New South Wales Supreme Court CITATION : GPT Management Ltd & Anor v Spa Heaven Pty Ltd & Ors [2005] NSWSC 1043 HEARING DATE(S) : 30 September and 12 October, 2005 JUDGMENT DATE : 12 October 2005 Equity Division JURISDICTION : Commercial List JUDGMENT OF : Palmer J DECISION : Summary judgment refused; proceedings transferred to Administrative Decisions Tribunal. CATCHWORDS : RETAIL LEASES ACT - "DISPUTE" - Whether "retail tenancy dispute" is confined to a dispute as to the existence of a legally enforceable claim. LEGISLATION CITED : - Retail Leases Act 1994 (NSW) - s.3, s.63, s.68, Pt 8 Div 3 s.74(1), s.75 - Wellington v Norwich Union Life Insurance Society Limited [1991] 1 VR 333 CASES CITED : - Lang's Commercial Leasing in Australia - para 4-010, 45-110 GPT Management Ltd and Lend Lease Real Estate Investments Ltd - Plaintiffs Spa Heaven Pty Ltd - First Defendant/First Cross Defendant Dawn Enterprises NSW Pty Ltd - Second Defendant/First Cross Claimant PARTIES : Jacqueline Dawn Eckford - Third Defendant/Second Cross Claimant Catherine Gray - Fourth Defendant/Second Cross Defendant Peter Gray - Third Cross Defendant FILE NUMBER(S) : SC 50006/05 S.B. Adams (Sol) - Plaintiffs COUNSEL : 1st & 4th Defendants: T.O Bland 2nd & 3rd Defendants: M.P. Cleary Adams & Co - Plaintiffs SOLICITORS : 2nd & 3rd Defendants: Aubrey Brown Partners LOWER COURT JURISDICTION : Ex tempore Introduction 1 The Plaintiffs were the lessors and the First and Second Defendants were the lessees of retail shop premises in the Erina Fair Shopping Centre at Erina. The Third and Fourth Defendants indemnified the Plaintiffs for any loss occasioned by breach of the obligations of the First and Second Defendants under the lease. 2 On 27 October 2004, the Plaintiffs terminated the lease for non-payment of rent and other moneys said to be due under the lease. On 29 March 2005, the Plaintiffs entered into a lease of the shop with another tenant. 3 By their Amended Summons the Plaintiffs claim judgment against the Defendants in an amount of $200,640, together with interest. That amount comprises a liquidated sum of $84,813, being the balance of rent outstanding to the date of termination, and a sum of $115,827, being unliquidated damages for loss of rent for the premises between the date of termination of the Defendants' lease and the execution of a new lease with another tenant. 4 By their Defence, the Second and Third Defendants admit that, in breach of the lease, the First and Second Defendants failed to pay rent and other moneys due under the lease and that the lease has been validly terminated. The Defence does not admit the amount of arrears of rent claimed in the Amended Summons. No other defence to that part of the Plaintiffs' claim is shown. The Defence denies that the Second and Third Defendants are indebted to the Plaintiffs in the amount claimed for unliquidated damages on the ground that the Plaintiffs did not use reasonable endeavours to mitigate their loss by finding a new tenant earlier than they did. There are other grounds of defence to this part of the claim which I do not need to elaborate for the purposes of this application. 5 The Second and Third Defendants have filed a Cross Claim against the First and Fourth Defendants wherein they claim that, by reason of breaches of the Partnership Act 1892 (NSW) and other wrongdoing, the First and Fourth Defendants are liable to indemnify the Second and Third Defendants in respect of their liability to the Plaintiffs. 6 The Plaintiffs have filed a Notice of Motion seeking summary judgment against all Defendants. The First and Fourth Defendants have failed to appear despite being given proper notice of the motion. The Second and Third Defendants have appeared and oppose the entry of judgment. The issues 7 Mr Cleary of counsel, who appears for the Second and Third Defendants, says that judgment cannot be entered as sought for two reasons. The first is that a defence to the Plaintiffs' claim for unliquidated damages has been sufficiently shown in the Defence. The second is that the whole of the Plaintiffs' claim against the Second and Third Defendants is, or involves, a "retail tenancy dispute" as defined in the Retail Leases Act 1994 (NSW) ("the Act") so that by virtue of s.68 of the Act the Plaintiffs are not permitted to bring these proceedings against them. 8 In addition, the Second and Third Defendants have filed a Notice of Motion seeking an order that the whole of these proceedings be transferred to the Administrative Decisions Tribunal pursuant to s. 75 of the Act. 9 Mr S. Adams, solicitor, who