Jittiwanakorn v Chung Shan Enterprises Pty Ltd
[2022] NSWCATCD 100
•04 July 2022
Civil and Administrative Tribunal
New South Wales
Medium Neutral Citation: Jittiwanakorn v Chung Shan Enterprises Pty Ltd [2022] NSWCATCD 100 Hearing dates: 16 May 2022 Date of orders: 4 July 2022 Decision date: 04 July 2022 Jurisdiction: Consumer and Commercial Division Before: S Thode, Senior Member Decision: 1. Application COM 21/47598 is dismissed.
2. In application COM 22/09161 Yuttapong Jittiwanakorn must pay to Chung Shan Enterprises Pty Ltd the sum of $173,809.43 immediately.
3. Yuttapong Jittiwanakorn must pay the costs Chung Shan Enterprises Pty Ltd of both applications on the ordinary basis as agreed or assessed.
4. In the event any party applies for different costs orders, the order for costs made in paragraph (3) above ceases to have effect.
5. For any different application for costs, the following directions apply to that application:
6. The applicant for costs (costs applicant) is to file and serve any evidence and submissions on costs within 14 days of the date of publication of these orders.
7. The respondent to the costs application (costs respondent) is to file and serve any evidence and submissions in reply within 14 days of the date of publication of these orders.
8. The costs applicant is to file and serve any submissions in reply within 21 days from the date of publication of these orders.
9. The submissions of the parties are to include submissions about whether an order should be made dispensing with a hearing of the costs application pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013.
10. In the event that any party applies for a different costs order, an indexed and paginated bundle of all costs submissions is to be provided to the Tribunal at the end of the submission period.
Catchwords: LEASES AND TENANCIES – Retail Lease – Whether land tax is apportionable
Legislation Cited: Retail Leases Act 1994 (NSW)
Cases Cited: David Securities v Commonwealth Bank of Australia 175 CLR 353
Texts Cited: Nil
Category: Principal judgment Parties: Yuttapong Jittiwanakorn (Applicant)
Chung Shan Enterprises Pty Ltd (Respondent)Representation: Counsel:
Solicitors:
DM Flaherty (Applicant)
A Oakes (Respondent)
FKG Law (Applicant)
Origin Lawyers (Respondent)
File Number(s): COM 21/47598; COM 22/09161 Publication restriction: Nil
REASONS FOR DECISION
Background
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The parties entered into a retail lease for premises known as xx Majors Bay Road, Concorde for a period of 5 years commencing on 1 April 2017 and terminating on 31 March 2022.
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It was a term of the lease that the lessee must pay to the lessor 100% share of outgoings including 100% of any land tax payable by the respondent in respect of the lessor’s ownership of the whole of the land on which the demised premises are situated. The downstairs are was leased by the applicant and used for his restaurant business. The upstairs area of approximately equal size was not used by the applicant. The area upstairs consists of residential premises used by the respondent lessor. Xx Majors Bay Road is also the registered address of the respondent company.
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The applicant lessee commenced proceedings on 15 November 2021 seeking orders pursuant to section 72 of the Retail Leases Act 1994 (the Act). In the section ‘what orders do you want?’ the applicant stated:
An order to not pay the amount of $37,253.
An order that the respondent pay the amount of $164,502.
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In the section entitled ‘reasons for asking for orders’ the applicant states as follows:
Lessee entered into a five year lease with the lessor on 19 September 2017 property leased …. at Majors Bay Road Concorde.
The top floor is a residential unit of equal size and area to the subject premises and to the best of the Lessee’s understanding, is occupied by a relative of the director of the lessor. The residential unit has its own mailing address and separate water and electricity metre.
Outgoings on the lease includes council rates, water rates, building insurance and land tax as to 100% share of outgoings. Lessor has climbed payment from the lessee of 100% of the total amount due for council rates, water rates, building insurance and land tax for the whole of the building, which includes the top floor residential unit.
