Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd

M Ashhurst SC; D Meyerowitz-Katz (appellants) JAC Potts SC; AR Langshaw (first respondent) Submitting appearance (second respondent)

Newhouse & Arnold Solicitors (appellants) Speed & Stracey Lawyers (first respondent) Crown Solicitor's Office (second respondent) File Number(s): 2023/90820 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity - Commercial List Citation: [2023] NSWSC 60 Date of Decision: 9 February 2023 Before: Stevenson J File Number(s): 2021/136164

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] The first appellant, Croc's Franchising Pty Ltd, is the operator of a children's play centre franchise. The second and third appellants are its founders and directors. The first respondent, Alamdo Holdings Pty Ltd, is registered proprietor of a property in Castle Hill, Sydney. In 2017, Alamdo agreed to grant Croc's a commercial lease over the Castle Hill property. Croc's and Alamdo executed an Agreement for Lease ("AfL") and a Lease Document in registrable form which purported to create a 10-year lease with the second and third appellants guaranteeing Croc's obligations. Because Alamdo failed to register the Lease Document, the parties agreed that Croc's only legal proprietary interest in the premises was a tenancy at will. In June 2018, Croc's entered into possession, but the real occupant was its franchisee who traded from the premises. In March 2020, the World Health Organization declared COVID-19 a worldwide pandemic. In April 2020, the Commonwealth enacted the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) ("Jobkeeper Rules"), creating the Jobkeeper benefits scheme. By December 2020, a business was eligible for Jobkeeper benefits if it satisfied various tests, including, relevantly, the "decline in turnover" test (cl 8). This test was met if, "at or before the end of the fortnight" in which it applied for Jobkeeper, the business showed a year-on-year fall in projected GST turnover either for any calendar month after 30 March 2020 or for any of the three quarters in 2020 except the first. In March 2020, Australia's "National Cabinet" issued the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19 ("National Code"), designed "to impose a set of good faith leasing principles" for commercial tenancies where the tenant was eligible for Jobkeeper. To reflect the National Code, New South Wales enacted Sch 5 to the Conveyancing (General) Regulation 2018 (NSW), which came into force on 24 April 2020 and expired on 24 October 2020 ("the First COVID Regulation"). On 24 October 2020, a new form of the regulation was enacted, to expire on 24 April 2021 ("the Second COVID Regulation"). Under both versions of the Regulation, commercial tenants could invoke certain protections if they were eligible for Jobkeeper benefits and therefore "impacted lessees". Central to both regulations was the term "prescribed period". Under the First COVID Regulation, the prescribed period was the entire lifespan of the regulation. Under the Second COVID Regulation, the prescribed period ran from 24 October 2020 to 31 December 2020, leaving almost four months until the regulation expired on 24 April 2021. Under both regulations, cl 4 prohibited landlords from taking "prescribed action" for, inter alia, non-payment of rent during the prescribed period. Prescribed action included terminating the lease. Clause 5, in terms, prohibited a landlord from taking prescribed action for, inter alia, non-payment of rent unless there had been good faith rent negotiations. Clause 6 prohibited a landlord from, inter alia, terminating the lease unless the Small Business Commissioner certified that a mediation attempt had failed. In March 2020, Croc's fell behind on its rent to Alamdo. Croc's and Alamdo corresponded about possible rent relief. On 28 April 2020, Alamdo's director, Mr Anthony Maurici, offered Croc's a 50% rent waiver and 24 month deferral on the balance. Croc's did not respond to the offer. Negotiations continued until November 2020. Croc's position was that, under the National Code, it was entitled to rent relief in proportion to its franchisee's business downturn, rather than its own. On 1 October 2020, Croc's paid its rental arrears for 1 April to 24 April 2020. No rent due after 24 April was paid. On 3 December 2020, Alamdo took possession of the premises and purported to terminate the lease. Alamdo then commenced proceedings seeking damages for, inter alia, unpaid rent and outgoings. Croc's cross-claimed, alleging that Alamdo's termination was prohibited by the Second COVID Regulation and seeking loss of bargain damages. The primary judge found that Alamdo was entitled to terminate because Croc's was not eligible for Jobkeeper at the date of termination and therefore not an "impacted lessee" under the Second COVID Regulation. In the event this analysis was wrong, the primary judge also found that cll 5 and 6 of the Regulation created a "gateway" through the prohibition in cl 4, and that Alamdo had satisfied both cll 5 and 6. The primary judge also held that, although the Lease Document was unregistered, the parties were bound by the AfL. He awarded loss of bargain damages to Alamdo. Croc's appealed. Alamdo filed a notice of contention. The issues on appeal were: (i) Was Croc's eligible for Jobkeeper benefits and therefore an "impacted lessee" under the Second COVID Regulation? (ii) Did cll 5 and 6 of the Second COVID Regulation create a gateway through the prohibition in cl 4, or did cl 4 act as a "blanket" prohibition during the prescribed period? (iii) Did Alamdo comply with cl 5 of the Second COVID Regulation? (iv) Did the Retail Leases Act 1994 (NSW), s 88(2) extend the operation of the COVID Regulation beyond its expiration? (v) Although there was no registered lease, did the AfL create contractually binding obligations whose breach by Croc's could sound in damages? (vi) By sending a tax invoice for rent due in December 2020, did Alamdo affirm the lease? (vii) Despite the Second COVID Regulation, was Alamdo entitled to terminate because of Croc's failure to pay rent before that regulation came into force? (viii) Was the primary judge wrong to find the second and third appellants guaranteed all of Croc's obligations under the AfL, and remained guarantors despite the terms of a "guarantor release" clause in the AfL? (ix) On its cross-claim, was Croc's entitled to damages for Alamdo's repudiation by wrongfully terminating the lease? The Court of Appeal (Payne and Stern JJA agreeing, Basten AJA dissenting) held, allowing the appeal and remitting the matter to the Equity Division: On issue (i) (Payne JA at [39]-[53], Stern JA at [187], Basten AJA at [199]): (1) Alamdo conceded it had led the primary judge into error when construing the Jobkeeper Rules. This concession was correct: an entity was eligible for Jobkeeper, so long as it satisfied the "decline in turnover" test in cl 8 at some point before the end of the fortnight (but not necessarily during that fortnight) in which it first applied for Jobkeeper benefits. Eligibility did not fluctuate from fortnight to fortnight: at [46]-[50]. (2) Croc's was an "impacted lessee" under the Second COVID Regulation: at [51]. On issue (ii) (3) The general principles for interpreting Acts of Parliament are applicable when interpreting delegated legislation: at [82], [202]. Interpretation Act 1987 (NSW) ss 21, 32, 33 applied; Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at [19] applied. (4) Subordinate legislation should, however, be construed bearing in mind that often it will not have been drafted with the same care as an Act of Parliament: at [84], [197], [202]. Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] applied. On issue (ii) (Payne JA at [54]-[110], Stern JA at [187]-[198]): (5) The National Code and the commercial leasing principles it contained were available extrinsic material when construing the COVID Regulations: at [103], at [190]. Both COVID Regulations in terms permitted the Court to take the leasing principles into account: at [103], [195]. Interpretation Act 1987 (NSW) s 34(1)(b)(i); Conveyancing (General) Regulation 2018 (NSW) Sch 5 cl 7 applied. (6) The leasing principles prohibited termination of a commercial lease for non-payment of rent during the COVID-19 pandemic period and a reasonable subsequent recovery period: at [59]. (7) Unlike in the First COVID Regulation, cl 4 in the Second COVID Regulation applied only if the landlord sought to terminate during the prescribed period itself. Further, while the First COVID Regulation's "prescribed period" covered its entire lifespan, the Second COVID Regulation's "prescribed period" covered only two months of its six month duration. Because of this significant change, the Second COVID Regulation's meaning should not be tied to that of the First COVID Regulation: at [98], at [196], [198]. (8) Under the Second COVID Regulation, the cl 4 prohibition applied during the two-month prescribed period, equivalent to the "COVID-19 pandemic period" in the leasing principles. Clauses 5 and 6 were not temporally limited to the prescribed period and could operate for the four months after the prescribed period: at [104]-[107], [109], [197]. For the prescribed period, cl 4 created a blanket prohibition, while for the remaining four months, cll 5 and 6 created narrower restrictions and gateways through those restrictions. This construction was coherent and consistent with the leasing principles and National Code: at [108], [197]. (9) Because 3 December 2020 fell within the Second COVID Regulation's prescribed period, cl 4's blanket prohibition prevented Alamdo from terminating: at [110]. The prohibition applied to both Croc's tenancy at will and to the agreement created by the AfL, since the AfL was an "agreement for a lease" where the lessee was entitled to have the lease granted (Conveyancing Act 1919 (NSW) s 128): at [63], [148]. (Basten AJA contra): (10) A coherent application should be given to cll 4, 5, 6 and 7 of the second version of Schedule 5, consistent with the leasing principles in the National Code, by reading them as a package. Clauses 5 and 6 contained internal indications that expressly permitted the taking of action otherwise prohibited by cl 4(2); it was not possible to give them effect unless they qualified so much of the prohibition in cl 4 as fell within their compass: at [273]. Clause 5(1), while repeating one of the prohibitions in cl 4, did so in order to qualify it, in part. Clause 6 was not so limited, but imposed its own separate condition, cumulatively on cl 5: at [284]. (11) It would be contrary to principle, inconsistent with authority and defy common sense to interpret cl 4, in the second version of Schedule 5, as a blanket prohibition during the "prescribed period" and cll 5 and 6 as limited prohibitions only applying after the prescribed period. No such conclusion was tenable while the first version of Schedule 5; the amendments to the scheme made by the second version demonstrated no change to the underlying purpose or objects of the Schedule. The mere fact that, for a limited period, cl 5 operated when cl 4 did not, does not warrant the conclusion that cl 5 was to operate only during that period: at [289], [286]-[287]. On issue (iii) (Payne JA at [111]-[119], [125]-[130], Stern JA at [187], Basten AJA at [199]): (12) The primary judge was correct to find Alamdo satisfied cl 5. Its rent relief offer of 28 April 2020 was never withdrawn: at [116]. None of Croc's communications amounted to a "second or subsequent request" for negotiation, but were re-assertions of its claimed entitlement to have its rental relief calculated by reference to its franchisee's turnover: at [117]-[119]. (13) Privilege under the Small Business Commissioner Act 2013 (NSW) s 19(3) over evidence of the offer made by Alamdo during mediation was waivable by either party, and Croc's correspondence and conduct of the proceedings amounted to a waiver: at [127]-[129]. On issue (iv) (Payne JA at [121]-[124], Stern JA at [187], Basten AJA at [199]): (14) Section 88 of the Retail Leases Act 1994 (NSW) preserved the accrued operation of the COVID Regulations for the period that they were in force. It did not indefinitely extend the Regulations' effect beyond that period: at [123]. On issue (v) (Payne JA at [131]-[149], Stern JA at [187], Basten AJA at [199]): (15) The primary judge was correct that, by operation of the AfL, contractual rights arose between Croc's and Alamdo, in the terms of the AfL and Lease Document, and in parallel to any separate equitable or legal estate in the premises: at [144]. Croc's breach of this agreement could sound in damages: at [147]. Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544 at 54 applied; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252 cited. On issue (vi) (Payne JA at [150]-[156], Stern JA at [187], Basten AJA at [199]): (16) The primary judge was correct that Alamdo did not affirm the lease on 30 November 2020 by sending Croc's a tax invoice for rent due in December 2020. There was no inconsistency between Alamdo insisting on its right to receive rent and retaining its right to terminate: at [154]. Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656; Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632 at [48]-[53] applied. On issue (vii) (Payne JA at [157]-[166], Stern JA at [187], Basten AJA at [199]): (17) The primary judge was correct to find that Alamdo was not entitled to terminate for Croc's non-payment of rent between 1 and 24 April 2020 because its stated ground for termination was solely breaches arising after 24 April 2020: Payne JA at [163]. Todarello Property Investments Pty Ltd v GJA Kalra Pty Ltd [2021] NSWSC 1678 at [75]-[76] applied. (18) Additionally, by in October accepting Croc's late payment of rent up to 24 April 2020, Alamdo waived its entitlement to terminate on the basis the rent had gone unpaid: Payne JA at [164]-[165]. Owendale Pty Ltd v Anthony (1967) 117 CLR 539 at 556-557 applied. On issue (viii) (Payne JA at [167]-[180], Stern JA at [187], Basten AJA at [199]): (19) The primary judge was correct that, by cl 11 of the AfL and cl 20.1 of the Lease Document, the second and third appellants agreed to guarantee all of Croc's obligations under the AfL. In cl 20.1 of the Lease Document, any reference to a "Lease" should be read as a reference to the "AfL": Payne JA at [173]. (20) There was no error in the primary judge's construction of the terms "minimum guarantee period" and "guarantee release period" in cl 20.1 of the Lease Document, with the effect that the guarantors were not released if Croc's breached an essential term of the agreement created by the AfL at any point during the lease period: Payne JA at [177]-[179]. On issue (ix) (Payne JA at [181]-[185], Stern JA at [187]): (21) Croc's entitlement to damages for Alamdo's termination on 3 December 2020 was not properly litigated at first instance. A remitter was necessary to determine this issue: Payne JA at [185].

JUDGMENT

1. PAYNE JA: The present dispute concerns the termination of a commercial lease during the COVID-19 pandemic. The lessor and respondent to the appeal, Alamdo Holdings Pty Ltd ("Alamdo"), was the registered proprietor of Unit 5 of a property in Hudson Avenue, Castle Hill. Mr Anthony Maurici is Alamdo's sole director. The lessee of the Castle Hill property was Croc's Franchising Pty Ltd ("Croc's"), the first appellant. Croc's is the franchisor of a chain of child play centres, which operate across Australia. The second appellant is Mr Aldons, one of Croc's founders and directors. Mr Aldons agreed to guarantee Croc's obligations under its lease agreement with Alamdo. The third appellant is Mr Cusdin, Croc's other founder and director, who also acted as guarantor of Croc's lease obligations.
2. On 16 November 2017, Alamdo and Croc's executed the following documents: 1. An Agreement for Lease of the Castle Hill premises ("AfL"); 2. A Memorandum of Lease in registrable form which purported to create a lease for 10 years ("the Lease Document"); and 3. An Incentive Deed by which Alamdo agreed to pay Croc's a $250,000 contribution towards fit out.
3. Alamdo did not register the lease [1] . Its failure to do so gave rise to issues below and on appeal. On 18 June 2018, Croc's "entered into possession". However, the actual occupant of the Castle Hill premises was Croc's franchisee, Golden Rock & Hope Pty Ltd. Under a licence agreement, the franchisee was required to pay Croc's the full amount of rent due to Alamdo.
4. On 3 December 2020, Alamdo purported to terminate the lease and re-entered into possession of the Castle Hill premises. On 14 May 2021, Alamdo brought proceedings against the appellants, claiming damages for unpaid rent and outgoings, loss of bargain damages and a refund of part of the incentive payment it had made to Croc's. The appellants filed a cross-claim, alleging that Alamdo's termination was wrongful and amounted to repudiation, and that Croc's was entitled to loss of bargain damages as a consequence of the wrongful termination.
5. The primary judge (Stevenson J) delivered three judgments: 1. Challenge to COVID regulation: In Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd [2022] NSWSC 1746, the primary judge rejected Alamdo's argument that Sch 5 to the Conveyancing (General) Regulation 2018 (NSW) was not authorised by the legislation under which it was made. There was no appeal from that judgment. The State of New South Wales intervened in that aspect of the proceedings, and filed a submitting appearance as second respondent to this appeal. 2. Primary judgment: In Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 2) [2023] NSWSC 60, the primary judge found that Alamdo was entitled to terminate the lease and that it was entitled to damages for unpaid rent and loss of bargain. The primary judgment was delivered on 9 February 2023. Orders were made on 28 February 2023 as follows: TERMS OF ORDER MADE BY THE COURT

1. Judgment for the plaintiff against the first, second and third defendants in the amount of $1,076,869.33.

3. The State of New South Wales is to bear its own costs.

4. Reserve all other questions of costs, to be determined in accordance with the directions made on 16 February 2023. 1. Costs: In Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 3) (unreported, NSW Supreme Court, 8 March 2023), the primary judge ordered the appellants to pay 90% of Alamdo's costs on an indemnity basis. In this appeal, the only challenge to those costs orders was derivative, and turned on the outcome of the challenge to the primary judgment.

Relevant facts

1. On 11 March 2020, the World Health Organization declared COVID-19 a worldwide pandemic. After that date, the NSW government pursued various public health measures, which restricted the size of mass gatherings and prohibited or, at times, restricted indoor recreation centres like Croc's playcentres from operation. The Commonwealth and NSW governments also introduced various measures to address the economic effects of the pandemic which are at the heart of this appeal.
2. Until March 2020, there was no controversy between the parties about the lease. In March 2020, Croc's fell behind on rent. It paid $8000 of the $26,083.20 in rent payable for March 2020, before paying no further rent until July 2020.
3. On 14 March 2020, Mr Aldons and Mr Cusdin wrote to Mr Anthony Maurici asking for a two month rent abatement. Rent was due for the month of April, payable in advance on April 1 2020. Croc's originally paid none of that rent, but in October 2020 paid rent up to 24 April 2020 (see [18] below).
4. On 24 April 2020, Sch 5 of the Conveyancing (General) Regulation 2018 (NSW), headed "Commercial leases - COVID-19 pandemic special provisions", came into force ("the First COVID Regulation").
5. On 28 April 2020, Mr Anthony Maurici wrote to Mr Aldons, making the following offer: 1. A 50% rent waiver from 24 April 2020 for the "period during which your business remains closed by Government mandate"; 2. Deferral of the balance until 24 months after the "lifting of the government ban on operation of your business".
6. Mr Aldons and Mr Cusdin did not respond to this offer. The primary judge found that the offer remained open throughout 2020.
7. On 21 May 2020, Mr Maurici's son, Mr Sebastian Maurici, asked Mr Aldons to pay outstanding rent from before the commencement of the "COVID legislation". He also asked for Croc's financial documents so he could process the rent abatement request: • The last 12 months of BAS Statements. • Copy of Business Bank Statement(s) for previous 12 months. • Trading figures or financial reports for FY 2019 (audited and certified reports) • Trading figures or financial reports for the current Financial Year (certified by an accountant). • Most up to date financials available for Jan to present showing your loss of income.
8. On 16 June 2020, Mr Aldons replied, sending a Business Activity Statement for the franchisee occupying the premises. In exchanges with Alamdo during early August, Mr Aldons insisted that it was the franchisee's business information, rather than Croc's, which would be provided. Mr Anthony Maurici maintained that he needed Croc's financial information, not that of the franchisee.
9. For example, on 7 August 2020, Mr Aldons wrote to Mr Sebastian Maurici: The following information relates to the sales for Castle Hill so that you can apply the code of conduct accordingly for rent payable, deferred and waived : July sales $19,960 versus last year July of $95,431 Sales achieved = 20.92% Deferred amount = 39.54% Waived amount = 39.54% Sales achieved (%) is what is payable by my franchisee for rent ie 20.92% for July. (Emphasis in original)
10. In cross-examination, Mr Aldons agreed that he "didn't want to give Alamdo what it had been asking you for". He also agreed that he had insisted Croc's was "entitled to a rent reduction measured exactly in proportion to the reduction in sales" by the franchisee and that "All I have to show Alamdo is how much my franchisee's sales have reduced".
11. On 11 August 2020, Mr Aldons forwarded to Alamdo a copy of Croc's Jobkeeper application, which had been lodged with the ATO on 24 April 2020. Attached was a "monthly revenue summary" for the financial years ending 30 June 2019 and 30 June 2020. Those summaries showed total income for the period April to June 2019 of $623,455 and for the corresponding period in 2020, $172,566.21.
12. On 29 September 2020, the parties submitted their dispute to mediation before the Small Business Commissioner ("the Commissioner"). The primary judge found that records of what was said at the mediation could not be admitted into evidence.
13. On 1 October 2020, Croc's paid Alamdo $29,963, discharging its rental arrears for the month of April 2020, but only up to 24 April 2020, the date the First COVID Regulation came into effect.
14. On 13 October 2020, Mr Aldons sent Mr Anthony Maurici a request for a rent reduction for the period from 24 April 2020 to 30 September 2020. Mr Aldons included with this request more sales information about the franchisee's performance and again asserted that Croc's was entitled to a rent reduction in proportion to the franchisee's drop in revenue. Attached to this correspondence was a letter from Mr Penn, Croc's accountant, concerning Croc's "[t]urnover as per accounting records". The letter asserted that Croc's total income for the period July to September had fallen from $656,604.33 in 2019 to $375,124.36 in 2020.
15. In cross-examination, Mr Anthony Maurici explained that he thought there was no "v[e]racity" in this material as it was "the accountant's information … based on information provided by Croc's, and the information provided by Croc's was not presented, it was only tabulated, as if that's something that I have to accept".
16. On 24 October 2020, a further version of Sch 5 to the Conveyancing (General) Regulation came into force ("the Second COVID Regulation"). Clause 10 of the First COVID Regulation had provided that the version of Sch 5 which it brought into effect was repealed 6 months after its commencement. That limitation necessarily flowed from s 87(4) of the Retail Leases Act 1994 (NSW) which provided that regulations made thereunder expire on either a day that is six months after the day on which the regulation commences, or any earlier day decided by resolution of either House of Parliament.
17. Mr Aldon sent further emails on 5 November 2020 and 10 November 2020 asking for updates about his rent reduction request and again setting out the franchisee's financial position.
18. On 10 November 2020, Alamdo sent Croc's a notice under s 129 of the Conveyancing Act 1919 (NSW). The notice stated: I give you notice that you are in breach of your undertakings given in clause 4.1 by not paying Rent amounting to $187,785 including GST from 25 April 2020 to 30 November 2020. Your request for rent relief, which you claim is due to financial distress caused to your company by the coronavirus pandemic, is refused. Despite repeated requests for you to provide verifiable evidence of this financial distress, you have not done so. Therefore, Alamdo relying on the Lease and Schedule 5 of the Conveyancing (General) Regulation 2018 reacts to your breach by this notice. In particular: 1. You have not paid any rent since 24 April to be now in arrears for $187,785 plus interest; 2. you have not provided evidence that you are an impacted lessee as required by section 5(5)(b) of Schedule 5 of the Conveyancing (General) Regulation 2018; 3. you have not negotiated in good faith having regard to section 6 of Schedule 5 of the Conveyancing (General) Regulation 2018 …; … As a result of the above, my company is free of the prohibition to take this prescribed action as provided in section 5(7) of the Regulation. You have fourteen (14) days) to remedy this breach after which the Landlord, reserving all of its rights under the Lease, will re-enter the Premises, repossess them and terminate the Lease.
19. On 17 November 2020, Mr Aldons replied: In response to your notice of breach we provide the below information: We are entitled to rent relief as per the NSW code of conduct. The information relating to Croc's Franchising downturn in sales as well as jobkeeper eligibility has previously been sent and re-confirmed as at October this year as has the franchisees (business operating out of your premises under a license agreement) sales information, P+L's, participation in jobkeeper etc. We also sent a letter outlining our eligibility under the code. Nonetheless we are still waiting for you to provide the rental amounts due and payable based on the proportionate drop in sales (as provided). Can you please recalculate the rental due from April 24th to end November based on the information we have sent (sales)? We feel that we can get this business back to where it was before Covid and require your assistance until the end of the recovery period as per the code. We believe that both Croc's and our franchisee are entitled to the protections provided under the code and that your notice of breach is unlawful. Please advise the rent payable so that we can work with our franchisee to arrange prompt payment and work with our franchisee to keep the store open and get it profitable again.
20. At this point, Croc's engaged a solicitor, Ms Lauren Smyth. On 24 November 2020, she wrote a letter and forwarded some of Croc's financial information to Mr Maurici, including Business Activity Statements for each quarter from September 2018 to June 2020. However, she in effect repeated the assertion that Croc's was entitled to a rent reduction in proportion to the franchisee's reduction in turnover.
21. Ms Smyth also attached a 9 October 2020 confirmation by the ATO that Croc's satisfied the decline in turnover requirements and was eligible for Jobkeeper.
22. Correspondence between Ms Smyth and Mr Maurici continued into December 2020. Ms Smyth maintained that the position of the franchisee, rather than Croc's itself, was what mattered.
23. The primary judge found at [118]-[121]: 118 Ms Smyth's reference, in the first three rows of her table, to "rent waived" and "rent deferred" of 50% appears to bespeak her understanding, and thus that of Croc's, that Mr Maurici's 28 April 2020 offer had remained on the table for at least April to June 2020. 119 By reference to Croc's Business Activity Statements, Mr Potts SC and Mr Langshaw, who appeared for Alamdo, produced a calculation that showed that, despite a fall in income from 2019 to 2020, Croc's nonetheless made a profit, excluding GST, of $19,690 for the quarter ending June 2020 and $79,120 for the quarter ending September 2020. 120 On 27 November 2020 Ms Smyth sent Mr Maurici a further email, again focusing on the position of the Franchisee. Ms Smyth said: "Covid-19 has had a severe impact on the business. As an indoor playcentre, the franchisee was required to cease trading immediately. Unlike many other businesses, it had no opportunity to pivot its model or adjust its operations to generate an income. In circumstances where it has had no or minimal sales, it has not been in a position to pay rent, which is precisely why our client contacted you in March for rent relief." 121 Again, the focus of Ms Smyth's contentions was on the position of the Franchisee, rather than Croc's itself.
24. Alamdo took possession of the premises on 3 December 2020 and purported to terminate the lease. The proceedings below were commenced on 14 May 2021. Alamdo eventually granted a new lease for the Castle Hill premises on 7 June 2022.