appears for the Plaintiffs, concedes that: – a defence is shown by the Second and Third Defendants to the Plaintiffs' claim for unliquidated damages sufficient to warrant the Defence on that part of the Plaintiffs' claim going to trial; – the subject matter of the lease was a "retail shop" , as defined in s.3 of the Act; – there has been no mediation under Pt 8 Div 2 of the Act between the Plaintiffs and the Second and Third Defendants as to the subject matter of these proceedings, and the Registrar of Retail Tenancy Disputes has not given a certificate under s.68(1) of the Act. 10 However, Mr Adams submits that judgment should be entered against the Second and Third Defendants in the amount claimed for arrears of rent up to termination of the lease together with interest because: – the Defence, although it does not admit that part of the claim, does not put forward any substantive defence to it; – the Defence admits that rent was not duly paid and the uncontradicted evidence filed in support of the Motion proves the amount of the rent in arrears; – the Second and Third Defendants have not shown any ground upon which they can resist the claim for arrears of rent so that there is, and can be, no dispute that the sum claimed is owing by them to the Plaintiffs; – in the absence of any ground for dispute as to the Plaintiffs' claim for arrears of rent, there can, by definition, be no "retail tenancy dispute" as defined by s.64(1) of the Act; – accordingly, the prohibition contained in s.68(1) of the Act does not apply to the Plaintiffs' claim for arrears of rent and interest; – judgment should be entered for the Plaintiffs in the amount claimed for arrears of rent and the balance of the proceedings may, if appropriate, be remitted to the Administrative Decisions Tribunal under s.75 of the Act. The meaning of "retail tenancy dispute" 11 Section 63(1) of the Act defines "retail tenancy dispute" as: "… any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates." Section 68(1) provides: "A retail tenancy dispute or other dispute or matter referred to in section 65 (1) (a1) may not be the subject of proceedings before any court unless and until the Registrar has certified in writing that mediation under this Part has failed to resolve the dispute or matter or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter." 12 Neither Mr Adams, Mr Cleary nor I have been able to find any case discussing the meaning of the word "dispute" in the definition of "retail tenancy dispute" or otherwise for the purposes of Pt 8 of the Act. Mr Adams, however, relies on the following passage in paragraph 48-010 of Lang's Commercial Leasing in Australia : "It is suggested that mediation is not a prerequisite to every claim made under a retail shop lease. It is indicated in the legislation that a prerequisite to mediation is the existence of a retail tenancy dispute. It is the nature of a dispute that the parties disagree on the merits of a claim. In The International Webster New Encyclopaedic Dictionary , 'dispute' is said to mean 'to debate; to quarrel; to call into question; to contest; to make the subject of a disputation; to oppose'. Accordingly, it is suggested that if the lessee has failed to pay rent or outgoings and is in possession or has abandoned the premises, there is, without more, no retail tenancy dispute. The lessor should then be entitled to terminate the lease, recover possession physically or by proceedings in the Supreme Court. It should also be possible to institute proceedings for rent and outgoings as a liquidated claim in the courts. The Registrar would only need to be approached if there was a dispute, involving some denial, defence or cross-claim by the lessee challenging the validity or size of the claim." 13 The essence of Mr Adams' submission is that, because the Second and Third Defendants' Defence does not show a legal ground upon which they can defend the Plaintiffs' claim for arrears of rent, there is no dispute as to that claim and, therefore, no "retail tenancy dispute" for the purposes of Pt 8 of the Act. I am unable to agree. 14 The definition of "retail tenancy dispute" in s.63(1) is exceedingly broad and, clearly enough, it is intentionally so. The fundamental object of the retail tenancy legislation enacted in the States and Territories of Australia is to protect the weak against the strong, i.e. the small retail tenant against the large retail lessor: see, for example, Wellington v Norwich Union Life Insurance Society Limited [1991] 1 VR 333 per Nathan J; see also Lang's Commercial Leasing in Australia para 45-110. 