How does a tenant obtain relief against forfeiture of its lease? (Part 2)

In another example of the difficulties faced by landlords in opposing an application for relief against forfeiture, I recently appeared for a landlord of retail premises in the following circumstances:

The tenant had defaulted in paying the rent consistently over nearly 2 years;
At times, the tenant fell up to 6 months behind in rent;
The landlord had (very generously) served notices to pay the outstanding rent on at least 3 occasions (in addition to providing monthly reminder letters and e-mails about the outstanding rent);
Two of those notices expired and the landlord took possession of the premises;
After the first re-entry, the landlord allowed the tenant back into possession;
Finally, the landlord had enough and refused to allow the tenant back into the premises after the second re-entry;
After taking possession, the landlord negotiated a sale of the premises, with vacant possession;
Before a contract for the sale was executed, the tenant purported to pay the arrears of rent, and applied to VCAT for relief against forfeiture;
At the time of the first hearing before VCAT, the tenant had not paid the current month's rental.

Despite the damning record of rental payments, Deputy President McNamara of VCAT alluded to the fact that relief against forfeiture will almost always be granted to a tenant, if the tenant can satisfy the tribunal that it has taken steps to ensure that no further defaults will occur. 

In this case, the tenant offered a further security bond of 4 months' rental, having obtained a loan to provide the business with working capital, which was enough to satisfy the tribunal that it would take its obligations under the lease more seriously.


W G Stark
Hayden Starke Chambers

Personal Property Securities start date may be deferred again!

Further to my previous posts about the Personal Property Securities Act start date (4 September 2011 and 28 September 2011), the Federal Government introduced legislation into Parliament on 12 October 2011 which allows the start date to be further delayed.

The Personal Property Securities Register states that: "The purpose of the Bill is to assist in managing any risks which may arise approaching the implementation date and to remove the default commencement date of 1 February 2012."

The Bill achieves this purpose by amending the definitions of 'migration time' and 'registration commencement' time to allow the Commonwealth Attorney-General to determine a time other than the automic times set out in the Personal Property Securities Act.

At the moment, a further announcement is expected before Christmas 2011 about whether the start of the scheme will be further delayed.

W G Stark
Hayden Starke Chambers

How does a tenant obtain relief against forfeiture of its lease? (Part 1)

The classic decision in Victoria on this issue was made by Ormiston J in Jam Factory P/L v Sunny Paradise P/L [1989] VR 584. Ormiston J concluded that where a tenant undertakes to pay arrears of rent and to perform any other covenants which were breached, relief against the tenant's forfeiture of the lease should be granted as a matter of course, and refused only in exceptional circumstances. A failure to pay rent does not constitute an exceptional circumstance unless there are consistently lengthy defaults, leading to an inference that the rent will not be paid in the future.

In December 2010, I appeared for a tenant who sought relief against forfeiture in a retail leasing dispute in the Supreme Court (see V&O Princi P/L v Prestige Holdings Group P/L [2010] VSC 627).

The case was unusual because it was not dealt with by VCAT (see my earlier blog about VCAT's exclusive jurisdiction over retail leasing disputes). 

I have written a paper about that decision, which is available on the Greens List web site: www.greenslist.com.au under library, cpd papers, property law, Seminar on Property Law presented by Russell Cocks.

The case stands as further proof of the fact that it is very difficult for a landlord to oppose an application by a tenant for relief against forfeiture successfully.

W G Stark
Hayden Starke Chambers

Severance of joint tenancies paper 2011

I presented a paper at a Greens List breakfast briefing on Thursday 6 October 2011 on "Severance of joint tenancies". The paper is now available on Greens List's new web site. See: www.greenslist.com.au , then the library tab for a copy of the paper.

W G Stark
Hayden Starke Chambers

When will the Personal Properties Securities Act 2009 commence?

In my post dated 4 September 2011, I noted that the latest possible date for implementation of the scheme in the legislation is 1 February 2012. 

The Federal government has stated in its latest PPS newsletter that "the PPS Register ... will be publicly available before this time. We recognise the importance of knowing the precise registration commencement time (RCT) and will provide further updates as they are available." (See http://bit.ly/nQom40 ). 

The current newsletter also informs us that the new National PPS enquiries line is now open for business. The National Service Centre is now taking telephone enquiries on 1300 007 777 or 1300 00PPSR.

Stand by for updates, as they become available.

W G Stark 
Hayden Starke Chambers

What effect does the Personal Property Securities Act 2009 have on retention of title clauses?

The Personal Property Securities Act 2009 (Commonwealth) (“the PPSA”) (which is due to commence before February 2012 – see blog dated 5 September 2011) will have an adverse effect on all commercial suppliers who rely on retention of title clauses in their trading terms.

As previously noted, the PPSA sets up a new scheme of registration of security interests in personal property.

