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March 13, 2012

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FEA special leave to appeal denied

The High Court dismissed the application by the Liquidators for special leave to appeal in the FEA case on Friday.

The applicants sought leave firstly on the question of whether the correct test had been applied by the Full Court of the Federal Court when deciding that there was no equitable set-off and secondly on whether the words ‘without any deduction whatsoever’ in a lease are sufficient to exclude an equitable set-off.  It was conceded that the second question only arose if leave was granted in relation to the first question.

The Full Federal Court had determined at paragraph [173]ff of the intermediate appeal decision that there was insufficient evidence before the primary judge to establish that there was an equitable set-off.  The High Court held that this was a factual determination, so declined leave to appeal on question 1.  As a result, the second question did not arise.

Consequently, the Full Court’s decision on whether the words ‘without any deduction whatsoever’ stands undisturbed.  For discussion on that decision, see the earlier post here.

March 8, 2012

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Termination when tenant’s guarantor made bankrupt

In the interesting recent decision of N R Reid & Co Pty Ltd v Pencarl Pty Ltd [2011] VCAT 2241, Judge O’Neill sitting as a Vice President of VCAT considered a case in which the landlord terminated the lease after the tenant’s guarantor was made bankrupt.

The default and termination provisions of the lease took the usual form of giving the landlord the right to terminate the lease if the tenant’s guarantor became bankrupt.  However, the relevant clause was not expressed as a promise that was capable of being breached.

The landlord argued that:

  1. the lease gave the tenant a contractual right to terminate the lease if the tenant’s guarantor was made bankrupt;
  2. there is no sense in which the tenant ‘breached’ the lease as required by s 146 of the Property Law Act 1958 (Vic);  and
  3. accordingly, no notice was required.

His Honour Judge O’Neill accepted that argument, but does not appear to have been referred to any authorities on the issue.

Duncan’s Commercial Leasing in Australia (6th ed) discusses this issue, reviews the relevant authorities at [13.10], and concludes that:

  1. the English courts have tended to treat breach of a condition in a lease as equivalent to a breach of a covenant, requiring notice under s 146 or its equivalent;  and
  2. the issue is unresolved at appellate level in Australia.

This suggests that:

  1. it remains prudent to serve a s 146 notice on a tenant where the tenant or its guarantor has been made bankrupt or placed into liquidation;  and
  2. if the landlord has re-entered in those circumstances without a notice, it remains arguable that the re-entry was effective.

March 5, 2012

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Michael Redfern

Robert Hay just added the following post to his blog:

Michael Redfern died last Thursday night. Many readers will know Michael either personally or as one of Australia’s leading property lawyers. Michael had been ill for a number of years. Michael was a fine lawyer, a gentlemen, a mentor to many, generous and kind.  Any person who knew Michael could not help but like him. Apart from his many years as a solicitor, Michael made major contributions to the law in Australia as co-author of  ’Australian Tenancy Practice and Precedents’, the author of many articles and the presenter of many seminars. Michael will be sadly missed.   Michael’s funeral will be held on Friday 9 March, 2:30pm at Le Pine, 1048 Whitehorse Rd Box Hill.

Michael was a pillar of the leasing community in Victoria and will be sadly missed.

February 22, 2012

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A warrant for possession can only be executed once – Part II

Further to the post below, it appears to be possible to obtain leave of the Court to issue a fresh warrant: see Perpetual Ltd v Field [2010] VSC 445.

This prevents the need for a new proceeding.  However, it appears that a court appearance is still required (see paragraph [11] of the judgment above).

Thanks to my colleague Jordon Ross for alerting me to this case.

February 22, 2012

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A warrant for possession can only be executed once

I have recently been told that the Sheriff views a warrant for possession as capable of being exercised only once, after which the warrant goes stale.

This is probably correct in principal because any continuing trespass is broken by the Sheriff giving possession to the land owner, and a new cause of action accrues against the trespasser when he or she breaks back into the property.

However, this creates a problem for a land owner who has a warrant for possession executed against a trespasser who then breaks back in.  It means the land owner would need to make a fresh application to court for a new order and a new warrant, with all the associated costs, delay and frustration.

Consequently, land owners seeking to have a warrant executed against a trespasser should be vigilant in securing the property after the warrant has been executed.

February 9, 2012

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Disclaimer of a lease by the landlord’s liquidator does not extinguish the tenant’s property

 

[ED – the decision in this case has been overturned by the Court of Appeal – see subsequent post here.]

Her Honour Davies J in the Victorian Supreme Court has ruled that the liquidator appointed to a land owning company cannot use the disclaimer power under the Corporations Act to disclaim leases over that land.

In Willmott Forests Ltd (Receivers and Managers Appointed) (In Liq) & Ors [2012] VSC 29, handed down today, the Liquidators had entered contracts to sell land on which the Willmott forestry schemes’ plantations were established.  The Liquidators agreed to sell the freehold free of the Growers’ leasehold estates and sought judicial advice on whether the disclaimer power under s 568 of the Corporations Act could be used to extinguish the Growers’ leases.