Factual challenge

1. Before the primary judge, relying on Croc's Business Activity Statements, Alamdo produced a calculation that showed that, despite a fall in income from 2019 to 2020, Croc's nonetheless made a profit, excluding GST, of $19,690 for the quarter ending June 2020 and $79,120 for the quarter ending September 2020. The primary judge accepted as much: 242 As Mr Maurici sought to emphasise in his correspondence during that period, it was the impact of the COVID-19 pandemic on Croc's financial position, rather than that of the Franchisee, that was the matter that required attention. As it turned out, the information ultimately provided by Croc's to Alamdo concerning Croc's financial position, sent under cover of Ms Smyth's 24 November 2020 letter, showed that Croc's had continued to make a profit throughout 2020.
2. This was the only fact now relevantly challenged by the appellants under UCPR r 51.36(2) [2] . For the purposes of the appeal, the appellants created a table identifying additional liabilities and submitted that it showed that Croc's "traded at a substantial loss if the wages and tax paid by Croc's and the rent payable to Alamdo were taken into account" in the quarters ending June and September 2020.
3. To the extent it matters, I find that Croc's made a gross profit but a net loss in throughout 2020.

Conclusions of the primary judge

1. In circumstances I will explain in greater detail below, the primary judge found that: 1. Croc's had not proven that it was entitled to payments under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) ("Jobkeeper Rules"); 2. Croc's was not an "impacted lessee" within the meaning of the Second COVID Regulation as at 3 December 2020; 3. Clauses 5 and 6 of the Second COVID Regulation created pathways or exceptions by which a lessor might, by satisfying the preconditions contained in those clauses, be permitted to take "prescribed action" that was otherwise prohibited by cl 4 of the Second COVID Regulation; 4. Alamdo had satisfied the preconditions in cl 5 of the Second COVID Regulation prior to 3 December 2020 because it had renegotiated in good faith the rent payable under the lease; and, or alternatively, Alamdo was taken to have complied with cl 5 because Croc's had failed to provide Alamdo with evidence that it was an "impacted lessee"; 5. Alamdo also satisfied the preconditions in cl 6 of the Second COVID Regulation prior to 3 December 2020, because there had been a mediation before the Commissioner and the Commissioner had given the requisite certificate; and 6. Alamdo was entitled to loss of bargain damages.

Notice of appeal and notice of contention

1. In its notice of appeal, Croc's advanced the following 24 grounds of appeal: Eligibility for Jobkeeper and Status as Impacted Lessee 1 The primary judge erred by finding at J[119] and [241]-[242] that the first appellant ("Croc's") traded profitably for the quarters ending 30 June and 30 September 2020, and ought to have found that the evidence indicated that Croc's traded at a substantial loss if the wages and tax paid by Croc's and the rent payable to Alamdo were taken into account. 2 The primary judge erred by finding at J[246] that the rent payable by Croc's for the entire period from 24 April 2020 had been "reduced, waived or deferred" for the purposes of cl 5(3) of the COVID Regulation, in circumstances where his Honour made no finding that there had been any reduction, waiver, or deferral of any such rent, no party contended for such a finding, and there was no evidence to support such a finding. 3 The primary judge erred by finding at J[164]-[166] that the expression "at or before the end of the fortnight" in cl 7(1)(b) of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) ("Jobkeeper Rules") should be interpreted as meaning "during the fortnight", and ought to have found that it should be interpreted as meaning at the end of the fortnight or before that time. 4 The primary judge erred by finding at J[84] that the material provided with Mr Aldons' email of 11 August 2020 did not constitute evidence that Croc's was an "impacted lessee" within the definition of cl 2 and for the purposes of cl 5(3A) of the COVID Regulation, and ought to have found that the material did constitute such evidence because it demonstrated a year-on-year decline in turnover for the June 2020 quarter exceeding 30%. 5 The primary judge erred by finding at J[173] that Croc's had not shown that it qualified for jobkeeper payments as at 3 December 2020, and ought to have found that: a. Croc's had established that it qualified for jobkeeper payments as at 3 December 2020 because its turnover in the quarters ending on 30 June 2020 and 30 September 2020 had declined by more than 30% relative to the previous year; and b. accordingly, as at 3 December 2020, Croc's was an "impacted lessee" within the definition of cl 2 of the Conveyancing (General) Regulation 2018 (NSW) ("COVID Regulation"). 6 The primary judge erred by failing to find that the financial information provided by Croc's to Alamdo on 11 August 2020, 13 October 2020, and 24 November 2020 demonstrated that Croc's was and remained entitled to the jobkeeper payment as at each of those dates and was therefore an "impacted lessee" within the definition of cl 2 of the COVID Regulation throughout the entirety of the "prescribed period" as defined in that Regulation. COVID-19 Regulation 7 The primary judge erred by finding at J[194] that cll 5 and 6 of the COVID Regulation created "pathways" by which a lessor might, by satisfying the preconditions contained in those clauses, be permitted to take the "prescribed action" that would otherwise have been prohibited by cl 4(2). 8 The primary judge ought to have found that each of cll 4(2), 5, and 6 of the COVID Regulation were cumulative in operation, and nothing in cll 5 or 6 created an exception to the prohibition in cl 4(2). 9 The primary judge erred by finding at J[247] that Alamdo complied with its obligation under cl 5 of the COVID Regulation to engage in good faith negotiations concerning rent. 10 The primary judge erred by failing to find that Alamdo had not engaged in good faith negotiations concerning rent: a. at all; or, alternatively b. after receipt of the financial information provided by Croc's to Alamdo on 11 August 2020, 13 October 2020, and, or alternatively, 24 November 2020; or, alternatively c. after receipt of the further renegotiation requests in October and November 2020. 11 The primary judge erred by finding at J[226] that the Small Business Commissioner had given reasons for the failure of the mediation as required by cl 6 of the COVID Regulation, and ought to have found that the Commissioner had only certified the outcome of the mediation and had not given reasons for the failure. [Not pressed] 12 The primary judge erred by finding at J[260] that the COVID Regulation did not operate to prevent Alamdo from entering possession of the Premises on 3 December 2020 and terminating the Lease. 13 The primary judge erred by failing to find that Alamdo it was unlawful for Alamdo to enter possession of the Premises on 3 December 2020 and terminate the Lease, by reason of cll 4(2), 5(1) and, or alternatively, 6 of the COVID Regulation. 14 The primary judge erred by finding at J[257]-[259) that s 88(2) of the Retail Leases Act 1994 (NSW) had no effect in the proceedings, and ought to have found that it has the effect that the COVID Regulation continues to apply to the breaches of the Lease that occurred during the prescribed period, such that Alamdo remains precluded from taken prescribed action on the grounds of those breaches. Unregistered Lease 15 The primary judge erred by finding at J[135]-[147] that the Agreement for Lease operated to create a lease of the Premises from Alamdo to Croc's for a term of 10 years on the terms of the unregistered Lease Document. 16 The primary judge erred by failing to find that: a. no obligation to pay rent arose under the Agreement for Lease; b. Alamdo's failure to register the Lease Document had the consequence that no lease existed at law save for a monthly tenancy at will implied by s 127 of the Conveyancing Act 1919 (NSW); c. to the extent an equitable lease may have existed by reason of the Agreement for Lease and the unregistered Lease Document, no obligation to pay rent arose absent an order for specific performance; d. Alamdo was not entitled to an order for specific performance; and e. in those circumstances, Alamdo had no entitlement to damages for loss of bargain. Guarantees 17 The primary judge erred by finding at J[309] that the guarantees in the Agreement for Lease applied to an obligation to pay rent, and ought to have found that the Agreement for Lease contained no obligation to pay rent to which those guarantees could apply. 18 The primary judge erred by finding at J[319]-[321] that the cl 20.10 of the Lease Document should be construed such that the Guarantors are released from the end of the Minimum Guarantee Period unless a notice under s 129 of the Conveyancing Act 1919 (NSW) is served any time within the term of the lease. 19 The primary judge ought to have found that cl 20.10 of the Lease Document should be construed such that the Guarantors are released from the end of the Minimum Guarantee Period unless a notice under s 129 of the Conveyancing Act 1919 (NSW) is served any time within that period. 20 The primary judge erred by finding at J[109] and [323] that the notice sent by Alamdo to Croc's on 10 November 2020 was, in effect, a notice under s 129 of the Conveyancing Act 1919 (NSW), and ought to have found that it was not a notice under s 129 because: a. it related only to a failure to pay rent; and b. it did not adequately explain the consequences of non-compliance with the notice. 21 The primary judge erred by failing to find that the Guarantors had been released pursuant to cl 20.10 of the Lease Document on and from the end of the Minimum Guarantee Period (on 18 June 2020), and the release remains in effect. 22 Alternatively, if the guarantees in the Agreement for Lease otherwise applied to an obligation to pay rent and the guarantors were not released from their obligations, the primary judge erred by failing to find that the guarantees had no application to any obligation to pay rent in circumstances where the Lease Document was unregistered. Election 23 The primary judge erred by finding at J[274] that Alamdo's continual demands for Croc's to pay rent over the course of 2020 did not constitute elections to affirm the Lease, and ought to have found that each such demand was an unequivocal affirmation of the Lease with knowledge of the breaches comprising Croc's failures to pay rent before those demands. 24 The primary judge erred by finding at J[268]-[269] and [271] that Alamdo's 30 November 2020 demand for payment of rent for the month of December 2020 did not constitute an election to affirm the Lease, and ought to have found that it was an unequivocal affirmation of the Lease with knowledge of the breaches comprising Croc's failures to pay rent before that demand.
2. Alamdo filed a notice of contention, containing the following four grounds: 1 The first appellant's (Croc's) continuing failure to pay rent for the entire month of April 2020 was a breach of an essential term of the lease that was unaffected by the operation of Schedule 5 to the Conveyancing (General) Regulation 2018 (NSW) (Covid Regulation), and the first respondent's (Alamdo's) termination of the lease was valid on the basis of that breach, regardless of any other effect of the Covid Regulation. 2 Evidence of communications made by Alamdo or Croc's at the mediation on 29 September 2020 was admissible and should have been admitted, because s 19(3) of the Small Business Commissioner Act 2013 (NSW) created a right to object to that material which Croc's had waived, and that further evidence, in addition to the evidence relied upon by the primary judge, further supported the finding that Alamdo had renegotiated in good faith the rent payable under the lease within the meaning of cl 5 of the Covid Regulation. 3 The offer made by Alamdo on 28 April 2020 was an offer to waive 50 per cent of the rent, which on its proper construction meant that if that offer were accepted, that waived rent would never be payable by Croc's. 4 If the Court were to uphold ground 11 in the notice of appeal, and conclude that the Small Business Commissioner had not given reasons for the failure of the mediation as required by cl 6 of the Covid Regulation, then Croc's was estopped from relying on any insufficiency in the reasons given by the Small Business Commissioner which might otherwise have prevented Alamdo from satisfying the requirements of cl 6. [3]
3. In written submissions the appellants characterised the 24 grounds as relating to 13 discrete issues. The respondent dealt with the issues under the same headings as those adopted in the appellants' submissions.
4. It is convenient to address the grounds of appeal by reference to those discrete issues, the first two of which travel together and were subject to a concession by Mr Potts SC, senior counsel for Alamdo.

The appellants' first and second issues: erroneous construction of cl 7(1)(b) of the Jobkeeper Rules and failing to find that Croc's was an impacted lessee (appeal grounds 3-6)

1. On 9 April 2020, the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth) came into effect, permitting the Commonwealth to prescribe the payment of benefits to respond to the COVID-19 pandemic.
2. On the same day the Jobkeeper Rules came into effect which created the "Jobkeeper" benefits scheme.
3. Whether an entity qualified for the Jobkeeper scheme depended on s 7(1) of the Jobkeeper Rules, which on 3 December 2020 provided: 7 When an entity qualifies for the jobkeeper scheme (1) For the purposes of paragraphs 6(1)(b), 11(1)(c) and 12A(1)(c), an entity qualifies for the jobkeeper scheme for a jobkeeper fortnight if: (a) on 1 March 2020, the entity: (i) carried on a business in Australia; or (ii) was a non-profit body that pursued its objectives principally in Australia; or (iii) was a deductible gift recipient that was, or operated, a public fund covered by item 9.1.1 or 9.1.2 of the table in subsection 30-80(1) of the Income Tax Assessment Act 1997 (international affairs deductible gift recipients); and (b) the entity has satisfied the decline in turnover test at or before the end of the fortnight (see sections 8 and 8A); and (c) for a fortnight beginning on or after 28 September 2020 - the entity also satisfies the actual decline in turnover test (see section 8B) for the fortnight. Note: Qualifying entities must report monthly turnover information to the Commissioner for the duration of the scheme: see section 16.
4. There was no dispute that Croc's satisfied pars 7(a) and 7(c). The dispute before the primary judge turned on whether it met par 7(b), the "decline in turnover test".
5. The decline in turnover test was set out in s 8 [4] : 8 Decline in turnover test Basic test (1) An entity satisfies the decline in turnover test at a time (the test time) if: (a) the entity's projected GST turnover for a turnover test period in which the test time occurs falls short of the entity's current GST turnover for a relevant comparison period (the comparison turnover); and (b) the shortfall, expressed as a percentage of the comparison turnover, equals or exceeds the specified percentage for the entity (see subsection (2)). Note 1: See subsection (7) for the meanings of turnover test period and relevant comparison period. Note 2: Current GST turnover and projected GST turnover are modified for the purposes of this section and section 8A: see subsection (8). Note 3: For provisions about contrived schemes, see section 19 of the Act. Example: Patrick Enterprises assesses its eligibility for jobkeeper payments on 6 April 2020 based on a projected GST turnover for April 2020 of $6 million. It considers that the comparable period is the month of April 2019 for which it had a current GST turnover of $10 million. The April 2020 turnover falls short of the April 2019 turnover by $4 million, which is 40% of the April 2019 turnover. This exceeds the specified percentage, so the decline in turnover test is satisfied. … Meaning of turnover test period and relevant comparison period (7) For the purposes of this section and sections 8A and 8B: (a) unless paragraph (aa) applies - the turnover test period must be: (i) a calendar month that ends after 30 March 2020 and before 1 January 2021; or (ii) a quarter that ends on 30 June 2020, 30 September 2020 or 31 December 2020; and (aa) if the entity is a Table A provider - the turnover test period must be a period of 6 months starting on 1 January 2020; and (b) the relevant comparison period must be the period in 2019 that corresponds to the turnover test period. Note: When applying this subsection for the purposes of the actual decline in turnover test there is a different turnover test period: see paragraph 8B(1)(a). …
6. The "actual decline in turnover test" was as follows. There was no dispute that Croc's satisfied that test: 8B Actual decline in turnover test (1) An entity satisfies the actual decline in turnover test for a jobkeeper fortnight if the entity would satisfy the decline in turnover test (see sections 8 and 8A) at a time in the quarter applicable to the fortnight under subsection (2) if: (a) the turnover test period were the quarter, instead of the period determined under paragraph 8(7)(a) or (aa); and (b) instead of projected GST turnover, current GST turnover were used (including in subsection 8A(3), and in applying an alternative decline in turnover test determined by the Commissioner under subsection 8(6)). Quarter in which actual decline in turnover test must be satisfied (2) For the purposes of subsection (1), the quarter applicable to a jobkeeper fortnight beginning on or after 28 September 2020 is as set out in the following table. Quarter for which actual decline in turnover test must be satisfied Item If the fortnight begins: the quarter is the quarter ending on: 1 before 4 January 2021 30 September 2020 2 on or after 4 January 2021 31 December 2020

