VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
BUILDING AND PROPERTY LIST	
vcat reference No. BP1414/2022	
CATCHWORDS	
LANDLORD AND TENANT – Interlocutory injunction – whether there is a serious question to be tried – whether the tenant is obliged to contribute to non-specific outgoings – s 40 of the Retail Leases Act 2003 (Vic) considered – whether the disputed amount should be paid into trust as a precondition for the granting of an injunction.	

APPLICANT	Blue Train Café Pty Ltd (ACN 163 850 815)	
RESPONDENT	The Trust Company Limited (ACN 005 926 572)	
FIRST RESPONDENT TO COUNTERCLAIM	Xavier Francis Dimattina	
SECOND RESPONDENT TO COUNTERCLAIM	Francis Xavier Dimattina	
WHERE HELD	Melbourne/Videoconference – remote	
BEFORE	Deputy President E Riegler 	
HEARING TYPE	Interlocutory Injunction Hearing	
DATE OF HEARING	23 November 2023	
DATE OF ORDER	19 January 2024	
CITATION	Blue Train Café Pty Ltd v The Trust Company Limited (Building and Property) [2024] VCAT 75	

THE TRIBUNAL ORDERS THAT:
1.	UPON THE UNDERTAKING BY THE APPLICANT to abide by any order the Tribunal may make as to damages in case the Tribunal shall hereafter be of the opinion that the respondent shall have sustained any damages by reason of this order for which the applicant ought to pay the respondent, the Tribunal orders that until the further hearing of the applicant’s application or until further order, the respondent by itself, its servants and agents is restrained from entering into possession of the premises located and known as Shop UR3/U10, within the Southgate Retail Precinct, Southbank, Vic, 3006  (‘the Premises’) in reliance upon the notice of breach of lease dated 1 November 2023 (‘the Default Notice’).
2.	Subject to Order 3 of these orders, Order 1 is subject to or conditional upon the applicant paying future rent (payable in advance), outgoings which are specific to the Premises and future outgoings known as OPEX charges, fixed at 10 percent of the respondent’s calculation of OPEX charges or such other percentage as agreed between the parties (pending the final hearing and determination of the correct amount of OPEX charges payable by the applicant).
3.	The parties are at liberty to apply to adjust the percentage of OPEX charges payable by the applicant pending the final hearing and determination of applicant’s claim and respondent’s counterclaim, the subject of this proceeding.
4.	For the avoidance of doubt, the interlocutory injunction granted under Order 1 of these orders:
(a)	is confined to restraining the respondent from re-entering the Premises in reliance upon the Default Notice; and
(b)	does not otherwise prevent the respondent from exercising its rights under the Lease for a breach of the Lease unrelated to the subject matter of this proceeding. 
5.	By 9 February 2024, the parties must file and exchange short minutes of proposed orders setting out their recommendations for the future conduct of this proceeding (either collectively or individually). 
6.	Liberty to apply. 
7.	Costs reserved. 

E Riegler 
Deputy President			

APPEARANCES:		
For the Applicant:	Mr A Schlicht of counsel	
For the Respondent:	Mr R Peters of counsel	
For the Respondents to Counterclaim	Mr A Schlicht of counsel	

Reasons
introduction
1.	The applicant is the tenant (‘the Tenant’) of premises known as Shop UR3/U10, within the Southgate Retail Precinct, which it operates as a café/restaurant (‘the Premises’). The respondent is the registered proprietor of the Premises (‘the Landlord’). The relationship between the parties is governed by a lease dated 21 November 2012, Deed of Variation of Lease dated 22 May 2013 and an assignment of lease dated 13 August 2013 (‘the Lease’). 
2.	The parties have been in dispute since late 2019 over the condition of the Premises, the payment of outgoings (specifically, the cost of services attributable to the Premises); and other matters which largely relate to a claim for loss premised on an allegation that the Landlord has allowed the shopping complex in which the Premises are located to fall into disrepair. By its Amended Points of Claim filed in this proceeding, the Tenant claims damages against the Landlord in the vicinity of $2 million. 
