Cafe Dansk Pty Ltd v Shiel & Ors (Retail Tenancies) [2009] VCAT 36

1. The first and second respondents must comply with sections 46 and 47 of the Retail Leases Act 2003 with respect to the tenancy of Unit 5 and accessory Unit 6, 144 Nicholson Street, Fitzroy, under which the applicant is tenant.
2. The third and fourth respondents must furnish forthwith to the applicant a disclosure statement with respect to the renewal of the applicant's tenancy of Unit 5 and accessory Unit 6, 144 Nicholson Street, Fitzroy, such disclosure statement to be in the form of the document submitted on 15 December 2008 but modifying the text following the question in Part 3 - The Premises "Is the Tenant required to contribute to the cost of structure, fixtures, plant, equipment and services to or in the premises provided by the Landlord? to "Yes but subject to s 52 of the Retail Leases Act 2003".
3. The third and fourth respondents must account to the applicant for the interest which should have been earned pursuant to s 24 of the Retail Leases Act 2003 upon investment of the security deposit provided by the applicant under the terms of the lease between the applicant and Habradel Pty Ltd dated 18 August 2007 and the renewed lease of the same premises formed by the applicant's exercise of an option to renew.
4. Adjourned to further hearing - estimated duration half day on 2 February 2009 at 2:15 pm at 55 King Street, Melbourne, to consider the quantum of the third and fourth respondents' liability under the previous order.
5. Proceeding otherwise dismissed.
6. Costs reserved.

1. Mr Langevad is the principal of Café Dansk Pty Ltd. He says his company is in the business of purchasing "bankrupt" businesses, resuscitating them and selling them on. As part of its enterprise Café Dansk Pty Ltd acquired the tenancy of premises at 144 Nicholson Street, Fitzroy, where it now carries on business as "Mon Ami" Paris Grill Restaurant and Gallery. It entered into a tenancy of this property which was Unit 5 on a Plan of Strata Subdivision together with accessory Unit 6 for a term of three years commencing 1 April 2003. At that stage, the lessors were Nicholas James Murray and Pelican View Pty Ltd. The lease initially provided for a term of three years with options for four further terms each of three years. The lease included a special condition number 4.1 whereby the lessors agreed:
   • 4.1 Subject always to the Lessee complying with all of its obligations and responsibilities under this Lease, it will replace at its cost with an equivalent item any item of its fixtures, fittings and installations which has become unserviceable.
2. Clause 1(h) of the principal covenants in the lease constituted a covenant by the lessee -

To keep the Lessor's fixtures and chattels clean and in good and tenantable repair and to make good any damage to them, fair wear and tear and damage by fire or other cause not attributable to the negligence of the Lessee always excepted. Subject to those exceptions the Lessee must replace with a similar article of at least equal value all fixtures and chattels that may be destroyed, lost or so damaged as to be incapable of complete reinstatement to their former condition and must not permit any Lessor's fixtures and chattels to be removed from the Premises without the previous written consent of the Lessor, except for the purpose of necessary repairs.

1. The lease was expressed to be a demise to the lessee of the premises :

together with the lessor's fixtures and chattels described in item 4 of the Schedule ...

1. Item 4 of the schedule contained the text "see attached list".
2. As an annexure to the schedule, there was a list of items headed "Landlord's Fixtures & Fittings", some of which could properly be described as fixtures or fittings and others of which were clearly chattels, such as "7 tables". The covenant to pay outgoings was in standard form extending, inter alia, to municipal and water rates, gas, electricity rates and body corporate levies.
3. Clause 1(f) and (g) read as follows :

(f) To keep the Premises, including the faces of the external and internal walls which comprise the boundary of the Premises, together with any additions in good and tenantable repair and to make good any damage caused to the Premises during the Term, fair wear and tear and damage by fire or other cause not attributable to the negligence of the Lessee always excepted. The Lessee must also thoroughly clean the inside and outside of all windows at least once in every three months and clean and keep free of debris all drains, waste pipes, gutters, spoutings, rainheads and downpipes which exclusively serve the Premises.

(g) Not without the approval in writing of the Lessor or the Agent, to employ any person in the repair or maintenance of the Premises or to effect any structural alterations, additions or repairs or to install or remove any fixtures and fittings on the Premises.

1. Item 14 of the schedule of the lease under the heading "Security deposit" provided :

In lieu of the payment of a security deposit, the Lessee agrees that it will ensure that at all times during the term of this Lease and any further term taken pursuant thereto rental is paid four (4) months in advance. The Lessee further agrees that such forward payment of rental will be deemed to be by way of a security deposit and will be dealt with accordingly pursuant to the provisions of this Lease.

1. Clause 1(v) of the general provisions of the lease provided for the establishment of a security deposit :

as security for the performance by the Lessee of its obligations under this Lease .....