1. The primary judge concluded: 160 There is a dispute as to whether Croc's qualified for JobKeeper at the relevant time, namely on 3 December 2020 when Alamdo took possession of the Premises. 161 The JobKeeper Rules provided, in cl 7, that an entity qualified for the JobKeeper Scheme for a JobKeeper fortnight if, relevantly, it: (a) was carrying on business in Australia; and (b) "has satisfied the decline in turnover test at or before the end of the fortnight"; and (c) satisfied the "actual decline in turnover test" for a fortnight beginning or after 28 September 2020. 162 There was no dispute that, on 3 December 2020, Croc's satisfied requirements (a) and (c). 163 As to the requirement at (b), it was common ground that "the fortnight" was that commencing on Monday 23 November 2020 and concluding on Friday 6 December 2020, being the fortnight in which 3 December 2020 fell. 164 There was a dispute as to the meaning of the expression "at or before the end of the fortnight" for the purpose of cl 7(1)(b) of the JobKeeper Rules. 165 In my opinion, looking at the expression in the context of the JobKeeper Rules as a whole, those words must mean during the fortnight. They cannot mean any time "before" the end of the fortnight as, otherwise, once a lessee became an "impacted lessee", it would retain that status no matter how its turnover improved in the relevant "fortnight". 166 I agree with Alamdo that it was necessary that, here, Croc's showed that it satisfied the turnover test at some time during the period 23 November to 6 December 2020. I agree that this construction is consistent with the concept of qualification for the JobKeeper Scheme being tied to a specified fortnight and to be subject to the point in time test in cl 8. 167 Clause 8(1) of the JobKeeper Rules provided that an entity satisfied the decline in turnover test at a time (called the "test time") if: "The entity's projected GST turnover for a turnover test period in which the test time occurs fall short of the entity's current GST turnover for a relevant comparison period." 168 I agree with Alamdo's submission that the "test time" must be within the applicable JobKeeper fortnight; that is, here, within the period 23 November 2020 to 6 December 2020. That is made clear by the reference in cl 8(1) to the relevant entity's turnover for the "turnover test period in which the test time occurs". 169 Clause 8(7) of the JobKeeper Rules provided that the "turnover test period": "Must be: (i) a calendar month that ends after 30 March 2020 and before 1 January 2021; or (ii) a quarter that ends on 30 June 2020, 30 September 2020 or 31 December 2020." 170 The only "turnover test period" that could be relevant to Croc's eligibility for JobKeeper as at 3 December 2020 are the months of November or December 2020 (as "the" fortnight occurred in both of those months) or the quarter ended December 2020. 171 Croc's only adduced evidence of its decline in turnover for the preceding quarter ending September 2020. 172 Croc's has not adduced any evidence of its decline in turnover in November or December 2020 or in the quarter ending December 2020. Nor has Croc's adduced evidence of its GST turnover for the corresponding periods in 2019. 173 For those reasons, I accept Alamdo's submission that Croc's has not shown that it qualified for JobKeeper at the relevant time, and thus it has not shown that it was an "impacted lessee" at the relevant time.
2. On appeal Alamdo accepted that, contrary to the primary judge's finding, the first appellant was, in fact, an "impacted lessee" as at 3 December 2020 within the meaning of the regulation: POTTS: … we now accept that we led inadvertently the trial judge into error on this. … we now accept, in light of how one looks at the conjunction of the definition of JobKeeper fortnight and the prescriptive nature of the turnover test period … - we accept that when we urged his Honour to find in r 7(1)(b) of the JobKeeper Rules that the words "at or before the end of the fortnight" meant during the fortnight, that can't work for the reasons Mr Ashhurst explained …. The effect of that on the appeal is we now accept factually that the appellant had shown for the September 2020 quarter that they'd suffered a reduction in turnover of more than 30% and therefore they are, for that purpose, an impacted lessee. PAYNE JA: As at 3 December? POTTS: As at 3 December 2020…
3. This concession was correctly made. As originally enacted, the Jobkeeper scheme applied in the period from 30 March 2020 to 27 September 2020: see Jobkeeper Rules (as made) cll 5-6. On 16 September 2020, the scheme was extended to 28 March 2021 by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 8) 2020 (Cth). That instrument introduced par 7(1)(c) and s 8B into the Jobkeeper Rules. Paragraph 7(1)(c) required that "for a fortnight beginning on or after 28 September 2020 - the entity also satisfies the actual decline in turnover test (see section 8B) for the fortnight". The "actual decline in turnover test" as defined in cl 8B required that the entity's current GST turnover for the specified quarter fell short of its current GST turnover for the corresponding quarter in 2019. The specified quarter was the quarter ending on 30 September 2020 for a fortnight beginning before 4 January 2021, and the quarter ending on 31 December 2020 for a fortnight beginning on or after 4 January 2021.
4. The explanatory statement for the amending instrument said [5] : To qualify for JobKeeper payments for JobKeeper fortnights beginning on or after 28 September 2020 and ending on or before 3 January 2021, entities must satisfy the original decline in turnover test (now extended) and an additional test. Under this additional test, entities must demonstrate that their actual GST turnover has declined by the required percentage for the quarter ending 30 September 2020, relative to the entity's comparable quarter for this period. An entity that can demonstrate a fall in actual GST turnover in the quarter ending 30 September 2020 will also satisfy the original decline in turnover test, meaning that most entities enrolling for the first time will only have to demonstrate that their actual turnover has significantly declined in the previous quarter. (Emphasis added)
5. When the Jobkeeper scheme was first created, a qualifying entity would receive the payments each fortnight for the remainder of the scheme. So long as an entity satisfied the "decline in turnover" test in cl 8 at some point before the end of the fortnight in which they applied for Jobkeeper, they were eligible. There was no requirement that the relevant "test time" fall within the fortnight in question. There was no machinery for revoking eligibility for Jobkeeper payments. This was because the scheme created an emergency short-term measure designed to mitigate the severe impacts on businesses, and ultimately employment, of the COVID-19 pandemic and associated lockdowns.
6. When the Jobkeeper scheme was extended in September 2020, par 7(1)(c) and s 8B were inserted in order to revoke eligibility for the payments for entities whose actual income had recovered in the previous quarter. Eligibility would only be revoked if the entity's income had in fact recovered over a sustained period. The construction advanced below by Alamdo, which was adopted by the primary judge, could result in an entity's eligibility for the Jobkeeper scheme fluctuating from fortnight to fortnight. It is clear that this was not how the Jobkeeper scheme was intended to operate.
7. It follows that the primary judge was led into error by Alamdo. On 3 December 2020, Croc's was entitled to Jobkeeper as it had suffered a decline in turnover exceeding 30% in the quarter ending 30 September 2020 compared with the same quarter of the previous year.
8. The primary judge's findings at [166]-[173] (set out at [44] above) about whether Croc's was an "impacted lessee" derived from the finding about Croc's eligibility for Jobkeeper.
9. By reason of the conclusion on the appellants' first issue, the respondent correctly accepted that the primary judge should have concluded that Croc's proved it was an "impacted lessee".
10. Grounds 3-6 of the appeal should be allowed.

The appellants' third issue: erroneous construction of cl 4(2) of the COVID Regulation (appeal grounds 7, 8, 12 and 13)

1. The issue at the heart of this appeal is the correct construction of the Second COVID Regulation, which was the applicable regulation at the time Alamdo terminated the lease on 3 December 2020. The Second COVID Regulation must be interpreted alongside the First COVID Regulation, which it replaced. As explained below, both Regulations were designed to reflect the "National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles during COVID-19" ("the National Code"). A court, when making a decision relating to the termination of a commercial lease must have regard to the leasing principles set out in the National Code: cl 7 of the Second COVD Regulation.

The National Code

1. On 7 April 2020, the so called "National Cabinet" adopted the National Code and State and Territory governments, including New South Wales, committed to implement legislative measures giving effect to it. This commitment was recorded in the National Code: PARTIES TO THE CODE The Code will be given effect through relevant state and territory legislation or regulation as appropriate. The Code is not intended to supersede such legislation, but aims to complement it during the COVID-19 crisis period.
2. The National Code's purpose, in brief, was to impose a "set of good faith leasing principles for application to commercial tenancies … where the tenant is an eligible business for the purpose of the … JobKeeper programme".
3. The National Code contained the following "leasing principles": In negotiating and enacting appropriate temporary arrangements under this Code, the following leasing principles should be applied as soon as practicable on a case-by-case basis: 1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period). 2. Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code. 3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under 'definitions', below) of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant's trade during the COVID-19 pandemic period and a subsequent reasonable recovery period. 4. Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle #3 above over the COVID-19 pandemic period and should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant's capacity to fulfil their ongoing obligations under the lease agreement. Regard must also be had to the Landlord's financial ability to provide such additional waivers. Tenants may waive the requirement for a 50% minimum waiver by agreement. 5. Payment of rental deferrals by the tenant must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater, unless otherwise agreed by the parties. 6. Any reduction in statutory charges (e.g. land tax, council rates) or insurance will be passed on to the tenant in the appropriate proportion applicable under the terms of the lease. … 11. Landlords must not draw on a tenant's security for the non-payment of rent (be this a cash bond, bank guarantee or personal guarantee) during the period of the COVID-19 pandemic and/or a reasonable subsequent recovery period. … 13. Landlords agree to a freeze on rent increases (except for retail leases based on turnover rent) for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period, notwithstanding any arrangements between the landlord and the tenant. 14. Landlords may not apply any prohibition on levy any penalties if tenants reduce opening hours or cease to trade due to the COVID-19 pandemic.
4. Whilst the National Code contained goals which had by themselves only aspirational significance, as I have said, cl 7 of the First and Second COVID Regulations provided that a court "is to have regard to the leasing principles set out in the National Code of Conduct" when considering, relevantly "the termination of an impacted lease by a lessor".
5. Whilst the principles in the National Code were overlapping, and to some extent potentially inconsistent, it is clear that the Code expressly prohibited the termination of a commercial lease due to non-payment of rent during the COVID-19 pandemic period and during a reasonable subsequent recovery period. This matter was set out in leasing principle 1, which is the only paragraph of the National Code to address termination of a commercial lease due to non-payment of rent during the COVID-19 pandemic period.
6. I will return to the terms of the National Code when addressing the critical questions of construction.

The First and Second COVID Regulations

1. To give effect to the National Code, the NSW government created the First COVID Regulation, which took effect on 24 April 2020. Whether or not a commercial tenant qualified for Commonwealth Jobkeeper assistance determined whether it was an "impacted lessee" under the NSW COVID Regulation. The First COVID Regulation had effect until 24 October 2020, being the maximum six month period for a regulation of this kind pursuant to s 87 of the Retail Leases Act 1994 (NSW). Clause 4 of the First COVID Regulation provided: 4 Prohibitions and restrictions relating to commercial leases (1) If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of - (a) a failure to pay rent, or (b) a failure to pay outgoings, or (c) the business operating under the lease not being open for business during the hours specified in the lease. Note - See leasing principles No. 1, 11 and 14 in the National Code of Conduct. (2) If, during the prescribed period, a lessee under a commercial lease is an impacted lessee, the rent payable under the commercial lease (other than rent or a component of rent determined by reference to turnover) must not be increased. Note - See leasing principle No. 13 in the National Code of Conduct. (3) If, during the prescribed period, a lessee under a commercial lease was an impacted lessee, a lessor must not, after the prescribed period, take any prescribed action against the lessee on the grounds of a breach of the commercial lease consisting of a failure to pay an amount equivalent to or representing the rent increase amount referred to in subclause (2). Note - See leasing principle No. 13 in the National Code of Conduct. (4) If an impacted lessee is required by a provision of a commercial lease to pay a fixed amount that represents an amount of land tax or any other statutory charge (such as local council rates) or insurance payable by a lessor and the amount of the land tax or other statutory charge or insurance payable is reduced, the impacted lessee is exempted from the operation of the provision to the extent of the reduction. Note - See leasing principle No. 6 in the National Code of Conduct. (5) An act or omission of a lessee required under a law of the Commonwealth or the State in response to the COVID-19 pandemic - (a) is taken not to amount to a breach of a commercial lease, and (b) does not constitute grounds for termination of the lease or the taking of any prescribed action by the lessor against the lessee. (6) Nothing in this clause prevents a lessor and lessee agreeing to the parties taking any action in relation to the commercial lease (including the lessor taking any prescribed action or the parties agreeing to terminate the commercial lease).
2. An "impacted lessee" was defined as: 2 Meaning of "impacted lessee" (1) A lessee is an impacted lessee if - (a) the lessee qualifies for the jobkeeper scheme under sections 7 and 8 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth, and (b) the following turnover in the 2018-2019 financial year was less than $50 million - (i) if the lessee is a franchisee - the turnover of the business conducted at the premises or land concerned, (ii) if the lessee is a corporation that is a member of a group - the turnover of the group, (iii) in any other case - the turnover of the business conducted by the lessee. ...
3. Under cl 1, a "commercial lease" was any agreement to which the Conveyancing Act applied relating to the leasing of premises or land for commercial purposes. Pursuant to s 128 of the Conveyancing Act that included "an agreement for a lease where the lessee has become entitled to have his or her lease granted". Thus as I explain at [131]-[149] below, the AfL and, the unregistered Lease Document together were an agreement under which Croc's was entitled to have its lease granted. Because the Lease Document was unregistered, Croc's leasehold interest in the premises was a tenancy at will implied under s 127(1) of the Conveyancing Act. Both the agreement for a lease and the tenancy at will were "commercial leases" for the purposes of the COVID Regulation.
4. The "prescribed period", under the First COVID Regulation, was six months after the day on which the regulation commenced, namely the period from 25 April 2020 to 24 October 2020: cl 1. The prescribed period was thus co-extensive with the entire life of the First COVID Regulation.
5. On 3 July 2020, amendments to the First COVID Regulation commenced which effected changes to subcll 4(5) and (6). The parties referred to this as Regulation 1A. Neither party suggested that Regulation 1A affected the outcome of the appeal.
6. On 24 October 2020, the First COVID Regulation expired. That same day, the Second COVID Regulation commenced, in substance replacing the First COVID Regulation but with some important changes in drafting. The relevant operative prohibition remained cl 4 which provided: 4 Prohibitions and restrictions relating to impacted leases (1) This clause applies if, during the prescribed period, a lessee is an impacted lessee. (2) During the prescribed period, a lessor must not take prescribed action against the impacted lessee on the grounds of a breach of the impacted lease occurring during the prescribed period consisting of - (a) a failure to pay rent, or (b) a failure to pay outgoings, or (c) the business operating under the lease not being open for business during the hours specified in the lease. Note - See leasing principles No. 1, 11 and 14 in the National Code of Conduct. (3) The rent payable under the impacted lease must not be increased during the prescribed period, other than rent or a component of rent determined by reference to turnover. Note - See leasing principle No. 13 in the National Code of Conduct. (4) A lessor must not, after the prescribed period, take any prescribed action against the impacted lessee on the grounds of a breach of the impacted lease consisting of a failure to pay an amount equivalent to or representing the rent increase amount referred to in subclause (3). Note - See leasing principle No. 13 in the National Code of Conduct. (5) If an impacted lessee is required by a provision of an impacted lease to pay a fixed amount that represents an amount of land tax or any other statutory charge, such as local council rates, or insurance payable by a lessor and the amount of the land tax or other statutory charge or insurance payable is reduced, the impacted lessee is exempted from the operation of the provision to the extent of the reduction. Note - See leasing principle No. 6 in the National Code of Conduct. (6) An act or omission of an impacted lessee required under a law of the Commonwealth or the State in response to the COVID-19 pandemic - (a) is taken not to amount to a breach of the impacted lease to which the impacted lessee is a party, and (b) does not constitute grounds for termination of the impacted lease or the taking of any prescribed action by the lessor against the impacted lessee. (7) Nothing in this clause prevents a lessor and impacted lessee agreeing to the parties taking action in relation to the impacted lease, including the lessor taking prescribed action or the parties agreeing to terminate the impacted lease. (Emphasis added)
7. There was a significant change in language between the First COVID Regulation and the Second COVID Regulation. The First COVID Regulation provided that "If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of", inter alia, a failure to pay rent.
8. The temporal consideration "during the prescribed period" appears at the end of the clause and, from its position, grammatically limits the phrase "breach of the commercial lease". In the First COVID Regulation, the only temporal restriction is that the breach of lease must be during the prescribed period.
9. In the Second COVID Regulation, the language is quite different: "During the prescribed period, a lessor must not take prescribed action against the impacted lessee on the grounds of a breach of the impacted lease occurring during the prescribed period consisting of", inter alia, a failure to pay rent.
10. The phrase "During the prescribed period" was inserted at the start of the subclause. But it still appeared, as in the First COVID Regulation, at the end of the clause as well. The second appearance conveys the same meaning as in the First COVID Regulation. The first appearance of the phrase, at the start of the clause, however, is significant. It limited the prohibition to prescribed action taken during the prescribed period. That limitation did not appear in the First COVID Regulation, which prohibited prescribed action whenever it occurred (so long as the breach took place during the prescribed period). Importantly, under the Second COVID Regulation, the prescribed period was defined as only the first two months of the Regulation's lifespan. The clause 4 prohibition had work to do only for those two months. That temporal restriction makes the Second COVID Regulation quite different to the First COVID Regulation.
11. An impacted lease was defined as follows: 2 Meaning of "impacted lessee" (1) A lessee is an impacted lessee if - (a) the lessee qualifies for the jobkeeper scheme under sections 7, 8, 8A and 8B of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth, and (b) the following turnover in the 2018-2019 financial year was less than $50 million - (i) if the lessee is a franchisee - the turnover of the business conducted at the premises or land concerned, (ii) if the lessee is a corporation that is a member of a group - the turnover of the group, (iii) in any other case - the turnover of the business conducted by the lessee. Note - See amendments made to the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 8) 2020 of the Commonwealth. Note - For a lessee who was an impacted lessee during the period from 24 April to 23 October 2020 but does not meet the definition of impacted lessee under this clause - see clause 12.
12. The prescribed period was: prescribed period means the period beginning on the commencement of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 and ending at the end of 31 December 2020.
13. It was common ground that the lease between Alamdo and Croc's was an impacted lease and that Alamdo's termination of the lease on 3 December 2020 amounted to "prescribed action".
14. Following Alamdo's concession that Croc's was an "impacted lessee" as at 3 December 2020, the principal remaining issue in dispute was whether, as Croc's submitted, Alamdo was prohibited by cl 4 from taking "prescribed action" by terminating the lease during the prescribed period (which included 3 December 2020) or whether, as Alamdo submitted, and the primary judge found, by complying with cll 5 and 6 of the COVID Regulation, Alamdo was permitted to take prescribed action on 3 December 2020 against Croc's. Accordingly, the terms of cl 5 of the COVID Regulation must be considered.

Clause 5 of the COVID Regulation

1. In the First COVID Regulation, cl 5 imposed on lessors an obligation to "renegotiate" rent and other terms of their leases with impacted lessees: 5 Obligation to renegotiate rent and other terms of commercial leases before prescribed action (1) A lessor under a commercial lease must not take or continue any prescribed action against an impacted lessee on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note - This clause does not prevent parties to a commercial lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(4). (2) If an impacted lessee is a party to a commercial lease, any party to the lease may request the other parties to renegotiate the rent payable under, and other terms of, the commercial lease. (3) A party to a commercial lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the commercial lease. (4) The parties are to renegotiate the rent payable under, and other terms of, the commercial lease having regard to - (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. Note - See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct. In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover.
2. On 3 July 2020, Clause 5 was amended. Neither party suggested that those amendments were material to the outcome of the case.
3. In the Second COVID Regulation, cl 5 provided: 5 Obligation to renegotiate rent and other terms of impacted leases before prescribed action (1) A lessor under an impacted lease must not take or continue prescribed action against the impacted lessee on grounds of a breach of the impacted lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note - This clause does not prevent parties to an impacted lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(6). (2) A party to an impacted lease may request the other parties to renegotiate the rent payable under, and other terms of, the impacted lease. (3) A party to the impacted lease may make a second or subsequent request under subclause (2) but, unless the parties otherwise agree, an impacted lessee may make a second or subsequent request only if the request - (a) is made during the prescribed period, and (b) does not relate to rent for a period for which rent has been reduced, waived or deferred following a renegotiation under this clause. (4) A party to an impacted lease must, if requested under this clause - (a) renegotiate in good faith the rent payable under, and other terms of, the impacted lease, and (b) commence renegotiations within - (i) 14 days of receiving the request, or (ii) another period agreed to by the parties. (5) An impacted lessee must give the lessor the following in respect of the impacted lease - (a) a statement to the effect that the lessee is an impacted lessee, (b) evidence that the lessee is an impacted lessee. (6) The parties are to renegotiate the rent payable under, and other terms of, the impacted lease having regard to - (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. Note - See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct. In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover. (7) If the impacted lessee does not comply with subclauses (4)-(6), the lessor is taken to have complied with this clause. (8) To avoid doubt, a renegotiation commenced but not concluded before the expiry of the prescribed period may be continued and concluded after that expiry. Note - This clause applies only in relation to breaches of impacted leases consisting of a failure to pay rent during the prescribed period, being 24 April 2020 to 31 December 2020."
4. Clause 10 of the First and Second COVID Regulations was in essentially the same terms. The First COVID Regulation stated: [6] 10 Repeal of Schedule This Schedule is repealed on the day that is 6 months after the day on which it commences. Note - Section 87(4) of the Retail Leases Act 1994 regarding the duration of regulations made under Part 11 (Response to COVID-19 pandemic) of that Act. However, the two differed in effect. The "prescribed period" under the First COVID Regulation was the entire period of that Regulation, whereas the "prescribed period" under the Second COVID Regulation ended on 31 December 2020, while the regulation continued until 24 April 2021. The result was that whereas cll 4 and 5 had operated for identical periods under the First COVID Regulation, under the Second COVID Regulation, cl 4 ceased to apply on 31 December 2020, but the cl 5 prohibition, which was subject to an exception, applied for the life of the Second COVID Regulation, that is, until 24 April 2021.

Clause 6 of the COVID Regulation

1. Clause 6 of the First COVID Regulation required disputes to be submitted to mediation: 6 Disputes must be submitted to mediation before proceedings can be taken A lessor must not do any one or more of the following unless and until the Small Business Commissioner has certified in writing that mediation offered to be conducted by the Small Business Commissioner has failed to resolve the dispute and given reasons for the failure - (a) seek to recover possession of premises or land under the commercial lease, (b) terminate the commercial lease, (c) exercise or enforce any other right of the lessor under the lease.
2. Clause 6 was relevantly identical in the Second COVID Regulation. The only change was the replacement of the terms "lease" and "commercial lease" with "impacted lease".

