiff to resume occupation in January 2012.[60] Judge Lacava assessed the lost sales over the period rising to $152,688 for the calendar year 2011 and awarded compensation of $136,686 for lost profits.[61] His Honour also awarded additional amounts for damaged stock and fit out amounting in total to $218,599.63 plus interest.[62]
[59]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [95], [310]–[313].
[60]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [311].
[61]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [312]–[313].
[62]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, Order 17.
The parties had a mutual understanding that further remedial work was to be undertaken by the Defendant after the Tribunal handed down its decision in December 2011 concerning arresting excessive levels of moisture and eradicating excessive mould at the premises.[63] The Plaintiff assumed that the Defendant would undertake the remedial work, based on numerous emails emanating from the Defendant indicating that it was poised to undertake the work.[64] The Plaintiff’s inability to resume occupation in early 2012 resulted from the failure on the part of the Defendant to effect remedial work in a timely manner.[65]
[63]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [64]. See also Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [246].
[64]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [65].
[65]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [166].
On 29 April 2012, the Plaintiff commenced further proceedings in the Tribunal against the Defendant resulting in the order against which the present appeal is brought. The further proceeding claimed further losses arising after 31 December 2011.
By its Points of Defence dated 30 July 2012 in the Tribunal proceeding, the Defendant pleaded that it had been unable to perform the necessary building works to prevent water leakage and further mould infestation at the premises.[66] In September 2012, the Defendant applied, unsuccessfully, to strike out the 2012 proceeding on the grounds of res judicata.[67]
[66]Points of Defence to Applicant’s Further Amended Points of Claim (30 July 2012) (Exhibit BS-2 to the Affidavit of Bob Spaleta sworn 29 July 2014) [8], [9].
[67]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2012] VCAT 1442.
On 9 October 2012, the Defendant’s solicitors wrote to the Plaintiff advising that representatives of the Defendant and Premier Restorations would be—[68]
attending the property tomorrow 10 October 2012 at 10.00am to inspect the property for the purposes of assessing the repair works required to be done. We trust that this will not be of any issue to you.
Your attendance is not required and our clients will attend to locking up the property thereafter.
[68]Court Book 1503.
On 19 October 2012, the Defendant’s solicitors wrote to the Plaintiff advising that the damaged wall to the premises would be repaired, that all mould from both the surfaces and the air at the premises would be eradicated, and that these works would take a minimum of eight weeks.[69] The letter demanded that “all keys” to the premises be handed over. This led to a dispute about keys and whether the Defendant had keys to all the locks at the premises. That particular dispute was resolved by the Tribunal by orders made on 17 December 2012 by Senior Member Davis. These orders also provided that the Plaintiff was to be permitted to enter the premises for the purpose of photographing and cataloguing items belonging to it.
[69]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [64].
The foreshadowed works did not in fact commence at the premises until January 2013.[70] The Defendant alleged that part of the delay, apparently a period of three months, was due to the Plaintiff’s actions.[71]
[70]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [18].
[71]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [79].
In a witness statement dated 4 March 2013, Mrs Lepp, on behalf of the Defendant, stated that—
(a) total treatment of all surfaces in the premises was expected to be completed by approximately 5 March 2013;
(b) all mould was expected to be removed by 8 March 2013; and
(c) a report on final testing was expected to be received by 15 March 2013.
These works were not completed, or at the very least were not properly completed, within the timelines suggested by Mrs Lepp’s witness statement.[72] It is not clear when the remedial works were actually completed. As at 27 March 2013, some surface mould was still present, which indicated that some additional remediation works needed to be undertaken before the property was inhabited again.[73] The premises were adequately remediated at some point prior to 14 August 2013.[74] Senior Member Riegler held that the evidence did not go so far as to establish that “the delay in achieving remediated Premises fit for re-occupation could be said to demonstrate that the … [Defendant had] evinced an intention that it did not intend to be bound by the terms of the Lease.”[75] Rather, Senior Member Riegler found that the Defendant was attempting to remediate the premises, albeit at a pace that justifiably attracted criticism.[76]
[72]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [79]–[80].
[73]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [92].
[74]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [91].
[75]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [93].
[76]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [93].
On the second day of the trial before Senior Member Riegler, the Defendant’s mould remediator, Mr Bryant, gave evidence that the only work he had been engaged to do in the premises was the removal of contents and general cleaning, and not mould remediation of the premises.[77] On 27 March 2013, the Plaintiff sent the Defendant a letter stating that the Defendant’s failure to rectify the premises constituted repudiation by it of the lease and that the Plaintiff accepted the repudiation, “bringing the Lease to an end”.[78] On 9 April 2013, the Defendant wrote to the Plaintiff accepting that the lease was at an end.[79]
[77]See Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd(No 2) [2014] VCAT 454 (Victorian Civil and Administrative Tribunal, R103/2012, Senior Member Riegler, 12–13 March, 20–1 May, 9–11 October 2013) 137–8.
[78]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [21].
[79]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [22].
The trial before Senior Member Riegler took place on 12, 13 and 14 March 2013 and on further dates in May and October of that year. Senior Member Riegler concluded that the purported termination of the lease by the Plaintiff was ineffective, because the evidence did not demonstrate that the failure to make the premises fit for occupation by 27 March 2013 evinced an intention that the Defendant was not willing to perform its obligations under the lease.[80] Instead, Senior Member Riegler concluded that the parties had mutually abandoned the lease.[81] Senior Member Riegler, accordingly, assessed damages for loss of profit for 2012 and until 9 April 2013, awarding $30,314 plus electricity charges of $393.76 for the period that the premises were unable to be occupied by the Plaintiff—the former sum being corrected on 11 September 2014 to $33,925.76.
[80]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [94].
[81]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [96].
Legislative provisions
The following provisions of the Act are relevant to the present proceeding:
52Landlord’s liability for repairs
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into—
(a)the structure of, and fixtures in, the retail premises; and
(b)plant and equipment at the retail premises; and
(c)the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.
(3)However, the landlord is not responsible for maintaining those things if—
(a)the need for the repair arises out of misuse by the tenant; or
(b)the tenant is entitled or required to remove the thing at the end of the lease.
(4)The tenant may arrange for urgent repairs (for which the landlord is responsible under this section or under the terms and conditions of the lease) to be carried out to those things if—
(a)the repairs are necessary to fix or remedy a fault or damage that has or causes a substantial effect on or to the tenant's business at the premises; and
(b)the tenant is unable to get the landlord or the landlord's agent to carry out the repairs despite having taken reasonable steps to arrange for the landlord or agent to do so.
(5)If the tenant carries out those repairs—
(a)the tenant must give the landlord written notice of the repairs and the cost within 14 days after the repairs are carried out; and
(b)the landlord is liable to reimburse the tenant for the reasonable cost of the repairs and may not recover that cost or any part of it as an outgoing.
Note
Section 39 regulates the ability of the landlord to recover outgoings (including the cost of repairs). Section 41 provides that capital costs are not recoverable from a tenant.
…
54Tenant to be compensated for interference
(1)A retail premises lease is taken to provide as set out in this section.
(2)The landlord is liable to pay to the tenant reasonable compensation for loss or damage (other than nominal damage) suffered by the tenant because the landlord or a person acting on the landlord’s behalf—
(a)substantially inhibits the tenant's access to the retail premises; or
(b)unreasonably takes action that substantially inhibits or alters the flow of customers to the retail premises; or
(c)unreasonably takes action that causes significant disruption to the tenant's trading at the retail premises; or
(d)fails to take reasonable steps to prevent or stop significant disruption within the landlord's control to the tenant's trading at the retail premises; or
(e)fails to rectify as soon as practicable—
(i)any breakdown of plant or equipment that is not under the tenant's care or maintenance; or
(ii)any defect in the retail premises or in the building or retail shopping centre in which the retail premises are located, other than a defect due to a condition that would have been reasonably apparent to the tenant when entering into or renewing the lease or when the tenant accepted assignment of the lease; or
(f)neglects adequately to clean, maintain or repair the building or retail shopping centre in which the retail premises are located (but not the retail premises themselves).