If in the reasonable opinion of the Lessor or the Agent, the Premises are in a clean and tenantable condition on the date the Lessee vacates the Premises and the Lessee has fully complied with the Lessee's covenants contained in this Lease, the Security Deposit must be repaid to the Lessee within 14 working days of the date on which the Lessee vacates the Premises ....

The clause authorised the agent to pay the lessor -

such amount as may be necessary to rectify any breach of any covenant or to restore the Premises and account to the Lessee for the balance.

1. By the end of the first three year term of the lease, the reversion of the premises had become vested in a company known as Habradel Pty Ltd. By an instrument of renewal dated 18 August 2007, Café Dansk and Habradel agreed to renew the lease but not for the three year term which was provided for in the original lease. Rather, the renewal was to be for two years and two months commencing 1 April 2006 and expiring 31 May 2008. There were to be four further terms of three years each. Certain special conditions provided for in the original lease were deleted so that they did not apply in the renewed term. Clause 4.1 quoted above was not one of the deleted clauses. There was an additional provision whereby Habradel transferred all of its interest in the lessor's chattels described in the annexure to the original lease to Café Dansk.
2. In February 2008, the reversion to the premises was acquired by Mr and Mrs Yalamanchili, who are the third and fourth respondents in this proceeding. Mr Yalamanchili told me that he and his wife hold this property as an investment on behalf of their superannuation fund.
3. Under the revised arrangement, the next option term of the lease commenced on 1 June 2008. It is common ground that Café Dansk exercised its option to renew the lease of the premises for a further term commencing on that date.
4. By the time of the exercise of the option, the Yalamanchilis had appointed Mr Shiel, who is the first respondent in this proceeding, to act as their managing agent. He submitted a series of documents to Café Dansk for execution to document the further term. This, and other disputes between the Yalamanchilis and Café Dansk, went for mediation convened by the Small Business Commissioner. On 25 August 2008, the Commissioner certified that :

Mediation and other forms of alternative dispute resolution has been attempted but has been unsuccessful.

1. On 2 September 2008, Mr Langevad, on behalf of Café Dansk, commenced proceedings in the Tribunal seeking the following relief :
   1. A renewed lease without alteration as required.
   2. A renewed schedule without alteration excepting dates etc as required.
   3. A current disclosure statement as required.
   4. Proof that our rental guarantee bond is named as such.
   5. Proof that all interest on our rental guarantee bond has been credited to our account since the Act required it to be paid.
   6. All costs including SBC and VCAT.
   7. Damages through not being able to sell our business.
   8. Return of 90 days rent paid in good faith because of non-provision of a disclosure statement.
   9. Return of all monies paid in good faith for repairs and maintenance.
   10. Return of losses associated with my time.

[All monies to be paid as forfeiture of future rents].

1. A mediation conducted at the direction of the Tribunal also proved unsuccessful.
2. Mr Langevad regarded the various documents presented to his company for execution as unsatisfactory because the text of the schedules departed from the text of the original lease and the lease as renewed for the first time and the standard "boiler plate" term presented were constituted by a different addition of the lease standard published by the Real Estate Institute of Victoria.
3. When the matter came before me, Mr Langevad said that there were three things which he was seeking. First, he sought documentation, namely a properly renewed lease and disclosure statement together with an estimate of outgoings in accordance with s 46 of the Retail Leases Act 2003 (the Act) and an audited statement of actual outgoings as provided for by s 47 of the Act. Secondly, he wished to obtain a declaration that in the events that had occurred and on the basis of the terms binding between the parties, his company was not liable for any maintenance and repairs to the subject property and, finally, he sought orders for the payment of interest which he submitted in the circumstances should be credited to his company's account relative to the prepayment of rental stipulated in the original lease which he says his company had maintained.
4. It is common ground that the renewed lease is governed by the Retail Leases Act 2003.
5. The hearing in this matter concluded shortly after lunch on 7 January 2009. On 9 January, I was handed a facsimile transmission from Mr Langevad in which he advanced some supplementary submissions as to costs. Since I have decided to reserve the costs in this proceeding for further consideration, these additional contentions need not detain us. More significantly, however, he referred to a telephone conversation which he had with a registry officer of the Tribunal in which he said he received an assurance that his company's case would be determined not only upon what was argued at the hearing but also on the basis of the "written submissions" which he had filed. I was uncertain as to what document was being referred to. As a result, upon receipt of the facsimile transmission, I had the same registry officer telephone Mr Langevad asking him to identify the document or documents to which he referred. If a document were identified which raised some point that had not been considered at the hearing at all, I would have to consider whether the rules of natural justice required me to hear supplementary submissions from counsel for the respondents, Mr White, whether at a further scheduled hearing of the matter or by way of supplementary written submission. I directed the registry officer to inform Mr Langevad that absent the identification of some particular document or documents, his company's case would be adjudicated upon what was argued at the hearing. The registry officer telephoned Mr Langevad. I am informed that Mr Langevad identified no particular document or documents. Hence, this determination is based upon what was argued at the hearing.

