This appeal arises out of a dispute between the parties who had entered into a retail lease regulated by the Retail Leases Act 1994 (NSW) (the RL Act).
The Appellant is the lessee under the lease (which we will refer to as the Lease), and the Respondent to this appeal is the lessor.
The Appellant lodged an application in the Consumer & Commercial Division of the Tribunal in July 2023 and the Tribunal's decision was published on 17 April 2024. That decision (which we will refer to as the Decision) is the subject of this appeal.
By the Decision, the Tribunal dismissed the Appellant's application because the Tribunal determined that it had no jurisdiction to provide the remedies sought by the Appellant.
The background facts are recorded in the Decision and may be summarised as follows:
1. The term of the Lease commenced on 1 December 2018 and terminated on 30 November 2023. We understand that the Appellant remains in possession.
2. The Lease did not contain an option to renew. In May 2023, the lessor gave notice under s 44 of the RL Act of its intention not to renew or extend the Lease.
3. The Appellant applied to the Tribunal for rent relief as a result of being an impacted tenant under the Retail & Other Commercial Leases (COVID-19) Regulations 2020 (NSW) and its various successors. For convenience we will refer to those regulations cumulatively as the "COVID Regulations". The Appellant also applied for an order extending the term of the Lease in accordance with the provisions of the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles which is referred to in the COVID Regulations (the Code of Conduct). The Appellant also claimed that the Respondent should give him a discount for land tax and council rates.
4. The Tribunal found that in the period April 2020 through to September 2021, the Appellant paid the rent due under the Lease in the amounts required by the Lease. We observe that the application appears to seek a refund of a portion of rent paid for that period. The total amount sought to be refunded was $8,149.00.
5. The Tribunal found that the Appellant was an "impacted lessee" for the purposes of the COVID Regulations. The Tribunal also found that the parties had had communications about the Appellant's request for rent relief and that those negotiations had progressed "in a disjointed manner".
6. In September 2021 or October 2021 the Appellant lodged an application for mediation. We observe that attached to the Appellant's application is a certificate dated 14th June 2023 from the Deputy Registrar, Retail Tenancy Disputes stating that mediation has not taken place.
At [11] of the Decision, the Tribunal found that the Tribunal does not have the jurisdiction under the RL Act to alter the provisions of the Lease to reduce the rent payable by the Appellant. The Tribunal also found that the RL Act does not confer jurisdiction on the Tribunal to order the Respondent to grant the Appellant a further 24-month term in circumstances where the Respondent has taken the necessary action under s 44 of the RL Act to inform the Appellant that a further term will not be granted. Finally, the Tribunal found that the RL Act does not confer jurisdiction on the Tribunal to alter the terms of the Lease concerning land tax.
The Tribunal then went on to consider the COVID Regulations and previous Tribunal decisions as to how the COVID Regulations are to be interpreted.
In particular, the Tribunal considered the recent Appeal Panel decision in Weiss v Agus [2024] NSWCATAP 51 (Weiss v Agus) to which we will refer later in these reasons.
At [26] the Tribunal found that the Respondent had not taken any action against the lessee which could be described as "prescribed action" prohibited by the COVID Regulations, and that the proceedings before the Tribunal did not concern "prescribed action". Rather, the Tribunal found that the proceedings related to the renegotiation of rent and the Appellant's claim that the Respondent should provide to the Appellant reductions in rent in the form of waivers and deferrals of rent.
It is important to summarise how the Tribunal interpreted the operation of the COVID Regulations and we set out a summary of the Tribunal's reasoning in the following paragraphs.
As indicated earlier, the Tribunal relied upon and followed the decision in Weiss v Agus. The Tribunal also relied upon an earlier Appeal Panel Decision in Wellness Bodycare Pty Ltd v Newtons Pharmacy Services Pty Ltd [2023] NSWCATAP 312 (Wellness Bodycare). The relevant principles from those decisions are recorded at [29] of the Decision.
We will describe those principles and the provisions of the COVID Regulations and the Code of Conduct subsequently in this decision. It is sufficient for the moment to state that the Tribunal held at [31] that, having regard to the principles articulated in Weiss v Agus and Wellness Bodycare, the Tribunal has no jurisdiction to make the orders sought by the Appellant under the COVID Regulations or under the RL Act.
However, the Tribunal stated that a lessee may bring a claim against a lessor under s 62B of the RL Act if the lessor engaged in unconscionable conduct by reason of a failure to comply with the COVID Regulations. The Tribunal found that the Appellant had not alleged that the Respondent had engaged in unconscionable conduct and that it would be unfair to consider the evidence before the Tribunal upon the basis that such conduct was contended. The unfairness arose because the Respondent had not been put on notice of an unconscionable conduct claim being made against it.
