VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
BUILDING AND PROPERTY LIST	
vcat reference No. BP1245/2022	
CATCHWORDS	
Practice and procedure: application by respondent to strike out proceeding under s 78 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic); application dismissed; costs reserved; proceeding to be set down for final hearing.	

First APPLICANT	Thi Hoa Nguyen t/as Derrimut Charcoal Chicken & Kebab	
SECOND APPLICANT	Dung Van Bui	
RESPONDENT	Noordenne Derrimut Village Pty Ltd (ACN 004 527 628)	
WHERE HELD	Melbourne	
BEFORE	Member C Edquist	
HEARING TYPE	Directions Hearing by videoconference	
DATE OF HEARING	10 February 2023	
DATE OF ORDER	24 May 2023	
Date of reasons	24 May 2023 	
CITATION	Nguyen v Noordenne Derrimut Village Pty Ltd (Building and Property) [2023] VCAT 590	

OrderS
1.	The application of the respondent for dismissal of the applicants’ proceeding under s 78(2) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) is itself dismissed.
2.	The respondent’s application for costs is reserved.
3.	The Principal Registrar is directed to list the proceeding for final hearing before Member Edquist, at 2.15 p.m. on Friday 2 June 2023, with an allowance of half a day. The purpose of the hearing will be to determine, at least:
(a)	whether the Notice of Breach dated 26 August 2022 was valid;
(b)	the respondent’s application for costs.
4.	Liberty to apply.

Member C Edquist Member			

APPEARANCES:		
For Applicant	Mr D Epstein of Counsel	
For Respondents	Mr N Andreou of Counsel instructed by Mr A White, solicitor	

Reasons
Background
1	The first applicant, Ms Thi Hoa Nguyen, is a tenant under a lease (the Lease) granted by the respondent, Nordenne Derrimut Village Pty Ltd (ACN 004 527 628), (the Landlord) in respect of a shop in Mount Derrimut Road, Derrimut, Victoria (the Premises). The Lease was made on or about 8 October 2020. Ms Nguyen operates a takeaway food business there known as Derrimut Charcoal Chicken & Kebabs. The second applicant, Mr Bui, is involved in the business. It is convenient to refer to the applicants collectively as “the Tenants” even though, strictly speaking, only Ms Nguyen is the tenant under the Lease.
Base rental and percentage rent
2	A particular feature of the Lease is that the rent payable each month comprises two parts. There is a “base rental” and a “percentage rent”. The base rent is stipulated in clause 1 of the schedule appended to the Lease (the rent schedule). At the outset of the Lease, it was $4,333.33 plus GST per calendar month. The clause stipulated that on each anniversary of the Commencement Date, the rental would be increased by 3% plus GST.
3	The percentage rent is dealt with in clause 2 of the rent schedule. The percentage rent is equal to “ten per cent or 12%” of annual gross sales made on or from the premises exceeding the annual base rent multiplied by 8.33. The percentage rent is to be calculated at the end of each lease year on the basis of the tenant’s gross sales for that lease year. 
4	The rent schedule also sets out rules for the calculation of the percentage rent at the end of each year. Clause 2(e) requires the tenant to deliver to the landlord gross sales figures at the end of each month. Clause 2(f) requires the tenant to keep “full and accurate books of account and records including all sales, cash register rolls, page strips and other evidence of gross sales”. And clause 2(g) sets up a process under which the Landlord can audit the tenant’s books of account and records of gross sales.
Notice of breach 
5	In about the middle of last year, it came to the Landlord’s attention that the Tenants were (allegedly) advertising the business for sale on the basis of a representation that the annual gross turnover was greater than that submitted to the Landlord for the purposes of calculating the percentage rent. The discrepancy is not minor. The Landlord submits that, even if the information contained in an affidavit filed by Mr Bui is taken at face value, the tenant’s turnover for the financial year ending 30 June 2022 is $388,825.00 exclusive of GST. This is significantly larger than the $250,000.00 per annum estimated by the Landlord’s managing agent from the turnover figures provided by the Tenants.
