285 ALR 27
Bank of New South Wales v The Commonwealth (Bank Nationalisation Case) [1948] HCA 7
(1948) 76 CLR 497
Calderbank v Calderbank [1975] 3 All ER 333
Carr v Western Australia [2007] HCA 47
(2007) 232 CLR 138
Source
Original judgment source is linked above.
Catchwords
(2012) 248 CLR 1285 ALR 27
Bank of New South Wales v The Commonwealth (Bank Nationalisation Case) [1948] HCA 7(1948) 76 CLR 497
Calderbank v Calderbank [1975] 3 All ER 333
Carr v Western Australia [2007] HCA 47(2007) 232 CLR 138(1968) 121 CLR 45
Gerlach v Clifton Bricks Pty Limited [2002] HCA 22(2002) 209 CLR 478)
K & S Lake City Freighters Pty Limited v Gordon & Gotch [1985] HCA 48(1985) 157 CLR 309
Licul v Corney [1976] HCA 6(1976) 180 CLR 213
Maqableh v Kaklamanis [2021] NSWCATAP 385
Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48(2011) 244 CLR 427
Mills v Meeking [1990] HCA 6[1990] 169 CLR 21491 ALR 16
New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50[1998] 194 CLR 355
Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue (Vic) [2001] HCA 49(2001) 207 CLR 72
SAS Trustee Corporation v Miles [2018] HCA 55[2017] 91 ALJR 936347 ALR 405
Victims Compensation Fund Corporation v Brown [2003] HCA 54(2003) 77 ALJR 1797
Judgment (15 paragraphs)
[1]
lls v Meeking [1990] HCA 6; [1990] 169 CLR 214; 91 ALR 16
New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50; (2016) 260 CLR 232
New South Wales Land & Housing Corporation v Orr [2019] NSWCA 231
Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; [1998] 194 CLR 355
Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue (Vic) [2001] HCA 49; (2001) 207 CLR 72
SAS Trustee Corporation v Miles [2018] HCA 55; (2018 )361 ALR 206
Sneaker Boy Retail Pty Ltd v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141
State of Victoria v Turner [2017] 17 VR 217.
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; [2017] 91 ALJR 936;
347 ALR 405
Victims Compensation Fund Corporation v Brown [2003] HCA 54; (2003) 77 ALJR 1797; 201 ALR 260
Texts Cited: Beazley, Vout & Fitzgerald, Appeals and Appellate Courts in Australia and New Zealand (2014)
Category: Principal judgment
Parties: Sheridan Martin & Raelene Sidgreaves (Appellants)
Big Country Developments Pty Limited ACN 000 235 923 (Respondent)
Representation: Counsel:
N Simone (Respondent)
[2]
Solicitors:
Gibson Howlin Lawyers (Appellants)
And Legal (Respondent
File Number(s): 2022/00146007; 2022/00206976
Publication restriction: Nil
Decision under appeal Court or tribunal: Civil and Administrative Tribunal
Jurisdiction: Commercial and Consumer Division
Citation: N/A
Date of Decision: 23 December 2021
Before: M Tibbey, Senior Member
File Number(s): COM 21/26399
[3]
REASONS FOR DECISION
By Notice of Appeal filed on 20 May 2022 Sheridan Martin and Raelene Sidgreaves (Appellants) appealed against orders made in the Commercial and Consumer Division of the Tribunal (Tribunal) on 22 April 2022 in proceedings between the Appellants and Big Country Developments Pty Limited ACN 000 235 923 (Respondent).
By Reply to Appeal filed 8 June 2022 the Respondent sought the dismissal of the Appellants' appeal and opposed the granting of an extension of time to appeal the Tribunal's decision.
On 13 July 2022, the Respondent filed a Cross Appeal against the orders of the Tribunal. We will refer to the Respondent Cross-Appellant as the Respondent throughout these reasons.
The Appeal Panel was informed during the hearing of the proceedings that approximately $10,000 has been paid by the Appellants to the Respondent pursuant to the orders of 22 April 2022. It is common ground that, if the Appellants' appeal succeeds, and the Respondent's cross appeal fails, the Appeal Panel will make an order pursuant to s 81(1)(d) of the Civil and Administrative Tribunal Act 2013 (NSW) (CAT Act) setting aside the order of the Tribunal that the Appellants pay to the Respondent the sum of $23,780.83 and make an order that any monies paid by the Appellants to the Respondent be repaid to them. If the Appellants' appeal fails, and the cross appeal succeeds, pursuant to s 81(1)(d) of the CAT Act, the order of the Tribunal will be set aside, and in lieu thereof, an order made that the Appellants pay to the Respondent the sum of $34,730.85. If the appeal and the cross appeal fail the Appellants will be liable to pay the Respondent the balance of the sum of $23,780.83 ordered by the Tribunal.
The appeal commenced to be heard on 25 July 2022, but due to technical difficulties, was unable to be concluded on that day. The appeal was ultimately heard on 7 September 2022, when the Appeal Panel's decision was reserved.
These are the reasons of the Appeal Panel for allowing the appeal and dismissing the cross appeal.
It was sensibly agreed that, pursuant to s 50(2) of the CAT Act, the costs of the appeal and cross-appeal could be determined "on the papers" and without an oral hearing, and further agreed that it was appropriate that a timetable for written submissions be ordered.
[4]
The decisions of the Tribunal
As the Respondent's Reply to Appeal Notice asserts that time to appeal commenced to run upon the publication of the decision of the Tribunal of 23 December 2021 (the first Decision), rather than from the date of the Tribunal's decision determining the proceedings of 22 April 2022 (the second Decision), and as the former decision was the foundation for the latter decision, it is appropriate to refer to the reasons of the Tribunal of both 23 December 2021 and 22 April 2022.
[5]
The first Decision
The orders of the Tribunal of 23 December 2021 provided for the filing of written submissions with respect to:
"(a) the amounts payable to give effective to the reasons for decision and the basis upon which the amounts are payable;
(b) any ancillary or consequential Orders required;
(c) costs, having regard to s 60 of the Civil and Administrative Tribunal Act 2013;
(d) whether you consent to further determination and final orders being made "on the papers" without a further oral hearing."
As is not in doubt, the parties made further submissions pursuant to those directions which informed the making of the orders of the Tribunal of 22 April 2022.
The Tribunal identified [3] the application by the present Respondent as being for payment of rent in the sum of $34,076.35, a Local Court filing fee of $507, costs of $554.40 and interest at the rate of 7% per annum until the date of Judgment, thereafter post-judgment interest at the rate set out in Rule 36.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).
The background to the proceedings was recorded by the Tribunal in terms which are not controversial for present purposes. The Respondent owned premises known as Shop 1/73 Longueville Road, Lane Cove (the premises) [4]. The partnership of the Appellants rented those premises [5], first entering into a Lease with the Respondent on or about 1 December 2014 [7]. The Lease was renewed thereafter for periods which ended on 30 November 2019, whereafter the Appellants "held over on a month to month basis" [7].
The Appellants fell into arrears of rent, the sum of $34,730.85 sought by the Respondent representing the arrears [9]. We do not understand that sum to have ever been controversial.
The history of correspondence between the parties, commencing on 19 February 2020, was referred to in detail by the Tribunal. On 19 February 2020 the Respondent wrote to the Appellants, outlining their failure to pay the total rent owed for the first two months in the holding over period [10]. On or about 3 April 2020 the Appellants emailed the Respondent requesting that they pay no rent but did not provide evidence of how their turnover was being affected by Covid-19 as compared with trade prior to Covid-19 [11]. The Respondent communicated with the Appellants by telephone, informing them that they would need to pay the rent or the holding over period would cease "given the rental arrears which dated back before Covid restrictions were in place" [12].
[6]
The second Decision
In its reasons of 22 April 2022 [2], the Tribunal rejected the assertion of the Appellants that there had been "an enforceable settlement prior to the substantive reasons for decision being delivered". We do not understand that either party suggests that issue assumes significance for present purposes. The Tribunal recorded [3] that both parties agreed to have the proceedings "finally determined" without an oral hearing pursuant to s 50(2) of the CAT Act.
The Tribunal referred to the submissions of each party with respect to the quantum of the Respondent's entitlement in the light of the findings made in the first Decision. The Tribunal considered the submissions of the parties and, determined [10] that the Respondent was entitled to recover $20,938.21. The Tribunal further found [11] that "as a matter of discretion and in the interests of finality, no interest is awarded after 31 January 2022" but that the interest payable to 31 January 2022 was $2,269.05.