Decision of the primary judge

1. The primary judge concluded that cl 5(1) and cl 6 created circumstances in which, notwithstanding the general prohibition in cl 4(1), "prescribed action" could be taken during the "prescribed period" by a lessor on the grounds of failure to pay rent, provided that the requirements of the succeeding subclauses of cl 5 (that is, engagement in good faith negotiation) first took place. His Honour found: 175 The general rule was established by cl 4(2), which provided that, relevantly to this dispute, if a lessee was an "impacted lessee" the lessor could not take any "prescribed action" against the lessee during the "prescribed period" in relation to failure to pay rent. 176 The prohibition in cl 4(1) was itself expressed in unconditional terms. 177 However, cl 4 was followed by cll 5 and 6. 178 Clause 5(1) was directed to the taking of a 'prescribed action' arising from a failure to pay rent during the "prescribed period" and stated that a lessor could not take such action "unless the lessor has complied with this clause"; that is, negotiated in good faith the rent payable having regard to the impact of COVID-19 and the leasing principles in the National Code and in the light of evidence adduced by an "impacted lessee" of its status as such. 179 Croc's accepts that the words "unless the lessor has complied with this clause" in cl 5(1) operated to create an exception but submitted that the exception was "to the bar created by cl 5(1), not the bar created by cl 4(2)." 180 The bars created by cll 4(1) and 5(1) were both directed to taking "prescribed action" against an "impacted lessee" during the "prescribed period" arising from, relevantly, a failure to pay rent. 181 In my opinion, what cl 5(1) sought to do was to create a circumstance in which, notwithstanding the general prohibition in cl 4(1), "prescribed action" could be taken during the "prescribed period" on the grounds of failure to pay rent provided that the requirements of the succeeding subclauses of cl 5 (that is, the engagement in good faith negotiation) first took place. 182 That is made clear by the use of the word "unless" in cl 5. If a lessor did not comply with cl 5, the prohibition in cl 4(1) remained. 183 The lessor could not act inconsistently with cl 4(1) vis-à-vis non-payment of rent "unless" it complied with cl 5. If it did, it could. 184 This position is confirmed, in my opinion, by the "Note" to cl 5(1). The note, although not a part of the regulation, can nonetheless be taken into account in construing the regulation. The note explained what was sought to be achieved by cl 5(1) when it stated: "The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2) - (4)." 185 The lessor would not take "unilateral prescribed action without complying with" the balance of cl 5. If it did, it could. 186 The position is further confirmed by the heading to cl 5 which, again, is able to be taken into account in construing cl 5. 187 The heading is: "Obligation to renegotiate rent and other terms of commercial leases before prescribed action" (Emphasis added.) 188 The use of the word "before" points to the conclusion that the regulatory intention was that a lessor could not take "prescribed action' before engaging in a renegotiation of rent. If it did, it could. 189 The evident object of the clause was to encourage good faith renegotiation of rent and intended to have effect concurrently with cl 6, to which I will now turn. 190 Clause 6 prohibited a lessor from seeking to enforce any rights under a commercial lease, including recovery of possession or termination of a lease "unless and until" the Small Business Commissioner had certified that a mediation had taken place and the parties had failed to resolve the dispute. 191 Again, the words "unless and until" create an exception to the general prohibition in cl 4(1). The use of the words "unless and until" make this particularly clear. 192 On behalf of Croc's it was submitted that "the provision creates its own bar to certain actions and also specifies exceptions to it (being the issue of the certificate and the reasons by the Commissioner)". 193 I do not accept that submission. It appears to me that, just as cl 5 created an exception to the general rule in cl 4, cl 6 created a further exception, that was conditional upon the Small Business Commissioner issuing a certificate of the kind described. The evident object of the clause was to ensure that parties to a lease mediate their differences before a lessor could exercise a right to take any "prescribed action" described. 194 In those circumstances, I think that Alamdo was correct to contend that cll 5 and 6 created "pathways" by which a lessor might, by satisfying the preconditions contained in those clauses, be permitted to take the 'prescribed action' that would otherwise have been prohibited by cl 4. 195 As Alamdo pointed out in its final reply submissions, the difficulty with Croc's submission that cll 4, 5 and 6 created a 'layered scheme' and operated cumulatively, such that a lessor must comply with each of the provisions, is: " … that it renders each of cll 5 and 6 gateways to nowhere, because if the preconditions contained in those clauses are each satisfied by a landlord they are [on Croc's argument] still prohibited from taking any of the actions that would otherwise then be permissible by the immoveable obstacle of cl 4(2)." 196 Further, as Alamdo pointed out, were Croc's submissions correct, there would be no point in the wording 'unless' used in cl 5 and 'unless and until' in cl 6 because, on Croc's argument, even if the requirements of cll 5 or 6 were satisfied, the bar in cl 4(2) could not ever be overcome. 197 In final written submissions, it was submitted on behalf of Croc's that the point of compliance with the requirements of cll 5 and 6 would be that a lessor would be free to engage in "prescribed action" after the expiration of the "prescribed period". I can see nothing in the language of the COVID Regulation that provides support for that contention. (footnotes omitted)

Consideration - Construction of the COVID Regulation

1. The general principles relating to the interpretation of Acts of Parliament are applicable to the interpretation of delegated legislation: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; [1996] HCA 36. That general law principle is expressly set out with respect to purposive interpretation, and the use of extrinsic materials, in s 32 and s 33 respectively of the Interpretation Act 1987 (NSW), which apply to "statutory rules", a term defined in s 21 to include a regulation.
2. Legislation is to be construed as a whole and in its context: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]. The same principle extends to regulations, and therefore the Second COVID Regulation: Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at [19].
3. Clauses 4, 5 and 6 of the Second COVID Regulation should be construed so that they each have a coherent operation. Subordinate legislation should, however, be construed bearing in mind that often it will not have been drafted with the same care as an Act of Parliament: Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] per Leeming JA, Bathurst CJ and McColl JA agreeing.
4. The present issue is whether, in the Second COVID Regulation, by restating one part of the prohibition on cl 4, "breach of the impacted lease consisting of a failure to pay rent during the prescribed period", cl 5 provided an implicit "gateway" to avoid the prohibition in cl 4, by the use of the words "unless the lessor has complied with this clause", and if so, the period for which that gateway applied.
5. Given cll 4, 5 and 6 first came into effect as part of the First COVID Regulation, it is appropriate first to construe them in that context. Clause 4, in terms, created a blanket prohibition upon terminating the commercial lease of an impacted lessee for non-payment of rent during the prescribed period. From the outset the scheme of the Regulations included cll 5 and 6. They each referred to prohibitions which were similar to or overlapped with the prohibition in cl 4, but those overlapping prohibitions were expressly made conditional.
6. Specifically, cl 5(1) provided that a lessor must not take or continue prescribed action on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period "unless the lessor has complied with this clause". Clause 6 provided that a lessor must not take specified actions, including the termination of a commercial lease, "unless and until" the Small Business Commissioner had certified that a mediation had failed. Similarly, the headings to each of cll 5 and 6 referred to obligations to take steps "before" certain action was taken.
7. The "prescribed period" of the First COVID Regulation was the entire period that that regulation was to be in force. Clause 10 of the First COVID Regulation stated: 10 Repeal of Schedule This Schedule is repealed on the day that is 6 months after the day on which it commences. Note - Section 87(4) of the Retail Leases Act 1994 regarding the duration of regulations made under Part 11 (Response to COVID-19 pandemic) of that Act.
8. The Explanatory Note to the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (being the regulation which inserted the First COVID Regulation) indicated that the object of the First COVID Regulation was to give effect to the National Code in the following ways, in that it: (a) prohibits and regulates the exercise of certain rights of lessors relating to the enforcement of certain commercial leases during the COVID-19 pandemic period, and (b) requires, in response to the COVID-19 pandemic, that lessors and lessees renegotiate the rent and other terms of those commercial leases in good faith having regard to the leasing principles set out in the National Code of Conduct, before any legal enforcement action of the terms of those commercial leases can be commenced.
9. The problem at the heart of this case was, that from the beginning, the aims in sub-paragraphs (a) and (b) of the Explanatory Note were ambiguous and, perhaps, potentially inconsistent. Sub-paragraph (a), the "prohibition" and "regulation" of certain rights, co-exists with a legislative purpose in sub-paragraph (b) of requiring re-negotiation of rent before legal enforcement action, thereby implicitly recognising that enforcement action for non-payment of rent would be permissible, at least at some time in the future, following a good faith negotiation.
10. By cl 7, the First COVID Regulation required the Court to consider the leasing principles in the National Code.
11. The first leasing principle in the National Code was that "Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)". It is, however, correct that the remainder of the National Code, in particular, leasing principles 3-6, 11 and 13 envisaged that landlords would be encouraged to engage in negotiations about the payment of rent. Exceptions to the prohibition on terminating commercial leases for those who undertake good faith negotiations about reducing rents (cl 5) and engage in a mediation (cl 6) are likely consistent with those leasing principles.
12. The ambiguity in the Explanatory Note and, to a lesser extent, the National Code, is reflected in the terms of the First COVID Regulation. On its face, the cl 4 prohibition upon termination of a commercial lease for non-payment of rent during the prescribed period was absolute, at least for so long as the lessee continued to be an impacted lessee. An absolute prohibition upon termination of a commercial lease during the COVID-19 pandemic period (or reasonable subsequent recovery period) for non-payment of rent is what, in terms, the first leasing principle in the National Code requires. The conduct prohibited by cl 5(1) and cl 6 in the First COVID Regulation, subject in each case to an exception, is overlapping with the cl 4 prohibition.
13. The critical issue for the construction of the First COVID Regulation is whether a coherent application of cll 4 ,5 and 6 is available giving effect to the absolute prohibition in cl 4, for a period, while properly leaving work for cll 5 and 6 to do. It is clear that each of cll 5 and 6 prohibit certain conduct, relevantly termination of a commercial lease for non-payment of rent and that each provides a gateway to engage in that conduct. The words "unless" in cl 5 and "unless and until" in cl 6 make that clear. The question is whether the gateway in cll 5 and 6 should properly be seen as applying at a different time, after the absolute prohibition in cl 4 is spent.
14. If so, cll 4, 5 and 6 the First COVID Regulation would operate so that a landlord was prohibited from taking any prescribed action, including terminating a commercial lease for non-payment of rent for the period the lessee continued to be an impacted lessee. When the First COVID Regulation was drafted, that period would end no later than 27 September 2020, the date on which the Jobkeeper scheme was originally to expire. The exception to the prohibition in cl 5, on the other hand, would permit the taking or continuation of prescribed action during the remainder of the prescribed period under the First COVID Regulation, which ran until 24 October 2020.
15. An immediate issue in accepting this construction of cll 4, 5 and 6 of the First COVID regulation is that the "prescribed period" under the First COVID Regulation was the intended lifespan of the regulation. For this reason, the better view of the First COVID Regulation is the conclusion reached by the primary judge in resolving the constructional question. That conclusion was consistent with the principle described by Herzfeld and Prince in Interpretation (2nd ed, 2020, Thomson Reuters) at [5.210]: "if apparently inconsistent provisions cannot be construed in such a way that the apparent inconsistency disappears, one method of resolving the inconsistency is to subordinate a general provision to a more specific one dealing with the same subject matter".
16. This is perhaps a surprising outcome, having regard to the National Code's clear prohibition upon termination of a commercial lease during the COVID pandemic period for non-payment of rent, and to the clear statement in the National Code that state legislation will be introduced to "give effect" to the National Code, for termination of a commercial lease to be permissible simply by conducting a good faith negotiation, for however fleeting a time (cl 5) or upon certification by the Small Business Commissioner that mediation has failed (cl 6).
17. Whilst the construction of the First COVID Regulation I prefer is a matter properly to be taken into account as part of the context in construction the Second COVID Regulation, it is not a complete answer to the critical question of construction. The First COVID Regulation was introduced at the start of the global pandemic. The First COVID Regulation contained apparently inconsistent provisions which could only be resolved by subordinating the general provision in cl 4 to the more specific ones dealing with the same subject matter in cll 5 and 6. Quite different language was deliberately used in the Second COVID Regulation. The time periods during which cl 4 and cl 5 applied overlapped, but were no longer identical. I have concluded that, in context, which context properly includes the National Code, the Second COVID Regulation should not be understood as intending to enact the same inconsistent operation of cll 4, 5 and 6 as effected by the First COVID Regulation.
18. On the critical question of construction I have concluded that the language used by the Second COVID Regulation is sufficiently different such that cll 4, 5, and 6 operate differently under the Second COVID Regulation compared to the differently worded provisions in the First COVID Regulation. Whilst due the two month overlap of cll 4 and 5, the ambiguity I have earlier described remained, the different wording of the Second COVID Regulation is sufficiently clear to lead me to conclude that the better construction of cll 4,5 and 6 is that the various overlapping prohibitions apply in a different way in the Second COVID Regulation and at different times.
19. Clause 3 of the Second COVID Regulation provided that it "applies to the exercise or enforcement of rights under an impacted lease in relation to circumstances occurring during the prescribed period". Importantly, as I have said, unlike the First COVID Regulation, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period. Clause 5(1) contained no such limitation. Therefore, even after the prescribed period, unless cl 5 was complied with, a landlord could not terminate a commercial lease for "breach of the impacted lease consisting of a failure to pay rent during the prescribed period".
20. The prescribed period was, according to the definition in cl 1 of the Second COVID Regulation, "the period beginning on the commencement of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 and ending at the end of 31 December 2020." The Second COVID Regulation was to be repealed on 24 April 2021: 10 Repeal of Schedule This Schedule is repealed at the end of the day that is 6 months after the day on which this Schedule commences. Note - See section 87(4) of the Retail Leases Act 1994 regarding the duration of regulations made under Part 11 (Response to COVID-19 pandemic) of that Act. That is, there was a period of almost four months during which the blanket prohibition in cl 4(2) would cease to apply but the cl 5(1) prohibition, subject to an exception, would apply. If Alamdo were correct to construe cl 5 as a gateway to cl 4(2), that gateway would continue to be operative throughout, both whilst the cl 4(2) prohibition was in place and for the four months after that prohibition no longer applied. The inclusion within the Second COVID Regulation of express terms which ensured that the prohibition in cl 4 would cover a different, and shorter, period than that in cll 5 and 6, is a significant change from the First COVID Regulation and tends against the gateway construction favoured by the primary judge.
21. Clause 7 of the Second COVID Regulation, much like clause 7 of the First COVID Regulation, provided: 7 Court consideration of National Code of Conduct leasing principles A court, when considering whether to make a decision or order relating to any of the following, is to have regard to the leasing principles set out in the National Code of Conduct - (a) the recovery of possession of premises or land from an impacted lessee, (b) the termination of an impacted lease by a lessor, (c) the exercise or enforcement of another right of a lessor under an impacted lease.
22. Clause 7 provides explicit direction to the Court to have regard to the National Code in considering whether to make a decision relating to the termination of an impacted lease by a lessor. That direction of necessity includes taking into account the National Code in construing the Second COVID Regulation for the purposes of making that decision. I would, in any event, treat the terms of the National Code as available extrinsic material in construing the Second COVID Regulation.
23. Given the changes in language used from the First COVID Regulation, a coherent application can be given to cll 4 and 5 of the Second COVID Regulation, consistent with the leasing principles in the National Code in relation to the termination of a commercial lease due to non-payment of rent. This is achieved by treating the prohibition in cl 4 as applying during the prescribed period, equivalent to the COVID-19 pandemic period and reasonable recovery period in the leasing principles. Clause 5 should then be understood to provide both a prohibition and a gateway which extended to the period between 31 December 2020 and 24 April 2021, as long as the conditions in cl 5 were satisfied.
24. Croc's construction of the Second COVID Regulation better reflects the leasing principles in the National Code. As at 3 December 2020, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period. This is consistent with the principal prohibition in the National Code: "Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period". Clause 5(1), which had no such time limitation, provided a separate prohibition, subject to an exception, which applied after 31 December 2020 and before 24 April 2021.The pathway provided by cl 5 was capable of independent operation for the period of almost four months during which the cl 4(2) prohibition would cease to apply. The commercial incentive for landlords to negotiate reductions in rent during the "COVID-19 pandemic period" and the "reasonable recovery period", was that they could, after that period was over, after 31 December 2020 under the Second COVID Regulation, exercise their rights to terminate a commercial lease for non-payment of rent. That would be an incentive for landlords to negotiate rental reductions for the prescribed period in good faith, consistent with National Code leasing principles 3-6, 11 and 13.
25. This construction of cl 4 on the one hand, and cl 5 on the other, provides a coherent and separate operation for the overlapping prohibitions. It best gives effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions: see Project Blue Sky at [70].
26. The construction of the Second COVID Regulation I prefer better reflects the apparent purpose of the regulation and is coherent with the National Code. That construction also best gives effect to the purpose and language of those provisions while maintaining the unity of the Second COVID Regulation.
27. I have concluded that cl 4 of the Second COVID Regulation provided a blanket prohibition during the prescribed period, which included 3 December 2020, on the taking of prescribed action, including the termination of a commercial lease for non-payment of rent. This is consistent with the National Code Leasing Principle 1. Clause 5 of the Second COVID regulation, also consistently with National Code Leasing Principle 1, provided a means by which, , after 31 December 2020 and before 24 April 2021 a lessor could rely on a commercial lessee's non-payment of rent during the prescribed period as a basis to terminate the commercial lease but only: 1. if the good faith negotiation of the rent provided for in cl 5 had been undertaken; and 2. if the termination took place after the prescribed period.
28. The same timing issue applies to cl 6 as applies to cl 5. That is, compliance with cl 6 is not a gateway out of the prohibition in cl 4(2) in the period prior to 31 December 2020. As at 3 December 2020, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period, while cl 6 had no such limitation. The pathway provided by cl 6 was capable of operation for the period of almost four months during which cl 4(2) would cease to apply but cl 6 would continue to apply. It may be that cll 5 and 6 both needed to be satisfied if a commercial lease was to be terminated in the period between 31 December 2020 and 24 April 2021, but that issue does not need to be determined here.
29. I would allow grounds 7, 8, 12 and 13 of the notice of appeal. Clauses 5(1) and 6 of the Second COVID Regulation did not, on 3 December 2020, create an exception to the prohibition in cl 4(2). As at 3 December 2020, cl 4(2) of the Second COVID Regulation prohibited the termination of the commercial lease by Alamdo for non-payment of rent by Croc's during the prescribed period.

The appellants' fourth issue: finding that Alamdo had complied with cl 5 of the COVID Regulation (appeal grounds 1, 2, 9, 10, 12 and 13); construction of the letter of offer (notice of contention Ground 3)

1. Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the fourth issue does not strictly arise. Nevertheless, I have decided to address it relatively briefly: Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12]; Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8].
2. The primary judge concluded that Alamdo had complied with the requirements of cl 5. His Honour found: 240 However, the effect of the offer was that, for the moment, Croc's was not obliged to pay any rent. Although on 1 October 2020, following the mediation on 29 September 2020, Croc's brought rent up to date to 24 April 2020, it has paid no rent at all for the period since 24 April 2020. 241 As I have set out, Croc's consistent position was to propose that rent be reduced in proportion to its Franchisee's drop in turnover. As the passages from Mr Aldons' cross-examination that I have set out above show, he was not prepared to provide Alamdo with anything more than sales figures for Croc's itself. He certainly did not reveal to Alamdo that Croc's continued to trade profitably, despite the pandemic. 242 As Mr Maurici sought to emphasise in his correspondence during that period, it was the impact of the COVID-19 pandemic on Croc's financial position, rather than that of the Franchisee, that was the matter that required attention. As it turned out, the information ultimately provided by Croc's to Alamdo concerning Croc's financial position, sent under cover of Ms Smyth's 24 November 2020 letter, showed that Croc's had continued to make a profit throughout 2020. 243 In my opinion, Alamdo was correct to characterise Croc's approach to negotiations as follows: "The approach advocated by Croc's, both throughout the course of both the parties' negotiations prior to the termination of the Lease, and continuing in these proceedings, seeks to elevate Alamdo's obligation of good faith into something far more significant, akin to a presumptive entitlement of Croc's to receive rental relief from Alamdo in a manner consistent with the mechanical application, on a month by month basis, of certain general principles outlined in cll 3 and 4 of the Code of Conduct. That approach is incorrect. First, it seeks to impose an obligation on a landlord which far exceeds a requirement to renegotiate the rent in good faith, and instead impose a positive obligation upon a landlord to in fact grant rental relief by means of a particular formula. If that were the effect, then there would have been no need for negotiation. The effect of the Covid Regulations on the rent would have been automatic. Secondly, the Code of Conduct did not have any legal force beyond the requirement in cl 5(6) of the Second Covid Regulation that negotiations had to be conducted having regard to those principles, together with the economic impacts of the Covid-19 pandemic more generally (which also encompassed the corresponding impact on the landlord)." 244 Further, Alamdo sought and attended the mediation which took place on 29 September 2020. 245 For the reasons I have explained, the effect of cl 6 of the COVID Regulation was that once Alamdo and Croc's had attended a mediation, and the Small Business Commissioner certified that the mediation had failed to resolve the dispute and given reasons for the failure, it was then open to Alamdo to take the steps referred to in COVID Regulation cl 6, including taking possession of the Premises and terminating the Lease. 246 In reply submissions, Croc's sought to rely on the provision in cl 5(3) of the Second COVID Regulation allowing a party in the position of Croc's to make a "second or subsequent request" for negotiation. Croc's contended that it had made such request during November 2020. However, that request related to rent for a period for which "rent has been reduced, waived or deferred", namely the entire period from 24 April 2020 and was not one apt to engage cl 5(3): see cl 5(3)(b). 247 Overall, I am satisfied that Alamdo complied with its obligation under cl 5 of the COVID Regulation to engage in good faith negotiations concerning rent and, in any event, complied with the requirements of COVID Regulation cl 6. For both of those reasons Alamdo was entitled to enter possession of the Premises and terminate the Lease.
3. The primary judge held that Alamdo satisfied the onus of showing it had complied with all of its obligations under cl 5 after a request was made under cl 5(2). The appellants submitted that the primary judge's finding that Alamdo negotiated in good faith was premised on his Honour's construction of Alamdo's 28 April 2020 offer, including the findings that it "remained open for 2020" and that the requests made by Croc's to renegotiate rent during November 2020 "related to rent for a period for which 'rent has been reduced, waived or deferred', namely the entire period from 24 April 2020". The appellants submitted each of those findings was wrong: 1. First, they submitted that the offer was not capable of applying for the entire period from 24 April 2020 because the offer only concerned the period up to the re-opening of the business. There was no offer of any reduction, waiver or deferral of rent after the business resumed trading on 1 July 2020. 2. Secondly, they submitted that the offer did not remain open for 2020, pointing to the correspondence between the parties after 28 April 2020. 3. Thirdly, they submitted that there was no suggestion the offer had ever been accepted, since Alamdo consistently maintained that Croc's failed to provide various documents it conditioned the offer on. 4. Fourthly, the appellants submitted that "nothing resembling negotiations occurred after the mediation terminated on 29 September 2020, despite multiple requests by Croc's under cl 5(2) of the COVID Regulation". They submitted that those requests were made properly under cl 5(2), and that by failing to commence renegotiations within the requisite period, Alamdo failed to comply with cl 5(4) and was thus precluded by cl 5(1) from taking prescribed action.
4. The appellants make no suggestion of an error in the principles adopted by the primary judge, namely that the requirement for Alamdo to negotiate in good faith had both a subjective element, being an absence of bad faith, and an objective element, being a basic standard of fair dealing and willingness to engage about relevant matters.
5. I have set out the terms of the 28 April 2020 offer at [10] above. I would conclude that the offer made by Alamdo on 28 April 2020 was an offer to waive 50 per cent of the rent. This meant, on its proper construction, that if that offer were accepted, the waived rent would never be payable by Croc's. I would uphold ground 3 of the notice of contention. [7]
6. The primary judge was correct to conclude that Alamdo's offer of 28 April 2020 remained open throughout 2020. The offer was not expressed as being limited in time and was never expressly or impliedly withdrawn. The appellants' suggested limitation to the period before 1 July 2020 is an unduly narrow construction of the offer. The correspondence referred to by the appellants for the contrary proposition overlooks the fact that Alamdo's 28 April 2020 offer was itself preconditioned on the not unreasonable request for information establishing that Croc's was an "impacted lessee". Subsequent requests by Alamdo for that same information do not amount to an express or implied withdrawal of the 28 April 2020 offer. Further, whilst in the 28 April 2020 offer Alamdo sought financial accounts for Croc's business "at the premises", subsequent correspondence made it clear that what Alamdo was seeking for this purpose was financial information that related to Croc's business itself. Thus, the email of 10 August 2020 from Mr Maurici to Mr Aldons made it clear that he was seeking financial information relating to Croc's business.
7. None of the communications relied upon by Croc's for the period after the mediation terminated on 29 September 2020 comprised a "second or subsequent request under subclause (2)" within the meaning of cl 5(3) of the Second COVID Regulation. The communications that Croc's now relies upon were no more than a re-assertion by Croc's of its claimed entitlement to rental relief calculated by reference to the turnover of the franchisee. That assertion was not correct.
8. Following the conclusion of the mediation on 29 September 2020, the parties' negotiations had reached an impasse by reason of Croc's adherence to what it apparently now accepts as an incorrect view that it was entitled to rental relief calculated by reference to the reduction in turnover of its franchisee. The communications now relied upon by Croc's as new requests for rental relief again involved no more than a bare re-assertion of its position in that regard. Croc's requests merely reiterated the incorrect legal assertion, either in terms or implicitly: 1. 13 October 2020: Croc's wrote to Alamdo requesting a "rent reduction between 24th April to end September in line with the code of conduct based on the proportionate drop in revenue experienced by the entity trading from the premises …". 2. 5 November 2020: Croc's responded to Alamdo's November rental invoice saying "have you calculated the rent due based on the information I've sent previously regarding sales and the downturn?". The "information" referred to was information about the franchisee. 3. 10 November 2020: Croc's sent an email to Alamdo containing "sales information from the POS [the franchisee] for the previous months" to support Croc's request that Alamdo "work out the rent payable based on the code of conduct in NSW". 4. 17 November 2020: Croc's responded to Alamdo's breach notice of 10 November with a request that Alamdo "calculate the rental due from April 24th to end November based on the information we have sent (sales)". Again, the sales information Croc's had already sent related to its franchisee, not Croc's itself. 5. 24 November 2020: Croc's solicitor, Ms Smyth, sent Alamdo a letter asserting that Croc's and its franchisee were "impacted lessees" and seeking a rental reduction based on the franchisee's reduction in turnover: Having regard to the economic impact of the COVID-19 pandemic and the leasing principles of the Code, Croc's is seeking to renegotiate the rent payable and to agree with the Landlord, the following temporary arrangements: (a) The rent is reduced proportionately to the franchisee's reduction in turnover associated with the Premises for each month (Rent Reduction); (b) 50% of the Rent Reduction is waived; (c) 50% of the Rent Reduction is deferred, with the total deferred rent liability to be payable from 1 January 2021 and amortised over the balance of the lease term. (Emphasis in original)
9. The primary judge was correct to conclude that, by reiterating the same inflexible and incorrect assertion that it was entitled to rental relief because of the franchisee's reduced turnover, Croc's did not make a "second or subsequent request under subclause (2)" within the meaning of cl 5(3) of the Second COVID Regulation.

