Applicant v Respondents

It follows from this provision that any appeal is dependent upon two important qualifications. First, that the appeal be on a question of law, and secondly, that the Court gives leave to appeal. The legislative policy underlying these provisions is that "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."[3] 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."[4]

8 The leave requirement under s 148(1) of the VCAT Act is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[5]

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".[6] It also confers a discretion about whether to grant leave[7] 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.[8] It will ordinarily be necessary (in addition to a clearly articulated question of law)[9] for an applicant to make out a prima facie case[10] 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.[11]

9 An additional safeguard has since been imposed. Effective from 1 May 2018, the VCAT Act was amended to include s 148(2A).[12] The section provides:

The Trial Division of the Supreme Court may grant an application for leave to appeal under this section only if it is satisfied that the appeal has a real prospect of success.

10 This amendment sees the replacement of the requirement that an applicant seeking leave to appeal from VCAT to the trial division of the Supreme Court must show that there is a real or significant argument to be put that an error below exists,[13] sometimes referred to as the Hulls test.[14] Instead, all applicants under s 148 are now subject to the same and more burdensome requirement: they must demonstrate that the appeal has a real prospect of success.[15] With respect to applications subject to the same test,[16] the Court of Appeal has said:[17]

the test under s 63 of the Civil Procedure Act should be construed as one of whether the respondent to the application for summary judgment has a "real" as opposed to a "fanciful" chance of success; that the "real chance of success" test is to some degree a more liberal test than the "hopeless" or "bound to fail" test; and that, as the law is at present understood, the real chance of success test permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent's case is not "hopeless" or "bound to fail", it does not have a real prospect of succeeding.

11 The new requirement of s 148(2A) makes express the restraint this Court ought exercise when reviewing decisions of VCAT, a restraint long and more generally recognised in case authority. In considering applications 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:[18]

Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[19] 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:[20]

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,[21] Michaelis Bayley (Vic) Pty Ltd v Melbourne & Metropolitan Board of Works[22] and Teston Investments Pty Ltd v Melbourne & Metropolitan Board of Works.[23]

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."[24]

12 In terms of the parties' submissions, it is clear from the authorities to which reference has been made that the role of a specialist tribunal, such as VCAT, is not to be usurped by the Court and that a decision of such a tribunal is not to be interfered with absent a vitiating error of law.

13 For the reasons which follow, I am satisfied that the Applicant has established a question or questions of law which warrant the grant of leave to appeal. Moreover, as these reasons indicate, the appeal is successful.

14 Reference has already been made to the broad parameters of the Lease, being a five year lease, with an option for one further term of five years, commencing on 1 March 2016.

15 For present purposes, the following provisions of the Lease are of particular relevance:

(1) Clause 11.1 provides that the Premises "must only be used for the Permitted Use". The Permitted Use is provided for in schedule Item 18 of the Lease and is "Pilates and Barre Studio and associated uses".

(2) Clause 23.1 makes provision for essential terms:

23.1 Essential terms

Each obligation of the Tenant to pay money and to provide security to the Landlord, and the obligation of the Tenant under clauses 3, 6, 9, 11, 12, 14 and 15, are essential terms of this lease without which the Landlord would not have entered into this lease and that the Landlord is entitled to treat a breach of any of them as a repudiation of this lease.

(3) Clause 2.2 provides, inter alia, that the Lease is subject to the special conditions contained in Annexure A to the Lease (clause 2.2(c)).

(4) Special condition 1(a), set out in Annexure A to the Lease, provides for landlord's works:

1 Landlord works

(a) The Landlord must carry out and complete the following works to the Premises:

...

(xiii) install air conditioning to service the Premises; and

(xiv) The Landlord shall endeavour to complete all require [sic] Landlord works within a period of 8 weeks from either the date of the signing of the lease OR the date of the receipt of the bank guarantee required under this lease (whichever is the later),

(together, the Landlord's Works).

...

(e) In relation to the air conditioning units installed as part of the Landlord's Works (pursuant to special condition 1(a)(xiii)):

(i) the Tenant will at its sole cost, take out and maintain a maintenance contract for the Term (and any further term) with a reputable air conditioning service contractor to service those air conditioning units on a 6 monthly basis; and

(ii) subject to the Tenant's compliance with special condition 1(e)(i), the Landlord is responsible for any capital repairs associated with those air conditioning units.

(f) Special conditions 1(a), 1(b), 1(c) and 1(d) will be deleted from the new lease for the further term.

(5) Special condition 4 contained in Annexure A of the Lease provides for a rent-free period of three months from the commencement date.

16 The draft Notice of Appeal filed on 22 November 2018 identifies the orders sought by the Applicant in the following terms:

1. Under section 14(1)(b) of the Victorian Civil and Administrative Tribunal Act 1998, the Appellant landlord have leave to appeal from order 1 of the orders made on 25 October 2018 by Senior Member Riegler of the Victorian Civil and Administrative Tribunal in proceeding number BP863/2016, cited as S 3 Sth Melb Pty Ltd v Red Pepper Property Group Pty Ltd (Building & Property) [2018] VCAT 1684.
2. The appeal be allowed.
3. Order 1 of the orders made by the Tribunal on 25 October 2018 be set aside.
4. The proceeding be referred to the Victorian Civil and Administrative Tribunal for further hearing in accordance with the reasons of this honourable Court.
5. The Respondents pay the Appellant landlord's costs of this proceeding.
6. Such further or other relief as to this honourable Court seems fit.

17 The Applicant, the Landlord, seeks leave to appeal on the following questions of law:[25]

1. Whether the Tribunal misconstrued special condition 1(a)(xiii) of the lease as:

(a) giving rise to a continuing obligation on the part of the Appellant landlord to provide air-conditioning to service the premises on an ongoing basis during the currency of the lease;

(b) alternatively (if and insofar as it did give rise to such a continuing obligation), a fundamental term of the lease;

1. Whether the Tribunal misapplied the doctrine of repudiation in concluding that the Appellant landlord's conduct constituted a repudiation of the lease;
2. Whether the Tribunal denied the Appellant landlord natural justice or procedural fairness in concluding that:

(a) either special condition 1(e)(ii) of the lease or s 52 of the Retail Leases Act 2003 required the Appellant landlord to carry out the repair or replacement of the condenser fan of the air-conditioner at the premises, when neither provision had been raised by the Respondent tenant's case and neither provision had been the subject of any submission on the point, such that the Tribunal decided the proceeding, in part, on a point that was never the subject of either party's case;

(b) special condition 1(a)(xiii) of the lease obliged the Appellant landlord to repair the air-conditioner which obligation the Appellant landlord had from May 2017 ceased or failed to fulfil, when such allegations had not formed part of the Respondent tenant's case and had not been the subject of any submission.

18 The Applicant, the Landlord, asserts that the Tribunal erred in law in:[26]

1. concluding that special condition 1(a)(xiii) of the lease gave rise to a continuing obligation on the part of the Appellant landlord to provide air-conditioning to service the premises on an ongoing basis during the currency of the lease;
2. concluding that special condition 1(a)(xiii) of the lease was a fundamental term of the lease;
3. concluding that the Appellant landlord was in breach of special condition 1(a)(xiii) of the lease;
4. concluding that the Appellant landlord had repudiated the lease;
5. concluding that either special condition 1(e)(ii) or s 52 of the Retail Leases Act 2003 required the Appellant landlord to carry out the repair or replacement of the condenser fan of the air-conditioner at the premises; and
6. concluding that from May 2017 the Appellant landlord had ceased or failed to fulfil an obligation imposed by special condition 1(a)(xiii) of the lease to repair the air-conditioner.

