Zeus and Ra Pty Ltd v Nicolaou [2003] VSCA 11

Court of Appeal (Vic)|2003-02-28|Before: WINNEKE, P., CHARLES and EAMES, JJ.A.

The application of Chapter 2 (Gross Lettable Area Retail) is said to be:

"Used for calculating lettable areas in: * Shopping centres; * Commercial buildings; and * Strip shops, free-standing shops, semi-detached or terrace-type shops in suburban streets."

A definition of "gross lettable area" under Chapter 2 is stated in the following terms:

Thereafter, in paragraphs 2.1.1 to 2.1.4, follow quite precise rules for measuring areas within the walls of such premises.

The application of Chapter 3 (Gross Lettable Area) is said to be:

"Used for calculating lettable area in: * Warehouses; * Industrial buildings; * Free standing supermarkets; and * Showrooms."

Chapter 4 (Lettable Area - Hotels and Motels) is said to have application as follows:

"Lettable areas in: * Motels; * Hotels; * Residential hotels; and * Taverns."

In Chapter 4.3.1 a number of areas are excluded from the lettable areas of hotels and motels. A wide range of areas are then listed under eighteen dot points, one of which excludes from lettable area:

"areas set aside as public spaces including swimming pools, gardens, recreational facilities, parking areas, thoroughfares or access ways".

The two appendices to the guidelines provide little assistance in determination of the issues in this appeal, save that they emphasise that the guidelines address the technical difficulties which arise in calculating floor area within a building. Appendix 2 provides a series of diagrams representing, by way of example, the internal plans of buildings, and areas such as walls and stairs within buildings, in order to give guidance to those engaged in the task of calculating floor area, and to demonstrate what areas were to be excluded from the calculations of floor area.

In the hearing before Byrne, J. it was submitted on behalf of Zeus & Ra that the demised premises fell within the guidelines because the premises constituted "commercial buildings" under Chapter 2 of the guidelines. His Honour rejected that contention, noting that the demised premises comprised concrete-surfaced open space, apart from the relatively small building. The premises as a whole therefore did not meet the description of "commercial buildings", which his Honour considered was a description more likely applicable to office buildings. Although he did not expressly discuss the other descriptions of buildings contained in the guidelines his Honour concluded that none of the other descriptions of buildings listed in Chapters 2, 3 or 4 were applicable to the demised premises in this case.

His Honour then considered the contention of counsel for Zeus & Ra that even if the building did not meet any of the descriptions in Chapters 2, 3 or 4, Chapter 1 would still have application and would serve to exclude the concrete area from the calculation of "floor area".

The judge noted that the external areas of the demised premises did not meet the requirements of paragraphs (c) and (d) in the introductory identification of lettable area, since there was no roof over much of the demised premises and, at the time of the hearing, the concrete surface area was not locked and secured (although he accepted that that might be provided for in the future). His Honour held that, in any event, even if the demised premises had met all of the requirements of paragraph (a)-(d) the guidelines would not have applied, because the premises nonetheless had to fall within one of the categories of buildings identified in Chapters 2, 3 and 4 if the guidelines were to apply, and he held that the demised premises in this case did not. Having concluded that the guidelines were not applicable his Honour then determined the extent of "floor area" on the demised premises by application of the principles discussed in Sorbara.

Byrne, J. noted that the proposed commercial activities had not yet commenced, the building being derelict and the land being used solely for parking cars, but his Honour also had regard to the proposed commercial use which the tenants envisaged for the premises. That intended use was set out in a layout plan which was exhibited before his Honour and before us. The plan showed the intention to establish a café which would utilise portion of the indoor area of the existing building and also would provide outdoor seating and car parking facilities for those using the café. There would also be a car detailing and automotive repairs operation which would be carried out predominantly in an enclosed area in portion of the building but also partly under a proposed open shade canopy. Car washing and cleaning activities of vehicles would also be frequently carried out under a canopy. Vehicles on which services were being performed would be parked on the paved area. More than one proposed canopy was shown on the plan.

His Honour concluded, applying the definition of "retail premises", that almost all of the demised premises met the description of "premises that under the terms of the lease ... are to be used, wholly or predominantly for the carrying on" of the permitted commercial activities. As to the exclusion provided in paragraph (a) of the definition, his Honour concluded that it was the whole of the paved area and also the surface area of the existing building which comprised the floor area of the premises. It followed, therefore, that the floor area exceeded 1,000 square metres and accordingly the demised premises were not retail premises within the meaning of the Act, and the lease was not a retail tenancies lease over which VCAT had any jurisdiction.

Mr Moore, for Zeus & Ra, submitted, on appeal, that Byrne, J. was in error in concluding that the 1999 Guidelines did not apply to these demised premises. He submitted that his Honour had limited his consideration of that question to the issue whether the demised premises fell within the description of "commercial buildings" in Chapter 2 of the Guidelines and had failed to address, at all, the alternative submission advanced in the written submission of counsel for Zeus & Ra that the demised premises constituted "industrial buildings" under Chapter 3. We reject the contention that his Honour did not consider the alternative contentions as to the appropriate categories of the guidelines under which these premises might fall. By his finding that the building did not fall within any category of building in Chapters 2, 3 or 4 it is implicit that his Honour had considered the written submissions of counsel, but rejected them.

Mr Moore contended that the only portion of the demised premises that fell for consideration was that constituted by the existing building. That was so, he submitted, because the Guidelines deemed that it was only the internal surfaces of a building which were capable of constituting "lettable area" and, in turn, it was only "lettable area" which could constitute "floor area" under the definition of "retail premises" in s.3 of the Act. The Guidelines, he submitted, were intended to address the determination of "floor area" of all retail premises.

