Wednesday 4 December 2013

HCA held that the liquidator of a landlord company could disclaim landlord and tenants interests in lease

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The High Court today held 4:1 that the liquidator of a landlord company could disclaim both the landlord’s interest and the tenant’s interest in a lease.  See: Willmott Growers Group Inc v Willmott Forests Limited [2013] HCA 51. The decision will have significant implications for tenants and their financiers. Section 568(1) of the Corporations Act permits a liquidator to disclaim certain property of a company, including property that consists of a contract. French CJ, Hayne and Kiefel JJ held that a lease was a species of contract and that the leases which were the subject of the appeal were “property of the [landlord] company”  within the meaning of s.568. Their Honours rejected the contention that the disclaimer power applied only to leases to the company in liquidation and held that the rights of the landlord and tenant ceased from the date the disclaimer took effect. Gaegler J, who was in the majority, delivered a separate judgment. Keane J, in a powerful dissent,  held that a disclaimer could not divest rights that had already accrued such as the interest of a tenant. I will be writing further about this decision.



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Author: Robert Hays Barrister subject to copyright under DMCA.

Tuesday 3 December 2013

VCAT applies general law principles in property partition under Part IV

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There is a dearth of authority in Victoria concerning the principles that apply in determining claims for the partition of property under Part IV of the Property Law Act 1958.  In broad terms Part IV permits a co-owner of land or goods to apply for orders in respect of that land or those goods. VCAT has the power to “make any order that it things fit to ensure that a just and fair sale or division of land or goods occurs” (s.228). The Tribunal must order the sale of the land or goods unless it considers it would be more just and fair to order the division of the land or goods (s.229(1)). In Sherwood v Sherwood [2013] VCAT 1746 the Tribunal considered and applied general law principles in determining how property should be partitioned.  The dispute was between siblings who were registered as joint proprietors of the land. The brother applied to VCAT seeking an order that he retain the land and also claimed that he had paid 92% of the loan costs and other expenses relating to the land. He and his sister were jointly liable to repay the loan with which they had purchased the land. The sister claimed that her interest in the land fixed at the date of purchase at 50% because she was jointly liable to pay the home loan and was a joint tenant.  The Tribunal held that while the Act did not say that the Tribunal’s discretion was to be applied in accordance with the general law, it would not be just and fair to disregard the general law ([27]). At [34]  Senior Member Riegler said that   “I approach the task at hand having regard to and being informed of the general law, rather than simply imposing some form of instinctive justice”.

Apart from the deposit, the parties contributed equally to the purchase price because repayments of a home loan are not counted as contributions to the purchase price. See: Calverley v Green (1984) 155 CLR 242. The applicant contended that if regard were had to the general law it would be just and fair that the Tribunal impose a remedial constructive trust in his favour of the type found in Baumgartner v Baumgartner (1985) 160 CLR 583 reflecting the unequal contributions made by him that conferred a benefit on his sister or alternatively that he was entitled to contribution from his sister and entitled to an equitable charge to secure the making of the contribution.  The Tribunal held that the parties had not purchased the property as a joint venture or joint endeavor and therefore rejected the applicant’s claim for the imposition of a remedial constructive trust. The Tribunal also held that when they purchased the land the parties had not reached an agreement as to how much of the home loan they were each to pay or what proportion of beneficial interest they each were to hold and for that reason rejected the imposition of a common intention type constructive trust in favour of the applicant.

However, because the applicant paid most of the deposit the Tribunal ordered a resulting trust in favour of the applicant that varied the legal interests of the parties to reflect the fact that they each held the land as tenants in common, with the applicant holding a 54.33% share and the respondent the balance.

The Senior Member also ordered contribution from the respondent to the applicant to the extent that he had paid more than 54.33% of the home loan payments and other outgoings.  The respondent was ordered to pay $78,000 in contribution plus interest of more than $5000.


My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.



Friday 1 November 2013

Franchisee's outlet licence a retail premises lease?



Sam Hopper Barrister has posted an interesting article on his blog entitled "Is a franchisee's outlet licence a retail premises lease?".