3.	The Landlord disputes the claim made against it. It counterclaims $404,435.02, which amount is predominantly made up of what it contends are arrears of outgoings, stretching back to October 2019.
4.	On 1 November 2023, the Landlord served the Tenant with a notice of breach of lease under s 146 of the Property Law Act 1958 (Vic) (‘the Default Notice’), alleging that the Tenant had failed to pay rent, outgoings and other charges (including GST) amounting to $445,826.27.
5.	As indicated above, the parties have been in dispute for several years concerning the calculation of outgoings relating to the cost of services attributable to the Premises, and which are referred to as OPEX charges. Specifically, they are expenses incurred by the shopping centre which are apportioned amongst all tenants. The Tenant disputes the quantum charged to it. For example, it says that for the month of January 2023, the amount of OPEX for which it is liable should be $5,147.29 (excluding GST), whereas the Landlord contends that it should be $21,210.40 (excluding GST). The disparity between each party’s calculation of OPEX charges spans over several years, which has led to the aggregate amount now in dispute exceeding $400,000. 
6.	Mr Schlicht of counsel, who appeared on behalf of the Tenant, submitted that the whole of the amount claimed by the Landlord to be in arrears and the subject of the Default Notice relates to disputed OPEX amounts. He argued that the dispute concerning the calculation of OPEX charges dates back to late 2019 and that it ill behoves the Landlord to now rely on that dispute as a basis or ground upon which to terminate the Lease. 
7.	Mr Peters of counsel, who appeared on behalf of the Landlord, conceded that much of the amount claimed in the Default Notice related to disputed OPEX charges. However, he argued not all the amounts claimed could be attributed to disputed OPEX charges. He referred to electricity and gas charges, which were levied against the Tenant in 2020 but remain unpaid. 
8.	By this application, the Tenant seeks an order in the form of an interlocutory injunction restraining the Landlord from terminating or forfeiting the Lease in reliance upon the Default Notice. Numerous affidavits with exhibits, together with written submissions of the Landlord have been filed by the parties in support of or in opposition to the Tenant’s application for an interlocutory injunction. In addition, Mr Schlicht and Mr Peters, who both appeared at the hearing on 23 November 2023, supplemented that material with oral submissions.
9.	The legal principles concerning the granting of an interlocutory injunction are well-established and not in dispute. It is unnecessary to repeat those principles in these short reasons, suffice to say that the Tenant must establish that there is a serious question or questions for trial and that the balance of convenience favours the granting of an injunction. 
10.	I have considered that affidavit material and the submissions filed and made by the parties. What follows are my findings and reasons. 
Serious question to be tried 
11.	It appears that there are two grounds upon which the Tenant says that the Landlord is not entitled to rely upon the Default Notice. The first ground (‘Ground 1’) is couched in terms of the Tenant being entitled to set-off so much of its claim, sufficient to extinguish any claim made by the Landlord. 
12.	The second ground (‘Ground 2’) is that the whole of the amount claimed in the Default Notice relates to disputed OPEX charges. In that regard, Mr Schlicht submitted that the issues concerning the calculation of OPEX charges are complex and will require substantial evidence to determine. He submitted that these issues are matters for trial and clearly not able to be properly considered within the context of an interlocutory application.
Ground 1
13.	Although addressed by Mr Peters in his reply submissions, the contention that the Tenant was entitled to set off so much of its claim, sufficient to extinguish any claim made by the Landlord was not actively pressed by Mr Schlicht.
14.	In my view, Ground 1 needs to be considered by reference to the express terms of the Lease. Specifically, clause 6.1 of the Lease states, in part:
6.1	Method of Payment
The Tenant must make payments under this lease to the Landlord … without set-off, counterclaim, withholding or deduction.
