Kew Avenue Pty Ltd v Panorama Investment (Essendon) Pty Ltd (Building and Property) [2023] VCAT 85

1. The Respondent's application dated 30 May 2022, seeking an order:

(a) to discharge the injunction contained in the Tribunal's orders dated 1 June 2021 is refused; and > > (b) in the form of a declaration that the Respondent is entitled to take possession of the demised premises, the subject of this proceeding, as a consequence of the First and Second Applicants' alleged breach of lease and/or undertaking, is also refused.

2. For the avoidance of doubt, the reference to the payment of the undisputed amount of rental and outgoings in Order 3 of the Tribunal's orders dated 1 June 2021, relates to arrears of rent and outgoings that predate 1 June 2021 and does not relate to the period after 1 June 2021.
3. The Applicants' application that the Respondent pay the Applicants' costs of and incidental to their application dated 24 May 2022 and the hearing on 31 May 2022 on an indemnity basis is dismissed.
4. The substantive hearing of this proceeding (including the Respondent's counterclaim) currently listed for hearing on 18 April 2023 for four days is confirmed.
5. Liberty to apply.
6. Costs reserved.

1. On 1 June 2021, the Tribunal made orders in the form of an injunction restraining the respondent landlord (the Landlord) from re-entering or interfering with the First Applicant and Second Applicants' (the Tenants) quiet enjoyment of leased premises, located and known as Lot B and Lot C, 205-211 Keilor Road, Essendon (the Premises), pending further order (the Injunction Order).
2. The Landlord now seeks an order to dissolve the Injunction Order or alternatively, an order for possession of the Premises. It does so on two grounds; namely:

(a) First, it contends that the Tenants have failed to abide by an undertaking given by them when the Injunction Order was made (the Undertaking), to pay any future rental and outgoings from the date of the Injunction Order. It submits that this warrants that the Injunction Order be dissolved. > > (b) Second, it submits that it is entitled to exercise its right of forfeiture under the relevant leases for non-payment of rent or other breaches of the leases,[1] insofar as those breaches relate to ongoing obligations. In other words, it submits that the Injunction Order only restrained the Landlord from re-entering the Premises for breaches which existed prior to the making of the Injunction Order and not in relation to any subsequent breach of lease.

3. The controversy over whether the Tenants have paid the correct amount of rent since 1 June 2021 underpins both grounds upon which the Landlord relies. Mr Virgona of counsel, who appeared on behalf of the Landlord, submitted that if it is proven that rent has not been fully paid, then there are grounds to dissolve the injunction on the basis that the Tenants have failed to abide by the Undertaking upon which it was premised; or alternatively, it is open for the Landlord to re-enter, as the Injunction Order only operated to restrain the Landlord from re-entering based upon alleged breaches that predated that order.
4. Mr Sowden of counsel, who appeared on behalf of the Tenants, conceded that the amount paid in respect of rent from 1 June 2021 under both Leases was less than what was specified. However, he submitted that the reduction in rent was lawful because it was commensurate with the Tenants' entitlement to rent relief pursuant to the Commercial Tenancy Relief Scheme Regulations 2021 (the CTRS Regulations). In essence, he submitted, and I accept, that if the Tenants can demonstrate that there is a serious question to be tried as to whether they are entitled to rent relief under the CTRS Regulations, then it would be inappropriate, in the context of this application, to conclude that they failed to pay rent when due or otherwise failed to abide by the Undertaking, insofar as the payment of rent was concerned.
5. Given the matters raised by each of the parties, the question as to whether the Tenants are entitled to rent relief pursuant to the CTRS Regulations is critical in determining whether:

(a) the Tenants have failed to abide by their Undertaking to pay future rent, given at the time the Tribunal made the Injunction Order; and > > (b) the Tenants breached the terms of the Leases in relation to the payment of rent, entitling the Landlord to forfeit the same and re-enter the Premises.

