Ozoris Investments Group Pty Ltd v Malabar Headlands Pty Ltd; Malabar Headlands Pty Ltd v Ozoris Investments Group Pty Ltd

NCAT Appeal Panel|2024-02-05

W Chan (for Ozoris Investment Group Pty Ltd) D Allen (for Malabar Headlands Pty Ltd)

Konstan Lawyers (for Ozoris Investment Group Pty Ltd) Gladwin Legal (for Malabar Headlands Pty Ltd) File Number(s): 2023/00023343 and 2023/00349595 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: [2023] NSWCATCD Date of Decision: 19 September 2023 Before: D Bluth, Senior Member File Number(s): COM 22/51649, COM 22/54793

Introduction

This was an appeal and cross-appeal from the decision of the Consumer and Commercial Division of the Tribunal (Tribunal) in matters COM 22/51649 and COM 22/54793 published on 19 September 2023 (Primary Decision). Both proceedings were applications for orders under the Retail Leases Act 1994 (NSW) (RL Act).

Background

Matter COM 22/51649 was the application of Ozoris Investments Group Pty Ltd (Lessee) against Malabar Headlands Pty Ltd (Lessor). The Lessee sought orders that the Lessor pay it compensation of $250,000.00.
For reasons stated in the Primary Decision, the Tribunal dismissed the application.
Matter COM 22/54793 was the application of the Lessor against the Lessee. The Lessor sought orders that the Lessee pay it $6,529.08.
For reasons stated in the Primary Decision, the Tribunal ordered the Lessee to pay the Lessor $5,139.33.
Matter COM 23/06078 was listed for hearing at the same time as matters COM 22/51649 and COM 22/54793. Matter COM 23/06078 was the application of Ojikin Pty Ltd (Ojikin) against the Lessee. Ojikin had entered into a lease with the Lessor following the Lessor repossessing the subject premises on 11 November 2022.
Ojikin sought orders for relief against forfeiture, but ultimately abandoned that claim, with the consequence that the Tribunal dismissed Ojikin's application.

The appeals

Two appeals were filed. The first was the appeal of the Lessee being matter 2023/00023343 (Appeal).
The second appeal (2023/00349595) was an appeal by the Lessor, which was in substance a notice of contention (Cross Appeal).
Consideration of the Cross Appeal will only be necessary if we allow the Appeal.
For the reasons that follow, we have dismissed both appeals.