15.	I accept that a tenant may claim an equitable set-off in circumstances where the tenant’s equity “impeaches” the landlord’s title to the demand for rent. However, a tenant’s right of equitable set-off against rent may be excluded by the terms of the lease. In Citibank Savings Pty Ltd v Simon Federicks Pty Ltd (‘Citibank Savings’), Beach J found that a lease that requires the payment of rent “without deduction” precludes a tenant from claiming an equitable set-off. That decision has been followed in subsequent decisions of the Supreme Court of Victoria and by this Tribunal. 
16.	It was not submitted that Citibank Savings did not apply in the present case. Consequently, I find that the unliquidated damages claim made by the Tenant does not entitle the Tenant to set-off that claim against rent and outgoings that are otherwise due under the Lease. Therefore, I find that Ground 1 does not give rise to a serious question for trial.
Ground 2
Rent, outgoings or Recharges
17.	The Default Notice contained a schedule (‘the Default Notice Schedule’) which sets out the amounts which are said to be in arrears. Almost all those amounts relate to OPEX charges and GST on those OPEX charges. Apart from the OPEX charges (and GST), the other amounts which are said to be in arrears relate to:
(a)	electricity gas and oil recharges for 1 and 8 November 2022 and 10 February 2023; and 
(b)	rent and outgoings set out in an invoice dated 1 October 2023 (Invoice Number: 3722732) (which also includes an OPEX charge).
18.	According to Mr Schlicht, the October invoice was not recorded as paid in the Default Notice because the Tenant pays rent at the end of the month, rather than in advance. Mr Schlicht submitted this is because the Tenant had to first aggregate its reported sales in order to calculate the percentage of OPEX charge payable under the Lease. Mr Schlicht submitted that apart from the disputed amount of the OPEX charge, all rent arrears have been paid. Indeed, Mr Peters conceded that rent in respect of the 1 October 2023 invoice was paid on 16 November 2023. Although this payment was made after the 14 day period specified in the Default Notice, there is no evidence that the Landlord sought to terminate the Lease in reliance upon the Default Notice prior to the payment being made. In that respect, Mr Peters noted that the Landlord had undertaken not to exercise any right to re-enter or forfeit the Lease in reliance upon the Default Notice until after the outcome of this interlocutory application was determined. In other words, the Lease remains extant, notwithstanding the existence of the Default Notice.
19.	The Tenant also prepared a spreadsheet which set out its payments from January 2023 until September 2023 (‘the Tenant’s Spreadsheet’). That spreadsheet is attached the affidavit of Xavier Dimattina dated 8 November 2023. In that affidavit, Mr Dimattina deposes to the following:
14.	The Applicant has been paying turnover rent and communicating this transparently to the Respondent since Covid restrictions ceased for the hospitality industry. Attached at XD-1 page 29 is a copy of a spreadsheet showing monthly turnover, an application of a percentile figure and quantum of rent paid for that month since January 2023 to date.
20.	Although the Tenant’s Spreadsheet shows payments made, including a percentage of the OPEX charge, it does not disclose that any GST was paid, either on the base rent or the undisputed outgoings. Having regard to that document, it is not clear whether GST has been paid historically. Nevertheless, the Default Notice Schedule does not identify outstanding GST on rent or undisputed outgoings (apart from GST on rent and outgoings said to be unpaid). Therefore, I find that it is reasonable to imply, at least for the purpose of this interlocutory application, that GST was paid on rent and outgoings previously paid by the Tenant.
21.	Mr Peters explained that the category of charges falling under the heading Electricity Gas & Oil Recharges, referenced in the Default Notice Schedule related charges which the Landlord has paid but sought reimbursement from the Tenant. They total $11,656.46, excluding GST.