In the result, the Tribunal dismissed the Appellant's application and made directions for the parties to make submissions as to whether a costs order should or should not be made
[2]
Notice of Appeal
A Notice of Appeal was lodged by the Appellant on 10 May 2024.
The Notice of Appeal has not been completed. Rather, in the spaces requiring completion the Appellant has written "Please see Attachment A". The attachment takes issue with the Decision, but does not specifically address whether the Tribunal was in error in determining that it has no jurisdiction. Because we are in agreement with the Tribunal in that regard we do not think it necessary to set out in detail the Appellant's submissions contained in the attachment.
The Respondent has filed a Reply to Appeal as well as written submissions in opposition to the appeal. Again, because we are of the opinion that the Tribunal was correct in determining that it had no jurisdiction, it is unnecessary to set out the substance of the Reply to Appeal or the Respondent's submissions.
[3]
Consideration
It is relevant to the determination of this appeal to consider not only the two Appeal Panel decisions referred to in the Decision but also the judgment of Robb J in Darzi Group Pty Ltd v Nolde Pty Ltd [2021] NSWSC 774. In that judgment the court was required to consider a dispute between two parties having a lease regulated by the RL Act. There was a claim by the lessee and a cross-claim by the lessor. The judgment considered the various iterations of the COVID Regulations and, relevant to this appeal, stated the following:
1. The effect of the COVID Regulations is that the lessor is and continues to be prohibited from prosecuting the lessor's action for possession (being one of the prescribed actions defined in cl 3(1) of the COVID Regulations) for the period of time prescribed in the Regulations [121].
2. The lessee requested the lessor to renegotiate the rent payable and, consequently, the lessor was obliged to renegotiate the rent in good faith. That renegotiation was required to take place having regard to the economic impacts of the COVID-19 pandemic and the leasing principles set out in the National Code of Conduct [124].
3. The lessor will be perpetually barred from taking any prescribed action to recover from the lessee the shortfall in rent if the lessor did not comply with its obligations to renegotiate the rent in good faith [125].
4. At [142], the judgment referred to an earlier judgment by Robb J (Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141) in which his Honour made observations at [158] to the effect that the COVID-19 regime does not empower the court to decide the appropriate rent to be paid under an impacted lease, if the parties are unable to renegotiate the lease and the dispute is not able to be resolved by mediation. His Honour accepted, at [142], that there may be cases that must be addressed by the courts where this question arises in future but there are difficulties in determining the appropriate reduction in rent. The question did not arise in the present case because of a failure by the lessor to comply with the requirements of cl 7 of the COVID Regulation leading 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.
5. At [144], his Honour stated that it was not necessary, for the purposes of resolving the dispute before him, to consider whether the lessor's conduct was unconscionable.
Next, we refer to the Wellness Bodycare decision. This decision concerned an application brought by a sublessee against a sublessor for orders that rent did not have to be paid and that other rent should be reduced. The Appeal Panel said that if the parties engaged in the requirements to negotiate there could be three possible outcomes. The first was that the negotiation in good faith resulted in an agreement between the parties. The second possibility was that the negotiation in good faith did not result in an agreement. The third possibility was that there either had been no negotiation or no negotiation in good faith.
The Appeal Panel said that where there has been negotiation in good faith, but there was no resulting agreement, there was no power conferred on the Tribunal to waive or defer rent. This conclusion followed the decision in Jamaican Coffee Kitchen t/as Dushan and Shelby Trust v M20 [2022] NSWCATAP 2203 (Jamaican Coffee) where the Appeal Panel held at [262] that where there is a failed renegotiation of a lease or a breach by a landlord of the obligation to renegotiate a lease, then the Tribunal has no power to vary the terms of the lease.
In relation to the third situation described above (namely that there was either no negotiation or no negotiation in good faith), the Appeal Panel stated that in such a case the lessor cannot recover rent for the relevant period. Indeed, Robb J made the same comment at [139] in the Darzi Group case where his Honour stated that the lessor "will never be entitled to take a prescribed action" against the lessee for certain short payments of rent in circumstances where the lessor abruptly ceased to continue the negotiations.
We now turn to the decision in Weiss v Agus. In that decision, the Appeal Panel considered the relevant authorities and the terms of the RL Act, the COVID Regulations and the Code of Conduct, and stated (relevant to this appeal):
1. under the COVID Regulations a tribunal or court is only required to have regard to the Code of Conduct in three situations, each involving a claim by a lessor against a lessee, and not where a claim has been made by a lessee against a lessor: [74(2)];
2. if there was a bona fide negotiation but no agreement, there is no power of the Tribunal under s 72 of the RL Act to make orders varying the terms of the lease such that the rent was waived or deferred (Jamaican Coffee at [262]-[263]): [74(3)];
3. if a lessor was taking action against a lessee for recovery of rent arrears, the lessee could raise as a defence to the lessor's claim that the lessor had failed to negotiate in good faith in accordance with the requirements of the COVID Regulations and the Code of Conduct: [74(4)];
4. a lessee can raise as a cause of action against a lessor under s 62B of the RL Act that the lessor had engaged in unconscionable conduct by reason of a failure to comply with the COVID Regulations and the Code of Conduct. The lessee would not only be obliged to establish that the conduct was unconscionable, but also the appropriate remedy: [74(6)].