(3)The tenant must give the landlord written notice of the loss or damage as soon as practicable after it is suffered but a failure to do this does not affect any right of the tenant to compensation.
(4)This section does not apply to action taken by a landlord—
(a)as a reasonable response to an emergency; or
(b)in compliance with any duty imposed by or under an Act or resulting from a requirement imposed by a body acting under the authority of an Act.
(5)The amount of the compensation is the amount that is—
(a)agreed between the landlord and the tenant; or
(b)if there is no agreement, determined under Part 10 (Dispute Resolution).
Issues on appeal
I turn now to the questions raised in this appeal.
Question 1
The first question on appeal is whether the Tribunal wrongly failed to consider and apply s 54 of the Act in the determination of the Plaintiff’s claim. This question arises from what the Plaintiff says was the Tribunal’s failure to consider the claim which the Plaintiff brought under s 54 of the Act. While s 54 was not referred to in the Plaintiff’s Points of Claim before the Tribunal, the Plaintiff says that it nevertheless formed part of the claim. This, it submits, is by virtue of the fact that it was referred to in the Plaintiff’s written submissions to the Tribunal—most notably in its closing submissions dated 31 October 2013, and in its supplementary submissions dated 25 February 2014—which refer to s 54 as forming part of the basis of Judge Lacava’s judgment and which characterise the proceeding before Senior Member Riegler as being “just a continuation of” the proceeding before Judge Lacava.[82] The Plaintiff goes on to say that underlying its claim was the fact that the premises were unfit for occupation due to the failure of the Defendant to complete the remediation works, thereby depriving the Plaintiff of access to the premises which resulted in a failure on behalf of the Defendant to prevent significant disruption to the Plaintiff’s trading at the premises.[83] In these circumstances—and given that the Plaintiff was unrepresented—it was submitted that, as “a specialist Tribunal with exclusive jurisdiction over the claim and presumed familiarity with the provisions of the principal legislation”, the Tribunal should have recognised the relevance of s 54 and determined the claim accordingly.[84]
[82]Plaintiff’s Outline Submission (7 May 2015) [41].
[83]Plaintiff’s Outline Submission (7 May 2015) [42].
[84]Plaintiff’s Outline Submission (7 May 2015) [43].
The significance of the Tribunal’s failure to take into account s 54 lies in the effect which the failure had upon the calculation of damages. This is because Senior Member Riegler would not have determined that 2009 was a normal trading year for the purpose of calculating future losses.[85] Moreover, a finding of a relevant duty under s 54(1)(d) of the Act would mean that the landlord was in breach of that section by keeping the tenant out of occupation for some 22 months.[86]
[85]Transcript, p 128.
[86]Transcript, p 197.
In XYZ v State Trustees Ltd,[87] Cavanough J considered the proper application of s 46(1)(a) of the Guardianship and Administration Act 1986. His Honour held that s 45(1)(a) imposed three separate and cumulative requirements; including one dealing with a person being “unable to make reasonable judgments”, and another dealing with a person being “in need of an administrator of her or his estate”. In holding that the Tribunal in that proceeding had conflated the two requirements by considering matters relevant to the ability to make judgments when addressing the question of need, Cavanough J said:[88]
Mr Sharp’s submission assumes that the standard set by s 46(1)(a)(ii) is one of total and complete “incapacity”, or something similar. The assumption is not justified. Whatever the standard may be, it is not that high. However, it is not clear what … [the Tribunal] itself thought it was. During the argument, the senior member said at one stage that she was required to determine whether the plaintiff’s disability “affects” his capacity to make reasonable decisions about his legal and financial affairs. In her written reasons, she observed that the plaintiff did not accept that he had “diminished” capacity to make reasonable decisions etc. These references may indicate that the Tribunal set the bar too low. In any event, arguably, it was incumbent on the Tribunal to address the issue of the statutory standard in its reasons, particularly in view of the fact that Mr Sharp repeatedly submitted that the standard was very strict. The Tribunal did not do so. A failure by a tribunal to address in its reasons a submission which is worthy of consideration and is seriously advanced to the tribunal may in itself amount to an error of law for the purpose of a provision like s 148 of the VCAT Act.
[87](2006) 25 VAR 402.
[88](2006) 25 VAR 402 at 419 [42] (citations omitted and emphasis added).
The Plaintiff in the present proceeding submits that the failure on the part of the Tribunal was significantly more serious than the mere failure to address a submission. Rather, it is said, it is the failure to address a whole cause of action.
On the other hand, the Defendant says that the submission the subject of Question 1 was never seriously advanced before the Tribunal. Rather, the reference to s 54 to which the Plaintiff refers was, the Defendant says, nothing more than an “oblique reference” in an annexure to its submissions dated 31 October 2013.[89] Further, there were no arguments put forward in those submissions that s 54 of the Act ought to be considered and applied, nor was any claim put or articulated pursuant to s 54 of the Act.[90]
[89]Outline of Submissions of the Defendant (14 January 2015) [10].
[90]Outline of Submissions of the Defendant (14 January 2015) [10]–[11].
It is now well established that an error of law may be committed if a central issue is ignored by a tribunal, even if no submission is directed to the point,[91] as a tribunal is required to undertake its task regardless of the form which the parties’ submissions take.[92]
[91]Macedon Ranges Shire Council v Romsey Hotel Pty Ltd (2008) 19 VR 422 at 434 [41]; Transport Accident Commission v Bausch [1998] 4 VR 249 at 263; Australian Trade Commission v F & F Asia Pty Ltd (1996) 69 FCR 252 at 266.
[92]Transport Accident Commission v Bausch [1998] 4 VR 249 at 263; Macedon Ranges Shire Council v Romsey Hotel Pty Ltd (2008) 19 VR 422 at 434 [41].
In Kuswardana v Minister for Immigration and Ethnic Affairs, Bowen CJ said:[93]
In this case, it may be thought that the material before the Tribunal relating to the history and circumstances of the applicant should have been sufficient in themselves to raise in both the counsel for the applicant and in the Tribunal a desire to canvass the issue of immigrant or other status. However, counsel assumed immigrant status as did the Tribunal. The mere reciting of the applicant’s history and of the terms of s 13 by the Tribunal in its reasons are not sufficient to reveal a consideration of the issue of whether the applicant was an immigrant.
There is ample authority for the general proposition that an error of law arises where a Tribunal not exercising judicial power fails to consider a relevant factor in arriving at a decision or misapprehends the matters of which it has to be satisfied in reaching a decision. In this case not only is the consideration of immigrant status relevant but it is fundamental to the application and operation of the section. It is clear that the failure of the Tribunal to consider and decide whether the applicant was an immigrant was an understandable result of the approach of the applicant’s counsel—the thrust of the latter's attack was to the merits of the decision of the Minister not its “jurisdictional” basis.
Does one, therefore, say that the Tribunal made no error because of the approach of counsel? Alternatively, is the position that the failure to consider the question was an error but because of the conduct of the case before the Tribunal the consequences of that error may not be that the decision of the Tribunal is set aside or the case remitted? If the former is the position, the applicant has not made out a question of law for the purposes of s 44(1) of the [Migration Act 1958 (Cth)]. Whereas if the latter is the position he has made out the question of law, but may be denied any consequential relief.
[93](1981) 35 ALR 186 at 193–4.
In contrast to the circumstances of the cases to which reference has been made which involve issues of public law and thus wider interests than those arising in ordinary civil, inter partes, litigation,[94] there was no statutory “requirement” that the Tribunal consider other causes of action, or potentially relevant statutory provisions. So what then is the onus on the Tribunal member in litigation of this kind with respect to the provisions of the Act?
[94]XYZ v State Trustees Ltd (2006) VAR 407 at 419 [43].
The Plaintiff also says that the Tribunal had a duty to assist it, as a self-represented litigant. While the Defendant submits that this argument has no basis and is not an excuse for failing to raise the claim, a review of the authorities relating to a court or tribunal’s duty to assist unrepresented litigants does not appear to support the position of the Defendant.[95]
[95]Outline of Submissions of the Defendant (14 January 2015) [16].
