Dr N Kalokerinos Pty Ltd v Jain

Case •

[2024] NSWSC 1069

•

23 August 2024

Supreme Court


New South Wales

Medium Neutral Citation: Dr N Kalokerinos Pty Ltd v Jain [2024] NSWSC 1069
Hearing dates: 30 November 2023
Date of orders: 23 August 2024
Decision date: 23 August 2024
Jurisdiction:Common Law
Before: Campbell J
Decision:

(1) Grant leave to the plaintiff to appeal on Grounds 1, 2 and 3.

(2) Appeal dismissed.

(3) Grant leave to the defendant to cross-appeal on Grounds 1 and 2 and refuse leave on Ground 3.

(4) Cross-appeal allowed.

(5) Set aside Order 4 made by the Appeal Panel of the Civil and Administrative Tribunal (“Appeal Panel”) pronounced on 30 May 2023 and instead order that Order 1 in proceedings COM 22/020333 is varied by substituting the amount of $4,134.53 for $60,025.34.

(6) Set aside Order 5 pronounced by the Appeal Panel on 30 May 2023 and instead order that the plaintiff is to pay the defendant’s costs of the appeal to the Appeal Panel.

(7) The plaintiff is to pay the defendant’s costs of the appeal and cross appeal to the Court.

(8) Grant liberty to either party to apply for a special order as to costs by filing written submissions not exceeding 3 pages in length together with any necessary supporting affidavit by lodging them electronically with the chambers of Justice Campbell by 20 September 2024. The opposing party may respond by filing written submissions not exceeding 3 pages in length by lodging them electronically with the chambers of Justice Campbell within 14 days of the lodgement of the moving party’s written submissions.

Catchwords:

APPEALS – s 83 Civil and Administrative Tribunal Act 2013 (NSW) – termination of retail lease covered by COVID-19 Regulation – application for leave to appeal – cross-appeal – “appeal on a question of law” – question of law raised in cross-appeal – appeal dismissed – cross-appeal allowed

Legislation Cited:

Civil and Administrative Tribunal Act 2013 (NSW), ss 36, 38, 80, 83

Civil Procedure Act 2005 (NSW), s 56

Conveyancing Act 1919 (NSW), s 133A

Conveyancing General Regulation 2018 (NSW), Sch 5

Evidence Act 1995 (NSW), s 191

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

Retail and Other Commercial Leases (COVID-19) Regulation 2021, cll 3, 4, 5, 6, 6A, 6B, 6C, 6D, 9A

Retail Leases Act 1994 (NSW), ss 85, 87

Uniform Civil Procedure Rules 2005 (NSW), rr 12.6, 14.23

Civil and Administrative Tribunal Rules 2014

Cases Cited:

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33

Australian Gaslight Co. v Valuer General (1940) 40 SR (NSW) 126

Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139

Bulga Cole Management Pty Ltd v Hope Wine Group Pty Ltd [2020] NSWSC 1783

Chen v The Owners Corporation – Strata Plan No 55792 [2020] NSWSC 151

Day v SAS Trustee Corporation [2021] NSWCA 71

Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088

Fisher v Non-Conformist Pty Ltd [2024] NSWCA 32

Hope v Bathurst City Council (1980) 144 CLR 1

Jain v Dr N Kalokerinos Pty Ltd [2023] NSWCATAP 141

Jaycar Pty Ltd v Lombardo [2011] NSWCA 284

Liddell Coal Operations Pty Ltd v Hector [2021] NSWCA 47

Lustre Hoisery Ltd v York (1935) 54 CLR 134; [1935] HCA 71

Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970

Minister for the Environment, Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10; [2010] FCA 58

Peacock v Repatriation Commission [2007] 161 FCR 256; [2007] FCAFC 156

Todarello Property Investments Pty Ltd v GJ Kalra Pty Ltd [2021] NSWSC 1678

Category:Principal judgment
Parties: Dr N Kalokerinos Pty Ltd (Plaintiff)
Abhishek Jain (Defendant)
Representation:

Counsel:
E Vuu (Plaintiff)
A Lim (Defendant)

Solicitors:
McGirr and Associates (Plaintiff)
Carter Ferguson Solicitors (Defendant)
File Number(s): 2023/205772
 Decision under appeal 
Court or tribunal:
Civil and Administrative Tribunal
Jurisdiction:
Appeal Panel
Citation:

[2023] NSWCATAP 141

Date of Decision:
30 May 2023
Before:
G Blake AM SC, Senior Member
M Gracie, Senior Member
File Number(s):
2023/00013000

JUDGMENT

  1. This judgment is concerned with an appeal and cross-appeal under s 83 Civil and Administrative Tribunal Act 2013 (NSW) (“NCAT Act”) from a decision of the Appeal Panel of the Civil and Administrative Tribunal (“the Appeal Panel”). Appeals under s 83 NCAT Act may only be brought by leave of this Court and are limited to an “appeal on a question of law” (s 83(1)). Except as otherwise specified, references to legislation in this judgment are to the NCAT Act.

Factual background and first instance proceedings

  1. The parties’ dispute arises out of the retail lease of commercial premises at Shellharbour by the plaintiff (“DNK”) as lessor to the defendant (“Mr Jain”) for use as a restaurant. The premises were “part of a lot in the strata plan” (Appeal Panel judgment (Jain v Dr N Kalokerinos Pty Ltd [2023] NSWCATAP 141 (“APJ”) at [4]). The lease was entered into on 12 August 2020 for a term of 3 years commencing on 17 August 2020 and ending on 16 August 2023. There were two options for renewal, each for a period of 3 years.

  2. On 24 November 2021 DNK served Mr Jain with a purported notice of termination of the lease relying on various breaches including the failure to promptly pay the correct rent when it fell due. DNK evicted Mr Jain from the premises on 13 December 2021 by re-entering the premises and changing the locks. Mr Jain was permitted to remove his goods and chattels from the premises between 28 December 2021 and 31 December 2021.

  3. By application dated 20 December 2021, Mr Jain commenced proceedings in the Tribunal’s Commercial and Consumer Division (“CCD”) against DNK claiming relief under the Retail Leases Act 1994 (NSW) including a declaration that DNK’s termination of the lease was unlawful and constituted repudiation which Mr Jain accepted by electing to terminate the lease and sue for damages for breach of lease claimed under six heads of damage. The provisions of the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (“2021 COVID Regulation”) were central to Mr Jain’s case that DNK’s action evicting him was unlawful.

  4. On 18 January 2022 DNK commenced its own retail leases application in the CCD claiming compensation for loss or damage in the sum of $100,000. These competing applications were closely case managed, and it is relevant to note that directions were made for the exchange of points of claim and points of defence following completion of the exchange of evidence. It will be necessary to say more about the content and effect of these documents in relation to the Jain application in due course.

  5. These first instance applications were heard over three days by Senior Member D Bluth in the CCD who published his reasons and made the following orders on 13 December 2022 (Court Book (“CB”) p 302 ff):

In the Jain application

  1. The proceedings are dismissed.

  2. [Jain] is to pay the costs of [DNK] as agreed or assessed.

In the DNK application

  1. [Jain] is to pay to DNK the sum of $60,025.34 and interest pursuant to s 72(1)(a) of the Retail Leases Act 1994 (NSW).

  2. [DNK] is entitled to claim the bond of $5,200 and any accrued interest held by the Rental Bond Board and Mr Jain is to sign all necessary release documents to assist the applicant in claiming the bond.

  3. [Jain] is to pay the costs of [DNK] as agreed or assessed.

  1. It suffices for present purposes to say Senior Member Bluth found the COVID Regulation to be inapplicable to Mr Jain.

Internal appeal to the Appeal Panel

  1. Mr Jain appealed from Senior Member Bluth’s decision to the Appeal Panel under s 80 NCAT Act. By dint of s 80(3), the Appeal Panel decided to deal with the appeal by way of a new hearing (APJ at [29] and [38]). It is common ground that a new hearing under s 80(3) essentially proceeds as an appeal by rehearing, subject to the broad power conferred on the Appeal Panel by s 80(3)(b) to receive fresh evidence or evidence in addition to, or in substitution for the evidence received at first instance as the Appeal Panel considers appropriate the circumstances. The s 80 appeal essentially proceeded as a re-hearing on the papers. Not all of the first instance evidence was provided to the Appeal Panel but nothing turns on this.