1. The Tenants have separately occupied each of the properties comprising the Premises since the second half of 2019. By service of two Notices to Vacate, the Landlord sought to re-enter the Premises by 24 May 2021. This prompted the Tenants to seek and obtain the Injunction Order.
2. The Landlord submits that following the making of the Injunction Order, the Tenants failed to pay rent and outgoings in accordance with the terms of the two leases.[2] Consequently, following the making of the Injunction Order, the Landlord served six default notices in relation to the Lot B lease (the Lot B Lease) and five default notices in relation to the Lot C lease (the Lot C Lease). It contends that the 11 default notices have never been remedied.
3. On 24 May 2022, the Landlord purported to re-enter the Premises, purportedly in reliance upon the default notices served prior to that date. Shortly thereafter, the Tenants filed an application for relief against forfeiture and/or an order for injunctive relief, while at the same time physically regaining possession of the Premises.
4. On 30 May 2022, the Landlord filed this application seeking an order for possession and/or in the alternative, an application to discharge the Injunction Order.
5. The Tenants' application dated 24 May 2022 and the Landlord's application dated 30 May 2022 were both listed to be heard on 31 May 2022. However, given that the Tenants had already retaken possession of the Premises, the application for relief against forfeiture and/or injunctive relief was not pressed. Consequently, orders were made on that day for the further conduct of the Landlord's application and for the hearing of an application by the Tenants that their costs of and associated with their application be paid by the Landlord.
6. The Tenants remain in possession of the Premises, as of the date of this hearing.

1. Mr Virgona submitted that the Landlord consented to the making of the Injunction Order partly in consideration of the Undertaking being given by the Tenants, as set out in the Injunction Order:

UPON THE UNDERTAKING BY THE APPLICANTS BY ITS COUNSEL:

1. To duly pay to the Respondent the undisputed amount of rental and outgoings currently in arrears without set off within 7 days from the date hereof, such sum to be agreed between the parties failing which to be determined by the Tribunal upon further application by either party and any future rental and outgoings from the date of this order; and

1. To refrain from any activities that will result in any destruction of the Respondents fixtures or chattels; and

1. To pay the sum of $89,000 into the trust account of its solicitors, Zervos Lawyers, in cleared funds by 4:00pm on 11 June 2021, such sum to be held on trust until the determination of this proceeding or further order.

1. As noted above, Mr Virgona submitted that following the making of the Injunction Order, the Tenants failed or refused to pay rent and outgoings in accordance with the Injunction Order and to comply with their ongoing obligations under the two leases (the Leases), pending the determination of the substantive proceeding. He submitted, and I accept, that the Injunction Order did not operate to restrain the Landlord from otherwise exercising its rights of forfeiture in relation to breaches that occurred after 1 June 2021.
2. The Injunction Order stated, in part:
   1. Until the hearing and determination of this proceeding or until further order:
      1. The Respondent by itself, its servants and agents is restrained from re-entering or interfering with the First Applicant and Second Applicant's quiet enjoyment of the Premises; and
      2. The parties are restrained from relying on the provisions set out in Item 22 of the schedules of the Lot B Lease and the Lot C Lease, which form part of the subject matter of the dispute.
   2. For the avoidance of any doubt, Order 2 does not operate to restrain the Respondent from otherwise exercising its rights under the terms of the Lot B Lease and the Lot C Lease, in the event that the First Applicant and/or the Second Applicant fails to comply with their ongoing obligations thereunder.
3. Mr Virgona further submitted that ongoing breaches of the Leases constitutes a material change in circumstance since the making of the Injunction Order, which warrants it being dissolved or varied. He pointed to the following factors in support of that submission:

(a) the failure to pay all rent and outgoings since the date of the Injunction Order; > > (b) allowing other entities to occupy the Premises and operate their business contrary to the permitted use specified in the Leases; > > (c) the fact that the Landlord has entered into a contract of sale with a third party to purchase the Premises and where the purchaser requires vacant possession.

4. The Landlord relies on several affidavits in support of its application:

(a) affidavit of Annmarie Geros affirmed 30 May 2022; > > (b) affidavit of Alan Brody, affirmed 30 May 2022; > > (c) affidavit of Annmarie Geros affirmed 7 July 2022.

5. Mr Virgona submitted that the Injunction Order may be dissolved in circumstances where the party who obtained the injunction has not observed the terms on which the injunction was granted. Further, he argued that an interlocutory injunction granted until trial or further order can be varied or discharged where there has been a material change of circumstances since the making of the injunction order. He referred to the judgment of Young J in Paras v Public Service Body Head of the Department of Infrastructure (No 2), where his Honour stated:

The authorities indicate that the kind of exceptional circumstances that might attract the power of discharge or variation include where an interlocutory order was obtained by fraud or non-disclosure of material facts, or through an accident or mistake that occurred without the fault of the parties seeking relief under O 35 r 7(2)(c) ... The court's discretion to vary or set aside an order is to be exercised with great caution having regard to the importance of the public interest in the finality of litigation ... Further, as Spender J emphasised in Dudzinski in relation to O 35 r 7(2)(c), the rule is not an alternative to the appellant procedure in respect of interlocutory judgments, nor is it to be invoked for the purpose of allowing a party to present a case a second time to its better advantage. In my opinion, these principles apply, a fortiori, where the party applying for discharge of an interlocutory order seeks to reargue the issues that have already been determined by reference to additional evidence that was available to it on an earlier occasion but which he chose not to advance: see also Autodesk at 310 per Brennan J.[3]