19 As at the commencement of the Lease, the previous tenant's fit-out had been removed, taking the premises back to a bare shell. At that time, however, the premises included a Daikin Rooftop Packaged Air Conditioner that was about six years old.[27] The unit should have a lifespan of 20 years and was not beyond its lifespan.[28] Supply and return air were distributed and fed through solid roof-mounted ductwork connected to a split plenum box mounted to the ceiling above the internal stairs within the Premises.[29] One side of the plenum box supplies air and the other side draws it.[30] The existing air conditioning installation was found to be inefficient and problematic in that the air supply tended to be drawn into the return air vent, rather than pushed into the area to be serviced.[31] Ideally, it seems, ductwork should have been connected to the plenum box to distribute conditioned air through the Premises and to isolate and distance the supply air from the return air.[32]

20 In any event, at the time of entry into the Lease, the air conditioning unit was not operational.[33] As part of the Landlord's Works, the Landlord installed three-phase power to the air conditioning unit, installed a "Smart Temp" wall controller and then arranged for the air conditioning unit to be serviced, commissioned and tested before or during handover of the Premises to the Tenant. The Tribunal found that, by these means, the Landlord satisfied its obligation to install air conditioning to the Premises.[34]

21 It followed that the manner in which air conditioned air was to be distributed or balanced within the Premises depended upon the internal fit-out undertaken by the Tenant and the needs of the Tenant. [35] Thus, the precise scope of ductwork could not have been known at the time the parties entered the Lease.[36] It was found that it was, consequently, unlikely that the parties intended that the responsibility for installing ductwork was to rest with the Landlord.[37] Moreover, the absence of ductwork did not prevent the air conditioning from servicing the Premises.[38]

22 The Tribunal found that the air conditioning unit was correctly sized for the Premises[39] and carried adequate load capacity to service the Premises.[40] This was so, it was found, even without installation of ductwork to distribute or balance the conditioned air.[41] The Tenant did not enter into any maintenance contract for the servicing of the air conditioning unit as required by special condition 1(e)(i) contained in Annexure A to the Lease.[42]

23 From June 2016 to April or May 2017, the Tenant's Barre and Pilates instructor, Jasmine Turner (previously Jasmine Sibbald) conducted Barre and Pilates lessons at the Premises, conducting two to six classes approximately six or seven days a week.[43] During that period, she operated the air conditioner, which generally operated except for between five and ten occasions when it stopped working.[44] On most of these occasions Ms Turner was able to get it working by turning it off and then on again at the circuit breaker.[45] On the occasions when that did not work, it was either fixed by a tradesperson from her husband's work or referred to Mr Theo Kerlidis of the Landlord for rectification, and in each of these instances the air conditioning was fixed and continued to operate thereafter.[46]

24 On 23 May 2016, the Tenant wrote to the Landlord complaining, among other complaints, that there was no air conditioning service in the Premises, that the Landlord had sought to rely on the old system previously in place for which the Tenant had no evidence of its effectiveness, and that there were no ducts installed and the unit remained an eyesore with gaping holes where previous ducts had been.[47]

25 Following its earlier complaints, on 30 June 2016, the Tenant commenced the VCAT proceeding alleging, among other complaints, that there was no air conditioning at the Premises, that the Landlord had sought to rely on the old system previously installed, and that there were no ducts installed and there were gaping holes where ducts should have been.[48]

26 Between 27 October 2016 and 17 January 2017, various emails were exchanged with respect to the state of the air conditioning unit as a result of its inspection and servicing and works that might be conducted. It is not necessary to go into the detail of those matters, save to observe that the Tribunal found that, after a point in April or May 2017, the air conditioning system would only run for 20 minutes before it inexplicably turned off.[49] It appears that the fault which caused that effect did not exist at the time when the system was first commissioned.[50] The Tribunal found that from at least May 2017, this fault resulted in the air conditioning system not being able to service the Premises.[51] The fault was not diagnosed at that time.[52]

27 On 15 May 2017, the Tenant wrote to the Landlord by email with the subject heading "Airconditioning Unit" as follows:[53]

Theo

The air-conditioning has not been working for the past couple of weeks. I have only just been informed. Could you please arrange for a technician to come and service it.

Thanks

28 An hour later, the Landlord replied by email as follows, apparently attaching an email dated 17 January 2017:[54]

Hi Paul

Thanks for the email and sorry to hear that the a/c unit has stopped working.

In terms of maintenance in accordance with the lease, S3 is meant to be maintaining the unit every 6 months. The last I heard, see attached email, you were had [sic] a maintenance plan in place. Best to check with Jasmine.

Thanks, Theo

29 On 8 June 2017, the Tenant obtained a quotation for a replacement air conditioning package unit and ductwork priced at $32,276.20, and a quotation for replacement of the roof priced at $52,307.80 together with a brief report that stated:[55]

Arrived on site fault find on unit mother board is needing to be replaced as is compressor fan and all sheet metal duct work and flashings. This being said unit is beyond worthy of repair as more faults will occur due to units [sic] age, also the general install is incorrect as return and supply air are the same outlet.

whilst inspecting unit noticed a large amount of rust and 0 fall with water holding in areas of roof, condition is so poor requiring urgent replacement as water damage will occur in the not distant [sic] if the problem isn't addressed. I will send photos in a separate email of the maintenance required ...

30 On 21 June 2017 the Tenant sent the Landlord an email with the subject line "124 Bank St" in the following terms:[56]

Dear Theo,

The situation with the air conditioning unit in the Premises has become intolerable. I am not going to argue the points in this email that are the subject of our dispute at VCAT but merely highlight your obligations under the Lease.

You were required to 'INSTAL AN AIR-CONDITIONING UNIT' suitable for the Premises. You have never done that and the unit that is there is beyond repair and has never functioned properly for more than a couple of days. It has not functioned at all for the past 6 months.

I have instructed our lawyers to include in the particulars of our claim a requirement that you instal an air-conditioner as per your obligations. This will be non-negotiable and also form part of our claim in the mediation. I attach a quote from technicians we had inspect the unit for the purpose of repairing it. They reported that it was beyond economical repair. They also reported that the roof is in need of urgent repairs.

In recent weeks we have lost clients because of the cold weather and inability to heat the premises. We will also seek to recover from you compensation for our business losses.

I urge you to see sense and meet your obligations under the lease with respect to the air-conditioning unit.

31 Later the same day, the Landlord replied by email as follows:[57]

Hi Paul, you now have an issue with the roof?

In terms of the A/C you are meant to maintain it have you being doing so?

Please confirm ASAP.

R, Theo

32 Early that afternoon, the Tenant replied by email as follows:[58]

Theo

We are supposed to maintain the air conditioner you were supposed to instal. You never met that obligation so there is nothing for us to maintain.

Effectively you are trying to force us to make your run-down air conditioner serviceable to meet your obligations. It doesn't work that way.

Anyhow we have a VCAT dispute on this very issue which will be the subject of mediation next month and I don't intend to argue the merits of our claim with you by email. We both have lawyers. I suggest that you seek advice from them.

Paul A Norris-Ongso

33 A few minutes later the Landlord replied by email as follows:[59]

Paul, so you haven't been maintaining the unit as Jasmine has confirmed previously and you've continued to use the unit?

Stop evading in answering questions Paul.

T

34 Two hours later the Tenant replied by email as follows:[60]

As usual your obstinacy gets us nowhere.

We will sort it out in VCAT.

35 An hour later the Landlord replied by email as follows:[61]

Paul, Answer the question I requested earlier.

I need to know if you are still using the A/C that is in place and if you are servicing it, quite simple really.

T

36 There was no evidence before the Tribunal of any further correspondence between the parties in this vein at or about this time. Nevertheless, there was further correspondence a month or so later.

37 On 1 August 2017 the Tenant served a "Notice of Termination of Lease".[62] This notice asserted that the Landlord had persistently not installed air conditioning to service the Premises, and that this was a repudiation of the Lease which the Tenant accepted. On 2 August 2017 the Tenant sent an email to the Landlord stating that it had vacated the Premises the previous night.[63]

38 On 8 August 2017, the Landlord's solicitors wrote to the Tenant asserting breaches of essential terms including abandoning the Premises, using the Premises other than for the permitted use and subletting the Premises as a law office.[64]

39 The Tribunal found that the fault in the air conditioner was with the fan in the condenser unit.[65] After the Tenant had vacated the Premises, the Landlord had a new fan put in. This was ultimately a half-hour job.[66]

40 It is clear on the authorities that the proper construction of the provisions of a lease contract is a question of law.[67] The Applicant submits that, in this respect, the appeal has a real prospect of success, as opposed to a fanciful prospect of success, on each of the questions of law raised by the Notice of Appeal and that, consequently, leave to appeal should be granted and the orders sought made by the Court.[68]

Characterisation of special condition 1(a)(xiii)

41 The Applicant contends that, on its proper construction, special condition 1(a)(xiii) is not properly characterised as an ongoing landlord's repair covenant, as, it says, it was so characterised by the Tribunal. In this respect, the Applicant makes reference to the following passage in the Tribunal's Reasons:[69]

... I find that special condition 1(a)(xiii) of the Lease is not subject to any temporal limitation. It does not mean that once the air-conditioning system has been installed and is servicing the Premises, the special condition has no further work to do. If that were the case, removing the air-conditioning system after it had been installed would satisfy the special condition, which would be an absurd interpretation of that special condition. In my view, the obligation to install air-conditioning to service the premises means to service the Premises on an ongoing basis during the currency of the Lease. If the air-conditioning system stops working due to a malfunction of one of its critical components, and the Landlord refuses to repair that component, then the air-conditioning is no longer servicing the Premises.

