Matter COM 21/38550 is an application by Robin Raju & Associates Pty Ltd ('the tenant') for urgent interim orders granting relief against forfeiture against Kaplan Investments Pty Ltd ('the landlord').
The premises in question are a reception venue. There is a dispute as to whether the premises are a "retail shop" within the definition of s 3 and Schedule 1 of the Retail Leases Act 1994 (NSW) ('the RL Act'). Accordingly, there is an issue as to whether the Tribunal has jurisdiction in the matter.
[2]
Tribunal proceedings
Both parties filed substantive proceedings. In Matter COM 21/26432 the tenant sought orders that relevantly included "waving" (sic) an amount of rent as the tenant was COVID-19 impacted. The tenant's substantive proceedings were filed on 17 June 2021.
In Matter COM 21/33002, the landlord sought orders that relevantly included payment of rent arrears, outgoings and interest in an amount exceeding $76,000. The landlord's proceedings were filed on 2 August 2021. The landlord was legally represented by the same firm of solicitors throughout proceedings.
Prior to the substantive proceedings being commenced by the parties in the Tribunal, they had been to mediation before the Small Business Commissioner on 17 May 2021. A Certificate was issued by the NSW Office of Small Business dated 2 June 2021 that the mediation was unsuccessful.
On 26 August 2021, the landlord issued a Notice of Termination. The Notice was issued under the auspices of the Solicitors for the landlord. The Notice of Termination refers to the "Retail Shop Lease" between the parties entered into on 23 September 2019. The Notice identified that the tenant was in breach by failing to pay rent for the period form 29 March 2021 to 31 July 2021 in the amount of $31,281.20, and that the lease would be terminated on 9 September 2021. The Notice stated that "For clarity, the Lease is being terminated for outstanding rent due and payable prior to 13 July 2021 and therefor the Retail and Other Commercial Leases (Covid-19) Regulation 2021 is not applicable". The Notice identified the breach as failure to pay rent between 29 March 2021 and 12 July 2021.
On 9 September 2021 the tenant filed the application for interim orders. The application was prepared by the tenant's former Solicitor. The application did not clearly seek relief against forfeiture, but made reference to its opposition to the landlord taking possession of the property.
The landlord took possession of the property on or soon after 9 September 2021.
All of the proceedings were listed before the Tribunal on 1 October 2021 before Senior Member Charles. On that date, Mr Simpson of Counsel appeared for the landlord. Mr Simpson filed an outline of written submissions dated 1 October 2021. Those submissions assert the Retail and Other Commercial Leases (COVID-19) Regulation 2021 does not apply (and accordingly prevent the landlord from taking the "prescribed action" of terminating the lease and taking possession of the property for non-payment of rent) because the breach relied upon by the landlord occurred prior to that Regulation commencing on 14 July 2021.
Mr Simpson's submissions of 1 October 2021 make no reference to the Tribunal not having jurisdiction in the matter due to the lease being a commercial lease rather than a retail lease under the RL Act.
However, it appears Senior Member Charles identified the jurisdiction issue, because the directions made referred the matters down for a further directions hearing that was to include consideration of the issue of jurisdiction, and made directions for the filing and serving of evidence and submissions.
The matters then came before Principal Member Rosser on 14 October 2021, after the tenant made an application for an expedited hearing. Principal Member Rosser made further procedural directions regarding the filing and serving of evidence and submissions, and made the following orders:
"The hearing currently listed on 28 October 2021 will be brought forward to 19 October 2021. At that hearing the Tribunal will decide:
(a) Whether the Tribunal has jurisdiction to deal with the applications.
(b) If so, whether the lessee should be granted relief against forfeiture pending resolution of the substantive proceedings.
(c) If the Tribunal concludes that it does not have jurisdiction to hear and determine the applications, they will be dismissed."
At the hearing on 19 October 2021, Mr Loxton of Counsel appeared for the tenant and Mr Simpson of Counsel appeared for the landlord. The hearing was conducted by Audio Visual Link ('AVL').
At the hearing, the landlord did not seek to cross examine Mr Raju. The tenant briefly cross examined the agent of the landlord.
[3]
Documentary evidence and submissions of the parties
The tenant relied upon an affidavit of Mr Raju (director of the tenant) dated 7 October 2021 (excluding paragraphs [23]-[34] which were not read); 4 further documents relating to whether the venue held a liquor licence (which were tendered at the hearing as evidence in reply, after leave was granted); and an outline of submissions filed on 11 October 2021.
An earlier statutory declaration of Mr Raju dated 28 September 2021 was filed on 30 September 2021. That statutory declaration did not include any material that was not covered in Mr Raju's affidavit of 7 October 2021.