15 Part of the legislative policy of protection of retail tenants is that there should be mediation rather than litigation. The policy is evidenced in s.75(2), which requires Courts to have regard to "the general principle" that retail tenancy disputes should be dealt with, not by the Court, but by the special tribunal established to deal with such matters. When the tribunal comes to determine a claim under Pt 8 Div 3, it is required by s.74(1) and s.74(2) to endeavour to bring the parties to a mediated settlement rather than a litigious determination. The same policy of "mediation rather than litigation" is repeated in s.68(1) of the Act, which prevents a retail tenancy claim being made the subject of proceedings in any court before the possibility of a mediated settlement has been exhausted. 16 It is because the policy of the Act is to encourage parties to retail leases to discuss their differences constructively before resorting to legal proceedings that the definition of "retail tenancy dispute" in s. 63(1) is so wide. Within the purview of Pt 8 is "any dispute concerning" the liabilities or obligations of a party to a retail lease. That does not mean that the dispute is confined to legal issues, such as the existence or extent of an alleged legally enforceable liability or obligation. The dispute may be concerned with broader questions of fairness as to how an admitted legal liability may, or should, be enforced. 17 So, for example, a tenant may say to a landlord: "It is true that I, as one of several covenantors under the lease, have a joint and several liability with my co-covenantors. As a matter of law, you may enforce that liability against me alone. I have no defence to the claim, but I have a claim for contribution or indemnity from my co-covenantors and it would be harsh and unfair to rely on me alone to pay the whole of the liability when in justice I should be indemnified by my co-covenantors". 18 The landlord may say: "Your claim against your co-covenantors is nothing to do with me legally: you alone are liable to me for the whole debt. Pay me first and sue your co-covenantors afterwards". 19 If a tenant asserts that the landlord should, in fairness, stay its hand until the tenant has obtained contribution from a co-covenantor and the landlord refuses, asserting that is entitled to insist upon its strict legal rights, I do not see why that difference between them falls outside the words "any dispute concerning" the obligation of the tenant to pay the landlord arising under the lease. In my opinion, the words "any dispute concerning" should not be construed narrowly to mean "any legal issue concerning" , particularly in view of the remedial and protective character of the legislation as a whole. 20 The example which I have given in discussion is the situation in the present case. The Second and Third Defendants by their Cross Claim wish to indemnify themselves wholly or partly in respect of all of their liabilities to the Plaintiffs by recourse to the First and Fourth Defendants. Whether they should do so before or after paying the Plaintiffs the arrears of rent claimed in full, in my opinion, is capable of constituting a "dispute concerning" the obligations of the Second and Third Defendants to pay money under the lease for the purposes of Part 8 of the Act. 21 Accordingly, I am satisfied that the Second and Third Defendants have demonstrated a sufficiently arguable case that, as matters presently stand, the whole of these proceedings by the Plaintiffs are prohibited by s.68(1) of the Act. The Plaintiffs' Notice of Motion for summary judgment against the Second and Third Defendants must therefore be dismissed. Whether proceedings should be transferred to ADT Section 70 provides: " Retail tenancy claim means any of the following: (a) a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being: (i) a claim for the payment of a specified sum of money, (ii) a claim for relief from payment of a specified sum of money, (iii) a claim for the doing of specified work or the provision of specified services, (iv) a claim for the surrender of possession of specified premises, (v) a claim for assignment of rights under a lease or for a declaration that a lessor is not entitled to withhold consent to an assignment of the rights of a lessee, (vi) a claim for relief against forfeiture, (vii) a claim regarding the rectification of the lease, (viii) a claim regarding the invalidity of a lease for inconsistency with this Act or the regulations, (ix) a claim for a declaration of the rights, obligations