Sensibly, the submissions of Counsel in the appeal do not engage in detail with the components of the Tribunal's award. The Appeal Panel apprehends the outcome of the appeal and cross appeal will determine which parts, if any, of the Tribunal's orders are not disturbed.
The Tribunal ordered the Appellants to pay 75% of the Respondent's costs as agreed or assessed on the ordinary basis. The Appellants challenge that order. The reasons of the Tribunal for making the order are thus relevant.
The Tribunal identified the submissions of the parties [12]-[16] and found [17] that the Respondent had been "largely successful in its claim" and that, as the claim was for an amount of over $30,000, the Tribunal may award costs in the exercise of its discretion". It is not in doubt that, in the circumstances, Regulation 38 of the Civil and Administrative Tribunal Regulations 2014 (NSW) (CAT Regulations) was engaged.
The Tribunal took into account [18] the term of the lease of the premises that should there be a "need to enforce payment of rent", the Appellants would meet the Respondent's "reasonable legal costs" being a matter which the Tribunal took into account in the exercise of its discretion. For the reasons which it provided [19] the Tribunal declined to award indemnity costs. Neither party suggests that determination assumes significance for present purposes.
[7]
Whether the Appellants require an extension of time and/or leave to appeal
Both parties' written submissions engage with whether time to appeal expired on 22 January 2022, as the Respondent contends, or whether, as the Appellants contend, time to appeal did not run until the decision of the Tribunal on 22 April 2022 and, irrespective of any time issues, whether the Appellants required leave to appeal.
Understandably, given that, if the Appellants were out of time with their appeal, the Respondent was out of time with its cross appeal. Counsel for the Respondent was appropriately constrained in his oral submissions with respect to these issues.
Consistent with the usual practice, the Appeal Panel indicated that, if an extension of time and/or leave to appeal were required, that issue would be resolved by the determination of the merits of the Appellants' appeal. If leave is required, and the appeal has no merit, there would be no utility in granting leave. Conversely, if the leave is required, and the Appellants demonstrate merit, the prejudice to the Respondent of granting leave would not disincline the Appeal Panel to do so.
An appeal lies from a judgment or order of a Court or Tribunal (Bank of New South Wales v The Commonwealth (Bank Nationalisation Case) [1948] HCA 7; (1948) 76 CLR 497), and not from the reasons for that judgment or order as the reasons are not an operative judicial act (Driclad Pty Limited v Federal Commissioner of Taxation [1968] HCA 1; (1968) 121 CLR 45). A finding or ruling by a Court of Tribunal will not be appealable if no judgment or order is made in consequence thereof (State of Victoria v Turner [2017] 17 VR 217). Why that is so is readily apparent: appellate intervention is to cure legal error: not to vindicate the reputations or appease the hurt feelings of the parties to litigation.
Where the reasons for a decision, or a finding or ruling result in the making of a judgment or order, an appellate Court or Tribunal will consider them in order to determine whether appealable error is established (Beazley, Vout & Fitzgerald, Appeals and Appellate Courts in Australia and New Zealand (2014) p 17). Although, in the first Decision, the Tribunal made findings of fact and gave reasons for those findings of fact, it only made directions for further submissions, prior to making orders determining the proceedings. It is readily apparent that no orders made by the Tribunal in its first Decision gave either party enforceable rights.
[8]
Principles governing the appeal and cross appeal
The appeal and cross-appeal are governed by the provisions of s 80 of the CAT Act. Pursuant to s 80(2)(b) of the CAT Act, an appeal, or cross appeal, lies as of right on any question of law. Properly, each party concedes that, if successful, the appeal or cross-appeal will have succeeded on a question of law. Little needs to be said about what constitutes a question of law.
Relevantly for present purposes, in Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at 13, the Appeal Panel said that "questions of law" included "whether a wrong principle of law has been applied". If successful, the appeal or cross appeal will have succeeded on the basis that the Tribunal erred in law.
In the event that the appeal, or the cross-appeal is successful, rather than remit the proceedings for rehearing, the parties seek, pursuant to s 81(1)(d) of the CAT Act that the decision under appeal be set aside and another decision substituted for it. Given that there is no dispute between the parties as to the orders which should be made in the event of the appeal or the cross appeal succeeding, and, sensibly, no suggestion that any further evidence would be likely to be adduced at a rehearing, and that the costs of a rehearing would be disproportionate to the amount involved, the Tribunal is comfortable to proceed pursuant to s 81(2)(d) of the CAT Act in the event that the appeal or the cross-appeal is successful.
[9]
The Appellants' appeal
The grounds of appeal relied upon by the Appellants, as subsequently amended without opposition, provided:
"(i) the Tribunal erred in law by finding that the lease was not an impacted lease, within the meaning of Regulation 1, for the whole of the period from 1 May 2020 to 30 October 2020;
(ii) the Tribunal erred in law by holding that Regulation 1 and its successors applied to the Appellants or the circumstances of the lease, only from 28 August 2020, and not for the entire prescribed period (within the meaning of Regulation 1 and its successors);
(iii) the Tribunal erred in law by holding that the failure of the Landlord to comply with its obligation to negotiate did not prevent it from recovering rent for the period prior to 28 August 2020;
(iv) the Tribunal erred in law by failing to hold that the landlord was prevented from commencing the proceedings by Regulation 1 and its successors in relation to the rent owing for the whole of the prescribed period;
(v) the Tribunal erred in law by failing to have regard to the submission of the Appellants that clause 14 of Regulation 3 provides that the Appellants were impacted lessees for the whole of the prescribed period and therefore the landlord was prevented from recovering rent for that entire period;
(vi) the Tribunal erred in law by failing to provide adequate or sufficient reasons for its decision."
We do not understand ground (vi) to have ultimately been pursued with any enthusiasm. The Appeal Panel is not persuaded to uphold this complaint. In our view the decision did not offend anything said by the Court of Appeal in New South Wales Land & Housing Corporation v Orr [2019] NSWCA 231.
The substance of the Appellants' grounds of appeal confirms the adequacy of the reasons of the Tribunal in its first Decision, and why the Tribunal decided as it did in its second Decision is not in doubt in the light of the reasons published in its two Decisions. Significantly, the Appellants do not suggest that the Tribunal failed to make any material finding of fact, their complaint being that the Tribunal erred in its application of the law to the facts as found.
The Tribunal adequately exposed the process of its reasoning with respect to the critical legal issues in the proceedings. The issue for the Appeal Panel is whether it erred in doing so in either of the ways asserted by the parties. Ground (vi) does not require further consideration.
[10]
Consideration
In Darzi Robb J closely considered the "COVID-19 regulatory regime". His Honour referred [112] to Regulation 2 which came into effect on 24 October 2020 and held [114] that the savings provision in clause 14 "had the effect that, if Darzi was an impacted lessee at any time during the period of operation of the COVID-19 Regulation (Number 1), it was taken to be an impacted lessee for the whole of that period. That provision makes it clear that a lessee may be an impacted lessee if the definition of impacted lessee was only satisfied for a closed period". His Honour added [115] that, "the relevant parts of clauses 12 to 14 of that Regulation [ie: Regulation 3] were the same, mutatis mutandis, as the equivalent clauses in the COVID-19 Regulation (No 2)…".
In considering the application of Regulation 1, His Honour, having referred [117] to the meaning of "impacted lessee" in clause 4 of the Regulations found [118] that the lessee "was in fact an impacted lessee for the months of May and June 2020" as it "qualified for the JobKeeper scheme" and its turnover in the 2018-2019 financial year was less than $50 million dollars. It is clear, and we perceive not contradicted by anything later said by His Honour, that being an "impacted lessee" was an issue of fact, and not dependent upon satisfying a lessor of that fact.
His Honour rejected [132] the lessor's contention that the lessee had "provided insufficient evidence that it was an impacted lessee for the purposes" of the Regulations. His Honour said:
"In so far as Nolde relied, in its second s129 notice, on Darzi having provided insufficient evidence that it was an impacted lessee for the purposes of the COVID-19 Regulation (Number 1), I reject that argument, and also rejected the more general argument that the financial information provided by Darzi to Nolde was insufficient to enable Nolde to comply with its obligations to conduct a good faith renegotiation of the rent with Darzi."
His Honour further said [134] that the overarching principles in the Code require the parties to leases to "act in an open, honest and transparent manner, and (ii) each provide sufficient and accurate information within the context of negotiations to achieve outcomes consistent with this Code. Given the urgency of the situation, that meant that lessees would not necessarily be provided to produce extensive financial information to lessors, particularly if that information was not readily available and had to be prepared on a bespoke basis to satisfy the requests of lessors. To a considerable extent, it may be necessary for lessors in the renegotiation process to rely upon the honesty of lessees and apparently authentic financial information distilled from the accounting records of lessees".