[Emphasis in original.]

42 The Respondent, on the other hand, seeks to defend the construction of special condition 1(a)(xiii) as adopted by the Tribunal, both linguistically and on the basis of recent authority on the construction of commercial contracts. Reference is made in the latter respect to the reaffirmation of the proper approach by the High Court in Electricity Corporation v Woodside Energy Limited as follows:[70]

The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making a commercial nonsense or working commercial inconvenience'.

[Citations omitted.]

Reference was also made to other authorities in the same vein.[71]

43 On the basis of these authorities, the Respondent submits that:[72] "[t]he issue of construction, then, conduces to a short point. Air conditioning was central to the operation and profitability of an exercise studio - the permitted use of the premises. What would a reasonable business person have expected: was a requirement to install satisfied by attending to an existing system?". The Respondent then elaborates the argument that the word "install" connotes the provision of new air conditioning equipment, by reference to the language of the Lease and also s 52 of the RLA.[73]

44 I am, however, of the view that the authorities relied upon with respect to the construction of commercial contracts and the particular arguments advanced do not assist the Respondents' position. It is common ground that the Premises needed to be air conditioned for the purpose of the Tenant's business. In my view, it is clear that an effective and operational air conditioning system is "what a reasonable business person" would have expected; an expectation though which is to be mediated in terms of inter-parties' obligations by the language they employed in the Lease. On this basis and for the more particular reasons advanced by the Applicant, as set out in the reasons which follow, its approach to the construction of the critical provisions is to be preferred.

45 The Applicant contends that the Tribunal's conclusion in this respect is wrong for a number of reasons. First, it is said that the surrounding terms of the Lease show that the Landlord's obligation to "install air conditioning to service the Premises" is one that does indeed have a temporal limitation. It is to be performed at or within a reasonable time after the commencement of the Lease.[74] It is contended, and, in my view, correctly, that this can be seen from the chapeau to special condition 1(a), which provides that "The Landlord must carry out and complete the following works ..." (Applicant's emphasis); and special condition 1(a)(xiv), which provides for a period of eight weeks from the commencement of the Lease in which the Landlord is to "endeavour to complete all required Landlord works" (Applicant's emphasis).[75] Thus I accept the view that the Lease required the Landlord to endeavour to complete the installation of air conditioning to service the Premises within eight weeks from commencement. While the temporal limitation embodied a degree of flexibility, the flexibility would, on ordinary principles of construction, be limited to what was reasonable in the circumstances. Thus, in my view, the obligation cannot be regarded as a continuing obligation that lacked any temporal limitation. Moreover, the Respondents' contention that special condition 1(a)(xiii) should be read as requiring a new air conditioning installation is both at odds with this position and, in any event, not supported by the language used. If the parties had intended an obligation to install new equipment, they could easily have so provided - but they did not. The fact that they did not is consistent with the commercial purpose of these provisions as discussed. In any event, as the Applicant observes, the Respondent does not appear to have raised any objections or to have been concerned at the use of the existing equipment as the "installation". Indeed, why would it - within the commercial purpose of these provisions - provided the equipment was sufficiently new in terms of its accepted "life span" and operated properly?

46 Secondly, as observed by the Applicant, the Tribunal reasoned that if special condition 1(a)(xiii) had no further work to do once the air conditioning system had been installed and was servicing the Premises, then removing the air conditioning system after installation would still satisfy the special condition.[76] Clearly, such an outcome would, as the Tribunal reasoned, be an absurdity. I accept the Applicant's submission that the proposition is wrong in any event, because the law would readily imply a term that the air conditioning system was not to be removed so as to leave the Premises without air conditioning. Thus, no absurdity results from the temporal limitation to which the Lease shows special condition 1(a)(xiii) was subject.

47 Thirdly, the Applicant contends that the Tribunal was wrong to conclude that the words "to service the Premises" mean "to service the Premises on an ongoing basis during the currency of the Lease".[77] In my view, it is correct to say, as the Applicant does say, that the words "to service the Premises" identify the purpose of the air conditioning that is to be installed. Having regard to the principles of construction applicable and the commercial purpose of those provisions as has been discussed, it is, in my view, clear from the language of this particular provision and its context in other provisions of the Lease discussed that they qualify and describe the nature of the obligation to install, rather than establishing a separate and additional obligation. The Respondents' arguments to the contrary are at odds with the language and structure of this provision and the operation of other provisions discussed.[78]

48 Fourthly, the Tribunal, by the passage to which reference has been made, construed special condition 1(a)(xiii) as, in effect, a Landlord's "keep in repair" covenant. I accept the Applicant's contention in this respect that these provisions cannot have such an operation, both because of the temporal limitation inherent in these provisions, to which reference has been made, and because such a function is otherwise fulfilled.[79]

49 Fifthly, the Tribunal's construction relied upon the conclusion it had reached as to the allocation of responsibility for maintenance under special conditions 1(e)(i) and (ii). There are issues raised by the Applicant in relation to whether or not it was permissible for the Tribunal to place reliance on special condition 1(e)(ii).[80] But, putting these matters aside for the moment, I am of the view that, even if the Tribunal properly had regard to special condition 1(e)(ii), its reasoning in this respect is wrong. The fact that one contractual provision obviously performs certain work does not support the proposition that another contractual provision, less obviously, does the same work. I accept the Applicant's submissions that both logic and common sense would suggest that parties would ordinarily intend to express each term of their agreement once, rather than twice in different language; especially if, in the second instance, the obligation in question is difficult to identify in the language adopted. This proposition is, in my view, consistent with the ordinary and generally accepted approach to construction of contracts.

50 The Applicant contends that the Tribunal's error in construing special condition 1(a)(xiii) led it, in turn, to the erroneous conclusion that the Landlord's conduct, which the Tribunal described as "procrastination or non-performance", "would convey to a reasonable person in the shoes of the Tenant that the Landlord had disavowed itself of its obligation to repair the air conditioning system" (Applicant's emphasis).[81] As I have indicated, in my view, special condition 1(a)(xiii) imposes no such obligation and thus cannot form the basis for a conclusion as to "procrastination or non-performance" such as was reached by the Tribunal.[82]

If it were an ongoing obligation, would special condition 1(a)(xiii) be a fundamental term?

51 It is now trite law in Australia that contractual doctrines apply to leases; including those with respect to the characterisation, or otherwise, of terms as being fundamental.[83] In relation to fundamental or essential terms and repudiation, McHugh JA (as his Honour then was) said, in Wood Factory Pty Ltd v Kiritos Pty Ltd:[84]

A contract may be determined, apart from effluxion of time or by agreement, on one of three grounds. First, it may be determined for any breach of a fundamental or essential term: Suisse Atlantique Société d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 at 422; Associated Newspapers Ltd v Bancks [1951] HCA 24; (1951) 83 CLR 322 at 337; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 430-431. The test whether the term is fundamental is whether it is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise and that ought to have been apparent to the promisor: Associated Newspapers Ltd v Bancks (at 337). Secondly, a contract may be determined on the ground that the defendant has evinced an intention no longer to be bound by the contract: Freeth v Burr (1874) LR 9 CP 208 at 213. This is the doctrine of repudiation. Thirdly, a contract may be determined on the ground of fundamental breach by the defendant. If the promisor, although wishing to comply with the contract, is nevertheless in breach to such an extent that the promisee's bargain is substantially destroyed, the promisee can put an end to the contract. Some judges have treated fundamental breach as constituting an implied repudiation of the contract: see Suisse Atlantique Société d'Armement Maritime SA v NV Rotterdamsche Kolen Centrale (at 421-422) per Lord Upjohn and Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757 at 778-779 per Lord Wilberforce. But the better view would seem to be that they are separate categories. Repudiation depends upon the promisor's refusal to carry out the contract. Fundamental breach turns on the objective nature of the breaches whatever the state of mind of the promisor is. It may be, of course, that the objective facts which will constitute a fundamental breach of the contract are also evidence of an intention to repudiate the contract. In many cases the same facts will lead to a conclusion that there is both a fundamental breach and a repudiation. In other cases the objective facts may demonstrate only a fundamental breach.