6	The discrepancy between the turnover declared to the Landlord and the turnover represented to prospective purchasers of the business prompted the Landlord to issue a notice of breach dated 26 August 2022 (Notice of Breach) which gave notice of the Landlord’s intention to re-enter the Premises. 
The Tenants’ application for an injunction
7	The Tenants applied for an injunction to restrain the Landlord from re-entering and taking possession of the Premises on the basis that the Notice of Breach was invalid. The Tenants also sought an injunction requiring the Landlord to provide consent to the assignment of the Lease.
The hearing on 14 September 2022
8	The Tenants’ applications came before me on 14 September 2022. The application was treated as an application for an injunction to stop the Landlord from acting on the Notice of Breach. That application was adjourned for hearing on 29 November 2022. The Landlord confirmed through its counsel, Mr Andreou, that it agreed not to re-enter the Premises on the basis of the Notice of Breach pending resolution by settlement or determination by the Tribunal of the issue of the validity of the Notice. Orders were made for the Landlord to send to the Tribunal and to the Tenants evidence from its auditor in the form of an affidavit. The Tenants were also directed to file any responsive expert affidavit they proposed to rely on.
9	The second injunction application, which was aimed at procuring the Landlord’s consent to the assignment of the Lease, was adjourned to a date to be fixed. It was noted that this application could only be brought on for hearing once the issue relating to the extent of documentation which must be provided by the Tenants to the Landlord had been determined and the relevant information had been provided.
10	The costs of 14 September 2022 were reserved.
No hearing on 29 November 2022
11	I was not available to conduct the hearing on 29 November 2022 and it was adjourned to 20 January 2023.
The Tenants provided documents in January 2023
12	It appears from an affidavit sworn by the Landlord’s solicitor, Mr Andrew White, that the Tenants had provided the auditor appointed by the Landlord, Ms Marita James, with a bundle of documents on 9 January 2023. On 11 January 2023, Ms James sent an email to the Tenants requesting information and explanations concerning those documents. She sent a follow-up on 13 January 2023.
13	On 15 January 2023, Mr Bui responded, asserting that the Tenants had provided all relevant information and documents.
14	The Landlord’s lawyers on 16 January 2023 disputed that all relevant information has been provided.
The hearing on 20 January 2023
15	On 18 January 2023, the Landlord submitted further evidence in the form of an affidavit sworn by Mr White. 
16	The purpose of the hearing was to determine the Tenants’ application for an injunction preventing the Landlord from re-entering the Premises. The central issue was the legality of the Notice of Breach dated 26 August 2022. That, in turn, turned on an assessment of the information which the Landlord could properly require the tenant to provide under the terms of the Lease. Much of the hearing was spent by the parties in negotiations regarding the production of documents.
17	Because the Tenants advised the Tribunal and the Landlord that the proposed new tenant with whom it had been in discussions had withdrawn, the Tenants acknowledged that there was no basis upon which they could presently proceed with the application for a mandatory injunction requiring the Landlord to provide consent to assignment of the Lease. On this basis, that application was struck out.
18	The hearing was adjourned to 10 February 2023. Programming orders were made for the provision by the Tenants of evidence addressing documents which had been referred to either directly in Mr White’s affidavit, at paragraph 17, or indirectly in an exhibit to that affidavit.
Prior to the hearing on 10 February 2023
19	Prior to the hearing on 10 February 2023, Mr Bui filed and served an affidavit sworn on 6 February 2023. Mr White promptly referred that affidavit to the Landlord’s auditor, Ms James.
20	On 7 February 2023, Ms James prepared a letter to the Landlord providing a summary of her response to the documents which have been provided to her by the Tenants. That letter was sent to the Tenants on 8 February 2023. On 9 February 2023, Ms James provided a further letter addressed to the Tenants setting out the further documents she considered were required and the reasons for each request. Both those letters were put in evidence as exhibits to a further affidavit sworn by Mr White on 9 February 2023.