1. Mr Virgona submitted that the amount of rent and outgoings paid by the Tenants since 1 June 2021 was significantly less than what was required under the Leases. He referred to the affidavit of Annmarie Geros, the solicitor acting for the Landlord, who set out what the Landlord alleged was owing:
   1. ... I have read two updated reconciliation spreadsheets prepared by Panorama's managing agent, Allan Brodie, Weda Property in respect of Lot B in July 2022 and verily believe that:

(a) the total sum of $237,185.03 remains owed by Kew Avenue to Panorama since the commencement of the purported lease in respect of all unpaid rental arrears and outgoings for Lot B; and > > (b) of this amount, the sum of $53,323.68 (excluding any deferred COVID rent relief) remains owed by Kew Avenue to Panorama since the 1 June 2021 Orders in respect of rental arrears and outgoings for Lot B. The updated reconciliation spreadsheet for June 2021 to June 2022 is duplicated as follows:

1. I have read an updated reconciliation spreadsheet provided by Panorama's managing agent, Allan Brodie, of Weda Property in respect of Lot C and verily believe that:

(a) the total sum of $285,052.39 remains owed by Partnered Capital to Panorama since the commencement of the purported lease in respect of unpaid rent and outgoings for capital Lot C; and > > (b) of this amount, the sum of $73,257.65 (excluding any deferred COVID) rent relief remains owed by Partnered Capital to Panorama since the 1 June 2021 Orders in respect of unpaid rent and outgoings for Lot C. The reconciliation spreadsheet for June 2021 to June 2022 is duplicated as follows:

1. I am informed by Alan Brodie that the amount of $21,340.65 and $20,799.05 contained in the outgoings in the respective updated reconciliation tables for Lots C and B above are for the rates for the period of 1 July 2020 - 30 June 2021 and 1 July 2021 - 30 June 2022 and had not been paid until recently when the final instalment was due on 31 May 2022.
2. According to the affidavit of Stefan James De Palma dated 26 May 2022, the solicitor acting on behalf of the Tenants, the Tenants dispute the accuracy of the reconciliations prepared by the Landlord's leasing agent. Mr De Palma deposed to the following:
   1. I am instructed and verily believe that the Agent Reconciliations are vehemently disputed by the Tenants. By letter dated 12 April 2022 from Zervos Lawyers to Allan Brodie, I:
      1. Responded to the provision of the Agent Reconciliations;
      2. Set out the basis upon which the Tenant objects to the Agent's Reconciliation for Lot B;
      3. Set out the basis upon which the Tenant objects to the Agents Reconciliation for Lot C;
      4. The Agents Reconciliation failed to apply the Tenant's eligible threshold of rent relief having regard to its application for Rent Relief made pursuant to the CTRS;
      5. Enclosed updated and revised reconciliations in respect of both Lot B and Lot C (Tenants Reconciliations);
      6. Calculated the aggregate total of the alleged arrears in relation to both Lot B and Lots C in the sum of $72,662.48 before the application of the $89,000 currently held in Zervos Lawyers Trust Account.
      7. Advised that once the $89,000 held in Zervos Lawyers Trust Account is applied, the Tenants are in credit in the sum of $16,337.52.
3. Having regard to the matters set out in both affidavits referred to above, it is clear that a dispute exists as to what amount of rent and outgoings are payable or in arrears over the period June 2021 to June 2022. That dispute is underpinned by the following issues or questions:

(a) whether the Tenants are entitled to rent relief under the CTRS Regulations; and > > (b) whether the amount of $89,000 held in the Tenant's solicitor's trust account is rent paid on account of future rent.

4. Mr Virgona set out comprehensive submissions as to why the Tenants were not entitled to rent relief under the CTRS Regulations. Mr Sowden submitted that it was not appropriate for the Tribunal to determine that issue, within the context of this application, given that that the matter is set down for trial in April 2023 where the parties will be given the opportunity to present all of the evidence. He further submitted than an application has now been filed with the Small Business Commission, referring the dispute concerning the validity of the claim for rent relief. He submitted that reg 65 of the CTRS Regulations prohibits the Tribunal from determining an eligible lease dispute concerning the validity of the Tenant's claim for rent relief until the Small Business Commission has issued a reg 41 certificate.
5. In my view, it is appropriate to consider whether the Tenants are entitled to rent relief under the CTRS Regulations. This is because of the following factors.