The Appeal

The Lessee raises three grounds of appeal in its Amended Grounds of Appeal filed 29 November 2023.
The first ground of appeal is that the Tribunal erred by applying an improper construction of: 1. cl 6B of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) (2021 Regulation) to the facts; and 2. cl 5.4 of the lease dated 9 December 2015 (Lease).
Here the Lessee refers to [53] to [55] of the Primary Decision. Those paragraphs state: 53. The Tribunal cannot accept the proposition put by the Lessee, that the effect of the rent review mechanism in the Lease was that it was a fixed date and occurs only once a year. The proposition was put that "it either takes effect to increase the rent on that day or it does not." That is the Lessor has foregone the annual rent increase of 4%. 54. The proposition that if the lessor does not effect the agreed rent increase on the rent review date, then there is no rent review until the next review date is very novel, indeed. This would mean that the lessor has foregone the rent increase for a year. There is nothing in the Lease to suggest this. Rather, the position is that If the rent review is not communicated for some months but then once communicated, by for example a tax invoice, it is to have commenced on the review date and the rent increases become payable on receipt of that communication including back rent increases to the rent review date. That would mean that the lessor has not foregone the rent increase. The effect might be that the lessee has received a rent increase holiday for a period, but would have to make up the shortfall. 55. The same position applies to the effect of clause 6B of the COVID-19 Regulations. I agree with the position put by the Lessor that the correct interpretation of the effect of Clause 6B of the Regulation is that clause 6B merely suspends the enforcement of any rental increase as opposed to the suspension of the operation of any rental increase. The rent increase in the Lease of annually 4% was agreed between the Lessor and the Lessee at the time of entering into the Lease and would operate normally automatically. That automatic increase is suspended during the prescribed period. Thereafter the rent increase applies and is enforceable. Consequently, there was no rent credit to be applied, if it could to offset against the shortfall in payment of the insurance premium.
By way of particulars of this ground of appeal the Lessee submits that: 1. The Tribunal should have found that on a proper construction of cl 6B of the 2021 Regulation the Lessor was statute-barred from increasing the rent under the Lease. 2. The Tribunal should have found that on a proper construction of cl 5.4 of the Lease rent is reviewed and increased only on 7 December 2022 and each anniversary date thereafter for the remainder of the Lease. 3. As such by 2 December 2022 the Lessee was in credit under the Lease and there was no right to the Lessor to terminate the Lease and re-enter.
The second (alternative) ground of appeal is that the Tribunal erred in applying the wrong legal principle to the facts, namely that the Lessee was estopped by convention.
Here the Lessee refers to [79] to [81] of the Primary Decision. Those paragraphs state: The Tribunal's position 79. The Tribunal is satisfied that the Lessee communicated to the Lessor its acquiescence that the rent increase was payable after the prescribed period. Further, acquiescence by one party to an assumption made by another is sufficient to constitute a conventional estoppel. In the "Indian Grace" (No 2) AC 878 at 913, Lord Steyn said in the judgement: an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared.. or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would eb unjust to allow him to go back on the assumption…" This passage was approved in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] 69 NSWCA 65 [198] 9 Tobias JA, Mason P and Campbell JA agreeing). 80. The termination of lease was on the basis of unpaid outgoings (as well as alleged unpaid rent) as is evident from the Notice of Default and the Notice of Re-entry. Departure from the common assumption is unjust to the Lessor. It falls within the second category referred to by Dixon J in Grundt, one party has exercised against the other party rights which would exist only if the assumption were correct. The unjustness of the departure from the assumption for a conventional estoppel is established as the lessor placed reliance on the assumption and detriment would be suffered by the Lessor in breaching the Lease by an illegal re-entry exposing the Lessor to damages (Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 [202-203]). This is further supported by the categories determined by Dixon J in Thompson v Palmer [1933] 49 CLR 507 at 547 as set out in paragraph 74 of these Reasons, particularly the second where one party has exercised against another party rights which would exist only if the assumption were correct. 81. The Tribunal finds that Estoppel by convention is established and the Lessee is resisted from now claiming that the payment of the monthly rent increases was not the case but in fact was an overpayment of the rent.
By way of particulars to this ground of appeal, the Lessee submits that the Tribunal should have found that the Lessee was entitled to rely on its argument with respect to overpayment of rent.
The third (alternative) ground of appeal was that the Tribunal erred by failing to accord the Lessee procedural fairness by failing to grant to the Lessee an opportunity to be heard concerning the legal principle of approbation and reprobation.
Here the Lessee refers to [82] to [85] of the Primary Decision. Those paragraphs state: Approbate and Reprobate 82. A principle of general application was held by Sir Nicholas Browne- Wilkinson V-C (as he then was) in Express Newspapers PLC v News ( UK) Ltd [1990] 18 IPR 201 where his Lordship said [210] "There is a principle of law of general application that it is not possible to approbate and reprobate. That means you are not allowed to blow hot and cold in the attitude you adopt. A man cannot adopt two inconsistent attitudes towards another: he must elect between them and having elected to adopt one stance, cannot thereafter be permitted to go back and adopt an inconsistent stance " The above is discussed in Apotex Pty Limited v Sanofi [2013] FCA 1425 [12] as applicable to Australia. 83. Brennan J in Commonwealth v Verwayen [1990] 170 CLR 394 at [421] acknowledged the existence of the doctrine of approbation and reprobation. His Honour said that it "precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right he exercised.." 84. The Lessee now says that the rent increases did not apply and in fact were illegal under the COVID-19 Regulations contrary to the position it took as clearly evidenced in the email correspondence referred to in paragraph 77 of the Reasons. There the Lessee was quite clear that it would pay the 4% rent increase after the prescribed period had been determined. Further, the Lessee now says that the sum of $2, 529.33 being the balance of the insurance premium outgoing was payable as at the date of re-entry, 11 November 2022, again contrary to the position taken by Mr Selim as evidenced from his witness statement recited in paragraph 55 of the Reasons that he was adamant that the increased amount was not payable. 85. This a clear case of approbation and reprobation by the Lessee, initially taking one position, that the increase in outgoings was payable after the prescribed period and that the insurance premium increase was not payable, and now saying the increase in rent was not payable but the insurance premium was payable, being a reversal of each position. The Lessee should be denied the opportunity to now change its position. The detriment to the Lessor in relation to reversal of the Lessee's attitude to the rent increases is evident, as the Lessor now seeks to rely on Estoppel by convention to secure its position without which, if the Lessee was correct in the interpretation of Regulation 6B of the COVID-19 Regulations (but it is not correct in such interpretation) the re-entry may be illegal. The Lessee should not be allowed to approbate and reprobate its position in relation to rent increases. It was prepared to accept the position put by the Lessor (with a minor exception to the rent increase for 3 months during the prescribed period) and should be held to that position. In relation to the reversal of the Lessee's position on the outgoing of the increase in insurance premium, this leads to the next proposition put by the Lessor that at the time of re-entry the Lessee by maintaining it was not liable to pay and had no intention of paying the outgoing, repudiated the Lease.
By way of particulars to this ground of appeal, the Lessee submits that: 1. The Tribunal found that the Lessee was barred from raising the argument with respect to rental increases on the basis of the legal principle of approbation and reprobation where such a principle was not raised by any party to the proceedings. 2. The Tribunal ought not have entertained the legal principle at all.