The Growers argued that the disclaimer power could not be used to extinguish their leases.  The Growers’ arguments were accepted.

This decision has significance for the restructure and liquidation of agricultural or forestry managed investment schemes.  It prevents the Liquidator from unilaterally extinguishing Growers’ leases (provided the Growers are not otherwise in default), affording the Growers a greater opportunity to restructure their schemes.

The decision also has wider significance.  For example, a Liquidator could be appointed to a company that owned a large shopping centre.  If the Liquidator could use the disclaimer power to extinguish shop owners’ leases, then he or she may be able to disclaim a large number of leases in the centre.  The Liquidator could then either sell the land free of those leases, re-let the shops at a higher rent or try to extract higher rent from sitting tenants.  This would, in turn, increase the value of the freehold for the benefit of the company’s creditors at the expense of shop owners.  Her Honour Davies J’s decision, it appears, prevents this from happening.

As far as I am aware, the use of the disclaimer power in this way was first raised before Robson J in Re Timbercorp Securities Ltd (in Liq) (No 3) (2009) 74 ACSR 626 [2009] VSC 510.  It was also argued before Davies J in BOSI Securities Services Ltd v Australia and New Zealand Banking Group Ltd (2011) 84 ACSR 341; [2011] VSC 255 and before Dodds-Streeton J in Willmott Forests Ltd, in the matter of Willmott Forests Lit (Receivers and Managers Appointed) (In Liq) [2011] FCA 1517.  However, this is the first time that an Australian court has ruled on this question.

Congratulations to Garry Bigmore QC and Matthew Kennedy, instructed by Clarendon Lawyers, whose submissions were accepted by the Court.

February 7, 2012

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Deputy President Macnamara of VCAT appointed as a County Court Judge

The Governor in Council has today appointed VCAT Deputy President Michael Francis MacNamara as a Judge of the County Court of Victoria.

Deputy President Macnamara has been a long standing Deputy President at the Tribunal and has been responsible for the retail tenancies list for many years.

Congratulations to his Honour on his appointment.

It remains possible that his Honour will continue to sit as one of the Vice Presidents of  VCAT.  VCAT has a number of Vice Presidents, who are required to be County Court judges.

February 7, 2012

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More on the impact of online trading on retail rents

For those who were interested in my last post about the impact of online sales on retail leasing rental values, here is a link to a post on a similar topic by my colleague and friend Mark McKillop.

Mark’s post summarises and contains a link to a document by Ferrier Hodgson that touches on the same topic and is well worth reading.

February 6, 2012

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Article in The Age on the impact of online trading on retail shopping centres

Hello all, and welcome back to the new legal year.

During January, The Age published an interesting comment by an economic analyst about the impact of the shift towards online shopping on rent for retail shops, particularly in light of the recent announcement by Myer that it does not intend to renew a number of its leases.  The author, Michael Pascoe, suggests that this can only have a downward effect on retail shop rents.

He suggests that a number of the current long-term vacancies are caused either by:

  1. landlords who are unwilling to respond to changes in the market;  or
  2. inflexible lenders who will require repayment of part of their loan in the event that the rent is reduced (the value of a commercial rental property is usually calculated as a multiple of its rent).

He also suggests that some of the larger landlords are cutting deals on rent to protect tenants and that this may have a flow-on effect on second- and third-tier properties.

A copy of the article is available here.

It builds on press on shopping centre rents in August and September last year (see previous posts here and here).

This is relevant to practitioners for both landlords and tenants in a number of ways:

  1. it increases the uncertainty of a rental determination if a lease provides for a review to market.  Recent changes to the market will not yet be reflected in many determined or agreed market rents as reviews typically take place every five years.  Consequently, opinions may vary significantly between valuers as to the impact of recent changes to the market.  Practitioners for both landlords and tenants should advise their clients of this uncertainty and consider making submissions to a determining valuer in the event that the rent cannot be agreed;
  2. a threat by a tenant to ‘walk’ or refuse to renew a lease may have a greater impact (both in the context of a dispute and of an insolvency);  and
  3. the lack of replacement tenants (or replacements at comparable rent) may have an impact on whether landlords commence actions for possession and rental arrears now or delay until circumstances improve.

January 15, 2012

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‘Use’ in an Alpine lease defined – part II

A few people have requested a copy of the reasons in the recent County Court decision in Evans & Ors v Thurau Pty Ltd [2011] VCC 1444 on the meaning of the word ‘use’ in an Alpine lease.

An earlier post on the decision is available here.

The decision has not made its way to AustLii yet.  If you are interested in the decision, a copy is attached here.  The relevant discussion is contained in paragraphs [66] to [85] of the reasons.

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