(a) This question, insofar as it relates to the obligation to pay rent after 1 June 2021, has not been previously considered by the Tribunal, nor was it considered in the making of the Injunction Order. > > (b) The Injunction Order required the Tenants to pay future rent and outgoings from the date of the Injunction Order (from 1 June 2021). However, determining future rent and outgoings from 1 June 2021 will involve considering whether any compliant request for rent relief for the period 28 July 2021 until 15 March 2022 was made. As to the amount of rent relief, I accept Mr Sowden's submission that this question may involve further evidence and is best left for trial. However, determining whether a compliant request for rent relief was made is confined to considering whether the request complies with reg 27 of the CTRS Regulations. > > (c) In my view, determining whether a compliant request for rent relief has been made (as opposed to determining the correct amount of rent relief) is not caught by the jurisdictional restriction under reg 65 of the CTRS Regulations. This is because determining whether a compliant request for rent relief has been made underpins the definition of an eligible lease dispute, as that phrase is referred to in reg 65 of the CTRS Regulations. In other words, in order for there to be an eligible lease dispute, one must first determine whether there has been a compliant request for rent relief. If there is no compliant request for rent relief, then, by extension, there is no eligible lease dispute caught by the jurisdictional restriction in reg 65 of the CTRS Regulations. > > (d) As already noted above, I do not accept the Tenant's submission that they were only obligated to pay undisputed rent and outgoings after 1 June 2021. In my view, Recital B of the Undertaking distinguishes between two time periods; namely: the period prior to 1 June 2021 and the period after 1 June 2021. In the former period, the Tenants are only required to pay the undisputed amount of rent and outgoings in arrears, whereas in the latter period, the Tenants are required to pay any future rental and outgoings. > > (e) In relation to the $89,000 to be held in the trust account of the Tenants solicitors, it is unclear to me what that amount represents. Recital D of the Injunction order does not provide any explanation as to what that amount represents. In any event, I do not accept that that amount represents the payment of rent and outgoings on account of future rent and outgoings, nor do I consider that it can be applied in that way.

1. Regulation 27 of the CTRS Regulations sets out the requirements for making a compliant request for rent relief. It states, in part:

(1) A tenant under an eligible lease may request rent relief from the landlord under the eligible lease.

(2) A request under subregulation (1) must be in writing and be accompanied by a statement from the tenant -

(a) at the tenant is an eligible tenant;

(b) that the tenant satisfies the decline in turnover test, including setting out -

(i) the tenant's turnover for the turnover test period, including the turnover test period used;

(ii) the tenant's comparison turnover, including stating whether the relevant comparison period or a specific alternative turnover method was used; and

(iii) if an alternative comparison turnover method was used, how the comparison turnover was calculated; and

(iv) the tenant's decline in turnover; and

(v) the reduction in rent that would satisfy the minimum requirements of an offer under subregulation (8); and

(vi) any other circumstances that the tenant would like the landlord to consider in making an offer under subregulation (8)(d)(ii).

(3) Within 14 days after making a request under subregulation (1), the tenant must provide information to the landlord that evidences the turnover figures contained in the statement under subregulation (2), including at least one of the following -

(a) extracts from the tenant's accounting records;

(b) the tenant's business activity statements;

(c) statements issued by an ADI in respect of the tenants account;

(d) a statement prepared by a practising accountant -

and include a statutory declaration made by the tenant or an authorised officer of the tenant, stating that the tenant is an eligible tenant and that the information provided by the tenant under this subregulation and subregulation (2) is true to the best of the tenant's knowledge and belief.

1. Mr Sowden submitted that the Tenants made a compliant request for rent relief under cover of letter from Zervos Lawyers dated 30 September 2021. The letter asserted that the leases were eligible leases, that the Tenants were eligible tenants and that they met the decline in turnover test set out in reg 12 of the CTRS Regulations, by reference to the comparison periods January to March 2020 and July to September 2021.
2. Regulation 12 of the CTRS Regulations states:

For the purposes of regulation 9(1)(c), a tenant satisfies the decline in turnover test if -

(a) the tenant's turnover for the turnover test period falls short of the tenants comparison turnover; and

(b) the shortfall, expressed as a percentage of the comparison turnover (the decline in turnover) equals or exceeds -