  2. Mr Jain propounded two grounds of appeal (APJ [28]): the first challenging Senior Member Bluth’s decision that DNK lawfully terminated the lease for breach; and the second, that s 133A Conveyancing Act 1919 (NSW) (“CA”) was misinterpreted and accordingly misapplied in respect of the quantum DNK’s “make good” damages under the lease. However, in its review of the matters in dispute, the learned members of the Appeal Panel identified 14 separate issues to be considered for the purpose of resolving the appeal. Some of those issues were procedural in nature. In its comprehensive reasons (i.e., the APJ) published on 30 May 2023, the Appeal Panel thoroughly evaluated each of the issues identified for its consideration. It is unnecessary for me to provide a summary of the whole of the Appeal Panel’s reasons because, as will become apparent, the issues agitated by the parties in this Court are more limited.

  3. The Appeal Panel made the following orders and notations (APJ [239]):

1.   Leave to appeal is granted against order 2 in [Jain] proceedings … and order 3 in [DNK] proceedings ….

2.   The appeal is allowed in part.

3.   Orders 1 and 2 in [Jain] proceedings … are set aside and in substitution the following orders are made:

(1)   [DNK] is to pay [Jain] $100 immediately.

(2)   The proceedings are otherwise dismissed.

(3)   [DNK] is to pay the costs of [Mr Jain] as agreed or assessed under the applicable “costs legislation”.

4.   Order 1 in [DNK] proceedings … is varied by substituting the amount of “$18,318.25” for “$60,025.34”.

5.   There is no order as to the costs of the appeal.

The proposed grounds of appeal in this court

  1. By the further amended summons seeking leave to appeal filed pursuant to leave granted by the Registrar on 13 September 2023, DNK proposed the following grounds of appeal, which I will summarise:

  1. The Appeal Panel erred in law at [APJ [128]] in its construction of cll 6A to 6D (inclusive) of [2021 COVID Regulation].

  2. The Appeal Panel erred in law at [APJ [106]] by finding that the first instance tribunal constructively failed to exercise jurisdiction by not addressing or overlooking material.

  3. In the alternative to (ii), the Appeal Panel erred in law at [APJ [115]] by treating the phrase “generally admits” in a points of defence filed in proceedings in the Tribunal, in the same manner as an agreed fact within s 191 of the Evidence Act 1995 (NSW) and by accepting that it was true that Mr Jain was an “impacted lessee” [APJ [118]].

Each of these grounds of appeal was supported by “particulars” referring to essentially factual matters arising out of the course of the first instance hearing in the Tribunal. I interpolate these Particulars raise questions which somewhat confound the issue of whether each ground raises “a question of law” as required by s 83(1) NCAT Act. I will leave this to one side for the moment.

  1. By the cross-summons filed on 21 July 2023, Mr Jain advances the following grounds:

  1. That the Appeal Panel constructively failed to exercise jurisdiction through making orders inconsistent with its reasons for decision.

  2. That the Appeal Panel erred in law in its assessment of “material error” with respect to:

  1. 1.   Deciding the matter on the basis not advanced by the parties;

  2. 2.   Applying the incorrect standard of materiality.

  1. That the Appeal Panel incorrectly exercised the costs discretion with respect to:

  2.    (1)   the principle that costs follow the event.

  3.    (2)   success on agreed items of loss.

The question of leave

  1. DNK, by reference to the judgment of Wright J in Chen v The Owners Corporation – Strata Plan No 55792 [2020] NSWSC 151 (at [37]) applying the principles derived from Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 (at [42] per Campbell JA; (Young and Meagher JJA agreeing), argues that an applicant for a grant of leave to appeal needs to demonstrate that the proposed appeal involves “issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond something that is merely arguable”. This principle is derived at least in part from the principle of finality and the concern that the costs, both public and private, generated by an appeal should not be disproportionate to the significance of the questions involved.

  2. I am not so sure that this principle applicable to leave to appeal to the Court of Appeal is directly transposable. The position occupied by a single judge of the Supreme Court sitting in a trial division is very different from that of the Court of Appeal, which is the State’s highest court, subject only to the constitutional jurisdiction of the High Court of Australia. Moreover, if an applicant for leave under s 83 correctly identifies a question of law, an issue of principle will almost always be involved and a question of public importance, not infrequently. A “clear injustice” may be another matter, especially if the strength of the argument is not shown to be more than merely arguable. It should also be pointed out that the tribunal, like all administrative tribunals, is not empowered to authoritatively decide questions of law; that is the province of the courts, especially the Supreme Court. The tribunal, in the case at hand, and more often than not, while not a court, is charged with the exercise of power in the nature of the judicial power of the State for quelling controversy in matters of mainly private litigation, which may otherwise have to be dealt with in the courts. The proportionality of costs with respect to the amount of claim will always be a factor relevant to leave. But there is no threshold amount involved. If the question of law is fairly arguable and can be shown to be material to the outcome in the tribunal, leave may be more readily granted even in respect of a small claim at least in matters assigned to the Common Law Division rather than the Court of Appeal. After all, part of the importance of the work of the tribunal is the provision of a forum for the resolution of disputes of limited monetary value, but nonetheless of importance to the litigants involved. It seems to me that the approach to leave ought not be unduly strict provided it is principled. Leave is, of course, a filter which represents the intention of Parliament that not every aggrieved litigant in the Tribunal, even if a question of law is said to be involved, is entitled to his or her day in the Supreme Court because the cost, both public and private, may be disproportionate to the matter in issue.

  3. From DNK’s point of view, the damages recovered at first instance were reduced by more than $40,000 on appeal, a not insignificant sum. From Mr Jain’s viewpoint the substantial success he enjoyed before the Appeal Panel is in jeopardy and in any event, he contends that the Appeal Panel erred in law by treating the sum of $14,000 odd as possibly damages for breach of the covenant to repair damage to common property, rather than a breach of the covenant to repair the demised premises affected by s 133A CA. While it may be arguable whether some proposed grounds raise a “question of law,” the significance of the matters to which I have specifically referred are sufficient to justify a grant of leave to appeal. The question of leave can be considered in respect of the other grounds when I consider the substance of them.

Ground 1 of the appeal

  1. It is common ground between the parties that the iteration of the 2021 COVID Regulation applicable in this case is that published on being the version which was in force between 1 December 2021 and 12 January 2022. I make this observation, like the 2020 iteration of the COVID Regulation, the 2021 COVID Regulation was subject to frequent amendment during its short legislative life between 14 July 2021 and 13 January 2022 when it was superseded by the 2022 iteration. The regulation was made by the responsible Minister under the s 87 Retail Leases Act 1994 (NSW) (cf s 85 of the same Act).

  2. It may be convenient to refer to cl 9A of the 2021 COVID Regulation adopting the leasing principles set out in the National Code of Conduct (“the Code”) as mandatory considerations for the exercise of certain powers in relation to the enforcement of a lease against “an impacted lessee”.

  3. The Code is defined in cl 3 of the 2021 COVID Regulation as meaning the “National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles during COVID-19” adopted on 7 April 2020. SME is an initialism for small to medium enterprises. The Code was produced on the hearing of this appeal as Annexure E to the affidavit of Justine Phillip Drew, sworn on 15 August 2023 (CB p 162). Mr Drew is the solicitor for the plaintiff with day-to-day carriage of the matter.

