NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd

Background

1. Perpetual (the custodian of the Dexus Office Trust) is the registered proprietor of the Premises. As noted above, Dexus is the responsible entity of the Dexus Office Trust. NTT is a technology and business consulting services company.
2. On around 19 July 2013, NTT entered into the Lease of the Premises (located at Level 19, 45 Clarence Street, Sydney) with the Dexus entities for a term of eight years, commencing on 1 September 2013 and terminating on 31 August 2021. The lease term therefore now has less than twelve months to run.
3. In or around July 2017, NTT, with the consent of the Dexus entities, entered into a sub-lease of the Premises with a third party known as Society One.

Assignment Proposal

1. In or around August 2019, a proposed assignment of the Lease for the balance of its term was negotiated with Cover Genius Pty Ltd (CG). CG is an Australian company within the Cover Genius group of companies (the Cover Genius Group). The Cover Genius Group operates a global insurance technology business.
2. A document setting out the terms of the proposed assignment (the Assignment Proposal) was signed by CG (by its Chief Operating Officer, Mr Brenton Charnley). It had been prepared by Cushman Wakefield, real estate agents, on behalf of Society One (see the affidavit sworn on 17 August 2020 by Mr Angus McDonald, the Chief Executive Officer of CG, at [17]). The proposed assignee named in the Assignment Proposal was CG. I interpose to observe that, not only was CGS (which was only incorporated at around this time - see the affidavit sworn on 17 August 2020 by Mr McDonald at [11]) not a party to the Assignment Proposal, there is also no evidence that it was agreed to by CGS or by any of the parties to the subsequent Deed of Assignment.
3. The Assignment Proposal included, as a condition precedent, the "[d]rafting and execution of a formal Deed of Assignment and Deed of Consent to Assignment being executed by all parties…". The Assignment Proposal also provided that: Notwithstanding this [Heads of Agreement], no legally binding agreement will be created between the parties until such time as both parties have executed the formal Assignment documents including those required by the Lessor.
4. On or before 23 December 2019, CGS, which by then had both been incorporated and identified as the proposed assignee, entered into a licence agreement as licensee, with Society One, as licensor, to enable CGS to occupy part of the Premises (the Licence Agreement) until 30 April 2020. Although the commencement date of the Licence Agreement was specified as 23 December 2019, the Licence Agreement specified (by cl 2.1.1) that: 2.1.1 This agreement is subject to and conditional upon: (a) the Licensee [CGS] and Landlord [NTT] entering into a deed of assignment of lease over Level 19, 45 Clarence Street, Sydney, NSW 2000; and (b) the Licensee, Licensor [Society One], Landlord and Head Landlord [Perpetual] entering into a deed of consent to assignment, on terms acceptable to the Licensor on or prior to the Commencement Date (Condition Precedent).
5. Those events did not happen by 23 December 2019 and, although cl 2.2.1 of the Licence Agreement provided that the Licensor (i.e., Society One) might waive the benefit of the Condition Precedent by notice in writing, there is no evidence that Society One waived the benefit of the Condition Precedent, in writing or otherwise. Rather, on 23 December 2019, Society One emailed CGS, stating that: … it [the Licence Agreement] is not yet fully executed on our side we should be ready to exchange today at 3pm provided you have: 1. A fully executed copy of the deed of consent to assignment 2. A fully executed copy of the deed of assignment 3. Bank Guarantee 4. Insurance certificate.
6. It appears that CGS did not provide the abovementioned documents to Society One on 23 December 2019 and it does not appear to be disputed that the Licence Agreement did not commence on that date.
7. On 23 December 2019, Mr Charnley sent an email to solicitors at Sparke Helmore (acting for NTT) and HWL Ebsworth (HWLE) (acting for the Dexus entities) and others, in relation to the Assignment of Lease: "following up" on the execution of the lessor's deed of consent to the assignment of lease; noting that Society One and "Cover Genius" (by which I understand him to be referring to CGS) had executed the Licence Agreement; and advising that "Cover Genius" wished to occupy the property prior to the Christmas break to enable it to do some works over the period. It is relevant, for reasons that will shortly become apparent, to note that the email also sought advice as to whether anything further was required "from either Society One or Cover Genius with respect to this".
8. It does not appear that there was a response to this email until 6 January 2020 when, by email sent at 2.43 pm, Ms Grace Mangraviti (of HWLE) forwarded to Mr Calvin Tay (of Sparke Helmore) an email attaching what was said to be the final version of the deed (of assignment) for his reference and noting her understanding that Mr Tay's client (NTT) and the transferee "will execute the deed tomorrow". At 3.09 pm that day, Mr Tay responded to the effect that he would need to obtain instructions on the further amendments discussed between the transferee and the landlord (which he said had not been provided to him nor previously highlighted).

Deed of Assignment

1. The parties to the Deed of Assignment were named as Perpetual (as "Landlord" under the Lease), Dexus (as the "Responsible Entity"), NTT (as assignor, or "Tenant") and CGS (as "Transferee"). The relevant clauses of the Deed of Assignment are as follows.
2. Clause 2.1 provided for the assignment by NTT, as Tenant, to CGS, as Transferee or assignee, of all of its interest in and in relation to the Lease on and from the date of assignment (defined as 1 May 2020 - see cl 1.1 and Item 3).
3. Clause 2.2 provided that Perpetual consented to the assignment by the Tenant of all its interest in and in relation to the Lease to the Transferee (again, CGS) without prejudice to the Landlord's rights, powers and remedies under the Lease.
4. Pursuant to cl 4.1, CGS was obliged to perform all the obligations of NTT as tenant under the Lease from 1 May 2020 and, pursuant to cl 4.3, CGS was to indemnify NTT with respect to CGS' performance of its obligations as tenant under the Lease from 1 May 2020 (the CGS Indemnity).
5. Clause 4.4(a) obliged CGS to provide a bank guarantee (the CGS Bank Guarantee) by 1 May 2020.
6. Pursuant to cl 4.4(b), Perpetual was required to return to NTT the bank guarantee NTT had provided to Perpetual (the NTT Bank Guarantee) within 14 days of CGS providing the CGS Bank Guarantee.
7. Pursuant to cl 5.3, NTT was obliged to indemnify Perpetual, as Landlord, with respect to any default or delay by CGS in the performance of its obligations under the Lease on and from 1 May 2020 and in respect of any default or delay by CGS in the performance of CGS' obligations under the Deed of Assignment (the NTT Indemnity).
8. Pursuant to cl 5.4, NTT was to be released from all claims by Perpetual arising out of the Lease (including under the NTT Indemnity, subject to an exclusion not relevant for present purposes) on the later of 1 May 2020 or the date that CGS provided the CGS Bank Guarantee.
9. Clause 7 required CGS promptly to lodge for registration the transfer of lease effecting the assignment with the Land Title Registry.
10. Clause 9.7 permitted execution of the Deed of Assignment in counterparts.

Execution of the Deed of Assignment

1. It is not disputed that CGS signed the Deed of Assignment on 7 January 2020.
2. At 1.57 pm on 7 January 2020, Mr Charnley emailed solicitors at Sparke Helmore and HWLE, copied to Ms Bree Clare (of CG), "following up" the status of the Deed of Assignment. Relevantly, this email said: … We would like to execute this today so as to obtain access to the property. As you would be aware, we are already 2 weeks behind schedule for the property, as we'd hoped we'd have access prior to the break. Could you please provide an update and please advise asap if there are any issues so we can look to resolve today.
3. At 2.05 pm that day, HWLE responded to Mr Charnley advising that execution versions of the deed had been sent to Ms Clare (of CGS) and attaching a version of the deed for his reference. The email from Ms Mangraviti stated that this version was pending confirmation from the assignor (NTT) that the revised terms requested by CGS were "agreeable" (presumably, meaning "acceptable") to NTT. The email noted that, "[w]e are yet to receive an update in this regard".
4. By email on 7 January 2020 sent at 3.06 pm, Mr Tay (of Sparke Helmore) then sent to Mr Charnley what he referred to as the "final form" of the "Deed of Consent and Assignment of Lease" provided by the lessor's lawyers. Instructions were given for Mr Charnley to print four copies of this document and have "Cover Genius" (again, presumably there meaning CGS) sign them where indicated. This email went on to state: Please return the document to me to be issued to NTT for their signature, and then to be forwarded to the landlord. In the interim if you can also scan a copy of Cover Genius' scanned document, it would assist. I look forward to receiving finalised documents for further action.
5. Pausing here, by reference to the above, CGS says that it did not provide its signed execution page in purported exchange of counterparts; rather, it says that the stated intention to execute in counterparts arose only on 8 January 2020, in response to a query from HWLE (as to which, see below).
6. On 7 January 2020, by email sent at 5.12 pm (responding it would seem to the email of 3.09 pm on 6 January 2020), Ms Clare (of CGS) sent an email to Mr Tay (of Sparke Helmore), copied amongst others to Ms Mangraviti (of HWLE), with a PDF attachment, stating that "attached are the signed pages from Cover Genius - please let me know if you require anything further from our side". The attached signed pages were four copies of the execution page each signed by the transferee (under an execution clause that notes that the document was executed in accordance with s 127 of the Corporations Act 2001 (Cth) (Corporations Act) by two directors of CGS).

