Ning v Cong

NCAT Appeal Panel|2022-05-12

REASONS FOR DECISION

By notice of appeal filed on 3 March 2022 the appellants appeal a decision of the Tribunal received by them on 7 February 2022 ("the decision").
By the decision, following orders were made: 1. Pursuant to s 72 (2) of the Retail Leases Act 1994, The Office of the NSW Small Business Commissioner is directed to pay to the lessees, Scott Shiguo and Hong Zhao the sum of $6237.11. 2. For the avoidance of doubt, the Tribunal notes of the amount of $6237.11 referred to in order 1 is amount referred to in order 3 made by the Appeal Panel on 28 September 2021 in Cong v Ning [2021) NSWCATAP 292. 3. Each party is to bear their own costs of this application (see COM 21/42622).
The appellants claim that the Appeal Panel should make the following orders: 1. The office of the NSW Small Business Commissioner is directed to pay to the lessors, Helen Ning and Max Fei, the sum of $2929.11. 2. The lessees, Scott Shiguo and Hong Zhao are to pay to the lessors, Helen Ning and Max Fei, the sum of $2700 for solicitors costs. 3. The lessees, Scott Shiguo Cong and Hong Zhao are to pay the lessors, Helen Ning and Max Fei, the sum of $608 for mediation costs.

Background

These proceedings have an extensive history. The respondents, pursuant to a retail lease jointly leased retail premises being part of a shop in Dee Why from the appellants which included four car parking spaces.

First Tribunal Orders

The Tribunal made the following orders: 1. an order made pursuant to s 72 (1) (f) (iv) of the Retail Leases Act 1994 (the Act) declaring that the Lessors, Helen Ning and Max Fei, are entitled to payment of an amount of $7,531.55 on account of rent arrears and other out of pocket expenses, which is to be paid out of the security bond amount presently held by the Office of the NSW Small Business Commissioner as Bond No. P 02092-0 (Security Bond). 2. Pursuant to s 72 (2) of the Act, the Office of the NSW Small Business Commissioner is directed to pay to the Lessors the sum of $7,531.55 out of the Security Bond. The balance of the Security Bond is to be paid to the Lessees, Scott Shiguo Cong and Hong Zhao. 3. To facilitate compliance with orders 1 and 2 above, the Deputy Divisional Registrar is directed to send a copy of these orders to the Office of the NSW Small Business Commissioner. 4. All other claims in the applications constituted by file No. COM 20/32615 (the Lessees' application) and by file No. COM 20/50753 (the Lessors' application) are dismissed.
By such decision the Tribunal found that the lessors were entitled to an amount of $7,531.55 consisting of the following: (1) $1,294.44 (the deficit in rent not paid by the Lessees to the Lessors for the period from 1 June 2017 to 31 May 2018); (2) $2,929.11 (the deficit in rent not paid by the Lessees to the Lessors for the period from 1 May 2020 to 31 May 2020); (3) $2,700.00 (solicitors costs incurred by the Lessors of and incidental to enforcement action in consequence of default by the Lessees under the retail lease, whether non-payment of rent or breach of clause 10, subletting the 4 car parking spaces without permission of the Lessors); (4) $608.00 (the mediation costs in the present proceedings).
The Tribunal rejected the claim for $24,960 made by the lessor for 'loss of rent' for the four car spaces.

Previous Appeal Decision

The lessees appealed such orders: see Cong v Ning [2021] NSWCATAP 292. In those proceedings the Appeal Panel found that the respondents were "impacted lessees" and that the landlord (the appellants) were required to negotiate a reduction in accordance with the National Code of Conduct. Further, referring to the principle in Darzi Group Pty Ltd v Noble [2021] NSWSC 774, at (45), the Appeal Panel identified that it appeared that the appellant's failure to renegotiate the rent in good faith.
The orders of the Appeal Panel were as follows: (1) The appeal is allowed in part. (2) Order (1) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied by replacing the words "$7,531.55 on account of rent arrears and other out of pocket expenses" with the words "$1,294.44 on account of rent arrears". (3) Order (2) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied to read "pursuant to s 72(2) of the Act, the office of the NSW Small Business Commissioner is directed to pay to the lessors the sum of $1,294.44 out of the security bond. The sum of $6,237.11 is to be retained by the Commissioner pending the determination of the balance of the proceedings. The balance of the security bond is to be paid to the lessees, Scott Shiguo Cong and Hong Zhao". (4) The lessors' claims for, rent for the period 1 May 2020 to 31 May 2020 in the amount of $2,929.11, $2,700 in respect of solicitors' costs, and $608 in respect of mediation costs, are remitted to the Consumer and Commercial Division of the Tribunal, differently constituted, for determination consistently with these reasons.
Accordingly, the Appeal Panel remitted the lessors' claims for rent for the period 1 May 2020 to 31 May 2020 in the amount of $2929.11, and $2700 claimed by the appellants as a solicitor's costs, and $608 in respect of mediation costs to the Consumer and Commercial Division of the Tribunal, differently constituted for determination consistently with the reasons of the Appeal Panel

