Double win for the Tigers and a win for tenants in the Court of Appeal

On the same day as the Richmond Tigers secured a berth in the Grand Final, the Court of Appeal handed the Tiges another important win that has implications for the retail tenancies market generally.

The Court of Appeal on Friday has upheld Croft J’s decision in Richmond Football Club Ltd v Verraty Pty Ltd [2019] VSC 597 discussed here.

The Court of Appeal’s decision can be found at Verraty Pty Ltd v Richmond Football Club Ltd [2020] VSCA 267 (16 October 2020) and has a number of aspects.

First, the part of the decision with immediate practical impact is that a tenant cannot have a ‘late exit’ from or ‘jump out of’ the Retail Leases Act 2003 (Vic) during the term of the lease. This is important, as it means that the landlord and tenant of a lease that started its life as a retail premises lease can rely on the lease remaining under the Act throughout its term.

Secondly, my friend Paul Duggan has also written a useful post on the Court of Appeal’s decision here. Paul has also made the following point (emphasis added):

It is less clear whether a lease can ‘jump’ upon renewal of a lease. For example, ‘retail premises’ under the Act exclude premises whose tenants are listed on the ASX. Despite this, Verraty suggests that the retail premises lease for a ‘Mum and Dad’ business will continue to be a retail premises lease even where the tenants sell their business and assign their lease to an ASX-listed company during the life of that lease. So if that ASX-listed assignee then exercises an option to renew the lease, what is the status of the resulting further term? Croft J implies the answer depends on the terms of the lease involved. The Court of Appeal does not express a view.

Thirdly, the Court of Appeal said this (at [90], emphasis added):

In our view, acceptance of the Landlord’s construction — that the Act ceases to apply once the premises are no longer retail premises — necessarily means that cls 5.2(b) and 15.1(b)(i) (rendered void pursuant to ss 50 and 35(3), respectively) would apply and operate as originally intended and negotiated by the parties. The Act rendered the clauses void but if (contrary to our conclusion under proposed grounds 1–3) the Act no longer applies, as contended by the Landlord, there would be no reason why the clauses, negotiated by the parties and otherwise applicable, should not continue to operate. It is no answer to say that once the clauses are void they cannot be revived. Rather, they would only be void in particular circumstances and if those circumstances did (hypothetically) cease to exist, there would be no reason why the clauses should continue to be void. Although the relevant provisions of the Act operate directly and expressly on the retail premises lease, as the Tenant contends, so as to displace the express terms of the lease, it is only as a consequence of the application of the Act to the lease. If (hypothetically) the Act no longer applied to the lease, plainly, its provisions would no longer operate on it.

This is a paragraph that has already sparked debate within the leasing community. For my part, I think that all we can conclude at this stage is that a clause rendered void when the RLA 2003 applied to it will not be void if the Act stops applying. However, we may need more litigation before we know with certainty whether and when either the Act, or clauses rendered void by the Act, apply to a renewal.

This post originally appeard on Sam Hoppers Blog