Mr Moore submitted that the intended usage of each section of the building on the demised premises should be examined in determining whether any and what portions of the building fell within the parameters of Chapters 2, 3 or 4. Thus, he submitted, what on the plan is proposed to be the office area of the building, should be regarded as being "commercial building" under Chapter 2 of the Guidelines; the proposed café within the building should be regarded as being "a semi-detached shop" under Chapter 2; the proposed workshop should be regarded as being "an industrial building" under Chapter 3 of the Guidelines. Accordingly, all areas of the building fall within the Guidelines. His Honour, therefore, was wrong to have concluded that the usage of the building did not place it within any of the categories described in Chapters 2, 3 or 4.

As an alternative argument, Mr Moore contended that because the intended use of the demised premises will be predominantly "industrial" the whole building should be regarded as falling within Chapter 3, it being properly described as "an industrial building".

Mr Clarke, for Nicolaou, submitted that Byrne, J. was correct in holding that the demised premises in this case did not fall within any of the categories identified by the guidelines. Accordingly, the guidelines had no application, and having had "regard" to them as required by s.3(5) they were to be put to one side and the question whether the Act applied to these demised premises fell to be determined solely by application of the principles stated by the Court in Sorbara.

In the alternative, Mr Clarke submitted that the Guidelines had an intended application only by way of assisting the calculation of "floor area" within buildings, (extending to such additional parts of retail premises as met the requirements of having a durable or permanent surface, being capable of being cleaned, which had a roof, and which surface may be locked and secured by means of permanent structures).

In the event that it was concluded that the terms of the guidelines did have the effect of precluding any area other than the internal floor area of the existing building from being treated as "floor area" then, Mr Clarke submitted, the guidelines were beyond the power given to the Minister by s.3(5). Alternatively, the guidelines were contrary to the terms of the 1998 Act and were ultra vires. As a further alternative argument, counsel submitted that the guidelines purported to limit the power of the Supreme Court and were invalid, there having been no compliance with s.85(5) of the Constitution Act 1975.

Threshold issue: Is "lettable area" synonymous with "floor area"?

As may be seen, on both sides it is contended that whatever other effect the guidelines may have they applied only to the confines of buildings (together with areas which met the four qualifying conditions of Chapter 1, which conditions required any paved areas to be roofed and lockable). The difference between the parties was that on behalf of Zeus & Ra it was contended that only those areas which constituted "lettable areas", upon application of the guidelines, were to constitute "floor area" for the purpose of the Act, whereas for Nicolaou it was submitted that the guidelines facilitated the measurement of "floor area" within buildings (including paved, roofed and lockable areas) by providing a methodology for conducting such measurements, but left it to the relevant tribunals to determine whether any areas not covered by the guidelines were also to be treated as floor area. As to those areas, in the event of dispute the issue would be determined by application of the principles set out in Sorbara.

The contention of counsel for Zeus & Ra was that Sorbara now had little if any application, because the guidance it provided as to whether certain areas should be counted as "floor area" related to areas which the guidelines now expressly excluded from such calculation. Indeed, Mr Moore, for the appellant, submitted that the terms of the 1999 guidelines represent the implied rejection of the approach to the determination of "floor area" which had been approved by the Court of Appeal in Sorbara and the substitution, by the use of "guidelines", of a mandatory direction that "lettable area", and only "lettable area", could constitute floor area, for the purpose of the Act.

Mr Moore agreed that the threshold issue on this appeal was the question whether the intended and effected purpose of the guidelines was to make "lettable areas", as provided for in the guidelines, the only areas which were to be "floor area" under the Act. It was agreed on both sides that if the guidelines did not have that effect, so that the question whether the concrete open areas on the demised premises constituted "floor area" fell to be determined by the principles discussed in Sorbara, then it was open to Byrne, J. to have concluded, as he did, that that open area also constituted floor area, so that the floor area would exceed 1000 square metres and the Act would therefore have no application.

Mr Moore's submission was, of course, that the 1999 guidelines did apply to these demised premises and that they were intended to be determinative of the methodology to be employed in measuring the floor area. The submission interpreted "lettable area" as being synonymous with "floor area". That contention depends upon the interpretation of the following phrase in Chapter 1 of the guidelines:

"Lettable area as measured by these guidelines, is to be taken to be Floor Area for the purposes of section 3(1)(a) of the Retail Tenancies Reform Act 1998."

There is no definition of "floor area" in the Act. Counsel for Zeus & Ra contended that the above phrase in the guidelines is to be read as though it commences with the word "Only", and that it then constituted a definition of "floor area" for the operation of paragraph (a) in the definition of "retail premises". No reason could be suggested why Parliament would have adopted such a circuitous route to achieve that result rather than simply providing a definition of "floor area" in the Act or otherwise amending the Act so as to effect that change.

Mr Moore submitted that Parliament had sought to overturn the effect of Sorbara and to confine "floor area" in the way Nathan, J. had suggested it be confined in Robert v. Besford[10], a decision which was expressly disapproved in Sorbara. When Sorbara was decided the 1998 guidelines had been published but did not fall for interpretation by the Court. The 1999 guidelines followed the decision of Sorbara. One major difference between the 1998 and the 1999 guidelines was the insertion in the latter of what became Chapter 1 - Introduction. In that Chapter paragraphs (a) to (d) were inserted, and external areas were not to be included as "lettable area" unless the four conditions were met. The first three of those conditions, Mr Moore correctly submitted, were in terms almost identical to the first three criteria adopted by Nathan, J. in determining "floor area"[11]. The fourth criterion stated by Nathan, J. was that regard be had to the purpose for which the surface was being used. The fourth item in Chapter 1, being paragraph (d), requires that a surface be capable of being locked and secured by a permanent structure. The close adherence to the approach of Nathan, J. suggests, Mr Moore submitted, its endorsement.

