Should a tenant seeking an injunction to restrain re-entry be required to pay disputed arrears into a trust account? Part 3

Further to my earlier posts here and here, Croft J’s reasons in The Trust Company Limited v Blue Train Cafe Pty Ltd [2024] VSC 232 (10 May 2024) are now available on AustLii.

The substance of the appeal was a challenge to the Tribunal’s conditions placed on the grant of an interlocutory injunction.  

The landlord and the tenant were in dispute about the amount of certain outgoings that were payable under the lease.  The landlord served on the tenant a default notice alleging arrears of rent, outgoings and other charges amounting to $445,826.27.  The tenant sought an injunction on the basis that it disputed certain charges in excess of $400,000, referred to as OPEX Charges, that had been charged since 2019.  

At the hearing of the injunction at VCAT, the landlord sought orders that the full amount of the disputed payments be paid into a solicitor’s trust account.  However, this was refused and, in accordance with its usually practice, the Tribunal granted the injunction on condition that the tenant continue to pay rent and a sum towards the OPEX Charges until trial, without requiring the disputed arrears to be paid into a solicitor’s trust account.

The landlord appealed the decision on a number of grounds, including that the equitable maxim that ‘they who seek equity must do equity’ requires a party seeking an injunction to pay disputed arrears into a trust account, relying on the decision of the Federal Court in Telstra Corporation Ltd v First Netcom Pty Ltd [1997] FCA 860.  Importantly, Telstra was a case about a commercial contract, but was not a leasing case.

In refusing the landlord’s appeal, Croft J held that (footnotes omitted):

[40]     An interlocutory order for an injunction, such as the one granted by the Tribunal, is a matter of practice and procedure.  This Court must exercise “particular caution” when reviewing such a decision.  Absent a vitiating error in law, the role of a specialist tribunal, such as VCAT, is not to be usurped by the Court.  The Tribunal was required to make an interim decision on a complex matter affecting proprietary interests of the parties.  It considered all relevant matters and, when granting the interlocutory injunction, exercised its discretion in a manner consistent with the Maxim, and thus, the principle in Telstra.  

…

[42]     … application of the Maxim and Telstra does not necessarily require a finding that the Respondent make advance payment of the outstanding OPEX Charges, and monthly payment of ongoing OPEX Charges, as a precondition to an injunction.  The OPEX Charges claimed by the Appellant are not, in my view, analogous to the undisputed sum owed by First Netcom in Telstra.  The Tribunal found that the parties had been in dispute over the calculation of OPEX Charges for over four years, as informed by a Default Notice and other documents including the Points of Counterclaim filed by the Appellant.  The calculation of the proportion of outgoings for which the Respondent is liable was found by the Tribunal to be a difficult exercise owing to the relevant clauses of the Lease, design of the greater areas surrounding the Premises, and the fact that not all outgoings payable could be characterised as OPEX Charges.  In the absence of evidence from the parties as to calculation of the OPEX Charges payable, the Tribunal found that the question of OPEX Charges to be paid by the Respondent is most appropriate to be determined at trial.  To determine this question at the interlocutory stage was held to be “impossible and inappropriate”.  I agree with the Tribunal’s finding on the complexity of the exercise of calculating OPEX Charges.  Such a question is best suited for determination through a substantive trial where parties can assist the Tribunal with comprehensive evidence and submissions.  As submitted by the Respondent, the Tribunal’s decision to grant the injunction with the usual undertaking as to damages was informed by evidence of a bank guarantee and two personal guarantees.  On this basis, it rejected a submission that the injunction without the precondition of full payment was “insufficient”.  The reasoning employed by the Tribunal is consistent with the Maxim, and does not give rise to an error in law.  

The landlord also argued that an interlocutory injunction should preserve the status quo, which required the payment of the OPEX Charges in full until trial.  In rejecting that argument, the Court made the following observations about the grant of an interlocutory injunction in a leasing dispute (footnotes omitted):

[44]     There are important differences between commercial leases, involving proprietary interests, and ordinary commercial contracts such as that in Telstra.  The different interests at stake will bear upon the exercise of equitable discretion in granting injunctive relief.  The Tribunal’s application of principle in granting the injunction is consistent with the nature of the Lease in dispute.  The OPEX Charges are calculated by the landlord each month, with no evidence put before the Tribunal as to how they are calculated.  As referred to in the Tribunal’s reasons, and as submitted at various stages by both parties, requiring the Respondent to pay the full amount of the OPEX Charges as a precondition to the injunction would have defeated its ability to trade.  Had the Tribunal granted the preconditions sought by Appellant, the status quo in an ongoing lease would have been undermined.

The upshot of the Court’s decision is that the Tribunal’s usually practice is likely to continue, and tenants seeking an interlocutory injunction to prevent landlord re-entering will usually not be required to pay disputed arrears into a trust account in order to obtain that injunction.