In summary, where there is no negotiation or a failed negotiation, the lessee is not entitled to apply to the Tribunal for an order that rent be reduced, waived or deferred, or that the terms of the lease otherwise be varied. However, the lessor may be unable to take any prescribed action against the lessee. On the other hand, where the lessee alleges unconscionable conduct (for example by alleging that the lessor failed to negotiate in good faith, or at all), then the Tribunal may make an order for payment of damages under the power authorised by s 62B of the RL Act.
In our view, the effect of the COVID Regulations is to protect an impacted lessee from enforcement or recovery action by the lessor, and to require the parties to enter into negotiations. The negotiations are to be conducted consistently with the Code of Conduct. The COVID Regulations and the RL Act do not give the Tribunal power to modify the terms of the lease including with respect to rent, the term of the lease or with respect to land tax or council rates. They also do not empower the Tribunal to require the lessor to enter into a new lease in circumstances where the lease has expired and has not been renewed (as is the case here).
We see no error in the reasoning of the Tribunal as recorded in the Decision and agree with the Tribunal that the Appellant's application was for orders which the Tribunal has no power to make. Accordingly, the Tribunal was correct in dismissing the Appellant's application.
We understand, from statements made at the hearing of the appeal, that the Appellant has lodged another application in the Tribunal, this time alleging unconscionable conduct. We also understand that the lessor has lodged an application in the Tribunal seeking orders, including an order for possession. It would make sense for those two applications to be heard together but that is a matter for the Consumer & Commercial Division of the Tribunal.
In the course of the hearing of the appeal the Appellant referred to an extract from clause 12 of the Code of Conduct recorded at [25] of the Decision which states that a lessee should be given the opportunity to extend the lease for the equivalent period of the rent waiver and/or rent deferral. The Appellant also referred to clause 8 of the Code of Conduct contained in the same paragraph of the Decision which clause states that payment of rent deferrals must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater. In our view these provisions direct the parties as to how they should conduct the negotiations, but in the event that the negotiations do not result in an agreement, the Tribunal has no power to impose upon the parties its own determination as to how rent should be deferred or waived or whether the term of the lease should be extended.
As stated above it is our view that the COVID Regulations and the Code of Conduct do not go so far as to give to the Tribunal the power to renegotiate the terms of the lease. Rather the regime contained in the COVID Regulations and the Code of Conduct was intended to temporally protect the lessee from action by the lessor and to impose upon the parties the obligation to negotiate and have regard, during the course of those negotiations, to certain principles set out in the Code of Conduct.
The Appellant made reference to another lease to which he is a party and stated that the lessor in that case had agreed to extend the lease. That of course does not mean that the Respondent in this case is obliged to follow the example set by the other lessor. What happened in relation to the other lease is irrelevant to the dispute between these two parties.
During the hearing of the appeal, the Respondent indicated that it seeks an order for costs of the appeal to be paid by the Appellant. There appears to be a relationship between the lessor and its retained solicitors. Accordingly, we think it necessary to have some evidence before us that, if we are to consider making a costs order, the terms of the retainer between the Respondent and its solicitors are fair and reasonable having regard to the apparent appearance of the parties not being at arm's length. Accordingly, we have made directions for submissions to be provided with respect to costs as well as for the provision of evidence. The evidence in this case is intended to address the question of whether the retainer can be described as reasonable and fair. There are also other considerations that the parties need to address. These considerations arise by reason of the provisions of s 60 of the Civil & Administrative Tribunal Act 2013 (NSW).
Accordingly, the orders of the Appeal Panel are as follows:
1. Appeal dismissed.
2. If the Respondent seeks an order that its costs of the appeal be paid by the Appellant, the Respondent must, within 14 days of the date of this decision, file and serve evidence and submissions in support of such application.
3. Within 28 days of the date of this decision, the Appellant may file and serve evidence and submissions opposing the Respondent's application for costs.
4. The submissions concerning costs should include a statement as to whether the party consents to the Appeal Panel deciding costs on the papers and dispensing with a further hearing on costs.
[4]
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: 01 August 2024
Parties
Applicant/Plaintiff:
Ngo
Respondent/Defendant:
Sin & Partner Pty Ltd
Legislation Cited (3)
Administrative Tribunal Act 2013(NSW)
Other Commercial Leases (COVID-19) Regulations 2020(NSW)