COVID-19 and subsequent events

1. From 24 March 2020 to 27 April 2020, Mr Charnley and Mr McDonald had a series of communications with the Dexus entities, with the stated purpose of CGS obtaining rental or some other form of assistance with respect to CGS' obligations as tenant under the Lease from 1 May 2020 (see affidavit sworn on 17 August 2020 by Mr Angus McDonald at [51]).
2. On 24 March 2020 at 8.06 am, Mr Charnley sent an email to Ms Griffin (of Dexus), stating that: ... as of 1 May NTT and Society One will assign their lease to Cover Genius and in preparation for this I am reaching out to request a without prejudice discussion with Dexus regarding our lease commitments. The current economic environment has had an impact on Cover Genius and we'd like to get on the front foot with Dexus to discuss options with regards to rent payments that will commence 1 May...
3. On 8 April 2020 at 11.00 am, Mr Charnley sent a further email to Ms Griffin again requesting, "a without prejudice discussion with Dexus regarding our lease commitments commencing 1 May at Level 19 45 Clarence Street" and confirming that, "the current Covid-19 pandemic has had a significant impact on Cover Genius and our revenue''.
4. On 16 April 2020, Mr McDonald sent an email to Ms Griffin requesting "an update on when we can any [sic] rental waiver or deferral discussion with Dexus".
5. On 22 April 2020 at 8.18 am, Ms Griffin responded, indicating that Dexus would be directing CGS to complete a questionnaire seeking information about the impact of COVID-19 on its business. Mr McDonald replied asking whether the process to be adopted by Dexus could be expedited on the basis that, "[w]ithout a clear pathway forward within a week our directors are going to need to make a decision on if we are going to be able to continue".
6. On 27 April 2020, Mr Charnley sent an email to Dexus requesting "urgent assistance from Dexus due to the current impact of the pandemic".
7. Thereafter, on 27 April 2020, a formal request was made by Dexus for CGS to complete its "Customer Assistance Form" in order that Dexus might then consider CGS' request for assistance in line with the Australian Government's Commercial Tenancies Code of Conduct.
8. An application dated 27 April 2020 (see also the affidavit sworn on 17 August 2020 by Mr Angus McDonald at [52]) was then made by CGS to Dexus, "seeking a 100% waiver of rent and outgoings due to the impact of the Pandemic". This application referred to attempts made by the CG Group, "to discuss the upcoming lease obligations under a lease assignment due to commence on 1 May 2020" and to attempts "to market the Clarence Street property including: Cushman and Wakefield to market assignment options; and Office Hub to explore flexible sublease options for a number of spaces. Entered into negotiations with the existing sublease tenant Unidqys to discuss remaining as a tenant in suite 2".

Issues for determination

1. The issues for determination (now that the case based on of frustration has been abandoned) were identified in written submissions in advance of the hearing as follows: 1. Is the Deed of Assignment valid and enforceable? 2. Is NTT entitled to specific performance? 3. Is CGS liable to indemnify NTT for all amounts claimed by Perpetual in respect of CGS' default or delay in the performance of its obligations under the Lease? 4. Is Perpetual (and/or Dexus) entitled to call upon the NTT Bank Guarantee?
2. At the hearing, which had been expedited by Sackar J, CGS raised for the first time the proposition that, in determining the question of relief available to NTT, it was necessary to have regard to Schedule 5 ("Commercial leases - COVID-19 pandemic special provisions") to the Conveyancing (General) Regulation 2018 (NSW) (which I will hereafter refer to as the COVID-19 Regulations). In those circumstances, I granted leave to the parties to file supplementary submissions after the close of the hearing as to relief and the COVID-19 Regulations.
3. It is convenient first to dispose of the underlying issues and then to consider how, if at all, the abovementioned statutory regime changes the ultimate disposition of the proceedings. In particular, I consider the issues as to the operation of COVID-19 Regulations from [198] below).
4. Furthermore, as noted above (see at [4]), the dispute between NTT and the Dexus entities was resolved by the making of consent orders, which I will set out in due course.

Is the Deed of Assignment valid and enforceable?

1. It is convenient first to note that the issue raised in correspondence by the Dexus entities in February 2020 as to the manner of execution by NTT (to which NTT responded in its submissions in advance of the hearing), did not appear to be pressed during oral submissions (i.e., CGS did not seem to press an argument that it is not bound by the Deed of Assignment because NTT did not execute the Deed of Assignment in accordance with the requirements of s 127 of the Corporations Act). It will not be necessary to do deal with this, for reasons that I will explain later, but for completeness I refer below to the submissions that NTT made on this issue.

Section 127 of the Corporations Act

1. NTT says that there is no dispute that CGS validly executed the Deed of Assignment on 7 January 2020 and says that it was thereafter bound by the Deed of Assignment on that date, irrespective of the subsequent validity of NTT's execution. Alternatively, and in any event, NTT submits that it did execute the Deed of Assignment on 8 January 2020 in accordance with the requirements of s 127(1) of the Corporations Act, first, when it was signed by two of its directors (Mr Craig Goldberg and Mr Michael Miers), and then when it was re-executed on 20 February 2020 and those re-executed copies were then signed by Mr Miers on or around 21 February 2020 before returning them by express post to Sparke Helmore. It is noted that thereafter, on or around 28 February 2020, Sparke Helmore express posted the copies of the Deed of Assignment executed by NTT to HWLE. It is submitted that, therefore, the requirements of s 127 of the Corporations Act were met by NTT.
2. Furthermore, it is noted that, by s 127(4), the ways in which a company may execute a document, including a deed, are not limited by s 127. In this regard, it is said that the section does not operate to prescribe the only methods by which a company may execute a document and, were NTT to have adopted a method other than that identified by sub-s (1) and (2), the other parties to the Deed of Assignment would not have available the assumptions of due execution provided by sub-s (5) and (6) (which assumptions NTT says are not here relevant in circumstances where NTT does not wish to escape liability with respect to the Deed of Assignment).
3. For these reasons, NTT submits that there is no force to the suggestion that the Deed of Assignment was not validly executed.

