Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd & Ors

Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd & Ors - [2012] VCAT 1442 - VCAT 2012 case summary — Zoe

[5]

This interlocutory proceeding arises after long and protracted litigation between the parties, which culminated, at least in part, in a determination by the Tribunal on 1 December 2011 ('the Earlier Proceeding'). That determination required the First Respondent to pay the Applicant damages of $218,599.63 plus interest.
The nature of the dispute comprising the Earlier Proceeding is not dissimilar to what is before the Tribunal in this proceeding. In essence, the Applicant ('the Tenant') leased retail premises located in Brighton ('the Premises') from the First Respondent ('the Landlord') pursuant to a lease agreement dated 10 November 2006 ('the Lease'). The Premises have long suffered from water ingress and moisture problems, leading to the Premises being unfit for occupation. As a result, the Tenant was awarded damages commensurate with its loss occasioned by the inability to occupy and trade from the Premises.
The orders made by the Tribunal on 1 December 2011 awarded damages up until the 31 December 2011 (paragraph 311) and it would appear from the published Reasons that this date was selected on the assumption that the Premises would be repaired and fit for occupation sometime in January 2012. According to the Tenant, this has not occurred. It contends that the Premises remain unfit for occupation and that work is still to be completed to remedy the water ingress and moisture problems.
Consequently, the Tenant has not re-occupied or re-commenced trading from the Premises. As was the case in the Earlier Proceeding, the Tenant now claims loss and damage based on its inability to re-occupy and trade from the Premises. In particular, it claims:
- (a) loss of the value of the business goodwill of $40,000; and
- (b) loss of profits from 1 January 2012 and continuing.
On 15 June 2012, the Landlord served the Tenant with a default notice purporting to be a notice under s.146 of the Property Law Act 1958 ('the Notice of Default'). The Notice of Default alleged that the Tenant had assigned the Lease without the consent of the Landlord and contrary to the terms of the Lease. The 'assignment' was said to have occurred because the directors and shareholders of the Tenant had changed, which the Lease deemed to constitute an assignment of the Lease.
By further correspondence dated 24 July 2012, the Landlord gave notice to the Tenant that as the breaches referred to in the Notice of Default had not been rectified; the Lease was at an end.
By this interlocutory application, the Respondents raise a number of issues arising out of the matters referred to above and in defence to the Tenant's claim:
- (a) First, they contend that the lease between the parties was lawfully terminated on 24 July 2012. Therefore, any claimed loss of profits cannot extend past that date. Similarly, there is no basis to claim for the loss of the goodwill value in the absence of a leasehold interest.
- (b) Second, they say that the current proceeding is res judicata because what is claimed has already been heard and determined in the Earlier Proceeding.
- (c) Third, and in the alternative, they contend that that no claim lies against the Second and Third Respondents at law, based on the current pleading. In that regard, they contend that the claims against the Second and Third Respondents should be struck out pursuant to s.75 of the Victorian Civil and Administrative Tribunal Act 1998.
Having regard to the issues raised by the Respondents, a number of questions were set aside for preliminary hearing in Order 2 of the Tribunal's orders dated 24 August 2012:
- (a) Has the lease dated 27 June 2006 being lawfully terminated?
- (b) If yes to question (a), does the Applicant otherwise occupy the premises pursuant to a valid lease agreement?
- (c) If yes to question (a), and no to question (b), does the Applicant have any cause of action against the respondents in this proceeding?
My comments and findings in answer to these questions are set out hereunder.

[25]

In paragraph 7 of her Affidavit Irena Spaleta states that she sent a letter to me on 8 July 2011 informing the Respondents of changes to be made to the Applicant's ownership and its directors. She exhibits what she claims is a copy of the letter as her exhibit IS-1. That statement is untrue. I have never received such a letter, and I first became aware of the purported letter dated 8 July 2011 when I received and read the Affidavit.
In paragraph 23 of her Affidavit Ms Spaleta further states that on 21 December 2011 she wrote and sent a letter to me advising me that she had become bankrupt and that her husband Bob Spaleta was the sole owner and director of the Applicant...
That statement is also untrue. I have never received such a letter. I first became aware of the letter dated 21 December 2011 when I received and read a letter from the Applicant to my solicitors... dated 5 July 2012 enclosing a copy of the said letter.
I do not recall receiving the letters described in paragraph 4 and 5 herein in or about 8 July 2011 or 21 December 2011 respectively, and do not believe that I have received them or that they were sent to me.
Mr Gronow of counsel, who appeared on behalf of the Respondent, argued that there were two modes of service available to the Tenant in order to effect good service of the 8 July letter. It could have posted the letter to the Landlord's nominated address for service set out in the Lease or it could have served the letter in accordance with s.109X of the Corporations Law 2001 (Cth). In the latter case, this would require the letter to be either posted to the registered office of the Landlord or personally served on Mrs Houghton, a director of the Landlord.[1] However, neither option was adopted. Instead, the letter was posted to Mrs Houghton's residential address. It was not personally served and Mrs Houghton deposes to never having received the letter. Therefore, service of that letter is said to be ineffective.
Mr Gronow argued that it was of no consequence whether the letter was sent by post because there is no evidence that the letter was ever received by the Landlord or Mrs Houghton. He referred to Woodgate v Garard Pty Ltd,[2] a decision concerning service of a statutory demand. In Woodgate, Palmer J distinguished between what he referred to as the prescribed modes of service pursuant to s.109X of the Corporations Act 2001 (Cth) and what he referred to as informal service. His Honour stated:

[41]