A comprehensive review of the significance of the right to equality before the law and access to justice in terms of the duties of a judge in relation to assisting unrepresented litigants was undertaken by Bell J in Tomasevic v Travaglini, where his Honour identified a number of the disadvantages suffered by unrepresented litigants.[96] After stating the general principle that “courts possess all the necessary powers to ensure a fair trial, one aspect of which is the power to give assistance to a litigant in person”,[97] his Honour went on to explain how the duty to provide such assistance can extend beyond the courts:[98]
As part of their overriding obligation to ensure a fair trial, trial judges have a positive duty to give proper assistance to self-represented litigants, both in criminal and civil trials and also in interlocutory proceedings, such as in applications to strike out pleadings. The same duty applies to masters, magistrates, commissions and tribunals, but of course the application of the duty would have to take into account the particular demands of those jurisdictions. The duty applies even when all the parties are litigants in person.
[96](2007) 17 VR 100.
[97]Tomasevic v Travaglini (2007) 17 VR 100 at 118 [88] (citations omitted).
[98](2007) 17 VR 100 at 119 [89] (citations omitted).
In Seachange Management Pty Ltd v Bevnol Constructions & Developments Pty Ltd, Acting President Judge Ross, discussed how the duty to assist unrepresented litigants operates upon members of the Tribunal:[99]
[99][2008] VCAT 1479, [57]–[58].
57A member has a responsibility to ensure that the proceedings are fair. This means that in some circumstances a member has an obligation to intervene, both for the benefit of a litigant in person and more generally.
58The assistance provided by a member may, depending on the circumstances, include:
·identifying the issues which are central to the determination of the particular proceedings.
·drawing a party’s attention to the relevant legislative provisions and key decision(s) on the issue being determined.
·asking a party questions designed to illicit information in relation to the issues which are central to the determination of the particular proceedings;
·assisting a party to conform to the Brown v Dunn principle and other procedural rules designed to avoid unfairness; and
·drawing a party’s attention to the relative weight to be given to Bar table statements as opposed to sworn evidence.
It is a balancing exercise as to how much assistance a judge, or tribunal member, is required to provide:[100]
[T]he advice and assistance which a litigant in person ought to receive from the court should be limited to that which is necessary to diminish, so far as this is possible, the disadvantage which he or she will ordinarily suffer when faced by a lawyer, and to prevent destruction from the traps which our adversary procedure offers to the unwary and untutored. But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent.
[100]Rajski v Scitec Corporation Pty Ltd (Unreported, New South Wales Court of Appeal, Kirby P, Samuels and Mahoney JJA, 16 June 1986) 72, quoted with approval in Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 446 [28]. See also Downes v Maxwell Richard Rhys & Co Pty Ltd (in liq) (2014) 313 ALR 383 at 389 [23]–[24].
In regard to relief, in Roennfeldt v Woodgrain Timber and Hardware Pty Ltd, Harper J said:[101]
The form of relief to be granted to a successful claimant must always be addressed by the court or tribunal whether or not that aspect of the case is in issue in the sense of being in contest. It is not difficult and it involves no necessary element of partisanship to explain any alternatives in the possible forms of relief, and to enquire of an unrepresented party what relief it seeks and of the other (represented or not) whether the grant of that relief is opposed.
[101][2006] VSC 68, [14].
The Defendant says that none of this is relevant, as s 54 simply does not apply.[102] In support of this, the Defendant turns to the exception in s 54(2)(e)(ii), which provides that a landlord is liable to pay reasonable compensation for a failure to rectify as soon as practicable any defect “other than a defect due to a condition that would have been reasonably apparent to the tenant when entering into or renewing the lease or when the tenant accepted assignment of the lease”. As the Plaintiff was well aware of the defects to the property, s 54 can have no application. As far as the other provisions of s 54(2) are concerned, they relate only to matters concerning a tenant who has occupation of and access to premises, and so are not relevant to the second lease. For the reasons which follow, the position put by the Defendant in this respect does not correctly address the operation of s 54 of the Act, and, particularly, the operation of those provisions in the context of the related provisions of s 52. The operation of these two sets of provisions is also relevant with respect to the issue of repudiation, so their provisions are now considered together in the context of the supplementary question.
[102]Outline of Submissions of the Defendant (14 January 2015) [13]–[15]; Transcript, p 167.
At the outset it is important to observe that both ss 52 and 54 preface their provisions (in sub-s (1) of each) with the words: “A retail premises lease is taken to provide as set out in this section.” This formulation is in a different form from the statutory implied covenants provisions long found in legislation such as the Property Law Act 1958 or the Transfer of Land Act 1958. Nevertheless, the effect of provisions such as ss 52 and 54 of the Retail Leases Act 2003 is to impose the provisions of those sections as lease terms or covenants in every lease to which the Act applies. The provisions of these sections thereby become terms of those leases. They are, however, not ordinary lease terms because they transcend and modify any other inconsistent express lease terms as a result of the operation of the provisions of s 94 of the Act. Section 94 prevents any contracting out or modification of the provisions or effect of the provisions of ss 52 or 54—and is cast in the following terms:
94The Act prevails over retail premises leases, agreements etc.
(1)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it is contrary to or inconsistent with anything in this Act (including anything that the lease is taken to include or provide because of a provision of this Act).
(2)A provision of a retail premises lease or of an agreement (whether or not the agreement is between parties to a retail premises lease) is void to the extent that it purports—
(a)to exclude the application of a provision of this Act; or
(b)to limit the right of a party to the lease to seek resolution of a retail tenancy dispute under Part 10 or otherwise to limit the application of that Part.
(3)A provision contained in any other agreement or arrangement (whether or not between parties to a retail premises lease) is void if that provision would be void under this Act if it were contained in a retail premises lease.
Section 52 imposes what has been described as a “minimum obligation on a landlord.”[103] It does not prevent the parties from agreeing to a more extensive obligation on a landlord,[104] and such agreements have been enforced.[105] Moreover, s 94 does not cause s 52 to operate as a cap on the extent of a landlord’s responsibility.[106]
[103]Di & Li Australia Pty Ltd v Jin Dun Pty Ltd [2014] VCAT 349, [20]. See also Savers Inc v Herosy Nominees Pty Ltd [2011] VCAT 1160, [120]–[123]; Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562, [24], [32]–[35].
[104]Di & Li Australia Pty Ltd v Jin Dun Pty Ltd [2014] VCAT 349, [21]; Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562, [31]–[35].
[105]Computers & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd [2010] VCAT 2054; Di & Li Australia Pty Ltd v Jin Dun Pty Ltd [2014] VCAT 349; Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562.
[106]Jin Dun Pty Ltd v Di & Li Australia Pty Ltd [2014] VSC 562, [30]–[35].
Section 52 of the Act now imposes on landlords a “keep in repair” covenant; as distinct from its imposition of a “put in repair” covenant prior to amendments made by the Retail Leases (Amendment) Act 2005.[107] The condition of repair which s 52 obliges the landlord to maintain is, in the terms of the section, “a condition consistent with the condition of the premises when the retail premises lease was entered into”.[108] This, in turn, requires consideration of the meaning of the expression “entered into” in the context of the provisions of the Act.
[107]Computers & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd [2010] VCAT 2054, [84].
[108]Retail Leases Act 2003, s 52(2).
The point at which a lease is entered into for the purposes of the Act is the subject of its s 7:
7When retail premises lease is entered into or assigned
For the purposes of this Act, a retail premises lease is entered into or assigned when—
(a)under the lease or assignment, the tenant enters into possession of the premises with the consent of the landlord; or
(b)under the lease or assignment, the tenant begins to pay rent for the premises; or
(c)the lease or assignment has been signed by all of the parties to it—
whichever first occurs.
It follows that where a lease is executed before the commencement of the term, the combined effect of ss 7(c) and 52 of the Act is to cast on the landlord the risk of, and liability for, not only damage to the premises that occurs during the term, but also any damage to the premises that occurs after the execution of the lease and before the commencement of the term.