1. The Tenants asserted that they had a reduction in turnover of 74% over those two accounting periods and had requested rent relief of that amount for the period 28 July 2021 until 15 January 2022.
2. Mr Virgona submitted that the Tenants' request for rent relief did not comply with reg 27 of the CTRS Regulations. In support of that submission, he referred to the Respondent's written submissions, which stated:
   1. Panorama denies the Rent Relief Application is a valid application under the CTRS regulations the following reasons:

(a) First, the Rent Relief Application was purportedly made as one single request on behalf of Kew Avenue and Partnered Capital. Partnered Capital and Kew Avenue occupy different premises for different permitted uses. The Rent Relief Application was not made separately by each of Partnered Capital and Kew Avenue in respect of the businesses. > > (b) Second, the application for rent relief was made in relation to a business called 'Water Drops Hand Car Wash'. Critically, the ABN for "Water Drops Hand Car Wash" is not registered to either Kew Avenue or Parking Capital (the alleged tenants). The ABN for "Water Drops Hand Car Wash" is in fact registered in the name of Ciaran Nominees, which is not a tenant under the Lot C Lease or the Lot B Lease. It follows that "Water Drops Hand Car Wash" is not the 'tenant's business' for the purposes of the CTRS. Ciaran Nominees has not made any application for rent relief and has not asserted itself to be a tenant or an eligible tenant. To the contrary, Ciaran Nominees claims in this proceeding to have a binding agreement to enter into a lease with Panorama for the permitted use of 'sale and higher of motor vehicles', but does not allege it occupies the Premises. > > (c) Third, no application for rent relief has been made in respect of a business that is registered in the name of Partnered Capital and Kew Avenue. Partnered Capital has registered businesses called "Water Drops Commercial Cleaning and Building Maintenance" and "Review Doctor" registered in its name, and Kew Avenue has a business called "Sports Car Rental On Line" registered in its name. The Rent Relief Application was not made with respect to any business with the names "Water Drops Commercial Cleaning and Building Maintenance", "Review Dr" or Sports Car Rental On Line". > > (d) Fourth, the permitted use under the disputed lot B Lease and Lot C Lease does not permit car washing. The permitted use under Lot C Lease Is "Vehicle Hire", and the permitted use for the Lot B Lease is "Auto". > > (e) Fifth, the analysis of the decline in turnover is unreliable because the application did not include the Victorian Business Grant $26,000. Furthermore, the comparative turnover periods selected by Kew Avenue and Partnered Capital are contrary to the CTRS (regulations 16(1) to (3)), which states that the alternative comparison turnover is to apply to a tenant that begins trading on or after 1 April 2019. The analysis of turnover does not comply with Regulation 16.

2. In the result, Kew Avenue and Partnered Capital is not an eligible tenant for the purposes of the CTRS and is not entitled to rent relief under the CTRS. The full amount of rent and outgoings is payable. Further there can be no dispute that the CTRS ended on 15 March 2022, and there can be no entitlement to rent relief after this date.[4]
3. In my view, the request for rent relief is flawed for a number of reasons. First, it is common ground that reg 16(3) of the CTRS Regulations applies in this case.[5] So much was conceded by Mr Sowden during the hearing on 17 November 2022. That sub-regulation is to be read with reg 14 of the CTRS Regulations, which states:

(b) if an alternative comparison turnover applies to the tenant, as calculated in accordance with the applicable alternative comparison turnover.

1. Regulation 16 then states, in part:
   1. Alternative comparison turnover - business began trading on or after 1 April 2019

(3) If the tenant began trading between 1 April 2019 and 31 March 2020 (inclusive), the tenant's comparison turnover is calculated by taking the sum of the tenant's turnover for each whole month after the tenant commenced trading and before 1 April 2020 divided by the number of whole months of trade multiplied by 3.