The landlord relied upon affidavits of Mr Nussbaumer (managing agent of the landlord) dated 29 September 2021 and 18 October 2021. The landlord also provided written submissions dated 1 October 2021 and 18 October 2021.
[4]
The lease between the parties
The affidavits of Mr Raju and the first affidavit of Mr Nussbaumer refer to a history of the tenancy prior to the parties entering into a written lease between the parties dated 23 September 2019. It is unnecessary for the purpose of the application for interim orders to detail that history. In summary, the premises were previously let to an Eagle Boys pizza franchise between 2013 and 2018, when that lease was assigned to the tenant.
There is no dispute that the parties entered into a written lease commencing on 23 September 2019 with the fixed term ending on 26 September 2022. The form of the lease is headed "Retail Shop Lease". The permitted use of the premises was identified as "Function centre before 4pm and Function Centre/Restaurant after 4pm only".
The affidavit of Mr Raju does not provide any detail regarding the use of the premises. However, his affidavit contains "Booking Forms" and "Function Quotes" under the name of "Robina Function Centre-The Perfect Party Place". It was submitted that the premises is used for functions such as wedding receptions and 21st birthday parties, with food and beverages being served to persons in attendance at the functions. The premises are not part of a shopping centre.
The affidavits of Mr Nussbaumer also do not provide any detail regarding the use of the premises, other than to assert the landlord was aware of whether the tenant had obtained Council approval to operate as a restaurant.
The tenant asserted that it had approval to serve food and alcoholic beverages at the function centre and relied upon the 4 documents tendered as evidence in reply. For the purpose of this application it is unnecessary to make a finding as to whether or not the tenant had Council approval, because the landlord has not identified this as a breach of the lease in the Notice to Terminate. The landlord's action for breach is based solely upon non-payment of rent.
The affidavit of Mr Raju dated 7 October 2021 relevantly states that:
1. The tenant ceased operating "on or about February 2020 due to the pandemic".
2. "A few months later" the tenant applied for the Commonwealth government Jobkeeper grant. Mr Raju does not state in his affidavit that the tenant was paid Jobkeeper. He also does not state that the landlord was notified the tenant was in receipt of the Jobkeeper allowance and provided evidence of this. The only document provided in the affidavit of Mr Raju regarding whether or not the Jobkeeper grant was paid (and the period it was paid) was an extract from the Australian Taxation Office "Jobkeeper extension/View payments" portal, with the tax agent identified as Tax Professional Plus; and the client "Robin Raju & Associates Pty Ltd". The payment summary states that there was a wage subsidy paid in the months October 2020; November 2020; December 2020; January 2021; February 2021; and March 2021. The "business participant" is identified as "Tier 1". The wage subsidy paid does not exceed $3,600 for any of the identified months. Under the heading "employees" it is stated "no employees included in payment".
3. On 29 May 2020 the tenant and the landlord agreed to a 50% rent reduction for the period April and May 2020.
4. On 5 August 2020 the tenant's Solicitor wrote to the landlord's agent referring to the "National Cabinet Mandatory Code of Conduct in SME Commercial Leasing Principles" ('the Code of Conduct') stating that the tenant's business was the subject of "heavy restrictions placed upon hospitality industry" and that the tenant would "be unable to meet any of our future obligations under the lease until we become operational". The letter concluded by stating that "any assistance" to the tenant would be "highly appreciated".
5. On 13 October 2020 the tenant's Solicitor sent a further letter to the landlord's agent stating that the tenant could not pay rent until the business "improves and becomes operational".
6. On 19 October 2020 the landlord's agent emailed the tenant stating that other function centres were operating and that rent "needs to be paid up".
7. On 20 November 2020 the tenant's Solicitor wrote to the landlord's agent that due to COVID restrictions the tenant could only have 50 patrons out of 200 and this was not sufficient to "cover all his expenses". The letter stated that the "position may improve" when the tenant was able to have 100 patrons.
8. On 26 November 2020 the landlord's agent emailed the tenant's Solicitor stating that function centres could now have "over 100 people attending a function", and querying when rent arrears would be paid.
9. On 28 January 2021 the tenant lodged an application for mediation with NSW Office of Small Business.
10. On 17 May 2021, the mediation occurred. According to Mr Raju he "accepted the 50% rent deferral" but "disputed" 9 months to pay rent arrears.
11. On or about 18 May 2021 the landlord's agent made an offer of a rent waiver and deferral. However, Mr Raju stated that he did not agree to a "9 month repayment period".
