A recent case in the Supreme Court of Victoria makes it clear that the ability of a party to challenge the issue of a certificate by the Commissioner in a retail lease context is limited. The case upheld a certificate issued by the Small Business Commissioner to permit the parties to commence a proceeding in VCAT where the VSBC had taken steps to arrange a mediation, although one of the parties had not signed a mediation agreement, nor attended a mediation.

What happened?

The Lord of the Fries Pty Ltd (Tenant) held a lease in Chadstone Shopping Centre for a term of 6 years.

Mr Koronczyk was the sole director of the Tenant and guarantor of the Tenant’s obligations under the lease.

Around May 2021, Perpetual Ltd and Vicinity Funds Re Ltd as custodian and trustee of the Vicinity NVN Trust (Landlord) made an application to the Victorian Small Business Commission (VSBC) for mediation in relation to the Tenant’s failure to pay rent. The Landlord’s application listed Mr Koronczyk and his brother as contacts for the mediation application.

A mediation was conducted on 12 and 13 July 2021. The VSBC issued a certificate under section 87(1) of the Retail Leases Act 2003 (Vic) (Act) stating that the mediation had failed. Mr Koronczyk’s brother had attended the mediation together with a property consultant engaged by the Tenant. Mr Koronczyk himself did not attend the mediation.

About 18 October 2021 the Landlord terminated the lease.

On 9 December 2021 the Landlord commenced proceedings in the Victorian Civil and Administrative Tribunal (VCAT) against the Tenant and Mr Koronczyk as guarantor of the Tenant.

On 29 April 2022 VCAT ordered the VCAT proceedings to be struck out with a right of reinstatement as a result of the Tenant being placed into administration.

On 18 January 2023 following a request from the Landlord the VSBC issued an amended certificate stating that the mediation had failed between the Landlord, Tenant and Mr Koronczyk.

Following the issue of the certificate Mr Koronczyk’s solicitors sought a revocation of the certificate on the basis that Mr Koronczyk did not attend the mediation.

On 20 January 2023 the Landlord’s solicitors emailed the VSBC asking them not to revoke the amended certificate as Mr Koronczyk had at all times been aware of the earlier mediation, attaching copies of emails in support of its claim.

On 24 January 2023 a VSBC officer telephoned:

• the solicitor for the Landlord’s solicitors asking them whether the Landlord would participate a further mediation and was informed no;

• the solicitor for Mr Koronczyk advising them that the Landlord was not prepared to attend another mediation and that the VSBC did not have power to compel a party to attend mediation and therefore the VSBC would dissue a certificate un

On 25 January 2023 the amended certificate was issued.

On 14 February 2023 Mr Koronczyk issued proceedings in the Supreme Court for judicial review seeking orders:

• compelling the VSBC to comply with the VSBC Act and convene a mediation;

• quashing the certificate issued on 25 January 2023; and

• costs.

On 17 May 2023 the VSBC applied for summary judgement  dismissing Mr Koronczyk’s proceeding.

This case was heard on 9 June 2023.

What did the Court decide?

Justice Croft considered the argument of:

• Mr Koronczyk that the VSBC had not in fact arranged for a mediation between Mr Koroczyk and the Landlord and thus had failed to comply with the Act making the certificate issued on 25 January 2023 and the VCAT proceedings issued by the Landlord invalid.

• The VSBC that Mr Koronczyk’s judicial review proceeding was a delaying tactic to prevent the Landlord prosecuting its claim in VCAT. In effect an attack on the jurisdiction of VCAT to delay the prosecution of the VCAT proceedings against Mr Koronczyk. The VSBC had done all it was required to do and could do under the Act.

The Court determined that:

• the Act gives the VSBC power to facilitate mediation whether or not a formal application for mediation has been made to it;

• mediation under the Act is not limited to the traditional method of mediation;

• once the VSBC is aware of a dispute it is entitled to begin informal discussions with the parties with a view to providing preliminary assistance in dispute resolution with a view to resolving that dispute without the need for a formal mediation .

• section 86(3) of the Act provides the VSBC must arrange a mediation but this should be construed in context and not ignore the expansive provisions in the Act

The Court said that in spite of the use of the word “must” in section 86(6) of the Act, a restrictive approach requiring a formal mediation in all circumstances to be conducted prior to the issue of a VSBC certificate, would be contrary to the facilitative approach of the dispute resolution provisions of the Act.

Whilst Mr Koronczyk seeks to rely on the fact he did not execute a mediation agreement, nor participate in a mediation, he did not say that he was unaware of the July 2021 mediation. The fact that the Tenant was represented and Mr Koronczyk was the sole director at that time was significant.

The VSBC contact to make arrangements to facilitate the resolution of the dispute in January 2023 occurred but was stymied by the refusal to participate by the Landlord.

This conduct amounted to a discharge of the VSBC’s obligations under the Act. The certificate issued on 25 January 2023 was found to be valid in light of this expansive interpretation.

If you would like to discuss VSBC certificates of retail lease dispute resolution please contact:

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Ben Wyatt
Principal Lawyer
T: +61 3 9611 0115 | M: +61 409 173 928
E: bwyatt@sladen.com.au

Kelvin Tay
Senior Associate
T: +61 3 9611 0148 | M: +61 413 557 157
E: ktay@sladen.com.au