Melvic Pty Limited v MPP Holdings Pty Limited

Supreme Court of NSW|2007-12-05|Before: Harrison J

Introduction 1 These are proceedings commenced by summons filed in this Court on 26 November 2007. The plaintiffs (Melvic Pty Limited and Peelmont Pty Limited) are the lessors of two adjoining properties at Belmont to which I will shortly refer. The defendant (MPP Holdings Pty Limited) is the tenant of those premises from which it conducts a pharmacy pursuant to what is agreed to be a retail shop lease. 2 By their summons, the plaintiffs seek declarations that two notices to quit issued respectively by the plaintiffs to the defendant on 30 October 2007 are valid. The summons seeks in addition an order that the defendant vacate the premises the subject of the notices to quit on or before 18 December 2007. Other relief is sought including an order that the proceedings be placed in the expedition list. 3 The matter came before me today in the duty list for determination of a notice of motion filed by the defendant on 4 December 2007. By that notice of motion the defendant seeks an order that the proceedings be transferred to the Administrative Decisions Tribunal pursuant to s 75 of the Retail Leases Act 1994 ("the Act"). Alternatively, the defendant seeks an order that the proceedings be stayed pursuant to s 68 of the Act until the Registrar of the Tribunal has certified in writing that the mediation has failed or that the Court is otherwise satisfied that mediation under Pt 8 of the Act is unlikely to resolve the dispute. Background 4 Section 75 of the Act is headed "Removal of Court Proceedings to the Tribunal". Sub-section (1) provides: "(1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that:

(b) the interests of justice do not require that the matter be dealt with by the court."

5 Section 63 of the Act is headed "Interpretation". In the usual way, it sets out a series of definitions of the terms used in the Act. One of those terms is "retail tenancy dispute" which that section defines to mean: "… any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates, and (without limiting the generality of the foregoing) includes a dispute about a security bond, but does not include a dispute of the kind referred to in section 19 (1) (b) or 31 (1) (b) as to the rent payable under a retail shop lease (where the rent is to be current market rent for the shop)." 6 Clause 13.2 of each lease is headed "Holding Over" and is in the following terms: "In the event of the Lessee holding over after the expiration or sooner determination of the term hereby granted with the consent of the Lessor, the Lessee shall become a monthly tenant only of the Lessor such tenancy to be terminable by no less than one month's notice at a monthly rental equivalent to a monthly proportion of the total yearly rent and Outgoings payable by the Lessee hereunder at the expiration or sooner determination of such term and otherwise on the said terms and conditions, mutatis mutandis, as those herein contained, so far as applicable." 7 The notices to quit that are the subject of the prayers for relief in the plaintiffs' summons are in identical terms, save for the name of the lessor in each case. They are dated 30 October 2007 and addressed to the defendant. Each provides relevantly as follows: "Take notice that [the lessor] of the premises being that part of Ground Floor 558 Pacific Highway, Belmont, formerly known as "Soul Pattinson Pharmacy" having an area of [stated] square metres under lease dated 19 May 1997 requires you to quit and deliver up the premises on 18 December 2007." 8 Each notice to quit gave the defendant a period of precisely 49 days to quit and deliver up occupation of the premises to the plaintiffs. 9 The defendant's application for removal of the proceedings to the Tribunal is based upon a contention that the notices to quit are in some way invalid or that the lessors have somehow failed (albeit in an unspecified way) to comply with the requirements of cl 13.2 of the leases. Mr Ogborne of counsel, who appears for the defendant, argues that whereas the existence of a retail shop lease is not in dispute, there is in the circumstances, as I have previously outlined, a dispute concerning the extent of compliance by the lessors with their contractual obligations.

Consideration 10 My attention has been drawn by Mr Ogborne to the decision of Palmer J in GPT Management Limited v Spa Heaven Pty Limited [2005] NSWSC 1043. That was a case in which the plaintiffs were lessors and the first and second defendants were lessees of retail shop premises in the Erina Fair Shopping Centre on the Central Coast. On 27 October 2004 the plaintiffs terminated the lease for non-payment of rent and other moneys said to be due under it. On 29 March 2005 the plaintiff entered into a lease of the shop with another tenant. 11 By their amended summons in that case, the plaintiffs sought judgment against the defendants for a sum in excess of $200,000 comprising a liquidated amount of nearly $85,000, being the balance of rent outstanding to the date of termination together with a further amount of nearly $116,000, being unliquidated damages for loss of rent for the period between the date of termination and the execution of the new lease with another tenant. The defendants did not put in issue the plaintiff's claims for the money or that the lease had been validly terminated other than to contend that they were not indebted to the plaintiffs in the amount claimed for unliquidated damages on the ground that the plaintiffs had not used reasonable endeavours to mitigate their loss by finding a new tenant earlier than they did. 12 His Honour was called upon in that case to deal with the meaning of "retail tenancy dispute". Commencing at par [14] of the judgment his Honour dealt with the matter in the following terms: "[14] The definition of ' retail tenancy dispute ' in s 63(1) is exceedingly broad and, clearly enough, it is intentionally so. The fundamental object of the retail tenancy legislation enacted in the States and Territories of Australia is to protect the weak against the strong, i.e. the small retail tenant against the large retail lessor." (authorities cited omitted)

"[15] Part of the legislative policy of protection of retail tenants is that there should be mediation rather than litigation. The policy is evidenced in s 75(2), which requires Courts to have regard to ' the general principle ' that retail tenancy disputes should be dealt with, not by the Court, but by the special tribunal established to deal with such matters … "

"[16] It is because the policy of the Act is to encourage parties to retail leases to discuss their differences constructively before resorting to legal proceedings that the definition of ' retail tenancy dispute ' in s 63(1) is so wide. Within the purview of Pt 8 is ' any dispute concerning ' the liabilities or obligations of a party to a retail lease. That does not mean that the dispute is confined to legal issues, such as the existence or extent of an alleged legally enforceable liability or obligation. The dispute may be concerned with broader questions of fairness as to how an admitted legal liability may, or should, be enforced."