Relevant principles as to delivery of deeds

1. Before turning to the respective parties' submissions, it is convenient here to summarise some of the relevant principles regarding delivery of deeds, since these were not in dispute. Although, I note that, in due course, it will be necessary to return in some greater detail to these principles and, particularly, the development of them.
2. The principles were outlined by Sackville AJA, with whom Allsop P (as his Honour then was) and Campbell JA agreed, in Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253 (Segboer v AJ Richardson). Relevantly, his Honour there said (at [51]-[59]; [72]-[73]): 51. The appellant's argument that the guarantee had not been delivered proceeded on the assumption that the guarantee was a deed. It is long established law that delivery is essential to a deed: R J A Morrison, H J Goolden, R F Norton, Norton on Deeds (2nd ed, 1928), at 10; Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263, 28 WAR 124, at [23]-[24], per Steytler J (with whom McKechnie and Hasluck JJ agreed). 52. It is common ground that delivery is required where a deed is executed, not only by an individual but by a corporation: see Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (1977) 2 NSWLR 109, at 118-119, per Helsham CJ in Eq: A J Bradbrook, "The Delivery of Deeds in Victoria" (1981) 55 ALJ 267, at 270-272. 53. The requirement for delivery has its origins in the symbolic significance of a manual transfer of a document: A J Bradbrook, at 267. But for at least two centuries, the requirement of "delivery" has been capable of being satisfied without physical delivery or transfer of the deed to the promisee or anyone else. Norton on Deeds states (at 13) that: "Delivery may be effected by words alone, or without words by the acts or conduct of the party, from which it can be inferred that he intended to deliver the deed as an instrument binding on him." 54. It is for this reason, that it held in Xenos v Wickham (1867) LR 2 HL 296, that a deed can be delivered even though it never leaves the possession of the party executing it: see at 323, per Lord Cranworth. Indeed, there is much older authority to that effect: see, for example, Doe d Garnons v Knight (1826) 5 B & C 671; 108 ER 250; Hall v Palmer (1844) 3 Hare 532; 67 ER 491; Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564; Re Way's Trusts (1864) 2 De G J & S 365; 46 ER 416. 55. In Xenos v Wickham, Blackburn J (whose opinion was upheld by the House of Lords) stated (at 312) the principles as follows: "no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to shew that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: 'I deliver this as my deed;' but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well. And it is clear on the authorities, as well as the reason of the thing, that the deed is binding on the obligor before it comes into the custody of the obligee, nay, before he even knows of it ..." 56. This passage was approved by the Privy Council in Macedo v Stroud [1922] 2 AC 330, at 337, per Viscount Haldane; see also Stromdale & Ball Ltd v Burden [1952] Ch 223, at 230, per Danckwerts J. Since no physical delivery of a deed is required, some caution should be exercised before using the expression "constructive delivery" in the present context: cf Peel Valley Mushrooms Ltd v Corporate Investment Australia Funds Management Ltd [2000] NSWSC 958; 35 ACSR 535, at 542 [22]-[25], per Santow J. 57. Blackburn J stated in Xenos v Wickham that the mere affixation of the seal does not render a document a deed. But a document in the form of a deed which has been signed and sealed is presumed to have been delivered: Hall v Bainbridge (1848) 12 QB 699; 116 ER 1032. The presumption may be rebutted, for example where the circumstances show that the parties executing counterpart deeds did not intend to be bound until the deeds were exchanged: Hooker v Christian Brothers. 58. The question in the present case is not (as the primary Judge seems to have thought) whether, on the evidence, the guarantees had been delivered to the Developer. Physical delivery is not required for a deed to be effective. The critical question is whether the party executing the deed has evinced an intention to be bound immediately. 59. In Xenos v Wickham, it was said that the question of whether a party had evinced an intention to be bound by a deed was a question of fact for the jury: at 309, per Piggott B; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70, at 78, per Tadgell J. Both parties in the present case accepted that the Bank's intention, for the purpose of determining whether the deed had been delivered, was to be ascertained objectively by reference to the words used by and conduct of the Bank and the facts attending the execution. This approach is consistent with the statements of principle in Norton on Deeds and in Xenos v Wickham, where Blackburn J emphasised the significance of the acts or words of the promisor: see also Ansett v Comptroller, at 79, citing Bowker v Burdekin (1843) 11 M & W 128, at 147; 152 ER 744, at 751, per Parke B: Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310, at 355, per Kennedy J […] 72. A deed can be delivered in escrow. The effect is that the deed is not recallable, but equally is not operative until a particular condition is satisfied: Beesly v Hallwood Estates Ltd [1961] Ch 105, at 118, per Harman LJ (with whom Lord Evershed MR agreed): Federal Commissioner of Taxation v Taylor [1929] HCA 13; 42 CLR 80, at 87-88, per Rich, Starke and Dixon JJ; Ansett v Comptroller of Stamps, at 79. Delivery of a deed in escrow is to be distinguished from a case where the grantor's intention is not to be bound at all until some future event occurs, in which case there is no delivery. An example is where a party to a conveyancy transaction executes a deed and returns it to his or her solicitor in the expectation that, in accordance with usual conveyancing practice, the deed will not be operative until exchange: Hooker v Christian Brothers, at 118, Bradbrook, at 269. 73. Whether a deed has been delivered unconditionally, delivered in escrow or not delivered at all depends on the executing party's intention. This question, as I have already indicated, is to be determined on the basis of the words used by and the conduct of the promisor, taking into account the circumstances attending the execution of the deed.

CGS' submissions

1. In brief compass, CGS' case is as follows: that the parties agreed that the Deed of Assignment would be delivered by exchange of counterparts; that, although CGS electronically distributed a signed execution page of the Deed of Assignment on 7 January 2020, that was not (relevantly) delivery of the Deed of Assignment; therefore, CGS was entitled to withdraw and recall its signed version of the Deed of Assignment before exchange; and, by letter dated 30 April 2020 and prior to any exchange of the counterparts of the Deed of Assignment, CGS indicated that it no longer proposed to complete the transaction, thereby withdrawing and recalling its signed version of the Deed of Assignment. It is CGS' position that the provision to CGS by Dexus, Perpetual and NTT (after commencement of these proceedings) of an executed version of the Deed of Assignment "purportedly" dated 12 March 2020 (see the chronology above) did not amount to exchange of counterparts or delivery.
2. More specifically, CGS argues that the words and conduct of the parties, including CGS, as evidenced in the communications attending CGS' execution of the Deed of Assignment, disclose that: first, the parties intended for the Deed of Assignment to be exchanged in counterparts, in accordance with usual conveyancing practice; and second, CGS did not evince an intention to be bound immediately but, rather, only an intention to be bound on exchange of counterparts with NTT and the Dexus entities.
3. CGS points to the communications between the parties on 8 January 2020 and 10 February 2020 (again, see the chronology above) as evidencing the parties' intention that the Deed of Assignment was to be exchanged in counterparts.
4. Similarly, CGS points to the following as evincing its intention not to be bound immediately by its execution of the Deed of Assignment on 7 January 2020: first, that it electronically distributed the signed pages only in response to a request by NTT that this would "assist"; second, that the condition in the Assignment Proposal that the offer was subject to execution of a formal Deed of Assignment by all parties (said to be to the same effect as cl 37 in 400 George Street - considered below at [147]ff), which it is said evidenced an intention not to be bound until all parties to the Deed of Assignment were bound; third, that CGS' execution of the Deed of Assignment on 7 January 2020 was contemporaneous with an understanding, it is said, that it was a requirement that execution of the Deed of Assignment was necessary to obtain access to the Premises for the purpose of fit-out works and occupation under a temporary licence; and fourth, the fact that, on its terms, the Deed of Assignment required the Landlord's consent (referring to cl 2.2). It is said that CGS could not have intended to have been immediately bound by the Deed of Assignment without obtaining such consent, as it would be obliged to NTT to perform the various obligations under the Deed of Assignment in circumstances where Perpetual could have prevented CGS from exercising the rights under the Deed of Assignment (such as occupation of the Premises).

NTT's submissions

1. By way of supplementary submission in response to the amended defence (as to which, see at [5] above), NTT says as follows.
2. NTT submits that CGS' argument is dependent on the following two propositions: first, that the parties had agreed that the Deed of Assignment would be delivered by exchange of counterparts; and second, that CGS withdrew its executed counterpart prior to the exchange of counterparts.
3. NTT's position in this regard is that: first, CGS delivered the Deed of Assignment absolutely, upon its execution, and CGS evinced an intention to be bound immediately when it so executed (and, it is said, there is no evidence to support the contention that the parties agreed to deliver the Deed of Assignment by exchange of counterparts); second, and further to the first, the conduct of CGS after its execution of the Deed of Assignment supports a finding that CGS intended to be bound from the time it executed the Deed of Assignment and so, once delivered, CGS was bound and it was not entitled to withdraw its signed document.
4. NTT points to the various emails and other matters (which I have summarised in the chronology above) and submits that: it is plain, from CGS's conduct and communications prior to and around the time that it executed the Deed of Assignment, that it evinced an intention to be bound immediately; that CGS delivered the Deed of Assignment absolutely, upon its execution by Mr McDonald and Mr Bayley on 7 January 2020; and, it was therefore at once operative, as the deed of CGS.
5. NTT submits that, while the parties agreed to execute the Deed of Assignment in counterparts and to exchange electronically, there is no evidence that there was an agreement only to be bound on exchange of counterparts, and certainly no agreement that the Deed of Assignment would be exchanged in accordance with usual conveyance practice.
6. NTT argues that the communications that passed between the parties concerning the Deed of Assignment show that CGS was intending by its execution of the Deed of Assignment to be bound immediately, so that it would be able to satisfy the Condition Precedent of the Licence Agreement and take occupation of the Premises.
7. NTT emphasises that there is no evidence to suggest that the parties conducted themselves on the basis that they would not be bound until all parties had executed, here seeking to distinguish 400 George Street. It is said that it was not at any point stated by CGS that it would be free to withdraw unless and until certain things occurred or that it would not be bound unless and until certain things occurred (nor was an intention as to a particular mode of binding the parties expressed).

