1. A declaration that the Notice to Vacate dated 30 July 2007 is void.
2. A declaration that the Applicant is entitled to a lease for a term of at least five years commencing on 8 April 2006.
3. An order that the First Respondent and the Second Respondent pay the Applicant's costs of and incidental to this Application.
4. Such further or other order as the Tribunal deems appropriate.
5. Upon the giving of the usual undertaking by counsel on behalf of Bob Jane, on 25 September 2007 Deputy President Macnamara granted an interlocutory injunction whereby:

The respondents be restrained from taking steps to resume possession of the premises situated at and known as 160-164 Commercial Road, Prahran, Victoria and evict the applicant from the premises pending the final hearing and determination of the proceeding.

He also made directions for the further conduct and hearing of the proceeding.

1. The respondents have made a counterclaim whereby they seek possession of the premises (by Commercial), damages, mesne profits until Bob Jane delivers up possession, interest and costs.
2. The matter came on for hearing before me on 22 October 2007. Bob Jane was represented by Mr Peters of counsel, and the respondents by Mr Martindale SC with Mr McIntyre of counsel. Bob Jane called one witness, Garry Job, its National Property Manager. The respondents called William Deague, and his son, David Deague who are directors of both Asian and Commercial. They also called a number of Asian's employees to give evidence about the administration and conduct of the business affairs of the 'Asian Group of Companies' and, in particular, Commercial.
3. Although affidavit material was filed by both parties, and the deponents cross-examined, the issues I am required to determine are essentially ones of legal interpretation and construction. They may be distilled as follows:
   1. Was Asian entitled to give the Notice?
   2. Did the Variation and Renewal of Lease constitute a 'new lease'?
   3. If the Variation and Renewal of Lease constitutes a 'new lease' has Bob Jane been in continuous possession for a period of 12 months?
   4. Is Bob Jane entitled to a five year lease commencing on 8 April 2006 (or 8 October 2006)?
   5. Has there been a waiver of the Notice?
4. Before turning to a consideration of the issues, I note, in passing, that this application is brought by Bob Jane against a background of it re-negotiating the basis on which it would remain in occupation of the premises with the previous landlord. At the time of those negotiations, Bob Jane indicated they were keen to have maximum flexibility in any arrangements because they were having difficulty conducting a profitable business from the premises. Although this was mentioned in correspondence with Mr Frenkel of Aldiron to which I will refer in these Reasons, Mr Job deposes in his affidavit that Bob Jane had been trading profitably from the premises.
5. Mr Job confirmed under cross-examination that Bob Jane decided not to exercise the option for a further six month term because it did not want that commitment nor did it want to "lock in for six months". The question of a five year lease was raised for the first time following receipt of the Notice.

1. Commercial, a subsidiary of Asian, has been the registered proprietor of the subject premises since 30 November 2006. The premises are managed through Melbourne Commercial Office Sales & Leasing Pty Ltd ('MCO'), another subsidiary of Asian. The companies share offices with Asian and other companies within the group. MCO manages a large portfolio of some 800 plus rental properties (those owned by the group and others owned by unrelated landlords).
2. The Notice was given by letter dated 30 July 2007 on Asian's letterhead signed by David Deague, Director requiring:

I advise that we require you to vacate the above premises and provide vacant possession on 1 October 2007.

Please acknowledge receipt of this letter by signing the enclosed copy and returning it in the self addressed envelope to...our office.

1. Bob Jane submits that Asian was not entitled to give the Notice as it was not the registered proprietor of the property, and it did not purport to give the Notice on behalf of Commercial. It contends the Notice is therefore void. Further, MCO, having been appointed to manage the property, was the only agent with general authority to give the Notice on behalf of Commercial.
2. The respondents submit that Asian, as the holding company, was entitled to give the Notice on behalf of Commercial. Various affidavits as to the position of Commercial within the group, and deposing as to Asian's conduct of Commercial's administrative and business operations in doing everything for and on behalf of Commercial other than executing any documents as required by law - such documents first being prepared by Asian, were filed. Each of the deponents attended the hearing for the purposes of cross-examination. Mr Brugaletti who is the Senior Leasing Manager for MCO, gave evidence that all arrangements in relation to the appointment of MCO to manage properties owned by companies within the Asian group are informal. He said he receives oral instructions from a variety of people within the group, the corporate landlord is rarely identified and he simply asks the Chief Financial Officer or one of the directors into which account rent should be deposited. Ms Allison, the administration manager, confirmed that the Commercial and other companies in the group do not have their own letterhead, and Asian's letterhead is used for correspondence in relation to their affairs.
3. I note that in response to Mr Job's email enquiry on 8 May 2007 to Mr Frenkel (of Aldiron): 'Are you able to tell us who the buyer was and what they may be planning?', Mr Frenkel replied, by email on 9 May 2006, that the purchaser of the property was Asian Pacific Building Corporation Pty Ltd of Level 14, 1 Queens Road, Melbourne 3004 and 'It may not be a bad idea to talk to them'.
4. On 15 August 2006 Mr Job received the following email from Ben Frenkel advising:

As you know the property has been sold to Asia (sic) Pacific Building Corporation Pty Ltd and/or nominee. Settlement will take place on 7 September 2006.

The rental payment of $10,083.34 (incl GST) which is due on 8 September 2006 should be paid to the purchaser whose address is level 14, 1 Queens Road Melbourne 3004. Don't forget to cancel the existing bankers order for the September payment.

On 10 October 2006 he received an email from Melbourne Commercial advising:

Melbourne Commercial Office Sales & Leasing (MCOSL) Pty Ltd has just been appointed to manage this property. Our parent company Asian Pacific Building Corporation (through Commercial Rd Developments Pty Ltd) settled on this property last month...(emphasis added)

1. All correspondence in relation to the Notice is on Asian's letterhead. Recent correspondence makes it clear that it is 'for and on behalf of Commerical...'. Interestingly, some of the earlier correspondence from Asian refers, in the subject line to a "Lease from Asian Pacific Building Corporation Pty to Bob Jane Corporation Pty Ltd' and on some of the correspondence from Gadens, solicitors for Bob Jane to a "Lease to Bob Jane Corporation Pty Ltd from Asian Pacific Building Corporation Pty Ltd'.
2. Although it is apparent that Bob Jane was made aware of, and understood, the relationship between the respondents, is this sufficient to enable me to find that Asian was acting as the agent of Commercial when it gave the Notice? I am satisfied on the evidence before me, as contained in the affidavits of a number of officers and employees of Asian, that Asian is responsible for, and generally conducts, the business affairs of Commercial, except as otherwise required by law. As the holding company, and noting that David Deague, who signed the Notice, is a director of both Asian and Commercial, I am satisfied Asian has an implied general authority to act on behalf of Commercial in this instance, and was therefore entitled to give the Notice.
3. If there is any doubt as to whether Asian had general authority to act on behalf of Commercial, I am satisfied that the Notice has been ratified by Commercial and is, therefore, valid. As the learned authors, Adrian Bradbrook and Clyde Croft, observe in Commercial Tenancy in Australia (2nd edition):

In Love v Chryssoulis (1977) 16 ACTR 1,...Joske J held that even although it is not shown that a notice to quit has been authorised by the landlord, such notice is effectively ratified by the landlord if he or she appears to the court for an order for possession of the demised premises and appears on the return of the application. [20.9]

This is clearly analagous to the current situation where the respondents have filed a counterclaim and where at paragraph 28 Commercial claims:

The First Respondent ('Commercial') is entitled to possession of the premises and the Applicant refuses to deliver up vacant possession of the premises to the Respondents.

Did the Variation and Renewal of Lease constitute a 'renewal' or a 'new lease'

1. Section 11 of the Retail Leases Act 2003 ('the Act') provides the Act only applies where the lease was entered into after the commencement of s11. The respondents contend that the Act does not apply. They concede that the six month lease commencing on 8 April 2006, and what, they maintain was a further lease commencing on 8 October 2006, were retail leases as defined in the Act. But, they contend, the Act does not apply as Bob Jane has been in continuous possession of the premises since the commencement date of the original lease - 8 April 1991 - and the lease was therefore entered into prior to the commencement of s11.
2. In determining whether Bob Jane has been in continuous possession since 1991 it is necessary to consider the provisions of the Variation and whether it was simply a renewal of the original lease, or constituted a new six month lease commencing on 8 April 2006. The original lease provided for an initial ten year term with an option for two further periods of five years. The first option was exercised, and the Renewal was in substantially the same terms as the original lease. Bob Jane did not advise Aldiron, in writing, that it did not wish to exercise the option for a second five year term, and the lease was therefore deemed to have been renewed. However, in January 2006 Mr Job sent the following email to Mr Frenkel:

As discussed, this Company has been unable to trade profitably from the Prahran location for some time now and therefore the Company wishes to advise that we would like to close the business when the current Lease expire.