22.	Several invoices prepared by the leasing agent on behalf of the Landlord have been exhibited to the affidavit of Jasmina Bradonjic dated 22 November 2023. Having perused those invoices, I am unable to reconcile all the Recharges with the invoices exhibited to that affidavit. The only Recharges which match invoices exhibited to that affidavit are the Recharges dated 10 February 2023, which are referred to in the invoice dated 11 February 2023; Water & Sewerage Recharges dated 1 October 2023 which are referred to in the invoice dated 1 October 2023; and the Water & Sewerage Recharges dated 26 October 2023 which are referred to in the invoice dated 5 November 2023. The total of those referenced Recharges amounts to $7,495.39, excluding GST. Although there are no source documents verifying the charges paid by the Landlord for which it seeks reimbursement, I accept, prima facie, that these amounts represent outgoings that would otherwise be payable under the Lease. In that respect, I note that Mr Schlicht did not submit that these charges were not payable under the Lease. 
23.	However, based on the evidence presented it is not clear to me whether these Recharges have now been paid. In that respect, I note that some of the Recharges form part of the 1 October 2023 invoice, which also included rent and OPEX charges. However, at the hearing on 23 November 2023, Mr Schlicht submitted that rent and undisputed outgoings have been paid (albeit late according to the Landlord). 
24.	Indeed, both Mr Schlicht and Mr Peters primarily focused on the short payment of OPEX charges, which was understandable given that the aggregate sum of OPEX charges in arrears claimed by the Landlord make up nearly all the amount claimed in the Default Notice. 
25.	Consequently, I find that there is a serious question for trial as to whether the amounts attributed to arrears of rent, outgoings or Recharges (including GST), as set out in the Default Notice Schedule have either been paid or are otherwise not payable. 
OPEX charges
26.	The OPEX charges constitute the Tenant’s share of outgoings attributable to the whole of the retail precinct, as a percentage of the leased area comprising the Premises. Several clauses of the Lease are relevant. Specifically:
4.1	Tenant’s Contribution to Outgoings
The Tenant must pay the Tenant’s Contribution for each Outgoings Year.
27.	The phrase Tenant’s Contribution is defined in the Lease as: 
Tenant’s Contribution means, subject to clauses 4.8, 4.9 and 4.12, for an Outgoings Year:
TP x N x A
		Y
where:
TP		=	the proportion obtained by dividing the Lettable Area of the Premises by the Lettable Area of the Centre expressed as a percentage, as varied under this lease.
N		=	the number of days of the Term in that Outgoings Year.
A		=	the Outgoings for that Outgoings Year.
Y		=	the number of days in that Outgoings Year.
28.	Clauses 4.8 and 4.9 of the Lease are also relevant: 
4.8	Allocation of Outgoings
Subject to the Act, the Landlord may:
(a)	allocate to particular tenants (including the Tenant) any Outgoings referable to those tenants (for example, rubbish removal, lighting, after-hours trading costs and the cost of operating air-conditioning equipment which services only particular premises);
(b)	…
(c)	allocate Outgoings between various parts of the Complex in the manner which the Landlord, acting reasonably, determines. 
4.9 	Tenant’s proportion of particular Outgoings 
In respect of any Outgoings allocated amongst particular tenants, the Tenant’s proportion for the purpose of calculating the Tenant’s Contribution will be the proportion of the Lettable Area of the Premises to the Lettable Area of all premises to which the item of Outgoings is referable. 
29.	As indicated above, the parties are in dispute as to the calculation of outgoings which, collectively are referred to as OPEX charges. That dispute has been ongoing for more than four years. It is a significant aspect of the matters which comprise both the Tenant’s Amended Points of Claim and the Landlord’s Points of Counterclaim, the subject of this proceeding. In essence, the Tenant contends is not liable to pay or contribute to non-specific outgoings. It contends that s 40 of the Retail Leases Act 2003 (Vic) (‘the RLA’) prohibits the Landlord from recovering outgoings from the Tenant, other than those outgoings that benefit the Tenant.