The article can be found at  http://samhopperbarrister.com/2013/10/22/is-a-franchisees-outlet-licence-a-retail-premises-lease/


Our clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain  services for any legal matter which is within the gamut of our legal experience.



Author: Sam Hopper Barrister gave me permission to publish a link on my blog to direct you to his article noting that Sam Hopper's authored work and as such it  is subject to copyright under DMCA.







Wednesday 30 October 2013

Section 32 statements should disclose leases


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It has long been a vexed question whether a vendor of land needs to include details of a lease affecting the land in the vendor statement provided to a purchaser pursuant to s.32 of the Sale of Land Act 1962.  Section 32 requires the disclosure of, among other things,  mortgages and charges affecting the land but does not expressly require disclosure of a lease. The vendor is required to include in the statement  a “a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction”. See: s.32(2)(b). It is established that s.32 should not be given a “narrow, restrictive construction having regard to the evident reformatory object of the leglislation”. See: for example, Vouzas v Bleake House Pty Ltd [2013] VSC 534 at [49].  In Krakowski v Eurolynx Properties Ltd (1992) V ConvR 54-436 ( BC9200732) O’Bryan J did not consider that s.32(2)(b) required a vendor to disclose the existence of a lease affecting the land. However, in IGA Distribution Pty Ltd v King [2002] VSC 440 at [252] Nettle J (as he then was) doubted that O’Bryan J was correct but did not specifically decide the issue. In Vouzas the vendor had disclosed the existence of the lease but had not disclosed that the tenant had entered into a conditional agreement to assign the lease. Macaulay J had to decide whether s.32(2)(b) required the vendor to disclose  that the tenant of the land being sold had entered into the conditional agreement to assign the lease.   The vendor knew about the conditional agreement to assign the lease. Macaulay J expressed the view that “the doubts expressed by Nettle J in the IGA case" concerning whether a lease need be disclosed were "well founded". However,  his Honour held that the vendor had not breached s.32(2)(b)  because that section did not oblige a vendor to disclose a conditional agreement to assign a lease. His Honour also said that “he was not convinced that an assignment of lease would need to be disclosed under s.32(2)(b").


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Author: Robert Hays Barrister subject to copyright under DMCA.


Monday 21 October 2013

VCAT not bound to refer matters to arbitration

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On 17 October 2013 I posted a note about Subway Systems Australia Pty Ltd v Ireland [2013] VSC 550 which concerned a dispute between a franchisor and a franchisee. The franchise agreement contained an arbitration clause.  VCAT refused to refer the dispute to arbitration pursuant to s.8 of the Commercial Arbitration Act 2011 which provides that:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when the submitting party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

Justice Croft held that VCAT was not a “court” within the meaning of s.8 and therefore the dispute could be heard and determined in VCAT.

The decision is significant because many agreements, particularly franchising agreements, contain arbitration clauses. The effect of the judgment is that if a proceeding is commenced in VCAT concerning an agreement that contains an arbitration clause a party to that agreement cannot request the Tribunal to refer the matter to arbitration pursuant to s.8.  If the same proceeding were commenced in the Magistrates’ Court, the County Court or the Supreme Court, the Court could refer the proceeding to arbitration. According to Justice Croft this did not produce an absurdity because VCAT was intended to be a forum for speedy and inexpensive resolution of disputes.

Justice Croft noted that a party to a proceeding in VCAT could still apply under s.77 of the VCAT Act to have the matter referred to the arbitral tribunal on the basis that it was a more appropriate forum.

In the earlier post about Subway  the Commercial Arbitration Act 2011 was erroneously referred to as a Commonwealth Act; the reference should have been to a Victorian Act.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 



Management fees - Practice Note for LIV's November 2012 lease revision

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The Law Institute of Victoria is issuing a Practice Notice concerning the reference to the amount of, and the calculation of, management fees in item 10 of  the schedule in the November 2012 Revision. The Practice Note says:

"When using the LIV Commercial lease for a retail premises lease containing an option to renew and under which management fees will be payable, it is recommended that:

  • Item 10 of the Schedule be modified by deleting the paragraph beginning ‘If the Act applies’ and ending ‘section 49(4)’.