Decision under Appeal

The proceedings were duly remitted and determined in accordance with the directions of the Appeal Panel and a decision was made by the Consumer and Commercial Division of the Tribunal on 7 February 2022 (COM 21/42622).
The Tribunal identified the issues for determination as whether the lessors could recover the rent; solicitors costs; and mediation costs, as described above. The Tribunal made the following orders: On 07-Feb-2022 the following orders were made: 1. Pursuant to s 72(2) of the Retail Leases Act 1994, the office of the NSW Small Business Commissioner is directed to pay to the lessees, Scott Shiguo Cong and Hong Zhao, the sum of $6,237.11. 2. For the avoidance of doubt, the Tribunal notes that the amount of $6,237.11 referred in order 1 is the amount referred to in order 3 made by Appeal Panel on 28 September 2021 in Cong v Ning [2021] NSWCATAP 292. 3. Each party is to bear their own costs of this application (COM 21/42622).
The Tribunal found: 1. the Tribunal had no power to revisit the findings of the Appeal Panel that: 1. the tenants were "impacted lessees" within the meaning of the JobKeeper Rules as in force in May 2020: at [44], 2. the lessors were required to negotiate a reduction in rent in accordance with the "National Mandatory Code of Conduct: that is the SME Commercial Leasing Principles during Covid - 19" adopted on 7 April 2020: at [46].
The Tribunal found that although the respondent's request for mediation was made on 16 April 2020 prior to the commencement of the first regulations which operated from 24 April to 24 October 2020, the 18 May 2020 communication from the Small Business Commissioner provided "reliable evidence that the lessors refused to engage in mediation during the prescribed period".

Second Tribunal Orders

The Tribunal made the following findings: 35. As a result of the lessors refusal to negotiate with the lessees, the Tribunal finds the lessors did not negotiate in good faith in relation to the rent. They instead refused to engage in mediation and maintain their view of the lessees were not "impacted lessees". 36. It is also clear that the lessors [sic] (lessees) provided a statement and supporting documents which constituted evidence that they were impacted lessees. Consistent with what was said in Darzi at [125], as noted by the Appeal Panel at [51], the Tribunal determined that the lessors are barred from taking action to recover arrears of rent for the period from 1 to 31 May 2020. 37. Accordingly, in relation to the claim for $2929.11 for rent for the period from 1 to 31 May 2020, the answers the questions posed above are as follows: (1) Did the lessors renegotiate in good faith in relation to that rent? No. (2) Did the lessees provide a statement that they were impacted lessees and evidence that they were impacted lessees? Yes. (3) Can the lessors make a claim for that rent? No (4) If so in what amount of the lessors entitled to recover? Does not arise. 38. The claim for $2700 for solicitor's costs has three components: (1) $600 for writing a letter on or before 18 May 2020, plainly the letter dated 12 May 2020 referred to above (2/70), (2) $1100 for "Review Documents and Draft Statement" on before 17 September 2020 (2/71), and (3) $1199 for "Legal Consultation re-breach of contract and NCAT application" (2/72). 39. At the hearing of this matter, it was suggested this claim for $2700 was based on a breach by the lessees which were said to be a sub-letting four car spaces. However, the reasons delivered by the Tribunal on 25 February 2021 reveal that claim was dismissed. The reasons delivered by the Appeal Panel on 28 September 2021 reveal that claim was not the subject of any appeal. 40. The claim for $608 for mediation costs was a charged (Sic -charge) Imposed by the Small Business Commissioner for conducting a five-hour mediation. That mediation was conducted after the lessees lodged their application, in compliance with an order made by the Tribunal on 21 September 2020, prior to the lessors lodging their application 4 December 2020.
The Tribunal found that the lessors were not entitled to recover any of the three amounts which are the subject of the hearing and that the claims for solicitor's costs in mediation costs were amounts "requiring a payment of a… fee or charge relating to, unpaid rent otherwise payable by a lessee", contrary to paragraph (g) in the definition of "prescribed action". The Tribunal continued at [43]: As a result, the lessors were not entitled to maintain those two claims. It is also noted the reasons delivered by the Appeal Panel links those claims to the security bond which would also involve a "prescribed action" contrary to paragraph (h) in the definition of those words.
The Appeal Panel concluded therefore that the lessors could not succeed in their claim, nor should they succeed in their claim for costs of the proceedings since special circumstances needed to be shown and that it did not consider there were any special circumstances, which would justify an order for costs.
The Tribunal concluded: 47. As the amount in issue at the re-hearing was $6237.11 ($2929.11 plus $2700 plus $608), the applicable provision in relation to costs is again section 60 and not rule 38 (2) (b). There is nothing that has occurred since the hearing of the appeal that would warrant a finding that there are special circumstances warranting an order for costs. Accordingly consistent with the decision of the Appeal Panel, and with the decision at first instance, the Tribunal does not consider any order for costs should be made.