In our opinion, even allowing for the apparent adoption of some of the criteria suggested by Nathan, J. - for the purpose of excluding some areas from calculation as "lettable area" - it does not follow that those same spaces might not constitute "floor area" when considered in light of the Sorbara principles. Whilst Mr Moore's contention gains some force by virtue of the adoption in the guidelines of three of the criteria used by Nathan, J., a decision to override Sorbara by such a circuitous route of applying guidelines issued by the Minister rather than by legislative change would be an improbable approach for Parliament to have adopted, and one for which clear evidence would be required. Furthermore, to be effective the suggested over-riding of Sorbara would require that "lettable area" in the guidelines be synonymous with "floor area" in s.3. Mr Moore submitted that that was indeed the effect of the guidelines.

In our view, neither the Act nor the guidelines purport or intend to make "lettable area" synonymous with "floor area". The phrase quoted above, from Chapter 1 ("Lettable area as measured by these guidelines is to be taken to be Floor area . . ."), merely allows that within the broader ambit of "floor area", "lettable area" is to be included. This does not make "lettable area" the exclusive determinant of "floor area". The terms of s.3(5) are entirely consistent with this view, and so, too, are the terms of the guidelines themselves.

In the Chapter 1-Introduction the guidelines are said to be "for the measurement of lettable area" and are provided "to assist in determining the floor area of retail premises for the purposes of that Act". If the appellant is correct then the guidelines are not merely providing assistance in determining the floor area: they are determining "floor area", by providing assistance in the measurement of "lettable areas" of the internal portions of buildings.

The terms of s.3(5), in our view, are consistent only with the expressions "lettable area" and "floor area" not being synonymous. It is in the process of determining "floor area" that "regard shall be had" to the quite distinct concept of "lettable area". That suggests that what constitutes "floor area" is broader than what constitutes "lettable area", but may include identified "lettable areas" within it. Furthermore, if "floor area" cannot be anything other than "lettable area", then it would be quite inappropriate that a tribunal might merely have "regard" to the guidelines rather than be bound to apply them as the sole determinant of what constitutes "floor area". The suggested mandatory force of the guidelines, for which Mr Moore contends, gains little support from the wording of Chapter 1, which states that they are merely "to assist in determining the floor area of retail premises". Nor do the terms of s.3(5) support Mr Moore's contention by their requirement that "regard shall be had to the guidelines". The latter phrase contemplates that the matters in the guidelines must be given weight as a fundamental element in the determination (see R. v. Hunt; Ex parte Sean Investments Pty Ltd[12]) but that the decision maker retains a discretion to have regard to other matters also. In any event, s.3(5) provides that regard is to be had to the guidelines only "for the measurement of lettable area".

In response, Mr Moore suggested that it was intended that a discretion be left to the tribunal to exclude from the calculation of floor area an area which would otherwise have constituted "lettable area" under the guidelines. Were that so then the tribunal and the parties would be provided with no guidance from either the 1998 Tenancies Act or the guidelines as to why the discretion might be so exercised, given that to exclude any "lettable area" from the calculation of "floor area" would be to disregard what was said to be the intended mandatory operation of the guidelines as, in effect, a definition of "floor area".

It would be entirely consonant with the conclusion that the ambit of "lettable area" is both distinct from and is more narrow than the ambit of "floor area" that the guidelines should have application only to the calculation of floor area within buildings (and areas complying with the terms of paragraphs (a) to (d) in Chapter 1) and were not intended to apply to or provide guidance concerning the identification and measurement of floor areas in locations on demised premises that did not meet those conditions. It is not, it seems, in dispute (each side seeing different significance in the interpretation), and there can be little doubt, that the guidelines are intended to have the restricted application discussed above, that is, to be primarily concerned with internal floor space in buildings.

In our view, there are many indications that the guidelines were intended to apply only to internal areas of buildings. In the first place, there is the statement in Chapter 1 that "the lettable area of any retail premises is the sum of the lettable area

of the following internal parts of the retail premises ..."(our emphasis)[13]. Furthermore it is implied by the statement that "lettable area only includes the part or parts of retail premises that have ...", followed by reference to paragraphs (a)-(d).

That the guidelines apply only to internal structures is, we think, again made clear in Chapter 2 where, under the heading "Application", it is said that Chapter 2 is to be "used for calculating lettable areas in ... commercial buildings" (our emphasis). In the same chapter, under the heading "Definition", "Gross Lettable Area - Retail" is said to be the aggregate "of floor space contained within a tenancy at each floor level ..." (our emphasis). These terms plainly refer to the internal areas of the building. In Chapter 3, "Gross Lettable Area" has application for calculating "lettable area in ... industrial buildings" (our emphasis). All of these passages in our view demonstrate the purpose and scope of the guidelines and their intended application only to internal areas of buildings.

