Funfood Pty Ltd v Centura Global Holdings Pty Ltd

The Decision Under Appeal

1. The following is a summary of the Decision:
2. The decision records that the Appellant no longer claimed that it is an impacted lessee for the purposes of the Retail & Other Commercial Leases (Covid-19) Regulation 2021.
3. The Appellant's contention was that an agreement had been reached between the parties reducing the rent to $8,000 per month (approximately). The Appellant contended that it had become aware that the Council had not given consent to the sublease between the parties and, accordingly, being gravely concerned about the arrangement, the Appellant adjusted rental or lease payments to $5,000.
4. The Appellant further contended that the Respondent is not, nor has ever been, registered for GST and that therefore, the amount attributable to GST paid by the Appellant to the Respondent should be treated as a credit in the ledger between the parties. The Appellant contended that the Respondent's failure to register for GST is unconscionable conduct within the meaning of s 72AA of the RL Act. Where the Decision refers to the Respondent it appears to be a reference to the First Respondent.
5. On 23 November 2021 the Respondent served a "default occurrence notice" on the Appellant alleging that the outstanding rent amounted to approximately $240,000. On 2 February 2022 the Appellant was informed that the Second Respondent had taken possession of the premises and that thereafter had opened a business at the premises.
6. The Appellant submitted that it was only $18,000 in arrears or, alternatively, that it had overpaid the Respondent and that, consequentially, the Respondent had invalidly terminated the lease, and that the ability of the Respondent to pay damages to the Appellant is uncertain. The Appellant submitted that this weighed in favour of the status quo being maintained in the interim. The Appellant contended that damages were not a sufficient remedy because the Appellant had established a name for its business and had built up goodwill.
7. The Respondents' submission was that the orders for relief against forfeiture should not be granted as the Appellant had delayed in applying to the Tribunal for relief and that the balance of convenience favoured the Respondents.
8. The Respondents contended that, although the Notice of Termination was given on 24 November 2021, the Appellant took no steps to set aside or dispute the notice until commencement of proceedings in the Tribunal on 3 March 2022.
9. The Respondent contended that the rent was unilaterally reduced by the Appellant. The Respondent further contended that the Appellant was in breach of the lease by failing to maintain the premises
10. It is clear from [1] and [14] of the Decision that the Tribunal considered that the application before it concerned whether the Appellant should be protected by an interim order for relief against forfeiture. Given that the Second Respondent was in possession, the proposed order in effect would have required the Respondents to vacate the premises and permit the Appellant to be restored to the premises.
11. At [15] the Tribunal said that the difficulty for the Appellant was that their default for non-payment of rent was "persistent and significant".
12. The Tribunal considered at [17] whether the Appellant could pay all rent arrears and whether the Tribunal was able to be satisfied that rent would be paid on an ongoing basis. The Tribunal found that there was no suggestion by the Appellant that it undertook to pay the sum of $8,000 per month as agreed on an ongoing basis or even the sum of $5,000 per month that was unilaterally imposed by the Appellant. Further, the Tribunal found that if the Appellant were to pay $5,000 this would still be substantially less than the total arrears claimed by the Respondent.
13. At [17] the Tribunal referred to the Appellant's view that it had overpaid the Respondent, and currently owed nothing. The Tribunal found that there was no evidence provided by the Appellant regarding its ability to pay rent in future.
14. At [18] the Tribunal stated that it was not satisfied that the balance of convenience favours relief against forfeiture. The Tribunal also found that the Appellant had not shown to the Tribunal's satisfaction that damages will not be an adequate remedy and made a positive finding that damages were an adequate remedy if the Appellant succeeded in its claims against the Respondents.
15. At [20] the Tribunal referred to the fact that the Appellant had paid approximately $300,000 to acquire its interest in the lease and the business conducted at the premises. The Tribunal found that the Respondent's action in taking possession of the premises constituted evidence that the Respondent was mitigating possible losses that may be incurred by the Appellant.
16. At [21] the Tribunal found that there was evidence that a number of the Appellant's employees had been offered ongoing employment by the Respondent and that the Respondent is conducting business at the subject premises. The Tribunal also referred to an undertaking as to damages given during the course of the hearing and the Tribunal found that there was an absence of evidence to support the contention that the Appellant can satisfy any order for damages (and thereby meet its undertaking) if the substantive application were not to be successful.
17. At [23] the Tribunal referred to the delay in bringing the proceedings for interim relief and described the delay as significant. The Tribunal noted that the Notice of Termination was served on 27 November 2021 but the proceedings in the Tribunal were not commenced until 3 March 2022. The Respondent took possession of the premises on 2 February 2022. The Tribunal found the explanation for the delay was not reasonable and that that delay weighed significantly against the Applicant.
18. At [24] the Tribunal described relief against forfeiture as a discretionary order that must be exercised having regard to the particular circumstances. The Tribunal found that, on balance, damages are an adequate remedy and that the Appellant has failed to act promptly. The Tribunal found that the balance of convenience favoured the Respondents.

