Leung v Hungry Jack's Pty Ltd [1999] VSC 477

(iii) the date upon which the parties to the dispute became parties to the lease?

(b) Whether ISN and IH are eligible, within the meaning of section 3(1)(d)(i) of the Retail Tenancies Act, to be incorporated in Victoria as proprietary companies pursuant to the Law."

Mr. Derham did not accept that that unilateral formulation of the issues was correct, suggesting that the first real question was whether a lease of premises which were not retail when entered into initially might later become one.

35. In its written submissions, the respondent appeared to assume that the application was based on s.38(5)(b)(i). Notwithstanding that, Mr. Brett for the applicant made some submissions concerning evidence of error of law, and that the determination of the question might add to the certainty of commercial law. I will shortly deal with the relevant authorities concerning the principles upon which applications of this kind should be determined.

38. It is necessary for me to refer to certain relevant provisions of the RTA 1986. The Act does not specifically define a "retail premises lease". It does define, however, "retail premises" as meaning any premises that under the terms of the lease relating to them "are used or are to be used" wholly or predominantly for the carrying on of a business involving the sale or hire of goods by retail or the retail provision of services. The definition then goes on to address exclusions which include premises that have a floor area exceeding 1,000 sq.mts. and specifically excludes -

"(d) premises the lease relating to which is held as a tenant by -

(i) a corporation within the meaning of the Companies (Victoria) Code that would not be eligible to be incorporated in Victoria as a proprietary company; or

(ii) a subsidiary of a corporation referred to in sub-paragraph (i); or

Section 4 of this Act contains other relevant provisions -

"(1) The whole of this Act applies to a retail premises lease that is entered into after the commencement of this section unless the lease is entered into under an option granted or an agreement made before that commencement.

(2) Part 3 applies to a dispute arising after the commencement of this section under a retail premises lease, whether the lease was entered into before or after the commencement of this section."

Part 3 is that part of the Act which makes provision for the determination of disputes including both the conciliation and arbitration process pursuant to the provisions of the Commercial Arbitration Act 1984.

49. Section 3(4) of the RTA provides as follows -

"For the purposes of this Act a retail premises lease is entered into when -

(a) under the lease the tenant enters into possession of the premises or begins to pay rent for them; or

(b) all of the parties to the lease have signed the lease -

56. All of these provisions, having regard to the circumstances of this lease, led to submissions being made concerning the jurisdiction of the arbitrator which were raised before the arbitrator. Indeed, the arbitrator had ordered that the issue of jurisdiction be dealt with as a preliminary issue to be determined in an interim award. As I have indicated, both sides provided detailed written and oral submissions on 16 October 1998 and 15 April 1999. Before the arbitrator, the argument advanced by the landlord (see the arbitrator's reasons in the interim award, page 4, paragraph 3) was that the relevant date for determining whether the premises were retail premises was the date on which the relationship of landlord and tenant was entered into. This led to the conclusion, in that submission, that the premises were not retail premises at the time of the entering into the lease between Rialta and Hungry Jack's because the latter company was not a tenant within the meaning of s.3(1)(d)(i) or (ii) of the RTA because CF was a public company, remaining as such until September 1997, and that it was still one at the date of the assignment by Rialta of the lease to the present landlord. The arbitrator, however, concluded that the relevant date for determining whether the premises were retail premises within the meaning of s.3(1) was the date of the Notice of Dispute. The arbitrator had on a previous occasion in a matter of Vanda W. Holdings Pty. Ltd. v. G. & L. Tierney Pty. Ltd., concluded that the effect of the exclusion set out in paragraph (b) of the definition of retail premises in s.3 had to be determined as at the date of giving the Notice of Dispute, he then applying authorities such as Laurie v. Carroll [1958] HCA 4; (1958) 98 C.L.R. 310 and Razelos v. Razelos (1969) 3 All E.R. 929 and concluding that the date at which the jurisdiction of the court or tribunal was to be determined was the date of the institution of the proceedings. In Vanda an application for leave to appeal was made to the Supreme Court and rejected by Eames, J.: see 1997 V.ConvR. 58-526. This led to the first ground of appeal here being that the arbitrator had erred in finding that the relevant date for determining whether the premises were retail premises within the meaning of s.3(1) was that date. Before me, Mr. Brett submitted that Hungry Jack's was a subsidiary of CF at all material times and that it was a subsidiary at the relevant dates of the corporation and it would not be eligible for incorporation as a proprietary company in Victoria. He relied upon ss.4(1) and 3(4) of the RTA to contend that it was made clear that the application of the Act depended upon the time at which the lease was entered into, that being the time at which it should be determined whether or not the premises were retail premises. The argument was also advanced that the subsequent change in corporate status of CF in 1997 could not have been an event to give rise to a retail premises lease which had not been in existence prior to that date. No new lease was entered into at that time or since that time, nor had the identity of the tenant changed. He contended that any construction to the contrary produced absurdities, must be contrary to the intention of the Parliament, and led to uncertainty as to the contractual relationship prevailing at any time between the landlord and tenant because a tenant could change the terms of the contractual relationship by unilaterally converting itself to a proprietary company. This involved the contention also that the decision of the arbitrator and Eames, J. in Vanda was either wrong or could be distinguished.