It is well settled that at common law the renewal of a lease by the exercise of a tenant’s option to renew produces a new and discrete lease term, a new demise—not something in the nature of an extension of an existing term.[109] The common law position is, naturally, amenable to modification from time to time by statute; whether in substance or in the manner of its application. In my view, the Plaintiff correctly analyses the effect of the provisions of the Act in this respect in submitting, in effect, that s 7 modifies the application of the common law principle for the purposes of the Act, in prescribing when the renewal term is “entered into”.[110] This analysis does not, in my view, produce the result as submitted by the Defendant, that this would produce “two leases and two demises of the same premises at the same time, one being under the old lease and the other being under the renewed lease.”[111] As I have indicated, the machinery of the Act is clear and does not, in my view, produce such a result.
[109]Gerraty v McGavin (1914) 18 CLR 152 at 163. See also Adrian J Bradbrook, Clyde E Croft and Robert S Hay, Commercial Tenancy Law (LexisNexis, 3rd ed, 2009) [14.1].
[110]See Ross-Hunt Pty Ltd v Cianjan Pty Ltd [2009] VCAT 829.
[111]Supplementary Submissions of the Defendant (10 August 2015) [15].
The operation of s 7 of the Act in the present circumstances, and on renewal of the lease, invites a distinction to be drawn between the exercise of a tenant’s option and the commencement of the terms of a renewed lease from damage that occurs before that time, during the original lease or earlier renewed term. Additional issues and considerations arise in the case of the former.
It follows from the position discussed thus far that a new lease and a new demise that arises on the exercise of the tenant’s option to renew is “entered into” for the purposes of ss 7 and 52 of the Act after the option is exercised and s 7(a), (b) or (c) are satisfied. The Plaintiff submits that the renewed lease has been “signed” by both parties at this point—the landlord by its signature on the original lease containing the option, and the tenant by its signature on the notice of exercise of option. However, in my view, these signatures are merely the essential precursors to the satisfaction of s 7(a), (b) or (c), and do not, of themselves, satisfy s 7(c). It seems to me that this is the basis for drawing a distinction between the exercise of an option to renew and the “entering into” of the renewed term. Moreover, this approach is more consistent with the language of s 7(c), which contemplates a document—such as a lease—being signed by all of the parties. Indeed, this was the approach of Deputy President Macnamara in Ross-Hart Pty Ltd v Cianjan Pty Ltd—an approach which, in my view, is correct.[112]
[112][2009] VCAT 829, [32].
For the reasons which follow, it is incorrect to state—as some have done—that the condition of the premises by reference to which s 52 operates during a renewed term is necessarily the condition at the commencement of the renewed term. That is to ignore the operation of s 7 and is an interpretation that would defeat the evident purpose of s 52 in the case of damage to the premises that arises between the date of exercise of the option and the commencement of the renewed terms as a result of the failure of the landlord to comply with the provisions of that section during the original term, other than due to the tenant’s misuse.
Where damage to the premises for which a landlord is responsible under s 52, or other obligations under the provisions of that section, arises during the original term of the lease, this may lead to liability for loss suffered during the renewed term in the following ways.
First, for the preceding reasons, the condition of the premises by reference to which s 52 operates during a renewed term is the condition at the time the renewed term is “entered into”. A landlord’s failure during the renewed term to maintain the premises in a condition consistent with their condition at that time and perhaps at the time of exercise of the tenant’s option, depending on the interpretation of s 7 with respect to paragraph (c), leads directly to liability under s 52, despite the existence of the damage at the commencement of the renewed term.
Second, liability may arise for loss suffered by a tenant after the premises have been restored to the condition required by s 52.[113] If such a loss is caused by the landlord’s breach of the covenant imported by s 52 into the original lease, and if the test in Hadley v Baxendale is satisfied,[114] the tenant will be entitled to compensation, even if the loss is not suffered until after the end of the term of the original lease.
[113]See, eg, Di & Li Australia Pty Ltd v Jin Dun Pty Ltd [2014] VCAT 349.
[114](1854) 156 ER 145.
Third, liability may arise directly by the operation of s 52 on the renewed lease. This follows because:
(1)The landlord will not be heard to contend that the condition of the premises is the condition when the renewed lease was entered into, if that condition is due to the landlord’s failure to fulfil the covenant imported by s 52 into the original lease. Putting it another way, when s 52 refers to the condition of the premises when the lease was entered into it is to be taken, in the case of a renewed lease, to be referring to the condition in which the landlord has been responsible for maintaining them. To interpret these provisions otherwise would be to permit the landlord to take advantage of its own wrongdoing. As submitted by the Plaintiff, this is a principle of general application that a person will not be permitted to take advantage of his or her own wrongdoing.[115] The principle has been applied in the context of leases,[116] including under the Act.[117] It applies to the construction of contracts[118] and of statutes.[119] Moreover, this interpretation of these provisions and the application of this principle is consistent with the approach of the Court to the Act as being ameliorating or remedial legislation.[120]
(2)By application of the principle recognised in Di & Li Australia Pty Ltd v Jin Dun Pty Ltd,[121] Jin Dun Pty Ltd v Di & Li Australia Pty Ltd,[122] and Computers & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd,[123] the original lease—which by s 52 obliged the landlord to maintain the premises in a condition consistent with their condition when the original lease was entered into—constituted a prior agreement as to the condition in which the landlord was to keep the premises. That agreement sets the condition, consistent with which s 52 then obliges the landlord to maintain the premises during the renewed term.
[115]See, eg, Morgan v Lake Macquarie City Council [1993] NSWCA 184.
[116]See, eg, Alghussein Establishment v Eton College [1988] 1 WLR 587 at 591, 594; Newmarket Corp Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157, [326]; World Best Holdings Ltd v Sarker (2010) 14 BPR 27,549; Gnych v Polish Club Ltd (2015) 89 ALJR 658.
[117]Computers & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd [2010] VCAT 2054, [108]. See also Savers Inc v Herosy Nominees Pty Ltd [2011] VCAT 1160, [141]–[142].
[118]Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 440–1; Newmarket Corp Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157; Hope Island Resort Holdings Pty Ltd v Jefferson Properties (Qld) Pty Ltd [2005] QCA 315, [49].
[119]Grozier v Tate (1946) 64 WN (NSW) 1 at 3; Nash v Stielow [1950] VLR 39 at 42; Steedman v Baulkham Hills Shire Council (No 2) (1993) 31 NSWLR 562 at 570, 580; Allen v Bega Valley Shire Council (1994) 85 LGERA 364 at 369; Gnych v Polish Club Ltd (2015) 89 ALJR 658 at 664 [33].
[120]See Peppercorn Nominees Pty Ltd v Loizou (1997) V ConvR 54–560; Fitzroy Dental Pty Ltd v Metropole Management Pty Ltd [2013] VSC 344. See also Clyde E Croft, Robert S Hay and Luke A Virgona, Retail Leases Victoria (LexisNexis, Loose-leaf) [10,030].
[121][2014] VCAT 349.
[122][2014] VSC 562, [31]–[35].
[123][2010] VCAT 2054.
For the preceding reasons and for some further, more particular, reasons, Senior Member Riegler’s statement that “[i]t is inconceivable that Parliament would have intended for the Landlord to remain responsible for maintaining retail premises in a condition consistent with the condition at the commencement of the original lease term in circumstances where the lease may provide for multiple terms extending over many years” is not sustainable.[124] The further, particular, reasons are that—
(1)there is no limit on the length of the original term of a lease. The parties are free to choose between, say, a 5 x 5 year lease and a 10 year lease with no option. It seems unlikely that Parliament would have intended the operation of s 52 to differ between these two situations; and
(2)if the obligation imposed by s 52 on the landlord during the original term is fulfilled, then the condition at the end of the original term—which is likely to be the same as the condition when the renewed lease is entered into—will be consistent with the condition when the original lease was entered into, save for fair wear and tear, which would generally not sound in liability for any party. Consequently, there is no inconceivability or absurdity about this outcome at all.
[124]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [39].
Applying these principles to the facts of this case, the Plaintiff submits that the Defendant’s failure to remediate the mould infestation in the premises was not only a breach of the covenant of the original lease imposed by s 52, but that the Defendant’s continuing failure to remediate the premises during the term of the renewed lease was a breach of the covenant imported by s 52 into the renewed lease. Thus, it is said that breach was a repudiation of the lease by the landlord which entitled the tenant to terminate the lease by accepting the repudiation, which it did by its letter dated 27 March 2013.