  • The information relating to the amount of the management fee and the method of calculating the amount payable by the tenant, for the first accounting period of the lease term, be specified in the disclosure statement rather than the lease.  This will satisfy section 49(1)(b) without creating potential issues where an option is exercised.  When an option is exercised, the disclosure statement for the new term should also specify the management fee and the method of calculating the amount payable by the tenant for the first accounting period of the new lease."

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.



Author: Robert Hays Barrister and Derry Devine subject to copyright under DMCA.



The Practice Note was drafted by Derry Davine and Robert Hay.

Friday 18 October 2013

Arbitration clause ineffective to oust VCAT's jurisdiction

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In a fascinating decision given today the Supreme Court of Victoria held that an arbitration clause in a lease could not oust VCAT’s jurisdiction under the Retail Leases Act 2003 (2003 Act).  In Subway Systems Australia  Pty Ltd v Ireland [2013] VSC 550 Croft J held that VCAT was not a “court” within the meaning of the Commercial Arbitration Act 2011 (Cmlth).  The matter came before Croft J after a VCAT member declined to find that the Tribunal was bound to refer the dispute to arbitration under s.8 of the CAA. In broad terms s.8 of the CAA requires a court before which an action is brought in a matter which is the subject of an arbitration agreement to  refer the matter to arbitration if one of the parties  makes that request.  Croft J held that VCAT was not a “court” for the purpose of s.8(1) of the CAA and therefore VCAT was not bound to refer the dispute to arbitration.  His Honour also accepted that  by the time s.8 of the CAA might be said by a party to a lease to be engaged, s.94 of the 2003 Act  had already rendered void the clause requiring disputes under the lease to go to arbitration. Section 94(2) of the 2003 Act provides that a provision in a retail premises lease is void to the extent that it purport to exclude the application of a provision of the 2003 Act  or to limit the right of a party to a lease to seek resolution of a retail tenancy dispute under Part 10 of the 2003 Act.


Author: Robert Hays Barrister subject to copyright under DMCA.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Friday 5 July 2013

Most tenants who provide services engaged in retail provision of services

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Many readers will be familiar with the "ultimate consumer" test that is commonly used to determine whether premises are "retail premises" within the meaning of s.4(1) of the Retail Leases Act 2003. If the premises are "retail premises" the Act applies; if premises are not "retail premises" the Act does not apply. Premises are "retail premises" if "under the terms of the lease relating to the premises" they "are used, or are to be used, wholly or predominantly for.....(a) the sale or hire of goods by retail or the retail provision of services". See: s.4(1). Nathan J in Wellington v Norwich Union Life Insurance Society Limited [1991] VR 333 held that patent attorneys (and other professional businesses such as solicitors, architects and medical specialists) conducted a business providing retail services.  His Honour held that the  "essential feature of retailing" was the provision of an item or service "to the ultimate consumer for fee or reward".  The end user might be a member of the public but was not necessarily so. The problem has been to identify the "ultimate consumer". Nathan J did not regard it as significant that a patent attorney's advice might pass through the hands of an intermediary on the way to the ultimate consumer. But what would the position be if the patent attorney's advice was used as "input" into a solicitor's advice to the solicitor's client? Would the solicitor be the "ultimate consumer"?

It will be much easier to answer these questions following the recent decision of Fitzroy Dental Pty Ltd v Metropolitan Management Pty Ltd [2013] VSC 344. The effect of the decision is that most tenants whose business provide any sort of service will be engaged in the "retail provision of services" and the Act will apply.

In Fitzroy Dental the landlord leased premises premises comprising a cafe/restaurant and a conference centre and facilities to a tenant who in turn received bookings from conference or function providers to conduct functions and conferences. The cafe/restaurant was used only for the provision of food and drink to the attendees at the functions and conferences. The landlord commenced a proceeding against the tenant in the Supreme Court. The tenant contended that VCAT had exclusive jurisdiction to hear and determine the  dispute because it was "retail tenancy dispute" within the meaning of s.81(1) of the Act. See: s.89(4). The permitted use under the lease was "Conference Centre, Cafe/Restaurant Area and associated office and storage area".