59. Mr. Derham, Q.C. for the respondent submitted that the arbitrator's decision was consistent with the general rule that jurisdiction is to be determined by reference to the date of the dispute both with decisions on the application of the rule in actual arbitrations held pursuant to the RTA 1986. See Galtieri v. Baniscas (1994) V.ConvR. 54-504 at 65-782 to 783 (Mandie, J. of this Court); Haidar v. Blendale Pty. Ltd. [1993] VicRp 89; [1993] 2 V.R. 524 at 527 (Gobbo, J.). He argued that the arbitrator's decision was consistent with the approach that the courts had taken generally to jurisdiction under this Act, referring also to J_oad v. Ospies Hotels Pty. Ltd._ [1995] VicRp 13; [1995] 1 V.R. 198; Nime Pty. Ltd. v. Seven Storey Pty. Ltd. (1994) V.ConvR. 54-491; Bradbun Pty. Ltd. v. Bobo Nominees Pty. Ltd. (1994) V.ConvR. 54-501; Re Malsons [1991] 2 Qd.R. 61; Jam Factory v. Sunny Paradise Pty. Ltd. [1989] VicRp 54; [1989] V.R. 584 at 586-7 (Ormiston, J.); Klewett Pty. Ltd. v. Lansdowne [1989] VicRp 85; [1989] V.R. 969 at 973 (Ormiston, J.) and Award No. 17 (1997) V.ConvR. 58-526. Mr. Derham also pointed to s.4(2) (previously cited) contending the specific provision concerning dispute resolution procedures in relation to a dispute under a retail premises lease applied whether the lease was entered into before or after the commencement of the section (my emphasis). He argued that this was decisive and clearly pointed to the Parliamentary intention that jurisdiction to determine the dispute concerning the retail premises lease was to be determined whether the lease was entered into on or after the commencement of the section. He thus contended that on the jurisdiction point it was irrelevant when the lease was entered into. This argument was that the legislative intent was to open the gate to jurisdiction, no matter when the lease was entered into. Thus, he contended, the arbitrator was clearly right to conclude that the date of the institution of the proceedings (the Notice of Dispute) was the appropriate time for the assessment of jurisdictional facts. On this basis CV was a proprietary company on the date of the Notice of Dispute so that, in Mr. Derham's submission, the attack on want of jurisdiction failed, unless the tenant's status was one of ineligibility

62. It is convenient at this point, since want of jurisdiction was the principal argument and is directly linked to the interim award finding that jurisdiction did exist, to address the principles which must be applied in deciding whether leave should be granted.

65. In Leighton Contractors Pty. Ltd. v. South Australian Superannuation Fund Investment Trust (unreported, Supreme Court of South Australia, 11 November 1994) Debelle, J. described the applicable principles to be considered by a court when deciding whether to grant an application for leave under s.38(5), in following way:

"(1) there is no appeal from an arbitrator on a question of fact;

(2) while s.38 provides that an appeal shall be from the award of an arbitrator on a question of law, leave must nevertheless be obtained unless both parties consent to the appeal;

(3) leave will only be granted in circumstances prescribed in s.38(5);

(4) the applicant for leave must satisfy both paragraphs (a) and (b) of 38(5);

(5) the epithet "manifest" in the expression "manifest error of law" is used to indicate an error which is evident and obvious rather than one which is arguable;

(6) if the court determines that there is no manifest error of law, an application based on this ground fails;

(7) if the court is satisfied that a manifest error of law exists, a question arises whether the court should, in the exercise of its discretion, grant leave; and

(8) assuming that there is not a manifest error or on the face of the award, it may be argued that there is strong evidence that the arbitrator made an error of law and the determination of the question may add, or may likely to add, substantially the certainty of commercial law. This requirement indicates that the question should be one of wider and greater importance than, for example, the construction of a one-off clause in the context of the particular agreement between the parties."

76. With respect to the requirement under s.38(5)(b)(i) that there be a manifest error on the face of the award, the weight of authority is strongly to the effect that the error must be evident and obvious rather than merely arguable. See Promenade Investments Pty. Ltd. v. State of New South Wales (1992) 26 N.S.W.L.R. 203 at 225 (Sheller, J.A.) in which the view is expressed that the error of law must be more than merely arguable and that there should be "powerful reasons for considering on a preliminary basis, without any prolonged adversarial argument, that there is on the face on the award an error of law.