Lessee has disputed the calculation of payment of outgoings from the outset of the lease. Lessor did agree to some reduction on some of these outgoings since the commencement of the lease. However, the lessor has continued to wrongly claim from the lessee 100% of outgoings, including 100% of the land tax, as assessed for the whole building as opposed to the premises leased.
The lessee relies on section 24B of the Retail Leases Act 1994 and claims a refund of all of the land tax paid by the lessee from 2017 to 2020 in the sum of $164,502 being payment of outgoings for unrelated land, and in order that he not pay land tax claim for the year 2021 in the sum of $37,253.
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In points of defence filed on 8 February 2022 the respondent relevantly admits that there is a retail lease in respect of the property at Majors Bay Rd Concorde (the property) however, in answer to the claim the respondent states:
that the total lettable area of the property is approximately 60% and in the event the Tribunal finds that the land tax should be apportioned, then 60 % of the land tax is payable;
section 24B(1) of the Retail Leases Act does not apply to the lease because the property is land on which the building which is the retail shop is situated and therefore the property is not ‘unrelated land’ as defined in section 24B(2).
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In the event that the Tribunal accepts that the upstairs premises are “unrelated land” and finds that section 24B of the Act is applicable, it is further the respondent’s defence:
that the agreement between the applicant and the respondent dated 20 June 2019 requires the applicant to pay outgoings in accordance with clause 5 of the lease and such outgoings include 100% share of land tax.
Further and in the alternative the respondent says that the applicant is estopped from recovering any land tax because the applicant signed the retail lease in 2019 agreeing to pay land tax and in reliance on the lessor’s agreement to pay land tax, the lessor complied with the lease and the respondent will suffer detriment if the expectation to pay land tax is not fulfilled;
the applicant cannot more than three years after the debt accrued recover any payments made and the applicant’s claim for repayment of land tax more than three years ago is statute barred pursuant to s71 of the Act.
In the event that the lessor is found to be liable to repay any land tax, the lessor is entitled to a set off in the sum of $37,253 in respect of unpaid outgoings for 2021 land tax; and the sum of $80,447.82; and in respect of unpaid rent throughout the period from 8 May 2021 to 7 January 2022.
The lessor’s application COM 22/09161
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The lessor commenced proceedings COM 22/09161 on 9 February 2022. The lessor as applicant seeks an order pursuant to section 72(1)(a) of the Retail Leases Act that the lessee pay to the lessor the sum of $37,253 in respect of unpaid outgoings for 2021 land tax; and the sum of $80,447.82 in respect of unpaid rent throughout the period from 8 May 2021 to 7 January 2022.
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I understand that the parties are in agreement as to the unpaid outgoings for land tax and in respect of the sum outstanding for rent as stated and that this amount should are accounted for in these reasons.
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For convenience I shall refer to the parties as lessor and lessee.
Lessee’s outline of submission
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I have received the lessee’s written outline of submission dated 14 April 2022 and reply submissions dated 26 April 2022. I have also considered the court book and tender bundle prepared by the parties.
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It is common ground at the building at Majors Bay Road comprises two levels.
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The downstairs level includes the restaurant area and the upstairs includes residential premises occupied by the lessor.
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The area of each level is approximately equal.
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It is not in dispute that the retail lease requires the lessee to pay 100% of total outgoings for the building/centre including land tax.
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It is submitted that there is no formula, methodology or any means at all provided by the terms of the lease which would allow the lessor to apportion the total amount of land tax payable for the retail lease premises.
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It is submitted that because the lessee is not using the upstairs level of the building and because the upstairs level did not benefit the lessee, he should not have to pay any land tax by reason of section 24B of the Act.
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Section 24B of the Act renders void any provision in retail shop leases that requires the lessee to pay an amount in respect of rent and other costs associated with “unrelated land”.
24B RENT AND OTHER COSTS ASSOCIATED WITH OTHER LAND NOT RECOVERABLE FROM LESSEE
(1) A provision in a retail shop lease is void to the extent that it requires the lessee to pay an amount in respect of rent and other costs associated with unrelated land.