The appellants fifth issue: no compliance with cl 6

1. This issue was not pressed by the appellants.

The appellants sixth issue: failure to apply s 88(2) of the Retail Leases Act 1994 (NSW) (appeal ground 14)

1. Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the sixth issue does not strictly arise. I will address it only briefly.
2. The primary judge concluded at [255]-[259]: 255 Section 88(2) of the Retail Leases Act provided: "Schedule 5 to the Conveyancing (General) Regulation 2018 continues to apply, despite the repeal of that Schedule, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that Schedule." 256 That section commenced on 25 March 2021. 257 Croc's appeared to be suggesting in its submissions that the effect of this section is to operate as a continued preclusion to Alamdo's ability to prosecute these proceedings. 258 I do not agree. The effect of the section is to provide that the COVID Regulation continued to apply, despite their repeal, in relation to a lease "while the lease was an impacted lease". 259 It has no effect in relation to these proceedings.
3. On its proper construction s 88 of the Retail Leases Act preserves, upon the repeal of the COVID Regulation, the accrued operation of the regulation for the period that it was in force. The section does not have the effect of indefinitely extending the emergency measures applied during the ''prescribed period". Such a construction would be directly contrary to the strict temporal limits for those measures required by s 87(4) of the Retail Leases Act which provides: (4) Regulations made under this section expire on - (a) the day that is 6 months after the day on which the regulation commences, or (b) the earlier day decided by Parliament by resolution of either House of Parliament.
4. I would reject ground 14.

Evidence regarding mediation (notice of contention ground 2)

1. Given the conclusion that Alamdo complied with cl 5 of the Second COVID Regulation, this issue does not strictly arise. I will nevertheless address it briefly.
2. Alamdo contended that the primary judge should not have rejected further evidence of the negotiations that occurred, being evidence of a further offer that Alamdo conveyed to Croc's during the mediation. The primary judge concluded that such evidence was inadmissible because of s 19(3) of the Small Business Commissioner Act 2013 (NSW), which provides: Any statement or admission made in connection with any alternative dispute resolution services provided by the Commissioner under this Act is not admissible in any legal proceedings.
3. Section 19(3) creates a species of statutory privilege and not an absolute bar to admissibility. "Not admissible" should be understood as meaning "not admissible over objection": Seltsam Pty Ltd v McGuinness (2000) 49 NSWLR 262; [2000] NSWCA 29 at [149]; Lazaris v R [2014] NSWCCA 163 at [97]; and Panayi v Deputy Commissioner of Taxation [2017] NSWCA 93; (2017) 319 FLR 228 at [39].
4. The privilege created by s 19(3) is capable of waiver by a party's conduct.
5. The following statements, in subsequent open correspondence, demonstrate waiver of the statutory privilege by Croc's: 1. In a letter to Alamdo dated 27 November 2020, Ms Smyth wrote: I am instructed that the landlord's offer at mediation was not sufficient. Had our client accepted the offer to pay the rent with minimal reduction, it would have placed significant financial pressure on the franchisee and our client and affected the ongoing viability of the business. 1. In a letter to Alamdo dated 8 December 2020, Ms Smyth wrote: As previously advised, the Landlord's 50% rent relief offer at mediation (with a 25% waiver and 25% deferral of rent) for July to December was not sufficient.
6. In addition, Croc's, in advancing a positive case in its pleadings [8] and its submissions [9] , necessarily laid open to scrutiny the full nature of the parties' negotiations, including the offers made by Alamdo reflected in the correspondence cited immediately above. I would allow ground 2 of the notice of contention.

The appellants' seventh and eighth issues: finding that a lease was granted and accepted pursuant to cll 3.1 and 3.3(a) of the AfL (appeal ground 15) and failure to find that Alamdo was not entitled to loss of bargain damages (ground 16)

1. Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the seventh and eighth issues do not strictly arise. I will nevertheless address them together and briefly.
2. Both parties accepted that the Lease Document purported to create a tenancy for a term longer than three years. The consequence of its non-registration was that, by reason of ss 41 and 53 of the Real Property Act 1900 (NSW), the Lease Document conveyed no legal leasehold estate to Croc's. Instead, the only title granted to Croc's was a monthly tenancy at will implied by s 127 of the Conveyancing Act.
3. As such, Alamdo's claim for loss of bargain damages did not rely on the Lease Document, but rather on cll 3.1 and 3.3(a) of the AfL. The word "Lease" was defined in the AfL to mean a lease of the Castle Hill premises in a form annexed to the AfL. Clause 3.1 provided that "the Landlord grants the Lease to the Tenant, and the Tenant accepts, the grant of the Lease from the Commencing Date". Clause 3.3(a) provided that, from the Commencing Date, the parties were "bound by the Lease as if the Lease were completed, signed and delivered".
4. Pursuant to cl 3.2(a), Croc's was obliged to give the "Relevant Items" including the signed lease, to Alamdo when the AfL was entered into, to be held by Alamdo in escrow pursuant to cl 3.2(b) pending the insertion of various details by Alamdo under cl 3.2(c). Pursuant to cl 3.2(d) Alamdo was obliged to, among other things, arrange for the Lease Document to be registered as soon as practicable after the Commencing Date was determined and to return a signed version to Croc's. For reasons that were not explained, Alamdo failed to do so, and thus the Lease Document was never completed or registered.
5. The primary judge held at [139] that the effect of cl 3.3(a) of the AfL was that Croc's became bound by the lease "as if it had been registered", relying on Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544 at 547. His Honour also referred to Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252 and observed that the passage relied upon by the appellants did not deal with the enforceability of contractual rights of the parties under a contract giving rise to an unregistered lease.
6. The primary judge held that Croc's answer to the claim for loss of bargain damages depended upon its contentions as to the consequences of the lease not being registered, which his Honour rejected. He thus held that Alamdo was entitled to loss of bargain damages. The primary judge found: 144 I think Alamdo was correct to submit that based on this authority [Leitz Leeholme], the correct conclusion is that, pursuant to cl 3.1 of the Agreement for Lease, a lease was granted and accepted on and from the Commencing Date, 18 June 2018. None of the terms of the Agreement for Lease merged on the grant of the Lease, or indeed would have merged upon registration of the Lease Document. The rights created by the Agreement for Lease existed concurrently with any other rights which arose by the Lease document; had it been registered.
7. The appellants submitted that the above findings cannot be correct, both on a proper construction of the AfL and having regard to the authorities to which the primary judge referred.
8. The appellants submitted that the starting point is Alamdo's acceptance that cl 3.1 of the Lease Document was not effective to create a lease, and Alamdo's consequent reliance on cll 3.1 and 3.3(a) of the AfL. If cl 3.1 was ineffective to create a lease, then so, it was submitted, were cll 3.1 and 3.3(a) of the AfL, since it was also an unregistered instrument purporting to create a lease for a term exceeding three years.
9. Further, the appellants submitted that cl 3.3(a) of the AfL did not mean that the Lease Document was binding on Croc's as though it was registered, but merely as though it was "completed signed and delivered". They submitted that "completion, signing and delivery" is not equivalent to "registration", since under the terms of the AfL separate obligations flowed from the fact of "completing, singing and delivering" on the one hand, and "registration" on the other.
10. The appellants also submitted that the authorities relied on by the primary judge do not alter this conclusion. They said that in Leitz Leeholme, Glass JA held at 546 that an unregistered memorandum of lease may give rise to an executory agreement for a lease which is enforceable at law, but remains ineffective actually to create a lease at law. Mahoney JA similarly held at 548 that the unregistered memorandum in that case gave rise to rights "similar to those, which would be created by a contract to give such a lease". The case, the appellants said, was not authority for the primary judge's conclusion that cl 3.1 of the AfL created a lease at law.
11. The appellants further submitted that the primary judge's conclusion was contrary to Chan v Cresdon. At 256 the majority described the obligations which the lessor sought to enforce as "obligations which, at best, as between the landlord and the lessee, arise, not under the lease at law, but under an equitable lease which is the equivalent of the lease at law". At 257 their Honours explained that what was enforceable was the "antecedent agreement, evidenced by the unregistered instrument, not the instrument itself".
12. The appellants further submitted that the primary judge did not identify which of Alamdo's three proposed bases for its entitlement to terminate the lease he accepted: 1. a breach of an essential term by Croc's; 2. repudiation of its obligation to pay rent; or 3. the express right in cl 15.3 of the Lease Document to determine the lease (if an event of default occurred).
13. The appellants then challenged each of these proposed bases for termination. The substance of its argument was that each of the three bases was premised on the valid legal effect of the Lease Document. If the Lease Document never took effect as a lease at law, the appellants said, then it was impossible for Croc's to breach its essential terms or repudiate the obligation to pay rent. Nor, if a legal lease was never created, could Alamdo avail itself of an express right to terminate. These arguments were clearly contingent on the appellants' succeeding in their primary challenge: that the terms of the Lease Document were not enforceable because the Document created no legal lease.
14. I would reject the appellants' submissions. The primary judge was correct that by operation of the AfL, on and from the "Commencing Date" of 18 June 2018, contractual rights immediately arose in the terms recorded in the AfL and the Lease Document itself. These contractual rights bound the parties and existed in parallel to any rights which separately arose as incidents of any equitable or leasehold estate in the premises conveyed to Croc's. The primary judge's adoption of that approach was consistent with the principle that contractual and proprietary rights exist in parallel. This was explained in Leitz Leeholme at 547: The agreement and the tenancy at will are independent sources of rights. At no stage do they merge, so that the termination of the estate automatically extinguishes the agreement. The relevant principles are, in my view, as follows. A lease of land under the Real Property Act for a term exceeding three years creates no legal term unless it is both registrable and registered. But the informal instrument may be treated as evidencing an agreement for a formal lease: Carberry v. Gardiner. The unregistered memorandum of lease operates merely as an agreement specifically enforceable in equity, but not itself creating a legal term in the land, Australian Provincial Assurance Association Ltd. v. Rogers. Entry into possession and payment of rent bring into existence a common law tenancy upon such terms of the unregistered memorandum as are applicable to the tenancy at will. But, in so far as the memorandum operates as an agreement, it retains a separate identity as the repository of the substantial rights of the parties. The doctrine relevant for present purposes had been previously worked out in relation to demises which were void at law, not having been made by deed as required by the statute. The purported lease, nevertheless, took effect as an executory agreement for a lease enforceable in equity, and there entitling the lessee to a formal lease: Hoyt's Pty. Ltd. v. Spencer; Butts v. O'Dwyer. The existence or otherwise of a contract is determined exclusively by common law principle: Parkin v. Thorold. Accordingly, when these decisions allude to an informal lease operating as an agreement for a lease enforceable in equity, they affirm, not only the availability of equitable relief, but also the existence of a contract at law. If the innocent party deems damages to be adequate, there is no reason why the contract may not be enforced at law. (citations omitted)
15. I agree with the primary judge that Leitz Leeholme is a complete answer to the appellants' arguments on non-registration of the lease. It is correct that the Lease Document did not create a legal lease, as Croc's submitted. But the obligations created by the AfL, including in the terms of the Lease Document, were contractually enforceable.
16. I also agree with the primary judge that the appellants' reliance upon Chan v Cresdon is misplaced. That case turned upon the proper construction of a guarantee of obligations expressed to arise "under this lease" which were contained in an unregistered memorandum of lease. That clause was held, on its proper construction, to encompass a guarantee of rights which arose as an incident of the legal leasehold estate conveyed to the tenant and not any contractual rights between the parties arising under the memorandum of lease. The majority indicated (at 257), in respect of those contractual rights, that s 41 of the Real Property Act "does not avoid or render them inoperative", consistently with what had earlier been said in Leitz Leeholme.
17. The complaint that Alamdo was not entitled to loss of bargain damages was derivative of the argument that the AfL and Lease Document did not create enforceable obligations. They did so, as explained above. Croc's failure to pay rent was clearly a breach of that agreement, capable of sounding in damages.
18. Finally, as explained, a commercial lease under the Second COVID Regulation included "an agreement for a lease where the lessee has become entitled to have his or her lease granted". The agreement created by the AfL and Lease Document met that description.
19. I would reject grounds 15 and 16.

The appellants ninth issue: failure to find that Alamdo had affirmed the lease on 30 November 2020 (appeal ground 24)

1. The appellants claimed that Alamdo had affirmed the lease on 30 November 2020 by sending a tax invoice for rent in December 2020 and demanding in a covering letter payment of arrears in rent.
2. The primary judge found: 262 As I have set out above, on 30 November 2020 Alamdo sent Croc's a Tax Invoice for the rent for December 2020 under cover of letter stating: "Please pay your back rent arrears immediately. You are in breach of the lease agreement and Alamdo Holdings reserves all of its rights to terminate the agreement and repossess the premises." 263 Similarly, in the invoice itself, Alamdo said: "Rent for month - please pay back rent arrears immediately. You are in breach of the lease and Alamdo reserves all of its rights to terminate the lease and repossess the premises." 264 Croc's contends that Alamdo thereby affirmed the Lease and, accordingly, had no entitlement, on 3 December 2020, to enter possession of the Premises and terminate the Lease. 265 The law in relation to election by affirmation has very recently been considered by the High Court of Australia in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788. 266 The majority said: "With the modern approach to termination of contract, the doctrine of election by affirmation came to be applied consistently to instances in which the innocent party elected not to exercise a power to forfeit a lease or to terminate a contract. Hence, if a tenant breached a covenant in a lease entitling the landlord to forfeiture and re-entry, but the landlord, with the knowledge of all the circumstances, elected to affirm the lease by a communicated act such as the acceptance of rent, this was an 'unequivocal recognition of the continued existence of the lease' which would 'amount to a waiver of that [power]' to forfeit the lease. The landlord was treated as having a power, by conduct, to 'elect to affirm the lease'." (Citations omitted.) And: "This doctrine of election by affirmation of a contract has been recognised by decisions, including in this Court, for almost a century. The dominant rationale is that 'the mere fact of intimating [a] choice' in relation to these alternative rights makes it "inevitable, or necessary in the interests of justice, that the choice, when once made, should be irrevocable". In other words, the choice between maintaining one right or set of rights and extinguishing an alternative, immediately inconsistent right or set of rights is one that must be irrevocable 'because [the sets of rights] are inconsistent [so that] neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the benefit of enjoying the other.'"(Citations omitted) 267 Similarly, Gageler J, although in dissent in the result, said: "If, on the other hand, the innocent party, having knowledge of facts which give rise to the right to terminate the contract, makes and unequivocally communicates a choice not to exercise that right but instead to affirm the contract, the innocent party will be precluded from later exercising the right to terminate the contract." 268 There has been no communication here by Alamdo of a choice not to exercise its right to terminate but instead to affirm the contract. 269 In neither its covering email of 30 November 2020, nor in the invoice itself, did Alamdo demand that the December 2020 rent be paid. The demand was for "back rent arrears". 270 Alamdo was not required to exercise any right in order to become entitled to the continued payment of rent. Pursuant to cl 4(1) of the Lease Document, rent was payable by Croc's under the Lease by way of equal monthly instalments in advance on the first day of each month and without demand. The rent was due without any requirement for action by Alamdo. The rent for December 2020 which was the subject of the invoice was due and payable automatically and involved no exercise of any right on the part of Alamdo. 271 By providing the tax invoice for December 2020 rent Alamdo was doing no more than complying with its obligation under cl 6(2)(c) of the Lease Document to provide a tax invoice. There was no inconsistency in Alamdo discharging that obligation - to furnish a tax invoice - and maintaining its right to terminate the Lease. 272 I think Alamdo was correct to submit that it was not put to any relevant election by the issue of an invoice for December 2020 rent. 273 Croc's also contended that Alamdo, by demanding on 21 May 2020, 30 June 2020 and in August 2020 that Croc's pay the rent owing for the period to 24 April 2020, elected not to terminate the Lease in reliance on breaches occurring prior to that date. 274 I cannot see how the making of those demands amounted to any such election. 275 In any event, for the reasons I have set out above, Alamdo did not seek to terminate the Lease on the basis of Croc's failure to pay the balance of the rent due for April 2020.
3. I have concluded that the primary judge was correct. The specific rights and obligations in question were not mutually exclusive, or immediately inconsistent, in the sense required to put Alamdo to election. See: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656; and Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632 at [48]-[53]. There is no meaningful difference between the concepts of "'waiver" and "election": Delor Vue at [39]; Agricultural & Rural Finance v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [56]-[62].
4. On the hypothesis here being addressed, Alamdo had a right to terminate the Lease for continuing breaches of essential terms of the lease. In addition, Alamdo had both: 1. an entitlement to receive rent for the month of December 2020 due on 1 December 2020 without demand: cl 4.1 of the Lease Document; and 2. an obligation to render a tax invoice in respect of that upcoming payment against the possibility it would become due: cl 6.2(c) of the Lease Document.
5. Alamdo's right to receive rent was not contingent on its exercise of some act that was inconsistent with its maintenance of a right to terminate the lease. Alamdo had not sought, was not offered and did not accept any part payment of rent for December 2020. The obligation on Croc's to pay rent arose immediately on 1 December 2020 without demand for the entire month of December 2020.
6. The terms of the invoice and covering email did not amount to an unequivocal act by Alamdo sufficient to convey any election to affirm the lease. Each of those communications contained an express reservation of Alamdo's rights to terminate the lease. So much was also reinforced by the terms of the Lease Document, which recorded the parties' agreement that the demand by Alamdo of rent would not be a waiver of any earlier breach by Croc's: cl 15.5(c).
7. I would reject ground 24.