The Cross Appeal

We stated above that the Cross Appeal is in fact a form of Notice of Contention.
We note that a separate appeal was probably unnecessary. This is because NCAT Guideline 1- Internal Appeals states: 44. Where a respondent wants to argue that the orders appealed against were correct but for reasons different from those given by the Tribunal, the respondent should complete the section in the Reply to Appeal which requires the respondent to state whether there are any other reasons why the Tribunal's orders were correctly made.
For a brief discussion of the issue, see M H Investments Aust Pty Ltd v Hurstville City Council [2015] NSWCATAP 180 at [36] and Wilson v Commissioner of Police, New South Wales Police Force [2015] NSWCATAP 248 at [58].
Returning to the Cross Appeal, the grounds stated are: Whether the Tribunal applied the wrong principles in that: (a) asserting a right to set-off against rent in breach of the lease was not conduct of the same kind as disputing the amount of insurance outgoings; and (b) in order to establish repudiation it was not necessary for the Tribunal to find that the Lessee "[evinced] an intention not to be bound at all by the Lease" (at [101]), since a repudiation can occur when a party evinces an intention to fulfil an agreement in a manner substantially inconsistent with that party's obligations.

The Primary Decision

It is appropriate to summarise the relevant sections of Primary Decision.

Background

At [2] to [10], the Tribunal set out the background to the dispute. The background facts were briefly stated and are as follows: 2. On 9 December 2015 the Lessee entered into a lease (the Lease) with the Lessor respectively of leased premises being the ground floor shop of 59 Bar Parade, Malabar (the Premises) to conduct a café, take away food and restaurant. 3. The Lease was one part of a series of three collateral contracts for the sale of the business located at the Premises together with the equipment. 4. On 3 November 2021 the Lessor notified the Lessee of the increase to rent by 4% (or $463.25) to $12,044.85 from 9 December 2021 during the currency of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (COVID-19 Regulations). The increase was objected to by the Lessee as being unlawful and contrary to the Regulations. 5. On 18 July 2022 the Lessor required the Lessee to pay 65.5% of the insurance outgoings. The Lessee objected to the increase of $2,529.33 over the previous year's amount. 6. On 11 November 2022 the Lessor issued a Notice of Re-Entry and repossessed the Premises. The Notice of Re-Entry alleged partial unpaid rent for the period of 1 December 2021 to 28 February 2022 and partial unpaid insurance outgoings. 7. On 14 November 2022 the Lessor issued a letter from its Lawyers offering the Lessee access to the Premises to remove its goods and return the Premises to their original condition following the Re-entry. The lessee has called this a Notice of Termination of the Lease. 8. On 21 November 2022 the Lessor entered into a new lease with Okijin Pty Ltd (Okijin). 9. On 2 December 2022 the Lessee re-enters the Premises pursuant to an interim order from this Tribunal. 10. On 7 December 2022 the Lessee continued to pay rent with a further 4% increase ($481.80).

The Lessee's position

At [11] to [13] the Tribunal summarised the Lessee's position. In summary, the Lessee submitted that, as at 11 November 2022, it was in credit with the Lessor such that there was no right of re-entry. That credit was made up of the payment of the increase in rent when such increase was, according to the Lessee, not legal pursuant to the COVID Regulations applying at the relevant period.
As a consequence, the Lessee submitted it was the Lessor that was in breach of the Lease.

The Lessor's position

At [14] to [16] the Senior Member summarised the Lessor's position. In summary, the Lessor submitted that it was entitled to re-enter and terminate the Lease for non-payment of rent and outgoings. The COVID-19 Regulations only suspended rent increases for the prescribed period, which was in effect three months only.

The hearing

Relevantly, the Tribunal noted at [20] that the question for determination was whether the Lessor was entitled to re-enter the premises on 11 November 2022 and, if not, what damages ought to be awarded to the Lessee.

The Tribunal's position

At [52] to [55] the Tribunal set out what it described as its position. Paragraphs [53] to [55] are set out above.
At [57], the Tribunal explained why the Lessor's re-entry into the premises was valid. This was because: even on the Lessee's own position that it had overpaid the rent and therefore there was a credit in the hands of the lessor, the Lessee had not authorised for that credit to be applied to pay the shortfall in outgoings. The Lessor even if it wanted to could not apply any alleged credit against the shortfall in payment of outgoings without the express authority of the Lessee, especially when the Lessee as at 11 November 2022 was opposed to such payment. Only subsequent to the re - entry has it conceded that the full amount of the insurance premium should be paid any alleged credit used to offset that liability.

Estoppel

At [58] to [81] the Tribunal considered the Lessor's submission that the Lessee was estopped from claiming that any overpayments of rent from 8 March 2022 can be taken to have discharged the liability to pay outgoings.
At [81] the Tribunal found that estoppel by convention was established and that and the Lessee "is resisted from" now claiming that the payment of the rent increase was in fact was an overpayment of the rent.

Approbate and reprobate

The Tribunal considered this issue at [82] to [85], which are set out above.