52 The reasoning of McHugh JA in Wood Factory indicates that the distinction between a breach of a fundamental or essential term and the circumstances of repudiation of a contract, or a lease, may often be illusive but, nevertheless, the distinction remains important.[85] It is, however, established, that the parties to a contract, or a lease, "may stipulate that a term will be treated as having a fundamental character although in itself it may seem of little importance, and effect must be given to any such agreement". So much was made clear by Gibbs CJ in Shevill v Builders Licensing Board.[86] In the present circumstances, the Lease contains no such stipulation with respect to any repair covenant on the part of the Landlord or, indeed, to any of the provisions of special condition 1. The Lease does have a "Shevill clause" in the form of clause 23.1 (which is set out above),[87] but none of the special conditions contained in Annexure A are so characterised expressly. This does not, however, preclude the characterisation of other terms of a contract or lease as being fundamental or essential, even though they are not subject to such an express "Shevill clause" provision.

53 Where a contract or lease does not stipulate a time for performance of a particular term, it is unlikely that the term is fundamental or essential. This principle has been applied to a landlord's repair covenant leading to the conclusion that it was not an essential or fundamental term of a lease.[88] There is no reason, in my view, why the same position does not follow in the present circumstances. Moreover, a landlord's repair covenant will, typically, encompass a large range of possible defects which may need attention; from major structural defects down to the most minor and inconsequential defects or problems. It follows that to treat such a covenant as, ipso facto, a fundamental term of the lease with the consequence that any breach, no matter how trivial, would entitle the tenant to terminate the lease is contrary to common sense and would cause injustice to landlords.

54 Moving from a more general principle to the present circumstances, the Tribunal, in characterising these provisions, said:[89]

In the present case, I accept Mr Norris-Ongso's evidence that air-conditioning was critical for the financial success of the Tenant's business. He said that clients were moving to other premises because the Premises could not be properly warmed during the colder months of the year. Although no data was provided evidencing the migration of clients from one fitness centre to another, I accept that it is likely that customers of a fitness centre require and expect a comfortable ambient temperature in which to work out. Consequently, I find that the obligation to provide air-conditioning to service the Premises is a fundamental term of the Lease.

[Tribunal's emphasis.]

55 Even if it is accepted that air conditioning was critical for the financial success of the Tenant's business, I accept that, as submitted by the Applicant, it does not follow that, in the sense in which the Tribunal construed special condition 1(a)(xiii), it was a fundamental term of the Lease. Moreover, I accept that it should be observed that there is a slide in the language or reasoning in the passage in the Tribunal's Reasons set out in the immediately preceding paragraph which is directed to this issue. It can be seen that in the language of the Tribunal's reasoning, the word "install" that appears in the Lease has been replaced with, or conflated with, the word "provide". The word "provide" does tend to connote and to accommodate a sense of a continuing obligation; in contrast to the word "install", which does not as a matter of language. Clearly, the use of the word "provide" is more consistent with the manner in which the Tribunal interpreted and applied special condition 1(a)(xiii) than the word "install" that actually appears in the Lease. I accept that the substitution of the word "provide" for the word "install" in the Tribunal's reasons is indicative of the error in reasoning into which the Tribunal fell.

56 Thus I accept that the conclusion reached by the Tribunal on the proper construction of special condition 1(a)(xiii), encapsulated in the passage set out previously,[90] is erroneous for the following reasons:[91]

(1) there is no time stipulated for compliance with any landlord's repair obligation;

(2) it would cause injustice to the Landlord for such an obligation to be on a hair-trigger. This is especially so when the requisite repair might be a simple and inexpensive matter that the Tenant could easily and sensibly arrange and then either claim the expenditure from the Landlord as damages[92] or exercise the Tenant's right of recoupment by deducting the amount paid from the rent;[93] and

(3) in Progressive Mailing House Pty Ltd v Tabali Pty Ltd, Mason J said:[94]

repudiation of a contract is a serious matter and is not to be lightly inferred and...neither a breach of a covenant to pay rent nor a breach of a covenant to repair, without more, constitutes a breach of a fundamental term, nor amounts to a repudiation of a lease.

The "more" to which Mason J referred is lacking in this case.

Was there a breach of special condition 1(a)(xiii)?

57 In my view, as submitted by the Applicant, the Tribunal's error in construing special condition 1(a)(xiii) led it to the erroneous conclusion that "the Landlord had disavowed its obligation to repair the air conditioning system, notwithstanding repeated requests being made by the tenant for the Landlord to honour its obligations under the Lease" and that the Landlord had thereby repudiated the Lease.[95]

58 For the preceding reasons, I am satisfied that on a proper construction of the provisions of special condition 1(a)(xiii), the Landlord had fully satisfied its obligations under this special condition in or about May or June 2016 when it completed the installation of operational air conditioning of adequate load capacity to the Premises; a position which the Tribunal did find.[96]

59 The Applicant contends that the Tribunal misapplied the doctrine of repudiation on a variety of bases; which it helpfully summarises as follows:[97]

(1) failed to take into account the requirement of notice, without which there cannot be a breach of a landlord's repair covenant, alternatively the Tribunal misconstrued the Tenant's emails of 15 May 2017 and 21 June 2017 as constituting such notice when on their proper construction they did not do so;

(2) failed to take into account material facts being the continuing chain of email correspondence after the Tenant's second email of 21 June 2017.[98] The further emails in the chain show that the Landlord's legitimate questions were being evaded by the Tenant;

(3) despite recognising that repudiation is not lightly to be inferred, went ahead and lightly inferred it; and

(4) failed to recognise that a party is not at law entitled to accept another party's repudiation if the first party is not itself willing and able to perform the contract.

60 For the reasons, which follow, I accept that the Tribunal fell into error with respect to its application of the doctrine of repudiation in the present circumstances, as contended for by the Applicant. Moreover, questions of whether the Tribunal has misapplied a legal doctrine,[99] whether a statement has a quality which the law requires,[100] and whether facts as found can support the legal description the Tribunal has sought to give them[101] are, on the authorities, clearly questions of law.

61 Where the whole premises is demised, a landlord's repair covenant is ordinarily construed as a covenant to repair on notice.[102] Until a landlord possesses information about the existence of a defect in the premises such as would put a reasonable person on enquiry as to whether repair works are needed, a landlord's contractual obligation to repair does not arise.[103]

62 The emails of 15 May 2017 and 21 June 2017 did not put the Landlord on notice of a defect in the air conditioner which it was the Landlord's obligation to repair. The email of 15 May 2017 is extracted above.[104] It notified the Landlord that the air conditioning had not been working. It said nothing about the nature of the problem with the air conditioning except that it requested the Landlord to "...arrange for a technician to come and service it". But, as the Tribunal found, servicing of the air conditioner was an obligation of the Tenant under special condition 1(e)(i) of the Lease, which the Tenant had failed to fulfil.[105] This email did not, in that context, notify the Landlord of a defect which it was the Landlord's responsibility to repair. In the context of the provisions of the Lease, it amounted to no more than request that the Landlord fulfil the Tenant's service covenant. Consequently it did not activate the Landlord's repair obligation.

63 The Tenant's first email of 21 June 2017[106] is, in my view, no more helpful. Relevantly, it reads as follows:

You were required to 'INSTAL AN AIR-CONDITIONING UNIT' suitable for the Premises. You have never done that and the unit that is there is beyond repair and has never functioned properly for more than a couple of days. It has not functioned at all for the past 6 months.