Dexus entities' supplementary submissions

1. As noted above (see at [4]), the Dexus entities have compromised the claim with NTT and I have already made consent orders thereto. Nevertheless, it is convenient here to note the submissions by the Dexus entities as to the enforceability of the Deed of Assignment.
2. In short, the Dexus entities maintain that both NTT and CGS are liable to pay unpaid rent and other moneys owing, as NTT has not been released from its obligations under the Lease and CGS is also bound as tenant as a result of its entry into the Deed of Assignment (as to which, see below).
3. Insofar as the effect of the amended defence by CGS is to assert that the Lease does not bind CGS, the Dexus entities say that they are still entitled to the relief sought by prayers 5 and 6 of the amended cross summons against CGS. It is contended that CGS' change of pleading is not supported by the evidence, and that: first, none of the parties, at any time, adopted the position contended for by CGS; second, that the conduct of CGS was specifically contrary to its now pleaded position; third, in particular, that CGS maintained (until the amendment to the defence on 19 August 2020) that it was a party to the Lease, and that the Lease had been frustrated; and fourth, that the evidence relied on by CGS does not take into account the entire chronology of events.
4. The Dexus entities say that here (as was the case in Segboer v AJ Richardson) the overwhelming inference is that CGS considered itself bound immediately (pointing to the facts as set out in the supplementary submissions of NTT and excerpted above). It is said that, at every step, the conduct of CGS was consistent with the conclusion that CGS was bound to the Deed of Assignment.
5. The Dexus entities submit, as does NTT, that the terms of the Deed of Assignment itself reinforce that conclusion (pointing by way of example to cl 3, which provides an acknowledgement by the Landlord that CGS would be occupying the part of the Premises by way of licence from the date of the Deed of Assignment itself and which, as its own evidence confirmed, CGS did so). It is said that a consideration of these matters makes it clear that: first, the Deed of Assignment constituted an assignment between NTT and CGS from the moment it was signed by those parties; and second, that CGS was bound to the Deed of Assignment and could not withdraw from it unilaterally once signed.

Determination

1. At the outset and as adverted to (at [108] above), it is instructive to make some further observations drawn from the cases and academic commentary on the execution and delivery of deeds.

Further observations re the relevant principles as to delivery of deeds

1. In Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609; 2 All ER 941, Lord Denning MR observed (at 619): The law as to "delivery" of a deed is of ancient date. But it is reasonably clear. A deed is very different from a contract. On a contract for the sale of land, the contract is not binding on the parties until they have exchanged their parts. But with a deed it is different. A deed is binding on the maker of it, even though the parts have not been exchanged, as long as it has been signed, sealed and delivered. "Delivery" in this connection does not mean "handed over" to the other side. It means delivered in the old legal sense, namely, an act done so as to evince an intention to be bound. Even though the deed remains in the possession of the maker, or of his solicitor, he is bound by it if he has done some act evincing an intention to be bound, as by saying: "I deliver this my act and deed." He may, however, make the "delivery" conditional: in which case the deed is called an "escrow" which becomes binding when the condition is fulfilled.
2. Meanwhile, in the same case, Winn LJ opined (at 623): … it might be very helpful in modem life if there were some modification of the law, departing somewhat from the strictness of the old rule. … I think it might be more realistic to depend upon physical movement or legal control of the document after the time when it is sealed, so that it would become the law that some adoptive demonstration is required additionally to the mere affixing of the seal. Concentration upon the movement of the deed thereafter would make it easier to solve the question, has the maker by parting with it to such extent and manner as may be proved expressed an intention - indicated, demonstrated an intention - -for it to be immediately binding, or demonstrated a suspensive intention that it shall not be immediately binding upon him but only binding if some particular event does occur?
3. Professor Wigmore (see John Henry Wigmore, Wigmore on Evidence (3rd ed. 1942, Little Brown) at [2405]) took the delivery of a deed as the first problem in defining the creation of a jural act, that is, as to when and how an act at law becomes a complete and final event.
4. In an academic article in 1970, which I have found of considerable assistance, Yale pointed to the fact that, of the three formal requirements to the execution of a deed, signing is the most recent in origin - the requirement of sealing being of relative antiquity (see D E C Yale, "The Delivery of a Deed" (1970) 28(1) Cambridge Law Journal 52 at 54). Indeed, in the royal courts, as recorded by Pollock and Maitland, "the law for the great became the law for all, and before the end of the thirteenth century the free and lawful man usually had a seal" (see F Pollock and F W Maitland, The History of English Law Before the Time of Edward I (Cambridge University Press, 1898, Vol II) at 224).

Did CGS relevantly execute?

1. As noted above (at [74]ff), in Segboer v AJ Richardson, Sackville AJA observed (as, I interpose to note, is also evident from the preceding historical analysis) that it is long established that "delivery" is essential, whether the grantor is a natural person or a corporation (see at [51]-[52], his Honour citing, inter alia, Hooker v Christian Brothers at 118-119), but that this does not require physical delivery (and, instead, may be effected by words and/or conduct from which it is to be inferred that the grantor intended to deliver the deed as an instrument binding upon he, she or it (see at [53]). His Honour also noted that there exists a rebuttable presumption that a document that has been signed and sealed is "delivered" (see at [57], citing also Xenos v Wickham and Hall v Baimbridge).
2. As to rebutting the presumption, his Honour noted that one such circumstance where the presumption will be so rebutted is where the circumstances reveal that parties executing counterpart deeds did thereby not intend to be bound until their deeds had been exchanged (and, see also, Hooker v Christian Brothers).
3. Indeed, as noted above, Sackville AJA emphasised that the critical question is whether the party executing the deed has evinced the requisite intention to be immediately bound and that this is an objective inquiry to be undertaken by reference to the words and conduct of the party, along with all the facts surrounding the execution (see at [58]-[59]).
4. Relevantly also, his Honour distinguished those cases where a deed is delivered in escrow from those cases where the grantor's intention is not to be bound at all until the happening or non-happening of some future event. In the latter case there is no delivery. In the former, an escrow is not recallable and, instead, is only operative once the stipulated condition, or conditions, is or are satisfied (see at [72]; and see also, for example, Beesly v Hallwood Estates Ltd [1961] Ch 105 at 118 per Harman LJ, with whom Lord Evershed MR agreed).
5. Again, whether a deed has been delivered unconditionally, delivered in escrow or has not been delivered at all, depends upon the grantor's intention which must be determined on the basis of the words and conduct of the grantor, taking into account the circumstances surrounding the execution (see at [73]).