Repudiation of the Lease by the Lessee.

This issue was considered at [86] to [101]. For the reasons given at [102], the Tribunal found that there were no grounds to assert the Lessee repudiated the Lease.

Damages

As the Tribunal found that the Lessor had legally exercised its right of re-entry and determined the Lease, it was not necessary to examine the Lessee's entitlement to damages.

Consideration of the first ground of appeal: the Tribunal erred in applying an improper construction of cl 6B of the 2021 Regulation and cl 5.4 of the Lease

Introduction

This ground of appeal is set out above.
Clause 6B of the 2021 Regulation provides: 6B Obligation to not increase rent The rent payable under an impacted lease must not be increased during the prescribed period, other than rent or a component of rent determined by reference to turnover.
It was common ground that the Lessee was an "impacted lessee" as defined in cl 4 of the 2021 Regulation.
Clause 5.4 of the Lease relevantly states: The rent is to be reviewed on the rent review dates stated in item 16 in the schedule. If this lease is extended by legislation, the rent review dates include each anniversary of the latest rent review dated stated in item 16 in the schedule (or if none is stated each anniversary of the commencement date) which falls during the extension.
Item 16 provides that "the rent review date" is "each anniversary of the commencement date starting on 7 December 2017".
The Tribunal's conclusions on the issue are found at [53] - [55] of the Primary Decision, which are set out above.

The Lessee's submissions

The Lessees' submissions are organised under the following headings: 1. When is rent to be reviewed? 2. Prohibition on increasing rent; 3. The effect of cl 5.4 and cl 6C.

When is rent to be reviewed?

The Lessee's submissions first address the Tribunal's interpretation of cl 5.4 of the Lease. These submissions may be summarised as follows: 1. Rent reviews occur "on" the rent review dates; the rent review does not occur at any other point or on any other day; either a rent review occurs on 7 December of a particular year, or it does not. 2. The Tribunal's conclusion that this could not be so because the Lease would then have the effect of the Lessor forgoing increased rent for a year if the review was not communicated to the Lessee was erroneous because: 1. In construing any contract, one assigns the words their plain and ordinary meaning: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 348. 2. The key operative word in cl 5.4 is "on". In turn, that word is made conditional to only certain dates throughout the life of the Lease. 3. The Tribunal assumed that the Lessor needed to notify the Lessee before the rent review and the rent increase could take place. The Tribunal does not point to a "single provision" in the Lease requiring that to be the case, in circumstances where "paradoxically" [55] of the Decision suggests that the Tribunal was of the view that the increase occurred "automatically" in any event and without further need for input from the parties. 1. Thus, the Tribunal erred in its construction of cl 5.4. The proper construction is that the rent will increase on the review date. That review date will occur relevantly on 7 December 2021 and the subsequent anniversary dates, and not any other day.

Prohibition on increasing rent

The Lessee's submissions then consider the meaning of cl 6B.
After noting that "prescribed period" was defined in cl 3 of the 2021 Regulation to mean 13 July 2021 to 13 January 2022, the Lessee submits that: 1. In interpreting legislation words should be given their plain and ordinary meaning unless the contrary is shown: Cody v J H Nelson Pty Ltd (Cody) (1947) 74 CLR 629 per Dixon J at 647; Maunsell v Olins (Maunsell) [1975] AC 373 at 382; [1975] All ER 16 at 18 per Lord Reid. 2. Cl 6B is clear in its meaning. It simply means that rent must not be increased under the lease between 13 July 2021 and 13 January 2022. It does not say that rent may be increased and then its enforcement of the difference suspended. That is quite a different mechanism and its effect on the rights and obligations of the parties are quite different; 3. On the interpretation found by the Tribunal, the Lessee would incur an obligation to pay the Lessor. At common law, that would ordinarily be enforceable when it fell due and payable. The Lessee submits that this means: At its outer extreme this would amount to 6 months worth of rent for a particular property. If that right to enforce were suspended by statute the next question is when the right would become enforceable. Under the Regulation there is no provision for when that amount of outstanding but unenforceable rent would become enforceable. That cannot be the legislative intent of Parliament. 1. Such a reading would also ignore the actual intent of Parliament: Interpretation Act 1987 (NSW), s 33; 2. The 2021 Regulation was one in a series of regulations designed to give effect to, and promote the goals of, the National Code of Conduct (Code), Leasing Principle 13 of which states: 13. Landlords agree to a freeze on rent increases (except for retail leases based on turnover rent) for the duration of the COVID-19 pandemic and a reasonable subsequent recovery period, notwithstanding any arrangements between the landlord and the tenant. 1. Reading "everything together", it was the intent of Parliament that rent not increase during the pandemic period. It is not simply the suspension of enforcement of rent due. Suspension was given effect by prohibiting the taking of "prescribed action" for a "prescribed breach" prior to mediation: cl 6C of the Regulation.
Clause 6C relevantly provides: 6C Compulsory mediation (1) A lessor must not take prescribed action against an impacted lessee on the grounds of a prescribed breach of the impacted lease that has occurred during the prescribed period unless - …
The Lessee submits that provides that by reasons of these matters and in interpreting the cl 6C in the way it did, the Tribunal fell into error.

