Cao v ISPT Pty Ltd

The appeal in *Cao v ISPT Pty Ltd* concerned the construction of a commercial lease and whether COVID-19 public health restrictions frustrated the lease agreement. The tenant, Cao, argued that the restrictions prevented the premises from being "opened" for business as required by the lease, and that the lease had been frustrated by these supervening events. ISPT Pty Ltd, the landlord, contended that the tenant remained obligated under the lease.

The primary legal issues before the Court of Appeal of New South Wales were whether the COVID-19 public health orders rendered performance of the lease impossible, thereby frustrating the contract, and how the "paramount clause" of the lease should be construed in light of these restrictions. Specifically, the court had to determine if the tenant was excused from its obligations due to the inability to operate the premises in the manner contemplated by the lease, and whether the tenant had assumed the risk of such restrictions under the terms of the lease.

The court reasoned that the paramount clause, which stipulated that the tenant must "open and use the Premises for the purpose of a [specified business] at all times during the Term," did not require illegal activity. Therefore, compliance with public health orders that prohibited opening for business did not constitute a breach of this clause. Furthermore, the court found that the doctrine of frustration did not apply because the COVID-19 public health orders were a risk for which the tenant had assumed responsibility under the lease. The court held that the orders did not necessitate a radical or fundamental change in what was contracted for, meaning the core obligations of the lease remained substantially the same, albeit with a temporary inability to trade.

Consequently, the appeal was dismissed, and the appellants were ordered to pay the respondents' costs of the appeal.