The appellants' tenth issue: elections prior to 30 November 2020 (appeal ground 23) and further ground for valid termination (notice of contention ground 1 and appeal ground 23)

1. I will deal with the appellants' tenth issue and ground 1 of the notice of contention together as they raise related issues.
2. It was common ground below that prior to 3 December 2020 Croc's had not paid the full amount of rent due for the month of April 2020. By ground 1 of its notice of contention, Alamdo asserted that the non-payment of the April 2020 rent was a continuing fundamental breach of the lease which entitled it to terminate. That breach arose on 1 April 2020, outside of the "prescribed period", and was therefore beyond the scope of the First and Second COVID Regulations.
3. Alamdo submitted that nothing in the First and Second COVID Regulations precluded termination for that ongoing fundamental breach as at 3 December 2020. Croc's sole reply to this contention was that Alamdo had irrevocably elected at an earlier time not to terminate on that ground, and the appellants expressly conceded below in final address that Alamdo was entitled to terminate the lease for that breach "unless the doctrine of election bites".
4. The appellants submitted that the primary judge should have concluded that Alamdo had irrevocably elected at an earlier time not to terminate on the ground of non-payment of the full amount of April 2020 rent.
5. In relation to this claim the primary judge found that: 152 … the COVID Regulation did not operate to prevent Alamdo from taking "prescribed action" including taking possession, based on Croc's unregulated failure to pay all of the April 2020 rent in advance. 153 But Alamdo did not seek to take those "prescribed actions" on those grounds. 154 Rather, as its 10 November 2020 breach notice made clear, Alamdo sought to exercise its rights by reason of Croc's failure to pay rent since 24 April 2020 and failure to provide evidence that it was an impacted lessee; that is relying on breaches during the "prescribed period". … 156 I am unable to see any distinction between the circumstances that were before Darke J in Todarello and the circumstances here. 157 Accordingly, the mere fact that Alamdo may have been able to rely upon Croc's failure to pay the April 2020 rent in advance to terminate the Lease is not itself an answer to Croc's contentions as to the effect of the COVID Regulation on Alamdo's rights.
6. The decision referred to by the primary judge of Darke J in Todarello Property Investments Pty Ltd v GJA Kalra Pty Ltd [2021] NSWSC 1678, was directly on point. There Darke J found: 75 I am satisfied, based on the ledgers in evidence, that amounts of management fees (as claimed by the plaintiff in the period from July 2019 to April 2020) were in arrears as at 24 April 2020. Those amounts appear to make up the majority of the total arrears of $17,530.44 that stood in the account at the end of March 2020. It might have been open to the plaintiff in October 2020 to seek to terminate the lease on the grounds of breaches of the lease that had occurred before 24 April 2020 and remained un-remedied. Clause 8 makes it clear that nothing in Schedule 5 prevents a lessor from taking prescribed action on grounds not related to the economic impacts of the COVID-19 pandemic. 76 However, the plaintiff did not pursue such a course. Its purported termination was expressly based, in at least substantial part, upon breaches consisting of failures to pay rent during the prescribed period. In circumstances where the plaintiff had not complied with cl 5, that action was prohibited by Schedule 5 to the Conveyancing Regulation. That the plaintiff may have been able to effect a termination of the lease in another way does not detract from the fact that the termination was effected contrary to a legislative prohibition. In my opinion, the purported termination was thereby invalid and of no effect.
7. Alamdo's purported termination on 3 December 2020 was entirely based upon breaches consisting of failures to pay rent during the prescribed period. Alamdo did not seek to rely upon non-payment of rent on 1 April 2020. For essentially, the same reasons as Darke J in Todarello I would reject ground 1 of the notice of contention.
8. If it were necessary to do so, I would accept that Alamdo elected to affirm the lease in the present case by acceptance of part payment of the April 2020 rent. That is, as I have found on issue 9, Alamdo did not waive Croc's ongoing breaches during the prescribed period, but Alamdo did waive the breach constituted by failure to pay the rent due before the prescribed period. The history of the April rent payment was as follows: 1. On 27 March 2020, Mr Maurici emailed Mr Aldons attaching an invoice for the April 2020 rent; 2. Rent of $26,083.20 was due on 1 April 2020 and not paid on that date; 3. On 28 April 2020, Mr Anthony Maurici emailed Mr Aldons offering a 50% waiver of rent from 4 April 2020 and a deferral of 50% to be paid during the 24 months following the lifting of restrictions affecting Croc's business; 4. On 21 May 2020, Mr Sebastian Maurici emailed Mr Aldons seeking financial information and payment of the remaining rent for March 2020 and up to 24 April 2020; 5. On 30 June 2020, Mr Sebastian Maurici emailed Mr Aldons attaching an invoice for July rent and saying "As discussed, please bring your rent up to date for March and April"; 6. On 13 July 2020, Croc's paid $5,000 in rent to Alamdo; 7. On 10 August 2020, Mr Anthony Maurici emailed Mr Aldons demanding further financial information and the payment of rent up to 24 April 2020; 8. On 28 August 2020, Mr Sebastian Maurici emailed Mr Aldons attaching an invoice for September rent and demanding payment of rent for March and April 2020; 9. On 1 October 2020, Alamdo received a further late payment of rent for March and April 2020 (credited to 24 April 2020) in the sum of $29,963; 10. On 13 October 2020, Croc's wrote to Alamdo requesting a rent reduction from 24 April 2020 to the end of September 2020 calculated by reference to the drop in revenue of the franchisee, rather than Croc's.
9. I conclude by reference to items (7), (9) and (11) that Alamdo sought and was paid the April 2020 rent up to 24 April 2020. Assuming this is a case where Croc's failure to pay rent on 1 April 2020 entitled Alamdo to forfeiture and re-entry, Alamdo, with the knowledge of all the circumstances, elected to waive that particular entitlement and affirm the lease by a communicated act, being the acceptance of April rent up to 24 April 2020. This was an "unequivocal recognition of the continued existence of the lease" which amounted to "a waiver of that [power]" to forfeit the lease: Owendale Pty Ltd v Anthony (1967) 117 CLR 539 at 556-557. With full knowledge of its rights, Alamdo elected to waive its entitlement to terminate on grounds of non-payment of rent that accrued before the prescribed period. It follows that those grounds for termination were no longer available when Alamdo purported to terminate on 3 December 2020.
10. For this additional reason I would reject ground 1 of the notice of contention and allow ground 23 as it related to the April rent.

The appellants' eleventh issue: failure to construe the scope of cl 11 of the AfL (appeal grounds 17 and 22)

1. Again, given the conclusion I have reached about the correct construction of the Second COVID Regulation the 11th issue does not strictly arise. I will nevertheless address it briefly.
2. Croc's complained that the primary judge failed to deal with its arguments about the scope of cl 11 of the AfL.
3. At [309], the primary judge found, in addressing Chan v Cresdon: [309] In that case, the landlord sued guarantors upon a guarantee clause contained in a registrable form of lease that had not been registered. The terms of the guarantee provided that the guarantors guaranteed to the landlord the "due and punctual performance by [the tenant] of the obligations on its part to be performed under this lease" (emphasis added). As Alamdo has pointed out, applying the general principles of construction that a guarantee is to be construed strictly, the Court construed the reference to "this lease" strictly to mean a lease conveyed at law, and not the agreement to lease otherwise enforceable between the parties in equity. However, in this case, Alamdo sues on the guarantees in the Agreement for Lease that, in terms, refers to the obligations of Croc's under that document.
4. Croc's submitted that this passage showed the primary judge assumed, erroneously, that cl 11 of the AfL guaranteed the relevant obligations, without any real analysis.
5. Clause 11 of the AfL, being the guarantee on which Alamdo expressly relied, was relevantly in the following terms: the Guarantor agrees to guarantee the obligations of [Croc 's] under this Document on the terms of the guarantee set out in clause 22 of the Lease (as if that clause and the appropriate definitions were set out in full in this Document).
6. It was, and remains, common ground that the reference to "clause 22" was an obvious error and should be construed as "clause 20".
7. I have concluded that cl 11 of the AfL had the effect that those guarantees were given in respect of all obligations of Croc's under the AfL. The effect is that the cl 11 guarantee should be read by inserting cl 20 of the Lease Document, but replacing the word "Lease" with "AfL" where it appeared in clause 20.1 of the Lease Document. Read in that way, clause 20.1 as applied to the AfL included broad guarantees of Croc's payment of money "under this AfL", performance and observance of its obligations "contained in this AfL" and the payment of damages arising from breach of Croc's obligations "contained or implied in this AfL".
8. Croc's obligations under the lease on which Alamdo sued, including its obligations to pay money and otherwise observe the terms of the lease, owed their existence as contractual obligations to the terms of the AfL. That was the effect of cl 3.3 of the AfL.
9. I would reject grounds 17 and 22.

The appellants' twelfth issue: finding that the Guarantors were not released (appeal grounds 18, 19, 20 and 21)

1. Given the conclusion I have reached about the correct construction of the Second COVID Regulation the twelfth issue does not strictly arise. I will nevertheless address it briefly.
2. The primary judge held at [306]-[324]: 306 Croc's offers two answers to Alamdo's claim against the guarantors. 307 The first arises from the fact that the Lease was not registered. 308 Croc's referred to the High Court's decision in Chan v Cresdon. 309 In that case, the landlord sued guarantors upon a guarantee clause contained in a registrable form of lease that had not been registered. The terms of the guarantee provided that the guarantors guaranteed to the landlord the "due and punctual performance by [the tenant] of the obligations on its part to be performed under this lease" (emphasis added). As Alamdo has pointed out, applying the general principles of construction that a guarantee is to be construed strictly, the Court construed the reference to "this lease" strictly to mean a lease conveyed at law, and not the agreement to lease otherwise enforceable between the parties in equity. However, in this case, Alamdo sues on the guarantees in the Agreement for Lease that, in terms, refers to the obligations of Croc's under that document. 310 Second, Croc's submitted that Mr Aldons' and Mr Cusdin's obligations as guarantors had been released by reason of cl 20.1 of the Lease. 311 Clause 20.1 of the Lease provided: "20.1 Guarantee Subject to clause 20.10, the Guarantor unconditionally and irrevocably guarantees to the Landlord: (a) the payment of all money payable to the Landlord under this Lease; (b) the performance and observance by the Tenant of the Tenant's obligations contained in this Lease; and (c) the payment by the Tenant of any damages payable by the Tenant for failure to fulfil or delay in fulfilling any of the Tenant's obligations contained or implied in this Lease." (Emphasis in original.)" 312 That clause was expressed to be subject to cl 20.10 which was in the following terms: "20.10 Guarantor Release (a) In this clause 20.10, Minimum Guarantee Period means the period of 2 years commencing on the Commencing Date. (b) The Guarantor is released from its obligations in this clause 20 on and from the end of the Minimum Guarantee Period so long as there has not been, during the Guarantee Release Period, a breach of an essential term that has resulted in the Landlord serving on the Tenant a notice in accordance with Section 129 of the Conveyancing Act 1919." (Emphasis in original.) 313 The matter that divides the parties is the meaning to be given to the expression "Guarantee Release Period" in cl 20.10(b). That expression is not defined in the Agreement for Lease, nor in the Lease. 314 Croc's submits that "Guarantee Release Period" should be construed as having the same meaning as the expression "Minimum Guarantee Period" appearing in cl 20.10(a). 315 I see a number of difficulties with that submission. 316 The first is that there is a presumption that different words used in a document have different meanings. 317 Second, so construed, the effect of cl 20.10 of the Lease would be that the guarantors would only be liable for Croc's obligations if Croc's had been in breach of an essential term of the Lease during the period of two years commencing on the Commencing Date of 18 June 2018. That would have the effect that that two year period would represent the maximum period during which they were liable as guarantors, a proposition difficult to reconcile with the expression "Minimum Guarantee Period" in cl 20.10(a). 318 Further, were it the parties' intention that the guarantors only be liable for Croc's breaches of essential terms during the two years commencing on the Commencing Date, they could easily have said so. 319 A more likely construction is that "Guarantee Release Period" means something different from "Minimum Guarantee Period" and, as Alamdo submitted, means the balance of terms of the Lease following the expiry of the two year "Minimum Guarantee Period". 320 As Alamdo submitted, so construed: "What clause 20.10 therefore does is to effect a change in the scope of the guarantees after the initial two years of the term of the Lease. In the initial two years, the guarantees apply in their totality to all obligations of Croc's arising under the Lease. After that time, however, the guarantees only arise in the serious circumstances where Croc's has breached an essential term of the Lease and a s 129 notice has been issued to Croc's in respect of that breach. It in effect results in a step down of the scope of the guarantee after the first two years of the term of the Lease." 321 That appears to me to be a sensible construction of the clause and one that gives effect to the different expressions that the parties have chosen to use in the two subclauses of cl 20.10 of the Lease. 322 I cannot see any basis for Croc's submission that this would be an "absurd" result such as would warrant rectification of the clause by construction so as to construe the words "Guarantee Release Period" as meaning "Minimum Guarantee Period", in accordance with the principles summarised by Leeming JA in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq). 323 As I have set out above, on 10 November 2020, Alamdo served on Croc's a notice under s 129 of the Conveyancing Act in respect of Croc's failure to pay rent since 24 April 2020. Those breaches were breaches of an essential term. 324 Accordingly, the guarantors were not released from their obligations as guarantors. (footnotes omitted)
3. The construction of cl 20.10 adopted by the primary judge accords with the text of the clause, including in particular by giving work to do to each of the phrases "Minimum Guarantee Period" and "Guarantee Release Period". There was no error in the adoption of that construction.
4. The primary judge correctly adopted a construction of cl 20.10(b) as effecting a change, or stepping down, in the scope of the guarantees after the initial two-year period, such that during the "Minimum Guarantee Period", the guarantees extended to every obligation to pay money, the performance of every obligation of Croc's and all obligations of Croc's to pay damages.
5. On the hypothesis that this issue arose, the primary judge was correct to conclude that the guarantors were not released from their obligations as guarantors. I would reject grounds 18, 19, 20 and 21.

The appellants' thirteenth issue: failing to uphold the cross-claim

1. Croc's submitted that if, as I have found, the Court accepted that Alamdo had no lawful right to terminate the lease and re-enter possession, then it repudiated the agreement in the AfL and Lease Document. Croc's submitted that "[b]y treating the AfL and Lease Document as at an end after the repudiation had occurred, Croc's accepted the repudiation and is thus entitled to damages for loss of bargain".
2. The difficulty with this ground is that by reason of late filing of the cross-claim, the parties contemplated that there would be a separate hearing about damages if the cross-claim succeeded. Accordingly, a number of issues have not been litigated before the primary judge.
3. I have found that Alamdo was precluded from terminating the lease only by reason of a regulatory prohibition. The Second COVID Regulation did not have the effect of modifying the terms of the lease, but was instead premised upon the existence of certain rights, and sought to restrict the exercise of those rights in specific circumstances. This raises a significant potential issue in relation to any damages claim by Croc's. It was only by operation of the Second COVID Regulation that Alamdo was not entitled to exercise rights it would otherwise be legally entitled to enforce. Any damages claim would need to address the effect of the Second COVID Regulation. Whilst no doubt an injunction may have been available to prevent termination of the lease on 3 December 2020 had it been sought, no express rights to damages for breach are conferred by the Second COVID Regulation. As to any implied rights to damages for breach of the Second COVID Regulation, Alamdo had obligations under the COVID Regulations to negotiate in good faith if requested to do so. I have found that it complied with those obligations. It may be, on the correct construction of the Second COVID Regulation, Croc's is not entitled to damages for wrongful termination of the lease. The terms of cl 9 pf the Second COVID Regulation, which provide that the "rules of equity and of common law" are not excluded from applying to the determination of a dispute concerning the termination of a commercial lease by a lessor may raise additional issues. As neither the Court below nor this Court has heard argument on this issue, this Court is not in a position to resolve that question.
4. Two further matters were raised by Alamdo in written submissions which are antecedent to the calculation of damages and not adequately addressed by Croc's on this appeal. The first was that Alamdo's conduct, in acting upon an incorrect understanding of the Second COVID Regulation, did not give rise to a repudiation by way of anticipatory breach: see DTR Nominees Pty Ltd v Mona Pty Ltd (1978) 138 CLR 423 at 432. Alamdo's conduct was arguably in accordance with the AfL and the Lease Document. It was only by reason of the Second COVID Regulation that the termination of the lease was impermissible. As best I can tell from the record below, the parties did not litigate the question of whether, had what I have found to be the correct construction of the Second COVID regulation been explained to Mr Maurici, Alamdo would nevertheless have gone ahead with the termination. This Court is not in a position to resolve that question.
5. The second issue raised by Alamdo was that Croc's was at all material times in continuing breach of essential terms of the lease and Croc's had not shown itself ready and willing to perform so as to be capable of accepting any repudiation of the lease by Alamdo. As made clear in Foran v Wight (1989) 168 CLR 385 at 397-402, a plaintiff, being unable to prove actual performance, has to prove that the defendant has refused to perform (thereby dispensing with performance by the plaintiff) and that the plaintiff was ready and willing to perform and would have performed but for the dispensation. In this context readiness and willingness denotes ability, as well as disposition, to perform. Repudiation by one party amounting to a waiver of performance by the other party does not entitle that party to enforce the contract on the notional footing that he or she has actually performed his or her part of the contract. Proof of readiness and willingness goes to the existence of the cause of action. At all times Croc's position was that it would only pay rent if Alamdo offered Croc's the waivers and deferrals to which Croc's was "entitled", based on the decreased turnover of its franchisee. Croc's had no such "entitlement". Croc's was entitled to a good faith negotiation of rent. It received that. I doubt that Croc's proved it was ready, willing and able to fulfil its obligations under the AfL or the tenancy at will. I have concluded, however, that as the matter was not properly litigated below or in this Court the entire question of damages, if any, payable to Croc's, should be remitted to the Equity Division.

Conclusion and orders

1. For the foregoing reasons I propose the following orders: 1. Appeal allowed. 2. Set aside orders 1 and 2 of Stevenson J dated 28 February 2023 and all orders dated 8 March 2023 and in lieu thereof order: 1. The Amended Commercial List Statement filed 19 August 2021 is dismissed. 2. First respondent to pay the appellants' costs of the Amended Commercial List Statement. 3. The Commercial List Cross-claim Statement filed 15 November 2022 remitted to the Equity Division to deal with damages, if any, to which the first appellant is entitled. 4. Costs of the cross-appeal to be costs in the cause of the remitted hearing. 1. First respondent to pay the appellants' costs of the appeal.
2. STERN JA: I agree with the orders proposed by Payne JA and with his Honour's reasons. The short reasons set out below are intended merely to provide some short elaboration of my reasons for concurring with Payne JA as to the key issue, being the construction of the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (NSW), which introduced what Payne JA calls the "Second COVID Regulation" on 24 October 2020.
3. For convenience, I will use the terms defined in the judgment of Payne JA.
4. The construction adopted by Payne JA properly takes account of both the language and purpose of the Second COVID Regulation. It gives each of cll 4, 5 and 6 work to do. It gives due weight to the significant difference between the language of cl 4 in the First and Second COVID Regulations.
5. I consider that there is ambiguity on the face of the Second COVID Regulation as to how cll 4, 5 and 6 interacted. It is therefore appropriate to have regard to extrinsic material which may bear upon construction: s 34(1)(b)(i) of the Interpretation Act 1987 (NSW). As to the purpose of the Second COVID Regulation, the terms of the National Code, adopted on 4 April 2020, make it clear that the intention was that the National Code would be: "given effect through relevant state and territory legislation or regulation as appropriate".
6. The Second COVID Regulation was a regulation enacted to meet that purpose. That is also apparent from the Explanatory Note to the Second COVID Regulation, which states that: The object of this Regulation is to repeal and remake, with amendments, the [First COVID Regulation] to extend prohibitions and requirements in relation to the exercise of certain rights of lessors during the COVID-19 pandemic period until the end of 31 December 2020.
7. The Explanatory Note to the First COVID Regulation had made it clear that it was enacted to give effect to the National Code.
8. Moreover, a note under subcl 4(2) of the Second COVID Regulation stated: Note. See leasing principles No.1,11 and 14 in the National Code of Conduct.
9. Similar notes referencing principles in the National Code could be found after subcll 4(3), (4), (5), 5(6) and (8). Whilst s 35(2) of the Interpretation Act makes it clear that such notes are not part of the Regulation, they are material that is capable of assisting in the ascertainment of the meaning of the Regulation. Thus, whilst they would only be given relatively little weight, they further support my conclusion as to the purpose of the Second COVID Regulation. In this regard paragraph 1 of the Leasing Principles in the National Code, referenced in the note under subcl 4(2) of the Second COVID Regulation, was the only paragraph that addressed termination of a commercial lease due to non-payment of rent (as Payne JA observes at [59]). It set out the principle that landlords "must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)".
10. Clause 7 of the Second COVID Regulation, the terms of which are set out in Payne JA's judgment at [98], makes it clear that the Court should have regard to the leasing principles in the National Code when construing the Second COVID Regulation when considering questions such as are raised in the present cases.
11. Having regard both to both the language and purpose of the Second COVID Regulation, it is apparent that the drafter: 1. intended the period of operation of cl 4 on the one hand, and cll 5 and 6 on the other, to be different. That is abundantly clear from the terms of subcl 4(1), which limited the operation of cl 4 to "during the prescribed period". There was no such limitation in cll 5 or 6; and 2. intended subcl 4(2) to mean what it said, being that during the prescribed period there was a prohibition on prescribed action, including for a breach of an impacted lease by reason of a failure to pay rent which occurred during the prescribed period. Subclause 4(2)(a) made express and specific provision for that prohibition to apply as regards a breach consisting of a failure to pay rent. Unlike cl 5, subcl 4(2) did not include any exception to its prohibition on the taking of prescribed action.
12. Whilst there was some overlap between the operation of cll 4 and 5 during the prescribed period, the construction adopted by Payne JA gives those clauses a coherent operation, with each clause having work to do. Clause 4(2) set out a prohibition which applied during the prescribed period. Subclauses 5(2) to (8) set out and regulated steps which could be taken during the prescribed period (or after). However, compliance with those subclauses did not enable any relaxation of the prohibition in subcl 4(2), which applied during the prescribed period. Subclause 5(1) set out a conditional prohibition that covered only the taking of prescribed action on account of a breach consisting of failure to pay rent, prohibited both the taking and continuation of prescribed action, and was not limited in effect to the prescribed period. Steps taken during the prescribed period under subcll 5(2) to (8) would be relevant to whether the conditions upon which prescribed action could be taken or continued under subcl 5(1) were satisfied, and would thus be relevant to whether a lessor could take prescribed action after the prohibition in subcl 4(2) ceased. Whilst there is some overlap, as is well recognised, subordinate legislation should be construed bearing in mind that often it will not have been drafted with the same care as an Act of Parliament: Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] (Leeming JA, Bathurst CJ and McColl JA agreeing).
13. The First COVID Regulation was plainly enacted in a context of some urgency and disruption. By the time that the Second COVID Regulation was enacted, it was clearly seen as appropriate expressly to limit the operation of cl 4, but not cll 5 or 6, to a defined period less than the period of operation of the Regulation as a whole. That is not unexpected in an evolving situation such as that within which it was made. In these circumstances, and accepting the construction of the First COVID Regulation as set out in the reasons of Payne JA at [96], the construction of cl 4 of the Second COVID Regulation should be approached in the context of, but need not in my judgment be tethered to, that of cl 4 of the First COVID Regulation.
14. BASTEN AJA: This is an appeal from a decision of Stevenson J concluding that the respondent, Alamdo Holdings Pty Ltd (Alamdo), was entitled to terminate a commercial lease for non-payment of rent by the lessee and first appellant, Croc's Franchising Pty Ltd (Croc's). [10] I agree with Payne JA, except with respect to the proper construction of the "Second COVID-19 Regulation", which is critical to the outcome of the appeal, the other grounds being unsuccessful. The issue concerns the relationship of cl 4(2) with cll 5 and 6. Croc's submitted that cl 4(2) constituted an absolute prohibition on the lessor taking any prescribed action, including the termination of an impacted lease, on the ground of "a failure to pay rent". The alternative construction, for which Alamdo contended, was that cl 5 provided a mechanism by which the party to an impacted lease could avoid the prohibition in cl 4 if the ground for taking prescribed action were a "failure to pay rent during the prescribed period", and so long as cl 6 was also complied with. The latter construction complies with the relevant principles of statutory interpretation (including common sense) and should be accepted. The appeal should be dismissed.
15. While the relevant statutory instrument has been referred to above as the "Second COVID-19 Regulation", the instrument in question was Schedule 5 to the Conveyancing (General) Regulation 2018 (NSW), and was titled "Schedule 5 Commercial leases - COVID-19 pandemic special provisions". It, and its predecessor, will be referred to below as the first and second versions of Schedule 5, the first being that which commenced on 24 April 2020 and the second that which commenced on 24 October 2020.
16. It is desirable to identify at the outset the principles of statutory interpretation which must be applied. To give context to the discussion of relevant principles of statutory interpretation (and at the risk of repetition) it is convenient to set out the key prohibitions in cll 4 and 5, and cl 6 in full, as first promulgated: 4 Prohibitions and restrictions relating to commercial leases (1) If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of - (a) a failure to pay rent, or (b) a failure to pay outgoings, or (c) the business operating under the lease not being open for business during the hours specified in the lease. Note. See leasing principles No. 1, 11 and 14 in the National Code of Conduct. … 5 Obligation to renegotiate rent and other terms of commercial leases before prescribed action (1) A lessor under a commercial lease must not take or continue any prescribed action against an impacted lessee on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note. This clause does not prevent parties to a commercial lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(4). … 6 Disputes must be submitted to mediation before proceedings can be taken A lessor must not do any one or more of the following unless and until the Small Business Commissioner has certified in writing that mediation offered to be conducted by the Small Business Commissioner has failed to resolve the dispute and given reasons for the failure - (a) seek to recover possession of premises or land under the commercial lease, (b) terminate the commercial lease, (c) exercise or enforce any other right of the lessor under the lease. (The full text of cll 4 and 5 relevant to the issues on the appeal is set out below.)