The effect of cl 5.4 and cl 6C

The Lessee submits that combined effect of cl 5.4 of the Lease and cl 6C of the 2021 Regulation is that the rent increase which would have ordinarily occurred on 7 December 2021 did not occur. This is because legally it could not occur by operation of cl 6C. Thus, for the rest of contractual year until 7 December 2022, the rent remained at $11,580.60 per month.
For the reasons and calculations set out at [29] to [32] of its submissions, the Lessee concludes at [33] that: [i]t is immediately obvious that as at 11 November 2022 there was a credit of $1,736.87 in the lessee's favour. In other words the lessee was not in breach for failure to pay any amounts and not in breach of the lease. It follows that the landlord had no right of re-entry on 11 November 2022 and was itself in breach of the lease by re-entering and purporting to terminate.

The Lessor's submissions

In summary, the Lessor submits that cl 6B prohibited a landlord from enforcing a right to increase rent or to receive increased rent during the prescribed period, but that cl 6B only operated to suspend rather than destroy such rights. At the end of the prescribed period, a landlord was not prevented from exercising a right to increase rent or to receive increased rent.
The Lessor submits that: 1. While the Lessee submits that the meaning of cl 6B is that rent must not be increased under the lease between 13 July 2021 and 13 January 2022), the text of the clause is silent on the operation of rent review clauses before or after the prescribed period. 2. All that is clear from cl 6B, and on which both parties are agreed, is that rent must not be increased during the prescribed period. 3. The Lessor's construction of cl 6B does not involve rent being increased during the prescribed period, but involves a right to a rent review (in this case automatic) being exercised after the prescribed period. 4. The plain and ordinary meaning of the text does not provide the answer to the constructional choice as to whether the prohibition on rent increasing during the prescribed period was intended to prevent a right to increased rent from arising at all, if it would have arisen during the prescribed period, or alternatively whether the prohibition was intended to suspend or limit a landlord's right to increased rent or exempt a tenant to pay increased rent but only until the end of the prescribed period.
The Lessor submits that its interpretation of cl 6B is supported by: 1. Principles of statutory construction (which are set out at [22] to [24] of its submissions); and 2. Reason of the legislative background to the 2021 Regulation (which are set out at [25] to [31] of its submissions).
The Lessor concludes its submissions as follows: 32. The context of the principal Act demonstrates that the 2021 Regulation applied only to regulate, or prevent the exercise or enforcement of the rent review, or to exempt Ozoris from the operation of the rent review provision during the prescribed period. The context of section 87 of the Retail Leases Act 1994 discloses a legislative scheme that was primarily concerned with the temporary regulation of the exercise of rights or exemption from obligations under leases. 33. The Tribunal should find that the construction of cl 6B that is in accordance with the text, context and purpose of the Regulation is that a lessor was prohibited from enforcing a right to increased rent that accrued under the lease for a period within the prescribed period. Clause 6B of the 2021 Regulation did not operate to make a rent review clause itself illegal or to make the operation of a rent review clause itself illegal so that an automatic increase that would otherwise have taken effect during the prescribed period would not operate after the prescribed period. 34. The Senior Member was correct to conclude (Reasons at [55]) that the automatic increase "… is suspended during the prescribed period. Thereafter the rent increase applies and is enforceable".

The Lessee's submissions in reply

In brief submissions in reply the Lessee submits that: 1. The parties agree that this is a matter of statutory and contractual construction. 2. The basis of the Lessor's argument is that it was the intention of Parliament only to prohibit certain actions but not to alter the rights and obligations. The fallacy is that a prohibition of the exercise of "certain actions by lessors" is not an alteration of the lessor's rights. Every action afforded to the lessor whether by common law, contract or statute is a right of the lessor. To prohibit the exercise of an "action" which would ordinarily be exercisable under law is a curtailment of a right. 3. Parliament intended to alter the substantive rights between parties is clearly seen in the operation of the Covid regulations. A simple and clear example is that a lessor is prohibited from taking certain acts such as eviction for a prohibited reason such as failure to pay rent.
The submissions conclude with the Lessee submitting that the Appeal Panel should approach its task in an orthodox way by considering the wording of the legislation in the context that Parliament had intended to alter the rights as between parties to a commercial lease.