1. Eventually, following the Tribunal mediation on 15 December 2008, Mr Shiel, on behalf of the Yalamanchilis, submitted a form of lease for execution by Café Dansk that both in its schedule and in its standard terms conformed to the original lease. In those circumstances, subject to a further issue raised by Mr Langevad as to the lease and option terms, I believe the issue of the form of the lease is resolved.

1. In August 2008, following the Small Business Commissioner mediation, Mr Shiel, on behalf of the Yalamanchilis, submitted a disclosure statement to Café Dansk which, in addition to providing for outgoings relative to insurance, municipal water rates and body corporate rates, also indicates an outgoing charge for -

The owner may recover from the tenant cost of repairs and maintenance to the property. Repairs to the property will vary from year to year, and this amount is an estimate only.

1. Along with the 15 December 2008 version of the lease, a further version of the disclosure statement was submitted that deleted the charge for repairs and maintenance from the list of outgoings. Mr Langevad remains of the opinion that this disclosure statement is unsatisfactory. He refers to Part 3 of the standard form of the disclosure statement as stipulated in the Regulations under the Act which includes the following :

Structure, fixtures, plant, equipment and services to or in the premises provided by the Landlord NIL

Is the Tenant required to contribute to the cost of structure, fixtures, plant, equipment and services to or in the premises provided by the Landlord? YES

If so, to what extent? REPAIRS & MAINTENANCE DURING THE TENANCY as specified in the Lease**.**

1. I will defer expressing an opinion as to the appropriateness of the disclosure statement as to these matters pending disposal of the issues raised in connection with repairs.

1. Section 46 of the Act, which it is common ground regulates the lease of the subject premises, provides as follows :

(1) A retail premises lease is taken to provide as set out in this section.

(2) The landlord must give the tenant a written estimate of the outgoings to which the tenant is liable to contribute under the lease that itemises those outgoings.

(3) The tenant must be given the estimate of outgoings -

(b) in respect of each of the landlord's accounting periods during the term of the lease, at least one month before the start of that period.

(4) The tenant is not liable to contribute to any outgoings of which an estimate is required to be given to the tenant as set out in this section until the tenant is given that estimate.

1. Mr Langevad complains that the Yalamanchilis have failed to provide the relevant estimate of outgoings.
2. Mr White of counsel, who appeared on behalf of the Yalamanchilis, submitted that the disclosure statement was an adequate compliance with s 46 of the Act and constituted compliance not only for the first accounting year of the term of the lease but for its entire term. Mr White offered no authority to support this proposition.
3. It is clear that the section is framed in mandatory terms and applies for each accounting period. A single disclosure statement simply cannot constitute compliance with the section. Had the section intended that the disclosure statement which, at least at the outset of the lease, would be expected in its outgoing section to track the "estimate" which would be given before the lease was entered into, it could have said so. The Yalamanchilis are obliged by the statute to give the s 46 statement for each year which has elapsed. Sub-section (4) provides that pending compliance with s 46 -

the tenant is not liable to contribute to any outgoings of which an estimate is required to be given.

1. Dr Croft in his work on Retail Leases Victoria comments -

These provisions also raise the possibility that a tenant may be able to recover outgoings which have been paid in circumstances where s 46 has not been complied with and the tenant was unaware of its rights under subs 46(4). In other words, in the situation where the tenant has paid outgoings to the landlord under a mistake of law, namely that he was not obliged to do so because of the provisions of subs 46(4). [60,020] 19,107 [Service 6].

1. In his submissions in reply, almost as an afterthought, Mr Langevad said that he sought to recover the amounts that he had "paid in good faith". I am not sure whether he was making a claim of the type which Dr Croft described under s 46(4). Assuming that he was making such a claim, it ought not succeed. A person cannot succeed in a claim to recover monies paid under mistake unless the person was labouring under a mistake. Mr Langevad did not suggest that he was unaware of s 46(4) when he made whatever payments he in fact made. Absent proof that he was making a payment under mistake, and there was none before me, any claim to recover monies paid under mistake must fail. (Springvale Washed Sand Pty Ltd v City of Springvale [1969] VicRp 101; [1969] VR 784).

1. Section 47 of the Act provides :

(1) A retail premises lease is taken to provide as set out in this section.

(2) The landlord must prepare a written statement that details all expenditure by the landlord, in each of the landlord's accounting periods during the term of the lease, on account of outgoings to which the tenant is liable to contribute.