Turning now to s 54 of the Act, the Plaintiff submits that its right to compensation under s 54 stands independent of the question of the extent of the Defendant’s obligation under s 52. The Plaintiff’s right to compensation arises, it claims, when the landlord substantially inhibits the tenant’s access to the premises (s 54(2)(a)), or fails to take reasonable steps to stop significant disruption within the landlord’s control to the tenant’s trading at the retail premises (s 54(2)(d)). Thus, the Plaintiff says, the right to compensation arises regardless of whether the landlord is in breach of the obligation imposed by s 52. While I accept these submissions as to the distinct operation of ss 52 and 54, that is not to say that the sections are not related in their operation and application. This is particularly so with respect to the proper application and operation of s 52 where a lease has been renewed and the importance of its provisions thus construed for the operation of s 54 insofar as the condition of the premises at the commencement of the lease term may be relevant and also with respect to the operation of s 54 more generally.
The Defendant in its submissions places particular emphasis on what are characterised as the preclusive effects of s 54(2)(e)(ii) of the Act. Thus, the Defendant submits with respect to s 54:[125]
[125]Supplementary Submissions of the Defendant (10 August 2015) [4]–[12] (emphasis in original and citations omitted).
4.Section 52(2) of the Act provides the landlord is responsible for maintaining certain defined aspects of the premises in a condition consistent with the condition of the premises when the lease was entered into, misuse by the tenant excluded.
5.Section 54(2)(e) of the Act provides that the landlord is liable to pay to the tenant reasonable compensation for loss or damage suffered by the tenant because the landlord fails to rectify as soon as possible:
any defect in the retail premises or in the building or retail shopping centre in which the retail premises are located, other than a defect due to a condition that would have been reasonably apparent to the tenant when entering into or renewing the lease …
6.Section 54(2)(e)(ii) makes it clear that for the purpose of payment of compensation, defects which should have been reasonably apparent to the tenant when renewing the lease are excluded.
7.It follows that Senior Member Riegler in the decision the subject of the appeal correctly found at [39]–[49] in relation to the claim under s 52 that the landlord was not liable under the renewed lease to make good water ingress or mould issues that were manifest at the time the lease was renewed. It is further submitted that the decision Senior Member Riegler relied on of Ross-Hunt Pty Ltd v Cianjan Pty Ltd,[126] was correctly decided.
8.Ground of Appeal 1 in this appeal in substance criticises Senior Member Riegler for failing to discern that by reason of the Plaintiff’s VCAT points of claim not referring to s 54, but by reason of there being references to s 54 in a schedule to the Plaintiff’s closing submissions dated 31 October 2013 and supplementary submission dated 25 February 2014 in VCAT a claim under section 54 was intended. It is clear, however, that had Senior Member Riegler apprehended that a claim was being made for compensation pursuant to s 54, he would have identified that it was a claim excluded by the application of s 54(2)(e)(ii) of the Act.
…
9.The lease was renewed by the exercise in February 2011 of the option to renew the lease from 18 May 2011. The legal effect of the exercise of the option is that it creates a lease in equity from the commencement of the new term and the right to compel the landlord to execute a lease in accordance with the agreed terms and conditions.
10.Judge Lacava in his judgment dated 1 December 2011 awarded compensation under s 54(2) including for loss of profits for the period from May 2008 until 31 December 2011, including slightly more than the first six months of the renewed lease. His Honour dealt with the claims for compensation under the original lease and the renewed lease together. His Honour did not address the application of s 54(2)(e)(ii). Had he done so, it is submitted that his Honour would have found compensation could not be awarded in respect of the condition of the premises from the commencement of the renewed lease to 31 December 2011 under s 54.
11.Senior Member Riegler addressed the claim for compensation as one from 1 January 2012 to the time of termination of the lease, being 9 April 2013. If he was obliged to consider an unarticulated claim under s 54 of the Act, which it is submitted he was not, and which omission did not involve any error of law, the result would have been the same.
12.Section 52 of the Act imposes a prospective obligation on the landlord to maintain defined aspects of the premises (but not the premises as a whole) in a condition consistent with their condition when the lease was entered into. Section 52 creates no entitlement to compensation. The entitlement to compensation arises under section 54(2)(e), which is subject to the exception that the landlord is not liable to pay compensation in respect of defects due to a condition that would have been reasonably apparent to the tenant when renewing the lease.
[126][2009] VCAT 829, [32].
For the preceding reasons, and on a proper construction of the provisions of s 54 of the Act, I am of the opinion that the Defendant’s submissions are misconceived. Moreover, to submit that s 94 of the Act “has no relevant application in the present context” is, as has been discussed previously, to misunderstand the whole structure and operation of the Act.[127] Of critical importance to the Defendant’s argument is the effect of s 54(2)(e)(ii) of the Act, an issue to which I now turn.
[127]Supplementary Submissions of the Defendant (10 August 2015) [13].
Section 54(2)(e)(ii) is the only provision of s 54(2) qualified by reference to what “would have been reasonably apparent to the tenant when entering into or renewing the lease”. However, the Defendant’s supplementary submissions set out above appear to seek to extend this qualification to the whole of s 54(2) by referring to compensation under s 54(2) generally. There is no basis for such an extension as the plain wording and structure of s 54(2) precludes it—such extension of the qualification to the rest of the section is impermissible. Thus, contrary to paragraph 8 of the Defendant’s supplementary submissions, had Senior Member Riegler apprehended that compensation was being sought under s 54(2), compensation could have been awarded under one or more of the other provisions of s 54(2). The same fallacy infects paragraph 10 of the Defendant’s supplementary submissions. As the Plaintiff submits, paragraph 10 purports to challenge part of the award made by Judge Lacava, which has never been the subject of any appeal. Indeed, Judge Lacava’s reasons show that his Honour awarded compensation under s 54(2)(d), not s 54(2)(e)(ii).[128] Nevertheless, Judge Lacava did not award compensation in respect of losses suffered after 31 December 2011. Hence the proceeding that came before Senior Member Riegler was after further losses had been suffered. Moreover, it is wrong to say, as the Defendant does in paragraph 12 of its supplementary submissions, that s 52 of the Act “creates no entitlement to compensation.” Compensation for breach of s 52 has been awarded in several cases,[129] consistent with the common law which awards damages for breach of a landlord’s repair covenant.[130]
[128]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [243], [246].
[129]See, eg, Ross-Hunt Pty Ltd v Cianjan Pty Ltd [2009] VCAT 829; Computers & Parts Land Pty Ltd v Aust-China Yan Tai Pty Ltd [2010] VCAT 2054; Di & Li Australia Pty Ltd v Jin Dun Pty Ltd [2014] VCAT 349.
[130]See, eg, Calabar Properties Ltd v Stitcher [1984] 1 WLR 287.
2.The horse-drawn bus between Knightsbridge and Clapham, which Lord Bowen is thought to have had in mind, was real enough. But its most famous passenger, and the others I have mentioned, are legal fictions. They belong to an intellectual tradition of defining a legal standard by reference to a hypothetical person, which stretches back to the creation by Roman jurists of the figure of the bonus paterfamilias. As Lord Radcliffe observed in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728:
The spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself.
3.It follows from the nature of the reasonable man, as a means of describing a standard applied by the court, that it would misconceived for a party to seek to lead evidence from actual passengers on the Clapham omnibus as to how they would have acted in a given situation or what they would have foreseen, in order to establish how the reasonable man would have acted or what he would have foreseen. Even if the party offered to prove that his witnesses were reasonable men, the evidence would be beside the point. The behaviour of the reasonable man is not established by the evidence of witnesses, but by the application of a legal standard by the court. The court may require to be informed by evidence of circumstances which bear on its application of the standard of the reasonable man in any particular case; but it is then for the court to determine the outcome, in those circumstances, of applying that impersonal standard.
[208][2010] EWCA Civ 1168, [63].
Importantly, this extract from Etherton LJ does not detract from the position that, although the test is objective, it does accommodate the subjective intent of the “contract breaker” so long as that intent is manifested to the other relevant party objectively. It must follow, though, that such “objective” statements of intent must be viewed against what the “contract breaker” actually does over time to address or remediate the breaches upon which the claim for repudiation is ultimately founded.