Background or context to the enactment of the 2021 Regulation

We commence by setting out the background to the enactment of the 2021 Regulation, which we consider forms part of the context to the interpretation of that regulation. As the High Court of Australia observed in Taylor v Owners - Strata Plan No 11564 (2014) 253 CLR 531 at 557; [2014] HCA 9 (footnotes omitted): 65. Statutory construction involves attribution of legal meaning to statutory text, read in context. "Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning ... But not always." Context sometimes favours an ungrammatical legal meaning. Ungrammatical legal meaning sometimes involves reading statutory text as containing implicit words. Implicit words are sometimes words of limitation. They are sometimes words of extension. But they are always words of explanation. The constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and it is not repair. 66. Context more often reveals statutory text to be capable of a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural. The choice between alternative meanings then turns less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies. (emphasis added)
Clause 6B was inserted into the 2021 Regulation by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 (NSW) (2021 Amendment Regulation), which commenced on 13 August 2021.
Thus, cl 6B of the 2021 Regulation was in effect on 7 December 2021.
Clause 6B of the 2021 Regulation relevantly provided: The rent payable under an impacted lease must not be increased during the prescribed period ...
The explanatory note to the 2021 Regulation was in the following terms: Explanatory note The object of this Regulation is to limit the exercise of certain rights by a lessor under retail and certain other commercial leases for a breach of the lease if - (a) the lessee is a business that qualifies for certain grants due to the impact of the COVID-19 pandemic, and (b) the breach is a prescribed breach that occurs between 13 July 2021 and 20 August 2021. Before exercising the right, the lessor must try to resolve the breach using mediation
The explanatory note to the 2021 Amendment Regulation stated: Explanatory note The Retail and Other Commercial Leases (COVID-19) Regulation 2021 and the Conveyancing (General) Regulation 2018, Schedule 5 provide protections for certain commercial lessees (impacted lessees) where related businesses have had a fall in turnover due to lockdowns in New South Wales. The object of this Regulation is to extend those protections as follows - ... (b) to prohibit a lessor increasing rent during the prescribed period if the lessee is an impacted lessee.
"Prescribed period' was defined in cl 3 to mean: the period commencing at the beginning of 13 July 2021 and ending at the end of 13 January 2022.
The 2021 Regulation was repealed by the Retail and Other Commercial Leases (COVID-19) Regulation 2022 (2022 Regulation) (by s 16(1)(a)) with effect from 13 January 2022 on commencement of the 2022 Regulation).
On commencement, the 2022 Regulation included cl 8 in the same words as cl 6B of the 2021 Regulation.
"Prescribed period" was defined in cl 3 of the 2022 Regulation to mean: the period commencing at the beginning of 13 July 2021 and ending at the end of 13 March 2022.
The 2022 Regulation was amended by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2022 (NSW) with effect from 14 March 2022 (2022 Amendment Regulation).
The effect of the 2022 Amendment Regulation was to omit cl 8 of the 2022 Regulation in relation to increases of rent from that date.
The explanatory note on the cover page of the 2022 Amendment Regulation stated: Explanatory note The object of this Regulation is to remove requirements in relation to impacted leases that: … (b) prevented rent payable under an impacted lease from being increased.

Principles of statutory construction

The Lessor submitted, and we accept, that the general principles relating to the interpretation of primary legislation are equally applicable to the interpretation of subordinate legislation: Disorganized Developments Pty Ltd v South Australia (2023) 97 ALJR 575; [2023] HCA 22 at [14];
Both parties provided helpful references to authorities dealing with statutory interpretation. As noted above, the Lessee referred to Cody and Maunsell.
The Lessor referred us to SZTAL v Minister for Immigration and Border Protection (2017) CLR 362; [2017] HCA 34 and in particular to two passages.
The first passage was at [14] where Kiefel CJ, Nettle and Gordon JJ stated: The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose [13]. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense [14]. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
Footnote [13] is a reference to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 ; [1998] HCA 28 [69] to [71] and Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [2009] HCA 41 at [47].
In Project Blue Sky, the Court said (footnotes omitted): 69. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of the provision must be determined "by reference to the language of the instrument viewed as a whole"[46]. In Commissioner for Railways (NSW) v Agalianos, Dixon CJ pointed out that "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed". Thus, the process of construction must always begin by examining the context of the provision that is being construed. (emphasis added)
In Alcan at [47] the Court said (per Hayne, Heydon, Crennan and Keifel JJ, footnotes omitted): This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy. (emphasis added)
The second passage of SZTAL relied on by the Lessor was at [58] where Gaegler J (as the Chief Justice then was), observed that often a court or tribunal faces a "constructional choice". His Honour stated that [58] that (footnotes omitted): The constructional choice presented by a statutory text read in context is sometimes between one meaning which can be characterised as the ordinary or grammatical meaning and another meaning which cannot be so characterised. More commonly, the choice is from "a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural", in which case the choice "turns less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies.

