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Retail Lease Dispute : Koronczyk v VSBC [2023] VSC 431

The case of Koronczyk v Victorian Small Business Commissioner & Ors involved a legal dispute surrounding the interpretation and application of the Retail Leases Act 2003 (RLA) in a retail lease dispute. The central issue in this case was whether the Victorian Small Business Commissioner (VSBC) Parties had fulfilled their obligations under the RLA regarding the mediation process and whether Koronczyk’s claims had any real prospect of success.

Background

The case revolved around a dispute between the Landlords and the Tenant, with Koronczyk acting as the guarantor for the Tenant’s lease. The VSBC, a government agency responsible for assisting small businesses in resolving disputes, became involved in the dispute resolution process. The RLA empowered the VSBC to facilitate mediation and other forms of alternative dispute resolution between parties in retail lease disputes.

Koronczyk sought relief in the form of an order quashing the certificate issued by the VSBC and compelling them to comply with Section 86(3) of the RLA. Section 86(3) required the VSBC to arrange a formal mediation if a dispute arose between parties to a retail premises lease. However, the VSBC argued that their obligation to arrange a mediation was procedural and not mandatory, and that they had fulfilled their obligations under the RLA.

Analysis of the Case

The court analyzed the interpretation of the relevant provisions of the RLA, as contended by the VSBC Parties. The court ultimately accepted the VSBC’s interpretation, based on the language used in the provisions and the broader context of the legislation. The court noted that interpreting Section 86(3) as a mandatory provision would lead to the possibility of a party refusing to participate in a mediation, rendering the VSBC’s dispute resolution process ineffective.

The court further examined the history and background of the dispute, highlighting that the first mediation between the Landlords and the Tenant took place on July 12, 2021. However, VCAT proceedings were subsequently initiated on December 9, 2021, resulting in a drawn-out and delayed process.

Section 87(1) of the RLA states: ‘A retail tenancy dispute may only be the subject of proceedings before the [Victorian Civil and Administrative (VCAT)] Tribunal … if the Small Business Commissioner has certified in writing that mediation or another appropriate form of alternative dispute resolution has failed, or is unlikely, to..’

In an attempt to thwart the VCAT proceedings, Koronczyk argued that he was not properly informed about the mediation and that he did not execute a mediation agreement or confidentiality agreement. The court dismissed this claim, noting that Koronczyk was the director of the Tenant and was aware of the first mediation. The court also highlighted the VSBC’s efforts to facilitate a resolution, including contacting both parties for discussions, but the Landlords’ solicitors refused to participate in any further mediation.

The court then considered the consequences of non-compliance with the RLA. It was argued that the VSBC’s power to issue a certificate under Section 87(1) was not dependent on the conduct of a mediation, but rather on the party obtaining a certificate stating that a mediation had failed or was unlikely to resolve the dispute. The court agreed with this interpretation, stating that requiring an actual mediation before issuing a certificate would render the second certification option otiose.

Furthermore, the court evaluated the extent and consequences of non-compliance in this case. It was noted that Mark Koronczyk had ample opportunities to participate in a mediation but failed to do so. The court also observed that Mark Koronczyk had not taken any steps to progress the VCAT proceedings, including filing a defense or communicating his defense to the Landlords. As such, the court found that the extent of Koronczyk’s breach was minimal and that the relief sought by him would not do justice between the parties.

Conclusion

In conclusion, the court ruled in favor of the VSBC Parties, finding that they had fulfilled their obligations under the RLA in relation to the mediation process. The court further determined that Koronczyk’s claims had no real prospect of success and that the proceeding was an unmeritorious attempt to challenge the VCAT’s jurisdiction. As a result, summary judgment was entered in favor of the VSBC Parties.

Plain English Summary of the Case

Come to the (mediation) party, or risk ending up in Court.

Background

Koronczyk, was a shop owner who had acted as the guarantor for the shop’s lease and he was in disagreement with the landlord. The landlord lodged a case with VCAT. Before a retail lease dispute is referred to VCAT, the Retail Leases Act requires the VSBC to try and resolve the dispute. The VSBC certified that it had tried to resolve the dispute, but dispute resolution had failed.

In an attempt to keep the dispute out of VCAT, Koronczyk took this case (Koronczyk v VSBC & Ors [2023]) to the Supreme Court. In this Supreme Court Case Koronczyk was asking the Victorian Supreme Court to compel the VSBC’s intervention in the dispute. Koronczyk argued the VSBC had not fulfilled its duties under the Retail Leases Act to arrange a formal mediation.

The VSBC contended that they had already attempted to assist the parties in communicating and resolving their issues through informal means before. As such, they argued that they were not obligated to arrange another mediation session.

The Supreme was tasked with determining whether the VSBC’s stance was legally sound or not. They carefully examined the provisions of the Retail Leases Act, a legislative framework governing shop leases, to determine the extent of the VSBC’s responsibilities.

The court concluded that the VSBC had fulfilled their obligations as per the Retail Leases Act. The court’s decision was grounded on the fact that the VSBC had made previous efforts to facilitate communication between the parties, which the landlord chose not to participate in. Consequently, the court ruled that the VSBC was not required to arrange another mediation session.

Koronczyk asserted that he was unaware of the initial mediation attempt by the VSBC. However, the court found this claim to be untenable, considering that he was the shop’s director and should have been aware of such proceedings. The court also highlighted that Koronczyk had missed other opportunities to resolve the dispute, which weakened his position.

Ultimately, the court ruled in favor of the VSBC, stating that Koronczyk‘s claims were unlikely to succeed. Additionally, the court criticised Koronczyk‘s attempt to challenge the VSBC’s decision to allow the dispute to go to VCAT, asserting that he had numerous chances to resolve the dispute but failed to do so.

The ruling emphasises the importance of adhering to standard dispute resolution pathways and legal regulations which utilise available opportunities to settle disagreements fairly and efficiently. It highlights the significance of parties taking active measures to resolve disputes rather than resorting to legal action as a last resort.

LAW Litigator
LAW Litigatorhttps://www.lawarren.com.au/news
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