  4. The purpose of the 2021 COVID Regulation was to provide a legal framework for the implementation of the Code in New South Wales. I was not taken by counsel expressly to any of the 14 paragraphs set out in the Code under the heading Leasing Principles. Reference was made to the third last of the eleven dot points set out in the section entitled “Overarching Principles of this Code”, presumably for the guidance of legislators. That dot point is in the following terms:

“All leases must be dealt with on a case-by-case basis, considering factors such as whether the SME tenant has suffered financial hardship due to the COVID-19 pandemic; whether the tenants lease has expired or is soon to expire; and whether the tenant is in administration or receivership.”

  1. In the definitions section, financial stress or hardship includes, “SME tenants which are eligible for the federal government’s Job Keeper payment are automatically considered to be in financial distress under this Code”.

  2. A central aspect of the 2021 COVID Regulation is the meaning of “Impacted Lessee” as defined by cl 4. I will set it out in full:

4   Meaning of “impacted lessee”

(1)  A lessee is an impacted lessee if—

(a)  the lessee qualifies for 1 or more of the following, or would qualify but for a COVID-19 Disaster Payment made to the lessee by the Commonwealth—

(i)  2021 COVID-19 Micro-business Grant,

(ii)  2021 COVID-19 Business Grant,

(iii)  2021 JobSaver Payment, and

(b)  the following turnover in the 2020–2021 financial year was less than $50 million—

(i)  if the lessee is a franchisee—the turnover of the business conducted at the premises or land concerned,

(ii)  if the lessee is a corporation that is a member of a group—the turnover of the group,

(iii)  in any other case—the turnover of the business conducted by the lessee.

(2), (3) (Repealed)

As can be seen, consistent with the definition in the Code, a lessee is an “impacted lessee” if the lessee qualifies or would qualify for the specified forms of governmental relief and the current business turnover was less than $50 million. One can see that this picks up in part the definition of financial stress or hardship from the Code, and I reiterate, SME tenants which are eligible for the federal government’s job keeper payment are automatically considered to be in financial distress under the Code.

  1. By cl 5, the 2021 COVID Regulation “applies to the exercise or enforcement of rights under an impacted lease in relation to a prescribed breach of the lease occurring during the prescribed period”. An “impacted lease” is one to which an impacted lessee is a party and a prescribed breach is defined by cl 3 in the following terms:

prescribed breach of an impacted lease means—

(a)  a failure to pay rent, or

(b)  a failure to pay outgoings, or

(c)  the business operating under the lease not being open for business during the hours specified in the lease.

“Prescribed period” is defined as the period commencing at the beginning of 13 July 2021 and ending at the end of 13 January 2022. The operative provisions are found in Pt 2 which applies if, at any time during the prescribed period, a lessee is an impacted lessee (cl 6).

  1. Another important definition is that of “prescribed action” (cl 3):

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.”

  1. By cl 6C a lessor is prohibited from taking prescribed action against an impacted lessee on the grounds of the prescribed breach unless mediation has occurred under the Retail Leases Act and, if the lessee has so requested, the lessor has complied with a request for re-negotiation under cl 6D. Importantly, the lessor is taken to have complied with cl 6D, “if the impacted lessee does not comply with Clause 6A” (cl 6D(4)).

  2. The legal interpretation of cl 6A is central to the arguments of the parties. I will set it out in full:

6A   Provision of information

(1)  An impacted lessee must give the lessor the following information in respect of the impacted lease—

(a)  a statement to the effect that the lessee is an impacted lessee,

(b)  evidence that the lessee is an impacted lessee.

(2)  The information—

(a)  may be given before, or as soon as practicable after, a prescribed breach occurs, and

(b)  must be given within a reasonable time after it is requested by the lessor.

(3)  The lessor may request the information under this clause at any time if the information is reasonably required to ensure that the lessee continues to be an impacted lessee, but may not request the information more than once every 2 weeks.

  1. Although the arguments were put in much greater detail, the essential thrust of the submission of Mr Vuu of counsel for the plaintiff was that the information, the subject of cl 6A had to be provided or volunteered by the lessee as a condition precedent to the operation of cll 6C and 6D protecting the lessee from prescribed action. To put it slightly differently, the argument was that a lessee had an affirmative obligation to comply with cl 6A(1) as a condition precedent to the operation of the beneficial provisions of cll 6B, 6C and 6D which were protective of the position of the lessee.

  2. Ms Lim of counsel accepted that an impacted lessee had an affirmative duty to provide the information specified in cl 6A(1): a statement to the effect that the lessee is an impacted lessee with supporting evidence. The real question, however, was when that duty was required to be performed. Counsel argued by reference to cl 6A(2) that the statement and evidence was not required to be provided until “a reasonable time after it is requested by the lessor” (cl 6A(2)(b)), although the impacted lessee had the option of volunteering the statement and evidence “before, or as soon as practicable after, a prescribed breach occurs”. Understood in this way, counsel argued, the provision of the statement and evidence supporting it was not a condition precedent to the operation of the provisions of Pt 2 of the 2021 COVID Regulation which were designed to be protective of an impacted lessee who had committed a prescribed breach.

  3. Counsel elaborated this argument by reference to the history of 2021 COVID Regulation commencing with the 2020 iteration. In its original form, the regulation did not impose any obligation on the impacted lessee to provide a statement or evidence to that effect. That obligation was first imposed by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020. The amendment inserted an equivalent of cl 6A(1) in the 2020 COVID Regulation equivalent of cl 6D imposing the obligation to re-negotiate. Counsel also pointed out that in its original irritation, the COVID Regulation included the cl 6A(1) provisions in cl 6 (the equivalent of cl 6C prohibiting “prescribed action” until mediation had taken place.

  4. Counsel argued that from this history of the 2021 COVID Regulation one could see that the provision of information by the impacted lessee was not intended to be a condition precedent to those provisions of the regulation which were protective. This legislative history made it unlikely that the promulgation of cl 6A as a separate provision requiring the impacted lessee to provide the relevant information operated as a condition precedent in the manner contended for by DNK.

  5. Before considering how the matter of interpretation was dealt with by the Appeal Panel and at first instance, I wish to refer to the decision of Darke J in Todarello Property Investments Pty Ltd v GJ Kalra Pty Ltd [2021] NSWSC 1678. Todarello Property is one of a number of cases to which I was referred by counsel. While no case dealing with the 2021 COVID Regulation was uncovered by counsel’s researchers, to my mind from the cases to which they did refer, Todarello Property provides the closest guidance. Having said that, the commercial premises, the subject of that lease was covered by the provisions of Sch 5 to the Conveyancing General Regulation 2018 (NSW), which had been inserted into the conveyancing regulation on 24 April 2020 and amended subsequently by the various iterations of the regulation to which I was taken. It is thus cognate delegated legislation.

  6. The form of the provision limiting prescribed action by the landlord with which Darke J was concerned was the equivalent of the provisions to which I have referred where the obligation to provide the required information was to be found not in a separate provision, like cl 6A, but as part of the equivalent of cl 6C. cl 5(3A) is the provision requiring the information the subject of cl 6A(1). Darke J said at [71]:

“It may be debateable whether the renegotiation of rent that was required following the defendant’s request on 6 April 2020 had actually commenced by 3 July 2020 such that cll 5(3A) and 5(3B) would apply to the incomplete renegotiation. Assuming that those provisions did apply, I do not think that cl 5(3A) would operate to impose any obligation upon the defendant unless the lessor called for the giving of the information. The clause is intended to operate in a variety of situations, including a renegotiation that had commenced but not concluded. It would operate even if the negotiation was in practical terms almost finished. I would construe cl 5(3A) as requiring the lessee to give the specified information to the lessor if the lessor requests that it be given. Here, the plaintiff did not do so, even after the defendant provided the information it did on 31 July 2020 in answer to the plaintiff’s request made on 13 June 2020. The information so provided was in any event evidence that the defendant was an impacted lessee insofar as it showed that the defendant was claiming wage subsidies under the Jobkeeper scheme and had suffered a more than 30% reduction in revenue since 1 April 2020. In my view that is some evidence that the defendant qualified for the Jobkeeper scheme and is hence some evidence that the defendant was an impacted lessee. The plaintiff could have asked the defendant for more evidence that it was an impacted lessee, but it did not do so. I note that the plaintiff did not thereafter suggest (until the Notice of Termination was served) that the defendant had failed to provide evidence that it was an impacted lessee.” (My emphasis.)

