Plaintiff v Defendants

2 The proceeding arises from leases entered into by the plaintiff with each of the first and second defendants of premises from which to conduct child care centres. In 2006 the plaintiff entered into a lease with the first defendant of a child care centre at Euroa for term a of 10 years and with the second defendant for a child care centre at Riddells Creek for a term of 10 years. At that time the plaintiff was a subsidiary of A.B.C. Learning Centres Limited which at the time was a listed corporation within the meaning of s 9 of the Corporations Act 2001 (Cth). A consequence of that relationship was to exclude the leases from the meaning of "retail premises" under the Retail Leases Act 2003 (Vic)[1] ("the Act") and not to enliven the application of its provisions.[2] A.B.C. Learning Centres Limited was, however, delisted from the stock exchange on 31 August 2009. The delisting of the parent company had, as one of its consequences, the effect of enlivening the provisions of the Act. That is because s 82 of the Act provides that Part 10 applies to a lease of premises that are "retail premises at any time during the lease". The plaintiff's contention is that, and for present purposes it may be accepted that, as from 31 August 2009 (that is, from the plaintiff's parent company being delisted), the leases became leases of retail premises for the purposes of Part 10 of the Act and are governed by its provisions. The defendant maintained that the Court nonetheless lacks jurisdiction to hear and determine the plaintiff's claim by reason of s 89(4) of the Act and that, in any event, the pleading as drawn is insufficient to maintain the action for breach of the covenants concerning assignment.

3 The jurisdictional claim is based upon s 89(4) of the Act which confers exclusive jurisdiction upon VCAT over retail tenancy disputes except (relevantly) for applications for relief against forfeiture. Section 89(1) of the Act provides that VCAT has jurisdiction to hear and determine an application by a landlord or a tenant under a retail premises lease, or by a specialist retail valuer, seeking the resolution of a "retail tenancy dispute". Section 81(1) defines a "retail tenancy dispute" to mean, amongst other things, a dispute between a landlord and a tenant arising under or in relation to a "retail premises lease" to which the Act applies or applied. Section 89(4) restricts the jurisdiction of this and other Courts from hearing retail tenancy disputes by providing:

Subject to section 23(4) (key-money and goodwill payments prohibited), a retail tenancy dispute other than -

(a) an application for relief against forfeiture; or

(b) a claim under Part 9 (Unconscionable Conduct) -

is not justiciable before any other tribunal or a court or person acting judicially within the meaning of the Evidence (Miscellaneous Provisions) Act 1958.

Section 98 makes clear that s 89(4) was intended to alter the jurisdiction of this Court by preventing this Court from hearing a retail tenancy dispute other than an application for relief against forfeiture or a claim for unconscionable conduct under Part 9 of the Act. Section 98 of the Act provides that it was the intention of s 89(4) "to alter or vary" s 85 of the Constitution Act 1975 (Vic). Section 85 of the Constitution Act 1975 (Vic) confers upon this Court its jurisdiction as the superior Court of Victoria "with unlimited jurisdiction". The defendants contended, therefore, that s 89(4) of the Act expressly reduces the otherwise unlimited jurisdiction of this Court to hear a retail tenancy dispute and that the plaintiff's claim cannot be maintained in this Court except in so far as s 89 preserves for this Court jurisdiction on "an application for relief against forfeiture".

4 The plaintiff's answer to the jurisdictional issue is that the Court is not confined, as the defendants contended, provided that it is properly seized with a claim that is within its jurisdiction. The plaintiff's contention is that once a claim for relief against forfeiture is properly made the Court has accrued jurisdiction to entertain related matters and to grant other relief. It calls in aide of that submission the dicta in Xiao v Perpetual Trustee Company Ltd[3] where Vickery J said:

[O]nce the Court is properly seized of jurisdiction in relation to the claim for relief against forfeiture, the Court has jurisdiction to entertain the other related claims made by the plaintiff and grant the relief sought on any of the other claims, should it be found that any of them have been established. The principle of accrued jurisdiction confers jurisdiction on a Court to deal with matters incidental to but relevantly connected with the claim in respect of which the Court has jurisdiction directly conferred upon it, by entertaining all of the matters which are linked in the controversy between the parties and making such remedial orders within its power as may be necessary or convenient.

The defendants contended that this dicta should not be followed or applied in this proceeding. His Honour based his conclusion upon the reasoning in the decisions which had considered the accrued jurisdiction of the Federal Court. To those considerations may be added good sense and expeditious disposition of litigation. It is obviously desirable for litigants to have their disputes dealt with once and for all as inexpensively and expeditiously as possible. It is generally desirable that a litigant commencing a proceeding within the jurisdiction of this Court should be able to have determined once, and in one process, all of the common matters relating to a single controversy between them.