30.	Historically, the Tenant has paid what it considers to be the correct amount of OPEX charges. However, it is clear from the Default Notice Schedule and other documents, including the Points of Counterclaim filed by the Landlord in this proceeding, that the Landlord disagrees with the amount of OPEX charges calculated by the Tenant.
31.	The relevant clauses of the Lease illustrate the complexity in calculating proportionate outgoings for which the Tenant is liable. That complexity is exacerbated by the fact that the Premises form part of an area known as the Centre, which forms part of a greater area known as the Complex. Further complexity arises because some of the outgoings payable by the Tenant do not fall within the rubric of OPEX charges.
32.	Other than making a submission that the dispute concerning OPEX charges has been ongoing over the past four years and comprises a significant part of the substantial issues to be determined in this proceeding, the Tenant has not explained how it calculates the percentage of OPEX charges which it says it is liable to pay. Similarly, the Landlord has not explained how it calculates the percentage of OPEX charges which it says the Tenant is liable to pay. No doubt, further evidence will be given at the substantial hearing of this proceeding in support of each party’s position.
33.	In those circumstances, I find that the question as to what amount of OPEX charges are to be paid by the Tenant clearly remains a question for trial. It is impossible and inappropriate for me to attempt to determine that question within the context of this interlocutory application. Indeed, to do so would be akin to summarily determining one of the most substantial issues in this proceeding without having the benefit of evidence or submissions directly on point. 
Balance of convenience
34.	Mr Peters referred me to two authorities in support of his submission that the Tribunal should either not exercise its discretion in favour of the Tenant, or at the very least, only do so subject to certain conditions being met. The first of those authorities is the decision of the Full Court of the Federal Court of Australia in Telstra Corporation Ltd v First Netcom Pty Ltd (‘Telstra’), where the Court observed:
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.
35.	Mr Peters submitted that having regard to the observations made by the Court in Telstra, it is appropriate that any order restraining the Landlord from exercising its rights to terminate the Lease in reliance upon the Default Notice, should be subject to the Tenant paying all disputed monies to the Landlord, to be held in trust pending the outcome of the substantive issues in dispute. Mr Schlicht opposed any order framed in that manner. He submitted that the payment of the amount claimed by the Landlord would seriously undermine the Tenant’s ability to continue to trade.
36.	In my view, the issues in Telstra can be distinguished from the matters before me. Specifically, the monies in dispute in Telstra related to a contractual relationship between the parties and the preservation of services that Telstra was providing First Netcom. Here, the Tenant is seeking preservation of more than a contractual relationship; namely, the proprietary interest constituting the leasehold. It is that leasehold which underpins the business conducted by the Tenant. The factual matrix in this proceeding is fundamentally different to what was before the Court in Telstra.
37.	Although it may be the case that where a party seeking injunctive relief is unable to raise a strong argument that there is a serious question for trial, the balance of convenience might not favour the granting of injunctive relief, unless some form of security was provided to supplement the injunctive relief. Indeed, Almond J alluded to that in Sudjalim Pty Ltd v Homle Pty Ltd, where he observed, in the context of determining where the balance of convenience lies, that: 
It is common ground that on an application for an interlocutory injunction, the Court will need to determine whether there is a serious question to be tried as to the plaintiff’s entitlement to relief; whether the balance of convenience favours the granting of an injunction, including whether the plaintiffs are likely to suffer an injury for which damages will not be an adequate remedy; and whether there are any discretionary considerations which weigh for, or against, the grant of relief. These questions must be examined together. An apparently strong claim may lead a court more readily to grant an injunction where the balance of convenience is fairly even. A more doubtful claim, which nevertheless raises a serious question to be tried, may still attract interlocutory relief if there is a marked balance of convenience in favour of it.
[underlining added]
38.	In my view, the question over what amount of OPEX charges are payable is complex and not easily determined. In other words, I find that the Tenant’s claim, that the amount charged in respect of OPEX charges is contrary to s 40 of the RLA, cannot be described as a ‘doubtful claim’.