79. A similar view was expressed by Eames, J. in Tierney Pty. Ltd. v. Vanda Holdings Pty. Ltd. (1997) V.ConvR. 54,570 at 66,817. In Natoli v. Walker (unreported, New South Wales Court of Appeal, 10/2/95) Kirby, P. stated:

"Obviously, there is a difficulty in the word 'manifest'. What may be 'manifest' to one judicial officer may fail to persuade another. The criterion cannot be the swiftness of mind of the sharpest intellect. Nor can it be the perception of one whose whole career has been devoted to examining and reflecting upon building contracts. An objective, not a subjective, test for what is 'manifest' is contemplated. But the word will not go away. Against the background of its history in this context it requires swift and easy persuasion and rapid recognition of the suggested error. Otherwise, Parliament has taken the decision that it is better for the community as a whole that the parties should be held to their arbitral award. The price of lengthy exploration and reconsideration may prove warranted in a particular case. But, in the administration of justice as a whole, it is not. Expressed in economic terms, the marginal utility of the variations which will be achieved in particular cases is outweighed by the marginal cost of the delays, frustrations, uncertainties, inconvenience and legal and other expenses thereby necessitated. This will seem a harsh decision to those who can show error in an arbitrator's award. It will seem particularly harsh where an error of law can be shown. It may even seem intolerable where an arguable, but not 'manifest', error of law is demonstrated. But that is the choice which Parliament had deliberately taken. Judges must be faithful to that choice. They must obey it, even where their inclinations suggest that a detailed and painstaking review of the facts and the law might ultimately persuade them that the arbitrator has erred."

83. The cases are even more extensive: see Australian Gas Fields Ltd. v. Phillips Co. Aust & Anor. (unreported, 1 October 1998, Supreme Court of Queensland, Atkinson, J.); Re Tiki Village International [1994] 2 Qd.R. 674; and Re Caf-Grains [1994] 2 Qd.R. 252, and more recently in this State the decision of O'Bryan, J. in Allen v. Henry 1999 VSC 238 at p.9. The tension between the application of the principle of swift recognition of the error and the necessity, in what are frequently complex cases, to argue and demonstrate the error is not always simple to resolve. Some penetration of the intellectual process and legal analysis is bound to be necessary. In cases in which the judge hearing the application for leave to appeal in his judgment rapidly identifies an error and goes on to grant leave, and then hear the appeal himself or herself, the difficulty is more simply resolved. There can be other difficulties created if any detailed analysis of the submissions is undertaken with close consideration of whether an error had occurred. This might have a limiting effect upon the approach of another tribunal going on to consider the substance of the matter, if leave were granted. For that reason, one can perceive in some of the cases a disinclination to develop reasons for an error as being perceived and said to be manifest. In this case, I am relieved of those difficulties as the parties are in agreement that whatever the decision, I should consider only the aspect of whether leave should be granted. Applying those principles, I do not have much difficulty in concluding that there is no manifest error shown on the face of the award in respect of the issue of jurisdiction. The decision appears to me to be correct and no substantial injustice is done by leaving it unreversed.

86. Mr. Brett also developed an argument that there was strong evidence that the arbitrator had made an error of law(although it did not seem to me that his argument as to the meaning of strong evidence added much to the argument advanced in respect of the manifest error of law) but he added as a necessary ingredient the fulfilment of the requirements of s.38(5)(b)(ii) that the determination of "the question" (which I deem in his argument to be that the premises were not retail premises) may add or be likely to add substantially to the certainty of commercial law. I cannot accept this submission. Indeed, it would seem to me that it might have the opposite effect. As to the 'strong evidence' aspect, it may be doubted that that is merely a synonym for manifest error of law. It appears to be concerned with a case in which the circumstances would suggest that a conclusion or inference as to facts was not open, or a case in which there was some doubt about testimony or documentary evidence. See David's Distribution (Vic) Pty. Ltd. v. Danks (Beach, J., Supreme Court of Victoria, 2 September 1998). In that case he considered that the findings of fact by the arbitrator were manifestly erroneous. I am not satisfied that there is any evidence that the arbitrator made an error of law or that his determination of the questions of law raised would add substantially to the certainty of commercial law.

89. If the matters raised in s.38(5)(b) as to the inhibitions on the granting of leave are cumulative to (a), the argument was advanced on behalf of the applicant that the determination of the question of law could substantially affect the rights of one or more parties to the arbitration agreement. The questions of law concerned for this purpose were the same questions that arose in relation to the jurisdiction issue save that (a) was determined by the arbitrator without manifest error against the applicant. Determination of the question or questions concerning jurisdiction does not to my mind fall within s.38(5)(a) because the rights of the applicant are not affected within the meaning of that sub-section by a decision that there was jurisdiction in the arbitrator to proceed to determine what the rights in the circumstances of the applicant and the respondent respectively are. Put another way, a finding of jurisdiction does not substantially affect the rights of the applicant or the respondent, notwithstanding that if there is no jurisdiction there could be no consideration of their respective rights. Nevertheless there has been no adjudication about their rights, as I would interpret the meaning of 'rights' within that sub-section to be. It would follow that if there has been no determination regarding the rights of a party to the agreement there could not be grounded any appeal against the determination of rights. These matters are yet to be determined by the arbitrator.