Thus, I turn now to consider the second proposition raised by the Plaintiff on this question on appeal; namely, whether the Tribunal’s interpretation of the doctrine of repudiation failed to recognise that a persistent failure to perform a contract may constitute repudiation even though the party in breach may genuinely intend to fulfil their obligations at a later point of time.
In Laurinda, Mason CJ spoke of the fine line which exists between a reluctance to perform one’s obligations in a timely manner, as opposed to a reluctance to ever perform those obligations. The Chief Justice said:[209]
There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way. But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the party's obligations and not in any other way.
[209](1989) 166 CLR 623 at 634.
In the same case, Deane and Dawson JJ examined a number of English authorities which discussed the circumstances where non-performance may constitute repudiation, again emphasising the importance of viewing the non-performance through the eyes of a reasonable person in the position of the innocent party. Their Honours said:[210]
[210](1989) 166 CLR 623 at 658.
An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor’s conduct ‘would be reasonably calculated to have upon a reasonable person.’[211] It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.
…
It is not necessary for repudiation of a contract that the repudiator make plain that he will never perform his contractual obligations at all. What Lord Dunedin described[212] as the assumption of ‘a shilly-shallying attitude in regard to the contract’ and what Lord Shaw of Dunfermline[213] called ‘procrastination ... persistently practised’ can, in some circumstances, reach the stage of repudiation even though accompanied by assurances of ultimate performance at some future time. In that regard, the law was correctly stated by Lord Shaw in the following extract from his judgment in Forslind[214] which is directly in point to the circumstances of the present case:
If, in short, A, a party to a contract, acts in such a fashion of ignoring or not complying with his obligations under it, B, the other party, is entitled to say: ‘My rights under this contract are being completely ignored and my interests may suffer by non-performance by A of his obligations, and that to such a fundamental and essential extent that I declare he is treating me as if no contract existed which bound him.’ ... In business over and over again it occurs—as, in my opinion, it occurred in the present case—that procrastination is so persistently practised as to make a most serious inroad into the rights of the other party to a contract. There must be a stage when the person suffering from that is entitled to say: ‘This must be brought to an end. My efforts have been unavailing, and I declare that you have broken your contract relations with me.’
Lord Shaw[215] went on to point out that ‘the question whether the stage has been reached when procrastination or non-performance’ constitutes repudiation is essentially one of fact. That question will, as has been said, only be properly answered in the affirmative when procrastination or non-performance has marked the stage of conveying to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.
[211]Carswell v Collard (1893) 20 R (HL) 47 at 48; Forslind v Bechely-Crundall (1922) SC (HL) 173 at 190 (“Forslind”).
[212]Forslind (1922) SC (HL) 173 at 190.
[213]Forslind (1922) SC (HL) 173 at 192.
[214]Forslind (1922) SC (HL) 173 at 191–2.
[215]Forslind (1922) SC (HL) 173 at 192.
There is, with respect, a great deal of force in the words of Lord Shaw to which Deane and Dawson JJ have referred. Nevertheless, after considering the statement of Mason CJ in Laurinda, the Tribunal found that the present circumstances fell within the second category posited by Mason CJ; namely, that the Defendant evinced an intention to carry out repairs and remedial work as and when it suited it to do so.[216] The Tribunal went on to say:[217]
Therefore, it is necessary to look at the circumstances leading up to the purported termination of the Lease in order to determine whether the delay in effecting repairs and remedial work is reasonably explicable or whether the delay leads to the inexorable conclusion that the Landlord had no real intention of making the Premises fit for occupation.
[216]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [78].
[217]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [78].
Turning now to the third proposition, I find that again, while the Plaintiff’s submissions on this point have some merit, they do not support the position that the findings of the Tribunal regarding repudiation were in error. It is true that the Tribunal did make reference to a number of events which took place after 27 March 2013, including reports which were dated 3 April 2013, 16 May 2013, and 14 August 2013, as well as evidence of airborne sampling of the premises conducted on 20 April 2013.[218] As the Plaintiff has correctly submitted, these are not matters which can be given any weight when considerations are made as to the Defendant’s intention to fulfil its obligations under the lease, nor do they colour the circumstances which may be considered when one determines how a reasonable person in the position of the Plaintiff may infer what the Defendant’s intentions may be regarding those obligations. However, rather than demonstrating that matters which occurred after the date of the alleged repudiation were taken into account by the Tribunal in assessing the Defendant’s intention, the Tribunal explicitly stated that these later events did not assist with determining whether the termination of the lease was justified:[219]
91.I find that at some point prior to 14 August 2013, the Premises had been adequately remediated. In other words, given that there is no evidence to contradict the opinion expressed in the LRM Global report, the Tenant’s claim that the Premises have never been made for fit for re-occupation is not made out.
92.However, the fact that the Premises may have been fit for occupation as at 14 August 2013 does not, necessarily, assist me in determining whether the Tenant lawfully terminated the Lease on 27 March 2013.
[218]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [82]–[83], [86], [90]–[91].
[219]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [91]–[92].
The final proposition on which this question on appeal is founded—that the Tribunal ignored the fact that the Plaintiff had been denied occupation of the premises for 22 months prior to purporting to accept the Defendant’s repudiation—overlaps to some degree with the second proposition, that of delay.
In my opinion, the Tribunal made errors of law with respect to the first, second and fourth propositions advanced by the Plaintiff in this context and thereby failed to find that the Defendant had repudiated the lease. This failure to find repudiation flowed from too great significance being given to the asserted intention of the Defendant to rectify and address breaches—particularly in the context of the full picture of objective facts including those found with respect to the period Judge Lacava was considering, as a result of the application of ss 52 and 54 of the Act, as well as the matters the subject of Judge Lacava’s findings discussed above in the context of issue estoppel. The whole picture provided by an appreciation of the relationship between and operation of ss 52 and 54 of the Act is of significantly breached “statutory covenants” throughout the original and renewed terms where the factors which were to be properly considered with respect to repudiation were not to be taken out of the picture by reason of the renewal of the lease—whether as a result of the operation of s 54(2)(e)(ii) of the Act or otherwise.[220]
[220]See above, [49]–[56].
Question 4
The Plaintiff submits that the Tribunal wrongly treated the Plaintiff’s claim for goodwill as a unitary claim and, in dismissing that claim, wrongly failed to consider and determine whether the Plaintiff’s claim for loss of goodwill should have been upheld in part.[221]
[221]Plaintiff’s Outline Submission (7 May 2015) [65]–[67]. See, also, Transcript, pp 64–5.
Senior Member Riegler addressed and dismissed the Plaintiff’s claim for loss of goodwill.[222] Senior Member Riegler did so because he was not prepared to find on the evidence that the Plaintiff’s business had been “completely destroyed”:[223]
107.Ultimately, I consider that there is insufficient evidence to find, on the balance of probabilities, that the rescission of the supply contracts occurred after the Earlier Proceeding was heard. Importantly, however, even if it were established that the supply contracts were rescinded after the Earlier Proceeding was heard, there is insufficient evidence tying that factor to the destruction of the Tenant’s business in order to draw the necessary causal link. No doubt the loss of supply contracts may have adversely impacted on the profitability of the business, however, that is a far cry from concluding that the business has been completely destroyed. In my view, further evidence would need to have been adduced that any attempt to re-establish supply contracts was unsuccessful and that this led to a situation where the Tenant was unable to trade profitably. There is no direct evidence establishing that.
108.In my view, the evidence going to the issue that the Tenant’s business has been completely destroyed, such that it is no longer viable to re-establish that business, is speculative. I am not persuaded, based on the general comments made by Mr and Mrs Spaleta, that the business conducted by the Tenant was unable to be re-established during the currency of the Lease, had it run its full term. No doubt, the Tenant may have suffered ongoing losses but that is a very different head of damage to a claim for damages based on the business having been completely destroyed.