(a) make the statement available to the tenant at least once in relation to expenditure during each of the landlord's accounting periods during the term of the lease; and

(b) give the tenant the statement within 3 months after the end of the accounting period to which it relates.

(4) The outgoings statement may relate to more than one tenant as long as each tenant to which it relates can ascertain from the statement the details relevant to the tenant.

(a) prepared in accordance with relevant principles and disclosure requirements of applicable accounting standards (in force from time to time) made by the Australian Accounting Standards Board; and

(b) in the case of a statement given under subsection (3)(b), accompanied by a report prepared by a registered company auditor (within the meaning of the Corporations Act) that states whether -

(i) the statement correctly states the landlord's expenditure during the accounting period in respect of the total amount of outgoings, and each individual outgoing that comprises more than the prescribed percentage of the total amount of outgoings, to which the tenant is liable to contribute; and

(ii) the total amount of estimated outgoings for that period (as shown in the estimate of outgoings given to the tenant) exceeded the total actual expenditure by the landlord in respect of those outgoings during that period.

(6) However, the outgoings statement given under subsection (3)(b) need not be accompanied by an auditor's report if it -

(ii) water, sewerage and drainage rates and charges; and

(v) any other outgoing of a kind prescribed by the regulations; and

(b) is accompanied by copies of assessments, invoices, receipts or other proof of payment for all expenditure by the landlord included in the statement.

(7) An auditor preparing a report under subsection (5)(b) must ensure that the tenant is given a reasonable opportunity to make a written submission to the auditor on the accuracy of the outgoings statement.

1. Mr White submitted that s 47(6) exempted his clients from the obligation to provide an auditor's report. Certainly when the lessor was claiming an estimated $2000 for building repairs and maintenance, the requirements of sub-section (6) were not made out and the obligation to provide the audited report would appear to have arisen. Even with the deletion of this amount, a major amount provided for in the lease and in fact recovered and sought to be recovered are body corporate fees of the amount at present of approximately $2000. This is not one of the specifically enumerated items in s 47(6)(a)(i)-(iv). No further classes of outgoings appear to have been prescribed by the regulation. Hence, it would seem that the Yalamanchilis are obliged to provide the audited statement in accordance with s 47 of the Act. Ultimately, however, even if Café Dansk is provided with the audited statement which Mr Langevad demands on its behalf under s 47, I doubt that the matters which concern him will be addressed. Mr Langevad's complaint in the present instance does not seem to be that the Body Corporate or Owners Corporation, as it is now called for the relevant subdivision, is not levying the amounts for which recovery is sought. Rather, his grievance is that the Owners Corporation's levies are themselves invalid or inappropriate. What Mr Langevad really wants is an audit of the Owners Corporation, not an audit of the lessor. I see nothing in s 47 which would entitle him to what he seeks. All that the auditor appointed under s 47 will be able to do is to assess what has actually been charged to the lessor and identify what the lessor has actually spent. He will have no entitlement to enter into a determination of the propriety of what has been charged by the Body Corporate anymore, one might think, than he would be entitled or obliged to audit the activities, say of the utility company providing water and levying water rates which are passed on as outgoings to the tenant.

1. Mr Langevad based his claim for a declaration that his company is not liable for any repairs or maintenance to the demised premises upon special condition 4.1 of the 2003 lease as renewed. This special covenant imposes on the lessor an obligation of replacement with respect to "any items of its fixtures, fittings and installations which have become unserviceable".
2. Mr White submitted that the reference to fixtures, fittings and installations, was a reference to the lessor's fixtures and chattels which are referred to as being part of the demise in the introductory paragraph to the lease deed and are specifically described by reference to an annexure in item 4 of the schedule. As previously noted, it was part of the transaction whereby the 2003 lease was renewed by Habradel Pty Ltd as lessor that the items in the annexure would be transferred to Café Dansk Pty Ltd. The results according to Mr White were that clause 4.1 had become effectively inoperative.
3. Mr White called evidence from Mr Shiel, the first respondent - the managing agent, to the effect that the fitout of the premises had been installed by Café Dansk or its predecessor tenants. The freehold reversioners owned little more than "the shell" of the building said Mr White. Mr Shiel said that as far as he could see, the only fitting or fixture which could be regarded as falling within the definition of "fixtures, fittings and installations" in special condition 4.1 were the sanitary fittings. The shop includes a lavatory for staff and customers.
4. Mr Langevad did not, as I understand it, deny that the fitout in the restaurant and gallery consisted of tenant's rather than landlord's fixtures. He identified no particular item that might be described as a fixture which had not been comprised in the annexure to the 2003 lease which would fall within the definition. Rather, he said that the landlord owned everything except the fitout. For instance, the fabric of the building could be regarded as a fitting or installation.
5. Mr Langevad said that clause 4.1 had been specifically included at his insistence. His view was that where a tenant agreed to pay a particular rent for premises for a term of years, in particular where there was a built-in rental escalation as there was in the present case, it would be unjust and wrong to require the tenant to keep paying that rent if the premises deteriorated during the term of the lease. He said he insisted upon the reference to replacement of fixtures, fittings and installations where they became unserviceable to avoid a situation which he had experienced with landlords in the past where the landlord continued to patch up something which should really have been replaced.
6. In Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 605-6, Mason J (as he then was) in an oft quoted passage said that evidence of the expectations of the parties as distinct from the circumstances surrounding the negotiation of the relevant contract were not receivable as to the true meaning of the words used in the written instrument which recorded the contract.
7. In Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337, 352, returning to the same theme, his Honour said :