1. It appears that the Tenants collectively adopted a turnover test period by reference to January to March 2020, compared to July to September 2021. In my view, adopting these accounting periods does not meet the decline in turnover test as stipulated in reg 12 of the CTRS Regulations. What should have occurred is that each Tenant should have adopted the alternative comparison turnover test, as set out in reg 16 of the CTRS Regulations, given that they both began trading between 1 April 2019 and 31 March 2020. In other words, they should have calculated the aggregate turnover between 1 April 2019 and 1 April 2020, divided that figure by the number of months trading and then multiplied that by three. That calculation would give the alternative comparison turnover. However, that did not occur.
2. Moreover, even if it were permissible to adopt any three-month period,[6] the comparator would need to be the same three-month period in the following year. However, the Tenant's request for rent relief adopted a comparator using a different corresponding three-month period.[7] This does not accord with reg 15 of the CTRS Regulations, which requires the comparator to be a corresponding three-month period from one year to the next.
3. Further, the Tenants have collectively requested rent relief, notwithstanding that they are different entities, operate different businesses and lease different premises under separate and distinct leases. I do not accept that the CTRS Regulations permit multiple tenants requesting rent relief under one application. Separate applications would need to be made, which is not the case here.
4. Accordingly, based on the material before me, I am not persuaded that the Tenants have an arguable case that were entitled to rent relief after 1 June 2021. Further, based on the material before me, I find that not all rent was paid from 1 June 2021.
5. Notwithstanding my finding that not all rent has been paid after 1 June 2021, in breach of the Undertaking given by the Tenants, I do not consider this, of itself, justifies dissolving the injunction. Similarly, and for the reasons which follow, the other breaches of lease alleged in the various default notices served by the Landlord do not justify dissolving the Injunction Order.
6. Clearly, the Injunction Order was made to maintain the status quo in relation to a dispute, which included what was payable under the Leases prior to 1 June 2021. The Injunction Order was granted on the Undertaking that the Tenants would pay future rental and outgoings incurred after 1 June 2021. It appears from the affidavit material filed on behalf of the Tenants that the Tenants were of the view that they were entitled to rent relief after 1 June 2021, albeit that I have found otherwise. Nevertheless, I am not persuaded that the Tenants actions can be categorised as a deliberate failure to abide by the Undertaking given.
7. Importantly, the Injunction Order specifically reserved the Landlord's rights in relation to future breaches. The reach of the Injunction Order was restricted to prevent the Landlord from re-entering based upon alleged breaches occurring prior to 1 June 2021. It did not restrain the Landlord from re-entering after 1 June 2021, if it was entitled to do so.
8. In that sense, the terms of the Injunction Order expressly permitted the Landlord to re-enter the Premises if lawful to do so (i.e., if permitted by the terms of the Leases or at common law) at any time after 1 June 2021. Indeed, during the hearing on 15 November 2022, the Landlord's solicitor conceded that that was precisely what the Landlord intended to do.
9. None of the matters raised by the Landlord in support of its application to dissolve the Injunction Order relate to facts or events that predate 1 June 2021. In Brimaud v Honeysett,[8] McLelland J, cited Gibbs CJ and Aickin, Wilson and Brennan JJ in Adam P Brown Male Fashions v Philip Morris and stated:[9]

A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts came into existence or it is discovered which render its enforcement unjust ... Of course the changed circumstances must be established by evidence.[10]

1. Here, there is no material change in circumstance which would justify dissolving the Injunction Order; nor do I consider that a failure to pay all future rental and outgoings, in circumstances where the Tenants had erroneously formed the view that they had made a compliant request for rent relief, justifies dissolving the Injunction Order.
2. The Injunction Order was not expressed to dissolve if there was a future breach of the Leases. In my view, it would not be just or appropriate to dissolve the Injunction Order because of subsequent events, where those events otherwise give the Landlord the right to forfeit the Leases and re-enter the Premises.

SHOULD THERE BE AN ORDER IN THE FORM OF A DECLARATION THAT THE LANDLORD IS ENTITLED TO POSSESSION OF THE PREMISES?

1. As indicated above there are several grounds raised by the Landlord in support of its contention that is entitled to an order in the form of a declaration that it be entitled to possession of the Premises. In that respect, it appears that the Landlord relies upon six default notices relating to the Lot B Lease and five default notices relating to the Lot C Lease served on the Tenants after June 2021 as the basis upon which it says that it is entitled to re-enter the Premises.
2. The alleged breaches of the Leases described in the various default notices fall into the following categories:

(a) failure to pay rent and outgoings, pursuant to clauses 2.1.3, 2.1.5 and 5.4.2 of the Leases; > > (b) failure to pay interest pursuant to clause 2.1.7 of the Leases; > > (c) failure to comply with clause 2.2.1 of the Leases by allowing others to use the Premises for a purpose other than for the permitted purpose; > > (d) failing to comply with clause 7.1.3(e) of the Leases by allowing effective control of the Tenant or Tenants to change; and > > (e) failing to 'top up' the security deposits required under the Leases.