92. On the issue of whether there was manifest error or strong evidence that the arbitrator made an error of law, there was considerable dispute on another issue, that is, as to eligibility to be a proprietary company, this issue arising by reason of the exclusion from the definition of "retail premises" in s.3(1) of the RTA of a subsidiary of a corporation within the meaning of the Corporations Law that would not be eligible to be incorporated in Victoria as a proprietary company. The arbitrator found that a corporation which fulfilled the requirements of s.116(2) of the Corporations Law was not a corporation which "would not be eligible to be incorporated in Victoria as a proprietary company".

95. The respondents' Notice of Contentions are to the effect that (1) the arbitrator erred in finding the respondents was a subsidiary within the meaning of the RTA of companies other than CF or CSA and (2) in finding that the respondent was a subsidiary, both under the RTA and the Corporations Law, of ISN and IH. From the perspective of the respondents, although it argues that those conclusions were incorrect, they produce no effect because the arbitrator concluded that the holding company could not be said to be ineligible to be incorporated in Victoria as a proprietary company. Mr. Brett argued that the test of eligibility for incorporation as a proprietary company as at 6th May 1998 was to be determined by an examination of the constituent documents (memorandum and articles of association) to see whether they contained the matters prescribed by Division 1 of the Corporations Law. He argued that each of them was ineligible to be incorporated because they failed to meet the criteria specified, that is to specify the nature of the alleged limited liability of those foreign corporations, in conformity with s.117(1) and 135(8)(iii) of the Law requirement that that be stated. He argued the absence of the words "proprietary limited" from their names was significant, they had no offices in Australia and they had only one director.

98. However, close attention must be paid to the language of s.116 of the Law in relation to the language of s.3(1)(d) of the RTA. The exclusion is founded upon a corporation that "would not be eligible", that is, it looks at the disqualifying characteristics and not the full array of matters required if the test was eligibility itself. Thus, Mr. Derham argued, it is by the criteria set out in s.116(2) that the legislature allows the company to seek relief from the normal requirements of reporting. He criticized the submissions made to the contrary, saying they proceeded upon the basis as though the company actually had to be a proprietary company in full compliance with the requirements of the Corporations Law if it were seeking registration as a proprietary company under the Corporations Law. This, he argued, was not the intendment of the sub-section because the RTA assumed that there may be tenants incorporated outside of Australia. According to the Award, the foreign companies each had a share capital and less than 50 members; those, in his contention, being the essential requirements for eligibility as a proprietary limited company. I note the submissions that were provided to the arbitrator in support of the arguments Mr. Derham advanced to me are to be found in Exhibit 7 to the affidavit of Ms Projekt. Mr. Derham submitted that the relevant holding company, ISN, was an overseas body corporate, as a commencing point. This then led on to the consideration of the exclusionary aspects. Thus he submitted that a corporation incorporated outside Australia is not necessarily a corporation that would not be eligible to be incorporated in Victoria. He disputed the submission that s.116(3) was the relevant consideration because that applied to all companies, not just proprietary companies. Similarly, he argued that with respect to s.117 of the Law that it could not have been the intention of the legislature that no company would be eligible unless it fulfilled every feature necessary for a corporate constitution under the Law. He relied on the Second Reading Speech (see Exhibit 5) p.1511. The effect of it was that the scope of the enactment was to cover premises held under a lease by companies including proprietary companies. He argued that there was no suggestion that compliance with all the requirements that might be required by the Corporations Law for all companies, including public companies, had to be met.

101. Moreover, Mr. Derham argued that from a consideration of ss.114, 115 and 116 of the Law, one could derive the essential characteristics for a company to be incorporated and remain registered as a proprietary company, or even to convert to a proprietary company. He claimed that when one went to the definition of retail premises in the RTA it was apparent that merely companies with the characteristics of paragraph (d) of the definition were contemplated.

104. I have said enough concerning the debate about this aspect. I regard it no differently from the issue concerning the time at which the assessment of the jurisdictional facts must be made. Whilst there may be arguments on either side there is no manifest error in the conclusion reached by the arbitrator on the question of non-eligibility. The respondent, of course, contended there was error by the arbitrator in the steps along the way, but that is not necessary for me to decide.

107. Accordingly, for the reasons advanced, I refuse leave to appeal from the decision of the arbitrator as to his jurisdiction.