Justice Croft held that the dispute between the landlord and the tenant was a "retail tenancy dispute" that had to be determined by VCAT. The conference facilities were open to the public in the sense that a member of the public (ie the conference provider) could approach the tenant to book the conference facilities. After reviewing the authorities His Honour held that conference provider was the "ultimate consumer" of services provided to him by the tenant. Those services were in turn an "input" into the different services provided to the attendees at functions and conferences.  Thus, there were two transactions involving the retail provision of services. The transaction between the tenant and the conference organising entity was for monetary consideration while the second transaction with the attendees did not always involve a fee or reward for the provision of services. It did not matter that the bodies organising the conferences and hiring the premises from the tenant were governmental authorities or public bodies such as a university, the Metropolitan Fire Brigade, the Police Federation or an industry association because such bodies had the capacity to enter into ordinary commercial agreements.

The case contains a helpful analysis of the relevant caselaw.

Author: Robert Hays Barrister subject to copyright under DMCA.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. Green

Wednesday 15 May 2013

Advisers must consider registration of leases

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Lawyers acting for landlords of non-retail premises where the proposed lease term exceeds 3 years need to seriously consider whether to register the lease. This is one of the consequences of the Court of Appeal’s decision in Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106.   If the lease is not registered, the term of the lease is assigned and the landlord is not a party to the assignment document, the assignee of the term will have the benefit of the contract but be excused from the burden of the contract.

In Victoria, a lease for a term in excess of 3 years may be registered. See: s.66 of the Transfer of Land Act 1966.  A lease made by deed for a term of less than 3 years is also a legal lease. However, an unregistered lease for a term exceeding 3 years is a lease in equity.

In Cooma the facts were:

  • the owner (Landlord) entered into a contract to sell land to a purchaser (Purchaser) which land was also leased to a tenant (Tenant) for a term of less than 3 years (Lease). The term of the Lease was close to its expiry date.

  • Before settlement and before expiry of the term of the Lease, the Purchaser’s  agent wrote to the Tenant (Agent’s Letter) offering a new for a term of 3 years commencing upon expiry of the Lease . The Tenant accepted the agent’s offer by signing the Agent’s letter (Agreement for Lease)

  • thereafter the Landlord, the Tenant and a third party (New Tenant) signed a documented entitled “Transfer of Lease” that assigned the balance of the term of the Lease to the New Tenant (Transfer).

  • The Transfer contained a special condition in which the New Tenant acknowledged receiving the Agent’s Letter (ie the letter from the Purchaser to the Tenant) “in relation to the Lease renewal” and in which the New Tenant acknowledged and consented to the terms and conditions for the renewal of the Lease.

  • The New Tenant occupied the land before the expiry of the Lease and the Purchaser became the registered owner of the leased land before the expiry of the Lease.

  • Shortly after the expiry of the Lease the New Tenant vacated the premises. The Purchaser contended that the New Tenant was obliged to comply with the  covenants contained in the Agreement for Lease. The New Tenant contended that it had the benefit of an option to renew or extend the Lease for a further 3 years which option had not been taken up. The Purchaser was successful in VCAT and in the Court of Appeal.

The Court of Appeal held:

(a)        the Lease was a legal lease because it was for a term not exceeding 3 years;

(b)        the Tenant’s signing of the Agent’s Letter gave rise to an equitable lease between the Purchaser and the Tenant (ie the Agreement for Lease);

(c)        it was irrelevant that when the Agreement for Lease was made there was no privity of estate between the Purchase and the Tenant (ie because the Purchaser was not the owner of the land) because it was well established that a if two parties contract as landlord and tenant neither of them can deny the title of the other;

(d)        a party to a contract for a lease that is not a legal lease (ie such as the Agreement for Lease) may assign the benefit of the contract but may not assign the burden;

(e)        thus, the Transfer (which transferrred the Agreement for Lease from the Tenant to the New Tenant) was incapable of subjecting the New Tenant to the burden of the Agreement for Lease and under the general law this remained so ever after the New Tenant entered into possession under the Lease;

(f)         after the Purchaser was registered as proprietor of the land it became, by reason of ss.141 and 142 of the Property Law Act 1958, entitled to the benefit and the burden of the Lease;

(g)       however, the assignment of the Agreement for Lease from the Tenant to the New Tenant had the effect of assigning the benefit of the contract to the New Tenant but not assigning the burden.