[11]
The respondent's cross-appeal
It is necessary to consider the cross appeal. In support of the cross appeal the Respondent submitted (37) that:
"To the extent that an error arises, it arises in the failure to have regard to and apply the deeming effect of clause 7(7) of Regulations 2 and 3 in respect of any prescribed action which was taken by the Respondent. Had clause 7(7) of Regulations 2 and 3 been applied appropriately then the entire amount claimed by the now Respondent at first instance was capable of being recovered following the Appellants' breaches of clauses 7(4) and (5) in failing to respond to the request for [sic] renegotiate on 12 May 2021. Accordingly, the first instance Tribunal ought to have awarded the now Respondent its entire claim for unpaid rent, being a claim for $34,730.85 plus interest and costs."
The ground of appeal pursuant to which the Respondent agitated its cross-appeal reflected that summary. The Appellants understood the terms of and basis for the Respondent's cross-appeal and, properly, did not suggest that, if established, it did not raise a question of law.
The Appellants disputed (para 34, submissions 22 July 2022) that, even if it was possible for the Respondent to enliven the provisions of clause 7 of the Regulation after the last of the Regulations ceased to be in effect, on the facts, the Tribunal would not accept that it had done so.
As we have earlier recorded, at no time prior to the Appellants vacating the premises did the Respondent accede to any request to renegotiate the rent payable by the Appellants pursuant to the lease. It is not in doubt that, prior to May 2021, the Respondent declined to participate in any process which might have fallen within the terms of clause 7 of the Regulations.
On 26 April 2021 (Appellants' Appeal Bundle p 93) the Appellants' solicitors wrote to the Respondent's solicitor and requested "pursuant to clause 7 of the Regulation (Number 3), that our respective clients renegotiate the rent payable under the lease of the property". Regulation 3 was then in force and remained so until 2 July 2021. The Appellants had vacated the premises six months prior to their request to renegotiate the rent for the period from 24 April 2020 to 30 October 2020.
On 12 May 2021 the solicitors for the Respondent emailed the Appellants' solicitors and responded to their "request for mediation dated 26 April 2021". The email raised a number of matters which are not relevant for present purposes and under the heading "Mediation", stated:
"We do not admit that the Regulation applies. Nevertheless our client is prepared to negotiate in good faith. Given the proceedings on foot (in the Local Court at that time) and given the lease has now come to an end, we submit that any negotiation ought to be directed to attempting to resolve the proceedings on foot, being Local Court of New South Wales proceedings Number 2021/0067009. We propose that the parties meet for an informal settlement conference to resolve the proceedings at a time agreeable to all."
[12]
The costs appeal
The Appellants submitted (paras 139-141, 28 June 2022) that, if the appeal is allowed, the basis upon which the Respondent was held to be entitled to a partial costs order would dissolve and, rather than having been partially successful, the Respondent will have been wholly unsuccessful.
The Respondent submitted (41) that its costs should continue to be payable because "the parties have contractually agreed on a position in respect of costs in the event of a dispute", the basis of that submission being the lease between the parties (Exhibit PH-1, p43, clause 5.1.8) by which the Appellants were submitted to have agreed that they would pay the Respondent's "reasonable legal costs relating to the default" of monies under the lease. It was further submitted (42) that the "Appellants should be held to the contractually agreed position on costs".
The reasons of the Tribunal with respect to costs referred to the Respondent's reliance upon the provision of the lease upon which the Respondent continues to rely. The Tribunal rejected the Respondent's reliance upon a "Calderbank offer" (Calderbank v Calderbank [1975] 3 All ER 333). The Appeal Panel does not understand that the Calderbank offer should assume significance for present purposes.
The Tribunal reiterated [18] that "It was a term of the Lease that, should there be a need to enforce payment of rent, that the reasonable legal costs of the Applicant would be met by the Respondents. This is a factor that the Tribunal takes into account in the exercise of its discretion as to costs". On a balanced reading of the Tribunal's reasons, the partial costs order in favour of the Respondent was made in reliance upon that fact or circumstance. The lease which contained that provision was entered into well before the Covid-19 pandemic, and the introduction of the Covid-19 Regulations. Moreover, it was the Respondent's considerable measure of success in the proceedings before it which led the Tribunal to find that the Appellants should pay the Respondent's "reasonable legal costs" and thus make the costs order.
The costs of the proceedings before the Tribunal being governed by Regulation 38, as the parties agree that they were, the Respondent's success in the Tribunal, in the absence of disentitling conduct, and none has been suggested, would have been sufficient basis for the costs order which the Tribunal made, even though, mathematically, it reflected the success of the Respondent to a marginally greater extent than the Respondent actually achieved.
[13]
Orders
1. The appeal is allowed.
2. The cross-appeal is dismissed.
3. Pursuant to s 81(1)(d) of the Civil and Administrative Tribunal Act 2013 (NSW) Order 1 made by the Tribunal on 22 April 2022 is set aside, and, in lieu thereof, and subject to the retention of the sum of $507, the Respondent is ordered to forthwith repay to the Appellants all monies paid to it by the Appellants pursuant to the said order.
4. Decision with respect to costs of the proceedings before the Tribunal at first instance and of the appeal and cross-appeal is reserved.
5. Within 14 days, the Appellants file and serve written submissions not exceeding 7 pages in length with respect to the costs of the proceedings before the Tribunal at first instance and of the appeal.
6. Within 21 days, the Respondent file and serve written submissions not exceeding 7 pages in length with respect to the costs of the proceedings before the Tribunal at first instance and of the appeal,
[14]
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
[15]
Amendments
30 September 2022 - Case title corrected.
Cross Appeal case number added.
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: 30 September 2022
Legislation Cited (8)
Civil and Administrative Tribunal Regulations 2014(NSW)
Commercial Leases (COVID-19) Regulation 2020(NSW)
Retail and Other Commercial Leases COVID-19 Regulation 2020(NSW)
The Appeal Panel has had before it, in the Appeal Books of each of the Appellants and the Respondent which comprise all of the material which was before the Tribunal. The Appellants filed written submissions in support of the appeal on 28 June 2022. The Respondent filed submissions in answer to the Appellants' submissions in the appeal, and submissions in support of its cross-appeal on 13 July 2022. The Appellants filed reply submissions on 25 July 2022 and further submissions, pursuant to the orders of the Appeal Panel of 25 July 2022, on 1 August 2022. Counsel for each party spoke to their written submissions at length on 7 September 2022.
On or about 27 July 2020 the Respondent informed the Appellants that it did not intend to continue the holding over period and required vacant possession of the premises from 1 August 2020.
An extension of time to 1 September 2020 was offered if all rental arrears were paid, which they were not. The Respondent allowed a further extension. Payments between May and October 2021 totalling $5,338.07 were received by the Respondent [14]. The Appellants ceased to occupy the premises on 30 October 2021 [15].
The Tribunal referred [16]-[18] to the three Regulations which were relevant to the proceedings, they being the Retail and other Commercial Leases (COVID-19) Regulation 2020 (NSW), the Retail and other Commercial Leases (COVID-19) Regulation (No 2) 2020 (NSW), and the Retail and other Commercial Leases (COVID-19) Regulation (No 3) 2020 (NSW). The Tribunal referred to the Regulations respectively as "Regulation 1", "Regulation 2" and "Regulation 3" and to them collectively as "the Covid Regulations". In the interests of clarity, the Appeal Panel adopts the same nomenclature.
Regulation 1 applied from 24 April for a period of 6 months. Regulation 2 was in force from 24 October 2020 until 2 January 2021. Regulation 3 was in force from 2 January 2021 until 2 July 2021.
The Tribunal referred to the "Arguments of the parties" [19]-[35]. As the Appeal Panel does not understand that either party's case on appeal is ultimately materially different to the cases advanced in the Tribunal, and as the Appeal Panel will need to engage in detail with the submissions made before the Tribunal, we need not reiterate the parties' submissions in these reasons.
Under the heading "Findings", the Tribunal exposed its findings with respect to the proceedings [36]-[64]. After reiterating the history of the Appellants occupation of the premises, the Tribunal recorded [39] that on 9 March 2021 the Respondent commenced proceedings in the Local Court for arrears of rent in the sum of $34,730.85, plus filing fee of $507, costs of $654.40 and interest.
