Australia: Retail Lease Claims: No Hesitation To Mediation

Last Updated: 18 July 2006

Owners and tenants in NSW are now well adjusted to the reality that a mediation before the Retail Tenancies Unit (RTU) is a prerequisite to any retail tenancy claim in the Administrative Decisions Tribunal. Now, according to a recent decision of the NSW Supreme Court, it seems that the requirement to mediate extends to all retail tenancy disputes, regardless of the venue.

The decision is a boon for the private mediators employed by the RTU and tenants wishing to put off the inevitable, but stands to escalate costs and delay for landlords seeking to recover straightforward debts.

Familiar facts?

In GPT Management Ltd & Anor v Spa Heaven Pty Ltd & Ors [2005] NSW SC 1043, the landlord:

  1. terminated the tenants’ lease for non-payment of rent and other money which had fallen due (Pre-termination Amounts);
  2. re-let the premises; and
  3. issued proceedings for the Pre-termination Amounts, as well as amounts which would have been payable between the date of termination and the date the premises were re-let (Post-termination Amounts).

The landlord also claimed against the two guarantors.

One of the tenants and one of the guarantors defended the claim in relation to the Post-termination Amounts. They asserted that, by reason of breaches of the Partnership Act, the other parties should be liable for the Post-termination Amounts. The other parties did not enter a defence at all.

The landlord sought summary judgment on the claim for the Pre-termination Amounts, being that part of the claim which was not disputed. The defendants sought to have the proceedings transferred to the Administrative Decisions Tribunal.

The landlord pointed out that no defence had been entered into in relation to the Pre-termination Amounts, and that the only dispute raised in relation to the Post-termination Amounts was a dispute between the defendants themselves, not a dispute between the plaintiffs and defendants.

Any dispute will do

Palmer J noted that "the fundamental object of the retail tenancy legislation … is to protect the weak against the strong; ie, the small retail lessee against the large retail lessor".

In His Honour’s view, one way the Retail Leases Act (the Act) implements this policy is the insistence upon mediation between the parties before litigation. His Honour observed that, in s68(1) of the Act, the "same policy of ‘mediation rather than litigation’ is repeated" in the Act through the requirement that a "retail tenancy dispute" not be the subject of legal proceedings until mediation has taken place.

His Honour noted that the definition of "retail tenancy dispute" in s63 of the Act is "exceedingly broad and, clearly enough, it is intentionally so".

Of particular concern to landlords is His Honour’s view that any "dispute", as it appears in Part 8 of the Act, is not "confined to legal issues, such as the existence or extent of an alleged legally enforceable liability or obligation. The dispute may be concerned with broader questions of fairness as to how an admitted liability may, or should, be enforced".

In this instance His Honour considered that the existence of a dispute, between the tenants and guarantors, as to which of them should bear liability was sufficient to prohibit any court proceedings before mediation, pursuant to the Act.

His Honour declined to enter summary judgment in relation to any aspect of the landlord’s claims.

All roads lead to the ADT

In relation to the motions seeking the transfer of the proceedings to the Tribunal, referring to s75(1) of the Act, His Honour considered that the dispute between the defendants was alone sufficient to justify the transfer of the entire proceedings to the Tribunal, even though there was no defence to the Pre-termination Amounts.

It is notable that His Honour dismissed the submission that he should refuse a transfer given the first and fourth defendant had failed to appear. His Honour considered that those defendants, despite their failure to appear before the Supreme Court, might take the opportunity to appear at the low cost Tribunal and participate in a mediation of the disputes as a whole.

His Honour considered that any retail tenancy dispute should be dealt with by the Tribunal "unless there are reasons of efficiency and justice to the contrary". The motion for summary judgment was dismissed with costs, and the landlord was ordered to pay the costs of the motion to transfer the proceedings to the Tribunal.

The judgment in Spa Heaven reinforces the message that a mediation attended by the parties is a prerequisite to proceedings involving any element of dispute.
By Paul Morgan


Rob Riddell

t (02) 9931 4940


John Grimble

t (02) 9931 4709


Paul Morgan

t (02) 9931 4830


This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.

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