Thus, the position at general law was that the New Tenant had the benefit of the Agreement for Lease but was not subject to the burden of the Agreement for Lease.

Fortunately for the Purchaser the Agreement for Lease was a “retail premises” lease within the meaning of s.4 of the Retail Leases Act 2003 (2003 Act). See also s.3 of the 2003 Act.  Section 8 of the 2003 Act provides that an assignment of a lease results in a continuation of the lease as opposed to creation of a new lease. Accordingly, despite the lack of privity of contract and estate between the New Tenant and the Purchaser, the transfer of the executory contract for a new lease (ie by the Transfer the Agreement for Lease was assigned) was in effect deemed by s.8 to have created privity of contract between them and thus conferred on the Purchaser a direct right of enforcement against the New Tenant.

The most important points arising from this case are that serious consideration needs to be given to whether a lease should be registered and, if the lease is not to be registered, ensuring that the clause governing assignments requires the landlord to be a party to the assignment document so as to ensure there is privity of contract between the landlord and the assignee of the term.

I will be doing a further blog concerning this case (stay tuned)

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Tuesday 23 April 2013

Changes to excluded retail premises

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The Retail Leases Act 2003 excludes from the definition of "retail premises" premises in respect of which the "occupancy costs" under the lease is more than the amount prescribed by the regulations. See: s.4(2)(a). Before 22 April 2013 the amount prescribed by the regulations was $1,000,000 per annum. From 22 April 2013 the amount prescribed is $1,000,000 per annum "exclusive of GST". See: regulation 6 in the Retail Leases Regulations 2013. The effect of the change will be to bring more premises within the definition of "retail premises".



Author: Robert Hays Barrister subject to copyright under DMCA.




My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience

Thursday 18 April 2013

Be wary of unrepresented parties at mediations

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Mediations at which parties are unrepresented or not represented by lawyers are fraught with risk. Even with legal representation mediations are stressful, particularly where the mediation is only fixed for a half day and there is pressure to avoid long winded discussions about the facts. Experienced mediators invariably offer unrepresented parties an adjournment so that legal advice can be obtained. VCAT recently decided case in which landlords sought to set aside terms of settlement agreed at a half day mediation conducted by the Small Business Commissioner. In Wong v Hook Line and Sinker Fish and Chips Pty Ltd [2013] VCAT 263 the landlords sought to have the terms of settlement set aside on the grounds of undue influence or duress by the mediator and a barrister.  At the mediation the parties had been in dispute about whether the tenant was being required to pay “key money” under a lease contrary to s.23 of the Retail Leases Act 2003. The terms of settlement required the parties to appoint a valuer to determine the market rent. The landlords were not represented by a lawyer at the mediation but were represented by an advocate who held himself out as an expert in retail tenancy matters and who prepared written submissions. The mediator was highly experienced and was accompanied by a trainee mediator. The tenant was represented by an experienced barrister. The mediator offered the landlords the opportunity to adjourn the mediation to enable them to obtain legal advice but the offer was declined. The landlords subsequently refused to appoint the valuer to determine the market rent and commenced a proceeding alleging that the terms of settlement had been obtained by undue influence or duress. At the hearing the mediator, the trainee mediator, the tenant's barrister at the mediation, representatives of the tenant, the landlords and the landlords' advocate all gave evidence. The Tribunal rejected all of the the landlords’ claims. An application for leave to appeal has been filed.



My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Author: Robert Hays Barrister subject to copyright under DMCA.