Evidence prior to, and around the time of, delivery of executed counterpart

1. First, it is relevant to note that, from at least December 2019, CGS was anxious to gain access to the Premises in order to commence fit-out works; and it knew that, in order to be permitted to do so under the licence entered into with Society One, it was necessary to satisfy the conditions precedent to that agreement (i.e., for there to be both entry into the Deed of Assignment and for the landlord's consent to the assignment), unless Society One waived those conditions (and there had been no suggestion that it would). Not surprisingly, therefore, the correspondence in late December 2019 and early January 2020 "following up" execution of the relevant documents was emphasising the need to gain access to the Premises for the purposes of the fit-out works. CGS knew that for this to happen there needed to be a binding assignment.
2. Ms Clare's email of 7 January 2020 to HWLE and Sparke Helmore, attaching the signed execution pages of the Deed of Assignment and asking if anything further was required from CGS' side, makes clear that, from CGS' perspective, it had done what was necessary for it to be bound by the Deed of Assignment. In that context, the sending of all four pages - not simply one to evidence execution - seems to me to be telling. Indeed, there was nothing in Ms Clare's email to suggest that there was a condition placed on electronic delivery of the execution pages (such as that CGS would not be bound unless and until exchange) nor was there any reference to exchange of documents at all. To my mind, what CGS was here conveying was that it had signed the Deed of Assignment and, from its perspective, that was all it had to do to be bound thereby.
3. In that context, the email of 8 January 2020 from Mr Charnley (of CGS) to HWLE and Sparke Helmore, seeking assistance to obtain executed copies of the documents that day if possible (because CGS required access immediately to the Premises), is consistent with an understanding that execution (but not physical exchange) was necessary for the assignment to be binding on the lessor and NTT. In that context and on that conventional understanding, execution by NTT of the counterparts occurred on that day (as evidenced by the email from Sparke Helmore attaching the executed counterparts) and, relevantly, two things then happened. First, HWLE confirmed that it was their client's process to execute all original counterparts, which would take approximately four weeks, but that this should not delay exchange "or access" (the latter, it will be recalled, only being permitted under the licence once there had been entry into the Deed of Assignment and the lessor's consent) and noting that HWLE further confirmed that once the original deeds had been received, access could be arranged with the lessor. Second, Ms Clare delivered to HWLE's offices, on the morning of 9 January 2020, the original copy of its executed counterparts and, later that day, access was provided to the Premises.

Evidence subsequent to purported delivery

1. I have concluded that the evidence leading up to, and at the time of, execution of the Deed of Assignment by CGS and electronic delivery of the executed counterpart pages, manifests the requisite intention that CGS would be immediately bound by the Deed of Assignment so executed and delivered. The subsequent communications and events in my opinion fortify that conclusion.
2. In that connection, of principal import are the communications between Mr Charnley and Mr McDonald, respectively, with the Dexus entities in the context of CGS seeking rental relief or other such assistance in relation to CGS' obligations as tenant from 1 May 2020 in light of the impact of the COVID-19 pandemic on its business in the period from March 2020. Those communications are set out in the chronology above. It is significant that, in those communications, reference is made throughout to CGS' "lease commitments" and to the prospective commencement of rent and other obligations.
3. True it is that one explanation for this correspondence may be that there was not an appreciation at that stage as to the legal argument later maintained at the hearing (i.e., that there was a legal basis on which it might legitimately be contended that the Deed of Assignment was not binding). However, the fact remains that the understanding of CGS (manifested through its officers) at the time was clearly that CGS was bound by the Deed of Assignment (and, hence, prospectively seeking relief from its obligations thereunder). Again, that reinforces the conclusion that, at the time of delivery of the signed execution pages of the deed, CGS' intention was immediately to be bound thereby.
4. There is no suggestion in that correspondence of entry to (or performance of) the obligations on the part of CGS to which reference is there made being conditional on an exchange of counterparts or any further execution or exchange by or with NTT; and the 30 April 2020 letter (insofar as it invokes the doctrine of frustration) is not consistent with an understanding other than that CGS was already bound to the assignment.
5. Accordingly, I also accept NTT's submission that the conduct of CGS after execution of the Deed of Assignment supports the finding that the Deed of Assignment is binding on CGS. As NTT emphasises in submissions, it is of no little consequence in this regard that CGS immediately proceeded to spend large sums of money fitting out the Premises and moved its staff into the Premises; and, furthermore, from the moment of execution, CGS consistently referred, in its communications with the parties, to its impending obligations under the Lease. CGS' strenuous attempts to negotiate with the Dexus entities a reduction in the rent which it plainly understood it would be obliged to pay as of 1 May 2020 are not the conduct (and these are not the communications) of a party who considered itself anything other than immediately bound by its execution of the Deed of Assignment.

Did NTT execute the Deed of Assignment in accordance with s 127?

1. For the preceding reasons (and as also noted at [70]ff above), it is strictly unnecessary to determine this inquiry. In that connection, as adverted to above, the s 127 issue was only the subject of submissions by NTT (not CGS or the other parties) and was not the focus of any oral argument. Indeed, the s 127 issue appears only to have arisen from the position taken in inter partes correspondence in the period before the hearing (see T 27 20-23). It has not been pursued. Were it necessary to decide, I would have held that the Deed of Assignment had been validly executed by NTT in accordance with s 127 of the Corporations Act, at the latest, when the documents were re-executed (well before CGS sought to withdraw).
2. I now turn to determine whether NTT is entitled to specific performance.

Is NTT entitled to specific performance?

1. As I have noted, NTT seeks specific performance of the Deed of Assignment. NTT contends that, in circumstances where the Deed of Assignment concerns the assignment of a lease of property and NTT would otherwise remain liable under the Lease until it terminates in August 2021, the decree of specific performance is appropriate. Furthermore, NTT contends that, in these circumstances, it is entitled to the benefit of an assumption that damages would be an inadequate remedy.
2. Meanwhile, CGS claims that, should the Deed of Assignment be valid and enforceable (as I have found it to be), it should not be required specifically to perform its obligations under the Deed of Assignment and/or the Lease. In sum, the position advanced (principally through the affidavit evidence of Mr McDonald) is that, were the Court to order specific performance, CGS would be unable to obtain a bond and would instead need to be wound up.
3. It is to be noted here that NTT says that the argument that appears to have been foreshadowed is that the relief sought by NTT should be refused on the ground of hardship or impossibility, as CGS is financially unable to raise the funds required for the CGS Bank Guarantee. In this regard, NTT says that, assuming that the Court would otherwise find that NTT is entitled to an order for specific performance, CGS bears the onus of establishing hardship or impossibility as an affirmative defence.

NTT's submissions

1. NTT argues that there are at least two difficulties with the proposition that an order for specific performance should be declined on the basis of hardship or impossibility.
2. First, it is said that CGS, on its own admission, generates no revenue and is, instead, dependent on funding from other companies within the CG Group to remain solvent; and (significantly) that this was always the case (even at the time when CGS entered into the Deed of Assignment). NTT says that what appears to have changed is simply the preparedness of the CG Group companies to fund CGS and, relevantly in this regard, that there is no evidence that those companies are in fact unable to fund the CGS Bank Guarantee such that specific performance would be impossible or would be productive of hardship.
3. Second, NTT submits that the authorities establish that one would be slow to refuse specific performance on the ground of CGS's purported inability to raise the funds required to satisfy the CGS Bank Guarantee or the rent owed under the Lease and that the question of hardship is not to be considered in the abstract; rather, the hardship claimed by a defendant as a basis to refuse specific performance, "must be balanced against the hardship which the plaintiff would suffer from refusal of that remedy" (quoting ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615 at 639 per Brooking J).
4. NTT contends that, were specific performance to be declined, it would suffer greater hardship than would CGS should the relief be granted. It says this because, following the assignment, NTT is liable for the payment of rent and outgoings owed under the Lease not as a tenant but pursuant to the NTT Indemnity. NTT points out that it does not itself have the benefit of the Lease; that it therefore cannot occupy the Premises, cannot seek rental relief from the Dexus entities and cannot attempt to mitigate its loss by seeking to sub-lease a part or whole of the Premises or find another tenant; while it continues to remain liable to the Dexus entities pursuant to the NTT Indemnity until the Lease terminates in August 2021.
5. For these reasons, NTT maintains that CGS has not established a basis for the Court to decline a decree of specific performance.