12. On 17 September 2021 the tenant received a COVID 19 business grant. However, the document attached to Mr Raju's affidavit was for the business name "Shelvin Sharma Holdings Pty Ltd" not "Robin Raju & Associates Pty Ltd" (the correct legal entity of the tenant in this matter). There was no explanation in Mr Raju's affidavit as to why the COVID 19 business grant was in the name of another legal entity.
13. After proceedings were commenced in the Tribunal, the tenant received a Notice to Terminate, as previously discussed.
According to Mr Raju, the venue was "booked" in the period between 11 October 2021 and 17 October 2021. A number of "booking forms" and one "quotation" were attached to his affidavit. There was no detail in the affidavit as to the process by which the purported "bookings" were made, or that anyone had paid any monies to the tenant. All of the documents appear to have the same writing, and there was no evidence as to who completed the documents. A "Booking Form" for a "Comedy Show" for 17 October 2021 contains at the bottom a handwritten date of "15/05/21".
The affidavit of Mr Nussbaumer dated 29 September 2021 contains the following information in addition to the information contained in Mr Raju's affidavit:
1. A copy of the tenant ledger for the period between 1 September 2018 to 1 September 2021. The balance for outstanding rent, arrears and charges was $77,707.47. In 2021, the only payments made by the tenant were on 31 May 2021; 18 June 2021; and 1 September 2021 in a total amount of approximately $15,000. In oral evidence Mr Nussbaumer stated the current arrears exceed $84,000.
2. At paragraph [59] of the affidavit Mr Nussbaumer sets out the purported prejudice to the landlord if interim orders were made to grant relieve against forfeiture.
In his affidavit of 18 October 2021, Mr Nussbaumer stated that he changed the locks on the premises on 9 September 2021 after the Notice of Termination expired, and was not aware of any Council approval for the premises to operate as a restaurant.
[5]
Are the premises a retail lease shop within s 3 and Schedule 1 of the RL Act?
Under s 3 of the RL Act, a "retail lease shop" is defined relevantly as "premises that are used, or proposed to be used, wholly or predominantly for the carrying on or one or more businesses prescribed for the purposes of this paragraph". Schedule 1 of the RL Act contains types of premises identified as "retail shop businesses".
The only relevant definition in Sch 1 of the RL Act that the tenant pointed to as being applicable to the premises was "restaurants, cafeterias, coffee lounges, food courts and other eating places".
The tenant asserted that the lease identified the premises as being a "restaurant or function centre" after 4pm in its "permitted use" provisions, and relied on the decisions of Akora (Bondi Junction) Pty Ltd v Buttrose [2008] NSWADT 275 and KM Sones Pty Ltd v Bonovas [2014] NSWCATCD 111.
In essence, the tenant submits that one of the "purposes" of the premises is use as a restaurant, and that it is sufficient that food and beverages are served to patrons of the function centre after 4 pm in their capacity of attending functions at the premises.
The landlord relies on the decision of Barrett J in Moweno v Stratis [2002] NSWSC 1151 ('Moweno') upheld on appeal by the NSW Court of Appeal in (2003) NSWCA 376.
It is clear that in considering this issue, the key authority that sets out applicable principles is Moweno. That authority has been followed in many decisions on this issue by the Tribunal; the predecessor Tribunal (the ADT); and the Appeal Panel of the Tribunal.
The applicable principles were summarised by Senior Member Bluth in Honings Bakery Pty Ltd v Cerialis Pty Ltd [2014] NSWCATCD 87 at [37] as follows:
Firstly one looks at the lease to see what is the permitted or agreed use of the premises;
If the agreement clearly defines what the use of the premises is to be, then the question as to whether or not the premises are a "retail shop" under s 3 of the RL Act will be determined as to whether or not that use appears in Schedule 1;
If the permitted or agreed use is not clear or is uncertain, or the use covers a number of different types of businesses, some of which are, or may be, within Schedule 1 described businesses, then an analysis is required of the actual use of the premises to determine whether the predominant use(s) fall within one or more of the businesses prescribed in Schedule 1.
In this matter, because the permitted or agreed use involves a type of use that are outside the scope of Schedule 1 of the RL Act (function centre) and a type of use that is within Schedule 1 (restaurant), the Tribunal must consider the evidence regarding the actual use of the premises.
Further, "predominant" use is the "most conspicuous or effective portion of the use". A specific percentage figure is not determinative, other than the use must be more than 50% to predominate (Hardcore Gym Pty Ltd v Police Citzens Youth Club Ltd [2014] NSWCATCD 249 at [15]-[17]).