3. In my view, it is not appropriate within the context of this application to make a declaration which would have the same effect as a final order requiring the Tenants to relinquish their possessory rights over the Premises. I have formed this view based on several factors.
4. First, the alleged breaches as to whether the Tenants conducted their businesses in accordance with the permitted use described in each of the Leases is a complex question and will require further evidence and legal submissions as to:

(a) what business was actually carried out on the Premises; > > (b) interpreting the nature of the permitted use described in the Leases and whether that interpretation is wide enough to capture actual use;[11] and > > (c) whether the Landlord consented to the actual use.

5. Second, the alleged breaches as to whether the Tenants allowed others to occupy the Premises or whether the Tenants relinquished control over the Premises also requires further evidence and legal submissions as to:

(a) what arrangements were in place between the different corporate entities; > > (b) whether those arrangements lead to a finding that a different entity was in possession or effective control; and > > (c) whether the Landlord consented or acquiesced, and what consequences that flow from such a finding.

6. Third, the alleged breaches of failure to pay rent and outgoings or 'top up' the security deposit also require further evidence and legal submissions, notwithstanding my finding that the request for rent relief did not comply with reg 27 of the CTRS Regulations. This is because:

(a) payments have been made at various times since 1 June 2021 and it is difficult to reconcile how those payments have been applied against the arrears particularised in each of the default notices; > > (b) according to the Tenants, the Landlord has failed to provide them with an estimate of outgoings pursuant to s 46 of the Retail Leases Act 2003 and as a consequence, the Tenants are not required to contribute to any outgoings until the estimate is given to them; and > > (c) Mr Snowden submitted that the Landlord drew down from the security deposits to pay for outgoings, which were not payable given that the Landlord had failed to provide a statement of outgoings pursuant to s 46 of the Retail Leases Act 2003.

7. Given my finding that the request for rent relief did not comply with reg 27 of the CTRS Regulations, I accept that there is unpaid rent if one compares the total amount of rent that was due and payable under the Leases from 1 June 2021 against the total amount of rent paid over that same period. However, it is difficult to reconcile payments made against the arrears claimed in the various default notices. Importantly, it is near impossible to confidently find that any particular default notice was not remedied by subsequent payments made prior to the Landlord exercising its right of re-entry. For example, Mr Sowden submitted, in relation to the last default notice dated 9 December 2021 for the Lot B Lease, which alleged non-payment of rent for November and December 2021, that:

The last notice is dated 9 December 2021 and refers to the sum of $8750 allegedly outstanding under the leases. The respondent has accepted rental since this notice and accordingly the notice is otiose.[12]

1. Mr Sowden's submission highlights the difficulty in determining whether the default notice dated 9 December 2021 has or has not been remedied and reinforces my view that further consideration is required as to how payments made after 9 December 2021 were treated or whether there is any other conduct on the part of the Landlord which may impact on the Landlord's right to rely upon that notice as the basis to re-enter. Indeed, the Landlord's written submissions concede that $48,250 was paid since November 2021 in relation to the Lot B Lease; and $100,250 was paid since March 2022 in relation to the Lot C Lease.[13] Although the Landlord submitted these payments were received under protest, the application for a declaration that the Landlord is entitled to possession is dated 30 May 2022, many months after the expiry of the 14-day period to remedy the alleged breaches set out in the 9 December 2021 notice. In my view, that may raise a question over the effectiveness of the default notice.
2. Further evidence is required to fully determine the legal effect of the various default notices and specifically, the 9 December 2021 notices. As I have indicated, I do not consider that it is appropriate in the context of this short application to determine issues which may require further evidence, cross examination of witnesses, additional documentation and legal argument, all of which can be explored fully at the final hearing in April 2023, where four hearing days have been set aside to hear the whole proceeding.
3. Therefore, for the reasons set out above, I decline to make a declaration entitling the Landlord to take possession of the Premises. My finding is not to be construed as a finding that the Landlord is not entitled to take possession of the Premises but rather, merely that it is inappropriate to make a declaration to that effect, within the context of this application.