At first sight there is some apparent variation in approach in Chapter 4. In that chapter hotels and motels are given discrete treatment. Expressly excluded from the lettable area of hotels and motels are areas set aside as public spaces, including swimming pools, gardens, recreational facilities, parking areas, thoroughfares or accessways. Many of those areas would have been excluded from the operation of the guidelines, in any event, by virtue of the exclusions provided by paragraphs (a) to (d) in Chapter 1. In Sorbara a number of businesses were identified as posing difficulty in determining their "floor area". They included car yards, motels, caravan parks, drive-in theatres and similar businesses where the nature of the business made determination of the question difficult. Sorbara provided a test for determining the question and it was held that although the question had to be determined on a case by case basis it may well be that the "floor area" of such businesses was co-extensive with the area of the demise. Thus, in that case, swimming pool areas, children's playgrounds, barbecue areas and car wash facilities were all included within the ambit of "floor area". Arguably, the exclusion of all or some of those areas from the scope of "lettable area" in Chapter 4 does not remove them or other such public areas from consideration as to whether they constitute "floor area", and in determining that question the principles discussed in Sorbara continue to apply. Therefore such areas would not be included in floor area by virtue of having been measured as "lettable area" under the guidelines, but they might be included by reference to Sorbara.

The public areas listed and excluded in Chapter 4 do not, in any event, include all of the external areas of a hotel or motel which had arisen in the various cases which had been considered in the Trial Division and been identified as problematic in Sorbara. Whether such additional external areas of a hotel and motel would constitute floor area remains to be considered by application of Sorbara principles. The terms of the guidelines do not demonstrate that such areas are not to be considered, at all.

It is not necessary to express a concluded opinion as to the scope of Chapter 4. Although Mr Moore contended that the inclusion of Chapter 4 in the 1999 guidelines (hotels and motels not having had separate treatment under the 1998 guidelines) demonstrated that the draftsperson was responding to the decision in Sorbara, delivered, as we have said, before the 1999 guidelines, and which concerned a motel, counsel on neither side sought to place weight for their competing contentions on the terms of Chapter 4. It is sufficient to observe that the exclusion of certain areas of motels and hotels from the operation of Chapter 4 does not detract from the conclusion we have reached as to the scope of the other chapters of the guidelines. Nor do the terms of Chapter 4 suggest that the purpose of the guidelines was to render Sorbara irrelevant to the determination of floor area. Indeed, it may be thought that one purpose of the guidelines was to address both the difficulties which arose generally when attempting to calculate the floor area of a building and also the particular difficulties in making such calculations with respect to certain internal spaces which were identified by Kenny, J.A. in Sorbara.[14].

We conclude, therefore, that the answer to the threshold question is that the guidelines were intended to apply to the internal floor areas of buildings, and (save for areas not excluded by paragraphs (a) to (d) in Chapter 1) not otherwise. Neither the terms of the guidelines nor the terms of the Act, in our opinion, support the contention of counsel for Zeus & Ra that "floor area" was to be confined to that described as "lettable area" under the guidelines. Accordingly, Sorbara continues to have application in determining whether areas which are within demised premises, but are not capable of constituting "lettable area", might nonetheless constitute "floor area".

Counsel for the respondent contended that the guidelines did not apply, in any event, because these premises did not fall within any of the categories of buildings in Chapters 2 to 4. Having regard to the conclusion we have reached on the threshold question, and the concession by Mr Moore that if that question was resolved in favour of Nicolaou then the appeal by Zeus & Ra would fail, it is not necessary for us to resolve the question whether any parts or the entirety of the existing building met the description of "commercial buildings" under Chapter 2, or "industrial buildings" in Chapter 3 of the guidelines[15]. It should not be taken, however, that we necessarily agree with his Honour that the building, considered as a whole, and whether having regard to its past, present or intended usage, could not meet the description of a "commercial building". In rejecting the contention that it should be so described, his Honour offered tentative support for the approach of Deputy President Macnamara in Lylecash Pty. Ltd. v. Mayfly Pty. Ltd.[16].

That was a decision which involved interpretation of the 1998 guidelines, which did not make express provision for hotels and motels. In that case the Deputy President did not consider the question in any detail, but noted that the inclusion of hotels and motels in the 1999 guidelines, in Chapter 4, suggested that hotels and motels were not included within the ambit of "commercial buildings" in Chapter 2. The Deputy President concluded that it was "more likely that commercial buildings are office buildings". In agreeing with that conclusion Byrne, J. noted that because shopping centres, strip shops, free standing shops, etc., were separately listed under Chapter 2 that suggested that "commercial buildings" was to be given a more narrow meaning than "the broad and general sense of that expression"[17]. Whilst we do not doubt that office buildings would fall within that description it is arguable that other buildings - that is, buildings which serve commercial rather than non-commercial functions - might equally be so described and that the express and additional identification of some other retail businesses in Chapter 2 might not deny that conclusion.

Byrne, J. found it unnecessary to resolve the question whether there was any conflict between the guidelines and the definition of "retail premises" by virtue of the fact that the former appeared to refer to present use whereas the definition provided for both present and intended use. His Honour held that "as they presently stand or as they might stand when the intended works are carried out"[18] the usage of the demised premises did not meet any of the categories described in the guidelines. It is also unnecessary for us to resolve that question. We do not necessarily agree with his Honour's tentative view that the guidelines are expressed in terms which might preclude their having application in determining the lettable area of a building by reference to intended use of the demised premises under a lease, as opposed to existing use. As is true in the present case - where there are detailed plans concerning the intended use of premises - the guidelines could be as usefully applied in calculation of lettable area by reference to plans as they would be in determining lettable areas by measuring areas presently used on demised premises. As presently advised, we do not consider that the guidelines are restricted to consideration of present use of premises rather than, in conformity with the definition in s.3, also being capable of applying where it is the intended use of premises which is under consideration.