Consideration of the Appeal

This appeal is an internal appeal brought pursuant to section 80 (2) (b) of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act"). Section 80 (2) relevantly provides: (b) in the case of any other kind of decision (including an ancillary decision) of the Tribunal at first instance - as of right on any question of law, or with leave of the Appeal Panel on any other grounds.
The grounds of appeal claim that the decision was not fair and equitable, and was against the weight of evidence because: (a) the Tribunal failed to apply the National Mandatory Code of Conduct; (b) the Tribunal erred in finding that the appellant did not negotiate in good faith in relation to the rent by overlooking the evidence provided by the appellant during the proceeding; (c) the Tribunal failed to consider clauses 7 (5) and 7) of the retail and other commercial leases That (Covid 19) regulation (No 2) 2020 NSW (the Second Regulation; (d) the Tribunal erred in following the decision in Darzi Group Pty Ltd v Noble.
Since this the appellant alleges that the decision is not fair and equitable, a factual issue arises. Part 6 of Schedule 4 to the NCAT Act applies. Subsection (1) provides that the Appeal Panel may grant leave under section 80 (2) (b) of the NCAT Act from an internal appeal only if the Appeal Panel is satisfied the appellant may have suffered a substantial miscarriage of justice because: 1. the decision of the Tribunal under appeal was not fair applicable, or 2. the decision of the Tribunal under appeal was against the weight of evidence, or 3. significant new evidence has arisen (being evidence was not reasonably available at the time the proceedings under appeal were being dealt with).
As determined in Collins v Urban [2014] NSWCATAP 17, at [84]: The general principles derived from these cases can be summarised as follows: (1). In order to be granted leave to appeal, the applicant must demonstrate something more than that the primary decision-maker was arguably wrong in the conclusion arrived at or that there was a bona fide challenge to an issue of fact: BHP Billiton Ltd v Dunning (2013] NSWCA 421 at [19] and the authorities cited there; Nakad v Commissioner of Police , NSW Police Force [2014) NSWCATAP 10 at (45]; (2) Ordinarily it is appropriate to grant leave only in matters that involve: (a) issues of principle; (b) questions of public importance or matters of administration or policy which might have general application; or (c) an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; (d) a factual error that was unreasonably arrived at and clearly mistaken; or (e) the Tribunal having gone about the fact-finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed.
Ground 1, ground 2, ground 3 of the appellant's appeal challenges the findings that the appellant did not negotiate in good faith; that the respondent were impacted lessees and that the turnover figures provided by the respondents do not justify finding that they were impacted lessees.
These grounds of appeal cannot succeed in light of the existing findings of the Appeal Panel in Cong v Ning [2021) NSWCATAP 292 namely: 1. The respondents were "impacted lessees" at [44] and the lessors did not appeal that finding; 2. The landlord was required to negotiate a reduction in rent in accordance with the National Code of Conduct at [45].
The factual finding was made by the Tribunal that the appellants did not negotiate in good faith in relation to the rent. Such finding is supported from the evidence of an email sent by the first named appellant to the respondent on April 20, 2020 at 11.26.31 am which states, inter alia: "3. We are not going to attending (sic) any the mediation, because you don't qualify under the government's policy".
The Tribunal found no evidence to lead to the conclusion that the appellants attempted to negotiate in good faith stating at [35]: As a result of the lessors refusal to negotiate with the lessees, the Tribunal finds that the lessors did not negotiate in good faith in relation to the rent. They instead refused to engage in mediation and maintained the view that the lessees were not " impacted lessees".
Such finding was open on the evidence to be made. Whilst the appellants submit that they were "ready and willing to negotiate the rent relief by repeatedly requesting the respondent to provide evidence to support their claims under the National Code of Conduct" no such evidence has been produced to the Tribunal, nor to the Appeal Panel. Instead the appellants maintained that they were not required to attend the mediation because the respondents had not provided them with financial information and that in accordance with the National Code of Conduct both parties are required to negotiate in good faith.
The lessors were not entitled to unilaterally decide that the lessees were not impacted tenants and that in consequence the lessors were justified in refusing to attend the mediation. The Appeal Panel finds no error in the factual finding of the Tribunal on this issue.