64 As observed by the Applicant, the position reached by the Tenant in the email correspondence at this stage had moved beyond saying that the air conditioner required servicing to the contention that:[107]

(1) the Landlord had failed to install an air conditioning unit;[108]

(2) the unit at the Premises was beyond repair;[109]

(3) the unit at the Premises had never functioned properly for more than a couple of days;[110] and

(4) the unit at the Premises had not functioned at all for the previous six months.[111]

65 The 21 June 2017 email attached a report and quotation for replacement of the entire air conditioning system and the entire roof of the premises[112] from Service Today. Relevantly, the Report stated:

Arrived on site fault find on unit mother board is needing to be replaced as is compressor fan and all sheet metal duct work and flashings. This being said unit is beyond worthy of repair as more faults will occur due to units [sic] age, also the general install is incorrect as return and supply air are the same outlet.

66 As the Applicant observes, it is instructive to compare the contents of this Report with the Tribunal's factual findings:[113]

(1) there was no finding that the condition of the motherboard constituted a defect and there was no contention on the part of the Tenant in its case before the Tribunal that the motherboard was defective;

(2) there was a finding to the effect that the condenser fan was the source of the problem,[114] but this finding was not open on the evidence, which was that it was a separate fan motor that needed to be replaced;[115]

(3) the Tribunal found that the condition of the ductwork did not constitute a breach of the Lease by the Landlord;[116]

(4) there was no finding that the condition of the flashings constituted a defect and there was no contention on the part of the Tenant in its case before the Tribunal that the flashings were defective;

(5) the Tribunal rejected the contention that the air conditioning unit was beyond worthy of repair;[117] and

(6) the Tribunal found that the Landlord was not required to install ductwork[118] and, further, that despite the proximity of the return air and supply air vents, the system was of sufficient capacity to service the Premises even without the installation of ductwork.[119]

It follows, on this basis, that none of the complaints made by the Tenant in its first email of 21 June 2017, including the attached Report, had any substance. Moreover, even the Tribunal's finding about the condenser fan was in the context of a report that recommended, contrary to the Tribunal's findings,[120] that the entire system needed to be replaced. The position is that, as contended by the Applicant, all the other complaints were either found to be false and unjustified or, in the case of the motherboard and the flashings, were never substantiated.

67 A further critical matter, if it is assumed that special condition 1(a)(xiii) constitutes a repair covenant - a characterisation crucial to the Tribunal's reasoning and the Respondents' position - there was no evidence of the Landlord ever being put on notice of any defect in the air conditioner that needed repair. Moreover, even if it might be said that the Report attached to the Tenant's first email of 21 June 2017 did in fact identify a defect requiring repair, the obligation on a landlord to carry out repairs when notified of defects does not require a landlord to overcome any natural scepticism that a tenant's correspondence might, in particular circumstances, have engendered in any objective observer,[121] and to minutely examine a litany of false and unjustified complaints in order to extract the one complaint buried in an attachment that actually had substance, although, even then, it was made without reference to any landlord's repair covenant.[122]

68 In my view, the Applicant's submissions in this vein must be accepted, as it is quite clear that a landlord's repair covenant in circumstances where the landlord has parted with possession of the whole of the demised premises is a covenant to repair on notice and that such notice must be clear and unequivocal in identifying the landlord's repair obligation and any alleged deficiency or deficiencies in its meeting that obligation. So in the present circumstances, I am of the view that the Tribunal ought to have found that the Landlord was not relevantly on notice of any defect, including any defective condenser fan, and therefore that any repair obligation which the Tribunal found it to have was not activated by the Tenant's first email of 21 June 2017. At the risk of repetition, I emphasise that, in my view, I do not regard these provisions of special condition 1(a)(xiii) as being properly characterised as a landlord's repair covenant.

69 Moreover, the Tenant's second email of 21 June 2017,[123] does not assist the Tenant any further. In that email, the Tenant alleges only that the Landlord had failed to install an air conditioner and that it was run-down and unserviceable; all contentions which the Tribunal rejected.[124] In my view, the Applicant is correct in observing that in the mind of an objective observer, this communication would have strengthened the scepticism which the Tenant's communications generally deserved.[125]

70 In concluding this aspect of matters, the Applicant submits that if it is accepted that the Tenant's 15 May 2017 email did not put the Landlord on notice that capital repairs were required, and if it is concluded, contrary to its submission, that the Tenant's 21 June 2017 email did put the Landlord on notice, then the Tribunal's conclusion that the Landlord was guilty of ten weeks' delay[126] cannot stand. In my view, as indicated, I do not regard either of these Tenant's email communications as putting the Landlord on notice as to repairs of any kind but, certainly, if notice was provided by the Tenant's 21 June 2017 email, then any finding of ten weeks' delay by the Tribunal is erroneous.

71 In deciding whether a party has repudiated a contract, the requirement at law of an objective assessment of the intention of the party in breach must take account of all the circumstances.[127]

72 In my view, the Tribunal's assessment failed to do so, in that it omitted consideration of the chain of communications between the parties after the Tenant's second email of 21 June 2017.[128] Following its description of this email, the Tribunal said:[129] "[n]o further correspondence passed between the parties other than the Tenant's correspondence dated 1 August 2018, wherein it gave notice that the Lease had come to an end". This conclusion was not only incorrect, but shows that the Tribunal failed to consider the further correspondence that was in evidence,[130] described previously in these reasons.[131]

73 The further correspondence shows that the finding that there was no further correspondence was not open to the Tribunal. The question of whether the Tribunal has reached a finding or conclusion that was not open to it is a question of law,[132] as also is the question of whether the Tribunal failed to take into account a matter that it was bound to take into account.[133] This further correspondence ends, not with a refusal on the part of the Landlord to carry out its contractual obligations, nor with silence on the part of the Landlord, but with a question from the Landlord, repeated from earlier communications, and earnestly pursued:

I need to know if you are still using the A/C that is in place and if you are servicing it, quite simple really.

Thus, the evidence shows, in my view, that it was the Tenant which failed to reply, thus ending the chain of communication between the parties. As indicated in the reasons which follow, this evidence has significance in terms of whether or not repudiation is to be inferred in the present circumstances.

74 Repudiation is "a serious matter and is not to be lightly inferred".[134] Although the Tribunal acknowledged this principle,[135] it then proceeded to hold that the Landlord had repudiated the Lease in circumstances that could not justify such a conclusion. In my view, it is the position that the Tribunal did so lightly. This is so for the following reasons:

(a) there was no time stipulated for the fulfilment of any Landlord's continuing repair obligations. Nor did the Tenant take any step to make time of the essence by giving notice stipulating a reasonable time for any necessary repairs,[136] so as to fix a reasonable time for performance, to put the Landlord at risk of a finding of repudiation if the Landlord failed to comply with its repair obligation and to give the Tenant a right to terminate in case of continuing breach beyond the reasonable time stipulated. As observed by the Applicant, none of this is surprising as the Tenant was not calling for the Landlord to repair the air conditioner. Rather, the Tenant's contention was that the Landlord was obliged to install a new air conditioner, a position that the Tenant maintained throughout the case in the Tribunal;

(b) on the other hand, even where time is not of the essence, whether under the express terms of the contract or as the result of a notice given to the party in breach stipulating a time for performance, delay may amount to repudiation. But, for it to do so, there must be procrastination that is "gross and protracted"[137] or "persistently practised".[138] The facts did not support such a conclusion in this case:

(i) in the circumstances, 10 weeks was not "gross and protracted" or "persistently practised" procrastination, especially when the parties had communicated on only two of the days in that period;

(ii) the Tenant's 15 May 2017 email cannot be regarded as having given notice of a relevant defect, for the reasons already indicated. Consequently, any period of delay did not commence before 21 June 2017;

(iii) nor can the Tenant's 21 June 2017 emails, again for the reasons already indicated. Consequently, any period of delay did not commence on 21 June 2017, and there were no subsequent communications from the Tenant that might have caused it to commence; and

(iv) what the Landlord did persist in, and reasonably so, was a question repeatedly put to the Tenant, but never answered, as to whether the Tenant had fulfilled its obligation to service the air conditioner. It was reasonable for the Landlord to ask such a question and to insist on an answer in circumstances where, on an objective analysis of the correspondence, the Landlord may have taken the view that its obligation to repair the air conditioner depended on the Tenant's fulfilling its obligation to take out and maintain a service contract for the air conditioner;

(c) an objective analysis of the communications suggests that the Landlord's position was not one of outright refusal or persistent failure to abide by its obligations, but that the Landlord may have believed that its obligation to repair the air conditioner depended on the Tenant fulfilling its obligation to have the air conditioner serviced. Insofar as such a position on the part of the Landlord might be erroneous, it was incumbent on the Tenant first to take steps to persuade the Landlord of its error if it wished to rely upon the Landlord's conduct as a repudiation of the contract.[139] This the Tenant did not do. Repudiation cannot reasonably be inferred in these circumstances;

(d) further, this conclusion is a fortiori where the dispute between the parties was already before the Tribunal and the Tenant had on more than one occasion in the correspondence stated its intention - which the Landlord did not dispute and therefore in which the Landlord may be taken to have acquiesced - to have the Tenant's complaint about air conditioning resolved in that forum;[140]

(e) the requisite repair was a simple one.[141] It was not a major or expensive or structural matter. The failure to effect such a simple repair cannot fairly or reasonably be characterised as a repudiation of the Lease. Further, it was always open to the Tenant to arrange for the air conditioner to be serviced and a replacement fan fitted, and the cost of the repair to be claimed from the Landlord as damages or recouped by deduction from the rent. This would not be an unreasonable or unusual step for a party in the Tenant's position to take in all the circumstances.