General considerations

1. As a matter of general law, principles of statutory interpretation apply to delegated legislation. [11] That general law principle is itself adopted with respect to purposive interpretation and the use of extrinsic materials in s 32 and s 33 respectively of the Interpretation Act 1987 (NSW), which apply to "statutory rules", a term defined in s 21(1) to include a "regulation", and thus a schedule to a regulation.
2. However, courts are conscious that subordinate legislation is not always drafted by parliamentary counsel, and may not adopt conventions regularly applied in drafting statutes. [12] In the present case, the Court may take judicial notice of the fact that many steps were taken in haste at the outbreak of the Covid-19 pandemic. [13] Further, as the notes to cl 4(1) and cl 5(1) set out above reveal, they were intended to give effect to "leasing principles" prepared by a body called the National Cabinet. [14] The leasing principles were not entirely coherent and pursued potentially conflicting purposes. These factors allow a court greater than usual leeway in construing the language of the instruments to achieve the stated or apparent purposes. [15]
3. Before identifying the applicable principles of statutory construction, it is necessary to state the nature of the constructional choice which is required to be made. Absent that step, the relevant principles cannot be identified. Having taken that step, and the relevant principles identified, those principles must be applied in construing the relevant provision.
4. To identify the constructional choice it is sufficient to note that cl 4(1) (later cl 4(2)) imposed an unqualified prohibition on a lessor under an impacted lease terminating or taking enforcement action based on a breach of the lease. Clause 5(1) imposed a conditional prohibition on a lessor under an impacted lease terminating the lease for non-payment of rent. The issue was whether a purported termination by the lessor (Alamdo) during the operation of the second version of Schedule 5, having complied with the condition in cl 5(1), was effective, despite the unqualified prohibition in cl 4.
5. Many judgments start by reciting the following statement in the joint reasons in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT): [16] "47 This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy."
6. That passage would not assist in this case. The Schedule contained three provisions which could not operate harmoniously (or, perhaps, at all), and which contained no indication as to their internal hierarchy. To the extent that no hierarchical principle was stated, one must be implied. However, as will be seen, the language of the qualified prohibitions, though not the language of the absolute prohibition, suggested the hierarchy, consistently with that which would be implied by accepted principles of statutory interpretation.
7. Further, a coherent operation is not established by finding a specific situation where one provision may have operation although, generally, it has none. In any event, that exercise contains an implicit hierarchical principle, because a similar approach may be taken to each of the three provisions. Indeed, if one seeks to maximise the operation of all three provisions, full effect should be given to cl 5, because it only operated in respect of one specific matter of several dealt with in cl 4, so that cl 4 would always have had a range of operations even if not in the area in which cl 5 operated.
8. The reasoning adopted by Croc's was that the most general provision (cl 4) should be given full effect and the specific provisions squeezed in so that they may operate if perchance an area can be found for them at some time or in some circumstance. For reasons which will be explained, that is contrary to established principles of statutory construction and contrary to authorities where similar problems have arisen.
9. Before addressing those principles, one other characteristic of the clauses in the Schedule should be noted. Many statements of the governing principle are expressed in relation to power-conferring provisions. The question in those cases is whether the most general conferral operates according to its terms, or must be read down so as to give effect to a more specific but qualified, limited or restricted conferral of power. By contrast, the Schedule assumed that a power exists (the power of a lessor to terminate a lease) and imposed constraints on the operation of that power. For reasons which will be explained, the situation is not in principle different in relation to a provision conferring a power, although it is the restriction, not the conferral of power which is to be addressed.

Establishing the hierarchy

1. There is no doubt that the fundamental issue in this case is to establish a hierarchy in order to determine which clause will prevail. This exercise was identified in the joint reasons in Project Blue Sky Inc v Australian Broadcasting Authority: [17] "70 A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions. Reconciling conflicting provisions will often require the court 'to determine which is the leading provision and which the subordinate provision, and which must give way to the other'. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme."
2. Some guidance may be obtained in determining a hierarchy of provisions from a statement by Dixon CJ in Commissioner for Railways (NSW) v Agalianos, [18] cited with approval in the joint reasons in Project Blue Sky, that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed."

Reading as written

1. One principle which has been identified, but quite rarely discussed, is to read the statutory instrument as one would any other document, "that is, from the beginning onwards". As explained by Priestley JA in Patman v Fletcher's Fotographics Pty Ltd: [19] "It is preposterous, in the literal sense, to read s 4, make assumptions concerning its purpose based on its language, without reference to what has preceded and then to read s 3 in the light of the purpose thus discerned in s 4. A much sounder way of reaching what the draftsman's purpose was is to read his Act in the sequence in which he wrote it."
2. In this case, reading the Schedule in the order in which provisions appear requires the reader to put himself or herself in the shoes of the drafter. It requires an attempt to understand the logic by which the drafter constructed the document and why cl 4 was followed by cll 5, 6 and 7. If, as suggested below, there is a clear answer in the National Code, the Schedule can be construed in a constructive, rather than a destructive, manner: that is, one starts with the assumption that the drafter had a clear purpose and believed it had been transposed into the instrument to be construed. That that is the correct approach was identified in 1942 by Jordan CJ in Hall v Jones:, [20] stating "that a Court is entitled to pay the Legislature the not excessive compliment of assuming that it intended to enact sense and not nonsense".

Later provision prevails

1. Pearce and Geddes identified the 'read as written' approach as "consistent with the rule that, in the event of a conflict between two sections in an Act, the later section prevails". [21] An example of the application of that approach may be found in Ross v The Queen, [22] where the question was whether a person convicted summarily for an indictable offence had a right of appeal to the Queensland Court of Criminal Appeal. Section 673 of the Criminal Code (Qld) provided that: "[a] person convicted summarily of an indictable offence may appeal against his conviction and against the sentence passed on his conviction on the same grounds and on the same conditions as if he had been convicted on indictment." Section 659 of the Code stated that: "[w]hen a person has been summarily convicted of an indictable offence, the conviction is to be deemed a conviction of a simple offence only, and not of an indictable offence."
2. Gibbs J noted that, if the words of s 659 "were given the fullest operation of which they are capable, they would render the provisions of s 673 entirely nugatory - since every person summarily convicted of an indictable offence would be deemed to have been convicted of a simple offence, there would never be a case in which an appeal could be brought under s 673". [23] Gibbs J continued: "There can be no doubt that the ordinary rules governing the construction of statutes require the provisions of s 659 to be given a construction that will render them harmonious with those of s 673, if that is possible. If the two sections could not both be given effect, s 673, being the later enactment, would prevail. … This does not mean that s 659 itself is deprived of effect; that section has ample room for operation - e.g., in cases in which a statute attaches some disqualification or other adverse consequence to a conviction for an indictable offence."
3. As can be seen, if this principle were applied, cl 5 would prevail.

Common sense approach

1. There is longstanding authority in favour of a "common sense" approach to statutory interpretation. For example, in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [24] Mason and Wilson JJ, quoting DC Pearce, stated that "[t]he rules [of statutory interpretation] … are no more than rules of common sense, designed to achieve this object", the object being "in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole". "Common sense" in this context may be understood as invoking the common practices by which the meaning of any written document is discovered; it therefore underpins the 'read as written' approach.

The specific will qualify the general

1. There is another basis on which cl 5 should prevail. That is the well-established (and common sense) principle that a specific provision will qualify a general provision. Whereas such principles as 'the later provision prevails' have been rarely applied, this principle has been widely applied and provides the default mechanism for resolving intractable conflicts, especially (but not only) within a single instrument.
2. Thus, if apparently inconsistent general and specific provisions cannot be construed textually to resolve the conflict, one should infer that the drafter intended that the general provision be subordinate to the more specific one dealing with the same subject matter. [25] Indeed, in Smith v The Queen, [26] the High Court held that the principle would "dictate" the outcome, observing: "It is but common sense that Parliament having before it two apparently conflicting sections at the same time cannot have intended the general provision to have deprived the specific provision of effect."
3. In The Ombudsman v Laughton, [27] Spigelman CJ stated in classical terms the principle that the general is subservient to the specific: "19 The maxim of statutory construction generalia specialibus non derogant reflects an underlying principle that a legislature, which has created a detailed regime for regulating a particular matter, intends that regime to operate in accordance with its complete terms. Where any conflict arises with the general words of another provision, the very generality of the words of which indicates that the legislature is not able to identify or even anticipate every circumstance in which it may apply, the legislature is taken not to have intended to impinge upon its own comprehensive regime of a specific character."
4. The application of the principle in Laughton is instructive. Mr Laughton brought proceedings against the Ombudsman in the Government and Related Employees Appeals Tribunal (GREAT), challenging the Ombudsman's refusal to appoint him to a vacant office. The right of appeal was created by s 20 of the Government and Related Employees Appeals Tribunal Act 1980 (NSW). The Ombudsman sought to rely upon a statutory immunity from "any civil or criminal proceedings in respect of any act, matter or thing done or omitted to be done for the purpose of executing [the Ombudsman Act 1974 (NSW)] or any other Act unless the act, matter or thing was done, or omitted to be done, in bad faith". Section 32 of the Ombudsman Act provided that the Ombudsman might employ staff "under and subject to" the Public Sector Management Act, which, as the Chief Justice noted, brought with it a right of appeal against the decision of the Ombudsman under s 20 of the GREAT Act. [28]
5. The Ombudsman relied upon a reading of the legislation not dissimilar to the approach adopted by Croc's in the present case. This was summarised and rejected by Spigelman CJ in the following passage: "9 Mr P Garling SC who appears for the Ombudsman submitted that there was no relevant tension or inconsistency. He submitted the right to appeal to GREAT is not removed entirely. What s 35A does is impose certain pre-conditions on the exercise of that right of appeal, namely that the leave of the Supreme Court must be obtained under s 35A(2), noting that such leave can only be granted if the court comes to the state of satisfaction for which s 35A(3) provides, namely that there is a substantial basis for an allegation of bad faith in the relevant decision. 10 This is one way of characterising the interrelationship between the sections. However, the limited circumstances in which the Supreme Court is able to grant leave is, on the appellant's submissions, such as to deprive the right of appeal under s 20 of the Government and Related Employees Appeal Tribunal Act of almost all of its intended content. Section 20 is directed, as I have quoted above, to an assertion by an applicant to GREAT that that person is 'more entitled to be appointed to the vacant office' than another. Limiting challenges to allegations of bad faith in the appointment process would deprive the right of appeal of almost all of its intended content."
6. As will be seen below, Croc's approach would, in the language of the Chief Justice, deprive cl 5 of almost all of its intended content.
7. A case involving an instrument strikingly similar to the Schedules, where a statute enacted a prohibition in two different forms, is No 20 Cannon Street Ltd v Singer & Friedlander Ltd. [29] The case concerned the operation of two UK statutory instruments known as the Counter-Inflation (Business Rents) Orders. The orders required that a "standard rate" be calculated which was payable but could not be exceeded during a "standstill period". The two provisions were as follows: "3 Rent shall not be payable in respect of the standstill period at a rate exceeding the standard rate and, where the terms of any tenancy provide for an increase of rent on or after November 6, 1972, the amount of that increase shall not be payable in respect of the standstill period. 4 Where a business tenancy comes to an end on or after November 6, 1972, and the premises are relet (whether to the previous tenant or not) the rate at which rent is payable in respect of the standstill period shall not exceed the standard rate, except to the extent that any such excess is properly attributable to a variation in the terms of the tenancy."
8. Megarry J reasoned as follows: [30] "The role at paragraph 4 gave rise to considerable discussion. Nobody was able to suggest anything that the first limb prohibited which the first limb of paragraph 3 had not already prohibited. Each of the prohibitions was in the same form of providing that rent in respect of the standstill period should not be payable at a rate exceeding the standard rate, and all that the first limb of paragraph 4 did was to take the same prohibition as the first limb of paragraph 3 imposed quite generally and impose it on a limited class of case, namely, where a business tenancy ended after November 5, 1972, and the premises were relet. To this extent, paragraph 4 seemed merely a partial repetition. Further, the limited exception in the second limb is in terms merely an exception from the first limb of paragraph 4 and does nothing to exclude the wide prohibition of paragraph 3. However, to read the two paragraphs literally in this way would produce an absurd result: an excess attributable to variations in the terms of a tenancy would escape the prohibition of paragraph 4 only to be caught by the prohibition of paragraph 3, and so the whole of paragraph 4 would be nugatory, the first limb as being a partial repetition, and the second limb as saving nothing from prohibitions of the order. Accordingly, I think that paragraph 4 must be read as excluding paragraph 3 to the extent of the overlap. In other words, it is paragraph 3 that imposes the general prohibition, but in the limited class of case covered by paragraph 4, it is paragraph 4 and not paragraph 3 that imposes the operative prohibition, thus carrying with it the exception. In this way effect is given to the whole of both paragraphs. Such an approach bears at least some relationship to the familiar maxim generalia specialibus non derogant. Put formally, it seems to me that the proper principle to apply if an enactment contains two similar prohibitions, one wide and the other applying only to a limited class of case wholly within the wide prohibition, is to the treat the wide prohibition as not applying to cases within the limited prohibition, especially if the limited prohibition is made subject to some exception and the wide prohibition is not."
9. Although no one referred to this case in the course of argument, the approach adopted by Megarry J is clearly apposite and entirely persuasive. It applied the same principle which the High Court had stated in Smith should "dictate" the outcome. Its adoption would be fatal to Croc's' submissions, the result of which, in Megarry J's language, is "absurd".

Purposive construction

1. Before turning to the provisions in the present case, it is necessary to say a little about the obligation contained in s 33 of the Interpretation Act to prefer a construction that would promote the purpose or object underlying the Act or statutory rule to one that would not promote that purpose or object.
2. Purposes can be identified at different levels of generality or specificity within a statutory scheme. Thus, a statutory scheme may itself have a purpose which can be identified at a high level of generality, whereas specific provisions may reveal more specific purposes, or aspects of the general purpose. As will be noted shortly, the Schedule identified their own objects, namely, to give effect to the arrangements proposed under the National Code. The National Code, however, identified a number of mechanisms for protecting lessees from the adverse economic effects of lockdown during the pandemic, each of which was separately reflected in a clause of the Schedule. What the National Code did not prescribe, however, was the interrelationship of the various steps which had been agreed upon by National Cabinet as appropriate. The State Schedule giving effect to the Code, however, had to reconcile the potentially conflicting purposes. That element of reconciliation must be understood as an underlying purpose of the Schedule.

Repeal and replacement

1. There is one further matter of moderate importance in the present case. There were two versions of Schedule 5; each was limited to a period of six months as required by its empowering legislation. Although the actions of Alamdo were taken while the second version of Schedule 5 was in force, there had been a material change to cl 4 in what was otherwise a re-enactment of the first version. On one view, Alamdo's construction of the key provisions was more powerful in relation to the first than the second version of Schedule 5. Accordingly, it becomes necessary to consider what weight should be given to the interpretation of the first version of Schedule 5 in determining the operation of the second.
2. Herzfeld and Prince have stated that "[i]n the absence of any contrary intention, where words in one statute are used in a subsequent statute to deal with the same subject matter along the same lines (i.e. in pari materia) it is presumed that the words have the same meaning in the subsequent statute as in the earlier statute". The presumption arising from re-enactment need not depend upon an earlier judicial decision as to the meaning of the statute. [31] Accordingly, it will be appropriate to address the proper construction of the first version of Schedule 5 and then to determine whether the limited changes made in the second version were intended to affect the overall operation of cll 4 and 5, their application at the time of the second version of Schedule 5 being the critical issue in the present case.

Construing the second version of Schedule 5

1. The application of the principles discussed above may be assisted by restating the provisions in question, although they have been set out by Payne JA. The next step is to identify the purpose of Schedule 5 and of the specific provisions within it. That course requires reference to the first version of Schedule 5.

Content of first version of Schedule 5

1. The first version of Schedule 5, promulgated on 24 April 2020, contained 10 clauses. Two provisions may be noted briefly. Clause 10 merely provided for the repeal of the Schedule six months after the day on which it commenced, in compliance with the empowering provision, being s 87(4) of the Retail Leases Act 1994 (NSW). Clause 9 preserved "the rules of equity and of common law" and was not referred to in the course of this proceeding.
2. Two other provisions were of peripheral relevance. Clause 3 read as follows: 3 Application of Schedule This Schedule applies to the exercise or enforcement of rights under a commercial lease in relation to circumstances occurring during the prescribed period. Clause 8 was the obverse of cl 3 and was relevant in so far as it confirmed the general purpose of the Schedule by excluding from its operation "grounds not related to the economic impacts of the Covid-19 pandemic".
3. The other provisions should be addressed in the order in which they appear in the Schedule. Clause 1 contained important definitions, two of which were central to the operation of the Schedule: prescribed action means taking action under the provisions of a commercial lease or seeking orders or issuing proceedings in a court or tribunal for any of the following - (a) eviction of the lessee from premises or land the subject of the commercial lease, (b) exercising a right of re-entry to premises or land the subject of the commercial lease, (c) recovery of the premises or land, (d) distraint of goods, (e) forfeiture, (f) damages, (g) requiring a payment of interest on, or a fee or charge related to, unpaid rent otherwise payable by a lessee, (h) recovery of the whole or part of a security bond under the commercial lease, (i) performance of obligations by the lessee or any other person pursuant to a guarantee under the commercial lease, (j) possession, (k) termination of the commercial lease, (l) any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State. prescribed period means the period ending at the end of the day that is 6 months after the day on which the Retail and Other Commercial Leases (COVID-19) Regulation 2020 commences.
4. Clause 2 was also definitional, providing a meaning for the term "impacted lessee", again by reference to the economic effects of the Covid-19 pandemic.
5. It remains to identify the content of the four operative provisions of the Schedule, namely cll 4, 5, 6 and 7. In accordance with the principle that the document should be read in the order in which it is written, relevant parts of these provisions are set out in that order below.
6. The first operative provision, cl 4, relevantly provided: 4 Prohibitions and restrictions relating to commercial leases (1) If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of - (a) a failure to pay rent, or (b) a failure to pay outgoings, or (c) the business operating under the lease not being open for business during the hours specified in the lease. Note. See leasing principles No. 1, 11 and 14 in the National Code of Conduct. (2) If, during the prescribed period, a lessee under a commercial lease is an impacted lessee, the rent payable under the commercial lease (other than rent or a component of rent determined by reference to turnover) must not be increased. Note. See leasing principle No. 13 in the National Code of Conduct. (3) If, during the prescribed period, a lessee under a commercial lease was an impacted lessee, a lessor must not, after the prescribed period, take any prescribed action against the lessee on the grounds of a breach of the commercial lease consisting of a failure to pay an amount equivalent to or representing the rent increase amount referred to in subclause (2). Note. See leasing principle No. 13 in the National Code of Conduct. … (6) Nothing in this clause prevents a lessor and lessee agreeing to the parties taking any action in relation to the commercial lease (including the lessor taking any prescribed action or the parties agreeing to terminate the commercial lease).
7. The following aspects of cl 4, in its original form, should be noted. First, cl 4(1) identified three categories of breach with respect to which the lessor must not take any prescribed action. The next provision, cl 5 was only concerned with one category of breach, namely (a), a failure to pay rent.
8. Secondly, the definition of "prescribed action" set out above was comprehensive, containing 12 paragraphs, including a final paragraph covering "any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State". As will be seen, while cl 5 applied to "prescribed action", cll 6 and 7 departed from this language in identifying conduct to which they applied.
9. Thirdly, although cl 4(1), consistently with cl 3, was limited to breaches which occurred during the "prescribed period", the prohibition on action by the lessor with respect to such a breach, was not limited to action which might have been taken during the prescribed period. Reading the words in isolation, the prohibition could continue after the prescribed period, preventing the lessor from relying upon a breach, so long as the breach occurred during the prescribed period. However, because the prescribed period was six months, and the Schedule only operated for six months, that eventuality could not arise. [32]
10. Fourthly, subcl 4(2) prohibited a rent increase. Although the phrase "during the prescribed period" qualified the time at which the lessee must be an impacted lessee, it may be inferred that the rent increase must not have occurred during that time either. In its terms, however, subcl (2) did not identify any temporal limit on the prohibition it imposed. That changed in the second version of Schedule 5.
11. Subclause (3) operated in tandem with subcl (2), and referred to the prohibited rent increase. It expressly prohibited prescribed action taken "after the prescribed period". It appears to have been included from an abundance of caution, as it might have been inferred that a prohibited rent increase could not give rise to prescribed action. Further, by way of marked similarity with the provisions considered in No 20 Cannon Street, noted above, it is difficult to give subcl (3) any function which is not covered by subcl (1), unless, contrary to initial impressions, subcl (1) did not operate after the prescribed period. However, why the drafter thought that was relevant in circumstances where the Schedule and the prescribed period were coterminous is unclear. There is no need to resolve this issue in the present case: rather, its significance is that it suggests that a strict textual reading of the Schedule is inappropriate.
12. The second operative provision, cl 5, read as follows: 5 Obligation to renegotiate rent and other terms of commercial leases before prescribed action (1) A lessor under a commercial lease must not take or continue any prescribed action against an impacted lessee on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note. This clause does not prevent parties to a commercial lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(4). (2) If an impacted lessee is a party to a commercial lease, any party to the lease may request the other parties to renegotiate the rent payable under, and other terms of, the commercial lease. (3) A party to a commercial lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the commercial lease. (4) The parties are to renegotiate the rent payable under, and other terms of, the commercial lease having regard to - (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. Note. See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct. In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover.
13. Four aspects of cl 5 are significant. First, the prohibition in cl 5(1), though not the order of the phrases, is identical to the prohibition contained in the chapeau to cl 4(1). The only difference from the prohibition in cl 4(1) is that in cl 5(1) it is limited to a ground identified in par (a) of cl 4(1), namely a failure to pay rent.
14. Secondly, the prohibition in cl 5(1), is qualified by the final words, providing an exception where the lessor has complied with this clause (the exception).
15. Thirdly, like cl 4(1), the first limb of cl 5(1) (the prohibition) is not temporally limited: both were to continue for the life of the Schedule. The two prohibitions being coterminous, if the general were to prevail, the specific would be rendered nugatory. However, that cannot have been the intention of the drafter, with the consequence that the specific provision should prevail and cl 4(1)(a) must be read down as subject to the specific exception set out in the immediately succeeding cl 5. As explained by the High Court in Smith, that conclusion is "dictated" by the principle that the general must be subject to the specific.
16. Fourthly, that conclusion is supported by a purposive approach to the question of construction. Although the notes contained in the respective clauses were not part of the Schedule, they were extrinsic material to which regard may properly be given. [33] Significantly, the "leasing principles" in the National Code of Conduct identified in notes within cl 4 (being No 1, 6, 11, 13 and 14) did not overlap with the principles identified in notes to cl 5 (being No 3-5, 7-10).
17. Clauses 6 and 7 may be considered together. Clause 6 has been set out above in full and need not be repeated; cl 7 provided: 7 Court consideration of National Code of Conduct leasing principles A court, when considering whether to make a decision or order relating to any of the following, is to have regard to the leasing principles set out in the National Code of Conduct - (a) the recovery of possession of premises or land from a lessee, (b) the termination of a commercial lease by a lessor, (c) the exercise or enforcement of another right of a lessor of premises or land.
18. Clause 6 differed from cll 4 and 5 in that the prohibition was not identified by reference to "prescribed action" but by reference to three categories of action, although the categories covered most of the defined prescribed actions. The significance for present purposes is the fact that the prohibition was subject to a qualification introduced by the phrase "unless and until".
19. The prohibition in cl 6, although not stated by reference to the defined term "prescribed action", effectively covered the field of conduct so defined. That this was intended may be inferred from cl 7, requiring the court to "have regard to the leasing principles set out in the National Code of Conduct", in dealing with the same conduct as that identified in cl 6. Thus, although differently expressed, cl 6 reflected the full extent of the prohibition in cl 4(1), but rendered it subject to compliance with a condition. If cl 4(1) were to prevail, cl 6 would be deprived of effect and its purpose, and the relevant leasing principles, frustrated.
20. The significance of cl 7 was that, in circumstances which mirrored (and were relevantly identical with) the prohibited conduct covered by cl 6, it envisaged that there might be action taken in a court, and required the court to have regard to the leasing principles in the National Code. This clause did not constitute a direction as to how to construe the Schedule of which it formed part, but gave direction as to matters to be borne in mind in exercising a jurisdiction which it assumed existed with respect to conduct encompassed by some prescribed actions. That was not consistent with cl 4(1) being an absolute prohibition on the taking of any such action.
21. Clause 7 of the second version of Schedule 5 was to the same effect as cl 7 set out above.