"Restaurant" is defined in the Macquarie Dictionary as "an establishment where meals are served to customers".
If there is a dispute as to jurisdiction, unless there is some statutory provision to the contrary, the onus is upon the party who asserts that there is jurisdiction to prove on the balance of probabilities that there are facts that establish jurisdiction (Owners of Ship Shin Kobe Maru v Empire Shipping Co [1994] HCA 54; (1994) 181 CLR 404).
The Tribunal is not satisfied that, assessed objectively based on the terms of the lease or on the basis of the evidence of the actual use of the premises, that the "predominant" use of the premises was intended to be, or was, use as a restaurant.
The limited evidence provided by the tenant was that, as part of operation as a function centre, events may be catered for at the premises. There was no clear evidence of when this would occur, how often it would occur, or what facilities were at the premises to make meals and to serve them to customers.
Accordingly, the evidence before the Tribunal establishes no more than use, or intended use, as a "restaurant" was minor, limited, ancillary or peripheral. In this regard, the facts are similar to Freedom Group Australia Pty Ltd v RO Corporate Pty Ltd [2016] NSWCATD 59, where a petrol station that included a facility where hot meals were served was held not to be a "retail shop" under the RL Act.
The Tribunal does not regard the decision in K M Sons Pty Ltd v Bonovas [2014] NSWCATCD 111 ('Bonovas') as a binding authority. It is a decision of a single Member of the Tribunal, not the Appeal Panel or a higher Court (albeit the Member was a Deputy President). The decision makes no reference to the principles in Moweno. Although the decision refers to Akora (Bondi Junction) Pty Ltd v Buttrose [2008] NSWADT 275, it appears to incorrectly work on the assumption that "actual use" is the relevant test, and any function centre that provides food and drinks at the premises for persons attending a function is used "predominantly" as a restaurant. That is not consistent with the authorities that have considered Moweno. In any event, in Bonovas there was significantly more evidence provided regarding the food preparation facilities at the premises and how such food was provided during functions at the premises. No such evidence was provided in this matter.
The Tribunal has also taken into account that the written lease refers to the lease as being a "Retail Shop Lease". However, that description in the written lease cannot take precedence over the principles set out in Moweno for determining whether or not the lease is for a premises intended to be used, or actually used, wholly or predominantly as a the type of premises identified in Sch 1 of the RL Act.
[6]
Does the Tribunal have jurisdiction by reason of Regulation 8 of the Retail and Other Commercial Leases (Covid 19) Regulation 2021 or the predecessor Covid-19 regulations?
Regulation 8 of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 states that Part 8 of the RL Act applies to "an impacted commercial lease dispute as if it were a retail tenancy dispute within the meaning of that Part". "Impacted commercial lease dispute means "a dispute about a prescribed breach of an impacted lease as referred to in the Conveyancing (General) Regulation 2018 Sch 5 Cl 4C(1). Part 8 of the RL Act is the "Dispute Resolution" provisions of the RL Act, including the powers of the Tribunal to determine retail tenancy claims.
The provisions of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 clearly do not apply because the breach relied upon occurred prior to 14 July 2021 when the Regulation came into effect. Accordingly, the breach could not be a "prescribed breach" within the Regulation (by reason of Regulation 5).
However, an issue that was not referred to in written submissions was whether the Retail and Other Commercial Leases (COVID 19) Regulation 2020 (No 1); (No 2) or (No 3) (i.e. the predecessor Regulations to the 2021 Regulations-'the 2020 Regulations') gave the Tribunal jurisdiction to hear at least the part of the dispute involving relief against forfeiture.
In oral submissions, the tenant's Counsel could not clearly indicate why any of the 2020 Regulations gave the Tribunal jurisdiction in the claim for relief against forfeiture other than broadly submitting that the Tribunal should accept that COVID 19 restrictions applied to function centres and the tenant was COVID 19-impacted.
The oral submissions of the landlord's Counsel did not address in any detail why the 2020 Regulations did, or did not, give the Tribunal jurisdiction, other than to submit that the tenant had not provided evidence to the landlord that it was an impacted lessee during the period that the 2020 Regulations applied.
The 2020 Regulations contain a similar (but not identical) provision in Regulation 8 as the 2021 Regulation.