5 The difficulty I have in following his Honour's conclusion is that, unlike the accrued jurisdiction of the Federal Court, the jurisdiction of this Court was expressly removed by s 89(4) of the Act through the Parliament's deliberate and conscious intention to adopt the process required by s 85(5) of the Constitution Act 1975 (Vic) for the specific purpose of limiting the jurisdiction of this Court. In my view the jurisdiction expressly excluded by the legislature is not reconferred, re-enlivened or reactivated by a litigant bringing an action which is within jurisdiction. To hold otherwise would, in my view, be to act contrary to a clear dictate of Parliament. That may produce an undesirable policy outcome from one point of view (namely, that this Court cannot decide all of the matters and disputes between the parties) but such an outcome may be thought to be in furtherance of the broader policy outcome of channelling all disputes of this kind, including the forfeiture claim, to VCAT. Indeed, counsel for the plaintiff candidly, and rightly, conceded that the proceeding commenced in this Court could wholly have been brought in VCAT (including the relief against forfeiture claim). I am reluctant to depart from an earlier decision of this Court, but should do so if I consider it to be erroneous.[4] In my view the only proceeding which may be brought by the plaintiff in this Court is an application for relief against forfeiture. To the extent that the plaintiff's claim is wider than that it must be dismissed. I am comforted in my view having noticed after drafting my reasons the extra judicial views expressed to like effect about the decision in Xiao by Dr Croft (as his Honour then was) and Mr Hay in Croft and Hay, Retail Leases Victoria.[5]

6 The pleading issue is essentially that certain paragraphs of the statement of claim should be struck out from the pleading because they do not disclose an existing cause of action. The point made is that the plaintiff's claim of an alleged breach of the assignment covenant is not maintainable because, on the pleadings, there was no lease with operative rights as at the date the breach is alleged to have occurred. Indeed, success on the claim for relief against forfeiture is critical to success on the claim of alleged breach of the assignment covenants.

7 The plaintiff's statement of claim pleads that the first and second defendants had served a notice of re-entry dated 22 December 2008 and that thereby they gave notice that they each re-entered their property "and terminated" the leases, demanding immediate possession. The allegation of a breach of the assignment covenants in the leases is alleged to have occurred some 12 months after the date of notice of re-entry and termination of the leases. On the current pleading, therefore, the plaintiff's claim in respect of the alleged breach of the assignment covenants is not maintainable as at the date of the request for an assignment which the defendants contended was made in December 2009. At the time when the assignment was sought, as pleaded, the defendants were under no obligation to consider the request since the leases had been terminated and, therefore, there could not have been a breach of the relevant covenant.

8 In the circumstances there should be struck out from the statement of claim those paragraphs relating to the alleged assignment breach and those paragraphs in the prayers for relief seeking relief other than from forfeiture. Counsel for the plaintiff maintained that the only paragraphs from the statement of claim to be struck out in that event are paragraphs 29 and 30 because the other paragraphs are sought to be relied upon in the claim for relief against forfeiture. Paragraphs 29, 30 and 31 plead affirmative breaches of leases which the pleading presupposes to be in existence and, therefore, should be struck out. Many of the preceding paragraphs in the statement of claim plead facts which seem more apt to the alleged breach of the assignment covenants than to the claim for relief against forfeiture, however, I cannot say that they cannot be made to have a bearing upon the latter. In the circumstances I shall not order that those paragraphs of the statement of claim be struck out but counsel may do well to consider whether they need amendment.

9 The final matter to consider concerns the costs of this proceeding. The first and second defendants have substantially succeeded in their application and are entitled to costs on the usual basis. I am not inclined to order costs on any higher basis in view of the decision in Xiao. The plaintiff's position was not untenable in light of that decision and it has not engaged in conduct that would warrant the Court showing any displeasure through a more burdensome costs order than would ordinarily follow from an unsuccessful hearing.

10 Accordingly, there will be orders (a) striking out paragraphs 29, 30 and 31 of the statement of claim, and paragraphs B, C, D and G of the prayer for relief and (b) that the plaintiff pay the costs of the first and second defendants on and in relation to the summons dated 8 June 2010.

A.B.C. DEVELOPMENTAL LEARNING CENTRES PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED) (ACN 010 788 501)

[2] Retail Leases Act 2003 (Vic) s 11.

[3] [2008] VSC 412 (Unreported, Vickery J, 13 October 2008) 4.

[4] Booth v Ward [2007] VSC 364; (2007) 17 VR 195, 48 (Cavanough J); Zotovic v Dobel Boat Hire Pty Ltd (1985) 62 ACTR 29, 32 (Blackburn CJ).

[5] LexisNexis Butterworths, Retail Leases Victoria, vol 1 (at service number 10) 112,054-112,057.