Furthermore, it becomes unnecessary to consider the contentions that the guidelines were ultra vires the 1998 Act or were otherwise invalid. We express no conclusions on those questions. Whether the guidelines be valid or invalid this appeal must fail.

The second appeal arises from an application which was commenced by Zeus & Ra in VCAT on 21 August 2002, shortly after Byrne, J. gave judgment in the first matter. Zeus & Ra made application to VCAT, their application being headed "Retail Tenancies List" and making the following claim -

"The First Respondent [Nicolaou] is the landlord of the site and by a lease to the Applicant [Zeus & Ra], leased the site for four years for $110,000 p.a. plus GST plus outgoings. The applicant wishes to undertake structural works upon the site. The landlord has neglected and/or refused permission to do those works, as a result the Applicant is suffering loss and damage. The Second Respondent [Peter F. Amad] was the solicitor for the Applicant at the time of entering into the lease. He failed to properly advise the Applicant that they may not be able to obtain the landlord's consent and as a result suffered loss and damage. Damage includes all costs consequential upon entering the lease including all liability to rental and outgoings pursuant to the lease. Further the landlord on 20 August 2002 served on the Applicant a Notice of Re-Entry, that notice is invalid as it is based upon a premise that the tenant is obliged to pay rental. There is no obligation to pay as no disclosure statement was served by the First Respondent pursuant to the Retail Tenancies Reform Act."

The orders sought in the application were in the following form -

1. A declaration that the Notice of Re-Entry is invalid.

2. An interim injunction that the landlord not be allowed to re-enter the premises until the final determination of this proceeding.

The application later asserted that the total claimed exceeded $15,000.

By letter dated 6 September 2002, Nicolaou brought an application in VCAT to strike out the proceeding pursuant to s.75(1) of the Victorian Civil & Administrative Tribunal Act 1998 ("the VCAT Act"). In support of the strike-out application, Nicolaou filed and served an affidavit sworn on 6 September 2002. In that affidavit Nicolaou made reference to a letter that had been received from Goldsmiths, the solicitors for Zeus & Ra, which set out the genesis of the dispute between the parties. Stated shortly the complaint was that Zeus & Ra proposed to construct a car wash area for which it was necessary to erect a canopy consisting of four vertical steel support beams supporting a stretch cloth. It was alleged that at the time the lease was negotiated, Zeus & Ra had advised Nicolaou of their requirements and that Nicolaou said he would consent to the canopy being erected. The letter said that Zeus & Ra had since formally requested consent to erect the canopy but Nicolaou would no longer give such consent, saying that the canopy would interfere with the line of sight for an advertising sign to the south of the property. The letter continued that Zeus & Ra were now left in a difficult position, since they could not run their business and generate rental income without the washing bays being covered. It was asserted that Zeus & Ra were now suffering substantial financial loss in consequence.

The matter came before VCAT as a directions hearing, at which application was made on behalf of Nicolaou that the proceeding be dismissed against him either pursuant to s.75(1)(a) or (b) and/or s.78 of the VCAT Act, or the inherent jurisdiction of the Tribunal to control its own processes. The application was duly heard by Judge Bowman on 12 September 2002.

Counsel for Nicolaou submitted to Judge Bowman that VCAT did not have jurisdiction to hear and determine any of the claims made by Zeus & Ra. He informed the judge that Byrne, J. had made a declaration that the demised premises were not retail premises within the meaning of the 1998 Act, no stay of his Honour's order had been granted, a Notice of Re-Entry had been served, and the lease had been terminated. Accordingly it was submitted that VCAT no longer had jurisdiction to deal with the matter and the present proceeding should be summarily dismissed or struck out.

In response, the solicitor for Zeus & Ra submitted that VCAT was not a court of pleading and reliance could be placed on all relevant legislation. He submitted that particularly in relation to a strike-out application, regard should be had to whether or not a proper or legitimate amendment of the pleading could save the application and stated that Zeus & Ra also relied upon the Fair Trading Act 1999. It was submitted that regardless of how the proceeding had arrived at the Tribunal and regardless of which list the matter had been placed in or what grounds were set out in the original application, the Fair Trading Act could also be relied on and pursuant to that Act the Tribunal had jurisdiction to hear and determine disputes between a landlord and a tenant. It was submitted that pursuant to the Fair Trading Act the Tribunal had jurisdiction to deal with the matter regardless of the operation of the 1998 Tenancies Act.

Judge Bowman accepted the argument advanced on behalf of Zeus & Ra. His Honour said -

"Whether or not it was so intended, the breadth of the jurisdiction conferred by the Fair Trading Act 1999 seems to me to be such that it encompasses a dispute between landlord and tenant. I also agree with the basic proposition that, once it is established that the matter is a fair trading dispute within the meaning of s.108(1) of that Act, the Tribunal may hear the dispute, and issues concerning the legislation upon which reliance is placed can be clarified by amendment if required. I agree with the fundamental proposition that it matters not how the dispute came to be before the Tribunal. Once it is before the Tribunal, and is a fair trading dispute, the Tribunal can then hear it. This is a fair trading dispute. The Tribunal can hear it."