13 There can be no issue that in that case a dispute existed between the plaintiffs and the defendants as to the extent of the defendants' liability to the plaintiffs having regard to their contention that the plaintiffs had failed properly or adequately, and possibly at all, to mitigate their loss by re-leasing the premises in a timely way. That dispute, it seems to me with respect, fell squarely within the terms of the definition of "retail tenancy dispute" in s 63 to which I have referred. Indeed, as his Honour indicated, the definition is extremely wide and must be read in the context of the Act as a whole, generally understood as remedial legislation. 14 Mr Lawson of counsel, on behalf of the plaintiffs, seeks to distinguish that case from the present circumstances. He argues in opposition to the transfer of the proceedings to the Tribunal that notwithstanding the wide and somewhat benign terms of the legislation and, in particular, the all-embracing nature of the definition of "retail tenancy dispute", it must nevertheless be demonstrated that a dispute in fact exists or, in other words, that the dispute must exist as a matter of substance and not merely as a matter of description. He draws to my attention the fact that there is not in existence in the present proceedings any cross claim or other prayers for relief which give rise to an issue beyond that contended for by the defendants which could arguably amount to a "retail tenancy dispute". 15 Mr Lawson emphasises, for example, that there is neither any dispute as to the plaintiff's entitlement to issue the notices to quit nor any prima facie issue as to their validly, or otherwise. 16 In my opinion, the definition of "retail tenancy dispute", although undoubtedly wide, is predicated upon the existence of a genuine dispute in fact. 17 I have been assisted by Mr Ogborne's customarily thorough submissions but I am unable presently to discern what is or may be the true nature of a dispute of substance between the defendant and the plaintiffs arising out of the notices to quit. The leases were for a pharmacy. I am informed that the defendant wishes to relocate its current pharmacy business to new premises. Regulations in force apparently prevent the defendant from transferring such a business from the premises it presently occupies to new premises before certain things occur. The details of those regulations are not presently significant. 18 It follows that if notices to quit validly require the defendant to vacate the premises by 18 December 2007, the business conducted from those premises could not, and probably will not, be relocated to new premises until some time apparently early in the New Year. It is submitted on behalf of the defendants, and for present purposes I accept, that that will carry with it some inconvenience and dislocation, including presumably loss of income, whilst the business remains inoperable. 19 Mr Ogborne argues that the interpretation of cl 13.2 of each of the leases should be read subject to an implied understanding that the power to issue notices for which it provides could only be exercised reasonably. For present purposes, such a contention can be accepted as uncontroversial. The extent to which the defendant can rely upon it for any practical benefit, however, is doubtful. For example, I am unable to identify how any application of a principle of reasonableness in contractual dealings between the plaintiffs and the defendant in this case could be used to elevate the defendant's attitude to a pending eviction to the level of an identifiable dispute concerning or arising out of the notices to quit. 20 I referred during the course of submissions by counsel to the need for the dispute to be bona fide. In using that expression I did not mean pejoratively to suggest that the defendant in this case, through some inappropriate means or illegitimate artifice, was attempting to avoid the consequences that will flow from a requirement that it vacate the premises, if that is what is to occur. I intended by the use of that expression simply to convey that any interpretation of the statutory definition of "retail tenancy dispute" should not in my view be considered in a vacuum, but that some flesh must be added to the bones of that inquiry before it can be ascertained whether or not a relevant retail tenancy dispute exists. A "dispute" in this context must amount to something more than mere opposition to a course of conduct, such as the service of an unwelcome notice to quit, or concern at the prospect of an anticipated or threatened event, such as eviction from leased premises. Conclusion 21 Doing the best I can in the present circumstances, I am unable to identify such a dispute. Although it does not therefore arise, it would have been my view that for the purposes of s 75 of the Act the interests of justice would, in any event, have required that this Court deal with this matter. A transfer to the Tribunal may well be something that could occur in a timely and relatively inexpensive way. I am not provided with information upon the basis of which I can form a view about that one way or the other. 22 It seems to me, however, that the issue for determination, if the matter is to remain in this Court, consists in a consideration of the notices to quit to which I have already referred. Although I would not wish to foreclose upon a final decision about it by me or anyone, the validity of the notices to quit in each case does not presently strike me as an overly complicated legal or jurisprudential exercise and the interests of justice would, in my mind, favour attention to that issue in this Court if a quick and cheap disposition of it is to be achieved. Result 23 In those circumstances, the defendant's application that the proceedings be transferred to the Administrative Decisions Tribunal pursuant to s 75 of the Act is dismissed. 24 I direct the parties, with or without the interposition of a mediator, to mediate what remains outstanding between them by no later than the close of business on Friday 14 December 2007 and that the solicitor for the plaintiffs by letter notify the Registrar of the Common Law Division of the result of the mediation by no later than 4.00pm the following Monday, 17 December 2007. 25 I will stand the matter over for hearing on Monday 17 December in the duty list. Costs are reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Melvic Pty Limited v MPP Holdings Pty Limited [2007] NSWSC 1433

CASES CITED : GTP Management Limited v Spa Heaven Pty Limited [2005] NSWSC 1043

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Cases Cited (2)