Repudiation cannot be accepted by a party not willing and able to perform

75 A party who is not willing and able to perform the contract according to its terms has no right to terminate the contract for the other party's breach, even if that breach would otherwise justify termination.[142]

76 In the present circumstances, the Tenant was in breach of its obligation to service the air conditioner, as the Tribunal found.[143] This failure did, in my view, disentitled the Tenant to rely on any repudiatory breach of the Landlord's obligation to repair the air conditioner as grounds for terminating the Lease. This position does not, however, arise because, as indicated in the preceding reasons, I am of the opinion that there was no repudiatory conduct on the part of the Landlord.

Denial of procedural fairness in respect of special condition 1(e)(ii) of the Lease

77 The question of whether the Tribunal has denied or accorded natural justice or procedural fairness to a party is a question of law.[144]

78 The Tribunal considered the question of which party was responsible for repairing the air conditioning unit.[145] The Tribunal considered special condition 1(e)(ii) of the Lease,[146] and concluded that it "... obliged the Landlord to carry out the repairs to the air conditioning unit, which included repairs such as replacing the condenser fan".[147]

79 The Tribunal then reasoned[148] that this was consistent with s 52 of the Retail Leases Act 2003 and concluded that "either special condition 1(e)(ii) or s 52 of the Retail Leases Act 2003 required the Landlord to carry out the repair and/or replacement of the condenser fan".[149] The Tribunal then noted,[150] correctly, that s 52 had not been relied upon by the Tenant, but then said that it had been unnecessary for the Tenant to do so in circumstances where the Landlord had not submitted that special condition 1(e)(ii) did not operate to bind the Landlord.

80 The Tribunal then went on to use this conclusion to support[151] its construction of special condition 1(a)(xiii); which, for the preceding reasons, is, in my opinion, erroneous.

81 Ultimately, the Tribunal concluded that the Landlord had disavowed "its obligation to repair the air conditioning system"[152] (Applicant's emphasis)[153] and had thereby repudiated its obligations under the Lease, which repudiation the Tenant was entitled to and did accept on 1 August 2017.[154] It is not entirely clear whether the repair obligation referred to by the Tribunal was that arising under special condition 1(e)(ii) or that arising on the Tribunal's construction of special condition 1(a)(xiii). In either case, the Applicant contends, there was a denial of natural justice, as to special condition 1(e)(ii) and as to special condition 1(a)(xiii).

82 The position before the Tribunal was that the Tenant neither relied on special condition 1(e)(ii) of the Lease, nor s 52 of the RLA. Neither provision formed any part of the Tenant's case. Neither party made any mention of either provision in their points of claim or defence or in their closing submissions.[155] Thus, the Applicant says that the question as considered by the Tribunal in its Reasons[156] did not arise on the case of either party.

83 Indeed, as the Applicant emphasises, at no stage was the Tenant's case a case of breach of a landlord's repair covenant. Insofar as it related to air conditioning, the Amended Points of Claim allege a breach of special condition 1(a)(xiii) - only - and that the breach was by "[failure] to carry out and complete the installation of air conditioning to service the premises" in that:[157]

(a) "there is no air conditioning at the premises";

(b) "the [Landlord] has sought to rely on the old system previously in place";

(c) "there are no ducts installed and there are gaping holes where ducts had been";

(d) "the old system is in such poor repair that it requires replacement, which the [Landlord] has repeatedly refused to do despite repeated requests by the [Tenant]";

(e) "the old system cannot work because its inlet and outlet pipes are immediately adjacent to each other"; and

(f) "the old system does not and cannot 'service the premises'".

Each of these specific complaints was rejected by the Tribunal, as also was the principal complaint of failure to carry out and complete the installation of air conditioning.

84 It follows, as a matter of procedural fairness, that where a court or tribunal proposes to rely upon a matter that has not been raised by the parties, and to rely on it in a way that is of substantial significance in the resolution of the case, or in the resolution of a substantial issue in the case, the court or tribunal should invite submissions concerning that matter.[158] Clearly, the proper construction of special condition 1(a)(xiii) and any interplay with special condition 1(e)(ii) of the Lease, and also s 52 of the RLA, is a matter of substantial significance in these proceedings. However, the Tribunal did not do so.

85 The consequence of this failure is, the Applicant contends, that the Landlord was denied an opportunity to:[159]

(a) present evidence as to what had or had not been done in respect of the obligation imposed by special condition 1(e)(ii);

(b) make submissions on the meaning and effect of special condition 1(e)(ii); and

(c) contest the view expressed by the Tribunal[160] that it would have been incorrect to submit that special condition 1(e)(ii) did not operate to bind the Landlord.

86 Moreover, the Landlord says that had it been afforded such an opportunity or, alternatively, had the Tribunal eschewed reliance on special condition 1(e)(ii) as the parties had done, the Tribunal would have or might have reached a different conclusion on the question of repudiation of the Lease.

87 In the present context, it is important not to lose sight of the nature and purpose of VCAT and its role in providing expeditious and cost-effective resolution of a wide variety of commercial, property and other disputes and the need to avoid "overly pernickety examination" of its reasons.[161] Many of its proceedings do, however, invite characterisation as serious and significant commercial litigation - particularly in the retail and other commercial leases fields.[162] This does not, of course, transcend the requirement that parties be accorded procedural fairness; rather, if anything, it emphasises the importance of that requirement. In the present circumstances, it must be accepted that an issue of substantial significance with respect to the proper construction of provisions of the Lease, and possibly the RLA, was effectively taken out of their hands and the Tribunal proceeded with its own analysis. That being the case, in the circumstances of the conduct of these proceedings before the Tribunal, I accept the submissions of the Applicant as to the consequences of the manner in which the Tribunal proceeded to deal with this issue.

88 The Tribunal's denial of procedural fairness in respect of the proper construction of special condition 1(e)(ii) of the Lease led it to misconstrue and misapply special condition 1(e)(ii). The Tribunal appears to have overlooked the fact that under special condition 1(e)(ii), the Landlord's responsibility for capital repairs associated with the air conditioning unit is expressly subject to the Tenant's compliance with special condition 1(e)(i). That provision requires the Tenant to take out and maintain a service contract for the air conditioning unit, an obligation which the Tribunal found the Tenant had breached.[163]

Denial of procedural fairness in respect of special condition 1(a)(xiii) of the Lease

89 The Tribunal reasoned, in summary, as follows:[164]

(a) special condition 1(a)(xiii), read in context with special conditions 1(e)(i) and (ii), envisages that repairs may be required from time to time, which reinforces the view that special condition 1(a)(xiii) is not to be construed to mean that a single breakdown, of itself, leads to a failure to install air conditioning to service the Premises;[165]

(b) special condition 1(a)(xiii) is not subject to any temporal limitation;[166]

(c) the obligation under special condition 1(a)(xiii) to install air conditioning to service the Premises means to service the Premises on an ongoing basis during the currency of the Lease;[167]

(d) air conditioning was critical for the financial success of the Tenant's business. Consequently the obligation to provide air conditioning to service the Premises is a fundamental term of the Lease;[168]

(e) therefore the refusal or failure to repair the air conditioning system if fallen into disrepair so that it cannot service the Premises, may constitute repudiation of the Lease;[169]

(f) the Landlord's failure to do anything to make the air conditioning system function so that it serviced the Premises from the written notice on 15 May 2017 until 1 August 2017 when the Tenant terminated the Lease was a fundamental breach of the Lease; [170]

(g) the Landlord's procrastination or non-performance would convey to a reasonable person in the shoes of the Tenant that the Landlord had "disavowed...its obligation to repair the air conditioning system" (Applicant's emphasis);[171]

(h) therefore the Landlord had repudiated its obligations under the Lease which repudiation the Tenant was entitled to and did accept on 1 August 2017.[172]

90 The Tenant's case in respect of the air conditioning at the Premises was based exclusively on special condition 1(a)(xiii). At no stage of the proceeding was it part of the Tenant's case that special condition 1(a)(xiii) imposed a repair obligation on the Landlord, or that the Landlord was in breach of a repair covenant in respect of the air conditioning.