Nothing has been advanced before the Appeal Panel which would support the appellants' submission that the Tribunal wrongfully applied Darzi. The appellants maintain that they "engaged in the renegotiation of the rent in good faith, the information provided by the respondents were insufficient and inaccurate to establish that the respondents were impacted lessees for the purpose of good faith negotiation". However, the finding was made that the appellant's did not comply with the relevant Regulations, and it follows that the legal consequence of their conduct was to disentitle them to take action against the respondents.
As a consequence of the appellants refusal to negotiate in respect of an "impacted lessees" the principle in Darzi at [125] applies. That is, the appellants are barred from taking legal action to recover the arrears of rent in the period 1 to 31 May 2020. Darzi states: 125. The Note to clause 7(4) is in my view material to a consideration of how the renegotiation of the rent under the Lease was required to take place, although the Note did not have the legal effect of restricting the general relevance of the leasing principles in the Code required by clause 7(4)(b). The effect of clause 7 was that Nolde will be perpetually barred from taking any prescribed action to recover from Darzi the shortfall in rent paid for March and June 2020, if Nolde did not comply with its obligation to renegotiate the rent in good faith.
The claim for $2929.11 accordingly fails because any action to recover that amount would constitute prescribed action. Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 3. .. prescribed action means taking action under the provisions of a commercial lease or seeking orders or issuing proceedings in a court or tribunal for any of the following - (a) eviction of the lessee from premises or land the subject of the commercial lease, (b) exercising a right of re-entry to premises or land the subject of the commercial lease, (c) recovery of the premises or land, (d) distraint of goods, (e) forfeiture, (f) damages, (g) requiring a payment of interest on, or a fee or charge related to, unpaid rent otherwise payable by a lessee, (h) recovery of the whole or part of a security bond under the commercial lease, (i) performance of obligations by the lessee or any other person pursuant to a guarantee under the commercial lease, (j) possession, (k) termination of the commercial lease, (l) any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State.
In respect of the claim for legal costs and mediation costs, the appellants rely upon the provisions of the lease which requires the respondent to pay such costs. However, these amounts required a payment "of… a fee or charge related to, unpaid rent otherwise payable by the lessee". The appellant's are not entitled to claim such amounts because it would amount to "prescribed action" contrary to paragraph (g) with the meaning of section 3 of the Second Regulations which were applicable.
The appellants maintain that clauses 7 (5) and 7 (7) of the Second Regulation was not taken into consideration. Clause 7 provides: 7 Obligation to renegotiate rent and other terms of impacted leases before prescribed action (1) A lessor under an impacted lease must not take or continue prescribed action against the impacted lessee on grounds of a breach of the impacted lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note - This clause does not prevent parties to an impacted lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)-(6). (2) A party to an impacted lease may request the other parties to renegotiate the rent payable under, and other terms of, the impacted lease. (3) A party to the impacted lease may make a second or subsequent request under subclause (2), but, unless the parties otherwise agree, an impacted lessee may make a second or subsequent request only if the request - (a) is made during the prescribed period, and (b) does not relate to rent for a period for which rent has 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 the lessor the following in respect of the impacted lease - (a) a statement to the effect that the lessee is an impacted lessee, (b) evidence that the lessee is an impacted lessee. (6) The parties are to renegotiate the rent payable under, and other terms of, the impacted lease having regard to - (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. Note - See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct. In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover. (7) If the impacted lessee does not comply with subclauses (4)-(6), the lessor is taken to have complied with this clause.