Conclusion

On 25 March 2020, the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) came into force. That Act amended the Retail Leases Act 1997 (NSW) by inserting a new s 87, which authorised the making of regulations to respond to the effect of the COVID-19 pandemic on the businesses of tenants whose leases were subject to that Act.
On 7 April 2020, the National Cabinet adopted the National Cabinet Mandatory Code of Conduct - SME Commercial Leasing Principles During COVID-19 (Code).
On 24 April 2020, the NSW Government promulgated the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (2020 Regulation) which gave legal effect to the Code.
As the Tribunal noted in Yigiter v Al Haery [2021] NSWCATCD 125: 56. The Code was adopted by the Federal Government on 7 April 2020. The Code does not of itself regulate parties to a retail lease to address the consequences or impact of the pandemic. In New South Wales that regulatory power is found in section 87 of the [Retail Leases Act 1994 (NSW)] which came into force on 27 March 2020. According to the section, the aim of that power is to make regulations that respond to the public health emergency caused by the pandemic and, depending upon the particular circumstances, this includes the prohibition of recovery of possession of premises by a lessor, the termination of a lease by a lessor, and regulating or preventing the exercise of enforcement or other rights of the lessor. 57. Since 24 April 2020, the New South Wales Government has made regulations to provide certain protection for retail tenants impacted by the pandemic, provide a process by which the parties to the lease can negotiate temporary relief arrangements, and prescribe how retail landlords can exercise certain rights under retail shop leases during the pandemic. The regulations are: 1. Retail and Other Commercial Leases (COVID-19) Regulation 2020 (Regulation No.1) which commenced on 24 April 2020. The regulation was amended on 3 July 2020. 2. Regulation 1 was repealed and replaced by the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (Regulation No.2) which commenced on 24 October 2020. 3. Regulation No.2 was replaced by the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 (Regulation No.3) which commenced on 1 January 2021 and ended on 28 March 2021. 4. The Retail and Other Commercial Leases (COVID-19) Regulation 2021 (Regulation No.4) commenced on 13 July 2021 and continues until repealed on 13 January 2022.
Cl 6B relevantly states that the rent payable under an impacted lease must not be increased during the prescribed period.
In summary, the Lessee submits that: 1. The clause says what it says; rent must not be increased under the Lease between 13 July 2021 and 13 January 2022. Clause 6B does not say that rent may be increased and then its enforcement of the difference suspended. 2. It was Parliament's intention that rent not increase during the pandemic period, and the clause does not suspend the enforcement of rent due. Suspension was given effect by prohibiting the taking of "prescribed action" for a "prescribed breach" prior to mediation: cl 6C of the Regulation.
On the other hand, the Lessor submits that its construction of cl 6B does not involve rent being increased during the prescribed period, but involves a right to a rent review (in this case automatic) being exercised after the prescribed period. The Lessor submits that its interpretation of cl 6B is supported by: 1. Principles of statutory construction; noting that the plain and ordinary meaning of the text does not provide the answer to the constructional choice offered by the parties; and 2. By reason of the legislative background to the 2021 Regulation (which are set out at [25] to [31] of its submissions).
We set out the terms of cl 5.4 above.
Clause 5.4 is followed by cl 5.5 which provides: The lessee must continue to pay rent at the old rate until the new rate is known. After that, the lessee is to pay the new rent from the next rent day. By that next rent day the lessee is also to pay any shortfall between the old and new rate for the period since the rent review date. Alternatively, the lessor is to refund to the lessee any overpayment of rent.
The Lease then states that there are three methods "for fixing the new rent on a rent review date" (cl 5.6), the first method "Method 1" being "by a fixed amount or percentage. It is common ground that item 16 in the Schedule to the Lease identified Method 1 and an increase of 4%.
This is presumably what the Tribunal had in mind when it stated at [55]: … The rent increase in the Lease of annually 4% was agreed between the Lessor and the Lessee at the time of entering into the Lease and would operate normally automatically. …
The Lease must bow to the legislation, and the Lease itself recognises that it may be impacted or its terms affected or changed by operation of legislation: see cl 5.4, which provides "[i]f this lease is extended by legislation".
However, we do not find the application of the rules of statutory construction to the interpretation of cl 6B, to be of particular assistance. As the Lessor submitted, the plain and ordinary meaning of the text of cl 6B does not provide the answer to the constructional choice offered by the parties. Just as cl 6B is silent on whether rent increases are suspended as opposed to being eliminated, it is also silent on whether the rent increases are eliminated as opposed to being suspended. Hence there is no "constructional choice", or at least none that can be resolved by reference to the plain or ordinary meaning of the text of cl 6B.
Turning to the Lease itself, as the Appeal Panel stated in Project 4301 at [27], the principles relevant to construction of a contract are not controversial. They can be summarised as follows: (1) Determination of the rights and obligations of parties to a contract is undertaken objectively. The key consideration is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe": Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]. (2) The primary duty of a Court or Tribunal when construing a written contract is to ascertain the legal meaning of a document "from the words of the instrument in which the contract is embodied": Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36 per Gibbs J. (3) A Court or Tribunal undertaking this task must consider the language used by the parties, the circumstances addressed by the contract and the objects which it is intended to secure. An appreciation of the commercial purpose of the contract requires an understanding of the genesis of the transaction, the background and the market: International Air Transport Association v Ansett Australia Holdings Ltd (2008) 82 ALJR 419 [2008] HCA 3 per Gleeson CJ at 423 [8]. (4) Although context and the surrounding circumstances known to both parties can be taken into account even in cases where there is an absence of apparent ambiguity, a Court or Tribunal is not permitted to depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 per Gibbs J at 109. (5) The interpretation of a written contract involves ascertaining the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 per Gleeson CJ, Gummow and Hayne JJ at 188.
The contractual term regarding rent increases was agreed to at the time the Lease commenced, as the Tribunal found. Cl 6B had the effect of preventing the rent increasing in accordance with the contract during the prescribed period. By operation of cl 6B, the rent did not increase during the prescribed period. However, cl 6B did not have the effect of displacing the contractual term regarding rent increases outside of the prescribed period. Once the prescribed period had ended, the rent increased in accordance with the rent review term of the contract.
We find support for that conclusion in cl 5.5 of the Lease which provides that the Lessee must continue to pay rent at the old rate until the new rate is known. This in our view is analogous to, and consistent with, a rent increase which was supposed to commence during the prescribed period, but was not able to do so by operation of the cl 6B of the 2021 Regulation.