It would seem logical that we consider a mutually suitable arrangement that allows you flexibility to consider future options with the property and that may allow us to continue to profitably operate the business beyond the expiration of the current Lease term.

...Perhaps we can get together again to discuss some options when you have had the opportunity to consider the matter.

Confirming our phone discussion today. I advised that I am worried about the effect on the business when customers and staff see the 'for sale' sign go up, so I have spoken with Rod Jane and we developed a suggested approach that will suit us and we believe will also be of benefit to you.

1. We need both formally agree that the option that automatically established a renewed lease term will be recinded - if that is the correct word (sic)
2. Bob Jane will agree to a new or extended 6 month lease term following the expiry of the current lease term (currently 7th April 2006 - so new or extended term would be till 7th Oct 2006)
3. New lease term will be based on rent of $110,000 pa plus GST plus all normal outgoings currently paid except land tax
4. Bob Jane be provided for an option for a further 6 month term (to be exercised say no later than one month prior to the extended term (ie exercised no later than say 7th Sept 2006)
5. If we are still in occupation at the end of the 12 month period (7th April 2007) the tenancy becomes a monthly one and either party can give the other party 'notice to terminate the lease' by the giving of say 2 months written notice.

This arrangement could be dealt with as an Amendment of Deed of Extension & variation of Lease or an exchange of letters.

I note neither of these emails was included in the affidavits filed in support of the application

1. Subsequently the Variation was prepared and executed by the parties reflecting the proposal put to Aldiron by Bob Jane. The parties agreed:

1. The Second Option is inoperative and of no effect.

In other words, that the deemed renewal of the lease was set aside.

1. It was submitted by Mr Martindale that notwithstanding some variations to the agreement between the parties, the Variation was in substantially the same terms as the original lease. Mr Peters submitted that the variations were so significant that the Variation must be regarded as a new lease.
2. Section 9(1) of the Act relevantly provides:

(1) In this Act, the renewal of a retail premises lease means the renewal of the lease -

(a) under an option granted under the lease for a further term; or

(b) under an agreement to renew the lease on substantially the same terms and conditions, except as to rent, for a further term entered into by all of the parties to the lease.

1. I find that the Variation does constitute a new lease. Many of the covenants contained in the original lease which the parties agreed to delete when entering into the Variation are significant; not least of which was the decrease in rental from $188,000.00 per annum to $110,000.000 per annum - a decrease of 41.5%. Further the Variation provides that the following covenants in the original lease are excluded and do not apply to the Variation: those contained in clauses 2.17, 2.20, 4.4, 4.5, 5, 5.1, 5.2, 5.3, 6, 9, 10, the Schedule, the Rent Schedule and the Guarantee. Of these, the following are, in my view, significant: clause 2.17 provides that Bob Jane will comply with all requirements of the Environment Protection Act 1970 (and any amendments); clause 4.5 whereby if the lessee continues in occupation after the expiration of the lease it does so as a monthly tenant with termination on one month's notice in writing; clause 5-5.3 relating to rent reviews; clause 6 whereby the lease is deemed to be renewed if the lessee fails to exercise its option within the specified period; the Rent Schedule which sets out the process for rent review; and the Guarantee whereby a director of Bob Jane guaranteed its performance of its obligations under the original lease. Further, Bob Jane was no longer responsible for the payment of land tax.
2. These exclusions must be considered in the context of the previous relationship between the parties. Bob Jane had, by the date of the Variation, been in occupation of the premises under the original lease, and the first renewal for some fifteen years. The first renewal was on substantially the same terms as the original lease. When the Variation was negotiated, the departures from the original lease are so significant that I am satisfied a new six month lease was entered into between Aldiron and Bob Jane commencing 8 April 2006.
3. I am fortified in this conclusion by the observations of Deputy President Macnamara in Lin Creations Pty Ltd v Sparkling Waters Pty ltd [2006] VCAT 1368:

The Full Court of the Supreme Court of Victoria in B.S. Stillwell v Budget Rent-A-Car [1990] VicRp 52; [1990] VR 589 has held that the preferred analysis of an option to renew a lease is that it is an irrevocable offer on the part of the lessor. That offer can be accepted only according to its terms. Any other action which leads the parties to some new contractual arrangement amounts to the acceptance of the counter offer by the lessor, not the exercise of the option to renew. On the account given by both parties that there was no written notice within the time stipulated by the 1999 lease and that whatever new arrangement the parties entered into was the result of further negotiation and offer and counter offer. [14] (emphasis added)

If the Variation and Renewal of Lease constitutes a 'new lease' has Bob Jane been entitled to continuous possession for a period of 12 months?

1. Bob Jane says it has been in continuous possession of the premises since 8 April 2006 and submits that it is entitled to a 5 year lease from that date. Bob Jane concedes that a new lease commenced on 8 October 2006 being the periodic tenancy created by virtue of the overholding, but relies on s10 of the Act as confirming that the lease, which commenced 8 April 2006, continued after the expiration of the six month period. Section 10 provides:

(1) If, in accordance with a retail premises lease, the tenant continues to be in possession of the retail premises for a period after the lease has expired, the lease is taken to continue for the purposes of this Act while the tenant is in possession of the premises.

1. I accept the respondents' contention that s10 does not apply to this lease and cannot be relied upon to determine whether there has been a continuation of the lease for the purposes of s12. In my view, s10 can only apply to retail leases which fall within the provisions of the Act as at the date of commencement of the overholding - in this instance, 8 October 2006. As at 8 October 2006, Bob Jane had been in continuous possession of the premises for a term of less than one year. The Act does not apply to a lease which is for a term of less than five years unless it is deemed to do so by virtue of the application of ss12 and 21.
2. Bob Jane relies on s12(2) of the Act which must be read in conjunction with s12(1) and which provides:

(1) This Act does not apply to a retail premises lease for a term of less than one year.

(2) However, if the term of a retail premises lease is less than one year and as a result of either or both of the following -

the tenant is continuously in possession of the retail premises for one year or more under the lease after the commencement of this section, this Act applies to the lease on and from the day on which the tenant has continuously been in possession of the retail premises for one year after that commencement.

(1) The term of a retail premises lease, including any further term or terms provided for by an option for the tenant to renew the lease, must be at least 5 years or, if the term remaining under any head lease under which the landlord holds the retail premises is 5 years or less, the length of that remaining term less one day.

1. Has the lease which commenced on 8 April 2006 been continued for the purposes of s12(2)? Senior Member Young recently considered the relevant authorities in Enterprises Pty Ltd v The Golden Sultana Pty Ltd [2006] VCAT 2547 and I concur with his observations at paragraphs 8 and 10 and his conclusion that a new lease is created by overholding:
   1. I consider that the finding in Gill v Wright, cited by the landlord, for the proposition that where provision has been made in the original lease in regard to overholding then overholding is part of the original grant and cannot be regarded as a new lease, is in direct conflict with the decision of the Chief Justice in Hamilton v Porter. In Hamilton v Porter at page 250 the Chief Justice said:-

Where property is leased for a term, the tenants interest under the lease comes to an end at the expiration of the term. To give him a continuing interest in the premises, apart that is to say from any right he may be given by statute, a new contract and a new tenancy is required. There must be a consensus ad idem between the parties. Such a consensus ad idem could be inferred, before the operation of the rent restriction acts, from the tenant remaining in occupation after the term had expired and the landlord allowing him to remain and accepting rent from him. Before such acts came into force the landlord was free to eject the tenant at the end of the term, if he so desired. An inference could therefore be legitimately drawn from his not doing so but on the other hand allowing the tenant to remain in possession, that he for his part was agreeing to the tenant continuing on as such. A clause in the original lease prescribing the terms, that will attach in the event of an overholding, presupposes that from the circumstances of the overholding a new tenancy can properly be inferred, for unless and until there is a new tenancy, the prescribed terms are left as it were in the air with no tenancy to which they can attach. Without such a new tenancy such a clause therefore will not operate at all.