The Landlord’s submissions of 9 February 2023
21	The Landlord filed written submissions dated 9 February 2023 asserting that Mr Bui’s affidavit of 6 February 2023 did not comply with the requirements of the Tribunal’s orders made on 20 January 2023. It was submitted that no documents had been identified by Mr Bui as having been provided, or were intended to be provided, to the auditor. To the extent that there was any indication of the basis for objection to the request for any particular document, the objection was made on a global basis and did not meaningfully identify why the document was beyond the scope of the relevant clause of the Lease. A global objection to the production of documents was rejected as misconceived.
22	The Landlord’s February submissions highlighted that the parties had been in dispute since 9 August 2022 concerning the tenant’s obligation to provide sufficient documents to enable the Landlord to carry out an audit. The Tenants had initially refused to produce evidence of takings and turnover apparently out of concern for their privacy. After the Tenants had applied for an injunction, the Tribunal in September 2022 ordered the parties to file affidavit material. The Landlord did so in the form of an affidavit from its auditor. The Tenants did not file any expert evidence in response. Between 14 September 2022 and 20 January 2023, the Tenants provided some documents required by the auditor but did not provide all the demanded documents. On 20 January 2023, the Tenants were directed to file an affidavit addressing certain documents referred to directly or indirectly in one of Mr White’s affidavits. Even after Mr Bui filed the affidavit, the auditor was still not satisfied and considered that she was still unable to complete her report due to lack of information.
23	The Landlord, in its February submissions, acknowledged that, in his affidavit, Mr Bui had referred to the opinions of other accountants regarding the validity of the auditor’s requests. For instance, there was a reference to the opinion of Mr Van who apparently told either Mr Bui or Ms Nguyen (it is not clear which one) on 13 January 2023 that he believed the further information requested by Ms James didn’t fall within the guidelines for a gross sales audit. There was a reference to the evidence of Mr Dao, a Certified Practising Accountant, who on 29 January 2023 told one of the Tenants that the further information wasn’t necessary to conduct a gross sale audit unless the auditor was conducting a forensic or financial audit. And there was a reference to an email from a Mr Zen Kam of ZE Global Public Accountants and Chartered Accountants, Singapore, stipulating the information required to conduct a gross sales audit. This evidence is attacked both as hearsay, and on the basis that it is not in a form expected from an expert. For instance, there was no information concerning the circumstances in which these accountants had been briefed. There was no information about their expertise, particularly in relation to Australian accounting standards, no information regarding the factual assumptions upon which they relied, and no explanation of their path of reasoning. Their evidence, such as it was, was unfavourably compared with that of Ms James, who identified in detail the reasons why she considered the document she had requested to be necessary.
24	Three orders were sought by the Landlord. The first was that certain paragraphs of Mr Bui’s affidavit should be struck out. The second was that the Tenants’ application should be dismissed under s 78(2)(a) of the Victorian Civil and Administration Act 1998 (Vic) (VCAT Act). The third was that the Tenants should pay the Landlord’s costs under s 92(2)(a) of the Retail Leases Act 2003 (Vic) (RLA).
The hearing on 10 February 2023
25	At the hearing on 10 February 2023, the parties were given an opportunity to resolve the issue of the remaining documents to be produced by the Tenants. Some progress was apparently made but complete agreement could not be achieved. At the conclusion of the discussions, I was informed that the Tenants still disputed documents referred to in two paragraphs of the auditor’s letter.
26	In these circumstances, I was called upon by the Landlord to determine the application they were making under s 78(2)(a) of the VCAT Act for an order dismissing the Tenants’ application and to make the order for costs the Landlord sought.
27	Having regard to the complexity of the material filed by the parties and to the limited time left to conclude the directions hearing, I reserved my decision on the Landlord’s s 78 application. As I concluded the hearing, I noted that if the Tenants were to put in further material before I issued my determination, that might affect the situation.