Notice of Appeal

1. The Notice of Appeal contended that the Decision was not fair and equitable and that the Tribunal should have given more weight to aspects of the Appellant's evidence.
2. It was contended by the Appellant that the decision was not fair nor equitable because:
3. The Tribunal only addressed the application for an order for relief against forfeiture and disregarded the fundamental position of the Appellant which was that the lease was not validly terminated by the Respondent. It was further contended that the Tribunal misapplied s 59 of the Evidence Act 1995 (NSW) concerning the hearsay rule, and further that the Tribunal had not given proper weight to the Appellant's undertaking as to damages.
4. The Appellant contended that the Tribunal erred in not accepting the Appellant's argument that a reduction in rent from $8,000 to $5,000 was not a basis to terminate the lease and that it was not the subject of the notice of 23 November 2021. For such a breach to justify termination 14 days written notice is required under clause 9.1 of the lease. The Appellant further contended that the Tribunal erred in holding that the Appellant was in default persistently and significantly and the Tribunal did not take into account the agreement reached to reduce the rent to $8,000 per month.
5. The Appellant contended that the Tribunal erred in failing to consider the first order sought by the Appellant in the interim application, namely an order (in effect a declaration) that the Notices of Termination were invalid.
6. The Appellant contended that the Tribunal had made errors of fact. These included the suggestion that the parties had not reached an agreement to reduce the rent to $8,000 per month and further that there was an error in the finding that the Appellant had not offered to pay rent if it were returned into possession.
7. The Appellant also contended that there were errors of law in not considering all of the orders sought and that such failure constituted a lack of procedural fairness and therefore an error of law.
8. With respect to the contention that the Tribunal failed to apply the hearsay rule correctly, the Appellant contended that, in describing the Appellant's evidence as "hearsay", the Tribunal placed less weight on that evidence than it would have had it not identified such evidence as hearsay evidence.
9. The Appellant further contended that the Tribunal erred in holding that the Appellant's undertaking to pay damages was not supported by evidence that the Appellant could pay damages.

Reply to Appeal

1. The Respondent's Reply may be summarised as follows:
2. The matter for determination by the Tribunal was an urgent application for interim orders and the mere fact that orders are listed in the interim application does not make them interlocutory or interim by nature.
3. The essence of the interim orders being sought was that the retail shop should be returned from the possession of the Respondents to the possession of the Appellant.
4. The Tribunal was correct in focusing attention on the question of possession and in doing so focused on the "balance of convenience" issues.
5. The Tribunal was entitled to form the view that each party had a reasonably arguable case, or that there was a serious question to be tried which case or question would not be determined until the final hearing.
6. The Tribunal did not make errors of fact. There was evidence to support findings that the parties had failed to reach an agreement on rent reduction under the COVID rules and that the Appellant had not offered to pay any rent, at all, if returned to possession.
7. The Tribunal did not need to make a final decision on whether the non-payment of rent was a valid ground for the default notice.
8. The Tribunal's reference to "hearsay" evidence can be taken as a decision to place less weight on that evidence than that which was requested by the Appellant.
9. There was a lack of evidence of the ability of the Appellant to be able to pay any order for damages pursuant to an undertaking as to damages.
10. The appeal requires leave and the Appellant has not raised any issues of principle or questions of public importance. Nor does the Decision reveal any substantial miscarriage of justice.
11. It is telling that the Appellant does not seek to disturb the Tribunal's findings concerning delay, damages being an adequate remedy, the absence of evidence to support an undertaking as to damages and that the Respondent was trading a new business from the premises and mitigating losses.