109.Moreover, the quantum claimed in respect of the destruction of the business or business goodwill is premised on an assumption that the business would have expanded to ten retail outlets. Again, the evidence going to that issue is speculative and I am not persuaded that this goal could have been achieved. In particular, there are so many variables which may affect the growth of a retail business from year to year and its ability to expand its operations to more than one retail outlet. These variables include factors such as the state of the retail market from one year to another, the availability of other retail premises and the likely profit that might be derived by those other retail outlets, especially when located in other locations that might have a very different demographic to the retail market in Brighton. The only evidence given in relation to these factors are general comments, reflecting the ambition of the Tenant to expand its business. No expert opinion evidence was adduced in support of this aspect of the Tenant’s claim. The evidence was largely given by Mr Spaleta, who is not qualified as an expert witness. Consequently, I find that the Tenant’s claim, in so far as it relates to the head of damage categorised as the destruction of the Tenant’s business or loss of goodwill is unproven.
It is clear that this approach treated the goodwill as a unitary concept, the consequence being that the Plaintiff had either lost all its goodwill or none of it.
[222]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [100]–[111].
[223]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [107]–[109].
I accept the Plaintiff’s submissions that the approach of Senior Member Riegler in this respect mistakes the concept of goodwill, particularly as explained by the High Court in Commissioner of Taxation v Murry.[224] As the High Court explained in Murry, goodwill is an indivisible item of property that is inseparable from the conduct of a business;[225] it includes whatever adds value to a business by reason of situation, name, reputation, connection, introduction to customers and the absence of competition;[226] and, it is the attractive force that brings in custom.[227] A further characteristic of goodwill, which is important for present purposes, is that it has value;[228] the value of goodwill can vary;[229] and it follows that goodwill can be diminished in value.[230]
[224](1998) 193 CLR 605 at 615–617 (“Murry”).
[225](1998) 193 CLR 605 at 608–609 [4].
[226](1998) 193 CLR 605 at 613 [16].
[227](1998) 193 CLR 605 at 613 [17].
[228](1998) 193 CLR 605 at 614–615 [19]–[20], [22].
[229](1998) 193 CLR 605 at 624, [48].
[230](1998) 193 CLR 605 at 624 [48].
As the Plaintiff submits, the Tribunal failed to consider whether its goodwill, although not completely destroyed, had nevertheless been diminished in value by the actions of the Defendant. I accept that, had the Tribunal done so, it would have found that being kept out of occupation from the premises for 22 months had damaged the Plaintiff’s goodwill and had reduced it in value, and the Tribunal would have compensated the Plaintiff accordingly. The Defendant submits that there was no evidence before the Tribunal by which to assess a reduction in goodwill.[231] I do not accept that this is an answer to the Plaintiff’s claim. To the extent that the Plaintiff’s claim for goodwill was open to be quantified, so too was any diminution of that goodwill. Senior Member Riegler noted that a claim for loss of goodwill had been abandoned in the earlier proceeding before Judge Lacava and said that the reasons for that had not been explained to him;[232] whereas, the reasons had in fact been explained by the Plaintiff.[233] It would appear, as the Plaintiff submitted in oral argument, that the assertedly unexplained abandonment of the claim, as Senior Member Riegler incorrectly believed it to be, influenced his approach to goodwill and may have contributed to the error which has been identified.[234] In any event, for the preceding reasons, I am of the opinion that the eighth ground specified in the Amended Notice of Appeal is established.
[231]Transcript, pp 175–6.
[232]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [106].
[233]Court Book at 113, 295; Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd(No 2) [2014] VCAT 454 (Victorian Civil and Administrative Tribunal, R103/2012, Senior Member Riegler, 12–13 March, 20–1 May, 9–11 October 2013) 643–4.
[234]Transcript, pp 67–70.
Question 5
The Plaintiff submits that the Tribunal wrongly failed to assess compensation (whether for a breach of s 54 of the Act or otherwise) on the basis of a loss of opportunity to expand the business of the Plaintiff by establishing another store or stores.[235]
[235]Plaintiff’s Outline Submission (7 May 2015) [70].
In the proceedings before Senior Member Riegler, the Plaintiff contended that its business would have expanded to ten retail outlets. In its closing submissions before the Senior Member, the Plaintiff pointed to correspondence with the Defendant showing a clear articulation of this intention before it took an assignment of the lease.[236] This contention and the evidence relied upon was described by Senior Member Riegler as “speculative”, and the Senior Member concluded that he was not persuaded that it could be achieved.[237] Consequently, the Tribunal refused to grant any relief in respect of the Plaintiff’s claimed inability to expand to further retail outlets.
[236]Court Book at 34, [83].
[237]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [109].
The Plaintiff submits that the Tribunal‘s conclusion in relation to this issue involved two errors of law. First, it is said that it ignored Judge Lacava’s finding that the Plaintiff planned to establish another retail outlet in Sydney.[238] There is, as the Plaintiff says, no reference to that finding in Senior Member Riegler’s reasons, even though he had plainly read Judge Lacava’s reasons;[239] and this finding was emphasised in the Plaintiff’s submissions before the Tribunal.[240] Secondly, it did not address the Plaintiff’s submission that it had suffered a loss of opportunity to open further retail outlets; referring the Tribunal to and relying upon the High Court decision in Commonwealth v Amann Aviation Pty Ltd.[241] Senior Member Riegler did note the existence of the Plaintiff’s claim for loss of opportunity at one point in his reasons,[242] but nowhere else in the reasons is the loss of opportunity claim separately considered. The Plaintiff contends that, had its loss of opportunity claim been considered by the Tribunal, it would have been awarded further compensation for loss of the opportunity to open a further retail outlet in Sydney. While the Plaintiff originally sought to claim for loss of opportunity in relation to other proposed retail outlets, that claim was not and is not pressed.[243]
[238]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [11].
[239]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [6].
[240]Court Book at 34; Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd(No 2) [2014] VCAT 454 (Victorian Civil and Administrative Tribunal, R103/2012, Senior Member Riegler, 12–13 March, 20–1 May, 9–11 October 2013) 45, 64, 397.
[241](1992) 174 CLR 64; Court Book at 37, 39, 50.
[242]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [4].
[243]Transcript, p 72.
I am of the opinion that the seventh ground set out in the Amended Notice of Appeal is established—with the caveat that, as noted earlier in these reasons, I am not satisfied that any issue estoppel arose in respect of Judge Lacava’s finding at paragraph 11 of his Honour’s reasons.[244]
[244]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd [2011] VCAT 2273, [11].
Questions 6(a) and (b)
The Plaintiff submitted that it was not open to the Tribunal on the evidence and material before it to find that there was no evidence as to whether stock preview items would continue to be provided or whether they would continue to be provided at such a reduced cost; and further that the Tribunal was obliged to have regard to evidence that stock preview items would continue to be provided and would continue to be provided at such reduced cost.[245]
[245]Plaintiff’s Outline Submission (7 May 2015) [75]–[79].
As noted above, the Plaintiff submitted that its considerable retail mark-ups were the result of its having assumed the roles of importer, distributor and retailer, and that its ability to achieve higher mark-ups on the preview items was a resultant privilege.[246] It was further said by the Plaintiff that it received the preview items as an incident of its normal business and, but for the interruptions to its business, would have continued to receive the preview items with similar frequency and at similarly low cost.[247] Senior Member Riegler assessed the Plaintiff’s claim for loss of profit on its retail business as follows:[248]
In my view, the inclusion of those select few Preview Items within other stock items, skews the calculation considerably. Therefore, I do not consider it appropriate to include those Preview Items as part of the data used in calculating the average mark up of stock items. Moreover, there is no evidence as to whether those promotional stock items will continue to be provided or whether they will continue to be provided at such a reduced cost. Nevertheless, even if those Preview Items are ignored, the average mark up according to the document tendered in evidence is approximately 253%.
Senior Member Riegler did accept that the Plaintiff would have enjoyed a higher mark-up “given its unique position as importer, distributor and retailer.” However, he based the assessment solely on ordered goods and rejected any contribution to profit margin of what are called “preview items”, which were also described by the Senior Member as “promotional items”. As will be seen from the reasons of Senior Member Riegler which are set out above, the finding is made that “[m]oreover, there is no evidence as to whether those promotional items will continue to be provided or whether they will continue to be provided at such a reduced cost”.[249] The Plaintiff submits there was in fact evidence in this respect before the Tribunal.[250] It follows, for this reason, that the finding was not open to the Tribunal. Moreover, whether the Tribunal has reached a finding or conclusion that was not open to it is a question of law.[251] Similarly, it is an error of law if the Tribunal failed to take into account a matter that it was bound to take into account.[252]
[246]Transcript p 79–87.
