VCAT not bound to refer matters to arbitration

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On 17 October 2013 I posted a note about Subway Systems Australia Pty Ltd v Ireland [2013] VSC 550 which concerned a dispute between a franchisor and a franchisee. The franchise agreement contained an arbitration clause.  VCAT refused to refer the dispute to arbitration pursuant to s.8 of the Commercial Arbitration Act 2011 which provides that:

“A court before which an action is brought in a matter which is the subject of an arbitration agreement must, if a party so requests not later than when the submitting party’s first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.”

Justice Croft held that VCAT was not a “court” within the meaning of s.8 and therefore the dispute could be heard and determined in VCAT.

The decision is significant because many agreements, particularly franchising agreements, contain arbitration clauses. The effect of the judgment is that if a proceeding is commenced in VCAT concerning an agreement that contains an arbitration clause a party to that agreement cannot request the Tribunal to refer the matter to arbitration pursuant to s.8.  If the same proceeding were commenced in the Magistrates’ Court, the County Court or the Supreme Court, the Court could refer the proceeding to arbitration. According to Justice Croft this did not produce an absurdity because VCAT was intended to be a forum for speedy and inexpensive resolution of disputes.

Justice Croft noted that a party to a proceeding in VCAT could still apply under s.77 of the VCAT Act to have the matter referred to the arbitral tribunal on the basis that it was a more appropriate forum.

In the earlier post about Subway  the Commercial Arbitration Act 2011 was erroneously referred to as a Commonwealth Act; the reference should have been to a Victorian Act.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Arbitration clause ineffective to oust VCAT's jurisdiction

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In a fascinating decision given today the Supreme Court of Victoria held that an arbitration clause in a lease could not oust VCAT’s jurisdiction under the Retail Leases Act 2003 (2003 Act).  In Subway Systems Australia  Pty Ltd v Ireland [2013] VSC 550 Croft J held that VCAT was not a “court” within the meaning of the Commercial Arbitration Act 2011 (Cmlth).  The matter came before Croft J after a VCAT member declined to find that the Tribunal was bound to refer the dispute to arbitration under s.8 of the CAA. In broad terms s.8 of the CAA requires a court before which an action is brought in a matter which is the subject of an arbitration agreement to  refer the matter to arbitration if one of the parties  makes that request.  Croft J held that VCAT was not a “court” for the purpose of s.8(1) of the CAA and therefore VCAT was not bound to refer the dispute to arbitration.  His Honour also accepted that  by the time s.8 of the CAA might be said by a party to a lease to be engaged, s.94 of the 2003 Act  had already rendered void the clause requiring disputes under the lease to go to arbitration. Section 94(2) of the 2003 Act provides that a provision in a retail premises lease is void to the extent that it purport to exclude the application of a provision of the 2003 Act  or to limit the right of a party to a lease to seek resolution of a retail tenancy dispute under Part 10 of the 2003 Act.

Author: Robert Hays Barrister subject to copyright under DMCA.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience.

Can the landlord pass on the costs of complying with the Building Act?

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Some of Melbourne’s finest legal minds are spending long hours trying to solve the question of whether a landlord can recover from a tenant the costs of complying with the landlord’s obligations under the Building Act 1993 (Act) and regulations.

Much of the debate concerns s 251  which provides that:

“(1)    If the owner of a building or land is required under this Act or the

          regulations to carry out any work or do any other thing and the owner does not carry out the work or           do the thing, the occupier of that building or land or any registered mortgagee of the land or the land               on which the building is situated, may carry out the work or do the thing.

(2)        An occupier may-

(a)        recover any expenses necessarily incurred under subsection (1) from the owner as a debt due to the              occupier; or

(b)        deduct those expenses from or set them off against any rent due or to become due to the owner.

.....

(6)        This section applies despite any covenant or agreement to the  contrary.”

             Underlining added

In my  the view the effect of s.251 is that if the owner is required by the Act or the regulations to carry out any work or do any other thing and does not carry out the work or do the thing:

(a)        the tenant can do the work that the landlord was obliged to do and  recover the costs from the                      landlord owner as a debt; and

(b)        the tenant can set-off the costs of doing the work that the landlord owner was obliged to do against                the rent; and

(c)        the usual rent covenant that rent must be paid "without deduction" will not assist the landlord if it fails             to comply with s.251 and the tenant does the work that the landlord was obliged to do (Chen v                    Panmure Hotel Pty Ltd[1]). 

However, s 251 does not answer the question whether a building owner can recover from the tenant the owner's costs of complying with its obligations under the Act and regulations. In other words, can the tenant be obliged to pay the owner’s costs of complying with the Act and regulations when s 251 has not been enlivened?

Section 39 of the Retail Leases Act 2003 (2003 Act) permits a landlord to recover outgoings from the tenant by appropriately drawn provisions in a lease. Section 41(1) of the 2003 Act makes void a provision in a lease that requires the tenant to pay an amount in respect of capital costs. Thus it is clear that the tenant could never be required to pay an amount in respect of capital works.

In my view, if s 251 is enlivened by the owner failing to do works that it was required to do under the Act and the tenant does that work, the owner cannot, pursuant to provisions in a lease, recover from the tenant the costs that the owner pays to the tenant under s 251.

But where 251 of the Act has not been enlivened and the owner seeks to recover from the tenant the costs that it has incurred in complying with the Act, it is not clear to me why the landlord should not be able to recover those costs from the tenant. Proponents of the view that the landlord cannot recover the costs will refer to Café Dansk Pty Ltd v Shiel[2] where Deputy President Macnamara (as his Honour then was) held that a landlord could not recover from the tenant the costs of complying with s 52 of the 2003 Act. In my view there are good arguments as to why Café Dansk is not correct, but even if it be assumed that the decision is correct the logic applied in Café Dansk does not necessarily apply when considering the Act. The Act and the 2003 Act are directed at different things. The Act is concerned with ensuring the safety of persons using buildings; its provisions are directed solely to that end; and it says nothing about the ultimate allocation of the costs of complying with the Act while the 2003 Act,  and s 52 in particular, is remedial leglislation concerned with restoring the balance of rights as between landlords and tenants. In my view it is not at all clear that there is anything in the Act that rebuts the presumption that an Act is not to be construed as taking away existing common law rights unless the legislative right to do so is clear[3]. I am not convinced that it is clear that Parliament intended to take away the contractual right to pass on the costs of compliance.    

---

[1] [2007]VCAT 2463

[2] [2009]VCAT 2009.

[3] Pearce, D.C and Geddes, R.S, Statutory Interpretation in Australia, 7^th ed, LexisNexis, 2011, paragraphs 5.27, 5.28 and 5.35.

My clerk can be contacted via this link http://www.greenslist.com.au/ if you wish to retain my services for any legal matter which is within the gamut of my legal experience. 

Author: Robert Hays Barrister subject to copyright under DMCA.

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Section 52(2) of the Retail Leases Act 2003 provides that:

"The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease is entered into:

(a) the structure of, and fixtures in, the retail premises;

      and

 (b)the structure of, and fixtures in, the retail premises; and

(b)                plant and equipment at the retail pemises; and

the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

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