Towercom Pty Ltd v Strathfield Group Limited [2000] VSC 370

Supreme Court of Victoria|2000-09-15|Before: O'BRYAN, J.

The defendant (applicant) issued a summons on 5 July 2000 seeking:

1. A declaration that pursuant to s.35 of the Retail Tenancies Reform Act 1998, the Victorian Civil and Administrative Tribunal is the appropriate forum for the determination of this proceeding.

2. An order that the writ in this proceeding be set aside.

This is the return of the summons after referral from the Master's Court to this Court.

By a lease dated 3 April 1997, George McDonald leased the land and buildings (the said land) situate at and known as 74-78 Sydney Road, Brunswick, to Strathfield Car Radios Pty. Ltd. for a term of four years commencing on 1 July 1996. The lease could be renewed for a further term of four years if the tenant requested the renewal in writing not more than six months nor less than three months before the end of the term. Effectively, this meant that notice of renewal had to be given by the tenant to the landlord between 1 January and 31 March 2000.

On 24 September 1997 the plaintiff (respondent) purchased the said land from the said McDonald subject to the lease and, on 26 November 1997, became the registered proprietor of the said land and entitled to possession of the said land at the expiration of the term of the lease.

On 3 April 1997, when the lease commenced, the defendant (applicant) was a proprietary company registered in the Australian Capital Territory. On or about 17 April 1998 the defendant (applicant) changed its name to Strathfield Group Limited and its type to a listed public company.

By letter, dated 26 April 2000, the plaintiff (respondent) gave notice to the defendant (applicant) that the defendant had not given notice of renewal of the lease for a further term of four years from 1 July 2000 in accordance with the terms of the lease, or at all, and that the plaintiff (respondent) required possession of the said land on and from the expiration of the term of the lease on 30 June 2000.

By letters dated 2 and 22 May 2000 the defendant (applicant) asserted that it renewed the lease for a further term and denied that the plaintiff (respondent) is entitled to possession of the said land.

On 1 June 2000 the plaintiff (respondent) issued the writ in this proceeding claiming:

A. A declaration that the lease will determine according to its terms at midnight on 30 June 2000; and

B. A declaration that on and from the determination of the lease the plaintiff (respondent) is entitled to possession of the said land.

On 15 June 2000 the defendant (respondent) issued Application No. R100/2000 in the Retail Tenancies List of the Victorian Civil and Administrative Tribunal seeking injunctive relief against the plaintiff (respondent) restraining it from taking possession of the said land.

The basis for the Victorian Civil and Administrative Tribunal proceeding is the defendant's assertion that at all material times the said land constituted retail premises within the meaning of the Retail Tenancies Reform Act 1998 (the 1998 Act) and that the dispute between the plaintiff and the defendant arises under or in relation to a "retail premises lease" only justiciable before the Victorian Civil and Administrative Tribunal and not justiciable before this Court. See Part 3 of the 1998 Act and in particular ss.33, 34 and 35.

The summons earlier referred to was issued for the purpose of upholding the jurisdiction of the Victorian Civil and Administrative Tribunal.

At the commencement of the hearing Dr. Croft, one of Her Majesty's counsel who appeared with Mr. Hanak of counsel of the plaintiff (respondent), was given leave to amend the statement of claim. The effect of the amendments is not of consequence to the matters raised in the summons. A new paragraph 10 asserts that the defendant (applicant) has remained in possession of the said land on and from 30 June 2000 and has refused to deliver up possession to the plaintiff (respondent) and a claim is made for possession of the said land.

When the lease commenced, the relevant legislation was the Retail Tenancies Act 1986. In the 1986 Act "retail premises" was defined in s.3(1):

"Retail Premises means 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, but does not include - (a) Not relevant; (b) Not relevant; (c) Not relevant; (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 (e) Not relevant."

Lease was defined to mean a lease or sub-lease having a term of not less than one year and included an agreement for such a lease or sub-lease.

By s.4(1) the whole of the 1986 Act applied to a "retail premises lease" that was entered into after the commencement of s.4 unless the lease was entered into under an option granted or agreement made before that commencement. "Retail premises lease" is not defined in either the 1986 Act or the 1998 Act.

By Part 3 (s.21) any dispute between a landlord and a tenant arising under a "retail premises lease", other than a claim by the landlord solely for the payment of rent or a dispute which was capable of being determined by a registered valuer under ss.10, 11 or 13, must be referred to arbitration in accordance with Part 3.