CGS' submissions

1. CGS notes that the balance of the term of the Lease is only around one year and that, historically, the Court of Chancery considered that remedies in relation to disputes over short term leases were to be made by way of an award of damages (citing Lavery v Purcell (1888) 39 Ch D 508 (Lavery v Purcell)). CGS submits that the same is so in the present case.
2. CGS further submits, in the alternative, that the Court should, in the circumstances of this case, decline to order specific performance in the form sought by the plaintiff because there is potential hardship and impossibility. Specifically, CGS submits that it is in a precarious financial position and, in the present situation, it is said that it is almost certain that CGS will not be able to obtain a bank guarantee for the sum sought by NTT and the Dexus entities.
3. In this connection, it is submitted that, where the consent of a third party is needed, such as the consent of a bank to issue a bank guarantee, the authorities provide that there should not be an absolute order that the party must perform; but, rather, that he, she or it must take all reasonable or necessary steps (citing Dougan v Ley (1946) 71 CLR 142; [1946] HCA 3; Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381). For this reason, it is submitted that, if an order is to be made, it should extend only to CGS being ordered to take all reasonable or necessary steps.
4. Furthermore, as to the availability (or otherwise) of specific performance, CGS also made submissions in relation to the statutory regimes regulating temporary rental relief and other such assistances. Given that I have concluded that a decree of specific performance ought not issue (not least for the reasons identified by CGS), it is unnecessary to say anything in relation to those submissions and I instead deal with them separately below (see from [198]).

Determination

1. For the following reasons, I have concluded that specific performance should not be ordered, in this case.
2. First, while not in itself dispositive, I have some doubt that damages would here be an inadequate remedy (cf JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 294 per Starke J and at 297 per Dixon J; [1931] HCA 15). This is because, in short and for the reasons explained, as the position stands, NTT was and remains liable under the NTT Indemnity to the Dexus entities but, by the Deed of Assignment, now has an enforceable contractual right, in the nature of the indemnity, against CGS; such that, whatever loss NTT has or will suffer by the Dexus entities enforcing its obligations under the NTT Indemnity, NTT can contractually recover from CGS. Having said this, I recognise that, in the current circumstances (if CGS' account of its parlous financial position is correct), NTT may have difficulty enforcing that indemnity as against CGS and it is for that reason that I say that this is not itself dispositive. Moreover, insofar as NTT says that it would not be in a position to mitigate its loss, I have some difficulty accepting that there would be no possibility of some form of negotiated outcome or, for example, other consensual arrangement if (though it may well be that this is unlikely) another occupant for the Premises were able to be located.
3. Second, I note that the presence of hardship to the defendant, if and where a decree of specific performance is issued, is a factor relevant to the exercise of the Court's equitable discretion. In this regard, in the presence circumstances, the order of specific performance may cause real and significant hardship to CGS. While it was held by Gummow J (his Honour then a Justice of the Federal Court of Australia), Black CJ and Cooper J agreeing, in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; 110 ALR 608 (see at 44, citing Fitzgerald v Masters (1956) 95 CLR 420 at 433; [1956] HCA 53) that an adverse movement in market prices was not sufficient to amount to hardship, I consider that the prevailing circumstances and economic impact resulting from the COVID-19 pandemic puts the present proceedings in a rather different category of case. In this connection, I have in mind cases such as Patel v Ali [1984] Ch 283; [1984] 1 All ER 978 (per Goulding J), though that was, of course, also a very different factual scenario to the present.

Is CGS liable to indemnify NTT?

1. The next issue to consider is whether CGS is liable to indemnify NTT. Specifically, NTT seeks a declaration that CGS is liable to indemnify it for all amounts claimed by Perpetual from NTT in respect of CGS's default or delay in the performance of its obligations contained or implied under the Lease, on and from 1 May 2020. To my mind, that CGS is liable follows from the finding in relation to the first of the issues considered above.
2. In short, NTT says (and I accept) that it is entitled to this indemnity by operation of the Deed of Assignment and, pursuant to the CGS Indemnity, NTT seeks an order that CGS pay to it the sum claimed by the Dexus entities in their cross summons (as to which, see from [195] below). CGS does not deny that it has provided the CGS Indemnity (though, it asserted that it was not bound by the Deed of Assignment for the reasons identified above).
3. Accordingly, I find that CGS is liable pursuant to the Deed of Assignment to indemnify NTT. Next, I must determine whether the Dexus entities are entitled to call upon the NTT Bank Guarantee.

Are the Dexus entities entitled to call upon the NTT Bank Guarantee?

1. Finally, there is the issue whether the Dexus entities are entitled to call upon the NTT Bank Guarantee. As will be recalled, by its third prayer for relief, the Dexus entities had sought an order that NTT continues to be liable under the Lease and the Deed of Assignment, including in respect of amounts falling due under the Lease and or the Deed of Assignment after 11 August 2020. However, as also noted (see at [4] above), this issue has been compromised. By consent, I made the following orders: 1. A declaration that [NTT] is liable to [Dexus] for the sum of $492,130.19 owing as at 11 August 2020 comprised of rent, outgoings and other amounts payable under [the Lease] and/or the [Deed of Assignment] […] or such other amount as this Honourable Court determine together with interest. 2. An order that unless and until [CGS] delivers to [Perpetual] a Bank Guarantee in favour of [Perpetual] to a sum equivalent to $569,848 and on the terms set out in clause 5.4 of the [Deed of Assignment], that [NTT] continues to be liable under the Lease and the [Deed of Assignment] including in respect of amounts falling due under the Lease and/or the [Deed of Assignment]. 3. An order that [Perpetual] and/or [Dexus] is entitled to call upon a part of the bank guarantee issued by Australia and New Zealand Banking Group Limited in respect of [NTT] […] to meet the liability set out in Order 1.
2. I interpose to note that, later, orders were also made in relation to the disposition of the extant costs issue as between these parties.
3. As may be observed, by this compromise, the issue (at least inter partes as between NTT and the Dexus entities) as to whether the Dexus entities are entitled to call upon the NTT Bank Guarantee has thereby, as I understand it, fallen away (as to which, see my summary of the disposal of the issues at [313]ff below).

COVID-19 Regulations and related matters

1. Finally, I turn to consider how, if at all, the COVID-19 Regulations alter the ultimate disposition of these proceedings.
2. Before turning to the parties' respective submissions, it is convenient first to outline the statutory regime and the recent decisions of Robb J in Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996 (Sneakerboy (No 1)) and Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141 (Sneakerboy (No 2)).

The statutory regime and the decisions of Robb J in Sneakerboy (No 1) and Sneakerboy (No 2)

1. The schedule containing the COVID-19 Regulations was added to the Conveyancing (General Regulation) 2018 (NSW) (Conveyancing (General Regulation)) by the Retail and Other Commercial Leases (COVID 19) Regulation 2020 (NSW). This regulation was introduced by the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW), which commenced on 25 March 2020. The regulation was made under s 87 of the Retail Leases Act 1994 (NSW) (the Retail Leases Act), which provides, inter alia, that regulations may be made under any Act relating to the leasing of premises for commercial purposes "regulating or preventing the exercise or enforcement of another right of a lessor or owner of premises or land under [that Act] … or an agreement relating to the premises".
2. The Conveyancing (General Regulation) was subsequently amended by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 (NSW) (Retail and Other Commercial Leases (COVID-19) Amendment Regulation), which commenced on 3 July 2020. By cl 11, the amendments made by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation extend to re-negotiations commenced before the commencement of the amendments but not to proceedings which had commenced in Court.
3. In this regard, CGS notes that, as the present proceedings were commenced on 2 July 2020, the relevant regulations are those as in force as initially introduced (without those later amendments made by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation in July this year).
4. By cl 4 of the COVID-19 Regulations, a lessor must not take any "prescribed action" against an "impacted lessee" on the grounds of breach of a commercial lease during the "prescribed period" consisting, inter alia, of a failure to pay rent or a failure to pay outgoing.
5. An "impacted lessee" is defined by cl 2 as inter alia a lessee that qualifies for the "JobKeeper scheme" and is a member of a corporate group with a turnover of less than $50 million in the 2018-2019 financial year.
6. Meanwhile, cl 1 defines the following relevant terms: commercial lease means any agreement to which the [Conveyancing] Act applies relating to the leasing of premises or land for commercial purposes, but does not include the following - (a) a lease entered into after the commencement of this Schedule, but not a lease entered into by means of an option to extend or renew the lease or any other extension or renewal of an existing lease on the same terms as the existing lease, (b) a retail shop lease under the Retail Leases Act 1994, (c) a lease under the Agricultural Tenancies Act 1990. lessee means the person who has the right to occupy premises or land under a commercial lease. lessor means the person who grants the right to occupy premises or land under a commercial lease. National Code of Conduct means the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19 adopted on 7 April 2020. prescribed action means taking action under the provisions of a commercial lease or seeking orders or issuing proceedings in a court or tribunal for any of the following - (a) eviction of the lessee from premises or land the subject of the commercial lease, (b) exercising a right of re-entry to premises or land the subject of the commercial lease, (c) recovery of the premises or land, (d) distraint of goods, (e) forfeiture, (f) damages, (g) requiring a payment of interest on, or a fee or charge related to, unpaid rent otherwise payable by a lessee, (h) recovery of the whole or part of a security bond under the commercial lease, (i) performance of obligations by the lessee or any other person pursuant to a guarantee under the commercial lease, (j) possession, (k) termination of the commercial lease, (l) any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State. prescribed period means the period ending at the end of the day that is 6 months after the day on which the Retail and Other Commercial Leases (COVID-19) Regulation 2020 commences.