The Tribunal rejected [41] the Respondent's contention that none of the three Covid Regulations applied because the Appellant's were "holding over" and therefore "nothing occurred that was "under the lease"". The Tribunal found [41] that the Appellants had "remained in occupation pursuant to the continuing terms of the Lease and that those terms remained operative even though the Lease was in a holding over period". That finding is not controversial for present purposes.
The Tribunal referred [42] to a letter from the Manager of Commercial Operations of the Local Council advising the Appellants to provide documents including a "snapshot" of the income of their business as a percentage change year on year and month on month including … with any supporting documentation". The Tribunal found [43] that it was not until 28 August 2020 that the Respondent had any statement that the Appellants were "impacted lessees" for the purpose of Regulation 1 and no evidence, beyond assertion, that they were in that position for the purpose of clause 7 of Regulation 1.
We will refer later in these reasons to clause 7 of Regulation 1, which was concerned with the "obligation to renegotiate rent and other terms of commercial leases before prescribed action". Prescribed action included, pursuant to Regulation 3, enforcing the rights of a lessor pursuant to a commercial lease of premises.
The Tribunal found [44] that, in the circumstances to which it referred, the Appellants were not entitled to any rent reduction due to Covid-19 for the period May to August 2020, "consistent with clause 7(3B) of Regulation 1, which provides the consequences of the failure of a lessee to provide information pursuant to Regulation 7(3A) of Regulation 1". The Tribunal accordingly found [45] that the Appellants owed the Respondent rent of $20,938.21, being the rent unpaid for that period, and that the Respondent was entitled to commence proceedings for payment of that amount. We do not understand the quantum of the amount found to be payable by the Appellants to be controversial in the appeal.
The Tribunal recorded [46] that, by letter to the Respondent written by a lawyer on behalf of the Appellants on 28 August 2020, the Appellants asserted that "their business was Covid impacted", in support of which claim figures were "asserted as to the extent of the downturn, part of an activity statement was provided to the Applicant and evidence was provided that Ms Sheridan Martin was in receipt of JobKeeper". Although there was no evidence that the Appellants' turnover was less than $50 million, the Tribunal inferred that it was. No part of the appeal involves any challenge to that assumption.
The Tribunal found [47] that, by providing the evidence they did on 28 August 2020, the Appellants "complied with the terms of Regulation 1, and therefore their lease became "Covid impacted" within the terms of Regulation 1, and also for the purposes of Regulations 2 and 3. The Tribunal recorded, accurately, there is no dispute [48] that the Respondent did not reply to the Appellants' letter of 28 August 2020. The Tribunal recorded [49] that the Respondent continued to require the Appellants to vacate the premises, which they did on 30 October 2020 [50], thereby marking the end of their occupation of the premises [51].
The Tribunal found [52] that between 1 September and 30 October 2020 the rent owed by the Appellants was $13,138.14, a figure which was not controversial before the Tribunal and has not been controversial in the appeal.
The Tribunal found [53] that the "lease was Covid impacted for the period between 1 September and 30 October 2020" in accordance with the Regulation. The Tribunal then considered the Regulations and the National Cabinet Mandatory Code of Conduct SME Commercial Leasing Principles During Covid-19 (the Code) of the Federal Government, which were given "legal effect" in New South Wales on 24 April 2020 by Regulation 1 [54].
The Tribunal referred to the decision of Robb J in Darzi Group Pty Limited v Nolde Pty Limited [2021] NSWSC 774 (Darzi), in which His Honour considered Regulation 1 of the Code and concluded at [128]-[130] that a tenant does not have to pay full rent during the prescribed period if he/she is an "impacted tenant", as to require abiding by the substantive terms of the lease during that period would "defeat the purpose of the legislation".
By reference to the statement of Robb J in Darzi at [95], the Tribunal held [57] that "so long as a business has qualified for JobKeeper and has a turnover of less than $50 million, it is an impacted lessee", and cited Robb J's statement that "more complicated financial information may be required to enable the terms of the rent reduction, waiver and deferral to be negotiated". The Tribunal referred [58] to Robb J's statements (at [121], [138] and [142] in Darzi), that a landlord cannot bring proceedings for recovery of rent from a Covid impacted entity until 1 July 2021 and, if the landlord fails to negotiate, the landlord is never able to take a prescribed action to recover underpayments of rent.
The Tribunal held [60] that "consistent with His Honour Justice Robb's reasoning in Darzi, the Tribunal finds that the failure to engage in reasonable negotiations when requested to do so in relation to the period during which the lease was Covid impacted prevents the Applicant from being awarded arrears in rent for the Covid impacted period in these or other proceedings".
The Tribunal rejected [61] the assertions of the Respondent with respect to whether the Appellants qualified for JobKeeper as "it appears that they were found at the time (28 August 2020) to qualify for JobKeeper and evidence of that was provided" to the Respondent. The Tribunal also found [62] that the "difficulty in quantifying any possible rent reduction is no answer to the failure to observe the obligation to negotiate during the prescribed period, as embodied in the Code".
The Tribunal found [63] that "as part of the claim has been upheld and it was necessary for the Applicant to bring the claim in order to obtain an award, the filing fee and interest of the amount found to be due and owing are payable by the Respondents". The Tribunal declined [64] at that stage to make an order with respect to legal costs.
The Tribunal referred [21] to the agreement of both parties that the Appellants pay the sum of $507, being the filing fee in the Local Court. In view of that agreement, the obligation to pay that sum is not controversial.
The first Decision of the Tribunal was, in our view, interlocutory and did not finally determine the rights of the parties in the substantive proceedings (Licul v Corney [1976] HCA 6; (1976) 180 CLR 213). The orders were procedural to facilitate further submissions which, on 22 April 2022, (any appeal aside) finally determined the rights of the parties in those proceedings. The legal, rather than the practical effect of a judgment or order determines whether the judgment or order is final or not [93] (Carr v Finance Corporation of Australia Limited (No 1) [1981] HCA 20; (1981) 147 CLR 246). The legal and practical effect of the first Decision of the Tribunal did not render it a final decision.
A judgment or order which is not final is an interlocutory judgment (Roy Morgan Research Centre Pty Limited v Commissioner of State Revenue (Vic) [2001] HCA 49; (2001) 207 CLR 72). In our view, the first Decision of the Tribunal was procedural, and thus interlocutory. As the findings in the first Decision provided the basis for the second Decision, they can be challenged in the appeal and cross appeal against the orders of 22 April 2022 (Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; (2011) 244 CLR 427; Gerlach v Clifton Bricks Pty Limited [2002] HCA 22; (2002) 209 CLR 478).
For the foregoing reasons, the Appeal Panel is satisfied that the Appellants do not require an extension of time to appeal or a grant of leave to appeal against the second Decision, and, consequently, although not sought, the Respondent does not require an extension of time to cross-appeal the second Decision of the Tribunal. Given that, if successful, the appeal or the cross appeal will have succeeded on a question of law, no other consideration of leave to appeal is necessary.
Sensibly, the Appellants' submissions commenced by referring to the Covid Regulations. Regulation 1, which was substantially, but not identically, repeated in subsequent Regulations, defined a "lessee" as "a person who has the right to occupy premises or land under a commercial lease". A "commercial lease" was defined as a retail shop lease, subject to exceptions which are not relevant for present purposes. The Appellants were at all material times a lessee. Their lease of the premises was at all material times a commercial lease as defined in Regulation 1.
Clause 4(1) of Regulation 1 relevantly provided that a lessee would be an "impacted lessee" if:
"(a) the lessee qualifies for the JobKeeper scheme;"
and
"(b) the following turnover in the 2018 2019 financial year was less than 50 million dollars"
Clause 5 of Regulation 1 provided that the Regulation applied to "the exercise or enforcement of rights under a commercial lease in relation to circumstances occurring during the prescribed period." The prescribed period of Regulation 1 was from 24 April 2020 to 24 October 2020. It is not in issue that the recovery of rent sought by the Respondent was for a period of 6 months from 24 April 2020. It is not in issue that the recovery of rent was a "prescribed action" pursuant to clause 6(1)(a) of Regulation 1.
Clause 7 of Regulation 1, the interpretation of which is pivotal to the determination of the appeal and the cross appeal, provided:
"7 Obligation to renegotiate rent and other terms of commercial leases before prescribed action
(1A) This clause applies to a commercial lease to which an impacted lessee is a party (an impacted lease).
(1) A lessor under an impacted lease must not take or continue any prescribed action against the impacted lessee concerned 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.
(2) Any 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 an impacted lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the impacted lease.
(3A) 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;
(3B) If the impacted lessee does not comply with subclause (3A), the lessor is taken to have complied with this clause.
(4) 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."