The Landlord’s s 78 application
28	Section 78 of the VCAT Act relevantly provides:
Conduct of proceeding causing disadvantage
(1)	This section applies if the Tribunal believes that a party to a proceeding is conducting the proceeding in a way that unnecessarily disadvantages another party to the proceeding by conduct such as—
(a)	failing to comply with an order or direction of the Tribunal without reasonable excuse; or
(b)	failing to comply with this Act, the regulations, the rules or an enabling enactment; or
(c)	asking for an adjournment as a result of (a) or (b); or
(d)	causing an adjournment; or
(e)	attempting to deceive another party or the Tribunal; or
(f)	vexatiously conducting the proceeding; or
(g)	failing to attend mediation or the hearing of the proceeding.
(2)	If this section applies, the Tribunal may—
(a)	order that the proceeding be dismissed or struck out, if the party causing the disadvantage is the applicant; or
(b)	[ not applicable];
(c)	make an order for costs under section 109.
(3)	The Tribunal's powers under this section are exercisable by the presiding member.
29	In Bell Corp Victoria Pty Ltd v Stephenson, (Bell Corp v Stephenson) Ashley J identified the matters which need to be considered in the exercise of the discretion under s 78(2). He listed them at [51] as follows:
•	The subject matter of the belief formed by the Tribunal for the purposes of sub-s. (1).
•	The nature of the power conferred by sub-s. (2) in the context of the armoury of power conferred upon the Tribunal by ss. 75-77. By this I mean, particularly, that s. 78(2) operates in circumstances which at least do not require that the proceeding be frivolous, vexatious, misconceived, lacking in substance or otherwise an abuse of process; and which at least do not require that the circumstances demonstrate want of prosecution. Put another way, the sub-section contemplates the making of an order with very serious consequences in circumstances that very probably would not fit the templates set up by ss. 75 and 76. Whilst it can rightly be said that the creation of such a remedy in the situation contemplated by s. 78(1) shows that an intention that orders be made in some cases where the situation exists, it should also be firmly concluded, in statutory context, that the remedy should be of last resort and not first resort.
•	The requirement imposed upon the Tribunal by s. 97. That section should be considered to import the concept that, ordinarily, the interests of case management should not be employed so as to shut a party out of litigating its case. The ultimate aim of the Tribunal, as much as of a court, must be the attainment of justice in respect of issues joined.
•	The requirement imposed by s. 98(1)(a), to the extent that a party should ordinarily be given an opportunity to be heard upon the merits. That opportunity is not absolute. It may be lost without breach of the rules of natural justice. But the consequence that the making of an order under s. 78(2) will deprive a party of an opportunity to be heard upon the merits is surely relevant to exercise of the discretion whether to so order.
•	The power to make costs orders conferred by ss. 109(2)(3) and 78(2)(c). The last-mentioned, it appears, might be exercised even though no order is made under s. 78(2)(a) or (b). 
30	Bell Corp v Stephenson was referred to with evident approval by Kaye JA in ACN 115 918 959 Pty Ltd (formerly known as Pearl Hill Pty Ltd) v Moulieris, a recent Supreme Court appeal which affirmed determinations made by Senior Member Kirton under ss 76 and 78.
31	In order for s 78 to apply, I must form a belief that the Tenants are  conducting the proceeding in a way that necessarily disadvantages the Landlord for one of the reasons listed in ss 78(1).
32	There is no suggestion that the Tenants have failed to comply with the VCAT Act or the regulations. They have not asked for an adjournment or caused one. It is not suggested that they have attempted to deceive the Landlord or the Tribunal. Nor have they failed to attend a mediation or a hearing. 
33	What is clear is that the Landlord contends that the Tenants have failed to comply with orders of the Tribunal without reasonable excuse. 
34	Furthermore, because a claim for costs is foreshadowed in circumstances where the Lease is governed by the RLA and the limitation on the recovery of costs set out in s 92 of that Act applies, I must infer that the Landlord says that the Tenants’ conduct is vexatious.