and liabilities of the parties under a lease, (x) without limiting the generality of subparagraph (i), a claim for compensation under section 10." Section 74 relevantly provides: " Tribunal must attempt to conciliate (1) The Tribunal must not make an order in respect of a retail tenancy claim or an unconscionable conduct claim that is before it unless it has brought, or used its best endeavours to bring, the parties to the claim to a settlement acceptable to all of them. (2) For that purpose, the Tribunal may adjourn the hearing of a claim to enable the dispute or matter concerned to be referred to the Registrar under Division 2 for mediation of the dispute or matter. (3) If such a settlement is reached, the Tribunal must make an order under this Division that gives effect to the settlement to the extent permitted by this Division." Section 75 provides: " Removal of court proceedings to the Tribunal (1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that: (a) the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal, and (b) the interests of justice do not require that the matter be dealt with by the court. (2) In determining whether or not it is appropriate that a matter be dealt with by the Tribunal, a court is to have regard to the general principle that retail tenancy disputes should be dealt with by the Tribunal rather than by a court. (3) Proceedings are taken to involve a retail tenancy dispute if any issue in dispute in the proceedings involves a liability or obligation with which a retail tenancy dispute is concerned. (4) This section does not prevent a court from granting urgent relief of an interlocutory nature where it is in the interests of justice to do so. (5) This section does not apply to proceedings by way of an appeal. (6) A court may make such ancillary orders as it considers necessary for the purpose of enabling an order under this section for the transfer of proceedings to the Tribunal to have full effect." 22 I am satisfied that the whole of these proceedings involve a retail tenancy dispute for the purposes of Pt 8 of the Act: the Cross Claim by the Second and Third Defendants against the First and Fourth Defendants is just as much "a retail tenancy dispute" as the claims by the Plaintiffs against the Second and Third Defendants. Accordingly, in obedience to s.75(1) of the Act, the Court must transfer the whole of the proceedings to the Administrative Decisions Tribunal unless the qualifications contained in s.74(1)(a) and (b) apply. 23 Mr Adams submits that there is no purpose in transferring the proceedings to the Tribunal because the Tribunal would have to deal with them in exactly the same manner as would this Court. There is no defence to the arrears of rent claim, Mr Adams says, and the Tribunal would be compelled to enter judgment for the Plaintiffs against the Second and Third Defendants in respect of that claim in the same way as this Court would have had to enter judgment were it not for the provisions of s.68(1) of the Act. It is inappropriate and contrary to the interests of justice, so Mr Adams says, to put the Plaintiffs to the expense and inconvenience of transferring the matter to the Tribunal when there is no purpose in doing so. 24 I do not agree that the Tribunal would have to deal with any of the Plaintiffs' claims in exactly the same manner as would this Court. Section 74(1) of the Act requires that the Tribunal must not make an order in respect of a retail tenancy claim unless it has brought, or used its best endeavours to bring, the parties to the claim a settlement acceptable to all of them. There is no similar requirement binding this Court in the Civil Procedure Act 2005 (NSW). 25 The parties to this dispute, as constituted by the present proceedings, include not only the Plaintiffs and the Second and Third Defendants but the First and Fourth Defendants. As I have noted, the First and Fourth Defendants have not appeared in response to the Plaintiffs' motion for summary judgment or in response to the Second and Third Defendants' motion to transfer the proceedings under s.75 of the Act. However, I cannot assume from that circumstance that the First and Fourth Defendants are of no substance and would have no interest in appearing before the Tribunal, particularly if there were means available under the Act of mediating all issues in which they are involved. In other words, the proceedings before the Tribunal could take a very different course from the course which they would probably take in this Court. 