[247]Transcript, p 92.
[248]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [148] (citations omitted).
[249]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [148].
[250]Transcript of Proceedings, Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd(No 2) [2014] VCAT 454 (Victorian Civil and Administrative Tribunal, R103/2012, Senior Member Riegler, 12–13 March, 20–1 May, 9–11 October 2013) 49–57, 69–74 and 535–8.
[251]See S v Crimes Compensation Tribunal [1998] 1 VR 83 at 89–90.
[252]See Macedon Ranges Shire Council v Romsey Hotel Pty Ltd (2008) 19 VR 422 at 434 [40].
The Defendant submits in response that due to the Plaintiff’s loss of the supply contracts, there was no supply of preview items and no evidence of the terms on which they might be supplied during 2012 and 2013.[253] In my view, this submission is unsustainable, as there is no evidence to indicate that, but for the matters complained of in this proceeding, the supply terms and availability of merchandise to the Plaintiff would have been any different during the period the subject of the Tribunal’s decision. As the Plaintiff submitted in oral argument:[254]
Of course once the distribution contract’s ended, that was the end of it, but that’s what happened in fact. But this is about what would have happened if the landlord had fulfilled his [sic] duty.
[253]Transcript, pp 178, 216–7.
[254]Transcript, p 96.
Rather, in this instance there was, as the Plaintiff submits, relevant evidence before the Tribunal, and the Tribunal’s conclusion expressed in the passage from the reasons which are set out above shows that it did not consider that evidence.[255] Instead, the Tribunal reached a conclusion as to the absence of evidence that was not open on the evidence before it.
[255]Transcript, pp 95-6.
The Plaintiff contends that the evidence in support of its claim with respect to the stock preview items was compelling and that, had the Tribunal taken the evidence of preview sales into account in assessing loss of profit, it would have come to a finding as to the Plaintiff’s profit margin of approximately double the margin it found, which would, in turn, have approximately doubled the damages awarded for loss of profit. It appears to me that the Tribunal’s removal of the preview items from the gross profit calculation was a Procrustean exercise unsupported by any additional evidence justifying a departure from the position adopted by Judge Lacava based on the evidence given by the Plaintiff. In any event, I am of the opinion that the ninth ground set out in the Amended Notice of Appeal is established and that assessment of damages for loss of profit on a proper basis is a matter for the Tribunal on remitter.
Question 7
The Plaintiff submits that the Tribunal’s exercise of its jurisdiction failed or miscarried, actually or constructively, due to the Defendant’s failure to comply fully with its obligation to give discovery of documents.[256]
[256]Plaintiff’s Outline Submission (7 May 2015) [86]–[90].
Late in December 2014, new material was made available to the Plaintiff which had not previously been available to it.[257] The material consists of documents produced on subpoena which the Plaintiff contends ought to have been discovered by the Defendant during the earlier VCAT proceeding. The Plaintiff submits that this material is relevant for the following reasons:[258]
[257]Court Book at 989–1144.
[258]Plaintiff’s Outline of Submission (7 May 2015) [83]–[85].
83.At [93] of the Riegler SM’s reasons, the Senior Member found that “… the Landlord was attempting to remediate the Premises, albeit at a pace that justifiably attracted criticism”. As appears from [91], this conclusion was based on a report from the Landlord’s expert LRM Global dated 14 August 2013 (CB 580). On this basis the Senior Member held at [94] that the Landlord’s failure to make the premises fit for occupation by 27 March 2013 did not evince an intention that the Landlord was not willing to perform its obligations under the Lease and, in consequence, that the Plaintiff’s purported termination of the Lease was ineffective.
84.This in turn led the Senior Member to a finding that the lease had terminated by mutual abandonment on 9 April 2013 (at [96]), and to dismiss the Plaintiff’s claim for loss of profit in respect of the period after that date (at [98]).
85.The material produced under subpoena casts doubt on conclusion of the LRM Global report of 14 August 2013. Notably:
(a)the earlier reports by LRM Global of 5 July 2013 (CB 1057) and 1 August 2013 (CB 1089), which were not discovered, adopted a method of testing that showed high levels of surface mould, including active mould growth, but this method was not adopted for the report of 14 August 2013 on which the Tribunal relied. The justification stated in the 14 August 2013 report is inconsistent with the description of at least one of the locations tested in the 5 July 2013 report;
(b)the 14 August 2013 report does not address the problem of moisture ingress identified in the 5 July 2013 report;
(c)the 14 August 2013 report does not explain why mould remediators were still working in the premises after the inspection reported on, as to which see CB 1118.
The Plaintiff contends that the question here is whether the Tribunal’s jurisdiction miscarried. In this respect, reference is made to Johnson v Director of Consumer Affairs Victoria as authority for the proposition that an error by the Tribunal on a matter affecting its jurisdiction is an error of law.[259] Moreover, it is contended that, on the same authority, s 148 of the VCAT Act is the appropriate vehicle to challenge such an error. Reference is also made to authority for the proposition that there is jurisdictional error on the part of a tribunal where it made its decision blamelessly but pursuant to a process which, unknown to it, was compromised by third party fraud; not that I take it that fraud is being alleged against the Defendant in the present context.[260]
[259][2011] VSC 595, [42].
[260]See Minister for Immigration v SZFDE (2006) 154 FCR 365 at 400 [131]; SZFDE v Minister for Immigration (2007) 232 CLR 189 at 206 [49], [52].
In the present instance, the Plaintiff submits that the Tribunal’s exercise of jurisdiction was stultified by the Defendant’s failure to give proper discovery. It said that this was in breach of an order made by the Tribunal to enable it to exercise its jurisdiction and to accord procedural fairness to the parties. The Plaintiff submits that it would appear to be sufficient that the Tribunal’s jurisdiction was so stultified, regardless of whether the failure to give discovery was fraudulent (which the Plaintiff says need not be alleged in this case) or merely careless.
The Defendant says that the failure to provide the documents does not give rise to an error unless it would have affected the outcome.[261] In terms of the effect of the alleged failure to give proper discovery, the Plaintiff contends that had the Defendant’s copies of the documents produced under subpoena been discovered, doubt would have been shed on the reliability of the 14 August 2013 report and the Defendant’s expert could have been cross-examined on the inconsistency between his report and the previous report. It was also said that the expert and the Defendant’s lay witness, Mrs Barbara Lepp, could have been cross-examined on the instructions that they had been given by the Defendant, and in particular, the limits of those instructions. Mrs Lepp, it is said, could have been cross-examined on the inconsistency between the condition of the premises described in the earlier LRM Global reports and her witness statement as cited by Senior Member Riegler.[262]
[261]Transcript, pp 179-80.
[262]Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd (No 2) [2014] VCAT 454, [79].
Thus, the Plaintiff submits that the evidence would have shown that the Defendant had, at least at the time of the Plaintiff’s email, no intention to address the source of the mould infestation, being water ingress to the premises, and would likely have weighed against the conclusion reached by the Tribunal as to whether or not the Defendant landlord had a genuine intent to remediate the leased premises. This, it is said, would likely have impelled the Tribunal to a different conclusion on the question of repudiation. Such a conclusion, the Plaintiff says, would have tripled the damages awarded to the Plaintiff for loss of profit.
In my view, the issues raised with respect to the alleged failure in the Defendant’s discovery are a matter to be addressed by the Tribunal when these proceedings are remitted to it, particularly having regard to the preceding reasons in this appeal as to the proper construction and operation of ss 52 and 54 of the Act, and on the question of repudiation in the context of those provisions and more generally.
Conclusions and orders
For the preceding reasons, I am of the opinion that the Court should make orders setting aside the orders made by the Tribunal on 22 April 2014 and remitting the proceeding to the Tribunal for assessment of damages in accordance with these reasons.
The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties on this issue.
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