Outcome

The interpretation of contractual terms is primarily a matter of law: J Edelman, The Interpretation of Written Contracts.1 See too, by analogy, Life Insurance Co. of Australia Ltd v Phillip (1925) 36 CLR 60 at 79; [1925] HCA 18, referred to in Collector of Customs v Pozzolanic (1993) 43 FCR 280 at 287; [1993] FCA 456. Similarly, the interpretation of legislation raises issues of the correct application of legal principle, and thus raise questions of law: Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at 46.
Both matters raise question of law for which leave to appeal is not required: Civil and Administrative Tribunal Act 2013 (NSW), s 80.
As we have found no error by the Tribunal in relation to the first ground of appeal, we would dismiss the appeal in relation to this ground.

Consideration of the second ground of appeal: the Tribunal erred in applying the wrong legal principle to the facts, namely that the Lessee was estopped by convention.

As noted, the Lessee submits that the Tribunal should have found that the Lessee was entitled to rely on its argument with respect to overpayment of rent.
However, during the course of the hearing, Mr Chan submitted that the second ground of appeal had "no work to do", if we were against his client on the first ground of appeal.
For the reasons set out above, we do not accept there is substance in the first ground of appeal.
Accordingly, there is no need to consider the second ground of appeal.

Consideration of the third ground of appeal: the Tribunal erred by failing to accord the Lessee procedural fairness by failing to grant to the Lessee an opportunity to be heard at all concerning the legal principle of approbation and reprobation.

During the course of the appeal hearing, Mr Chan conceded that even if the Lessor succeeded on this ground, but failed on the others, it would have no practical effect to the outcome of the appeal.
Accordingly, there is no need to consider this third ground of appeal.
We note for the benefit of Tribunal members and litigants alike, the failure to inform parties of a basis on which a decision may be decided may amount to a failure to provide the party with procedural fairness.

Consideration of the Cross Appeal

As we have not allowed the appeal, there is no occasion to consider the Cross Appeal.

Costs

The Lessee has been unsuccessful. We have therefore ordered the Lessee to pay the Lessor's costs of the appeal and the cross appeal. We have also made procedural directions in the event that either party contends for a different costs order.
We propose to consider any application for a different costs order on the papers and without a hearing: see Westerweller v The Owners Strata Plan No 18482 [2023] NSWCATAP 113 at [85].
If either party opposes that course, they are to address that issue in their submissions.

Orders

The Appeal Panel orders: 1. The appeal and the cross-appeal are dismissed. 2. The Appeal Panel proposes to order Ozoris Investments Group Pty Ltd to pay the Malabar Headlands Pty Ltd's costs of both the appeal and the Cross Appeal as agreed or as assessed. 3. If either party contends for some a different costs order, order 2 above ceases to have effect and the following orders apply. 1. The party seeking the different costs order (the costs applicant) is to file and serve evidence and submissions in support of the application for a different costs order on within 14 days of the date of publication of these reasons. 2. The costs respondent may file and serve any evidence and submissions in response within 28 days of the date of publication of these reasons. 3. The costs applicant may file and serve any evidence and submissions in reply within 35 days of the date of publication of these reasons.

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

Amendments 07 May 2024 - Name of: Oziris Investments Group Pty Ltd amended to Ozoris Investments Group Pty Ltd 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: 07 May 2024

Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021(NSW)

Retail and Other Commercial Leases (COVID-19) Regulation 2022(NSW)

Retail and Other Commercial Leases (COVID-19) Regulation 2021(NSW)

Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2022(NSW)

COVID-19 Legislation Amendment (Emergency Measures) Act 2020(NSW)

Retail Leases Act 1997(NSW)

Retail and Other Commercial Leases (COVID-19) Regulation 2020(NSW)

Leases Act 1994(NSW)

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