Mr Spaleta argued that knowledge of the change in directorship and shareholding weighed against the Landlord's failure to act until after this proceeding was issued entitles the Tenant to raise a defence of laches. In particular, he contends that the Landlord had knowledge of the changes and further proposed changes in the directorship and shareholding of the Tenant by 21 September 2011 or at the very latest at the costs hearing on 21 December 2011, when the issue was raised during the course of the Tribunal hearing. However, the Landlord chose not to act on the alleged breach until 15 June 2012, by which time the changes had occurred and nothing could be done to reverse those changes, having regard to the bankruptcy of Mrs Spaleta. Consequently, he argues that the delay in acting upon the breach disavows the Landlord from being able to rely upon it as a ground to terminate the Lease.
It is correct that delay or laches in pursuing an equitable right may amount to an affirmation of or assent to the violation of that right. However, laches is a defence against the prosecution of a purely equitable claim. In the present case, the Landlord asserts a legal right given to it under the lease agreement.[4] Moreover, the contention that the Lease has been forfeited is raised as a defence to the claims made against the Landlord. It is not the prosecution of an equitable right.
In my view, the 'defence' raised by Mr Spaleta is really a defence couched in terms of waiver or estoppel. However, that argument was not advanced by Mr Spaleta and for the reasons which follow, it is unnecessary for me to consider that argument further.
In particular, Mr Spaleta further contended that apart from corresponding with the Landlord, the Tenant did not act in response to the Notice of Default because it believed that there was nothing it could do to satisfy the notice. Therefore, there was no basis to terminate the Lease in reliance upon the notice. There is force in that submission.
The notice was stated to be a notice pursuant to clause 3(d) of the Lease and s.146 of the Property Law Act 1958. That provision states:

[65]

In my view, it is clear from a plain reading of the Reasons that the abatement of rent did not constitute an award of compensation in respect of any future loss of earnings after 31 December 2011. In fact, it would have been of little utility to require the Tenant to continue to pay rent because the rent paid would then become part of the Tenant's claim for loss and damage, given that it could not occupy the Premises by reason of the acts or omissions on the part of the Landlord.
In my view, there is a fundamental difference between the facts in the present case and those which were considered by the High Court in Chamberlain. In particular, in Chamberlain the debt claimed by the DCT in the second proceeding was the same debt claimed in the first proceeding. It related to the same tax assessments over the same period of time. That is not the case in the present proceeding. The cause of action did not crystallise until after the Landlord failed to make the Premises fit for occupation in January 2012. Similarly, the claim for loss of business goodwill is couched in terms of the loss eventuating as a result of the Premises not being able to be re-occupied in January 2012. In that sense, both claims only crystallised after January 2012. They could not have been the subject of litigation prior to that date.
Mr Gronow further argued that the claims constitute a claim for damages for breach of the Tribunal's orders to make the Premises fit for occupation. He submitted that such a claim was not maintainable. I do not accept that the claim is couched in terms of damages for breach of the Tribunal's orders. In fact, there is no order specifically requiring that the Landlord make the Premises fit for occupation. That obligation is found in the terms of the Lease itself. Therefore, it cannot be said that the damages claimed are akin to a claim seeking enforcement of a previous judgement.
Consequently, I find that the claims made by the Tenant as against the Landlord are maintainable.

[71]

In Norman v Australian Red Cross Society,[11] the Tribunal accepted that the principles discussed in the Court of Appeal's decision in State Electricity Commission v Rabel [12] applied when considering an application under s.75 of the Act. Those principles are summarised in Pizer's Annotated VCAT Act [13] to include:
- (a) The application is for the summary termination of the proceeding; it is not the full hearing of the proceeding.
- (b) The Tribunal's procedure on the application is in its discretion. The application may be determined on the pleadings or by way of submissions, or by allowing the parties to put forward affidavit material or oral evidence.
- (c) If a party indicates to the Tribunal that the whole of their case is contained in the material put before the Tribunal, the Tribunal is entitled to determine the matter by asking whether, on all the material placed before it, there is a question of real substance to go to a full hearing.
- (d) The Tribunal should exercise caution before summarily terminating a proceeding.
- (e) For a dismissal or strike out to succeed, the proceeding must be obviously hopeless, obviously unsustainable in fact or in law, can on no reasonable view justify relief, or be bound to fail.
- (f) A complaint cannot be struck out as lacking in substance merely because it does not in itself contain the evidence supporting the claims made.
In the present case, I accept Mr Gronow's submission that no cause of action has been established as against the Second and Third Respondents based on what is set forth in the Applicant's Further Amended Points of Claim. There is no contract alleged between them and the Tenant. There is no duty of care alleged. Moreover, no breach of any statutory provision is raised against them.
What is alleged is that the Third Respondent made representations from December 2012 until March 2013 that the Landlord would commence remedial work on the Premises, which has not occurred. However, nothing is said as to how those representations altered the position of the Tenant, given that no allegation is made that it relied upon those representations in any way. Its position before and after the alleged representations remains the same - unable to occupy the Premises.
It is further alleged that all respondents engaged in unconscionable conduct, which according to the document, is based on a factual contention that they knew not repairing would have serious negative effects upon the applicant's business and allowed it happen. Even if that factual contention could amount to unconscionable conduct, which I doubt, it fails to recognise that it is the Landlord, as distinct to its directors, which is responsible for the remedial work to be undertaken to the Premises.
Nothing is said as to how liability is to imputed to the directors, as distinct to the Landlord and in those circumstances, I find that no cause of action can be distilled from the document. The claim as against the Second and Third Respondents does not disclose an open and arguable case. Consequently, I will order that those claims are to be struck out, with liberty to apply for leave to file and serve an amended claim against those parties.

At a glance

Court

Decision date

Source

Judgment (83 paragraphs)

Versus (Aus) Pty Ltd v A.N.H. Nominees Pty Ltd & Ors (Retail Tenancies) [2012] VCAT 1442 (25 September 2012)

Parties

Cases Cited (2)