‘Use’ of an Alpine sub-lease was defined today by Judge Kennedy in the County Court of Victoria as requiring the sub-tenant to physically occupy the premises.

In Evans & Ors v Thurau [2011] VCC 1444, two sub-tenants were required under the terms of their sub-leases to make their alpine apartments available for use by the general public when not being ‘used’ by them.

The sub-tenants had their apartments set up for themselves but only stayed at the apartments for part of the ski season.  They did not make the apartments available to the public when they were not staying there.  The Court found that the word ‘use’ in the context of these sub-leases required the tenants to be physically present at the apartments in the general sense of staying there (rather than actually sitting in their rooms) and that, accordingly, the sub-tenants were in breach of their sub-leases.

I have been told that a large number of Alpine ski leases contain similar requirements and that this decision could have an impact on a significant number of leases and sub-leases in the Victorian ski fields.

A client of mine received summary judgment for possession in an interesting case today.

The judgment suggests that it is harder for a rogue tenant to resist summary judgment for possession since the introduction of the Civil Procedure Act 2010 (Vic).

In today’s case:

1. the defendant had entered into a vendor’s terms contract;
2. both the vendor and the purchaser purported to terminate the contract and the associated possessory rights;
3. however, the purchaser remained in possession, so the vendor sued for possession;
4. the vendor and purchaser entered into subsequent negotiations for the sale of the property;
5. the purchaser in his defence and counterclaim relied on the subsequent negotiations as giving rise to either a further agreement for the sale of the property on vendor’s terms or a Walton Stores-style estoppel;  and
6. the vendor sought summary judgment for possession and summary dismissal of that part of the counterclaim relating to specific performance of the alleged agreement.

His Honour Justice Habersberger held that the purchaser did not have a sufficiently strong case to warrant the grant of leave to defend.

When considering the new test for summary judgment and summary dismissal of a claim under the Civil Procedure Act 2010 (Vic), his Honour held that (see [43] and [44]):

There is no doubt, in my opinion, that the test (for determining summary judgment) under the CPA (“no real prospect of success”) is less stringent than the test under the Rules or the inherent jurisdiction (a question that “ought to be tried” or an arguable defence on the merits). This means that an application which does not succeed under the CPA must also fail under the Rules test.

I often see cases where a rogue tenant is able to use a weak, but arguable counterclaim for damages to great advantage.

Provided there is no prohibition on claiming a set off, the tenant can often use the damages counterclaim to obtain an injunction to restrain termination of the lease for non-payment of rent.

This then locks the landlord into a protracted (and expensive) court timetable.  This, in turn, strengthens the tenant’s bargaining power and often results in the landlord writing off a significant amount of rental arrears to avoid protracted litigation against a potentially insolvent tenant.  It also often leaves the landlord feeling frustrated with the legal system.

By making it more difficult for a tenant to resist summary judgment for possession on the back of a weak damages claim, the CPA makes it more difficult for rogue tenants to take advantage of a very weak damages counterclaim.

It also means that practitioners acting for tenants with a legitimate damages counterclaim that they wish to set off against rental arrears need to be vigilant to rally the tenant’s evidence for their counterclaim at the earliest stage.

A copy of the judgment is available here.

Thanks to my colleague John Simpson for helping me prepare this post.

In Burd & Cooper Pty Ltd (ACN 119 808 034) v C & P Cooper Pty Ltd (ACN 119 813 133) and Ors (Retail Tenancies) [2011] VCAT 1416, the tenant filed a counterclaim based on an alleged payment to the landlord of $210,000, then withdrew the counterclaim at the 11th hour before trial.

The landlord sought an order for costs on the grounds that the counterclaim was patently hopeless, and therefore was vexatious, enlivening the Tribunal’s jurisdiction to award costs under s 92 of the RLA 2003.

The Tribunal declined to award costs on the grounds that:

• the tenant withdrew on the basis that she could not prove the payment of $210,000;  and
• there was no evidence that she had any subjective knowledge that her case was hopeless.

