Should a tenant seeking an injunction to restrain re-entry be required to pay disputed arrears into a trust account?

In the recent case of Blue Train Café Pty Ltd v The Trust Company Limited (Building and Property) [2024] VCAT 75, the tenant sought an injunction to restrain the landlord from re-entering a leased premises because of alleged unpaid outgoings. The Tribunal found that there was an arguable case that the landlord had miscalculated the outgoings that were currently payable. 

The usual practice of the Tribunal in these circumstances (or when there is a counterclaim of the right quantum and character so that it arguably defeats the alleged arrears) is to make the interlocutory injunction conditional only upon:

1. the payment of rent from the date of injunction to trial; and

2. the usual undertaking as to damages.  

The Tribunal does not usually make an order for the payment of the disputed arrears into Court or a solicitor’s trust account.

However, the landlord in this case argued that any injunction should be made conditional upon the tenant paying the amount of the disputed outgoings into the trust account of the landlord’s solicitor.  

The landlord relied on mortgage cases where disputed arrears are, as a general practice, required to be paid into court. In particular, the landlord relied on the following extract from the decision of the Full Court of the Federal Court in Telstra Corporation Ltd v First Netcom Pty Ltd (1997) 78 FCR 132:

Thus it may be said that where a person seeks an injunction to restrain the termination of an ongoing agreement with the consequence that the party so enjoined is forced to continue to deal against his or her will, the party seeking the injunction will, prima facie, be required to pay to the party enjoined any monies owing between them or, if there is dispute as to whether monies are owing, to pay the amount in dispute into court, in addition to the normal undertaking as to damages.

… In determining the extent of the amount which would be paid into court (if any), the Court must, of necessity, have regard to the financial circumstances of the applicant for injunctive relief. Where the applicant is comfortably solvent, so that there would be no concern that the respondent be forced to continue to do business, and incur perhaps even greater indebtedness, and ultimately be left lamenting for amounts unpaid, the Court, as a matter of discretion, might refrain from ordering payment into court. But it will almost invariably be relevant to the way the Court exercises its discretion to have evidence as to the financial situation of the applicant, unless all amounts owing are paid to the respondent, paid into court, or security for the amount provided.

In Blue Train, in accordance with its usual practice, the Tribunal declined to follow those cases and ordered that the injunction should be granted without a condition that the disputed amount be paid into the trust account of the landlord’s solicitor. At that point, it was ‘steady as she goes’ as far as landlord and tenant dispute at VCAT are concerned.

However, I have been informed that an application for leave to appeal the decision has now been filed in the Supreme Court. I am not aware of a hearing date.

A successful appeal leading to a requirement for tenants to pay disputed arrears into a solicitor’s trust account as part of the price of an injunction would represent a significant departure from the Tribunal’s usual practices, although it appears that a similar requirement is near universal in mortgage cases. This would:

1. represent a significant shift in tenants’ ability to obtain an injunction to restrain wrongful re-entry over disputed arears or when the tenant has a counterclaim that defeats the arrears; and 

2. confine the strategies available to financially distressed tenants, potentially reducing the bargaining power and business recovery or exit strategies available to them.

Part 2 and Part 3 followups to this post can be found on Sam's Blog