His Honour then held that the first two paragraphs of the orders sought by Zeus & Ra were based upon the allegation that no disclosure notice had been given pursuant to the 1998 Act and were contingent upon that Act having operation in relation to the subject premises. The judge said that Byrne, J. had ruled that the premises were not retail premises and accordingly that the Act did not operate. It followed that the application for these orders should be summarily dismissed or struck out. His Honour, however, held that the claim for damages and costs in the application remained untouched by the decision of Byrne, J., not having been the subject of any ruling by his Honour. Judge Bowman accepted that the affidavit of Nicolaou had established to his satisfaction that a dispute existed concerning consent to the erection of certain structures and that there was no basis for summarily striking out this portion of the application.

Under the Fair Trading Act 1999 a "fair trading dispute" is defined in s.107 in the following way -

"(1) In this Part a `fair trading dispute' is a dispute or claim arising between a purchaser or possible purchaser of goods or services and a supplier or possible supplier of goods or services in relation to a supply or possible supply of goods or services."

Section 108 then provides that the Tribunal may hear and determine a fair trading dispute, and by s.s.(2) gives the Tribunal power to deal with such a dispute in a variety of ways. Under s.3 of the Act the word "services" is defined to include -

"Any rights (including rights in relation to, and interests in real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce ...".

In Part 2 of the Act various unfair practices are dealt with, including unconscionable conduct (ss.7 and 8), misleading or deceptive conduct (s.9), and false representations in relation to goods or services (s.12).

VCAT, when hearing a dispute under the Fair Trading Act, is required by the VCAT Act 1998 to act fairly and according to the substantial merits of the case in all proceedings (s.97). The general procedure section (s.98) provides that the Tribunal is bound by the rules of natural justice, may inform itself on any matter as it sees fit (s.s.(1)(c)) and, by s.s.(d) -

"must conduct each proceeding with as little formality and technicality, and determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and their proper consideration of the matters before it permit."

The Retail Tenancies Act 1986 ("the 1986 Act") was passed with the purpose of reforming the law relating to retail tenancy agreements. Under s.3 "retail premises" were defined 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, but does not include - (a) premises that have a floor area that exceeds 1,000 square metres; ...".

Part 3 of the Act related to the determination of disputes. By s.21(1) any dispute between a landlord and tenant arising under a retail premises lease, with certain very limited exceptions, was required to be referred to arbitration in accordance with Part 3. Sub-section (4) of s.21 provided that a dispute capable of being referred to arbitration under that section was not justiciable in any court or tribunal.

The 1986 Act was repealed by the 1998 Act. In the 1998 Act the same definition of retail premises was retained. Part 3 of the 1998 Act establishes a dispute resolution process, and s.34(1) states that, "This part applies to any dispute between a landlord and tenant arising under or in relation to a retail premises lease", again with certain limited exceptions. Section 35 then gives VCAT jurisdiction to hear and determine an application under Part 3 seeking resolution of such disputes, s.s.(2) providing that such disputes are not justiciable before any court or person acting judicially. It is made clear by s.48 that it is the intention of this section to limit the jurisdiction of the Supreme Court.

The substantial argument made by Mr Clarke for Nicolaou in this Court was that Judge Bowman erred in refusing to make an order striking out the whole of the proceeding brought by Zeus & Ra since VCAT did not have jurisdiction under s.107 of the Fair Trading Act to hear and determine a dispute with respect to a breach of a lease in circumstances where the relationship of landlord and tenant had been determined at the time of the application by Zeus & Ra to VCAT, the lease having been forfeited by re-entry. He submitted that although VCAT had in various decisions taken a wide view of the meaning of the expression "fair trading dispute", the definition of "services" used only the present and future tense, but not the past. Since the lease had been determined by re-entry, there was therefore no "dispute between" a landlord and tenant within the meaning of s.107 of the Act, taking into account the meaning of "services" and VCAT therefore had no jurisdiction to hear and determine any dispute. This was said to be consistent with the decisions in which it had been held that an arbitrator did not have jurisdiction under the 1986 Act in circumstances where the lease had come to an end before any application was brought.[19] We shall turn to these authorities shortly, but Mr Clarke's contention was that the effect of these authorities was that disputes between a former landlord and tenant in circumstances where it was common ground that the leases in question had terminated could not be resolved under the arbitral system provided by the 1998 Act on two grounds, first that there could be no dispute under a lease that had ceased to exist, and secondly, because the lease had ceased to exist, there was no relationship of landlord and tenant. Mr Clarke submitted that the wording of s.107 of the Fair Trading Act supported the view that this Act also contemplated only the resolution of disputes between present and future purchasers and suppliers of services, and did not cover claims for breaches of leases which had been terminated and no longer existed. Mr Clarke submitted that it was reasonable to assume that Parliament was aware of the decisions concerning the limitation of jurisdiction granted to arbitrators and VCAT under both the 1986 Act and the 1998 Act. Accordingly, it was reasonable, so the argument ran, to assume that if Parliament was aware of the authorities restricting the jurisdiction of arbitrators and VCAT in claims made under leases that had terminated, and had failed to employ clear words to reverse them, then Parliament was to be regarded as having legislated consistently with them.

Mr Moore, for Zeus & Ra, contended that ss.107 and 108 of the Fair Trading Act are cast in wide terms, and, the Act being ameliorative, should be construed generously rather than restrictively. He relied on the width of s.107(2) and the inclusion within that sub-section of a range of purely tortious claims within the ambit of fair trading disputes. He submitted that although a fair trading dispute will arise out of a present or possible contract, the existence of such disputes cannot be temporarily limited to the periods during which such contracts are negotiated and performed, but rather it continues until they are heard and determined, or otherwise disposed of. Otherwise, the argument ran, a fair trading dispute could not exist once the supply of services had been fully executed.