Changes made in second version of Schedule 5

1. Because Croc's contention that priority be given to cl 4(1) must have failed during the operation of the first version of Schedule 5, its case for giving priority to what became cl 4(2) in the second version required that there be a change in the language or structure sufficient to demonstrate an intention to reverse a major feature of the scheme in a manner not acknowledged, nor justified by any change to the National Code. To determine whether such a contention can be supported, it is necessary to identify the changes made.
2. First, some changes to the form of the first version were made while it was still operative, that is by way of amendments made on 3 July 2020. One such change was to insert in cl 5 a new subcl (1A) which read as follows: (1A) This clause applies to a commercial lease to which an impacted lessee is a party (an impacted lease).
3. The purpose of this change was entirely stylistic. Clause 5(1) had been awkward in referring generally to a "lessor under a commercial lease" who was not to take action against "an impacted lessee". The inclusion of the defined term, "impacted lease", permitted cl 5(1) to be simplified so that it referred to a "lessor under an impacted lease". It was then possible to replace the generic term "commercial lease" with "impacted lease" in other parts of cl 5. When the second version of Schedule 5 was enacted, the definition of "impacted lease" was taken out of cl 5(1A) and given its appropriate position amongst the definitions in cl 1. Other changes to cl 5 were retained.
4. Because the newly defined term was placed in cl 5 and applied (initially) only to cl 5, the terms of cl 4(1) were not varied to limit the term "lessor" to a lessor under an impacted lease, but that fact had no relevant consequence. The form of cl 4 was simplified in the second version. The critical change relied on by Croc's arose from the fact that the second version of Schedule 5 was to continue for a period of six months from the day it commenced (cl 10), but the "prescribed period" terminated "at the end of 31 December 2020". The prescribed period was thus limited to a period of a few days more than two months, while the Schedule operated for six months. Clause 4 was changed so that the unqualified prohibition which had been contained in cl 4(1) was then contained in cl 4(2) and was limited to the prescribed period. Clause 4, as amended, commenced as follows: 4 Prohibitions and restrictions relating to impacted leases (1) This clause applies if, during the prescribed period, a lessee is an impacted lessee. (2) During the prescribed period, a lessor must not take prescribed action against the impacted lessee on the grounds of a breach of the impacted lease occurring during the prescribed period consisting of - (a) a failure to pay rent….
5. There were thus three changes, of which two did no more than tidy up the language: the words "if a lessee is an impacted lessee" were removed and the prohibition was varied so that it no longer prohibited action "against the lessee" but against "the impacted lessee". Secondly, where the prohibition related to the grounds of a breach "of the commercial lease" under the former Schedule, the revised version picked up the newly defined term and referred to "a breach of the impacted lease". It is clear that neither of these changes was intended to alter the operation of the provision.
6. The third change was to commence subcl (2) with the words "During the prescribed period". On one view, that was a deliberate limitation on the earlier operation of cl 4(1), now cl 4(2); on another view, there was no effective change at all, because cl 4(1) had only ever operated during the prescribed period. The need to make that limitation express resulted from the prescribed period under the second version of Schedule 5 not being coterminous with the life of the Schedule.
7. The argument in favour of reading the new provision as making a significant variation was weakened by consideration of subsequent subclauses of cl 4. Thus, former subcll (2) and (3) (now (3) and (4)) read as follows: (3) The rent payable under the impacted lease must not be increased during the prescribed period, other than rent or a component of rent determined by reference to turnover. Note. See leasing principle No 13 in the National Code of Conduct. (4) A lessor must not, after the prescribed period, take any prescribed action against the impacted lessee on the grounds of a breach of the impacted lease consisting of a failure to pay an amount equivalent to or representing the rent increase amount referred to in subcl (3). Note. See leasing principle No 13 in the National Code of Conduct.
8. One change common to both these revised provisions was to omit the opening words in the former provisions namely, "if, during the prescribed period, a lessee under a commercial lease is an impacted lessee", being words which were rendered otiose by the adoption of the definition of "impacted lease".
9. Whether by intention or serendipity, subcl (4), with a prohibition limited to the balance of the life of the Schedule after the prescribed period, now had work to do, when formerly it appeared to be totally subsumed within subcl (1). Otherwise, each subclause of cl 4 was varied so as to take advantage of the definition of "impacted lease", a step not taken when the first version of Schedule 5 was amended.
10. Croc's submissions with respect to the effect of the change to cl 4(1) (now cl 4(2)) encountered significant obstacles. First, there is no doubt that a distinction was made when the second version of Schedule 5 was promulgated between the operation of the prohibition on taking prescribed action under cl 4, and other controls which were to continue to operate throughout the life of the Schedule. However, Croc's focused on one consequence of the change, namely that, assuming the prohibition in cl 4 had previously rendered cll 5 and 6 (and arguably cl 7) nugatory, those clauses now had some work to do which they did not have available to them prior to the change.
11. However, the fact that the three later provisions (cll 5, 6 and 7) would have had work to do during a period when the prohibition in cl 4(2) did not operate, provides no basis for inferring an intention that they should have no work to do with respect to a period when cl 4(2) did operate. In other words, the fallacy in giving priority to the general provision over the specific is not removed by finding some other work for the specific provisions to do.
12. On the other hand, if it is to be assumed that cll 5,6 and 7 had work to do during the first version of Schedule 5, it was necessary for Croc's to explain the dramatic change in the operation of provisions which were untouched in their terms in the second version of Schedule 5. The only remaining peg upon which Croc's could hang its submissions was extrinsic material providing support for the limited operation (if any) of the specific provisions. As will be seen, there was no extrinsic material reflecting such a change and the existing material supported a contrary conclusion as to the intended hierarchy of the provisions.

Relevant purposes and objects

1. The purpose of legislation may be gathered from (i) the language of the statute, (ii) internal extrinsic material, such as headings to sections and notes, [34] (iii) the legislative history, and (iv) contextual matters. In the present case, the inquiry must focus on the first version of Schedule 5; there is no new material relating to the changes in the second version beyond the change in language, which is neutral as to the underlying purposes of the key provisions.
2. The first version was accompanied by an "Explanatory Note to the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW)", to which consideration may be given pursuant to s 33 of the Interpretation Act. The Explanatory Note indicated that the "object" of the Regulation was to give effect to the National Code, so that the Regulation: "(a) prohibits and regulates the exercise of certain rights of lessors relating to the enforcement of certain commercial leases during the COVID-19 pandemic period, and (b) requires, in response to the COVID-19 pandemic, that lessors and lessees renegotiate the rent and other terms of those commercial leases in good faith having regard to the leasing principles set out in the National Code of Conduct, before any legal enforcement action of the terms of those commercial leases can be commenced."
3. Two aspects of this statement may be noted. First, the Explanatory Note identified a single generic "object" of the Schedule and identified, conjunctively, the quite separate and distinct purposes of (i) prohibition, (ii) regulation and (iii) a requirement to renegotiate rent and other terms of a lease. The Explanatory Note envisaged that the "prohibition" and "regulation" of the lessor's enforcement rights would co-exist with a legislative purpose requiring re-negotiation of rent before legal enforcement action, thereby implicitly recognising that enforcement action for non-payment of rent would be permissible after a good faith negotiation. This description was undoubtedly reflected in the Schedule; it assisted in resolving the issue of construction to the extent that it demonstrated an intention to accommodate each of these purposes within the Schedule.
4. Secondly, the "leasing principles" set out in the National Code were themselves silent as to the intended interrelationship of the various principles. That is unsurprising: conflicting principles may coexist, and their resolution will require a weighing process. The same is true of matters to which regard should be had, as prescribed by cl 7. An analogous function is served by Pt 6 of the Civil Procedure Act 2005 (NSW), and in particular s 58, which requires the courts to "have regard to" the overriding purpose (set out in s 56) of facilitating the "just, quick and cheap" resolution of the real issues in proceedings. Those three elements will often be in tension, but all must be addressed. In contrast, a rule in the form of a prohibition cannot be given any effect in an area where there is an inconsistent licence or liberty to act, unless one can be read as qualifying the other. Neither the Explanatory Note nor the leasing principles in the National Code supported the contention that cl 4 in the first version of Schedule 5 was to be given an absolute operation so as to deprive (or even diminish the effect of) the subsequent clauses. The Explanatory Note thus identified several purposes, in support of a singular object, but did not put them in a hierarchy. Nevertheless, it denied the possibility that some were to be disregarded or given no effect.
5. The separate and distinct purposes of each of cll 5, 6 and 7 can be located in the leasing principles: each should be given effect in accordance with its own apparent purpose. The first leasing principle was that "[l]andlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)". The leasing principles 3-6, 11 and 13 all envisaged that landlords would be encouraged to engage in negotiations about the payment of rent. Exceptions to the prohibition on terminating commercial leases for those who undertook good faith negotiations about reducing rents (cl 5) and engaged in a mediation (cl 6) were consistent with the latter principles. If cl 5 failed to provide an exception to the operation of cl 4, a re-negotiated rent would remain unenforceable and the purpose of cl 5 would be substantially frustrated.
6. The internal intrinsic material also provided assistance in resolving the issue of hierarchy. Whilst, pursuant to s 35 of the Interpretation Act, headings to clauses and notes are not parts of the Schedule, they can be relied on as extrinsic material, pursuant to s 34. Consistently with the qualification of the specific prohibition in cl 5, namely termination of a commercial lease "unless" the identified condition had been satisfied, the heading to cl 5 referred to steps to be taken "before" prescribed action was taken. Further, the note to cl 5(1) stated that "[t]he clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(4)." In other words, prescribed action would be available if the requirements of subcll (2)-(4) were complied with.
7. Clause 6 was also in the form of a prohibition subject to a condition introduced by the words "unless and until". Clause 6 provided that a lessor must not take specified actions, including the termination of a lease, "unless and until" the Small Business Commissioner had certified that a mediation had been undertaken but failed to resolve the dispute. Like the heading to cl 5, the heading to cl 6 referred to steps to be taken "before" prescribed action "can be taken".
8. Thus, both cl 5 and cl 6 contained internal indications that expressly permitted the taking of action prohibited by cl 4(1): it was not possible to give them effect unless they qualified so much of the prohibition in cl 4 as fell within their compass.
9. On the assumption that cll 4, 5 and 6 operated contemporaneously, as they undoubtedly did throughout the operation of the first version of Schedule 5, and for the period during which cl 4(2) operated under the second version, giving cl 4(1) and later cl 4(2) primacy would have rendered cll 5(1) and 6 nugatory.
10. Finally, cl 7, requiring the court to have regard to the leasing principles set out in the National Code of Conduct when considering action prohibited by cl 4, would also be rendered nugatory if there were an absolute prohibition on prescribed actions.
11. Accordingly, the only reading of cll 4-7 which would allow the provisions to operate coherently identifies cl 4(1) as a statement of the prohibition, followed by the qualifications expressed in cll 5 and 6, with a recognition in cl 7 that a court may be required to assess a prescribed action and, in doing so, should have regard to the leasing principles which gave rise to both the prohibitions and the qualifications thereon.
12. During periods when both operated, to give primacy to cl 4(1) (later cl 4(2)) would deprive cl 5(1) of effect and thus frustrate its purpose and the relevant leasing principles.

Absence of express qualification of cl 4

1. The appellants resisted the proposition that cll 5 and 6 qualified the absolute prohibition in cl 4(2) on the basis that, had that been the intention, the drafter could readily have so stated. That the drafter did not expressly take that course may be conceded: however, that does no more than identify the problem, namely that the drafter did not expressly identify in cl 4 the interrelationship of the three provisions. But that interrelationship is clear from the language of cl 5 and cl 6, as well as the internal extrinsic material. To read cl 4 in isolation from the provisions which follow it is an impermissible approach to its construction.
2. Indeed, it is not only the relationship with cl 4 which was in issue; the relationship between cl 5 and cl 6 also needed to be identified. Just as cl 4 can only be properly construed when read cumulatively with the succeeding provisions, and not in isolation, it would appear, as the respondent accepted, that cll 5 and 6 must also be read cumulatively, and the conditions attached to the prohibitions in each satisfied if the lessor were to be entitled to take a prescribed action.

Conclusions

1. Clauses 4, 5 and 6 all came into effect as part of the first version of Schedule 5. Clause 4, in terms, created a blanket prohibition upon terminating the commercial lease of an impacted lessee for non-payment of rent during the prescribed period. Clause 4 operated for the time the Schedule was in operation, which was six months, ending on 23 October 2020.
2. The fact that there was contemporaneity of operation throughout the first version of Schedule 5, required the conclusion, according to Croc's submission, that cll 5 and 6 had no effective operation during that period. That construction of the first version of Schedule 5 is absurd and cannot be accepted. It follows that, on Croc's case, the operation of cl 4(1), now cl 4(2), changed with the enactment of the second version. Thereafter, it must have obtained a new primacy merely because there would later be some work which cll 5 and 6 could do without qualifying cl 4(2); that is, not during the prescribed period, but after it terminated.
3. Croc's' submission ignored the first eight months during which the Schedule had effect and relied on the fact that during the last four months cll 5 and 6 would have had work to do, when cl 4(2) did not operate, to contend that therefore cl 4(1) (then cl 4(2)) should be given primacy at all times. Croc's simply did not address the consequence that during the eight months of operation of the Schedule, cll 5, 6 and 7 had no operation.
4. Even if it were permissible to take the second version of Schedule 5 in isolation, the fact that cll 5 and 6 (and cl 7) could have work to do after the end of the prescribed period, when cl 4(2) had ceased to operate, did not demonstrate that they had no work to do during the prescribed period.
5. A coherent application can be given to cll 4, 5, 6 and 7 of the second version of Schedule 5, consistent with the leasing principles in the National Code, by reading them as a package. Thus, cl 5(1), while repeating one of the prohibitions in cl 4, did so in order to qualify it, but only in part. Clause 6, in contrast, was not so limited, but imposed its own separate condition, cumulatively on cl 5.
6. Thus, each of those provisions was in the form of a prohibition, subject to a condition. Specifically, cl 5(1) provided that a lessor must not take or continue prescribed action on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period "unless the lessor has complied with this clause". The fact that cl 5(1) mirrored the prohibition in cl 4(2)(a), demonstrated that the element of overlap was intentional and was intended to isolate that aspect of the various prohibitions in cl 4 which was to be qualified.
7. This construction of the second version of Schedule 5 gives effect to the objects set out in the Explanatory Note and the leasing principles in the National Code of Conduct, which continued to be identified in the notes in the second version in precisely the same terms as in the first version.
8. Croc's proposed operation of the second version of Schedule 5 would be contrary to principle, inconsistent with authority and would defy common sense. No such conclusion was tenable while the first version was in force; [35] yet the amendments to the scheme made by the second version demonstrated no change to the underlying purpose or objects of the Schedule.
9. The primary judge correctly held that, as at 3 December 2020, cll 5(1) and 6 of the second version of Schedule 5 created two qualified exceptions to the prohibition in cl 4(2). Clause 4(2) did not prohibit the termination of the lease by Alamdo for non-payment of rent, if the conditions in cll 5(1) and 6 were satisfied. Grounds 7, 8, 12 and 13 should be rejected.

Orders

1. It follows that the appeal should be dismissed; Croc's and the individual appellants must pay Alamdo's costs in this Court.

Endnotes

1. As explained when dealing with issues 7 and 8 at [131]-[149] below, the primary judge concluded that by reason of non-registration and ss 41 and 53 of the Real Property Act 1900 (NSW), the Lease Document conveyed no legal leasehold estate to Croc's. Croc's enjoyed a monthly tenancy at will implied by s 127 of the Conveyancing Act 1919 (NSW). Alamdo's claim for loss of bargain damages relied on cll 3.1 and 3.3(a) of the AfL which created a separate agreement.
2. Facts relevant to the primary judge's findings that Croc's was not an "impacted lessee" under the relevant regulation were also challenged. As I will explain, that matter is no longer controversial.
3. Ground 11 was not pressed. It is thus unnecessary to address ground 4 of the notice of contention.
4. Section 8A provided a modified test for certain group structures and is not presently relevant.
5. Explanatory Statement, Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 8) 2020 (Cth).
6. Cl 10 of the Second COVID Regulation stated "This Schedule is repealed at the end of the day that is 6 months after the day on which this Schedule commences."
7. See at [35] above.
8. Further Amended Commercial List Response at 34(ii).
9. Opening submissions at [7], [37] and [94]-[95].
10. Alamdo Holdings Pty Ltd v Croc's Franchising Pty Ltd (No 2) [2023] NSWSC 60.
11. Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; [1996] HCA 36.
12. Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] (Leeming JA, Bathurst CJ and McColl JA agreeing) and other authorities cited by Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [14.40].
13. The National Code of Conduct governing commercial leases was released on 7 April 2020; the first version of Schedule 5 was promulgated 17 days later.
14. The "National Cabinet" was an extra-Constitutional meeting of Australian heads of governments; it first met on 15 March 2020 and released the National Code of Conduct on 7 April 2020.
15. Orchard Holdings at [46].
16. (2009) 239 CLR 27; [2009] HCA 41 (Hayne, Heydon, Crennan and Kiefel JJ) (footnotes omitted).
17. (1998) 194 CLR 355; [1998] HCA 28 (McHugh, Gummow, Kirby and Hayne JJ) (footnotes omitted).
18. (1955) 92 CLR 390 at 397.
19. (1984) 6 IR 471 at 475.
20. (1942) 42 SR (NSW) 203 at 208.
21. DC Pearce and RS Geddes, Statutory Interpretation in Australia (9th ed, LexisNexis Butterworths, 2019), p 140, par 4.5.
22. (1979) 141 CLR 432; [1979] HCA 29.
23. Ross at p 440.
24. (1981) 147 CLR 297 at 320; [1981] HCA 26.
25. Herzfeld and Prince, Interpretation, at [5.210].
26. (1994) 181 CLR 338 at 348; [1994] HCA 60 (Mason CJ, Dawson, Gaudron, McHugh JJ).
27. (2005) 64 NSWLR 114; [2005] NSWCA 339.
28. Laughton at [8].
29. [1974] 1 Ch 229.
30. No 20 Cannon Street at 235.
31. Herzfeld and Prince, Interpretation, at [8.290]; Harrison v Melhem (2008) 72 NSWLR 380; [2008] NSWCA 67 at [131] (Mason P, Spigelman CJ, Beazley JA and Giles JA agreeing).
32. Although the "prescribed period" defined in the Schedule ended on the day six months after the day on which the Retail and Other Commercial Leases (Covid-19) Regulation 2020 commenced, that was in fact the same day as the commencement of the Schedule, namely 24 April 2020.
33. Interpretation Act, ss 34 and 35.
34. Interpretation Act, s 35.
35. As accepted by Payne JA at [96] above. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2023