I observe, while the provisions in question are not identical, his Honour’s approach rather favours Ms Lim’s argument and to my mind is more consistent with the definition of impacted lessee and the definition of financial stress and hardship from the Code.

First instance decision relevant to ground 1

  1. Senior Member Bluth made the following relevant findings (at Judgment (“J”), [17]-[18], CB 307):

“On 20 November 2021 [DNK] served a notice on the applicant notifying of an urgent inspection of the premises on 24 November 2020 between the hours of 6 am and 10 am and also requesting financial documents to ascertain what if any relief ought to be provided as a consequence of the COVID Relief Measures Regulations. The request for information was not responded to by the applicant.

On 24 November 2021 [DNK] served on the applicant a Notice of Termination of Lease citing [a large number of] breaches as forming the basis of termination”.

  1. I observe that under cl 6A DNK was not entitled to “financial documents”. It was entitled to a statement from Mr Jain about whether he was an impacted lessee and evidence of that status which would have called for no more than evidence that he was in receipt of one of the specified COVID-19 benefits in accordance with cl 4. I repeat DNK was not entitled to “financial documents” generally. Moreover, Mr Jain was entitled to a reasonable time to respond before DNK initiated prescribed action on 24 November 2021. (At J [39]) the learned Senior Member misstated the effect of cl 6A(2), by saying that information must be provided “as soon as practicable after a prescribed breach occurs”.

  2. In cross-examination, Mr Jain apparently stated (probably erroneously in the light of other evidence) that he did not take any steps to obtain relief pursuant to the 2021 COVID Regulation and he did not require such assistance. This was at best ambiguous as the evidence before the Appeal Panel demonstrated that he had been in receipt of COVID relief payments paid through Service New South Wales said to be the 2021 COVID-19 micro-business grant and other payments as late as 25 November 2021 by way of JobSaver (Transcript Appeal Panel, pp 16-17; CB pp 148-149).

  3. The learned Senior Member’s conclusion (J [52]) was that the 2021 COVID Regulation did not apply as Mr Jain was not an impacted lessee “as [he] failed to state as such in compliance with [cl] 6A in a reasonable time (or if at all) and chose to avail himself of ‘a more beneficial regime set out in Special Condition 9 of the Lease’”.

Appeal Panel Decision

  1. Before the Appeal Panel, DNK agreed that the 2021 COVID Regulation was in force at all material times. DNK also conceded that if its re-entry to the premises on 13 December 2021 was prescribed action, “then it repudiated the Lease and its repudiation of the Lease was accepted by Mr Jain” (APJ [36]-[37]).

  2. The interpretation of 2021 COVID Regulation and in particular whether cll 6B and 6C were conditional upon an impacted lessee giving the lessor the information referred to in cl 6A(1) was identified by the Appeal Panel as the sixth issue. The Appeal Panel set out the relevant principles of statutory interpretation in a manner with which neither party takes issue (APJ [124] ff). The Appeal Panel expressed its conclusions as follows (APJ [128]):

“We are satisfied that the following actions are not dependent on the lessor having received information from the lessee within cl 6A(1) of the 2021 COVID-19 Regulation:

(1) the prohibition on the rent payable under an impacted lease being increased during the prescribed period pursuant to cl 6B;

(2) a lessor taking 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 there has been a failed mediation and compliance with cl 6D if the lessee has requested a renegotiation under that clause pursuant to cl 6C;

for the following reasons:

(3) as provided in cl 6A(2), there is no requirement for the lessee to give the information unless it is requested by the lessor;

(4) there is no equivalent of cl 6D(5) in cll 6B and 6C to the effect that the prohibitions do not apply if the lessee has not provided the information within cl 6A(1);

(5) there is no ambiguity in either cl 6B or cl 6C to permit the operation of these clauses to be taken into account in determining their proper construction. Even if there is an ambiguity, there is no likelihood of an absurd or unreasonable consequence. The lessor who is contemplating taking action in either cll 6B or 6C is entitled to request the information within cl 6A(1) pursuant to cl 6A(2)(b) and (3).

  1. With respect, the Appeal Panel’s decision in this regard is clearly correct. First, it is entirely consistent with the analysis of the cognate legislation by Darke J in Todarello Properties ([31] above). Secondly, it is clear to me from the language of cl 6A in the context of the whole regulation and having regard to the provisions of the Code that the protection of the interests of small to medium enterprises is the main purpose of the 2021 COVID Regulation. As I have sought to emphasise in my foregoing analysis, while an impacted lessee had an obligation under cl 6A(1) to make a statement to that effect and provide evidence supporting the statement, which in the context of cl 4 consisted of no more than the provision of evidence that the lessee was in receipt of a specified COVID relief benefit, that obligation did not crystalise until a request for the information was made by the lessor under cl 6A(2)(b); although the lessee had an option to volunteer it before or as soon as practicable after a prescribed breach occurred. Thirdly, this approach is entirely consistent with the definition of financial stress and hardship in the Code to the intent that small or medium enterprises in receipt of a specified benefit would “automatically” be treated as entitled to protection. It was only if the lessor queried the lessee’s status and requested the cl 6A(1) information that an obligation to provide it, and within a reasonable time, arose.

  2. I would dismiss Ground 1.

Ground 2 whether the Appeal Panel was wrong to find that the tribunal at first instance had constructively failed to exercise its jurisdiction

  1. This ground relates to issues 4 and 5 identified by the Appeal Panel (APJ [104]-[119]). Although issue 4 is formulated in terms of a constructive failure to exercise jurisdiction, a question law, from issue 5 it is clear that the underlying factual question involved the first instance decision that Mr Jain was not an impacted lessee to which I have referred to above. It is notable that the Appeal Panel found that neither party had addressed issue 4, but to my mind that is because the question was bound up with issue 5 which directly raised the question whether Mr Jain was an impacted lessee.

  2. So far as Ground 2 is concerned, it is clear that Senior Member Bluth made a finding of fact that Mr Jain was not an impacted lessee. In the Appeal Panel’s decision, however, the constructive failure to exercise jurisdiction consisted of a failure to address an argument advanced by Mr Jain at the first instance hearing that the question of his status was not open because DNK had in substance admitted that Mr Jain was an impacted lessee in its points of defence. It should be emphasised, that basal factual question seems to underpin the “question of law” fashioned as the “alternative” Ground 3. And it may be more logical to deal with the question of the admission in the points of defence when I deal with Ground 3.

  3. It is plain from the manner in which the Appeal Panel have expressed themselves that they were applying the “principle” arising from Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088 (at [24]-[25]). That is to say, the failure by a court or tribunal to address a substantial argument clearly articulated by a party may be jurisdictional error and therefore an error of law. In Day v SAS Trustee Corporation [2021] NSWCA 71 Meagher JA (with whom Payne and White JJA agreed) accepted that “a failure to address such an argument would constitute an error of law, and that the question whether there was such a failure raises a point of law: see Liddell Coal Operations Pty Ltd v Hector [2021] NSWCA 47 at [53]”; (Day at [15]). However, his Honour explained the application of the principle more fully later in his reasons (at [37]):

“As those decisions illustrate, a constructive failure to exercise jurisdiction (or a purported exercise, in the sense that there is an appearance of an exercise of jurisdiction) as alleged by the appellant is not a mere failure to consider evidence or to address an argument or submission, which may be contingent or otherwise insignificant, but a failure to understand and determine a case or claim. The ultimate question is whether a failure to consider and address certain issues or arguments involved a failure to address central or critical elements of the case or claim: compare, in relation to failures to consider evidence, Minister for Immigration and Citizenship v SZRKT (2013) 212 FCR 99; [2013] FCA 317 at [69], [111]. It will be insufficient for the appellant to show that his “three key issues” were not stated and determined discretely. What he must show is that they raised “substantial” (in the sense of clearly material) arguments or questions which the primary judge in substance failed to address in determining the appellant’s claim to have been incapable, by reason of a chronic adjustment disorder, of exercising the functions of a police officer at the time of his resignation.”