In the Jam Factory case[20], a lease had been forfeited for non-payment of rent and the plaintiff-landlord, having effected re-entry, brought proceedings for recovery of possession, while the defendant-tenant sought relief against forfeiture. The question of the Court's jurisdiction was raised by the landlord who argued that the 1986 Act had not deprived the court of jurisdiction to hear the tenant's application, nor the landlord's claims. Ormiston, J. held[21] that -

"There was no dispute between `a landlord and a tenant', nor one which arose `under a retail premises lease', for the simple reason that the relationship of landlord and tenant had been determined at the time the application by way of summons for relief against forfeiture was brought on 20 May 1988 and the lease had been forfeited by re-entry. Indeed, it was the very object of the application that there should be relief against that forfeiture. Upon granting relief it is no longer necessary to make a mandatory order requiring the former landlord to grant a new lease for the balance of the term remaining of the former lease, as, by reason of s.85(2) of the Supreme Court Act the effect of the order, when made, is that the applicant holds the land `in accordance with the terms of the lease without the need for a new lease'. Nevertheless, such a provision cannot deny the fact that, until relief is granted by the Court, there was no lease on foot, or that the relationship between the parties was not then that of landlord and tenant. Nor, even if one were to assume that those words could loosely describe the parties to this proceeding after re-entry, was there any dispute arising `under' the lease."

The decision in the Jam Factory case was applied in Klewet Pty. Ltd. v. Lansdown[22]. Furthermore, in Haidar v. Blendale[23] Gobbo, J. considered the jurisdiction of arbitrators under the 1986 Act where a claim was made for the recovery of key money against a former landlord by tenants who had assigned their leasehold estate to a successor. The landlord submitted that the Magistrates' Court had no jurisdiction by virtue of s.21 of the 1986 Act. Gobbo, J. held that whilst privity of contract continued to exist between the landlord and the assigning tenant, there was no privity of estate, and hence there was no dispute between landlord and tenant since in the absence of privity of estate the relationship of landlord and tenant did not exist. Section 21(1) of the 1986 Act was further considered by Tadgell, J. in Exford Pines v. Vlado's Pty. Ltd.[24], where his Honour stated that the expression "arising under" tends to be regarded as a narrower concept than "in connection with" or "in relation to" or "arising out of".

The Fair Trading Act was first introduced in Victoria in 1985 pursuant to an agreement between all states, to extend the coverage of laws prohibiting a wide range of deceptive or misleading practices in trading within Victoria over which the Trade Practices Act 1974 (Cth) had no jurisdiction. Constitutional limitations on the legislative power of the Commonwealth resulted in the federal legislation being based principally on the corporations power, and having very limited reach in relation to the trading activities of individuals and partnerships. The Fair Trading Act 1999, which was a consolidation of the Fair Trading Act 1985, the Consumer Affairs Act 1972, and the Ministry of Consumer Affairs Act 1973, was also introduced in pursuit of uniform fair trading legislation across Australia, and modelled where possible on the relevant provisions of the Trade Practices Act.[25]

The purposes of the Fair Trading Act 1999 are set out in s.1. They include the promotion and encouragement of fair trading practices and a competitive and fair market, the regulation of trade practices, provision for the safety of goods or services supplied in trade or commerce, and to provide for codes of practice. The Fair Trading Act was clearly intended to give VCAT a general jurisdiction for the resolution of fair trading disputes. The definition of "fair trading dispute" insofar as relevant, includes (omitting reference to "possible supply") a "dispute or claim arising between a purchaser ... of ... services and a supplier ... of ... services in relation to a supply ... of ... services." In our view this section plainly contemplates all contracts for the supply of services whether or not such contracts have been completed by delivery or even terminated by one party's repudiation of the contract for, say, failure to supply the services. Given the expressed purposes of the Act, it would make nonsense of the legislation to construe the sections as having operation only while a contract for the purchase and supply of services remains on foot and to be completed. Furthermore we should have thought it clear that the parties to such a contract continue to be still properly described as the "purchaser" and "supplier" notwithstanding that the services in question have actually been supplied, and the full price paid. The remedies for the unfair practices proscribed in Part 2 of the Act would otherwise in many cases be rendered inoperative and pointless.

If the words "purchaser" and "supplier" are to be construed as referring to the past, as well as the present and future, supply of services, the definition of the word "services" contained in s.3 then provides no support for the appellant's argument. For when the definition of "services" is read into s.107, the disputes covered by the Fair Trading Act include a dispute arising between a purchaser and a supplier of services (including rights and interests in relation to real property) that are provided, granted or conferred in trade or commerce. In our view there is nothing in the definition of a "fair trading dispute" properly construed, which would exclude from VCAT's jurisdiction under the Fair Trading Act a dispute arising between a purchaser and supplier under an executed contract.

In Humphries & Cooke Ltd. v. Essendon Airport Ltd.[26] Deputy President McNamara said that -

"It appears that sections 107 and 108 of the Fair Trading Act 1999 bestow a general landlord and tenant jurisdiction on this Tribunal. They give the Tribunal power to determine fair trading disputes which are defined as disputes between the suppliers and purchasers of goods and services. Services are defined in s.3 of the Act to include interests in real or personal property, and supply is defined to include grant. It follows in my view that whether or not the Retail Tenancies Reform Act applies to these premises the Tribunal has jurisdiction in a general sense to deal with a dispute between the landlord and tenant in the present circumstances."

We agree with the Deputy-President's interpretation of ss.107 and 108, which was applied by Judge Bowman in rejecting the appellant's application to strike out paragraphs [3] and [4] of Zeus & Ra's claim.