Appeal Hearing

1. The Appellant's oral submissions, to the extent that they add to the material already referred to, may be summarised as follows:
2. There was evidence before the Tribunal that the parties had agreed to reduce the monthly rent from a figure in the order of $17,000 to $10,400. There was also evidence that the parties had agreed to further reduce the rent to $8,000 per month.
3. The Default Occurrence Notice issued by the Respondent was invalid and wrongly asserted that the Appellant owed the Respondent a figure in the order of $240,000. The Appellant claimed that by 15 June 2021, the rent was not in arrears. To the extent that rent had not been paid either in full or at all after the issue of the Notice of Default the explanation is that the Appellant was concerned that it would not be able to claim a credit for GST paid to the Respondent because the Respondent was not registered with the Australian Tax Office for GST purposes.
4. The Tribunal missed the essential point, which was to consider and make a decision about the validity of the default notice.
5. In those circumstances, the balance of convenience would have pointed to maintaining the status quo prior to the Respondent taking possession.
6. Damages were not an adequate remedy because no account was taken of the fact that goodwill in the business would have been lost and not recoverable by damages.
7. There was evidence to the effect that a letter purporting to show that Council had consented to the lease between the parties was fraudulent.
8. The Appellant submitted that the order dismissing the interim application should be set aside and that we, the Appeal Panel should redetermine the application.
9. During the Appellant's submissions, the Appellant sought to rely upon fresh evidence concerning the status of the Respondents' registration for GST purposes. We declined to accept such evidence, giving reasons orally to the effect that, in our view, such evidence was not relevant to a determination of the appeal.

Respondents' Submissions

1. The Respondents' oral submissions may be summarised as follows:
2. Even if the Respondent is not registered for GST there is no evidence to the effect that that would disentitle the Appellant to a credit for the amount of GST paid by the Appellant to the Respondent. The Respondent submitted that the Appellant is entitled to a GST credit whether or not the Respondent is registered.
3. The Respondent relies upon the Notice of Termination and submits that it is a valid notice. It did not only rely upon rental default but also other breaches such as the breach of the obligation to manage the property and to maintain insurance.
4. The Tribunal was obliged to consider whether there was a triable issue. The submissions of the parties concerning the validity or otherwise of the Notice of Termination demonstrates that there was a triable issue.
5. There was evidence to the effect that even if the Appellant was not in default in respect of rental payments by June 2021, there had been prior failures to make rental payments. In any event, the Respondents submit that the agreement between the parties was a monthly licence. The Notice of the Default of 23 November 2021 purported to terminate that monthly licence.
6. The evidence concerning reductions in rent demonstrated rent was not in fact reduced but rather deferred. The Respondents' invoices specifically identify the deferred amounts. Once the Appellant acknowledged that it was not subject to the protection of the COVID Regulation the deferred amounts became payable.
7. The Tribunal's determinations on the issue of the balance of convenience have not been the subject of this appeal, and therefore the appeal cannot succeed.

Submissions in Reply

1. The Appellant made brief submissions in reply which included an offer to pay $18,000 to the Respondent on a without prejudice basis. The Respondents rejected that offer on the basis that the amount allegedly owing was considerably higher.