91 In light of these matters, the same position follows with respect to the Tribunal's dealing with the clause 1(a)(xiii) issues as follow from its dealing with the clause 1(e)(ii) issues, as has been discussed.[173]

92 The consequence of this failure is, the Applicant contends, that the Landlord was denied an opportunity to:[174]

(a) present evidence as to what had or had not been done in respect of the Landlord's repair obligation. The Tribunal described the absence of evidence of the Landlord arranging for its technician to inspect the air conditioning system in respect to the complaints raised by the Tenant from 15 May 2017, and the absence of evidence as to why the Landlord did not do so, as "curious".[175] In fact it was not curious; it was, as the Applicant observes, easily explained by the fact that on the Tenant's case, such evidence was irrelevant; and

(b) make submissions as to whether special condition 1(a)(xiii) constituted a Landlord's repair covenant.

93 I accept, on a similar basis as with respect to the clause 1(e)(ii) issues, that had the Landlord had such an opportunity, alternatively had the Tribunal eschewed consideration of special condition 1(a)(xiii) as if it were a repair covenant, as the parties had done, the Tribunal would have or might have reached a different conclusion on the question of repudiation of the Lease.[176]

94 For the preceding reasons, I am of the opinion that the Tribunal's errors of law led it to the erroneous conclusion that the Lease had terminated on 1 August 2017 by the Tenant's acceptance or the Landlord's repudiation of the Lease. This conclusion denied the Landlord its claim for:

(1) costs associated with entering a new lease;[177]

(2) rent and outgoings forgone after termination;[178]

(3) the difference between rent payable under the Lease for the balance of the term and the rent expected from the new lease.[179]

95 For the preceding reasons, leave to appeal is granted and the appeal is allowed. In the circumstances, it is, in my view, appropriate that the proceeding be remitted to the Tribunal for assessment of the heads of the Landlord's claim in accordance with these reasons.

96 The parties are to bring in orders to give effect to these reasons. I reserve the question of costs and will hear the parties further on this issue.

[1] S 3 Sth Melb Pty Ltd v Red Pepper Property Group Pty Ltd (Building and Property) [2018] VCAT 1684 ("the Reasons").

[2] Applicant's Outline Submission (16 January 2019), [1]-[3].

[3] Commissioner of State Revenue v Frost (2011) 83 ATR 832 at 834 [5] citing Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335-6 and Myers v Medical Practitioners' Board (Vic) [2007] VSCA 163; (2007) 18 VR 48 at 55-6 [28].

[4] Boucher v Dandenong Ranges Steiner School Inc [2005] VSC 400; (2005) 145 LGERA 21 at 26 [15] citing Spurling v Development Underwriting (Vic) Pty Ltd [1973] VicRp 1; [1973] VR 1 and Whitehorse City Council v Golden Ridge Investments Pty Ltd [2005] VSCA 198; (2005) 13 VR 275.

[5] (2011) 83 ATR 832 at 833-4 [3].

[6] Commissioner of State Revenue (Vic) v STIC Australia Pty Ltd (2010) 2010 ATC 20-232 at 11,839 [10];

[2010] VSC 608; 81 ATR 682 at 687 [10] per Davies J.

[7] Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331; Al-Hakim v Monash University (unreported, Court of Appeal, Vic, No 3707 of 2003, 28 March 2003); Myers v Medical Practitioners Board (Vic) [2007] VSCA 163; (2007) 18 VR 48.

[8] See Morris v The Queen [1987] HCA 50; (1987) 163 CLR 454 at 475; [1987] HCA 50; 61 ALJR 588 at 597; [1987] HCA 50; 28 A Crim R 48 at 63-64; [1987] HCA 50; 74 ALR 161 at 176-177 per Dawson J.

[9] Osland v Secretary to the Department of Justice [No 2] [2010] HCA 24; (2010) 241 CLR 320 at 333 [21]; [2010] HCA 24; 84 ALJR 528 at 536 [21]; [2010] HCA 24; 267 ALR 231 at 240 [21] per French CJ, Gummow and Bell JJ.

[10] Morris v The Queen [1987] HCA 50; (1987) 163 CLR 454 at 475; [1987] HCA 50; 61 ALJR 588 at 597; [1987] HCA 50; 28 A Crim R 48 at 63-64; [1987] HCA 50; 74 ALR 161 at 176-177 per Dawson J; Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335 [10]; [1999] VSCA 117; 15 VAR 360 at 366 [10].

[11] Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335-336 [11]; [1999] VSCA 117; 15 VAR 360 at 366 [11] per Phillips JA; Commissioner of State Revenue v Challenger Property Nominees Pty Ltd [2006] VSC 203; (2006) 63 ATR 65 at 69 [20] and 77 [65] per Hollingworth J.

[12] Justice Legislation Amendment (Court Security, Juries and Other Matters) Act 2017, s 31(3).

[13] Myers v Medical Practitioners' Board of Victoria [2007] VSCA 163; (2007) 18 VR 48 at 55 [28], citing Secretary to the Department of Premier and Cabinet v Hulls [1999] VSCA 117; [1999] 3 VR 331 at 335.

[14] See Emrys Nekvapil, Pizer's Annotated VCAT Act (Thomson Reuters, 6th ed, 2017) 871.

[15] The same requirement is imposed upon applicants for leave to appeal a VCAT decision before the Court of Appeal under s 148(1)(a) of the VCAT, with the additional requirement to such an application set out at s 14C of the Supreme Court Act 1986; see Emrys Nekvapil, Pizer's Annotated VCAT Act (Thomson Reuters, 6th ed, 2017) 874-7.

[16] Section 63(1) of the Civil Procedure Act 2010 empowers a court to give summary judgment in a civil proceeding if the defence, inter alia, has "no real prospect of success".

[17] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27 at 39 [29]. See also Kennedy v Shire of Campaspe [2005] VSCA 47, [3]-[14].

[18] [2005] HCA 40; (2005) 222 CLR 115 at 136 [64].

[19] 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] HCA 30; (2001) 206 CLR 323 at 348 [74].

[20] (Supreme Court of Victoria, Ashley J, 21 December 1994) at 13.

[21] (1971) 38 LGRA 6 at 18.

[22] (1980) 44 LGRA 65 at 67-8.

[23] (1985) 62 LGRA 346 at 349-50.

[24] The Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442, [59].

[25] Draft Notice of Appeal (22 November 2018).

[26] Draft Notice of Appeal (22 November 2018).

[47] Letter from IPT Law to Red Pepper (23 May 2016), 3.

[48] Draft Points of Claim (6 June 2016), [14].

[53] Email from Mr Norris-Ongso to Mr Kerlidis (15 May 2017); Reasons, [72].

[54] Email from Mr Kerlidis to Mr Norris-Ongso (15 May 2017); Reasons, [73].

[55] Service Today Invoice and Report (2 June 2017), 3; Reasons, [75].

[56] Email from Mr Norris-Ongso to Mr Kerlidis (21 June 2017 at 10:28am); Reasons, [74].

[57] Email from Mr Kerlidis to Mr Norris-Ongso (21 June 2017 at 12:13pm); Reasons, [77].

[58] Email from Mr Norris-Ongso to Mr Kerlidis (21 June 2017 at 1:21pm); Reasons, [78].

[59] Email from Mr Kerlidis to Mr Norris-Ongso (21 June 2017 at 1:32pm).