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances is an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself.

1. I accept that Mr Langevad intended to include a special condition that had the effect for which he now contends. That evidence on its own and in accordance with the principles enunciated by Sir Anthony Mason in the authorities referred, is reflective only of his subjective intentions at the time the contract was made. It is not probative as to what the contract actually means.
2. It seems unlikely that parties would choose the form of words to be found in special condition 4.1 to impose an obligation on a landlord, for instance, to replace a defective wall. An ordinary fixture such as an air-conditioning unit might become "unserviceable" but a wall which develops structural cracks would not normally be so described. The lease specifically makes reference to landlord's or lessor's fixtures and it is clear that in so referring, it is not referring to items such as structural walls. The conclusion that the lease is referring to the things referred to in item 4 of the schedule, and more particularly identified in the annexure, is inescapable. Similarly, the reference in the special condition to "its" viz the lessor's fixtures and fittings is calculated to refer to the items in the annexure. Mr Langevad placed particular reliance on the reference in the special condition "installations". That word is not especially apt to refer to the things in the annexure. Nevertheless, given the evidence as to the fitout being a tenant's fixture, one asks what were "the installations" of the landlord referred to? It would not be an ordinary use of language to refer to say a wall, a ceiling or the roof as an "installation". In my view, the proper construction of special condition 4.1 is that it refers to the items in the annexure. Once those items cease to be the property of the lessor, the clause becomes a dead letter. Accordingly, there is no basis upon which this special condition could be used as a ground for exonerating Café Dansk from any liabilities for repair and maintenance to, for instance, the building itself.
3. The question of the liability of landlord and tenant for repairs in tenancies governed by the Act is affected by s 52 of the Retail Leases Act 2003. That section provides as follows :

(1) A retail premises lease is taken to provide as set out in this section.

(2) The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into -

(a) the structure of, and fixtures in, the retail premises; and

(b) plant and equipment at the retail premises; and

(c) the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

(3) However, the landlord is not responsible for maintaining those things if -

(a) the need for the repair arises out of misuse by the tenant; or

(b) the tenant is entitled or required to remove the thing at the end of the lease.

(4) The tenant may arrange for urgent repairs (for which the landlord is responsible under this section or under the terms and conditions of the lease) to be carried out to those things if -

(a) the repairs are necessary to fix or remedy a fault or damage that has or causes a substantial effect on or to the tenant's business at the premises; and

(b) the tenant is unable to get the landlord or the landlord's agent to carry out the repairs despite having taken reasonable steps to arrange for the landlord or agent to do so.

(a) the tenant must give the landlord written notice of the repairs and the cost within 14 days after the repairs are carried out; and

(b) the landlord is liable to reimburse the tenant for the reasonable cost of the repairs and may not recover that cost or any part of it as an outgoing.

Section 39 regulates the ability of the landlord to recover outgoings (including the cost of repairs). Section 41 provides that capital costs are not recoverable from a tenant.

1. When the section was initially enacted with effect from 1 May 2003, it obliged a landlord to maintain structures, fixtures, plant, equipment, appliances and so forth "in good repair". Act No 82 of 2005 made a number of retrospective amendments to the 2003 Act including an amendment to s 52 which scaled back the landlord's liability to maintaining the relevant items "in a condition consistent with the condition of the premises when the retail premises lease was entered into". The note at the end of the section was also added by the 2005 amendment and the addition of the note was also made retrospectively.
2. Mr Langevad drew my attention to provisions on the website of the Victorian Small Business Commissioner. The effect of the addition of the note according to the website was that it would -

clarify that while the landlord is responsible to arrange and carry out the repairs under s 52(2), the cost of those repairs, other than capital cost and the cost of urgent repairs may be passed on to the tenant if they had been specified in the lease as recoverable outgoings under the lease.