Regulation 2, which commenced operation for a period of 6 months from 24 April 2020 to 31 December 2020, repeated the substance of Regulation 1. Clause 7 of Regulation 2 was identical to clause 7(1) and (2) of Regulation 1 but provided:
"(3) A party to the impacted lease may make a second or subsequent request under subclause (2), but, unless the other 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 already 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 to 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 impact of the COVID-19 pandemic, and
(b) the leasing principles set out in the National Code of Conduct.
(7) If the impacted lessee does not comply with subclauses (4)-(6), the lessor is taken to have complied with its lease.
(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."
Regulation 2 defined "impacted lease" as "a commercial lease to which an impacted lessee is a party".
The prescribed period for Regulation 3 was the period beginning with the commencement of Regulation 1 and ending on 28 March 2021. Clause 7 of Regulation 3 was relevantly identical to Regulation 2, save for clause 7(1) which provided:
"(1) 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 any of the following unless the lessor has complied with any obligations imposed on the lessor by this clause and clause 8 -
(a) a failure to pay rent,
(b) a failure to pay outgoings."
Regulations 2 and 3 each contained savings clauses 13 and 14, which are identical in all material respects and provided:
"13 Savings -
(1) Any act, matter or thing that, immediately before the repeal of Regulation [Regulation 2] had effect under that regulation continues to have effect under this regulation.
14 Savings provision - impacted lessees -
(1) A reference in this regulation to an impacted lessee extends to a person who was an impacted lessee under a repealed regulation in relation to a breach of the impacted lease that occurred at any time during which repealed regulation was in force.
(2) To avoid doubt, a person who was an impacted lessee within the meaning of a repealed regulation at any time during which the repealed regulation was in force is taken to be an impacted lessee for the whole of the period during which the repealed regulation was in force."
Clause 14(3) defined "repealed regulation" to mean Regulations 1 and 2.
As their submissions confirm, the crux of the Appellants' complaint is that the Tribunal erred in principle by failing to extend the benefit of the Regulations to them for the whole of the period from 24 April until 30 October 2020. Variously articulated, the Appellants' grounds advance that fundamental proposition. As Counsel for both parties advanced their clients' cases in the appeal and cross-appeal globally, it is unnecessary to refer to individual grounds of appeal.
The Appellants submitted (para 60, submissions 28 June 2022) that the Tribunal erred in making a finding at [43] that the Appellants were not "Covid impacted" for the purposes of Regulation 1, as that term does not appear in the Covid Regulation. The Appeal Panel does not accept that, when read in context of the totality of the Tribunal's reasons, that finding led the Tribunal into error. If the Tribunal erred, it was either, as the Appellants contend, in not extending the benefit of the Covid Regulations to them for the whole of the period from 24 April 2020 to 30 October 2020, or as the Respondent asserts in the cross-appeal, by extending the benefit of the Regulation to the Appellants for any part of that period.
Similarly, we do not consider that the Tribunal attempted to "determine a rent reduction for any period" as submitted by the Appellants (para 62, submissions 28 June 2022) or to have erred by purporting to make "a decision about whether a rent reduction was appropriate or required" as the Appellants contend (para 64).
The Appellants clarified (para 69) that, to the extent that the Tribunal found "that the lease was an impacted lease for the purpose of the Covid Regulations, the Appellants do not challenge that finding". It is not in contest that, throughout the whole period from 24 April 2020 to 30 October 2020 the Appellants were "impacted lessees" in accordance with the Regulation 1, and thereafter by the operation of the savings provisions of Regulations 2 and 3.
The crux of the Appellants' contentions was summarised (para 75, submissions 28 June 2022) in the following terms:
"For the reasons that follow, the Tribunal, having found:
(a) that the Appellants had made a valid request to renegotiate the rent under clause of Regulation 1;
(b) that the Respondent had an obligation to renegotiate the rent in good faith under clause 7 of Regulation 1;
(c) that the Respondent had failed to negotiate in accordance with clause 7 of Regulation 1;
should have held that the Covid Regulations prevented the Respondents from commencing proceedings to recover rent arrears for the entire period 1 May 2020 to 30 October 2020."
The Appellants submitted (para 78) that "At trial, the Respondent conceded, and the Tribunal accepted, that the Appellants met the description of impacted lessees for the purposes of Regulation 1". That submission accurately records the position of the Respondent in the proceedings before the Tribunal, from which, properly, it did not seek to resile in the appeal.
The Appellants submitted (para 80) that "Nothing in the Covid Regulations requires that the Appellants are taken to be impacted lessees only from the point at which they request renegotiation". The savings clauses in Regulations 2 and 3 were submitted (para 81) to have the effect that the Appellants were impacted lessees for the whole period Regulation 1 was in force and remained impacted lessees for the purposes of Regulation 2 and Regulation 3.
The Appellants relied (para 82) on the observation of Robb J in Darzi at [114] that clause 14 of Regulation 2 "makes it clear that a lessee may be an impacted lessee if the definition of impacted lessee was only satisfied for a closed period". It was thus submitted (para 83) that clause 14 in each of Regulations 2 and 3 make it "plain that if the Appellants are found to be impacted lessees under Regulation 1 at any time in the period 24 April 2020 to 23 October 2020, then, as a matter of law, the Appellants are taken to be impacted lessees for the whole of that period". It was accordingly submitted (para 84) that nothing in Regulation 1 confines the application of the provision "to the point at which the Appellants requested renegotiation onwards".
In Darzi, Robb J said, at [114]:
"Clause 14 (of Regulation 2) had the effect that, if Darzi was an impacted lessee at any time during the period of operation of the COVID-19 Regulation (Number 1), it was taken to be an impacted lessee for the whole of that period. That provision makes it clear that a lessee may be an impacted lessee if the definition of impacted lessee was only satisfied for a closed period."
The Appellants referred (para 86) to the finding of the Tribunal that, on 28 August 2020 the Appellants sought to renegotiate the rent payable under the lease in accordance with the requirements of clause 7(3A) of the Regulation (para 87) and that (para 88) the Tribunal found that the Respondent failed to comply with its obligation under clause 7(3) of Regulation 1, to renegotiate in good faith when requested to do so, until well after the Appellants surrendered possession of the premises.
The Appellants submitted (para 92) that the Tribunal erred in law by finding "that there was no prohibition on taking action to recover any rent payable before the Appellants requested a renegotiation and provided the information required by clause 7(3A) of Regulation 1".
The Appellants reiterated (para 95) their contention that nothing in clause 7 limited the prohibition on recovery action by the Respondent to the period after a request to renegotiate was made. The Appellants referred (para 99) to the Judgment of Robb J in Sneaker Boy Retail Pty Ltd v Georges Properties Pty Ltd (No 2) [2020] NSWSWC 1141 at [65] in which His Honour held that Regulation 1 prohibited prescribed actions "in relation to circumstances occurring during the prescribed period … whenever the rights are sought to be exercised or enforced … If [the circumstances] occur during the prescribed period, then the described actions cannot be taken during or after the period".
It is not in doubt that, as the Appellants submit (para 101), the Respondent did not take a prescribed action whilst Regulation 1 was in force. The Appellants further submitted, for the reasons advanced (para 103 to 111) that (para 112) "the prohibition on the Respondent commencing proceedings, or seeking orders in those proceedings, which took effect under Regulation 1, also had effect on 9 March 2021 when the Respondent filed its claim" the Respondent thus being "prohibited from doing so by the combined effect of the Covid Regulations" (para 113).
The Appellants referred to the decision of the Appeal Panel (para 117) in Cong v Ning [2021] NSWCATAP 292 (Cong) and the statement in that decision at [51] that:
"It is apparent that any prohibition on prescribed action by the landlords (including action to recover rent) in respect of the non-payment by the tenants of rent during May 2020 will continue to apply pursuant to (Regulation 2 and Regulation 3) and s 88 of the RLA. We note that Robb J in Darzi Group at [125] suggested that the landlord's failure in that case to renegotiate the rent in good faith had the effect that it "will be perpetually barred from taking any prescribed action to recover from (the tenant) the shortfall in rent paid."
It was submitted (para 120) that, as in Cong, the Appellants' appeal should be allowed and relief granted in the terms sought by the Appellants pursuant to s 81(1)(d) of the CAT Act.
The Respondent submitted (13 July 2022, para 19) that the Appellants' appeal could be "distilled for the purposes of a response" as being:
"(a) an error arose in failing to find that the Respondent was prohibited from recovering the rent (otherwise admitted as owed), this error is said to flow on from an error in finding that the lease was not an impacted lease prior to 28 August 2020; and
(b) inadequate reasons were provided regarding the term Covid impacted which appears in the first decision."