Further information received following the hearing on 10 February 2023
35	Before I had an opportunity to turn my attention to the reserved decision, the Tribunal received from the Tenants a copy of an email dated 14 March 2023 addressed to Ms James.  The email advised that a new folder had been compiled providing additional information which allegedly provided “answers to all your questions of your letter dated November 2023”. Interestingly, the email trail included an email from Ms James to Mr Bui which suggested that Ms James had sent a further letter requesting documentation and information in respect of the turnover audit on 16 February 2023. This was almost a week after the directions hearing at which I had reserved my decision.
36	Upon receipt of the communication from the Tenants dated 14 March 2023, I made an Order in Chambers seeking advice from the Landlord by 17 March 2023 whether it was still seeking an order that the application be struck out or whether it was now seeking another order. I also directed the Tenants to respond by 23 March 2023.
37	The Landlord wasted no time, advising through Mr White on 16 March 2023 that it vigorously opposed the Tenants reopening evidence on the issue and confirming that it was still seeking an order that the action be struck out or dismissed pursuant to s 78(2)(a) of the VCAT Act together with an order for costs.
38	The Tenants made substantive submissions to the Tribunal in a letter dated 23 March 2023. Some of those submissions clearly related to the Landlord’s application for costs. For present purposes, the key point is that the Tenants confirmed that they had sent to the auditor, Ms James, “all the possible documents and answers that it can provide regarding her letter on 9th February 2023”.
Should I have regard to the further information provided by the Tenants after the directions hearing on 10 February 2023?
39	This is a preliminary question which must be determined before I conclude my consideration of the Landlord’s s 78 application. This is because it is well-established that the Tribunal should not look at submissions received after the conclusion of a hearing if leave has not been given for the filing of those submissions. The principle is illustrated by Frugtniet v Law Institute of Victoria Ltd (Frugtniet). In that case the Court of Appeal, comprising Warren CJ, Nettle JA and Beach AJA, was confronted with a situation where, weeks after the hearing of the appeal and after the Court had prepared its reasons, the appellant sent an email to the registry in which he stated that he had withdrawn his instructions to the senior counsel and solicitors who had represented him on the appeal, and enclosed 18 typed pages of ‘Further Submissions’.
40	The Court refused to have regard to the ‘further submissions’, stating, at [45]:
... they should not have been forwarded to the Registry. Neither the Rules of Court nor the applicable Practice Statements gave any authority for them to be forwarded without leave, and the court has not been asked to give or given leave for them to be filed. Moreover, if leave had been sought, we would have refused it, because, if we were to give leave, we would then have to give leave to the builders to file replies, with consequent delay in the business of the court.
41	The Court of Appeal went on, at [46].
As has been said repeatedly in the High Court and in this court, the idea that parties may, without leave, file supplementary written submissions after the conclusion of oral argument is misconceived. The time and place to present argument, whether wholly oral or as supplemented by written submissions, is the hearing of the appeal. Once the hearing of an appeal has concluded it is only in very exceptional circumstances, if at all, that the court will later give leave to a party to supplement submissions.
42	In this particular case, I think it appropriate that I do look at the Tenants’ new submissions, even though they had been received after the hearing on 10 February 2023. I have reached this conclusion because, when I reserved my decision, I expressly remarked that if further material was provided by the Tenants, that might affect the situation. If I had not made that reservation, then I accept that it would not be appropriate to receive further evidence. However, I did express that reservation and it constituted an invitation to the Tenants to provide further material. Accordingly, the general principle illustrated by Frugniet does not apply.
43	The next question is whether it is fair that I have regard to the new material. This is an overarching requirement mandated in every proceeding before the Tribunal by s 97 of the VCAT Act.
44	The key argument as to why it would be fair for me to have regard to the further material is that it appears to be very relevant to the issue of whether a s 78 order should be made against the Tenants. If an examination of the documents confirms that the Tenants have now provided all the information required by the Landlord’s auditor, it is hard to understand why it would be appropriate to make a s 78 order. This is because the Landlord has ultimately got what it was insisting on. For this reason, I find that it would be appropriate to take the new information into account. 
