The awarding of costs when Fair Trading Act claims are included in retail tenancy disputes

VCAT recently considered whether s.92 of the Retail Leases Act 2003 applied to claims made under the Fair Trading Act 1999 (FTA) in a proceeding that also involved what was undoubtedly a ’retail tenancy dispute’. The effect of s.92(1) of the 2003 Act is that each party bears its own costs in a dispute governed by Part 10 (ie the dispute resolution provisions) of the 2003 Act.

In Complete Pets Pty Ltd v Coles Group Property Developments Pty Ltd [2012] VCAT 361 the head tenant was sued by a subtenant alleging that it was induced to enter into the lease by reason of misleading or deceptive conduct contrary to the FTA. The subtenant sought an order that the sublease was void ab initio. The guarantor of the subtenant’s obligations also claimed to have been induced to enter into the guarantee by reason of misleading or deceptive conduct contrary to the FTA and sought an order the the guarantee was void ab initi. Another applicant claimed to have been induced to invest in the business conducted at the leased premises by reason of misleading or deceptive conduct contrary to FTA and sought damages. The head tenant counterclaimed against the guarantor for unpaid rent and outgoings. The head tenant’s claim was the only claim that succeeded. The head tenant sought its costs under s.109 of the VCAT Act 1998.

The head tenant contended that the dispute was made up of four claims and conceded that the tenant’s claim against the landlord was a ‘retail tenancy dispute’ within the meaning of s.81 of the 2003 Act and therefore were caught by s.92(1).

However, the landlord contended that the other claims were ‘consumer-trader’ disputes under the FTA as defined in s.107 of the FTA and therefore the disputes were not covered by s.92 of the 2003 Act. The Tribunal held that it was irrelevant whether relief was being sought under the FTA and that the “critical question” was whether the parties were, pursuant to s.90 of the 2003 Act, ”parties to a proceeding before the Tribunal” on an application under s.89(1) of the 2003 Act. If the parties were parties to a proceeding under s.89(1) s.92 of the 2003 Act applied and s.109 of the VCAT Act was irrelevant. Section 89(1) of the 2003 Act provides that “The Tribunal has jurisdiction to hear and determine an application by a landlord or a tenant under a retail premises lease……seeking resolution of a retail tenancy dispute”.

The Tribunal took a purposive construction of the 2003 Act and held that the guarantor and the investors were “parties to the proceeding” within the meaning of s.90 of the 2003 Act with the consequence that s.92(1) applied and the parties had to bear their own costs. The head tenant also unsuccessfully argued that even if s.92(1) applied it was entitled to costs because the proceeding had been conducted vexatiously with the consequence that the exception to the general contained in s.92(2)(b) of the 2003 Act applied. The vexatious conduct alleged was a refusal to accept offers of settlement.