10. With the greatest respect I consider that the reasoning of Herring CJ is more logical than that of Brereton J, in that, for the overholding to take place the tenant must not leave the demised premises at the end of the term, as it is entitled to do; and, secondly, the landlord does not object, which it is entitled to do. Therefore, I do not see the inclusion of a term as to how overholding can take place sets up a new contract, it is put there by the parties as a description of how they will regulate that overholding and how it will be regarded in the event that it takes place. However, it is not a settled contract that this would happen, it does not create a right to possession or obligation in either party, it is subject to their behaviour at the end of the original tenancy. It still needs the consensus and agreement of both parties for the tenant to continue in occupation after the end of the original retail lease and I consider it is at this time that a new contract for the tenant to have possession of the demised premises is created between the tenant and the landlord.

1. Bob Jane remained entitled to continuous possession of the premises from 8 October 2006, the date of commencement of the overholding, until that entitlement was terminated by the two months Notice given to it by Asian on 30 July 2007 which required Bob Jane to deliver up possession of the property on 1 October 2007. The date of the Notice, and the date on which possession was required to be delivered up, were both within the 12 month period from the commencement of the 'new' lease on 8 October 2006.
2. I find that Bob Jane had not been 'continuously in possession of the premises' for a period of 12 months as at the date of service of the Notice, therefore the Act does not apply. As I have found the Act does not apply it is not necessary for me to consider or have regard to s21(2A).

Is Bob Jane entitled to a five year lease commencing on 8 April 2007?

1. For the reasons set out above, the answer is 'no'.

1. Bob Jane submits that if Asian was entitled to give the Notice, that it is of no effect because it has been waived by the respondents in demanding and accepting payment of rent for the period following 1 October 2007 - the date on which vacant possession was required to be delivered up pursuant to the Notice. On 12 August 2007 Commercial sent a tax invoice to Bob Jane for rental for the period 8 September to 1 October 2007. On 5 September 2007 Bob Jane paid a full month's rent - to 8 October 2007. On 14 September 2007, prior to commencement of these proceedings but after the respondents had been put on notice by facsimile from Bob Jane's solicitors on 11 September 2007 of its intention to do so if the Notice was not withdrawn and a five year lease granted to it by 18 September 2007, Mr William Deague advised Ms Brugaletta of MCO that Bob Jane did not intend to vacate. She gave evidence that she altered the computer records accordingly and on 17 September 2007 a tax invoice for rental for the period 1 October to 1 November 2007 was sent to Bob Jane. Details of the payment for the period up to 8 October 2007 had apparently not been recorded at that time.
2. As noted above, the matter came on before Deputy President Macnamara on 25 September 2007 when various orders were made including an interlocutory injunction restraining the respondents from taking possession of the premises pending final hearing and determination of the proceeding. Bob Jane then paid one month's rent on 28 September 2007. The issue of waiver was first raised in Bob Jane's Reply which was filed on 5 October 2007. The rent paid on 28 September 2007 was subsequently refunded on 11 October 2007. The rent for the period 2 - 7 October 2007 has not been refunded.
3. The respondents maintain that the invoice for the period 1 October to 1 November 2007 was issued by mistake and that, in any event, for a new tenancy to be inferred the parties must have intended there be a tenancy (Arnold v Mann [1957] HCA 64; (1959) 99 CLR 462). Having found the Notice was valid, and the periodic tenancy (the new lease created by the overholding) terminated, I cannot be satisfied that a new tenancy was created when the rent was paid and accepted. It is clear that this was not the parties' intention, as is apparent from the correspondence passing between them in the period 12 September to 11 October 2007.
4. The respondents also rely on s32AA of the Landlord and Tenant Act 1958 which provides that whether there is any demand or acceptance of rent within six months of the giving of a notice to quit, such demand or acceptance of rent is not a waiver of the notice.
5. Although the respondents have not provided any satisfactory explanation for the failure to refund the rental paid for the period 1 to 7 October 2007, I am satisfied that s32AA of the Landlord and Tenant Act applies and there has been no waiver of the Notice.

1. The respondents seek orders for possession, damages, mesne profits up until the date on which Bob Jane delivers up possession of the premises, interest and costs. The first respondent, Commercial, is clearly entitled to possession of the premises for the reasons set out above. I have not heard the parties in relation to the respondents' claim for damages, mesne profits, interest or costs. I will list the matter for a directions hearing at which time the parties may address me as to those matters. However, I draw the parties' attention to the provisions of s92 of the Act and note that costs may only be awarded in very limited circumstances.