(2) In this section--
"unrelated land" means land other than--
(a) land on which the building or retail shopping centre of which the retail shop forms part is situated, or
(b) land of the lessor used by or for the benefit of the lessees conducting business in that building or retail shopping centre or in connection with trading in that building or retail shopping centre.
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It is submitted that it cannot be argued that the upstairs residential area “is land used by or for the benefit of the lessee… or in connection with trading in that building”.
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It is submitted that the upstairs area is therefore “unrelated land”.
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If that is so, any provision in the lease that requires the lessee to pay an amount of land tax associated with ‘unrelated land’ is void.
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The applicant submits that the land tax has been paid by Mistake. The legal remedy available to a person who has paid monies by mistake is set out in David Securities v Commonwealth Bank of Australia 175 CLR 353 at 379 and the “payment of such money by the applicant gives rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point of circumstances which the law recognise this would make an order for restitution unjust.”
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It is submitted that the only defence relied upon by the respondent are the terms of an agreement between the parties entered into on 20 June 2019 and an allegation that the applicant is estopped from recovering any land tax payments. Under those circumstances the application should succeed and orders must be made in favour of the lessee.
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It is noted in the application form that the applicant has commenced proceedings and brought a claim more than 3 years after the liability or obligation to pay land tax arose.
Respondent’s outline of submission.
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It is submitted that under the lease the lessee was required to pay a 100% share of the land tax attributable to the property. Clause 5.1.2 of the lease states that the lessee must pay the lessor outgoings as is stated in item 14A and 14B in the schedule.
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It is not in dispute that the lease required the lessee to pay 100% land tax.
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In respect of the Act, it is disputed that the upstairs area of the premises can be defined as ‘unrelated land’.
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The lessee’s case can only succeed if he satisfies the Tribunal that by requiring the lessee to pay land tax in respect of the entire property rather than simply the proportion of the property that was the demise, the lease required the lessee to pay an amount in respect of unrelated land.
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It is submitted that the applicant’s argument must fail.
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Unrelated land is defined in section 24B(2) of the Act in the negative i.e. by reference to what ‘unrelated’ land is not.
"unrelated land" means land other than--
(a) land on which the building or retail shopping centre of which the retail shop forms part is situated, or
(b) land of the lessor used by or for the benefit of the lessees conducting business in that building or retail shopping centre or in connection with trading in that building or retail shopping centre.
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The lessor submits that land will not be ‘unrelated land’ if it meets the criteria of either subsection (2)(a) or the criteria in subsection 2(b). That is, the two subsections are to be construed disjunctively.
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The lessee submits that the coordinating conjunction “or” that sits between subsection 24B(2) (a) and (b) should be given a conjunctive cumulative construction. That is land will only be excluded from the definition of unrelated land if it satisfies the criteria of both sections 2(a) and 2(b).
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That submission should be rejected.
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The lessee’s construction is contrary to the ordinary meaning of the words in section 24B(2). The ordinary meaning of the word “or” is to have a disjunctive/dispersive meaning. The Tribunal should construe section 24B (2) of the Act consistently with the ordinary and natural meaning of the words used.
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That is land will only be required to meet one of the criteria in either subsection 2(a) or 2(b) be excluded from the definition of “unrelated land”.
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The property is land on which the building of which the retail shop forms part is situated. The restaurant operated on the ground floor of the building, which is situated on the property. The lessor submits the property therefore meets the criteria of section 24B(2) (a) and is not “unrelated land” in such circumstances, the contractual requirement in the lease to pay land tax/ outgoings for the property is not voided by section 24B(1) and the lessee is bound by the contract he entered into.
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The lessor’s primary submission is that satisfaction of section 24B(2)(a) is sufficient to deal with the question of unrelated land. However, the landlord also submits that the property is land owned by the landlord and the property is used for the benefit of the lessee who conducts business in the building on that property. Accordingly, the property is also land that meets the criteria of section 24B(2)(b). In that regard it is instructive that section 24B (2) uses the term ‘land’. The concept of leasehold should be understood as referring at least to a parcel of land that forms a registered lot or folio. It should not be construed in a restrictive fashion as referring to individual parts of a building that otherwise form part of a single piece of registered real property.