The provisions of the Act make it clear that:

• Personal property includes retention of title rights.
• A personal property security is when a secured party takes an interest in personal property as security for any obligation (such as a payment obligation) that involves the supply of secured finance

All suppliers of goods on credit should now:

·        Review their terms of trade with a view to ensuring that they meet the requirements of the PPSA, and

·        Be in a position to register a financing statement (covering their retention of title interest) on the Personal Property Securities Register, when it commences operation. Registration of a financing statement enables a secured party to ‘perfect’ its security interest.

Commercial lawyers in practice in Victoria should already be reviewing their clients’ terms of trade to ensure compliance with the PPSA.

W G Stark  
Hayden Starke Chambers

Timing is everything! Start date for PPSA deferred (again!)

I noted earlier today that the Personal Property Securities Act 2009 (Commonwealth) (“the PPSA”) was expected to commence on 31 October 2011. The start date has today been deferred indefinitely, although the Attorney-General's department noted in its notification that the last possible start date in the legisltation is 1 February 2012. I will keep you posted as the timetable develops!

WG Stark
Hayden Starke Chambers

How does the new Personal Property Securities Act 2009 affect me?

The Personal Property Securities Act 2009 (Commonwealth) (“the PPSA”) is expected to commence on 31 October 2011 (although its commencement has been deferred already at least once because not all jurisdictions were ready in May 2011).

The new regime raises a number of questions – some easily answered, others that are quite complicated.

This first blog on the PPSA will only deal with the basics. Further blogs will deal with more complex questions as the need arises, and as cases provide us with some guidance as to interpretation.

The PPSA sets up a new scheme of registration of security interests in personal property.

The Act provides:

• Personal property is any form of property other than land, buildings or fixtures which form a part of that land. It can include tangibles such as cars, art, machinery and crops; as well as intangibles such as intellectual property and contract rights (including retention of title rights).
• A personal property security is when a secured party takes an interest in personal property as security for a loan or other obligation, or enters into a transaction that involves the supply of secured finance
• For the establishment of a single national online register to replace a number of state securities registers and the ASIC register of charges granted by corporations
• It is not compulsory to register on the PPS Register. However, registration of a financing statement enables a secured party to ‘perfect’ its security interest.
• A perfected security interest will:
• have priority over an ‘unperfected’ security interest
• survive the grantor’s insolvency/bankruptcy, as an unperfected security interest will not; and
• in some cases survive the sale of the collateral, as an unperfected security interest will not.

The federal government has set up a web site[1] in anticipation of the commencement.

From 31 October 2011, any security interest in personal property should be registered at the Personal Property Securities Register.

The Federal Attorney-General is expected to confirm the commencement of the new regime some time in September 2011.

W G Stark  
Hayden Starke Chambers

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[1] http://www.ppsr.gov.au/

What do I need to know about VCAT’s Exclusive Jurisdiction over Retail Leases?

For 25 years[1], the jurisdiction of the courts of Victoria has been limited in relation to retail leases disputes under the Retail Leases Act 2003. VCAT currently has exclusive jurisdiction over these disputes (with minor exceptions, for example relief against forfeiture, and proceedings for recovery of rent).

Twice already in 2011, I have come across proceedings issued in the Magistrates Court of Victoria that seek orders that relate to these disputes. In the first case, although it had no jurisdiction to do so, the

Magistrates Court

had actually granted injunctive relief against the landlords, preventing them from taking possession of the retail premises. This is despite the fact that the tenants had ceased to pay the rent!

The legislation is the Retail Leases Act 2003. The relevant provisions are sections 81 and 89.  

In the Supreme Court of Victoria decision of A.B.C. Developmental Learning Centres Pty Ltd (Receivers and Managers Appointed) (Administrators Appointed) (ACN 010 788 502) v B.M. Children’s Services Pty Ltd (ACN 105 995 006) and others, [2010] VSC 262, Pagone J held (at paragraph 5):

“5 … the jurisdiction of this Court was expressly removed by s 89(4) of the Act ... In my view the jurisdiction expressly excluded by the legislature is not reconferred, re-enlivened or reactivated by a litigant bringing an action which is within jurisdiction. … the only proceeding which may be brought by the plaintiff in this Court is an application for relief against forfeiture. To the extent that the plaintiff’s claim is wider than that it must be dismissed. I … [note] the extra judicial views expressed to like effect about the decision in Xiao by Dr Croft (as his Honour then was) and Mr Hay in Croft and Hay, Retail Leases Victoria.”

This is a friendly reminder to solicitors in commercial practice in Victoria to bear these matters in mind when attempting to collect rent from recalcitrant retail tenants. 

W G Stark  
Hayden Starke Chambers

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[1] Legislation dating back to the Retail Tenancies Act, 1986 removed the jurisdiction of the courts of Victoria over retail premises leases.