Versus (Aus) Pty Ltd v A.N.H Nominees Pty Ltd [2017] VCAT 859
This is another section 54 Retail Leases Act (Vic) case – compensation for interference. While this case had many issues, it is interesting here to see that section 54 does not give a tenant a right to terminate the lease, but only to claim compensation.
The case involved water penetrating the premises and causing mould. The tenant had already been awarded $218,599.63 and $33,926.76 in damages in previous cases relating to compensation for interference. In the case that awarded $33,926.76, the tenant had claimed to terminate the lease due to repudiation, and claimed damages for the remainder of the term of the lease. The landlord disputed the repudiation, but accepted that the lease had ended. The Tribunal found no repudiation, and the compensation was limited up to the time the lease was ended.
The tenant appealed and the Supreme Court directed the Tribunal to re-consider the matter. The matter came back to the same Tribunal member. The case involved many issues and arguments, and ultimately the tenant was awarded approximately $85,000.00 based upon an estoppel argument (the landlord had promised to make repairs, the tenant stayed on in the premises for longer on the basis of that promise, and had suffered loss as a result of the landlord failing to make those repairs).
While the matter might go to appeal again, the Tribunal was clear that a tenant may not terminate a lease based upon section 54 of the Retail Leases Act. That section of the Act is titled: “Tenant to be compensated for interference”. It imposes itself in every lease that is subject to the Act. It includes:
“The landlord is liable to pay the tenant reasonable compensation for loss or damage (other than nominal damage) suffered by the tenant because a landlord or a person acting on the landlord’s behalf:
…
(d) fails to take reasonable steps to prevent or stop significant disruption within the landlord’s control to the tenant‘s trading at the retail premises”
The tenant argued that this imposed an obligation on the landlord to take reasonable steps to stop disruptions that were within the landlord’s control, and that a failure to perform this obligation was a breach of the lease that could amount to a repudiation.
However, the Tribunal found that the obligation imposed was not to take such steps, but only to provide compensation if the landlord failed to take such steps. The Tribunal extended itself to find that even a gross failure by the landlord to take these steps would not be a breach (presumably provided it paid compensation for interference).
The landlord had accepted that the lease had ended. If it hadn’t, the Tribunal may have found that the tenant had wrongly terminated the lease, and could have awarded damages to the landlord. All parties need to be very careful before taking that final step and terminating a lease..
Matthew Rafferty, Partner