K & M Zhang Pty Ltd t/as Tico Bakery v Sona Doeuk - [2023] QCAT 280

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

K & M Zhang Pty Ltd t/as Tico Bakery v Sona Doeuk and Anor [2023] QCAT 280

PARTIES:

K & M ZHANG PTY LTD T/AS TICO BAKERY

(applicant)

v

SONA DOEUK & SA-ATH DOEUK

(respondent)

APPLICATION NO/S:

RSL039-21

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

17 July 2023

HEARING DATE:

16 June 2022

HEARD AT:

Brisbane

DECISION OF:

Member Carrigan
Member McBryde
Member Judge

ORDERS:

1. The Notice of dispute - Retail Shop Leases Act 1994 filed in the Tribunal by the Applicant on 5 March 2021 is dismissed.

2. The Response and/or counter-application filed in the Tribunal by the Respondents on 1 June 2021 is dismissed.

CATCHWORDS:

LANDLORD AND TENANT - RETAIL AND COMMERCIAL TENANCIES LEGISLATION - JURISDICTION - whether lessee entitled to COVID-19 rent reduction - whether lessee eligible for jobkeeper scheme - whether there is an affected lease dispute

Retail Shop Leases and Other Commercial Leases (Covid – 19 Emergency Response) Regulation 2020 (Qld) s 5, s 5(1), s 5(5), s 14, s 21 and 42.

Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 9, s 100 and s 102.
Retail Shop Leases Act 1994 (Qld) s 5A, s 64 and Schedule Dictionary

Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) s 6, s 7, s 7(1)(a) & (b), s 8 and s 8 (5)– (7)

APPEARANCES & REPRESENTATION:

Applicant:

Renzong Zhang, Director of the Applicant Company

Respondent:

P Travers of Counsel instructed by T Lawyers Pty Ltd, Solicitors.