1. Mr Shiel in his evidence said that he attended a seminar conducted by the Real Estate Institute of Victoria which advocated this same view. It was apparently in reliance upon this view that Mr Shiel in the early version of the disclosure statement included an estimated outgoing of $2000 per annum for repairs and maintenance to the property. In his work Retail Leases Victoria, Dr Croft does not appear to refer to the note added to s 52 in 2005. On the suggestion that the landlord's cost of complying with s 52 may be recovered by the landlord as an outgoing, Dr Croft said :

Prior to the amendments effected by the 2005 amending Act, it had been suggested that a landlord may be able to recover the costs for his repair obligations under subs 52(2) from the tenant, but this suggestion would appear to face at least two reasonably substantial difficulties. The first is that under para 51(1)(c) a landlord is not able to claim from any person (including the tenant) the landlord's legal or other expenses relating to the landlord's compliance with the 2003 Act. The other difficulty is that even if the landlord's expenses in complying with subs 52(2) are regarded as falling within the definition of "outgoings" under s 3 of the Act, recovery of outgoings as defined depends upon the operation of ss 29 and 39 which, in turn, depends upon the lease provisions which comply with 39. As the provisions of subs 52(2) are 'implied terms', implied by force of statute and also expressly protected by the provisions of s 94 (which, in subs 94(1) expressly prevents contracting out with respect to 'anything that the lease has taken to include or provide because of the provisions of this Act' ...), the difficulty appears to be substantial.

1. I find Dr Croft's sceptical views on this point compelling. It would, in my view, make a mockery of s 52 if Parliament having allocated the responsibility for certain repairs to the landlord, the landlord could then send the bill to the tenant for the cost of carrying out those repairs. To attempt to reach this unlikely result by reliance on the note at the end of the section is, to quote Lord Salmon, "like trying to suspend a 3 tonne truck from a cobweb" (Broome v Cassell & Co [1971] 2 QB 354, 390). Even if I were wrong on this point, the strategy for a landlord to recover the cost of compliance with his s 52 obligations from the tenant would depend upon there being a covenant in the lease making these amounts recoverable as outgoings. There is no such clause in this lease. The covenants requiring the tenant to carry out the repairs itself do not deal with any outgoings issue.
2. There remain the repair obligations expressly imposed on Café Dansk by the standard terms of the lease. These provisions can have at best limited and perhaps no effect at all by reason of the existence of the term implied by s 52 of the Act and the other provisions referred to by Dr Croft in the passage quoted above including s 94. Experience in the retail leases area, however, has been that it is difficult in the abstract to formulate appropriate rules which do not have unforeseen results. The fact that there were extensive and retrospective amendments to the 2003 Act within two years of its enactment is a testimony to this experience. Nor, I think are all the "bugs" and "kinks" yet removed from the 2003 Act. I am inclined to doubt, for instance, that Parliament really intended that in circumstances such as the present, the fact that Body Corporate or Owners Corporation levies are now being sought as outgoings should transform an otherwise straightforward situation where no audit of outgoings would be required to one where audit is required. Precisely what Café Dansk's repair obligations if any are in the present circumstance is somewhat obscure. It is best adjudicated when and if a particular instance arises.
3. Mr Langevad also made reference to s 41 of the Retail Leases Act 2003. That section provides as follows :

(1) Subject to subsection (2), a provision in a retail premises lease is void to the extent that it requires the tenant to pay an amount in respect of the capital costs of -

(a) the building in which the retail premises are located; or

(b) any building in a retail shopping centre in which the retail premises are located; or

(c) any areas used in association with a building referred to in paragraph (a) or (b); or

(d) plant in a building referred to in paragraph (a) or (b).

(2) Subsection (1) does not operate to render void a provision in a retail premises lease requiring the tenant to undertake capital works at the tenant's own cost.

1. Mr Langevad's complaint, as I understood it, was that under the guise of being required to contribute to fees levied by the Body Corporate for the property or the Owners Corporation, as it is now described, Mr Langevad said his company was being required to contribute to capital costs for the common property of the building or to use the words of s 41(1(a) "the building in which the [leased] retail premises are located". This section was the subject of a retrospective amendment in 2005 which is to be found in sub-section (3). Nothing in that sub-section would appear to authorise the lessors to require by terms of the lease that Mr Langevad's company contribute to capital costs on the building in the form of a levy made by the Body Corporate or Owners Corporation. Mr Langevad asserted that the levies to which his company had been subjected did include capital elements. Mr Shiel, who represented himself, and the Yalamanchilis, denied this. Once again, all that I had before me was assertion and counter-assertion. There was no evidence as to precisely what had been levied, what the purpose of the levies were and how the money had been expended. In the absence of any proper evidentiary basis, it would be inappropriate, in my view, to try and deal with the interesting question in the abstract and divorced from any particular factual situation
2. The grant of declaratory relief is by its very nature discretionary. The considerations referred to in the previous paragraphs coupled with the fact that the primary ground relied upon by Mr Langevad, namely, special condition 4.1 has failed, renders it inappropriate to grant any declaratory relief with respect to the issue of repairs.