Consideration

1. We are of the opinion that the appeal should be dismissed for the reasons that are set out in the following paragraphs. The Respondents claimed costs of the appeal and we are of the opinion that an order for costs should be made.
2. In our view, the Decision was interlocutory because it was an interim decision made during the course of the substantive proceedings which had been commenced, but not yet determined. The relevance of deciding whether the Decision is an interlocutory decision arises out of the provisions of s 80 of the Civil & Administrative Tribunal Act 2013 (NSW) (NCAT Act). Section 80(2)(a) provides that an appeal may be made, in the case of an interlocutory decision, with the leave of the Appeal Panel and s 80(2)(b) provides that in the case of any other kind of decision an appeal lies as of right on any question of law or with the leave of the Appeal Panel on any other grounds. In the case of an appeal under s 80(2)(b) questions of leave may be regulated by clause 12 of schedule 4 of the NCAT Act. As this appeal is an interlocutory decision requiring leave (and therefore regulated by s 80(2)(a)) it is not affected by the provisions of clause 12 schedule 4.
3. The Appeal Panel decision in Collins v Urban [2014] NSWCATAP 17 dealt with the principles governing the granting of leave to appeal. Although that decision was predominantly concerned with s 80(2)(b), it referred to principles applied by courts when considering the question of leave to appeal. In our view, those principles apply to appeals under s 80(2)(a). The general principles are summarised in Collins v Urban at [84] and are:
4. In order to be granted leave to appeal the Appellant must demonstrate something more than that the primary decision maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact.
5. Ordinarily, it is appropriate to grant leave to appeal only in matters that involve issues of principle, questions of public importance or matters of administration of policy which might have general application or an injustice which is reasonably clear. Further, it is appropriate to grant leave in matters that involve a factual error that was unreasonably arrived at, and clearly mistaken, or in a case where the Tribunal having gone about the fact-finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
6. In this case, none of those matters identified in Collins v Urban apply. There is no issue of principle or a question of public importance or matter of administration or policy having general application. There is no injustice either reasonably clear or otherwise. There is no factual error unreasonably arrived at, and clearly mistaken and the Tribunal cannot be said to have gone about its decision making process in an unorthodox manner.
7. In support of the conclusions expressed in the above paragraph we will now turn to the specific issues raised by the Appellant.
8. The Appellant placed significance on the fact that the Tribunal did not determine whether the default notices were invalid and contends that the Tribunal should have made a determination to the effect that the notices were not valid. In our view, such an approach would have constituted a denial of procedural fairness so far as the interests of the Respondents are concerned. In the substantive proceedings directions have been made for the parties to file and serve evidence and no doubt a significant issue in those proceedings will be whether the notices of default were valid or not.
9. In the context of considering an interim application, necessarily dealt with quickly, it would be potentially unfair on the parties to make a final determination on the efficacy of the notices of termination. To the extent that the Appellant required to know the outcome of its position without delay it could have made an application for the substantive proceedings to be dealt with on an expedited basis.
10. In the circumstances of the Tribunal considering whether an interim order should be made restoring the Appellant to possession of the subject premises, the Tribunal could only reasonably, in fairness to both parties, make the assumption that there was a triable issue between the parties as to the validity of the Notices of Termination, but not finally determine that issue. No error has been demonstrated by the Tribunal taking the approach that it did, which was in effect to not determine whether the Notices of Termination were valid.
11. The Tribunal correctly, in our view, concentrated its attention upon whether the balance of convenience pointed to an order being made in favour of the Appellant or whether the Appellant should remain "locked out" pending the final determination of the dispute between the parties. The Tribunal determined that damages were an adequate remedy. The Appellant contended otherwise submitting that damages would not adequately compensate the Appellant for loss of goodwill. That submission was not explained in greater detail and in our view any loss in the value of the Appellant's goodwill is capable of being compensated by an award for damages: see, for example, Pastizzi Cafe Pty Ltd v Hossain (No 4) [2011] NSWSC 808.
12. The Appellant placed weight upon the submission that rent was not in fact outstanding. The Respondent, on the other hand, claimed that there had been breaches of the obligations to pay rent and that any agreement to reduce rent contained within it an agreement that some rent would be deferred whilst the Appellant was protected by COVID legislation. The Respondents counsel took us to evidence in the appeal book intended to show that rent had been deferred, not waived (see for example pages 377, 378 and 379) and that the Appellant had not kept its rent payments up to date (see pp 396 and 397).There was sufficient evidence to make it open for the Tribunal to find, as it did at [15], that the Appellant had been in default and that the default was "persistent and significant".