[60] Email from Mr Norris-Ongso to Mr Kerlidis (21 June 2017 at 3:23pm).

[61] Email from Mr Kerlidis to Mr Norris-Ongso (21 June 2017 at 4:30pm).

[62] Reasons, [79]; Letter from FCG Legal to Red Pepper (1 August 2017).

[63] Email from Mr Norris-Ongso to Mr Kerlidis (2 August 2017).

[67] Cripps v G & M Dawson Pty Ltd [2006] NSWCA 81; [2006] ANZ ConvR 350 at 359; NSWCA 81, [46]-[47].

[68] Kennedy v Shire of Campaspe [2015] VSCA 47, [12]. Further light is shed on the meaning of the formulation "real prospect of success" by the Court of Appeals analysis of the related phrase "no real prospect of success" in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27 at 39 [29]; and see s 148(2A) of the VCAT Act, and [9]-[11] above.

[70] [2014] HCA 7; (2014) 251 CLR 640 at 656-7 [35]-[36].

[71] Namely, Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95; Aurumstone Pty Ltd v Yarra Bank Developments Pty Ltd [2017] VSC 503.

[72] Respondents' Outline of Submissions (22 January 2019), [16].

[73] Respondents' Outline of Submissions (22 January 2019), [17]-[19].

[74] Applicant's Outline Submission (16 January 2019), [54].

[75] Applicant's Outline Submission (16 January 2019), [54].

[76] Applicant's Outline Submission (16 January 2019), [55].

[77] Applicant's Outline Submission (16 January 2019), [56].

[79] Applicant's Outline Submission (16 January 2019), [57].

[80] Applicant's Outline Submission (16 January 2019), [58].

[81] Applicant's Outline Submission (16 January 2019), [59].

[83] Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 29; and see Clyde Croft, Robert Hay and Luke Virgona, Commercial Tenancy Law (LexisNexis Butterworths, 4th ed, 2018) 542-72; 572-5 (more particularly as to fundamental terms). See also Koompahtoo Local Aboriginal Land Council v Sanpin Pty Ltd [2007] HCA 61; (2007) 233 CLR 115.

[84] (1985) 2 NSWLR 105 at 144-5 ("Wood Factory").

[85] Lagouvardis v Brett and Janet Cottee Pty Ltd (1994) 6 BPR 97476 at 3.

[86] [1982] HCA 47; (1982) 149 CLR 620 at 627.

[88] Douglas v Cicirello [2006] WASCA 226, [45]-[46].

[90] Reasons, [70] (set out above at [41]).

[91] Applicant's Outline Submission (16 January 2019), [68].

[92] Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592 at 608(4).

[93] See eg Lee-Parker v Izzett [1971] 1 WLR 1688.

[94] [1985] HCA 14; (1985) 157 CLR 17 at 32-3; additionally, the Applicant makes reference to further reasons of the Tribunal in this respect, namely, [71], as follows:

"With that in mind, I further find that the refusal or failure to repair the air-conditioning system, if fallen into disrepair so that it cannot service the Premises, may constitute a repudiation of the Lease".

This possibility was, however, not pursued, and it is, in any event, not material to the Tribunal's decision (and see Applicant's Outline Submission (16 January 2019), [69]).

[96] Reasons, [2], [26], [44], [46]-[48].

[97] Applicant's Outline Submission (16 January 2019), [72].

[99] Versus (Aus) Pty Ltd v ANH Nominees Pty Ltd [2015] VSC 515, [4(3)], [135].

[100] Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1 at 13 [24], 14 [27], 39 [127].

[101] Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2014] VSCA 353; (2014) 45 VR 771 at 784 [49], 806 [169] (reversed on other grounds in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1).

[102] Makin v Watkinson [1794] EngR 2251; (1870) LR 6 Ex 25; Morgan v Liverpool Corporation [1926] 2 KB 131 at 149-50; Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592 at 608(1).

[103] O'Brien v Robinson [1973] UKHL 1; [1973] AC 912 at 925-6; Austin v Bonney [1999] 1 Qd R 114.

[107] Applicant's Outline Submission (16 January 2019), [77].

[108] At [26] of the Reasons, the Tribunal found that this was not so.

[109] At [76] of the Reasons the Tribunal found that this was not so.

[110] At [46]-[48] of the Reasons the Tribunal evidently concluded that this was not so.

[111] At [46]-[48] of the Reasons, the Tribunal evidently concluded that this was not so.

[112] Reasons, [75]. Also extracted above at [28].

[113] Applicant's Outline Submission (16 January 2019), [79].

[115] VCAT Transcript (30 May 2018), 64-65, 78.

[121] A scepticism shared in other respects by the Tribunal, which rejected Mr Norris-Ongso's evidence in four key respects at [42], [45], [50] and [102]-[103], as well as, seemingly, at [137].

[122] See Jacob v Down [1900] 2 Ch 156, overruled in part in Stephens v Junior Army & Navy Stores Ltd [1914] 2 Ch 516.

[125] Applicant's Outline Submission (16 January 2019), [82].

[127] Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11; [1980] 1 WLR 277 at 280-1; Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 633; R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68 at [48]; Eminence Property Developments Ltd v Heaney [2011] 2 All ER (Comm) 233 at 242; EWCA Civ 1168, [63]; Versus (Aus) Pty Ltd v ANH Nominees Pty Ltd [2015] VSC 515, [127]; Impact Funds Management Pty Ltd v Roy Morgan Research Ltd [2016] VSC 221, [159]-[164].

[128] See above, [32] (where this email is extracted).

[130] Although these further emails were not specifically referred to, they were in the Respondent Landlord's Tribunal Book, the two volumes of which were accepted into evidence as exhibits R1 and R2: see VCAT Transcript (30 May 2018), 17-8, 36.

[132] S v Crimes Compensation Tribunal [1988] 1 VR 83 at 89-90.

[133] Macedon Ranges Shire Council v Romsey Hotel Pty Ltd [2008] VSCA 45; (2008) 19 VR 422 at [40].

[134] Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 633 per Wilson J; Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 32; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 643, 657; Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119.

[135] Reasons, [85]. Plainly the word "likely" is an error and should be read as "lightly".

[136] See Louinder v Leis [1982] HCA 28; (1982) 149 CLR 509 at 514, 526, 532-3; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 644, 652.

[137] Sindel v Georgiou [1993] FCA 527; (1984) 154 CLR 661 at 671.

[138] Forslind v Bechely-Crundall [1922] SC (HL) 173 at 192; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] HCA 23; (1989) 166 CLR 623 at 658.

[139] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 432-3; R & A Cab Co Pty Ltd v Kotzman [2008] VSCA 68 at [49].

[140] Emails from Mr Norris-Ongso to Mr Kerlidis (21 June 2017) at 1:21pm, 3:23pm. The reasoning of Lord Wilberforce in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11; [1980] 1 WLR 277 at 280 and 283 is applicable.

[141] It was ultimately a half-hour job: Reasons, [55].

[142] DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 433.

[144] GLS v PLP [2013] VSCA 127, [7].

[146] Quoted above at paragraph [15].

[153] Applicant's Outline Submission (16 January 2019), [96].

[155] The only references at trial appear to have been in cross-examination of Mr Norris-Ongso at VCAT Transcript (6 December 2017), 48, and a passing reference in the Landlord's opening submission at VCAT Transcript (7 December 2017), 12.

[157] Amended Points of Claim (18 August 2017), [14].

[158] R v Paddington & St Marylebone Rent Tribunal ex parte Bell London & Provincial Properties Ltd [1949] 1 KB 666 at 682-3; Piras v Egan [2008] NSWCA 59 at [174]; Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 at 171-3 [114]-[118]; Commissioner of State Revenue v Oakbee Pty Ltd (2013) 96 ATR 619 at 627; [2013] VSC 672, [31].

[159] Applicant's Outline Summary (16 January 2019), [100].

[161] See Roncevich v Repatriation Commission [2005] HCA 40; (2005) 222 CLR 115 at 136 [64]; and see above, [11].

[162] See Maltall Pty Ltd v Bevendale Pty Ltd (No 2) (1999) V ConvR 58-528.

[164] Applicant's Outline Summary (16 January 2019), [103].

[171] Applicant's Outline Submission (16 January 2019), [103](g); Reasons, [87].

[174] Applicant's Outline Submission (16 January 2019), [106].