It is agreed by the parties that when the lease of the said land commenced the lease satisfied each of the requirements of a "retail premises lease" pursuant to the 1986 Act. However, a statement of agreed facts contains the following paragraphs which show a change in the status of the defendant occurred on or about 17 April 1998.

"1. The defendant is a corporation incorporated under the Corporations Law in the Australian Capital Territory having been incorporated on 25 September 1991. 2. Between the period 2 March 1993 to 16 April 1998 the defendant was known as Strathfield Car Radios Pty. Limited and during that period was an Australian proprietary company. 3. Since on or about 17 April 1998 the defendant has been admitted to the official list for quotation of its shares on the Australian Stock Exchange and as such it is a listed public company."

In 1998 the Retail Tenancies Reform Act was enacted. Sections 1 to 7 came into force on 28 April 1998, ss.8 to 52 on 1 July 1998. Part 3 of the 1998 Act introduced a significant change in the dispute resolution process with respect to disputes between a landlord and a tenant arising under or in relation to a "retail premises lease". By s.34(2), Part 3 applies to a dispute arising under a "retail premises lease" to which the 1986 Act applies. By s.35(2) a dispute between a landlord and a tenant arising under or in relation to a "retail premises lease" is not justiciable before any tribunal other than the Victorian Civil and Administrative Tribunal or before any court or person acting judicially.

The definition of retail premises is unchanged by the 1998 Act.

A critical question for determination in the present proceeding is whether a "retail premises lease" at commencement of the lease ceases to be a "retail premises lease" if, before the end of the term, the premises to which the lease relates is held as a tenant by a corporation within the meaning of the Corporations Law that would not be eligible to be incorporated in Victoria as a proprietary company.

It cannot be gainsaid that for the purposes of the 1986 Act a "retail premises lease" for a term of four years was entered into when, under the lease, Strathfield Car Radios Pty. Limited entered into possession of the said land on 1 July 1996. On or about 17 April 1998 Strathfield Car Radios Pty. Ltd. became a listed public company named Strathfield Group Limited and was ineligible to be incorporated as a proprietary company.

What is the effect of the change in corporate type of the defendant from a proprietary limited company to a publicly listed company?

Mr. Grahame of counsel who appeared for the defendant (applicant) submitted that the change in type or status had no effect on the application of s.35 of the 1998 Act to the facts of this case. Mr. Grahame argued that support for this proposition is gained from: (a) the Minister's second reading speech; (b) the provisions of the 1986 Act; (c) s.166 of the Corporations Law. I read the Ministers' speeches (23 October 1986 and 8 April 1998) but found nothing in the speeches to support Mr. Grahame's proposition. Both the 1986 and the 1998 Acts are singularly unhelpful in resolving the issue raised in this proceeding. Given that one of the purposes of the Act is to provide protection to smaller retail tenants occupying retail premises as defined, the exclusion of a corporation not eligible to be incorporated in Victoria as a proprietary company is significant in distinguishing between a smaller retail tenant in need of protection and a retail tenant not so in need. The Corporations Law section which states that a change in the status of a company from a proprietary company to a non-proprietary company does not affect the property, or the rights or obligations, of the company is of no assistance to the defendant, in my opinion. Neither the property, nor the rights or obligations of the defendant are affected in a relevant way should the Court determine that the Victorian Civil and Administrative Tribunal does not have jurisdiction to determine this dispute for in that event this Court will determine the dispute according to law.

The purpose of the 1998 Act is to reform the law relating to retail tenancies (s.5). Part 2 contains a number of provisions designed to give protection to tenants who are in an unequal or inferior bargaining position to the landlord. Examples are: S.8: Disclosure; S.10: Tenant to be given copy of lease; S.11: Key-money and goodwill; S.12: Rent Review; S.15: Right to at least five years tenancy. This dispute is very much concerned with the option that a lease gives a tenant under s.15(1), known as a "statutory option". It is unnecessary to consider in detail the operation of s.15. The plaintiff alleges in this proceeding that the defendant failed to exercise the option in the lease in the manner prescribed by the lease. The defendant alleges a dispute is on foot between it and the plaintiff as to whether or not the statutory option is exercisable, or the lease is renewable under the option; and that the Victorian Civil and Administrative Tribunal has power to resolve the dispute. If Victorian Civil and Administrative Tribunal does not have exclusive jurisdiction to resolve the dispute it will be on the ground that the said land was not let by way of a "retail premises lease" when the dispute arose.