Practitioners faced with what appears to be a hopeless case should consider serving a Calderbank-style letter that points out the weaknesses of the opposing case.  This would at least provide some evidence that the other side was or should have been aware of the problems with their case.

Thanks to Mark Schramm for providing a copy of this case to me, and to Peter Nugent for discussing it with me.

In an interesting recent judgment, Richmond Football Club was able to recover a significant amount of land tax paid under a retail lease.

The Tribunal held that a deed of variation constituted a surrender and re-grant of the lease and that the re-granted lease was a retail premises lease under the RLA 2003.  Consequently, there was no liability to pay land tax and amounts previously paid could be recovered from the landlord.  However, the landlord was entitled to retain outgoings wrongly paid by the tenant.

Practitioners for both landlords and tenants should consider reviewing any leases of retail premises entered before the commencement of the RLA 2003 for deeds of variation that may constitute a surrender and re-grant.

A copy of the decision can be found here.

The landlord and tenant entered a lease in 1998 and a deed of variation in early 2004.  The deed of variation made various changes to the lease, including extending the term by 10 years, altering the rent payable and imposing an obligation to pay GST.  The tenant kept paying land tax and outgoings under the terms of the old lease.

VCAT held that the changes were so significant that the deed of variation constituted and surrender and re-grant of the old lease, and that the re-granted lease fell under the RLA 2003.

The tenant argued that:

1. land tax was not payable under s 50 of the RLA 2003;  and
2. as the landlord had not served an estimate of outgoings under s 46 of the RLA 2003, the tenant was not liable for outgoings paid under the term of the re-granted lease.

The landlord argued that the tenant was estopped from departing from the assumption that land tax and outgoings were payable under the lease.  However, the Tribunal found that the estoppel could not be made out because neither party was aware that the lease was in fact governed by the RLA 2003 until 2009, when it was first raised by the Richmond Football Club.

The landlord also argued that the Ministerial determination of 24 August 2004 excludes leases for a term of over 15 years and that imposes certain obligations on the tenant to conduct structural works.  The Tribunal found that, among other things, the re-granted lease commenced in 2004 and had a term of less than 15 years.

The landlord argued that the tenant was acting unconscionably and received a windfall gain, and that this breaches the unconscionable conduct provisions of the Fair Trading Act.  However, the Tribunal found that the tenant was acting honestly and that there was no unconscionable conduct.

The landlord also argued that there was good consideration for the payments and that the landlord had a counter-restitutionery claim, drawing an analogy to the Court of Appeal’s reasoning in Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd.  (2006) VSCA 6.

Tribunal found that:

1. the tenant’s occupancy of the premises increased the outgoings payable and the tenant has received a benefit from the outgoings that it has paid for, so the payment of rent is analogous to the payment of rent considered in The Dog Depot.  Consequently, the tenant’s claim for outgoings must fail;  and
2. there is a disconnect between the benefit enjoyed by the tenant and the imposition of land tax.  Land tax represents a cost connected to the landlord’s wealth and not the tenant’s use of the land.  Also, in The Dog Depot, there was an underlying contractual obligation to pay rent, but there was no similar contractual obligation to pay land tax as the covenant to pay land tax is excluded by the RLA 2003.

The Tribunal accepted the unchallenged submission from the landlord that any payment made outside the limitation period under the Statute of Limitations cannot not be recoverable.

I am presenting a paper on recent developments in relief against forfeiture as part of the Greens List breakfast briefing series.

My paper will be presented from 7.45 on 3 November 2011 at Level 1, 205 William Street, Melbourne.

I will be talking about:

1. some recent cases in which relief against forfeiture has been obtain or refused;  and
2. steps lawyers can take to maximise their clients’ prospects of either successfully bringing or resisting an application for relief from forfeiture.

Robert Hay will also be giving a presentation on recent developments under the Retail Leases Act 2003.

For anyone would like to attend, the registration form is available here.