13. The Appellant's reference to the assertion that the evidence of the Council having given consent to the lease between the parties was based upon a fraudulent letter does not, in our opinion, assist the Appellant. If the truth is that the Council did not give consent the Appellant, the Appellant did not explain why we should enforce the arrangement between the parties if that arrangement was liable to be set aside on the basis that the Council had not given consent.
14. The Appellant's submissions that the Tribunal was in error to describe the relevant evidence as "hearsay evidence" was, in our view, misconceived. The Tribunal referred to such evidence as "hearsay" merely as a way of describing the fact that the evidence was not persuasive because it was in the nature of indirect evidence. The Tribunal is not bound by the rules of evidence, but obviously must decide cases on the basis of evidence. The Respondent disputes the assertion that Council did not give consent. There is no error in the Tribunal's determination that the Appellant's evidence did not support the granting of interim relief.
15. Further, we are not satisfied that the Tribunal assigning little weight to an undertaking as to damages, given only in the course of argument at a hearing and unsupported by evidence that it could be met, warrants a grant of leave.
16. As the Tribunal said at [24] of the Decision, relief against forfeiture is a discretionary power that must be exercised having regard to each particular set of circumstances. The factors that the Tribunal took into account do not display any error and do not justify the granting of leave to appeal.
17. Accordingly, leave to appeal will be refused and the appeal will be dismissed.
18. The Respondents seek costs of the appeal and in their written submissions sought indemnity costs. At the hearing the Respondents said that indemnity costs were only sought in respect of the application to adduce fresh evidence. As indicated above, we have refused to allow fresh evidence. We do not think that that issue has significantly added to the costs of the Respondents and do not propose to make an order for indemnity costs.
19. However, for the reasons set out in the next paragraph we are of the opinion that the Respondents should have their costs of the appeal on the ordinary basis.
20. The Civil and Administrative Tribunal Rules (2014) NSW provide, at rule 38, that the Tribunal may award costs even in the absence of special circumstances where the amount in issue in a matter of this nature exceeds $30,000. That is the case here in that in the substantive application the Appellant seeks an order that it is not obliged to pay approximately $240,000 and also seeks damages of $590,000. By rule 38A, the position in rule 38 is effectively imported into our consideration of costs in the appeal, such that if the amount claimed or in dispute remains in excess of $30,000 in the appeal, the default position in s 60 of the NCAT Act, that each party pay their own costs, is displaced: Allen v TriCare (Hastings) Ltd [2017] NSWCATAP 25.
21. Here, what the Appellant put in issue in the appeal; that is what was "claimed or in dispute" was not a monetary sum, or an issue able to be considered by reference to a monetary sum.
22. Rather, the Appellant sought the orders set out in [3] above.
23. In those circumstances having regard what was said in Allen v Tricare, we are not of the view that r 38A applies and there needs to be special circumstances warranting an award of costs for the Respondents to succeed in claiming their costs. What is meant by that expression, and how it is to be applied, is well established: see, for example, The Owners - Strata Plan No 63731 v B & G Trading Pty Ltd (No 2) [2020] NSWCATAP 273.
24. In our view, there are special circumstances warranting an award of costs established here.
25. The appeal was unmeritorious, but more particularly it was prosecuted by a represented party without regard to several issues, each of which could, on its own, and cumulatively have been fatal to the appeal. The most significant of these is that the Appellant merely asserted that damages were not an adequate remedy, but neither supported that allegation by cogently developed argument nor advanced it as a ground of appeal. Once it is acknowledged that the Tribunal at first instance made that unchallenged finding, weighed with the other unchallenged findings made by the Tribunal such as the Appellant's "unreasonable" delay in bringing its application at first instance, it should have been apparent that the Tribunal's decision fell within its proper discretion. Further, the Appellant lodged a significant volume of material in the appeal and devoted a large portion of its argument to the issue of whether the Tribunal should have determined that the Notices of Default were invalid. For the reasons we gave at [21] to [23], that was not warranted.
26. The Respondents sought their costs in a lump sum, but we are not satisfied that the evidence as to the obligation of the Respondents to pay the amount claimed is sufficiently supported by evidence for us to make such an order.
27. Accordingly, we make the following orders: 1. Leave to appeal refused. 2. Appeal dismissed. 3. The Appellant is to pay the Respondent's costs of the appeal on the ordinary basis in an amount agreed or as assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 08 June 2022