It is beyond argument that this Court should determine for itself whether it has jurisdiction to determine the dispute and not leave the question to the Victorian Civil and Administrative Tribunal. See Waterend Pty. Ltd. v. Ennis Hickey and Co. Pty. Ltd. [1992] VicRp 29; (1992) 1 V.R. 430. Whether the said land constituted retail premises after the status of the defendant changed, on or about 17 April 1998, and remained so when the dispute arose on 1 June 2000, is appropriate for decision in this Court.

Dr. Croft submitted that the defendant's change of status simply means that the company lost the protection of Part 3 of the 1986 Act and the 1998 Act did not restore the protection of Part 3 since the lease had not been extended by the exercise by the defendant of the option for renewal.

Because the dispute arose before the option was exercised, the lease is subject to the 1986 Act, in my opinion. The 1998 Act repeated the excepting provisions of the 1986 Act. Consequently, if the 1998 Act applied the lease was not a retail tenancy lease when the dispute arose.

The recent decision of the Court of Appeal in Ensabella & Sons Pty. Ltd. v. Players on DownUnder Pty. Ltd. (2 May 2000) was not concerned with the issue which falls for decision in this case. The decision of Hedigan, J. in Leung v. Hungry Jack's Pty. Ltd. 2000 V. Conv. R. 54-614 is the only decision discovered by counsel which has considered the question of the jurisdiction of the arbitrator to hear and determine a dispute between a landlord and a tenant involving a retail tenancies lease pursuant to Part 3 of the 1986 Act.

In Leung, when the original lease was entered into in September 1988 the tenant was a public company. In September 1997 the tenant had converted to a proprietary company and by the date of the Notice of Dispute (5 May 1998) the tenant was a proprietary company. Following submissions by the parties as to the jurisdiction of the arbitrator to hear and determine the dispute the arbitrator ruled that the relevant date for determining whether the premises were retail premises within the meaning of s.3(1) of the 1986 Act was the date of the Notice of Dispute. The landlord had argued 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. He argued that because the tenant was a public company when the relationship of landlord and tenant was entered into the premises were not retail premises and, accordingly, the lease was not a "retail premises lease". The arbitrator dealt with the issue of jurisdiction as a preliminary issue. He rejected the argument for the tenant that Parliament could not have intended that premises come within or outside the Act by a unilateral action of the tenant becoming or ceasing to be a public company. Consistently with a previous award made by the arbitrator in Vanda W. Holdings Pty. Ltd. 1997 V. Conv. R. 58-526, the arbitrator said: "I believe that the general rule for determining when the jurisdiction of a court or tribunal must be established is the date of the institution of the proceedings." He cited Laurie v. Carroll [1958] HCA 4; (1958) 98 C.L.R. 310, Razelos v. Razelos (1969) 3 A.E.R. 929. In the context of the Retail Tenancies Act, he relied upon the views expressed by Mandie, J. in Galtieri v. Baniscas (1994) V. Conv. R. 54-504 and Gobbo J. in Haider v. Blendale Pty. Ltd. [1993] VicRp 89; (1993) 2 V.R. 524 at 527.

A change in status of a company from a proprietary company to a public company is a voluntary act by the company for commercial reasons which may include a deliberate decision by the company not to maintain the protection afforded to it by the Retail Tenancy Act.

The matter was considered by Hedigan, J. by way of appeal pursuant to s.38(5) of the Commercial Arbitration Act 1984. The requirement of s.38(5)(b)(i) is that a manifest error on the face of the award must be shown to institute an appeal against an arbitrator's award. His Honour concluded that no manifest error was shown on the face of the award in respect of the issue of jurisdiction.

The facts in Leung were the converse of the facts in the present case. In the present case the tenant company converted from a proprietary company to become a public company. It was not eligible to be incorporated in Victoria as a proprietary company when the dispute arose. It could convert from public to proprietary company (s.70 of the Corporations Law) but did not choose to do so.

I am of the opinion that premises leased as "retail premises" can cease to be "retail premises" during the term of the lease if any of the disqualifying characteristics specified in s.3(1)(a), (b), (c), (d) or (e) occur. The converse may create a "retail premises lease" for the purposes of the Act. Premises under the terms of a lease may become "retail premises" because the disqualifying characteristics specified no longer disqualify the premises and the tenant from the protection afforded by the Act.

In my view, when the dispute arose concerning the option, the plaintiff was entitled to seek resolution of the dispute in this Court. Section 35(2) did not apply. Orders will be made as follows:

2. Leave is granted to the plaintiff to amend the statement of claim dated 4 September 2000.

3. The question of costs is reserved for argument.

Retail Tenancies Reform Act 1998

Arbitration Act 1984

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