26 Mr Adams submits that the claim by the Second and Third Defendants against the First and Fourth Defendants may be fruitless so that it would be a waste of time to determine the dispute between the Second and Third Defendants and the First and Fourth Defendants. In particular, Mr Adams says that it would be a waste of the Plaintiffs' time and money to defer enforcement of its rights against the Second and Third Defendants pending a determination of the proceedings between the Second and Third and the First and Fourth Defendants. 27 While this may turn out to be the case, I have no evidence which would assure me that this will be the case. I simply do not know why the First and Fourth Defendants have not appeared and, in particular, I do not know whether enforcement proceedings against them may result in satisfaction of a judgment, or nothing. I cannot speculate, therefore, that any proceedings brought by the Second and Third Defendants against the First and Fourth Defendants will prove fruitless. 28 Mr Adams submits that it is contrary to the interests of justice to tie up the claims of the Plaintiffs against the Second and Third Defendants with the claims by the Second and Third Defendants against the First and Fourth Defendants. As I have indicated earlier, I think that the disputes between the Plaintiffs and the Second and Third Defendants, and between the Second and Third Defendants and the First and Fourth Defendants, raise similar general questions of fairness and justice as to the order in which the proceedings between the parties are determined and the order in which any judgments may be enforced. 29 The Court is required to pay regard to the policy of the Act that retail tenancy disputes should be dealt with by the Tribunal rather than the Court unless there are reasons of efficiency and justice to the contrary: s.75(1), (2). In the present case, no reason is demonstrated why the Court should refuse to transfer these proceedings either in the interests of efficiency or in the interests of justice. Accordingly, I will accede to the application of the Second and Third Defendants to transfer the whole of the proceedings to the Administrative Decisions Tribunal pursuant to s.75 of the Act. Costs 30 Mr Cleary, who appears for the Second and Third Defendants, seeks orders that the Plaintiffs pay the Second and Third Defendants' costs of the application for summary judgment and of the application to transfer the proceedings pursuant to s.75 of the Act. Further, Mr Cleary says that the proceedings should have been commenced in the Tribunal rather than this Court as a retail tenancy dispute was involved, so that the Plaintiffs should be ordered to pay the whole of the Second and Third Defendants' costs of the proceedings to date. 31 Mr Adams submits that there should be no order for costs against the Plaintiffs on the Motions because the defence upon which the Second and Third Defendants have succeeded in resisting summary judgment was filed very late. Secondly, he says, there was a novel question of law involved. While accepting the force of what Mr Adams says in that regard, I think that costs of the applications should, nevertheless, follow the event. 32 The lateness of the Defence is unfortunate but, once a defence under the Act had been raised, the Plaintiffs were put fairly upon notice of the point of law which would be taken. As to novelty, unfortunately there are many cases decided by the Courts in which a novel point arises; that is one of the inevitable risks in litigation that any litigant faces. I do not see any reason in this particular case why the costs should not follow the event, particularly as there was no decided authority in favour of the proposition put by the Plaintiffs. 33 It seems to me that there should be no order as to costs of the proceedings other than in respect of the two motions which have been debated before me. The work which has been done in by both sides in the proceedings generally will no doubt be of utility when the proceedings come before the Tribunal. The costs of that work should await the ultimate decision of the Tribunal. Accordingly, I make no order as to costs of the proceedings generally. Orders 34 The orders of the Court, therefore, are: (1) the Plaintiffs' Motion for summary judgment against the Second and Third Defendants is dismissed with costs; (2) the Second and Third Defendants' Motion to transfer the proceedings to the Tribunal pursuant to s.75(1) of the Act is granted; (3) the Plaintiffs will pay the Second and Third Defendants' costs of that motion. ~ oOo ~ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.