Landlord liable to pay compensation under s.54 of Retail Leases Act

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Tenants commonly complain about water entering leased premises and affecting their use and enjoyment of a tenancy. In National Hospitality Group Pty Ltd v Regal Hotels Pty Ltd [2013] VCAT 413 a landlord was held to be liable to pay compensation to a tenant under s.54 of the Retail Leases Act 2003 despite there being no defects in the leased premises. The tenant complained on many occasions to the landlord about water entering the premises.  The tenant sued for damages relying, among other provisions, s.54 of the Act. Section 54 implies into a  lease a requirement that the landlord pay reasonable compensation to the tenant for loss or disruption suffered by the tenant because the landlord fails to, among other things, take reasonable steps to prevent or stop significant disruption with the landlord's control to the tenant's trading at the premises.  Despite the cause of the water entering the premises being damage to storm water drains outside the leased area and there being no defects in the premises, the Vice President, Judge Jenkins held that the landlord was liable to pay the tenant damages of  $35,000. Judge Jenkins held that the landlord was liable to pay compensation under s.54(2) of the Act because it had "breached the covenant of quiet enjoyment by failing or refusing to take steps which were reasonably available to it", the breach being that the landlord had not kept the tenant informed of progress or investigations or provide it with any reports or advice and did not engage its own engineering or plumbing consultant to give advice and undertaken appropriate investigations.  It is  respectfully submitted that the decision shows a misunderstanding of the covenant of quiet enjoyment and imposes obligations on landlords that are not supported by the Act. Pursuant to a provision in the lease the tenant also entitled to an abatement of rent for the period when the premises was unfit for use.


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Author: Robert Hays Barrister subject to copyright under DMCA.

Friday 8 February 2013

Damages assessed on breach of collateral contract to grant a new term

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In an earlier post I referred to two cases in which the operator of restaurants in the Melbourne Casino and Entertainment Complex  succeeded in claims that they were entitled to additional 5 year terms despite their leases not containing such a term. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited [2012] VCAT 225. The tenants, who operated the restaurants "Waterfront" and "Cafe Greco", succeeded in claims that Crown had breached a collateral contract that they would be granted an additional 5 year term after the expiry of the 5 year term provided for in their leases. The tenants claimed that they were induced to spend millions of dollars on fit-outs because of a promise that there existing leases would be renewed. At the end of the intial 5 year term Crown refused to renew the leases and the area occupied by restaurants was leased to new tenants. Crown denied the existence of any collateral contract. Damages and interest have now been assessed with the tenants being awarded a total of more than $2,000,000. See: Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Limited and Fish and Company (Vic) Pty Ltd v Crown  Melbourne Limited (VCAT, unreported, 8 February 2013).

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.


Author: Robert Hays Barrister subject to copyright under DMCA.

Thursday 7 February 2013

Recovery of outgoings and the November 2012 LIV Lease


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The November 2012 LIV Lease excuses a tenant from performing any work that is the responsibility of the owner under the Building Act 1993. See: clause 3.3.3 which provides that the tenant is not obliged “to carry out any work that applicable legislation makes the responsibility of the landlord”. The new LIV Lease  also excludes from outgoings recoverable from the tenant “capital expenses and expenses whose recovery from the tenant would be contrary to applicable legislation”. See: the definition of “building outgoings in clause 1.1.  However, the LIV Lease includes in the definition of “building outgoings” the costs of “maintaining and repairing the building and the landlord’s installations and carrying works as required by relevant authorities…” (sub-paragraph (c) of the definition).

Thus it appears that provided recovery is not contrary to the Act, costs incurred by the landlord in complying with the owner’s obligations under the Act are recoverable from the tenant under the LIV Lease.  The question remains whether a landlord can or cannot recover from the tenant its costs in complying with owner’s obligations under the Act. The recent case of McIntyre v Kucminska Holdings Pty Ltd  [2012] VCAT 1766 did not determine that question. In McIntyre the lease required the tenant to arrange for an essential safety measure report and to purchase whatever fire fighting equipment was required in order to comply with the report. Section 251 of the Act provides that:
“(1)      If the owner of a building or land is required under this Act or the regulations to carry                 out any work or do any other thing and the owner does not carry out the work or do                 the thing,  the occupier of that building or land or any registered mortgagee of the land               or the land on which the building is situated, may carry out the work or do the thing.