  1. There is a real question about whether Mr Jain’s reliance upon the admission contained in the points of defence was a “clearly material argument” as opposed to mere relevant evidence. As Meagher JA explained, the gravamen of the constructive failure to exercise jurisdiction based upon Dranichnikov “is a failure to address central or critical elements of the case or claim”.

  2. It is quite clear that Senior Member Bluth well understood that Mr Jain’s claim to be an impacted lessee was a critical element of his case. It is also quite clear from the passages I have set out above that the learned Senior Member addressed the issue and did so on the basis of what the Appeal Panel found to be, correctly in my judgment, a misinterpretation of cl 6A 2021 COVID Regulation, so that his finding was vitiated by misdirection as to law as the Appeal Panel found.

  3. While the admission in the points of defence – which I will set out below – is an important part of the evidence relied by Mr Jain at the first instance hearing, the Senior Member proceeded on the basis that it was not conclusive evidence. As Ground 3 demonstrates, the Appeal Panel did not disagree that the admission was not conclusive, but found Mr Jain was an impacted lessee on other grounds to which I will come.

  4. With respect, in the circumstances, and applying Day I am of the view that the Appeal Panel was in error in finding the Tribunal at first instance constructively failed to exercise its jurisdiction. The substance of Mr Jain’s claim was that he was an impacted lessee rather than simply that DNK admitted as much. That was merely the evidence upon which he relied. This ground does raise a question of law, however, I am not persuaded that it is an error of law which vitiates the Appeal Panel’s decision because, having regard to its resolution of Issue 5, the Appeal Panel’s decision in relation to Issue 4 is not material in the relevant sense of contributing to the Appeal Panel’s decision: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33 at p 353 (per Mason CJ); Fisher v Non-Conformist Pty Ltd [2024] NSWCA 32 at [50] (Kirk JA; Meagher JA and Simpson AJA agreeing).

  5. For this reason I would reject Ground 2

Ground 3 – equating the admission at the point of defence to an agreed fact within s 191 Evidence Act 1995 (NSW)

  1. I set out Ground 3 below:

“[In the alternative to 2], the Appeal Panel erred in law at [APJ at [115]] by treating the phrase “generally admits” in a points of defence filed in proceedings in the Tribunal, in the same manner as an agreed fact within s 191 of the Evidence Act 1995 (NSW) and by accepting that it was true that Mr Jain was an impacted licensee [APJ at [118]].”

  1. In my judgment there are two matters raised in this ground. The first part of the ground relating to equating an admission in a point of defence to an agreed fact I accept raises a question of law. The second part of accepting that it was true that Mr Jain was an impacted lessee can only be, however one looks at it, a question of fact, which cannot be challenged under s 83; nor is a “no evidence” ground raised. There is no question of granting leave in relation to the factual component of the ground as formulated because only appeals limited to questions of law are competent.

  2. As is I have said repeatedly, a central aspect of Mr Jain’s case at first instance was that he was an impacted lessee. I have already remarked that case management of the first instance matters involved a direction that points of claim and points of defence be exchanged in each of the Jain application and DNK application. In the Jain application, Mr Jain set out the following in his points of claim (CB 200):

The Delta Outbreak

(8)   In June 2021, the Delta Outbreak led to a lockdown in the Shellharbour Local Government Area.

(9)   The applicant received the 2021 COVID-19 business grant.

(10)   In the 2020-2021 financial year, [the restaurant] had a turnover of less than $50 million.

(11)   In the premises, the applicant was an impacted lessee within the meaning of the Retail & Other Commercial Leases (COVID-19) Regulation 2021 (the COVID Regulation).

Mr Jain filed points of defence in the DNK application that DNK’s re-entry to the premises was a lockout, trespass, and a repudiation of the lease by the lessor. As I have made clear this was on the basis that the re-entry was unlawful because prescribed action was prohibited unless the provisions of the 2021 COVID Regulation were complied with.

  1. In response to Mr Jain’s points of claim in the Jain application, DNK stated:

“(2)   The respondent generally admits paragraphs 1 to 11 of the points of claim.”

  1. Obviously the central tenet of Mr Jain’s case was thereby “generally admitted”.

  2. The transcript of proceedings before Senior Member Bluth was not produced before the Appeal Panel or in this court. But it is apparent that the Senior Member allowed DNK to controvert rather than merely explain the circumstances in which the admission came to be made: cf Lustre Hoisery Ltd v York (1935) 54 CLR 134; [1935] HCA 71.

  3. It may be worth setting out the principle for which Lustre Hoisery stands as authority in full. In their joint judgment Rich, Dixon, Evatt and McTiernan JJ (at p 143) stated:

“This course of authority seems consistent with the view that words or conduct amount to an admission receivable in evidence against the party if they disclose an intention to affirm or acknowledge the existence of a fact whatever be the party's source of information or belief. In determining whether he intends to affirm or acknowledge a state of facts the party's knowledge or source of information may be material. For if he states that another person has told him of it, and it appears that he has additional sources of information to the like effect, it may be right to understand him as implying a belief in what he repeats. Or, again, a person who fails to contradict a statement concerning matters within his own know- ledge may be understood as acquiescing in the statement if the circumstances are such as to make it unlikely that he would allow an erroneous statement to pass unchallenged. But, although the meaning of his words or conduct may depend upon the state of his knowledge, once that meaning appears and an intention is disclosed to assert or acknowledge the state of facts, its admissibility in evidence as an admission is independent of the party's actual knowledge of the true facts. When admitted in evidence, however, its probative force must be determined by reference to the circumstances in which it is made and may depend altogether upon the party’s source of knowledge. If it appears that he had no knowledge, or that, although he had some means of knowledge, he had formed no certain or considered belief and indicated nothing amounting to a personal judgment or conclusion of his own, the probative force of the admission may be so small that a jury ought not to be allowed to act upon it alone, or in preference to opposing evidence.”

I will return to this.

  1. As I have said, this ground is concerned with the Appeal Panel’s issue 5 and, it may be said, by the means by which they determined that Mr Jain was an impacted lessee within the meaning of the 2021 COVID Regulation. It should be borne very firmly in mind that the Appeal Panel were conducting an appeal by way of re-hearing and they were empowered to decide the disputed facts for themselves.

  2. The Tribunal, of course, is not a court of this State and a fortiori not a court of strict pleading. The Appeal Panel observed that unlike the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), which do not apply to the Tribunal, the Civil and Administrative Tribunal Rules 2014 (NSW) contain no rules requiring pleadings or regulating their content. The Appeal Panel pointed out that under r 12.6(2) UCPR, “a party may not withdraw an admission in a defence that operates for the benefit of the other party, except with the consent of the other party or with the leave of the Court” (APJ [111]). The Appeal Panel said at [112]:

“We are satisfied that an admission in points of defence filed in proceedings in the Tribunal cannot be equated with an admission contained in a defence filed in proceedings in the Supreme Court or the District Court. There is no provision for pleadings in the NCAT Act or the NCAT Rules, and accordingly no equivalent provisions to rr 12.6(2) and 14.23 of the UCPR.”

UCPR 14.23 governs a requirement that pleadings in the Supreme Court and District Court are to be verified, with some exceptions.

  1. I should say the consideration that the clear admission contained in DNK’s points of defence could not be equated with a formal admission on the pleadings in courts of ordinary jurisdiction is not the end of its significance, having regard to the principle I have quoted from Lustre Hoisery. The admission was made in circumstances where each party was legally represented by counsel and solicitor and after all of the evidence had been exchanged in accordance with the case management directions made by the Tribunal at first instance. One would have expected in those circumstances that the admission was deliberately made after consideration of all of the evidence and with an opportunity for mature consideration. Like the efficiency provisions of s 56 ff Civil Procedure Act 2005 (NSW), s 36 NCAT Act establishes a guiding principle that the Act and the Rules are “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”. The Tribunal is to give effect to the guiding principle, inter alia, in the exercise of its powers under the procedural rules. And each party and legal practitioner representing a party is under a duty to co-operate with the Tribunal to give effect to the guiding principle. And, for that purpose, “to participate in the processes of the Tribunal and to comply with the directions and orders of the Tribunal”: s 36(3) NCAT Act. These provisions provided context to the question of the weight that ought to have been afforded the evidential admission contained in para [2] of the points of defence which was clearly admissible against DNK. Weight is, of course, a question of fact, not law.

