Croc's Franchising Pty Ltd v Alamdo Holdings Pty Ltd

The dispute before the Court of Appeal of New South Wales concerned a retail lease agreement and a related guarantee. Croc's Franchising Pty Ltd (the franchisor and lessor) sought to terminate a lease granted to Alamdo Holdings Pty Ltd (the lessee). The lessee contended that termination was prohibited by COVID-19 pandemic regulations and that the lessor had waived certain grounds for termination. The lessee also argued that the lease, not being registered, was bound by the contractual force of the agreement for lease. The guarantors of the lessee's obligations were also parties to the proceedings.

The primary legal issues before the Court of Appeal included whether the lessor was entitled to terminate the lease, particularly in light of the COVID-19 pandemic regulations which imposed a blanket prohibition on termination during a prescribed period, and whether specific exceptions within those regulations prevailed over the general prohibition. The court also had to determine the proper construction of the guarantee and the liability of the guarantors. Furthermore, the court considered whether the lessee's entitlement to damages had been sufficiently litigated and if it was appropriate for the appeal court to determine this issue. The admissibility of evidence relating to settlement negotiations, specifically privilege under section 19 of the *Small Business Commissioner Act 2013* (NSW), was also a point of contention.

The Court of Appeal allowed the appeal, setting aside the orders of the primary judge. The court found that the Amended Commercial List Statement was dismissed. The court reasoned that the interpretation of the COVID-19 regulations, particularly the interplay between the general prohibition on termination and specific exceptions, was crucial. The court also addressed the contractual force of the agreement for lease and the construction of the guarantee. The Commercial List Cross-claim Statement was remitted to the Equity Division to determine any damages to which the first appellant might be entitled, with the costs of the cross-appeal to be costs in the cause of that remitted hearing. The first respondent was ordered to pay the appellants’ costs of the appeal and the Amended Commercial List Statement.