(2)        An occupier may-

(a)        recover any expenses necessarily incurred under subsection (1) from the owner as a                 debt due to the occupier; or

(b)        deduct those expenses from or set them off against any rent due or to become due to                the owner.

(6)        This section applies despite any covenant or agreement to the contrary.”

Section 251 is enlivened if the landlord does not carry out the work or thing that the Act requires it to do. In McIntyre the Tribunal had to consider regulation 1217 of the Building Regulations 2006 which states:
“The owner of a building or place of public entertainment must ensure that any essential safety     measure required to be provided in relation to that building or place under the Act or these       Regulations or any corresponding previous Act or regulation-

(a)        is maintained in a state which enables the essential safety measure to fulfil its purpose;               and...”

Senior Member Riegler said at [64] that:
“In my view, the words of the provision [Regulation 217] made it clear that the obligation to bear the cost of the essential safety measures ultimately rests with the owner of land. I do not consider it open for a landlord to contract out of that obligation, even if at first instance the lease requires the tenant to undertake the work required in order to comply with whatever essential safety measures are applicable…”

And at [69]:
“In my view, s 251 of the Building Act 1993 does not necessarily prohibit a landlord from        placing such an obligation [to arrange for a essential safety measures report and to purchase  fire fighting equipment] on a tenant, save and except that the Landlord must reimburse the  Tenant for the costs associated therewith, failing which the Tenant is entitled to set-off those  costs against rent due and payable under the lease.”

And at [71}:
“I do not consider that a contractual obligation, placed on the tenant to undertake whatever  work is required in order to comply with an essential safety measures report, offends s 251 of  the Building Act 1993. The contractual and the statutory obligations are able to sit side-by-  side.”

In summary, the Senior Member’s view is that:

(a)          the owner landlord cannot contract out of its obligation under the Act;

(b)         if the owner landlord is required by the Act to do any work and the lease requires the tenant to do                 that work, the tenant must do the work but is  entitled to recover its costs from the landlord under s              251.

Assuming that the landlord does the work required by the Act or engages a person (other than the tenant) to do the work, it remains an open question whether a landlord can recover from the tenant as an outgoing the costs of complying with the Act. In my view there is nothing in the Act that suggests Parliament intended to interfere with a landlord’s right and a tenant’s right to bargain about the recovery of costs.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Author: Robert Hays Barrister subject to copyright under DMCA.

Friday 25 January 2013

Tenant cannot question the landlord's title


Please note for members of the public or practitioners in the legal profession where English is your second language a translation key in all languages of the world is available on this blog to assist you. The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com


In Create Invest Develop Pty Ltd v Cooma Clothing Pty Ltd [2012] VCAT 1907  VCAT had to decide the effect of a contract entered into by a tenant with a party that was not the registered proprietor of the leased land but who subsequently became the registered proprietor. The case is a good illustration of the principle that if two parties contract with each other as landlord and tenant, neither of them is entitled to deny the title of the other unless some other person by way of title paramount intervenes and disturbs the possession of landlord and tenant. In Create there was a lease in place the term of which was expiring on 31 January 2011 (“Original Lease”). 

In 2010 the land was offered for sale and the Applicant purchaser entered into a contract of sale with the landlord ("Landlord"). Before settlement, the Applicant purchaser offered the existing tenants a lease for a term of three years commencing 1 February 2011 which offer included a clause that permitted the landlord to terminate the lease to demolish or redevelop the premises and contemplated the execution of further documents including a lease that contained a demolition clause and guarantees. The tenants signed the offer (“the Lease Renewal”). Later, in 2010, the Landlord, the tenants and the Respondent signed a document styled “Transfer of Lease” which assigned the term of the Original Lease to the Respondent and contained a special condition in which the Respondents acknowledged being given a copy of the Lease Renewal and consent its terms and conditions. 