Consideration
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It is not controversial to state that prima facie, land tax is recoverable from the lessee pursuant to the lease. However, the amount is limited to the lessor's liability of the land concerned being assessed on a single holding basis, the land not being subject to any special trust and the landlord not being classified as a non-concessional company. When working out how much land tax the lessee must pay, where this has been agreed to in the lease, the calculation is based on the value of the land (emphasis added) where the leased property is located. If there is more than one retail shop on the lessor’s property, each lessee pays their proportion of the land tax. It is noted that the same applies for properties in shopping centres. Land tax is calculated on the total value of all your taxable land above the land tax threshold, not on each individual property. The relevant threshold as of 2021 for the payment of land tax is $755,000.
Was the land tax correctly calculated?
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I note the lessee’s submissions at page 50 of the submissions bundle. The lessee is critical that the lessor’s submissions “assume” that the invoices for land tax were “accurately compiled” by the lessor and that “there is just no evidence to make that assumption.” I am satisfied that the onus to establish an error in the lessor’s land tax calculations rests with the lessee. It is the lessee who seeks relief from payment of land tax. If it forms part of the lessee’s argument that the landlord wrongly calculated the land tax, it was incumbent upon the lessee to plead and particularise any error alleged. No such error in calculation is pleaded or particularised either in the lessee’s points of claim or in the points of defence filed in response to the lessor’s application. There is no mention of the alleged error in the statement of agreed facts and issues in contention at page 57 of the court bundle. I am satisfied, in the absence of any evidence or submission to the contrary, that the Ko affidavit establishes the land tax was correctly calculated at $37,253.32 as at the time the proceedings were commenced, and as now calculated on page 47 of the joint submissions bundle.
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The issue I must consider is whether the terms of the lease are contrary to the provisions of the Act and in particular section 24B (see section 7 of the Act). I accept the applicant’s primary position that section 24B makes void any lease provisions for the payment of land tax if the land for which land tax is payable meets the definition of ‘unrelated land’.
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For the reasons that follow I am not of the view that the requirement of the lessee to pay land tax pursuant to the lease is voided by operation of s24B of the Act. I do not agree with the lessor’s submission that by virtue of the fact that the residential premises above the restaurant are not used by the lessee, they are defined as ‘unrelated land’ and therefore not subject to the payment of land tax. I am of the view that ‘unrelated land’ cannot be land that forms part of the same folio or parcel of land, because the calculation of land tax is based on the value of the size of the land where the leased property is located, not on portions of the land.
Principles of Statutory Construction
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The principles of statutory construction are well-known and understood. They have been considered repeatedly by the High Court of Australia and by intermediate appellate courts. For example, in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, the plurality of the High Court of Australia said (at 78) that:
[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.
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The principles have also been more recently summarised by the Full Court of the Federal Court of Australia in Glencore Coal Assets Australia Pty Ltd v Australian Competition Tribunal (2020) 280 FCR 194 (at [239]) in which the Court emphasised that the task of statutory construction is to ascertain the contextual meaning of the words; with the starting point, being the text, whilst, at the same time, there is to be regard to context and purpose.
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I refer to the ordinary canons of construction. I am required to consider the definition section of the Act as an aid to the construction of the Act. Having considered the definition of "unrelated land" I am satisfied that definition is a disjunctive proposition, as is argued by the respondent and that “land” will only be required to meet one of the criteria in either subsection 2(a) or 2(b) in order to be excluded from the definition of unrelated land.
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The upstairs residential premises, being a residence located above the retail shop, cannot be separated from, or be considered different to land being the parcel of land or the folio of land on which the building of which the retail shop forms part is situated. The residence above the retail premises is not “unrelated land”. It is not sufficient to point to any part of the leased premises that is not used by the lessee, such as a garage, or driveway or part of the bin area as was contended here, and to state that this ‘land’ is not used for the benefit of the lessee. The land on which the retail lease premises rest is land for the purpose of land tax valuation, the divisibility of rooms or even square meters which may be counted upon the land is not relevant for the purpose of the definition of land or its land tax valuation.