1. The Tenants seek an order that the Landlord pay their costs of and incidental to their application dated 24 May 2022, including the costs of the appearance on 31 May 2022 on an indemnity basis. In considering that application, it is appropriate to recap the material facts which underpin that costs application.
2. On 24 May 2022, the Landlord re-entered the Premises, purportedly on the ground that it was entitled to do so because the Tenants had failed to remedy the breaches set out in one or more of the default notices served on the Tenants.
3. After the Landlord had re-entered the Premises and on the same day, the Tenants filed an application with this Tribunal seeking an order that they be relieved against forfeiture or alternatively an injunction, the effect of which would allow them to reoccupy the Premises. Prior to the hearing of that application, the Tenants re-occupied the Premises. This was done without the Landlord's consent.
4. On 30 May 2022, the Landlord filed its application to discharge the Injunction Order and/or seek a declaration that it be entitled to possession of the Premises. The hearing of the Tenants' application dated 24 May 2022 and the Landlord's application dated 30 May 2022 were both returnable on 31 May 2022. However, given that the Tenants had already reoccupied the Premises, the injunction/relief against forfeiture application was not pressed on that day and the hearing was confined to case management issues, where orders were made, including:

(a) an order dismissing the Tenant's application dated 24 May 2022 but reserving their costs of that application; > > (b) listing the proceeding for compulsory conference; and > > (c) listing the Landlord's application dated 30 May 2022 and the Tenant's application for costs to be heard on 19 July 2022, with one-day allocated. That application was subsequently adjourned to 17 November 2022.

5. Mr Sowden filed written submissions in support of the Tenants' costs application, which state, in part:
   1. Section 92 of the Retail Leases Act 2003 provides that each party to a proceeding is to bear its own costs, unless (pursuant to subsection (2)) a party has refused to take part in mediation or has conducted the proceeding in a vexatious way that has unnecessarily disadvantaged the other party.
   2. The applicant's claim that the respondent in re-entering the premises in breach of the Tribunal's orders has conducted the proceeding vexatiously and in a way that was "productive of serious and unjustified trouble or harassment or [which was] seriously and unfairly burdensome, prejudicial or damaging."[14] Conduct that requires a party to relitigate an issue that has already been determined can amount to vexatious conduct for the purposes of section 92(2)[15] noting that the applicants sought orders in effect compelling the respondent to comply with orders that had already been made. The conduct of the respondent in re-entering the premises on 24 May 2022 was tantamount to a contempt of the Tribunal's processes. This together with the serious and unjustified trouble that the respondent has caused the applicant's warrants an order for indemnity costs.[16]
6. I do not accept that the Landlord acted vexatiously in exercising what it considered to be a self-help remedy. As I have already noted, after 1 June 2021, the Landlord had served the Tenants six default notices in relation to the Lot B Lease and five default notices in relation to the Lot C Lease. The allegations of breach of lease set out in each of those notices are arguable, especially in light of my finding that the request for rent relief did not comply with reg 27 of the CTRS Regulations. In my view, acting upon one or more of the default notices as the basis to re-enter the Premises does not constitute vexatious conduct on the part of the Landlord.
7. Further, I do not accept that the re-entry by the Landlord, purportedly in reliance upon default notices which had not been remedied, constitutes a breach of the Injunction Order. As I have already indicated, Order 3 of the Injunction Order expressly stated that the order did not operate to restrain the Landlord from exercising its rights if the Tenants failed to comply with ongoing obligations under the Leases. In my view, that is precisely what the Landlord purported to do.
8. That being the case, the Tenant's application for an order that the Landlord pay their costs of and incidental to their application dated 24 May 2022 and the hearing on 31 May 2022 is dismissed. Those costs will remain costs in the cause, to be determined at the conclusion of this proceeding, should either party wish to prosecute an application for costs of the proceeding.

[2] It is noted that the Landlord contests the validity of the two leases and that the question as to their validity forms part of the substantive proceeding, listed for hearing on 18 April 2023.

[3] [2006] FCA 652.

[4] Respondent's Opening Submission on Discharge Application dated 14 July 2022, prepared by Kieran Hickie of counsel.

[5] It is conceded that the Tenants began trading between 1 April 2019 and 31 March 2020.

[6] In accordance with reg 15(1) of the CTRS Regulations.

[7] January to March 2020 compared to July to September 2021.

[8] (1988) 217 ALR 44.

[9] [1981] HCA 39; (1981) 148 CLR 170.

[11] For example, the nature of the permitted use for the Lot B Lease simply states 'Auto'.

[12] Applicants Submissions regarding the Respondents Application to Discharge of an Injunction dated 18 July 2022, [5].

[13] Respondent's Opening Submissions on Discharge Application dated 14 July 2022, [24]-[27].

[14] 24 Hour Fitness Pty Ltd v W & B Investment Group Pty Ltd [2015] VSCA 216 citing Bowman J in State of Victoria v Bradto Pty Ltd [2006] VCAT 1813.

[15] Staples Super Pty Ltd v Australian Asset Consulting Pty Ltd [2016] VCAT 1788.

[16] Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189.