As we have earlier recorded, we do not consider that the appeal is advanced by challenges to the adequacy of reasons, or with respect to its findings with respect to the term "Covid impacted" in the Tribunal's first Decision.
Regulation 1 was submitted to be:
"readily distinguishable from Regulations 2 and 3 which, significantly, include a deeming provision in clause 7(7) of those Regulations:
(7) If the impacted lessee does not comply with subclauses (4) to (6), the lessee is taken to have complied with this clause."
The Respondent relied upon the terms of subclauses 7(4)-(6) of both Regulations 2 and 3, the terms of which we have earlier set out.
The Respondent submitted (para 25) that "prior to the 28 August 2020 letter from the Appellants to the Respondent, the Appellants had not provided to the Respondent anything that could amount to compliance with subclause 7(5) of Regulations 2 and 3". The letter is found at pages 74 to 76 of the Appellants' bundle. The Respondent submitted (para 26) that "the 28 August 2020 letter contained no "evidence" as required by subclause 7(5)(b) and that no "evidence" was provided by the Appellants until a letter from the Appellants to the Respondent dated 26 April 2021 when first instance litigation was already underway". The latter letter is found at pages 93 to 103 of the Appellants' bundle.
The letter on behalf of the Appellants of 28 August 2020 stated (5.1) that the first "purpose" of writing to the Respondent was "renegotiating rent under the current lease consistent with the Retail and Other Commercial Leases COVID-19 Regulation 2020 (NSW) (Regulation) that came into effect on 24 April 2020."
The letter provided (paras 10 to 11) the details of the Appellants' asserted decline in turnover for the months of April, May and June 2019 and 2020 and a summary of the BAS statements for each of those periods, it being asserted that, over the quarter, the turnover of the Appellants' business declined by 39.86%. It was suggested (para 18) that the documentation enclosed demonstrated the Appellants' eligibility under the Regulation. Although difficult to read, the letter appears to have attached a number of documents apparently printed from the Australian Taxation Office Business Portal, and a statement to the First Appellant confirming her eligibility for JobKeeper. The Respondent appears to concede that the information provided on 26 April 2021 constituted "evidence" as required by subclause 7(5)(b) of Regulation 1.
The Respondent relied (para 27) on requests made on its behalf to renegotiate the rental dispute on 12 May 2021, and the fact that the request "occurred and was ignored by the now Appellants". It was thus submitted (para 28) that the matters relied upon by the Respondent "amounting to non-compliance of clauses 7(4) and (5) have the effect of triggering the deeming provisions in clause 7(7). Accordingly, the Respondent is deemed to have complied with the obligation to renegotiate. That being so the prohibition on recovery in clause 7(1), which does not apply "unless the lessor has complied with this clause", does not apply to the Respondent".
On behalf of the Respondent, reliance was placed (para 29) on the saving provisions in clause 13(1) in Regulations 2 and 3. Although raised in defence of the appeal, this appears to relate more to the cross-appeal.
The Appellants' submissions in reply of 25 July 2022 engaged more with the issues of extension of time than the appeal, although the substance of the earlier submissions were reiterated. The further submissions of 1 August 2020 engaged more with whether the provisions of the Regulations were remedial. The Appellants submitted (para 2), in reliance upon the decision in Darzi, that recourse to principles of interpretation of "remedial" provisions was unnecessary but did not disagree with the decision of the Appeal Panel in Maqableh v Kaklamanis [2021] NSWCATAP 385 (Maqableh) that the Covid Regulations were remedial in nature and should be interpreted liberally. Support for that proposition, if it be necessary, was submitted (para 4) to be found in the decision of the High Court in New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50; (2016) 260 CLR 232.
In view of the technical difficulties encountered when the appeal commenced to be heard, the Appellants summarised their earlier submissions. Without disrespect to the Appellants, given the comprehensive nature of their primary submissions, it is unnecessary to refer in detail to the Appellants' further submissions.
The Appellants submitted, in summary, and respectfully, (para 19) that the Tribunal "appears to have conflated the requirement that the Appellants provide evidence that they are impacted lessees with the anterior, and separate, question of whether the Appellants were in fact, impacted lessees". It was further submitted (para 20) that it was not necessary "in order to be considered impacted lessees, for the Appellants to provide evidence of that status to any other party. It is, by contrast, necessary that the Appellants provide evidence of their status as impacted lessees if they seek to make a request to renegotiate the rent payable under their lease" pursuant to clause 7(3A) of Regulation 1".
The Appellants reiterated (paras 22-24) that (para 22) "the Respondent conceded that the Appellants were, in fact, impacted lessees at all relevant times" and (para 23) that the Tribunal acknowledged "that all that is required for a business to be an impacted lessee is that it "qualifies for JobKeeper and has a turnover of less than 50 million dollars". It not being in dispute that the Appellants met each of those criteria at all relevant times" there was submitted to be no basis for the Tribunal to have restricted the application of the Covid Regulations in the way it did. The Appellants reiterated (para 24) that the letter of 28 August 2020 did not "qualify the Appellants as impacted lessees. They had that status regardless, whether as a matter of fact or due to the effect of clause 14(2) of Regulation 3, and the Appellants submit this was not in dispute".
In oral submissions, the Appellants referred to the decision of Robb J in Darzi Group Pty Limited v Nolde Pty Limited (No 2) [2022] NSWSC 643 (Darzi No 2). His Honour referred to his principal decision in the proceedings and said at [21] that the effect of the provisions of Regulation 1 "and the extensions made by the later versions of the Regulation, was that Nolde was and would continue to be prohibited until 1 July 2021 from prosecuting so much of then present proceedings as related to seeking an order for possession of the premises against Darzi, a declaration that Nolde was entitled to re-enter for breach, or any order that Darzi pay to Nolde the alleged shortfall in rent for May and June 2020".
His Honour said, again by reference to his decision in the principal proceedings [26] that:
"As Nolde had not complied with its obligation to negotiate the rent in good faith but had throughout the whole of the proceedings since the service of its Cross Claim prosecuted Darzi for breach of the lease, it was precluded from taking a prescribed action against Darzi in the future. This was essentially because the Covid-19 Regulation's objective would be thwarted if lessors could repudiate their obligation to negotiate in good faith with impacted lessees, and then later take proceedings against the lessees for breach of the strict terms of the lease after the proceedings ceased to be a prescribed action."
His Honour further said [33] that:
"Darzi's position is that Nolde, having failed in its obligation to renegotiate the Lease in good faith before the repeal of the relevant COVID-19 Regulation, cannot seek to enliven the provisions of a repealed instrument in an attempt to remedy its failure to comply with the requirements while it was in force. Because Nolde terminated any renegotiation by issuing the second s 129 Notice dated 17 July 2020, there was no renegotiation on foot at the time the relevant COVID-19 Regulation was repealed."
His Honour also said [42] that:
"The effect of Nolde's submission is that the Covid-19 regulatory regime permits a lessor to refuse at the time a lessee seeks to renegotiate the rent payable under the lease to do so in good faith, to contest the validity of the lease (or, in this case, the enforceability of an agreement to grant a further release) on the basis that the lessee is in breach of the rent covenant, and then, after judgment is delivered finding that the lessor is legally precluded from asserting the breach of the lease because its conduct wrongfully terminated the renegotiation, to reinstate a new negotiation to revise the rent covenant."
His Honour said at [43] that he accepted that:
"If Nolde wishes to challenge any determination made in the principal judgment that Nolde's conduct had terminated the renegotiation and that the effect of Nolde's refusal to renegotiate in good faith was that it was permanently precluded from seeking to engage the application of the now repealed COVID-19 Regulation, the proper manner to do that is by prosecuting an appeal from my determination."
The Appeal Panel has not been informed of any appeal against either of His Honour's decisions in the Darzi litigation.
His Honour added [135]:
"In making that observation, I do not mean to generalise, and depending upon the circumstances, and in particular the amount of the reduction in rent involved, over the course of a good faith renegotiation, lessors may well be entitled to require more financial information that is initially offered by lessees, but that process would need to be tailored to the financial information that was germane to the implementation of the Code, having regard to the reasonableness of causing delay and imposing costs on lessees as a result of the need to prepare additional financial information."
His Honour said [136] that the request for renegotiation by the lessee in Darzi was "based upon apparently authentic and correct, albeit concise, information concerning the turnover of the Respondent in the relevant period, and the equivalent turnover in the period 12 months prior. There was no apparent basis for Nolde to distrust the information, and it has not been shown in these proceedings that the information was false or inadequate". As is not in doubt, the present Respondent did not, at the time it was provided, express "distrust" of any information provided to it by the Appellants' solicitors on 28 August 2020 nor does any finding of fact made by the Tribunal in either of its decisions involve acceptance of any distrust of the information provided.