As discussed previously, neither party was of assistance regarding how Regulation 8 in the 2020 Regulations is to be interpreted. Although it is unusual for a Regulation to give the Tribunal jurisdiction to hear disputes that are outside the definition of a "retail shop" within the RL Act, the Tribunal must interpret the words of the 2020 Regulations, and Regulation 8 of the 2020 Regulations states that Part 8 of the RL Act applies to commercial leases for the purpose of the Regulation. Considering the economic and social disruption pertaining to COVID 19, the legislature must have intended, by the plain words of Regulation 8, that the Tribunal have a limited jurisdiction to consider disputes about the operation of the Regulations and grant relief against forfeiture, even if the Tribunal does not have the power to grant other types of orders arising from non-payment of rent or consider other breaches because the dispute did not involve a retail lease (i.e. the Tribunal does not have jurisdiction under the RL Act beyond the scope of the operation of the 2020 and 2021 Regulations).
However, the 2020 Regulations operated for the period from 24 March 2020 to 28 March 2021 (the "prescribed period" under the respective Regulations (No 1; No 2; and No 3)).
Under Clause 4 of the Regulations No 1 and No 2, an "impacted lessee" was relevantly if the turnover of the business was less than $50,000,000 a lessee in receipt of the Jobkeeper scheme under section 7, 8, 8 A and 8 B of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth. Under Regulation No 3 the criteria was the turnover of the business was less than $5,000,000 and the lessee met the new eligibility requirements for the Jobkeeper scheme introduced on 4 January 2021.
If the tenant was an "impacted lessee" there were prohibitions on the lessor under Clauses 6 and 7 of the 2020 Regulations regarding taking action to terminate the lease for non-payment of rent. However, to be an "impacted lessor" under Clause 7 (5) of the 2020 Regulations, the lessee must give the lessor (a) a statement to the effect that the lessee is an impacted lessee; and (b) evidence that the lessee is an impacted lessee.
In this matter, the evidence does not satisfy the Tribunal that the tenant gave the landlord evidence that it was in receipt of the Jobkeeper allowance during the period to 28 March 2021. Mr Raju's evidence was that the tenant was in receipt of the Jobkeeper allowance during that period (and there is some, albeit limited evidence to support this) but there is no evidence that the landlord was provided evidence during that period that the tenant was in receipt of the Jobkeeper allowance. The letters of the tenant's Solicitor refer generally to the tenant's income being affected by COVID 19 restrictions, but they do not clearly state the tenant was an "impacted tenant" for the purpose of the 2020 Regulations and provide evidence that the tenant was in receipt of the Jobkeeper allowance.
Accordingly, the Tribunal is not satisfied that the tenant was an "impacted tenant" within the meaning of the 2020 Regulations, irrespective of whether the landlord could rely on breach of the lease for non-payment of rent during the period between 29 March 2021 and 14 July 2021 and take possession of the property based on such a breach without being prohibited from doing so under Clauses 6 and 7 of the 2020 Regulations.
The Tribunal is not satisfied that it has jurisdiction under the RL Act; nor jurisdiction under the 2020 Regulations.
As the Tribunal is not satisfied it has jurisdiction, it is unnecessary to determine whether it would grant relieve against forfeiture on an interim basis. That issue involves consideration of serious issue to be tried, and balance of convenience. However, the usual basis that relief against forfeiture is granted is if the tenant pays all rent arrears and satisfies the Court it is able to pay rent due under the lease on an ongoing basis (Sneakerboy Retail Pty Ltd t/as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996 at [75] ('Sneakerboy No 1'). Even taking into account that the tenant may be an "impacted tenant" under the 2021 Regulation for the period from 14 July 2021 onwards and may be entitled to a rent reduction under the guiding principles set out in the leasing Code of Conduct from 14 July 2021 onwards (see the discussion of the principles in Sneakerboy No 1; and Sneakerboy Retail Pty Ltd t/as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141 in PS Market Pty Ltd v Brijcam Nominees Pty Ltd [2020] VCAT 1468 at [93]-[98]) the offer of the tenant to pay $9,000 is substantially less than the rent arrears for the period between 28 March 2021 and 14 July 2021, and substantially less than total rent arrears (even if there was a rent reduction under the Code of Conduct, if the Code of Conduct applied to the tenant). The evidence provided by the tenant regarding the ability to pay rent in the future is also scant.
[7]
Conclusion
The Tribunal does not have jurisdiction in the proceedings (both in respect of the application for interim orders and the substantive proceedings of both parties) and accordingly all of the proceedings are dismissed.
[8]
ORDERS
1. The proceedings in Matters COM 21/26432; COM 21/33002; and COM 21/38550 are dismissed.
[9]
I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.
Registrar
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 27 October 2021
Parties
Applicant/Plaintiff:
Robin Raju & Associates Pty Ltd
Respondent/Defendant:
Kaplan Investments Pty Ltd
Legislation Cited (3)
Retail and Other Commercial Leases (COVID-19) Regulation 2021(NSW)