Conclusion regarding the Landlord’s s 78 application
45	In order to determine the Landlord’s application for dismissal of the Tenants claim under s 78 of the VCAT Act, I must form a belief that the Tenants have conducted the proceeding in a way that has unnecessarily disadvantaged the Landlord by reason of certain matters. As noted above, two matters stand out as requiring consideration in the present case. These are:
(a) have the Tenants failed to comply with an order of the Tribunal without reasonable excuse;
(b) has the Tenants’ conduct of the proceeding been vexatious.
46	I am satisfied that the Tenants have failed to comply with orders made by the Tribunal. One such order was that made in September 2022 that the Tenants file affidavit material. They did not do so before the next hearing, which was on hearing on 20 January 2023. When an affidavit was filed, it was not from an expert as had been ordered, but from Mr Bui. Although Mr Bui’s affidavit did refer to the opinions of three different experts, no affidavit or report from any expert was filed. Accordingly, the Tenants’ material was deficient in terms of expert opinion.
47	The failure by the Tenants to comply with the Tribunal’s order concerning the filing of expert evidence has made the proceeding unnecessarily burdensome for the Landlord because there have been several hearings and yet the adequacy of the documentation provided by the Tenants has still not been formally assessed by the Tribunal. At the hearings on 20 January and 10 February 2023, time was taken up with negotiations in my absence rather than in a forensic examination of the material produced by the Tenants. For these reasons, I find that s 78(1) is enlivened. 
48	It may be that the Tenant’s behaviour has in all the circumstances been vexatious. In this connection, I note that the Tenants have at long last ceased resisting the demand for production of financial records which they previously had contended were privileged or “private”. This strongly suggests that the Tenants now concede that the Landlord’s initial position was justified. However, I make no finding on that matter as it is not presently necessary to do so and I consider that the Tenants should have a further opportunity to address the issue of whether they have been vexatious as it is relevant to the issue of costs.
49	I do not think it is appropriate to strike the Tenants’ proceeding out under s 78(2)(a) and I will dismiss the Landlord’s application for such an order. However, I will reserve for determination at a later time whether costs should be awarded against the Tenants.  I adopt this approach because it is clear, having regard to the other matters enumerated by Ashley J in Bell Corp v Stephenson, that an order striking out the Tenants’ proceeding under s 78 should not be made at this juncture. I have in mind the following matters. 
50	First, the documents demanded by the Landlord appear to have been provided, albeit late. To punish the Tenants by striking out their claim completely would be unfair in circumstances where an award of costs would be a much more proportionate remedy. This will still be the case even if, by reason of s 92 of the RLA, the gateway for an order for costs is a very narrow one.
51	Second, the principle enshrined in s 98(1)(a) that a party should ordinarily be given an opportunity to have their case be heard upon the merits is relevant because I consider that there will have to be a final hearing in any event. Irrespective of the disposition of the Tenants’ claim, the Landlord still maintains a claim for damages under the Lease based on the premise that the Notice of Breach was valid.  Also, the Landlord will want to have its claim for costs determined.
52	Precisely because there will have to be a final hearing, any argument that the proceeding ought be brought to a summary conclusion by the dismissal of the Tenants’ case is undermined. If there is to be a final hearing in any event, then the Tenants should be able to present their case on its merits.
Final hearing 
53	This proceeding needs to be concluded. I will list it for final hearing. The primary purpose of the final hearing will be to determine the matter which has been outstanding for months, which is whether the Notice of Breach was valid.
54	Another purpose of the hearing will be to determine the Landlord’s application for costs. Although the Tenants have made some submissions regarding costs in their letter of 22 March 2023, I consider they should be given the opportunity to fully address the Landlord’s claim for costs on the basis that their conduct of the proceeding has been vexatious.
55	If the Landlord has not been able to make a determination as to what the percentage rent is, the Landlord can make an application for a declaration about that matter at the final hearing. Alternatively, the tenant may seek such a declaration. If the percentage rent is declared to be higher than the rent which has been paid to date by the tenant, a finding as to arrears of rent might be made and an award of damages might be made.

Member C Edquist Member