Robb J referred [138] to the "extreme course of rejecting the continuation of negotiations" adopted by the lessor in those proceedings. The present Respondent did not reject the "continuation" of negotiations, but, even six months after the Appellants had surrendered possession of the premises, refused to engage the renegotiation process provided by the Regulations when invited to do so by the Appellants.
In Cong, at [48], the Appeal Panel referred to the analysis of the Covid-19 legislation by Robb J in Darzi at [103]-[114] and in particular at [134] to which we have earlier referred in relation to the evidence required to be provided by "impacted lessees". The Appeal Panel referred [49] to the operation of s 88 of the Retail Leases Act 1994 (NSW) (RLA) which provided, s 88(1), the "Retail and Other Commercial Leases COVID-19 Regulation Number 3 2020 continues to apply, despite the repeal of that Regulation, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that Regulation". It was thus held [51] that it was "apparent that any prohibition on prescribed action by landlords (including action to recover rent) in respect of the non-payment by the tenants of rent during May 2020 will continue to apply pursuant to those provisions and s 88 of the RLA. We note that Robb J in Darzi [125] suggested that the landlord's failure in that case to renegotiate the rent in good faith had the effect that it "will be perpetually barred from taking any prescribed action to recover from [the tenant] the shortfall in rent paid …".
As the submissions of Counsel for both parties confirm, the fate of the Appellants' appeal turns on the interpretation of the provisions of the Covid Regulations. Although variously articulated, as both parties' Counsel recognised, the issue raised in the appeal is whether the Tribunal erred in its interpretation of the Regulations by finding that it was only when the Appellants provided financial information to the Respondent on 28 August 2020 that the Respondent became unable to recover arrears of rent under the Lease.
In SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; [2017] 91 ALJR 936; 347 ALR 405; Kiefel CJ, Nettle and Gaudron JJ said, at [14] that the:
"starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is to be had to its context and purpose. Context should be regarded as the first stage and not at some later stage and it should be regarded in the widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historic or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected."
The context in and purpose for which the Covid Regulations were made is not in doubt and has been explained by Robb J in the passages in Darzi to which we have earlier referred. In our view, the context in which the Covid Regulations find expression, and their purpose do not provide a basis for affording the words of the provisions a meaning other than those by which they would ordinarily be understood in discourse (Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; [1998] 194 CLR 355). In SAS Trustee Corporation v Miles [2018] HCA 55; (2018) 361 ALR 206, at 64, Edelman J reiterated the difficulty of displacing an interpretation of a legislative instrument which has "a powerful advantage in ordinary meaning and grammatical sense" in favour of one which does not.
The definition of "impacted lessee" which finds expression in clause 4 of each Covid Regulation articulates two requirements. The first is that the lessee "qualifies" for the JobKeeper scheme. The second is that the turnover of the lessee in the 2018/2019 financial year was less than $50 million. It is apparent from Cong that clause 4 of Regulation 1 did not require that both lessees qualify for the JobKeeper scheme. That does not assume significance in circumstances where the Respondent accepts, correctly in the Appeal Panel's view, that the Appellants were impacted lessees pursuant to clause 4 of Regulation 1.
As is not in doubt, whether a lessee is an impacted lessee is a question of fact. As noted in Maqableh, the requirement is that a lessee "qualifies" for the JobKeeper scheme. In this case, the First Appellant was in receipt of payments pursuant to the JobKeeper scheme. In Darzi, Robb J noted that the fact that a lessee had been accepted as being entitled to benefits under the JobKeeper scheme should have satisfied the landlord of that fact.
It is not in doubt that, subject to matters arising pursuant to clause 7 of Regulation 1, once a lessee is "impacted" pursuant to clause 4 of the Regulation, the prohibitions and restrictions provided by clause 6, and particularly those provided by clause 6(1)(a) and (b), are enlivened.
The operation of these clauses of the Regulation is not in doubt, and as Robb J held in Darzi, once a lessee is impacted for part of a prescribed period, the lessee continues to be impacted for the whole of the prescribed period. The savings provisions of Regulation 2 and 3 preserve that position after Regulation 1 ceased to be of effect.
Clause 7 of Regulation 1 is concerned with the "obligation to renegotiate rent and other terms of commercial leases before prescribed action". As is clear from clause 7(1)(a) of Regulation 1, and preserved pursuant to Regulations 2 and 3, the trigger for clause 7 is that there is a "commercial lease to which an impacted lessee is a party". The Respondent accepts that requirement was satisfied in this case. The lease was thus an "impacted lease". Clause 7(1) clearly provided that a lessor under an impacted lease must not, relevantly for present purposes, take or continue any prescribed action against the impacted lessee on the grounds of a breach of the impacted lease consisting of failure to pay rent during the prescribed period unless the lessor has complied with clause 7 of the Regulation. The Appellants had failed to pay rent during the prescribed period.
Importantly for present purposes, clause 7(2) of Regulation 1 provided that "any party to an impacted lease may request the other parties to renegotiate the rent payable under, and other terms of, the impacted lease". In the event that a request was made pursuant to clause 7(2), pursuant to clause 7(3) the party that was requested to renegotiate the rent payable and other terms of the impacted lease was required to renegotiate in good faith. Also, pursuant to clause 7(3)(A) an impacted lessee "must" give the lessor "a statement to the effect that the lessee is an impacted lessee", and "evidence that the lessee is an impacted lessee". The failure of an impacted lessee to comply with clause 7(3)(B) was that the lessor is "taken to have complied with this clause", the practical effect of that being that the restraint on the lessor to be unable to take a prescribed action against the lessee, ceased. These proceedings do not provide the occasion for considering the meaning and effect of renegotiating "in good faith"- there were no relevant negotiations.
We are satisfied that the effect of the Regulation was that a lessee was obliged to provide a statement to the effect that it was impacted and evidence of that fact if, and only if, the renegotiation provisions of clause 7 of Regulation 1 were enlivened. As is clear, a lessee who was a party to an impacted lease could not, in reliance upon that status, prevent the lessor from being able to recover some, or potentially all rent payable under the lease. It was always open to the lessor to invoke the renegotiation provisions of clause 7. Once a lessor did so, in order to renegotiate the rent payable under a lease in good faith, the lessee may have to provide more extensive financial information than was required to establish its status as an impacted lessee, but that scenario never materialised in this case.
The evidence of the First Appellant, which we do not understand to have been controversial, was that on 3 April 2020, in response to the announcement on 3 April 2020 by the Prime Minister of the mandatory Code of Conduct with respect to commercial tenancies where the tenant was eligible for the Commonwealth Government JobKeeper programme, the Appellants "contacted the Applicants by email, noting that we had had to close our business, requesting to come to an agreement about the payment of rent, and requesting that the rent be waived while the shop was not open to the public" (para 10, Affidavit of First Appellant sworn 22 October 2021). The Affidavit does not annex a copy of the email.
The deponent further stated (para 11) "There was no response to those requests. The Applicant did not engage in any renegotiation of the rent at that time", and (para 12), that "On 6 April 2020 we received an email from the Applicant's agent notifying us that the Applicant required us to vacate the premises". The email annexed to the Affidavit found at page 69 of the Appellants' bundle was written by the agent of the lessor, as its first paragraph makes clear. The email did not engage with any request to negotiate the rent. It did not either dispute that the Appellants were or might be entitled to the benefit of the Covid Regulations when they came into force or effect or ask for any details of the financial circumstances of the Appellants' business. Although, until the commencement of Regulation 1, the Appellants could not be impacted lessees, the Respondent was on notice that, as and from the commencement of Regulation 1, they claimed to be.
The First Appellant further deposed (para 16, page 63) to the partnership having "registered for the JobKeeper scheme and, once it became possible on 5 May 2020, the partnership lodged its application or JobKeeper payments for the first JobKeeper fortnights". A copy of the partnership's first JobKeeper lodgement was annexed to the Affidavit.
On 14 May the partnership received the first JobKeeper payments under the scheme, an extract of the partnership's integrated client account showing the receipt of that payment (para 17 of the Affidavit).