1. The passage quoted from the special conditions of the lease relative to security deposits is problematic. On the one hand, it appears to say that there will be no security deposit merely the payment of rent in advance. On the other hand, Mr Langevad contends that he negotiated this provision so that the amount of the "advance payment", to use a neutral term, could be resorted to by the landlord only for non-payment of rent, not for issues of repair and not even to recoup the landlord for unpaid outgoings which the lease required the tenant to pay. The passages from Sir Anthony Mason's judgments in the Secured Income and Codelfa cases show why Mr Langevad's expectations and intentions with regard to the security deposit special provision are not probative. The provision that Café Dansk agreed that "such forward payment of rental will be deemed to be by way of a security deposit and will be dealt with accordingly pursuant to the provisions of this lease" clearly negate any contention that the advance payment of rent can be used only with regard to rental defaults and no other defaults. I quoted above from the text of the security deposit clause in the standard provisions of the lease. The passages state that return of the deposit is dependent upon the condition of the premises (which is not a matter of rental default) and that the deposit is to secure the lessee's obligations generally under the lease not merely the rental obligation.
2. Mr Langevad's view of the special provision under item 14 of the 2003 lease cannot be accepted.
3. Mr Langevad sought an order that his company's account should be credited with compound interest reaching back to 1 April 2003. In this he relied on s 24 of the 2003 Act which requires that security deposits "must be held by the landlord on behalf of the tenant in an interest bearing account" and that the interest earned is to "form part of the security deposit" and that the landlord "must account to the tenant for interest earned on the deposit". This section cannot apply to the 2003 lease which whilst undated is expressed to commence on 1 April 2003. The 2003 Act commenced on 1 May 2003 (s 2(5)) and generally applied only to leases entered into after that commencement (s 11). Certain provisions of the 2003 Act apply retrospectively to leases entered into before that commencement date but s 24 is not one of them. The 2003 lease would have been regulated by the Retail Tenancies Reform Act 1998. The 2003 Act made certain amendments to that statute in its continued application to pre-2003 leases but the insertion of a provision along the lines of s 24 was not one of them. Hence, there can be no claim for interest with respect to the pre-payment of rent for the term of the 2003 lease against any person. Even if there could be, the present lessors, the Yalamanchilis, were never party either by privity of contract or privity of estate to the 2003 lease and so therefore they could not be regarded as "the landlord" for the purposes of that lease.
4. No claim for interest can therefore predate 1 April 2006 the date of the lease as renewed by Habradel Pty Ltd with effect from that date. In the present case, the Yalamanchilis became entitled to the rents and profits of the premises in February 2008. Mr Langevad's contention is that if the Yalamanchilis are not liable for the interest from 2003 onwards, they certainly may be liable for the interest going back to the beginning of the present lease.
5. The evidence on the point of whether any interest had been earned in that period was unclear. As I understood Mr Shiel, he said that an amount equal to three months rent in advance had been accounted to his principals at settlement in February 2008. Inferentially, no interest had been passed over. Section 142 of the Property Law Act 1958 provides in broad terms that the burden of a lessor's covenant under a lease runs with the reversion. The effect then is that once persons become entitled to the reversion under a lease as the Yalamanchilis did in February 2008, they become liable upon the covenants of the lease. I was not referred to any authorities on the question whether this liability extended to any pre-existing defaults or not. The statutory obligation to invest the bond monies in an interest bearing account and to account for the interest established by s 24 of the Act creates the relevant obligation by the device of stating "a retail premises lease is taken to provide that ...", the effect then is to create a statutory implied covenant.
6. The section applies only "with reference to the subject matter of the lease". This phrase is equivalent to whether the covenant in question touches and concerns the land (Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 244 ALR 1, 22). According to Bradbrook and Croft Commercial Tenancy Law in Australia (2nd Ed) [1520] 324 :

Any covenant which affects the landlord qua landlord or the tenant qua tenant will probably be within the class of covenants which touch and concern the land.