  2. In any event, while acknowledging s 38 (2) NCAT Act which provides that the Tribunal is not bound by the rules of evidence, the Appeal Panel perceived a strong analogy between the admission by DNK of the facts set out in Mr Jain’s points of claim and agreed facts under s 191 Evidence Act 1995 (NSW), especially given that the points of defence document was signed by the solicitor acting for DNK.

  3. By reference to Minister for the Environment, Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10; [2010] FCA 58 at [35] (per Stone J), the Appeal Panel observed that s 191 Evidence Act is concerned with admissibility of agreed facts. It remains for the court or tribunal to determine whether the agreed facts are to be accepted in the evaluative process and to determine the weight afforded them (APJ [114]). (One would normally expect a court to accept agreed facts except for very good reason to the contrary).

  4. The Appeal Panel continued and stated its conclusions as follows ([115]-[119]):

“While we acknowledge that the Tribunal pursuant to s 38(2) of the NCAT Act is not bound by the rules of evidence, we consider that the Tribunal should treat an admission in points of defence filed in proceedings in the Tribunal which is signed by a solicitor in the same manner as an agreed fact within s 191 of the Evidence Act and in accordance with the principles in PGP at [35]. This approach is permitted by s 38(1) of the NCAT Act which empowers the Tribunal to determine its own procedure in relation to any matter for which the NCAT Act or NCAT Rules do not otherwise make provision. This approach also gives effect to the guiding principle to facilitate the just, quick and cheap resolution of the real issues in the proceedings pursuant to s 36(1) and (2)(a) of the NCAT Act. Such an admission of a fact will not be required to be proved by evidence.

We are satisfied that, by reason of the admission by DNK in the DNK defence at [2], the matters in the Jain points of claim at [9]-[11] were agreed facts before the Tribunal.

We do not accept the submission of DNK that the Jain points of claim at [11] fails to articulate with precision the relevant time that Mr Jain was an impacted lessee, or fails to properly articulate under which regulation he claimed to be an impacted lessee. Having regard to the Jain points of claim at [7], [9] and [10], and the amended wording of cl 4 of the 2021 COVID-19 Regulation, the agreed fact in the Jain points of claim at [11] was that Mr Jain was an impacted lessee within the meaning of the 2021 COVID-19 Regulation during the period from 13 August 2021 to 13 December 2021.

There is no reason why we should not accept this agreed fact as true. There was no contradictory evidence. It was not inherently incredible. While we accept that the Jain statement does not contain any evidence that Mr Jain was an impacted lessee and its date precedes the date of the Jain points of claim, this does not mean that we should not accept this agreed fact. In view of our acceptance of this agreed fact, this absence of any evidence by Mr Jain that he was an impacted lessee is irrelevant.

Further, the fact that Mr Jain chose to avail himself of special condition 9 of the lease did not mean that he ceased to be an impacted lessee, as found by the Tribunal in the Tribunal Decision at [52]. On its proper construction, the operation of special condition 9 was limited to the amount of rent payable for the period of 10 June to 11 October 2021, and had no other operative effect.”

  1. While one can appreciate the force of the Appeal Panel’s logic in expressing the conclusion at APJ [116], if this statement is to be understood as meaning that the effect of the points of claim and the points of defence read together was literally to be taken as a statement of agreed facts for the purpose of s 191 Evidence Act, the statement would go too far and would involve an error of law given that the Tribunal is not bound by the rules of evidence and that the putative agreed facts are not contained in an agreement in writing signed by the parties or their legal representatives. This would involve, in my respectful opinion an error of law.

  2. But I am not of the view that the Appeal Panel was stating that s 191 Evidence Act actually applied to DNK’s admission of paras [8], [9], [10] and [11] of Mr Jain’s points of claim. In my view it is clear that the Appeal Panel did not fall into error. They referred to s 38(2) NCAT Act and stated that admissions should be dealt with “in the same manner as an agreed fact within s 191 Evidence Act” (my emphasis0. The Appeal Panel did not say that they were agreed facts under that provision. Moreover, the Appeal Panel based its approach squarely on s 38(1) under which it was entitled to determine its own procedure in relation to matters for which the NCAT Act or rules “do not otherwise make provision”. The guiding principle was invoked.

  3. Quite clearly, the direction that legally represented parties in a commercial dispute of some complexity involving a retail lease exchange points of claim and points of defence was made for the purpose of clarifying the issues and reducing the matters in dispute. That the exchange of these documents was required after, and not before, the exchange of evidence enhanced rather than detracted from their utility. This circumstance enabled the parties to make proper admissions after having the opportunity for full consideration of the evidence on which the other side intended to rely. The Appeal Panel said (at APJ [115]), “such an admission of a fact will not be required to be proved by evidence”. At the same time, given the earlier reference to r 12.6(2) UCPR and having regard to the analogy drawn from s 191 Evidence Act, the Appeal Panel cannot be understood as denying the Tribunal’s power to grant leave for an admission so made or a fact so agreed to be withdrawn, challenged or contradicted.

  4. It may be that the Appeal Panel was incorrect in saying that there was no contradictory evidence in this case. But one needs to bear in mind the absence of a transcript of proceedings before the Tribunal at first instance. From Senior Member Bluth’s reasons, it appears that he permitted Mr Jain to be cross-examined about facts relevant to paragraphs [8], [9], [10] and [11] of his points of claim. But given that the Appeal Panel was exercising its powers under s 80(3) NCAT Act it was open to them to decide the facts for themselves and to afford, as they did, significant weight to the admission contained in the points of claim, given the circumstances in which it was made. Clearly, they did so. This was also entirely consistent was the principle stated in Lustre Hosiery.

  5. It should also be borne in mind that whatever evidence Mr Jain himself gave, as I have pointed out, there was documentary evidence before the Appeal Panel which had been before the Tribunal at first instance which proved Mr Jain had received a benefit specified in cl 4 2021 COVID Regulation.

  6. Mr Vuu also argued that it was not open to the Appeal Panel to treat the admission made in DNK’s points of defence as an agreed fact by reference to Peacock v Repatriation Commission [2007] 161 FCR 256; [2007] FCAFC 156 at [23]. In a unanimous decision, Downes, Lander and Buchanan JJ stated (at [23]):

“When the matter was remitted to the Tribunal for further consideration, it was the matter remitted which the Tribunal had to reconsider. The parties had no power to extend the role of the Tribunal, as they might have done if the subject was litigation in a Court, where the parties ultimately decide what the issues are. This is so even though the parties might have been able, in practical terms, to narrow the issues by concession. Nevertheless, even a concession does not permit the Tribunal to avoid its duty as an administrative decision-maker to make the correct or preferable decision.” (Citation omitted)

  1. Peacock was an appeal from a decision of the Administrative Appeals Tribunal reviewing a decision of the Veterans Review Board concerning whether Mr Peacock was entitled to an increase in his disability pension referrable to his Vietnam War service. In my own view this is a legal context quite different from the case at hand. The entitlement of Mr Peacock to a service pension and the Commonwealth’s liability for it were matters of public law to be determined in an administrative context. The work of the Tribunal, particularly in the CCD has a different context. The nature of the work assigned to the CCD puts it in the position of a “court-substitute tribunal”. As I have said, the Tribunal is exercising power in the nature of the judicial power of the State, although it is not a court, to quell civil controversies between private litigants of a type that would otherwise fall to be decided by a court of ordinary jurisdiction. This is quite a different context and, in my judgment, Peacock does not inform the nature of the Tribunal’s powers or duties in this regard.