The effect of Clauses 5 and 7 means that if the lessee does not comply by providing the relevant material, the lessor is taken to have complied with the clause. The appellants claimed that the respondents failed to comply by providing false or no information. However, the Appeal Panel in Cong v Ning observed at [47] that the appellants had declined to negotiate with the tenants on the basis that the tenants had not provided sufficient evidence that they were "impacted lessees". The First Appeal Panel said: [52] In light of the errors in paragraph 8 of the Tribunal's decision which we have identified above, it is clear that the question whether landlords are prohibited from taking action to recover the rent from May 2020 was not determined according to law. [53] It is necessary to set aside the order in relation to the payment of rent for May 2020 and remit to the Consumer and Commercial Division for determination consistently with these reasons the question whether the landlords are entitled to pursue proceedings to recover that rent. Issues that will arise on such re-hearing will include: whether or not the landlords complied with requirements of regulation 7 (3); whether the provisions of Regulation 7 (3A) and (3B) were applicable in the circumstances, and, if so, whether the tenants complied with the requirements of regulation 7 (3A). The Appeal Panel is bound by the earlier findings of the first Appeal Panel.
The appellants also maintain that the Second Regulation became effective after the decision and that clause 7 (5) required the impacted lessee to give a statement to the effect that the lessee was an impacted lessee and that there was evidence to support such claim. Further, Regulation 7 (7) provided that if the impacted lessee did not comply with subclauses (4) - 6) the lessor is taken to have complied with the clause. But the answer to this submission is that the first Appeal Panel found that the regulations bound the parties.
The appellants' submission is contrary to the earlier finding of the Appeal Panel, that the respondents were "impacted lessees". The Tribunal's decision under review did not make that finding but rather, found that it was bound by the finding of the Appeal Panel. The Tribunal made the following finding: [30]. The lessors case in relation to rent appears to involve the proposition that the lessees are not impacted lessees because they have not suffered any decline in turnover. The Tribunal cannot now find the lessees were not "impacted lessees": first, because that is an issue which could and should have been raised at the first hearing (Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45); secondly because it is not open for the Tribunal to now revisit a finding of the Appeal Panel (at [44]).
During the hearing before the Appeal Panel the appellants relied upon the fact that the Second Regulations did not come into effect until after the respondents made their request on 16 April 2020 for rent relief. At this time the First Regulations had not yet come into force, but did so eight days later on 24 April 2020 and continued in force until 24 October 2020. The respondents filed their Tribunal application on 30 July 2020. The Second Regulations came into force on 23 October 2020 and extended the prescribed period of the Regulations until 31 December 2020. The Third Regulations took effect from 18 December 2020 to 28 March 2021.
The Tribunal's decision in respect of both the respondent's claim for rent relief and the appellant's application filed on 4 December 2020 was issued on 25 February 2021 while the Third Regulations were operative.
The Appeal Panel finds that there is no irregularity in the Tribunal's approach. In answer to the submission that the Tribunal failed to take into consideration clause 7 (5) and 7 (7) of the Second Regulations, the appellant's submission suggests that Darzi does not have retrospective effect because that decision was decided on 28 June 2021 after the Third Regulations had expired. The Appeal Panel finds that there is no merit in such submission since the principle in that decision applies to the operation of the Regulations both before and after the date of publication of that decision.
The appellants also submitted that the respondent had relied upon incorrect financial information, namely that duplicate ABN numbers existed for their business. This was shown to be baseless because one ABN number was succeeded by another and at no stage were there simultaneous ABN numbers for the business of the respondents.
The Appeal Panel finds that there is no arguable error in the decision under appeal. It follows that leave to appeal is refused. Further, since no special circumstances exist, each party should pay its own costs of the appeal.

Orders

The Appeal Panel orders that: 1. Leave to appeal the decision be refused; 2. The appeal be dismissed.

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: 26 May 2022

At a glance

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Judgment (9 paragraphs)

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