39.	Further, I note that the Tenant has provided security in the form of a bank guarantee to the value of $151,250, which is supplemented by personal guarantees given by the directors of the Tenant. In those circumstances, I do not accept Mr Peter’s submission that the undertaking given by the Tenant can be categorised as insufficient. 
40.	Moreover, I accept Mr Schlicht’s submissions that if the leasehold is terminated, damages may not be an adequate remedy. In that respect, I repeat what I stated in in Qian Long Zan Pty Ltd v Ka Yan Butt:
47.	As is often the case with retail tenancies, the leasehold is interconnected with the tenant’s business and the loss of one results in the loss of the business and any goodwill attached thereto. This loss is sometimes difficult to compensate by way of damages.
48.	In this case, I am satisfied that the Tenant has invested significant funds and personal effort in maintaining a business through difficult periods. That is not to say that the respondents have not also suffered during the same period. However, I am satisfied that, subject to the Tenant continuing to pay rent and outgoings as and when they fall due, the balance of convenience favours granting the injunction, subject to the usual undertaking as to damages. In other words, I find that the prejudice that will be suffered by the Tenant if the injunction is not granted outweighs the prejudice that would be suffered by the respondents if the injunction is granted. 
49.	In that regard, I note that the proposed order will not prevent the respondents from exercising their rights under the Renewed Leases for breaches which are unconnected with the Default Notices. In other words, the Tenant’s obligation to continue to pay rent is unaffected by an interlocutory order restraining the respondents from terminating or forfeiting the Renewed Leases in reliance upon the Default Notices.
41.	In contrast, the prejudice suffered by the Landlord in maintaining the status quo, pending the outcome of the substantive issues in this proceeding, will be no different to what has occurred over the past four years. In other words, the Tenant will continue to pay rent, outgoings specific to the Premises and a proportion of the OPEX charges.
42.	Consequently, I find that the balance of convenience favours the granting of an injunction restraining the Landlord from exercising its rights in reliance upon the Default Notice. However, given the disparity between each party’s position as to how much of the OPEX charges are payable and the lack of evidence going to that question, I will order that the injunction be granted subject to the Tenant paying rent (in advance), outgoings specific to the Premises and a proportion of the OPEX charges due under the Lease. 
43.	In that respect, I note that the practice of the Tenant has been to pay rent and outgoings at the end of each month, rather than in advance, as required under the lease. As indicated above, Mr Schlicht submitted that this was because the Tenant was required to calculate the percentage of OPEX charges based upon turnover. It is unclear to me how that is the case, given that the clauses of the Lease which focus on the calculation of OPEX charges do not appear referable to the Tenant’s turnover. Therefore, I do not accept that submission as having any contractual basis. Rent must be paid in advance, as required under the Lease. 
44.	Based on the Tenant’s Spreadsheet, it appears that it has paid 8 percent and more recently 7.5 percent of the OPEX charges claimed by the Landlord. Again, it is unclear to me how those percentages were calculated. Nevertheless, for the purpose of this interlocutory application and having regard to s 91(1)(e)(ii) of the RLA, I find that it would be fair and desirable to fix that percentage pending the final hearing and determination of the proceeding at 10 percent, going forward. In my view, that best reflects what has been the status quo over the past four years. 
45.	In so finding, I appreciate that I have not heard from the parties as to what would be a fair and desirable percentage of the OPEX charges to be paid by the Tenant as a precondition to granting an injunction and pending the final hearing and determination of the proceeding. Therefore, I will give the parties liberty to apply to have that percentage amount varied, should they so choose. 
46.	I will reserve the costs of this aspect of the proceeding, noting that under s 92 of the Retail Leases Act 2003 (Vic), costs are not awarded in retail tenancy disputes unless special circumstances exist, as set out in that provision. 

E Riegler
Deputy President