On 28 August 2020, the Appellants, through their solicitors, made a formal request to renegotiate the rent under the lease pursuant to the provisions of Regulation 1. If not before, then at that time, the Respondent had an opportunity to request the Appellants to renegotiate in good faith the rent payable and other terms of the impacted lease pursuant to clauses 7(2) and (3) of Regulation 1. Upon doing so, clause 7(3A) of the Regulation would have been enlivened and, if the Appellants had failed to comply with the provisions of that clause, the Respondent would have been taken to have complied with the clause and, from that time, have potentially been able to seek to recover rent from the Appellants under the lease. As is not in doubt, the Respondent elected at that time not to ever enliven the provisions of the Regulation.
The savings provisions of Regulations 2 and 3 preserved both the position of the Appellants as impacted lessees and the entitlements of either party pursuant to the relevant Regulation to request renegotiation of the rent or other terms of the lease.
In our view, the legislative scheme created by the Regulations was clearly, as Robb J explained in Darzi, to prevent a lessor from taking prescribed action in the absence of a request, by the lessor or the lessee, to renegotiate the rent in good faith pursuant to clause 7 and, consequent upon such request, the lessee failing to comply with the disclosure obligations which the Regulation contained.
The Appeal Panel does not consider that the interpretation or operation of the Covid Regulation is unambiguous or uncertain. If, however, there is ambiguity or uncertainty, the interpretation of the Regulations which we prefer is supported by s 33 of the Interpretation Act 1987 (NSW) which provides that:
"In the interpretation of an Act or statutory rule a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object."
In Mills v Meeking [1990] HCA 6; [1990] 169 CLR 214; [1990] 91 ALR 16 at 19, Dawson J said that the "approach" required by s 35 of the Victorian Interpretation of Legislation Act 1984, which is in substantially the same terms as s 33 of the New South Wales statute:
"needs no ambiguity or inconsistency; it allows a Court to consider the purpose of an Act in determining whether there is more than one possible construction. References to the purposes may reveal that the draftsman has inadvertently overlooked something which he would have dealt with had his attention be drawn to it and if it is possible as a matter of construction to repair that defect, then this must be done. However, if the literal meaning of the provision was to be modified by reference to the purposes of the Act, the modification must be precisely identifiable as that which is necessary to effectuate those purposes and it must be consistent with the wording otherwise adopted by the draftsman. Section 35 requires a Court to construe an Act, not to rewrite it, in the light of its purpose."
In Victims Compensation Fund Corporation v Brown [2003] HCA 54; (2003) 77 ALJR 1797; 201 ALR 260, the High Court confirmed that legislative purposes stated at "extreme levels of generality" were not "useful in construing particular parts of the legislative language". In Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138; 239 ALR 415, at [5], Gleeson CJ cautioned that "For a Court to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for legislative purpose".
In Australian Education Union v Department of Education and Children's Services [2012] HCA 3; (2012) 248 CLR 1; 285 ALR 27 at 28, French CJ, Hayne, Kiefel and Bell JJ said that "In construing a statute it is not for a Court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose" and that deriving a statutory purpose involved considering the scheme of the Act as a whole, and the respective functions of the relevant parts of the statute.
It is clear that the "mischief" K & S Lake City Freighters Pty Limited v Gordon & Gotch [1985] HCA 48; (1985) 157 CLR 309, to which the Covid Regulations were directed, was initially to alleviate the impact of the Covid-19 pandemic on lessees of retail and other commercial premises
The scheme, however, is quite clear that an impacted lessee's reliance upon the provision is not unconditional: the lessor could, pursuant to the Regulation, request the impacted lessee to renegotiate the rent and other terms of the lease in good faith, failing which, the impacted lessee would lose the protection of the prohibition against the lessor taking prescribed action. It is to be remembered that, at the time the Covid Regulations were in place, it could not be known for how long they might continue or, once the periods prescribed by them ended, what, if any, relief from payment of rent in full under a lease might then become available to an impacted lessee. In those circumstances it cannot be suggested that the Appeal Panel's preferred interpretation of the Regulation is a "one-way street". The reality in this case is that, promptly upon the Covid-19 regime being announced, and after it had commenced, the Appellants sought to renegotiate the rent for the premises with the Respondent, albeit to no avail.
We conclude that the Tribunal erred in holding that the Appellants were only entitled to the benefit of Regulation 1 from 28 August 2020. Unless, as the Respondent contends by its cross-appeal, the Respondent was able to enliven clause 7 of, by that time, Regulation 3, the Appellants are entitled to succeed with their appeal. In our view, once the Appellants were impacted lessees, as clearly they were, and consistent with the decision in Darzi, subject to clause 7 of Regulation 1, and the savings provisions of subsequent Regulations, the Respondent was prevented for all time from seeking to recover any arrears of rent for the whole of the period 24 April 2020 to 30 October 2020.
On 13 May 2021, at 4.13 p.m. the Appellants' solicitors replied to the email from the Respondent's solicitors, stating:
"To be clear, our clients' request of 26 April 2021 was not for "mediation", but for a renegotiation of the rent payable under the commercial lease of the relevant property, having regard to the economic impacts of the Covid-19 pandemic and the leading principles set out in the National Cabinet Mandatory Code of Conduct, as described in the Retail and Other Commercial Leases COVID-19 Regulation Number 3 2020. So I can seek proper instructions on your correspondence, can you please confirm that your offer of an informal settlement conference will encompass the renegotiation process set out in that Regulation."
At 6.59 p.m. the same day the Respondent's solicitors responded by email, stating:
"To be clear we deny that the Covid legislation applies in the circumstances. If it does apply then, while the obligation is not defined in that legislation, the obligation to "renegotiate rent" may well be met by our proposal of an informal settlement conference. However, our point is that any negotiation cannot occur in a vacuum and ignore the circumstances, namely that the lease has come to an end and there are proceedings on foot regarding unpaid rent. Accordingly, any alternative resolution process (whatever label you wish to supply to it) must have regard to the legal proceedings which are on foot and any resolution must provide for the disposal of those legal proceedings for it to be a useful exercise."
It is not suggested that renegotiation pursuant to Regulation 3 ever occurred.
Not surprisingly having regard to the terms of the communications issued on its behalf, Counsel for the Respondent faced a difficult task in seeking to successfully argue that, if available, the Respondent had enlivened the provisions of Regulation 3, having expressly twice disavowed reliance upon them in response to specific requests to do so from the Appellants' solicitors.
As Regulation 3 applied until 2 July 2021, and consistent with passages in the Judgment of Robb J in Darzi (No 2) to which we have earlier referred and, for the reasons which follow, without needing to express a concluded view, the Respondent may have been able to successfully invoke clause 7 of Regulation 3 at any time prior to that date, notwithstanding that there was then no "lease", the Appellants having vacated the premises six months earlier.
The second question which requires determination is whether the Respondent enlivened clause 7 of Regulation 3. In view of the terms of the correspondence to which we have referred, we do not accept that the Respondent enlivened clause 7 of Regulation 3. The repeated express disavowal of the operation of the Regulation, or reliance upon it, in our view prevented the Respondent from successfully asserting that it enlivened the operation of clause 7. That being so, there is no basis for finding that the prohibition on the Respondent taking a prescribed action terminated. The obligation of the Appellants to provide financial information was never triggered in the circumstances.
In Darzi, at [142] Robb J reiterated that:
"A failure by the lessor to comply with the requirements of clause 7 of any version of the COVID-19 Regulation will lead to a permanent prohibition on the lessor taking any prescribed action against the lessee for non-payment of rent while the lessee was an impacted lessee. The position may be different in cases where the lessor complies with clause 7 in good faith, but the parties to the impacted lease are unable to reach an agreement."
The respondent not having engaged clause 7 of any regulation, no question of the extent or adequacy of the Appellants' financial disclosures or willingness to negotiate in good faith arises for consideration.
In the circumstances which we have identified, the Tribunal did not err in failing to find that the Respondent was entitled to seek the recovery of the arrears of rent payable pursuant to the Lease.
The cross appeal thus fails.
Given that, as the appeal will be allowed, and the Appellants will be relieved of the obligation to pay the $20,938.21, less the sum of $507 which is not disputed, as ordered by the Tribunal, the basis of the order for costs at first instance dissolves.
To allow the costs awarded at first instance to stand in circumstances where the basis of the costs order has dissolved does not sit well with the Appeal Panel. That is particularly so in circumstances where the orders which the Appeal Panel will make, mean that the Appellants have been overwhelmingly successful at first instance, and pursuant to Rule 38A, prima facie entitled to the costs of those proceedings.
Understandably, the submissions of Counsel with respect to the costs appeal were less extensive than with respect to the other, more complex aspects of the proceedings before the Appeal Panel. We do not understand either to vigorously dispute that the fate of the Tribunal's costs order is not determined by the outcome of the appeal and cross-appeal