1. A covenant with respect to a security deposit would certainly seem to fall within this category. Moreover, as the Gumland case shows, it is well established that a covenant to pay rent touches and concerns the land and here the provision in question could as easily be characterised as a provision for the payment of rental in advance.
2. It appears that the advance payment had never been invested in an interest bearing account until 24 October 2008. Can the Yalamanchilis be held responsible for the default before they became entitled to the rents and profits in February 2008? I was referred to no authority on the question whether the assignee of the reversion could be liable for breach of a landlord's covenant occurring prior to the assignment. Section 141 of the Property Law Act deals with the assignee's right to enforce the benefit of covenants. It was previously believed that absent a separate assignment of a right of action the mere assignment of the reversion did not carry with it a right to sue for past breach (Woodfall on Landlord and Tenant (Vol 1) (1960) [1869] 852). This statement and others to like effect were however disapproved by the English Court of Appeal in the case in Re King (deceased); Robinson v Gray [1963] Ch 459 where the covenant in question was one for repair and reinstatement. The result according to their lordships was that following assignment, the right of action was vested in the assignee and not in the assignor. The Full Court of the Supreme Court of Queensland in Ashmore Developments Pty Ltd v Eaton [1992] 2 Qd R1 reached the same conclusion relative to the right to enforce following assignment a claim for arrears of rent accrued prior to assignment. There seems no reason why a different rule should apply to the question whether the assignment of the burden of a covenant extends to breaches taking place prior to assignment.
3. It follows therefore that the Yalamanchilis are liable for the failure to invest the advanced payment of rent in accordance with the term implied by s 24 of the Act. Their liability with respect to that breach is not, however, simply to pay money to Café Dansk, rather it would be to add the appropriate sum to the security deposit which has now been established. In light particularly of the fact that I have rejected Mr Langevad's contention that the security deposit as established for this tenancy is available only for rental breaches, the amounts in question may ultimately go to the Yalamanchilis at the end of the tenancy.
4. Mr White contended that the Yalamanchilis' liability should be limited because Mr Langevad had failed to make a timely response to a request which was made eventually by Mr Shiel for a tax file number to enable the relevant security deposit account to be established. It was not demonstrated that it would have been entirely impossible to establish the account as distinct from the situation attended by unsatisfactory taxation consequences. It might be for instance that all of those consequences would "wash out" at the next return lodged by Café Dansk. Moreover, there was no explanation as to why the predecessor in title, namely Habradel Pty Ltd, did not establish the required security deposit. In the circumstances, therefore, the Yalamanchilis are responsible to account for the interest that should have been earned from the outset of the 2006 lease.
5. I had no evidence as to what interest should have been earned, hence that matter would have to be stood over for further consideration.

1. Mr Langevad also contended that the term of the lease be modified so as to shorten the existing term as established by the exercise of option in 2008 and add a further three years by way of an additional option period at the end. This should be done, he said, because the failure on the part of the lessors adequately to document the tenancy had meant that his company was unable to offer the business for sale.
2. Mr Langevad referred me to no precedent for granting relief in this form. So far as I am aware, there is no common law or equitable remedy which could be granted along these lines. Section 159 of the Fair Trading Act 1999 gives extensive powers to modify contractual relations between parties in the case of contraventions of the Fair Trading Act. Analogous powers have been extensively used by the Federal Court of Australia under the Trade Practices Act 1974 to modify the terms of retail leases held by shopping centre tenants on the basis that the tenants were induced to enter into the leases which were the subject of the modification or variation by misleading and deceptive conduct by the lessor or the lessor's agent. Here, the most that can be said is that there has been a delay on the part of the lessors in carrying out a contractual duty, namely, the provision of an appropriate lease deed for execution. This is a matter of breach of contract if anything, not breach of the Fair Trading Act. It cannot be said that these derelictions are so serious as to amount to unconscionable conduct which is also prohibited by the Fair Trading Act.
3. The claim for a modification of lease terms and options fails. I am not sure if Mr Langevad was advancing any claim for damages based on the delay in documentation. If he were, the absence of any evidence of loss and damage would be fatal to its success.

1. In light of my conclusions, I believe the disclosure statement as submitted on 15 December 2008 was appropriate subject to the addition of a reference to s 52 of the Act in the section dealing with the tenant's obligations with respect to structure, fixtures, plant, equipment and services.

1. It will be recalled that Mr Langevad made a claim for the costs of this proceeding and also for the mediation conducted under the auspices of the Small Business Commissioner. Whilst he did not elaborate, I understood this claim to be a claim for remuneration or compensation for the time which he has devoted to the matter. There are a number of difficulties with this claim. First, I know of no authority for the grant by this Tribunal or anybody else of awards of costs for mediations conducted under the auspices of the Small Business Commissioner. Secondly, the concept of "costs" as referred to in a number of procedural statutes including the Victorian Civil and Administrative Tribunal Act 1998 and the dispute resolution provisions of the Retail Leases Act refers to outlays to one's legal practitioner, not compensation for time spent by a lay client (Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403. Finally, s 92 of the Retail Leases Act drastically restricts the power to award costs in such a proceeding as this.
2. It would seem most unlikely therefore that Mr Langevad's claim for costs could succeed.

3. Mr White requested that costs be reserved. I am not sure whether he is contemplating making a costs application on behalf of his clients. Such an application would not encounter the barrier of Cachia v Hanes; it would of course still have to deal with the restrictions laid down by s 92 of the Act. In deference to Mr White's request, I will reserve costs.