CGS' submissions

1. As I have said, what follows comprise submissions supplementing the submissions made by CGS that: first, the Court should decline to order specific performance; and second, in the alternative, that any order for specific performance should be limited to requiring CGS to "take all reasonable or necessary steps" to perform its obligation, as the obligation to provide a bank guarantee is contingent on a bank's third party right to consent to providing that guarantee. I have disposed of those issues above; so the question here is as to the other relief sought and any damages award in lieu of specific performance.
2. In sum, CGS submits, having regard to or by operation of the COVID-19 Regulations, that the Court should: refer the parties for negotiation and mediation prior to making any decision regarding the appropriate remedy decline to order specific performance; and limit any declaration or order having the effect that CGS must pay over moneys to NTT (or, alternatively, the Dexus entities) to an amount equivalent to 50% of the rent and outgoings provided for in the Lease.
3. CGS submits that: the Lease is a "commercial lease" within the meaning of the COVID-19 Regulations as it was entered into on 1 September 2013, before the commencement date; and, further and in the alternative, the Deed of Assignment is a commercial lease within the meaning of the COVID-19 Regulations, as it is an agreement to which the Conveyancing Act 1919 (NSW) (Conveyancing Act) applies relating to the leasing of premises of land for commercial purposes (specifically, by s 128 of the Conveyancing Act, it is said that the Deed of Assignment is a Lease, as (if CGS is bound by it) it is an agreement for a lease where the lessee has become entitled to have his or her lease granted).
4. As to the commencement date, CGS says that the Deed of Assignment is not a "commercial lease" entered into after the commencement date (noting that the COVID-19 Regulations commenced on 24 April 2020 and NTT's claim is that the Deed of Assignment was executed on 19 March 2020). It is said that the fact that the effective assignment date of the lease was 1 May 2020 does not exclude the application of the COVID-19 Regulations, in circumstances where CGS was bound (on NTT's case) to take the lease on and from 19 March 2020.
5. CGS notes that, by cl 1 of the COVID-19 Regulations, "lessee" means the person who has the right to occupy premises or land under a "commercial lease"; and, it is said that CGS is a "lessee" because, if it was bound on and from 19 March 2020 to take the Lease from 1 May 2020, it has the right to occupy the Premises under the Lease.

NTT's submissions

1. In short, NTT's position is as follows.
2. First, that CGS should not be permitted to rely on COVID-19 Regulations to assert that the parties should be referred to negotiation and mediation or, alternatively, that an order for specific performance should be declined and the damages it is ordered to pay reduced by 50%. This is because CGS, it is said, was required (by r 14.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) specifically to plead the alleged application of the COVID-19 Regulations and the factual matters relied upon to support its application. It is submitted that unfairness and prejudice to NTT would result if CGS were to be permitted to rely on this unpleaded defence.
3. Second that, were CGS to be permitted to rely on the COVID-19 Regulations notwithstanding its failure to plead its entitlement to do so, the regulations there contained do not have any application to these proceedings, because: the Deed of Assignment is not relevantly a "commercial lease"; NTT is not relevantly a "lessor"; and CGS is not relevantly an "impacted lessee". Hence it is submitted that the Court is not required to have regard to the leasing principles set out in the National Code of Conduct; and NTT maintains that it is entitled to the relief sought in its amended statement of claim.
4. I interpose to note, as to the operation of UCPR r.14.14, I accept that, by its assertion (for the first time during the expedited hearing) that the COVID-19 Regulations apply, CGS raises matters of fact not arising out of its amended defence. As NTT submits, this point raises the factual issue as to whether CGS is an "impacted lessee", which in turn depends on a determination as to its eligibility for the JobKeeper scheme and the turnover of the CG Group in the last financial year.
5. Furthermore, as NTT emphasises, I also accept that this is a matter that would make NTT's principal claim for relief (or, indeed, the proceedings entirely) not maintainable (at least until a mediation between the parties is conducted) or otherwise substantially frustrate the relief sought, and, plainly therefore, it has taken NTT by surprise. I note that NTT submits that the authorities recognise that r 14.14 reflects the fundamental requirement that each party be given a proper opportunity to prepare and present its case.
6. While accepting that CGS' failure to plead the application of the COVID-19 Regulations is not necessarily fatal to the question of its entitlement to rely upon it, NTT submits that, whether or not the Court would be inclined to exercise its discretion to permit CGS so to rely is a matter that is predicated upon fairness to the parties. In these circumstances, NTT submits that fairness dictates that the discretion should not be exercised in CGS' favour.

Dexus entities' submissions

1. As noted above, proceedings between NTT and the Dexus entities were compromised by way of consent orders. The Dexus entities note that only declarations are sought against CGS in the cross summons and no damages are sought. Accordingly, the Dexus entities say that the COVID-19 Regulations do not prevent the Dexus entities obtaining relief because: that regime applies only to "the exercise or enforcement of rights under a commercial lease in relation to circumstances occurring during the prescribed period", and obtaining a declaration is not the "exercise or enforcement of a right"; in any event, the regime could not prevent the Dexus entities commencing proceedings against CGS as lessee, as nothing in the cross summons constitutes a "prescribed action"; and finally even if the Dexus entities are wrong on either of the preceding two points, no obligation to renegotiate the rent payable under the lease arises because CGS expressly withdrew from the renegotiation process required by cl 5 such that, by clause 5(3B), the lessor is taken to have complied with that obligation.
2. As to the last of those points, the Dexus entities note the exchange of emails between the principals of CGS and the property manager for Dexus between 14 to 18 May 2020 as unequivocally demonstrating that CGS, "…do not wish their application (for relief) to be reviewed, and they have waived their rights under the Code of Conduct".
3. Accordingly, the Dexus entities submit that CGS has no basis to resist prayers 5 and 6 of the amended cross summons, which declarations the Dexus entities say should be made (with costs).

Determination

1. It is convenient to dispose of this aspect of the proceedings as follows: first, to determine whether CGS is entitled here to rely on the COVID-19 Regulations; if so, second, to determine whether the Deed of Assignment is relevantly a "commercial lease" for the purposes of the COVID-19 Regulations; if so, third and following, to determine whether CGS and/or NTT are relevantly a "lessor" and/or "lessee" for the purposes of the COVID-19 Regulations; if so, fourth and finally, to determine whether CGS is, or has proven, that it is an "impacted lessee".

Is CGS entitled to rely on the COVID-19 Regulations?

1. As an initial matter, and as I have adverted to above (see at [258]ff), I see considerable force to the submission for NTT that CGS should not be permitted to rely on the COVID-19 Regulations. This is because I accept that, by reason of r 14.14 of the UCPR, CGS ought to have specifically pleaded the alleged application of the COVID-19 Regulations and the factual substratum from which any such claim is to be determined. That is particularly so having in mind NTT's position in relation to proof of CGS's entitlement to the JobKeeper scheme.
2. As to the unfairness and prejudice that NTT says it would suffer if I were to permit in my discretion CGS to rely on the COVID-19 Regulations, I note that the relevant prejudice is not that, by operation of the COVID-19 Regulations, NTT might thereby be denied the full extent of relief sought (though, that itself, for reasons that I will shortly come to, is not necessarily so in any event), but instead the prejudice of not now being able fully to test CGS's claim (again, noting particularly the issue as between the parties in relation to the JobKeeper scheme eligibility and its turnover in the last financial year, and otherwise).
3. I see that such unfairness and prejudice is here particularly acute, having in mind that, if CGS's position vis-à-vis the COVID-19 Regulations is good, then NTT's principal claim would be unmaintainable or, at the very least, substantially subjugated.
4. Nevertheless, I should here record that I appreciate that the proceedings have been instituted and prosecuted with necessary haste and the application and operation of the various emergency statutory amendments made over the last few months have been largely untested and are not altogether easy to comprehend. I mean no criticism by that observation. Furthermore, I appreciate that the prevailing commercial and other such circumstances would not have made the institution and prosecution of these proceedings any easier.
5. Having said these things, in the exercise of my discretion, I would not permit CGS to rely on the COVID-19 Regulations. In the event that I were to be wrong in the exercise of that discretion, I now turn to the next issue in relation to the COVID-19 Regulations, being whether the Deed of Assignment as between NTT and CGS is relevantly a "commercial lease".