The decision in the Jam Factory case is, as Mr Clarke emphasised, based both on the fact that there can be "no dispute arising under a retail premises lease which has ceased to exist" as well as the proposition that once the lease has been terminated, there is no relationship of landlord and tenant. But if under the Fair Trading Act the scope of the legislation includes what might be described as the past supply of services, it does not follow from the fact that "services" are defined to include rights in relation to and interests in real property that there must be an extant relationship of landlord and tenant for the jurisdiction given by this legislation to continue to operate. The operation of the Fair Trading Acts in relation to fair trading disputes does not, in our view, for the reasons we have given depend upon the continuance in existence of the relevant retail tenancies lease. It follows that we agree with the submissions for Zeus & Ra on this issue.

Mr Clarke also submitted that although Nicolaou had filed an affidavit upon which he relied in challenging the jurisdiction of the Tribunal, no affidavit had been filed on behalf of the former tenant. Relying on the decision of Cash Resources Aust. Pty. Ltd. v. Bentley[27] it was submitted that the failure of Zeus & Ra to provide an affidavit establishing a valid basis to enliven the jurisdiction of the Tribunal was fatal to Zeus & Ra's case in this appeal.

In our view there is nothing in this point. The application was certainly brought in the Retail Tenancies List of VCAT and did not on its face raise the Fair Trading Act 1999. But as we have already observed, the Tribunal is under s.98(1)(c) and (d) of the VCAT Act entitled to inform itself on any matter as it sees fit, and must conduct proceedings with as little formality and technicality and with as much speed as a proper consideration of the matters before it permits. In Cash Resources, Gillard, J. said[28] that if a party contested the jurisdiction of VCAT in the Supreme Court, the party applying to VCAT would have to establish by evidence that the application validly enlivened VCAT's jurisdiction. Nicolaou's application to strike out was however made to VCAT itself, on a date which had been set down for a directions hearing. The solicitor for Zeus & Ra submitted to Judge Bowman that VCAT had jurisdiction to hear and determine the claims sought to be made by Zeus & Ra by virtue of ss.107 and 108 of the Fair Trading Act. In our opinion both the terms of Zeus & Ra's original application to VCAT together with the contents of the Nicolaou affidavit (summarised in [60] above) which was before Judge Bowman provide all the foundation necessary to establish that the application was validly made to VCAT under the Fair Trading Act. One can readily discern from the contents of the application and the Nicolaou affidavit a sufficient basis for potential claims under various of the sections contained in Part 2 of the Act dealing with Unfair Practices. In our view the submissions made to Judge Bowman by the solicitor for Zeus & Ra, and set out in [63] above were correct.

Both appeals should, accordingly, be dismissed.

[1] The claim against Amad, related to his professional advice to Zeus & Ra as its former solicitor. Amad took no part in the appeal and we were advised he proposed to make no submissions and would abide by the court's decision on this appeal.

[5] Hall v. Joyworth Pty. Ltd. (1993) V.Conv. R. 54-461; F.P. Shine (Vic.) Pty Ltd v. Gothic Lodge Pty. Ltd. [1994] VicRp 11; [1994] 1 V.R. 194; Nime Pty. Ltd. v. Seventh Storey Pty. Ltd. (1994) V.Conv. R. 54-491

[13] The conclusion that both the 1998 and the 1999 guidelines were concerned only with the measurement of internal floor space within buildings was also reached by Dr. C. Crofts, in "Retail Tenancies" 3rd Ed., (2000) at 253.

[15] Although we have considered this question primarily by having regard to the overall or predominant usage of the building the approach suggested on behalf of the appellant namely, that the usage of the various sections of the building might be separately categorised for the purpose of the guidelines, gains some, albeit limited, support from the references in Chapter 1 of the guidelines to "the part or parts of retail premises". We have not found it necessary to reach any concluded opinion as to the appropriateness of the approach suggested on behalf of the appellant.

[19] Jam Factory Pty. Ltd. v. Sunny Paradise Pty. Ltd. [1989] VicRp 54; [1989] V.R. 584 at 586; Klewet Pty. Ltd. v. Lansdown [1989] VicRp 85; [1989] V.R. 969 at 974. See also Haidar v. Blendale Pty. Ltd. [1993] VicRp 89; [1993] 2 V.R. 524 at 526; Exford Pines Pty. Ltd. v. Vlado's Pty. Ltd. [1992] VicRp 75; [1992] 2 V.R. 449 at 450, 451.

[25] See the Second Reading Speech for the Fair Trading Act 1985, Hansard, Legislative Assembly, 28 May 1985, 716; and the Second Reading Speech for the Fair Trading Act 1999, Hansard, Legislative Assembly, 25 March 1999, p.187.

[26] [2001] VCAT 2439, decided on 30 November 2001, at paragraph [12].

LANDLORD AND TENANT - Retail tenancies - Retail Tenancies Reform Act 1998, s.3 - "Retail premises" - Whether floor area exceeds 1,000 sq. m. - Meaning of "floor area" - Guidelines for the Measurement of Lettable Areas 1999 - Guidelines issued under s.3(5) of Act - Meaning of "lettable areas" - Whether "lettable area" synonymous with "floor area" - Whether demised premises "commercial buildings" - Jurisdiction of Victorian Civil and Administrative Appeal Tribunal - Sorbara v. D.J. and A.J. McCallum Pty. Ltd. [1998] VSCA 71; [1999] 2 V.R. 1.

At a glance

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Judgment (107 paragraphs)

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Cases Cited (1)