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I am not of the view that the applicant has demonstrated that the payment of the land tax is contrary to the Act. Had the legislature wished to exclude or apportion the outgoing it would have done so using clear and unequivocal language. For example, Parliament did so expressly in relation to retail shops located in shopping centres. Section 30 of the Act imposes restrictions on non-specific outgoings in retail shopping centres. It limits the liability of a lessee of a shop in retail shopping centres for a non-specific outgoing to a proportionate amount reflecting its lettable area compared to the total lettable area. The note to section 30 of the Act states that it is purpose is to prevent a lessee from “being required to make up for any shortfall in outgoings recouped by the lessor that is attributable to vacant shops or concessions allowed to other lessees”.
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Land tax at such rates as may be fixed by any Act is to be levied and paid on the taxable value of all land situated in New South Wales which is owned by taxpayers. Land tax is imposed on the taxable value of land, being a folio or parcel of land. I have not been alerted to any authority, or practice for that matter, that makes the land tax apportionable by reference to the different portions of land that are used by the lessee other than if one folio of land has on it more than one retail shop.
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I am not persuaded that the applicant has established, on the balance of probabilities that the residential premises above the retail lease premises satisfy the definition of “unrelated land”. The onus is on the applicant to establish that the provisions of s24B have been enlivened and I am not satisfied that land tax has been charged contrary to the provisions of the Act.
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For these reasons the application must be dismissed.
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As the applicant’s primary argument fails it is not necessary for me to consider the other defences relied upon by the lessor.
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I find that the lessee owes to the lessor $46,357.56 for land tax outstanding (as at the date of submissions see page 47 of the submissions bundle) and $121,227.72 in rent outstanding, the amount being agreed. As the applicant was unsuccessful in his claim I order that the lessee pay to the lessor the sum of $46,357.56 (for land tax) plus $121,227.72 (for rent) or at total of $167,585.28.
Interest
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The lessor submits that interest accrued arising under the Rental Summary Schedule of the lease. The lessor’s submissions state that interest has accrued in the sum of $4470.40 plus $15.25 for each day after 7 March 2022. 115 days have passed from 7 March 2022 to the day of publication, being 1 July 2022. Multiplying 115 x $15.25 I allow $1753.75. Adding interest of $4470.40 and $1753.75 respectively to the debt outstanding I arrive at a sum of $173,809.43.
Order
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For the reasons set out I make the following orders:
Application COM 21/47598 is dismissed.
In application COM 22/09161 the respondent must pay to the applicant the sum of $173,809.43 immediately.
Costs
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The lessee has been unsuccessful in both applications and costs ordinarily follow the event. For that reason I make the following orders.
Yuttapong Jittiwanakorn must pay the costs of Chung Shan Enterprises Pty Ltd of both applications on the ordinary basis as agreed or assessed.
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Orders in the event that the costs order is challenged.
In the event any party applies for different costs orders, the order for costs made in paragraph (3) above ceases to have effect.
For any different application for costs, the following directions apply to that application:
The applicant for costs (costs applicant) is to file and serve any evidence and submissions on costs within 14 days of the date of publication of these orders.
The respondent to the costs application (costs respondent) is to file and serve any evidence and submissions in reply within 14 days of the date of publication of these orders.
The costs applicant is to file and serve any submissions in reply within 21 days from the date of publication of these orders.
The submissions of the parties are to include submissions about whether an order should be made dispensing with a hearing of the costs application pursuant to s 50(2) of the Civil and Administrative Tribunal Act 2013.
In the event that any party applies for a different costs order, an indexed and paginated bundle of all costs submissions is to be provided to the Tribunal at the end of the submission period.
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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
Decision last updated: 26 August 2022
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