In late 2010 the transfer of the freehold reversion was registered. In March 2011 the Respondent vacated the property and was sued by the Applicant for damages that comprised mainly rent for the period from 1 February 2011 pursuant to the Lease Renewal. The basis of the damages claim was that the Respondent was obliged to perform the Renewed Lease. 

The Respondent contended that all that had occurred was that it had an option to renew or extend the Original Lease which option it had not taken up.  The Respondent argued that at the time the Lease Renewal was made the Applicant was not the legal owner of the reversion and not entitled to the rents and profits as a purchaser and therefore there was no privity of estate or contract between the Applicant and the Respondent. 

The Respondent also argued that what had taken place did not amount to a “renewal” of a lease within the meaning of s 9 of the Retail Leases Act 2003, the 2003 Act did not contemplate leases that were entirely prospective, and the Lease Renewal was not a concluded agreement. All the Respondent’s contentions were rejected by the Tribunal. The Tribunal held that the Respondent as tenant was estopped from questioning the Applicant landlord’s title and therefore it was irrelevant that the Applicant was not the registered proprietor of the land when the Lease Renewal was entered into. The Tribunal also held that while the Lease Renewal contemplated the execution of further documents there was a binding contract, the Lease Renewal was not a renewal but the entry by the parties into a new lease.       



My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.




Author: Robert Hays Barrister subject to copyright under DMCA.

Thursday 24 January 2013

Option not exercised because of default

Please note for members of the public or practitioners in the legal profession where English is your second language a translation key in all languages of the world is available on this blog to assist you. The plain English blog without translation facilities is located at http://roberthaypropertybarrister.wordpress.com



In Computer & Parts Land Pty Ltd v Property Sunrise Pty Ltd [2012] VCAT 1522 the Tribunal was asked to determine whether an option contained in a lease was not exercisable by the tenant because of breaches of the lease that enlivened s.27(2) of the Retail Leases Act 2003 .  Section 27(2) provides that the "only circumstances" in which an option is not exercisable is if the "tenant has not remedied any defaults under the lease about which the landlord has given the tenant written notice" (s.27(2)(a)) or " the tenant has persistently defaulted under the lease throughout its term and the landlord has given the tenant written notice of the defaults" (s.27(2)(b)). Section 27(2)(b) is ambiguous: what is meant by "persistently", what is meant by "throughout its term", does a landlord have to give notice of each default or is one notice that describes all the defaults adequate? There have been a number of cases concerning s.27(2) all of which have avoided giving any definitive answers to these questions. 

See: for example, Westgate Battery  Company Pty Ltd v GCA Pty Ltd [2005] VCAT 2080 and Westside Real Estate Investments Pty Ltd [2011] VCAT 1830. In this case the term of  the lease was four years with two options for four year terms. The landlord relied on s.27(2)(a) and (b) in alleging that the option had not been exercised because at the time of the purported exercise the tenant had not remedied a default and the tenant had persistently defaulted under the lease throughout the four year term of the first option period. Firstly, the  Tribunal held that s.27(2) prevailed over the provisions contained in the lease concerning the exercise of the option.  

There had been nine occasions “over two stretches” when the rent was not paid on time and the rent had never been more than five weeks’ late. The Tribunal held that in those circumstances it was not “persuaded that the late payments could be described as ‘persistent’ (in the sense of ‘persevering’ or ‘constantly repeated’)" and that the late repayments had not occurred “throughout” the term of the lease.  Nevertheless, the Tribunal held that the option had not been exercised because when the tenant exercised the option it had failed to provide a bank guarantee as required by the lease and the landlord had given written notice of the default  (s. 27(2)(a)).  Rectification of the default after the purported exercise of the option did not alter the position.

The tenant sought relief against forfeiture of the option. The Tribunal followed the decision of Dixon J in Lontav Pty Ltd v Pineross Custodial Services Pty Ltd (No. 2) [2011] VSC 485 in  holding that VCAT had no power to grant relief against forfeiture of an option.


My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.



Author: Robert Hays Barrister subject to copyright under DMCA.