  2. I am not satisfied that the Appeal Panel’s approach to the fact-finding process involved an error of law or was itself erroneous in point of law. I would reject Ground 3.

Conclusion on the Appeal

  1. It follows that I am not satisfied the appeal has been made good and I will in due course dismiss the summons. But I turn now to the cross-appeal.

The Cross-Appeal

  1. The proposed grounds of cross-appeal are as follows:

  1. That the Appeal Panel constructively failed to exercise jurisdiction through making orders inconsistent with its reasons for decision.

  2. That the Appeal Panel erred in law in its assessment of “material error” with respect to:

  3. Deciding the matter on a basis not advanced by the parties;

  4. Applying the incorrect standard of materiality;

  5. The Appeal Panel incorrectly exercised the cost discretion with respect to:

(i)   The principle that costs follow the event.

  1. Success on agreed items of loss.

    1. Although these grounds are, with respect, expressed somewhat obtusely, it is clear from the written submissions that the subject matter of both Grounds 1 and 2 is an allowance of $14,383.72 the Appeal Panel made for the cost of making good damage to tiles in the restaurant kitchen. Proposed Ground 3 relates to the refusal by the Appeal Panel of a costs order in the s 80 appeal in Mr Jain’s favour, notwithstanding his substantial success. The substantial reason for the refusal of a favourable order for costs is the omission by Mr Jain’s legal representatives to ask for the order. This is made clear by APJ [224] and [237]. It is implicit in the Appeal Panel’s reasons on this matter, which was part of Issue 13, that had costs been sought, an order in Mr Jain’s favour would have been made. In any event, Ms Lim made it quite clear that if she was successful on Grounds 1 and 2, she would not press the application for leave to appeal on Ground 3 but would seek an order for costs of the proceedings before the Appeal Panel as a consequential order in the cross-appeal if there is any further reduction in the substituted damages which were the subject of the Appeal Panel’s Order 4.

Grounds 1 and 2

  1. For the reasons I have rehearsed, I am prepared to grant leave to Mr Jain to advance Grounds 1 and 2. Notwithstanding what I have said about the obtuseness of the pleaded grounds, I am satisfied that a question of law in substance arises. As there has been full argument on the appeal and cross appeal and the amount involved is not insignificant in the overall scheme of a claim brought in the Tribunal, I consider it a proper exercise of my discretion to grant leave.

  2. The Appeal Panel was of the view that there were two relevant covenants or stipulations in the lease covering the lessee’s obligation to bear the costs of repair or replacement of the tiles. The first was cl 7.2 in the following terms:

“The lessee must otherwise maintain the property in its condition at the commencement date and promptly do repairs needed to keep it in that condition, but the lessee does not have to –

7.2.1   Alter or improve the property;

7.2.2   Fix structural defects; or

7.2.3   Repair fair wear and tear.”

  1. The second was cl 18, which applied where the demised premises were part of a strata plan, as these premises were and relevantly provided as follows:

“18.7.1   where the property is a lot in a strata scheme the lessee must:

….

18.7.1.4 meet the cost of all damage to the common property caused by the lessee or any invitee or licensee of the lessee.”

  1. It is very clear from his reasons that Senior Member Bluth decided that Mr Jain’s obligation to repair the tiles arose under cl 7.2 of the lease (J [92]). He preferred the evidence of DNK’s expert, Mr Wallace to the evidence of Mr Jain’s expert, Mr Moore. However, when Mr Wallace tested the tiles, he found a large number were “drummy” or hollow sounding. This affected more than 20 percent of the surface area and was a pre-existing defect in the floor due to the manner in which the tiles had been laid.

  1. The Senior Member found that the full cost of replacing the tiles was $14,383.72, which sum he “reduced by 25 percent given the state of the tiling in the floor as identified by Mr Wallace” (J [92]). He allowed the sum of $10,787.80.

  2. Mr Jain accepted that his obligation under cl 7.2 inured notwithstanding his acceptance of the repudiation of the lease by the lessor. However, he argued his liability was limited by the provisions of s 133A CA as explained by Ward CJ in Eq (as the President then was) in Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970 at [279]. Her Honour said:

“It is noted that if the lessor has repairs actually carried out that is strong evidence that the cost of the works is the proper amount of damages (Jones v Herxheimer[1950] 2 KB 106 ) but that, otherwise, the lessor should prove the actual diminution in value of the premises to achieve more than nominal damages (Espir v Basil Street Hotel Ltd[1936] 3 All ER 91 ; James v Hutton[1950] 1 KB 9; [1949] 2 All ER 243 ).”

  1. As the damaged tiles had not been repaired or replaced as at the date of the hearing, Mr Jain argued that the legal effect of s 133A CA was that DNK had to prove the actual diminution in the value of the premises if it was to achieve more than nominal damages. The learned Senior Member rejected this argument stating (J [101]):

“The premises suffered damage and [DNK] is entitled to be compensated for the damage but not renewal. There was no suggestion that [DNK] would not make these repairs. I believe that s 133A can be distinguished as it deals with the valuation where repairs are never likely to undertaken by the landlord.”

  1. On appeal to the Appeal Panel, Mr Jain challenged Senior Member Bluth’s interpretation of s 133A CA. This was the Appeal Panel’s issue 11, which they expressed as follows:

“Whether s 133A of the Conveyancing Act was applicable to DNK’s claim for damages for a breach by Mr Jain of Clause 7.2 or Clause 18.7.1.4 of the lease relating to the repair of the premises and damage to the common property”.

  1. The Appeal Panel was satisfied that cl 7.2 on its proper construction was “a covenant or agreement to keep … premises in repair during the currency of the lease” within s 133A (1) CA. Clause 18.7.1.4 on the other hand, was not as it was an obligation to meet the costs of repairing damage to the common property rather than a covenant to keep the common property in repair (APJ [202]). Common property does not form part of the demised premises.

  2. Section 133A (1) is in the following terms:

(1)  Damages for a breach of a covenant or agreement to keep or put premises in repair during the currency of a lease, or to leave or put premises in repair at the termination of a lease, whether such covenant or agreement is expressed or implied, and whether general or specific, shall in no case exceed the amount (if any) by which the value of the reversion (whether immediate or not) in the premises is diminished owing to the breach of such covenant or agreement as aforesaid; and in particular no damage shall be recovered for a breach of any such covenant or agreement to leave or put premises in repair at the termination of a lease, if it is shown that the premises, in whatever state of repair they might be, would at or shortly after the termination of the lease have been or be pulled down, or such structural alterations made therein as would render valueless the repairs covered by the covenant or agreement.

The Appeal Panel stated their conclusions as follows (APJ [203]-[205]):

“We do not accept that s 133A(1) of the Conveyancing Act on its proper construction only applies where repairs are never likely to be undertaken by the landlord. The subsection is in two parts. The first part prescribes an upper limit on the damages recoverable for breach of a repair covenant which is operative during the currency or at the termination of a lease by reference to the diminution in the value of the reversion. The second part prohibits the recovery of any damages for breach of a repair covenant which is operative at the termination of a lease where it is established that the premises would at or shortly after the termination have been or be pulled down, or such structural alterations made as would render any such repairs valueless.

As there was no evidence that the premises would be pulled down at the termination of the lease, we accept that the second part of s 133A(1) of the Conveyancing Act has no operation in these proceedings. However, as cl 7.2 is a repair covenant within the meaning of this subsection, we are satisfied that the first part of the subsection is applicable to these proceedings.

It follows that the Tribunal made an error of law in finding that s 133A(1) of the Conveyancing Act did not apply to DNK’s claim for damages for breach of cl 7.2 of the lease.”