Is the Deed of Assignment a "commercial lease"?

1. As would be evident from the definitions section (excerpted at [205] above), critical to this aspect of the proceedings is whether the Deed of Assignment is a "commercial lease" (noting, for example, that the definitions of "lessor" and "lessee" hinge on whether the putative agreement is a "commercial lease" as defined).
2. As has been noted, a "commercial lease" is relevantly defined as "… any agreement to which the Act applies relating to the leasing of premises or land for commercial purposes…". Relevantly, "the Act" is defined to mean the Conveyancing Act.
3. Whether the Deed of Assignment is a "commercial lease" is not as straightforward as might initially appear. As will be recalled, CGS makes specific reference to s 128 of the Conveyancing Act and says that, by that section, the Deed of Assignment is relevantly a "commercial lease" (because, it is said, that if CGS is bound by the Deed of Assignment then it is an agreement for a lease where the lessee has become entitled to have his or her lease granted).
4. Section 128 provides: 128 Definitions For the purposes of this Division and Divisions 3 and 4 - Lease includes an original or derivative under-lease, also a grant at a fee farm rent, or securing a rent by condition, and an agreement for a lease where the lessee has become entitled to have his or her lease granted. Lessee includes an original or derivative under-lessee, a grantee under such a grant as aforesaid, his or her executors, administrators, and assigns, a person entitled under an agreement as aforesaid, and the executors, administrators, and assigns of a lessee. Lessor includes an original or derivative under-lessor, a grantor as aforesaid, a person bound to grant a lease under an agreement as aforesaid, and the executors, administrators, and assigns of a lessor. Under-lease includes an agreement for an under-lease where the under-lessee has become entitled to have his or her under-lease granted. Under-lessee includes any person deriving title through or from an under-lessee.
5. Some potential difficulties, therefore, with CGS' construction are as follows. First, at least arguably, the Deed of Assignment is not an agreement to lease - it is an agreement to assign an existing lease. Second, and relatedly, the Deed of Assignment is, again arguably, not an under-lease (or sublease) - it is an assignment of an existing lease. As to the second of those propositions, it is to be noted that, by the Deed of Assignment, CGS was not to take a sub-lease as sub-lessee and NTT as sub-lessor; rather, NTT was to assign to CGS its existing rights as lessee. Indeed, underlying each of these apparent difficulties is the fact that the Deed of Assignment does not operate to create a new leasehold interest in the Premises - again, it operates to assign an existing proprietary interest.

Is either of NTT and/or CGS relevantly a "lessor" and/or "lessee"?

1. Given that the definitions of "lessor" and "lessee" under the COVID-19 Regulations hinge on whether the Deed of Assignment is a "commercial lease", it follows that CGS and NTT would here satisfy that definition.

Is CGS, or has CGS proven that it is, an "impacted lessee"?

1. Finally, as to whether CGS is relevantly an "impacted lessee", it will be recalled that the identification of a lessee as relevantly "impacted" turns on whether the lessee is entitled to receipt of the JobKeeper scheme.
2. In this connection, it will be recalled that CGS has put into evidence inter alia: its enrolment for JobKeeper; receipt of payments as recorded in the June 2020 financials (though, as noted at [280], it is not altogether clear what entity has been in receipt of payments); and that the CG Group's turnover and net revenue for the 2018 to 2019 financial year was less than $50 million (by reference to the consolidated financial statements for the financial year).
3. On this evidence, and having in mind those matters that I have identified in relation to the discretion concerning r 14.14 (as to which, see at [294]ff above), I see force to NTT's submission that it is somewhat difficult for me to be satisfied that CGS, as a matter of fact and law, qualifies for the JobKeeper payment. Indeed, while perhaps formalistic, the receipt of a payment is not the same as an entitlement to it.
4. In this connection, I also again note NTT's submission in relation to CGS only having been incorporated in August 2019, such that there may be doubts as to the availability of the necessary comparison period for the purposes of the CERP Rules.
5. As to the seemingly modified test under s 8A (it will be recalled, which applies for certain group structures, such that where an employment entity is utilised within a group of companies, and that employment entity is unable to demonstrate a decline in its own turnover), again, I see force to the proposition that there is a paucity of evidence before the Court to enable me to make the necessary findings of fact.
6. Furthermore, I accept that there is difficulty, as a matter of statutory construction, in construing cl 2 as embracing eligibility under s 8A when the instrument expressly refers only to eligibility "under sections 7 and 8". More specifically, I do see that to construe cl 2 as defining an "impacted lessee" as also including a lessee who qualifies under s 8A would require the Court to read additional words into the clause in order to give effect to what may be perceived to be the statutory purpose; and that to do so would be to favour impermissibly a construction that fills gaps disclosed in the legislation (noting, again, what was said in Taylor v Owners-Strata Plan No 11564 at [37]-[38]). Indeed, while it seems patent that the intention was to include eligibility under s 8A, it is not for the Court here to speculate on that matter, in circumstances where the plain and ordinary meaning does not disclose any patent ambiguity or absurdity, nor is this necessary to remedy or repair a perceived deficiency in the instrument as presently enacted.

Conclusion and orders

1. It follows that the Deed of Assignment is valid and enforceable as against CGS, but that I will decline to order specific performance and that, accordingly, NTT will be left to a claim in damages. The quantum of those damages is referable to the moneys that: one, NTT has already paid to the Dexus entities in satisfaction of CGS' liabilities under the Deed of Assignment from the date on which CGS became liable therefor; and two, that NTT will, for the balance of the lease term, pay over to the Dexus entities in satisfaction of the liability that CGS has taken under the Deed of Assignment.
2. Having said this, and notwithstanding my disposition as to CGS' claims based on the operation of the COVID-19 Regulations, I consider that it would be in the interests of all the parties for them to proceed to a mediation with the aim of reaching some form of arrangement that best accommodates each of their interests and having the benefit of these reasons. I consider that an order directing the parties to participate in a mediation of this kind is in the interests of the just, quick and cheap resolution of the real issues in dispute, having in mind the overriding mandate prescribed by s 56 of the Civil Procedure Act.
3. As to costs, at this stage, I see no reason why costs should not follow the event and, NTT and the Dexus entities here having had substantial success, that CGS should bear the costs of the proceedings. Having said this, I will give the parties liberty to apply in the event that any party seeks a variation of my orders in relation to costs or there are any other issues in the implementation of these orders.
4. For the preceding reasons, I make the following orders: 1. Declare that the Deed of Assignment (as defined in [2] of these reasons) is valid and enforceable as against the first defendant. 2. Order, in lieu of specific performance of the Deed of Assignment referred to in Order 1, damages referable to [314] of these reasons. 3. Order that, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the first defendant pay interest on damages referred to in Order 2. 4. Declare that the second cross-defendant was liable to the second cross-claimant for the sum of $492,130.19 owing as at 11 August 2020 comprised of rent, outgoings and other amounts payable and remains liable for such other amounts as fall due under the Lease and/or the Deed of Assignment after 11 August 2020. 5. Order that the first defendant pay the costs of the plaintiff, second defendant and third defendant. 6. In the event that the first defendant notifies the other parties within 14 days that it seeks rent relief under the COVID-19 regulatory scheme, direct the parties to attend a mediation within 28 days thereafter and for that purpose refer the parties to the Registrar for court-annexed mediation. 7. Liberty to apply on three days' notice.

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: 09 October 2020