  1. The Appeal Panel also referred to the judgment of Ward CJ in Eq in Bulga Cole Management Pty Ltd v Hope Wine Group Pty Ltd [2020] NSWSC 1783 at [96] where her Honour said:

“Here, however, the evidence is that the costs have already been incurred. So the predicate for the proposition espoused in the above passages that the landlord should give evidence of the actual diminution in value of the premises if the landlord is to succeed in more than nominal damages, does not here apply. I consider that it is incumbent on Hope Wine, if it wishes to invoke s 133A (and to assert that the cost of the repairs in fact exceeded the diminution to the value of the reversionary interest in the Property caused by the alleged breach of the covenant to keep in repair or to make good the premises on termination of the lease) to plead that allegation. In other contexts it is the case that a party seeking to invoke a statutory provision must plead it (such as a party seeking to invoke the presumption as to representations in relation to future matters under the now repealed Trade Practices Act 1974 (NSW), though I do not suggest that this is directly analogous to the present case.) More relevantly, this involves a positive allegation as to a factual matter on which Hope Wine wishes to rely in its defence and that should be pleaded.”

  1. With great respect, it is clear that the Appeal Panel clearly understood the import of her Honour’s reasoning for they expressed their conclusions on the question of law as follows at [221]:

“We are satisfied that we should apply the second limb in Midcoast Petroleum at [279] and accordingly would have found that DNK in relying on estimates of the cost of the replacement of tiling in the kitchen and the breach of the waterproofing membrane had not proved the actual diminution in value of the premises if the liability of Mr Jain arose under cl 7.2 of the lease.” (My emphasis)

However, the Appeal Panel went on (at [222]):

“We are not satisfied that Mr Jain has established that the Tribunal made any material error in awarding damages in the amount of $14,383.72 in respect of the replacement of tiling in the kitchen and breach of the waterproofing membrane because he did not establish that he breached cl 7.2 rather than cl 18.7.1.4 of the lease. We would have needed to consider the strata plan, the first and second Wallace reports, the first and second Moore reports, the joint expert report, and transcript of the hearing before the Tribunal to determine which of these subclauses was breached by Mr Jain.”

  1. With respect, it is obvious that the Appeal Panel have made a mistake by stating that $14,383.72 was awarded in respect of the replacement of tiling in the kitchen and breach of the associated waterproofing membrane. The figure was $10,787.80. But more significantly there was never any suggestion either at first instance or on appeal that the kitchen was not part of the demised premises; there was never any question that the kitchen was part of the common property. The relevant portion of common property damaged was the balcony and Senior Member Bluth assessed that damage at a little of $1,300 (J [103]; Items 2 and 3).

Consideration of Grounds 1 and 2

  1. The subject of Ground 1 is that in summarising the result (APJ [2]), the Appeal Panel said, inter alia, they had decided “to vary the award [of] damages in favour of DNK to $4,034.53” and the concluding statement (at [238]) that DNK is entitled to recover damages of $18,418.25 (being the total of $4,034.53 and $14,383.72). While the difference is jarring, I am not persuaded by reference to it that the Appeal Panel constructively failed to exercise its jurisdiction. There is an inconsistency between the statements in APJ [2] and [230] also, but the differences are explained by the reasons given at [238] explaining the disposition of Issue 12. However, the jarring effect of that difference increases to a feeling of uneasiness when one considers APJ [230] where the Appeal Panel recorded their finding that DNK was entitled to costs of its application because it “was the successful party based upon the outcome of the proceedings as a whole as it was entitled to recover damages for breach of Clause 7.2 of the lease in respect of the agreed items”. This figure is the conceded figure of $4035.53 referred to in APJ [2]. There is no mention in either [2] or [230] of the assessed damages in respect of the kitchen tiles.

  2. The Appeal Panel certainly understood that Mr Jain was challenging the damages awarded at first instance other than in respect of the items he had conceded in the sum of $4,034.53. It also well understood that damages allowed in respect of the kitchen tiles was challenged on the basis that cl 7.2 applied and the outcome was governed by s 133 CA.

  3. I accept that on the whole these inconsistences are unexplained. They are material in as much as they are unexplained and sit uneasily together. Although I have misgivings, I am not satisfied that there has been a constructive failure to exercise jurisdiction because the final order is amply explained by the reasons given for the resolution of issue 12. What appears at APJ [2] and [230] did not feed into the orders pronounced. Of course, had they done so, those orders and in particular Order 4 would have been different.

  4. I turn then to Ground 2. I accept that it does not appear that DNK raised the question of onus on appeal, which seems to have been the decisive matter in Appeal Panel’s reasons for the resolution of Issue 12. I am of the view that it was not in issue either at first instance or on appeal that the kitchen was part of the demised premises and the obligation to repair the tiles could only have arisen under cl 7.2 and cl 18.7.1.4 did not apply because the kitchen was not part of the common property. Making every allowance for the complexities of the case and the Appeal Panel’s careful and thorough approach to it, this was a very significant misapprehension of the nature of Mr Jain’s case on appeal. The matter may in that way be explained as a constructive failure to exercise jurisdiction. On the other hand, it may that the error falls into that rare category of error that the only conclusion reasonably open on the evidence, facts and law was that any liability of Mr Jain to repair the kitchen tiles and waterproof membrane arose under cl 7.2: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 157B; Hope v Bathurst City Council (1980) 144 CLR 1 at 10; Australian Gaslight Co. v Valuer General (1940) 40 SR (NSW) 126 at [138]. Either way I am satisfied that the conclusion expressed at APJ [222] is vitiated by an error of law.

  5. As I am of the view that there is only one reasonably available answer to the issue, it is unnecessary for the matter to be remitted to the Appeal Panel and I will reduce the award of damages accordingly by making an order varying the decision of the Tribunal in accordance with s 83(3)(a) NCAT Act.

  6. It remains that DNK is entitled to nominal damages for the breach of cl 7.2. I observe that the Appeal Panel allowed $100 as nominal damages to Mr Jain on his claim for damages for breach of the lease. The same amount should be awarded and will be reflected in my orders varying the Appeal Panel’s orders. I appreciate that this arguably extends beyond the powers of the Court on a question of law appeal. However, I regard the order as expedient in the interest of justice for the avoidance of the generation of unnecessary costs to deal with a very minor detail. That the matter should be dealt with in this court seems consistent with both s 56 of the Civil Procedure Act and s 36 NCAT Act.

Ground 3

  1. Given that I am satisfied that Mr Jain has been successful on the cross-appeal, it is unnecessary for me to consider Ground 3 and I would refuse leave in respect of it. I am satisfied that I am empowered to make the appropriate costs order as a consequential order following my disposition of the appeal and cross-appeal. I will make an order that DNK pay Mr Jain’s costs of the s 80 appeal. I am aware that Mr Jain wishes to raise a matter of a special order as to costs and I will grant liberty in respect of that matter.

Orders

  1. My orders are:

  1. Grant leave to the plaintiff to appeal on Grounds 1, 2 and 3.

  2. Appeal dismissed.

  3. Grant leave to the defendant to cross-appeal on Grounds 1 and 2 and refuse leave on Ground 3.

  4. Cross-appeal allowed.

  5. Set aside Order 4 made by the Appeal Panel of the Civil and Administrative Tribunal (“Appeal Panel”) pronounced on 30 May 2023 and instead order that Order 1 in proceedings COM 22/020333 is varied by substituting the amount of $4,134.53 for $60,025.34.

  6. Set aside Order 5 pronounced by the Appeal Panel on 30 May 2023 and instead order that the plaintiff is to pay the defendant’s costs of the appeal to the Appeal Panel.

  7. The plaintiff is to pay the defendant’s costs of the appeal and cross appeal to the Court.

  8. Grant liberty to either party to apply for a special order as to costs by filing written submissions not exceeding 3 pages in length together with any necessary supporting affidavit by lodging them electronically with the chambers of Justice Campbell by 20 September 2024. The opposing party may respond by filing written submissions not exceeding 3 pages in length by lodging them electronically with the chambers of Justice Campbell within 14 days of the lodgement of the moving party’s written submissions.

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Decision last updated: 23 August 2024

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Dr N Kalokerinos Pty Ltd v Jain (No 2) [2024] NSWSC 1450
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