REASONS FOR DECISION

These proceedings relate to a dispute about a retail shop lease at 485 Boundary Street, Spring Hill, Brisbane involving the following issues;
(a)whether the “Permitted Use” under the terms of the lease excluded the tenant from selling “bubble tea”; and
(b)whether rent relief under the Retail Shop Leases and Other Commercial Leases (Covid – 19 Emergency Response) Regulation 2020 (the Regulation) was available to the tenant for the period from March 2020 to December 2020.
At the commencement of the hearing on 16 June 2022 the parties informed the Tribunal that they had reached an agreement whether the sale of “bubble tea” was a “Permitted Use” under the lease and it was unnecessary for the Tribunal to determine this issue.
Accordingly, the hearing continued in respect of the remaining issue before the Tribunal as to whether the tenant was entitled to Covid-19 rent relief under the terms of the Regulation for the period from March 2020 to December 2020.
Background Facts
On 22 January 2020 K & M Zhang Pty Ltd t/as TiCo Bakery (Applicant) as the tenant entered into a lease with Sona Doeuk and Sa-Ath Doeuk (Respondents) as the landlord of shop premises at 485 Boundary Road, Spring Hill in Brisbane.
The terms of that lease provided;[1]
(a)the commencement date of the lease was 22 January 2020 and was to expire on 21 January 2023 with a further option to extend the lease;
(b)the rent for the first year was $47,272.73 plus GST ($3939.40 plus GST per month);
(c)a market review of the rent was to be made on the exercise of the option for the further period of the lease from 22 January 2023;
(d)a “Rent Concession” was granted by clause 21A of the Schedule to the lease on terms that the Landlord shall allow the Tenant to occupy the Premises and gave the following rent concession;
(i) Rent free period for the period from 22 January 2020 until 21 March 2020. To avoid doubt, rent is payable from 22 March 2020.
[1] Statement of Renzong Zhang filed 26 August 2021 at exhibit "RZ -1".
Following the commencement of the lease, disputes arose between the parties in the period from January 2020 to at least July 2020. Those disputes related to;
(a)in March 2020 the Respondents requested rent increases under the lease; and
(b)in April 2020 whether the sale of “bubble tea” was a Permitted Use under the lease.
The parties engaged in negotiations and exchanged correspondence about the proposed rent increase and whether the Applicant was complying with the Permitted Use” under the lease. It is not necessary to set out the details of those negotiations and correspondence in any further detail as these issues are not required by the parties to be determined by the Tribunal.
The earliest evidence of any request for a rent reduction because of Covid-19 was in an email from the Applicant to the Respondents on 7 July 2020 which stated;
As we discussed, our shop, Tico bakery, has been largely impacted by COVID-19 since the day we started in March and we want to require a reduction in rent. Because we are newly opened the shop and there are not many customers in Spring hill these days, so we are sincerely willing to negotiate with the landlord about the reduction amount. If we could have 10% reduction for May to June, that would be greatly appreciated.
Nothing further appears to have happened about rent reduction until 9 September 2020 when the Applicant sent the following documents to the Respondents relating to its request for a rent reduction due to Covid-19;
(a)JobKeeper Statements issued by the ATO to the Applicant for the period 25 May 2020 to 19 July 2020. These Statements showed the “Wage subsidy” paid and current monthly turnover.
(b)Letter from Yu Wang, the senior Client Manager of Auslink, Accountants for the Applicants, certifying the tenant is a SME entity.
and also sought to negotiate the terms of the lease for reduction in rent for the relevant period.
On 14 September 2020 the Respondents’ requested all the Applicant’s documents and turnover reports from January 2020, GST activity statements, summary of government financial assistance and materials provided by government agency about financial assistance package. The Applicant was advised that on receipt of those documents the Respondents would review them and comply with the Regulation.
On 30 September 2020 the Applicants responded to the Respondents’ request for documents by;
(a)attaching a letter from their accountant stating the Applicants business turnover figures. (This letter confirmed annual turnover of the business is around $300,000)
and otherwise sought to debate whether other documents were required to be provided to the Respondent before it could consider a rent reduction.
On 2 October 2020 the Respondents sent a further letter to the Applicant advising that in order to comply with section 14 of the Regulation they required sufficient information to be provided for the parties to negotiate in a fair and transparent way and again requested the Applicant to supply documents as detailed in their letter of 14 September 2020.
Following further exchanges of correspondence the parties took part in an unsuccessful mediation conducted by Queensland Small Business Commissioner (QSBC). On 18 January 2021 the mediator nominated by QSBC informed the parties that while a mediation conference had been conducted, the outcome of the mediation was that no agreement was reached between the parties.
On 5 March 2021 the Applicants filed in the Tribunal a Notice of dispute – Retail Shop Leases Act 1994 relating to their dispute about the “Permitted Use” (now discontinued) and the COVID-19 rent relief claim. The outcome sought by the Applicant for its claim of COVID-19 rent relief was;
(a)60% of the monthly rent for March 2000 to June 2020 be waived;
(b)50% of the monthly rent for July 2020 to December 2020 be waived; and
(c)an order that no rent increases during the remainder two years of the lease.
The Respondents’ filed a Response and/or counter-application in the Tribunal on 1 June 2021. They disputed the claim under the “Permitted Uses” and the Covid-19 rent reduction. Orders were sought in respect of those two issues and that the Applicant pay the Respondents costs of and incidental to responding to the application on an indemnity basis.

Applicant’s Request for COVID-19 Rent Relief

The Applicant says that it provided financial documents to the Respondent consisting of; [2]
(a)Accountants letter of 28 August 2020 and September 2020;
(b)BAS between April and September 2020;
(c)Bankwest statements between 1 March 2020 and 20 April 2020;
(d)Bankwest statements between 17 June 2020 and 22 September 2020;
(e)JobKeeper statements issued by the ATO for the period 25 May 2022 19 July 2020.
[2]Statement of Renzong Zhang filed 26 August 2021 at paragraph 23.
The Applicant also says that an effort was made to mitigate the financial impact of COVID-19[3] and that invoices for online services can be provided if requested.
[3]Statement of Renzong Zhang filed 26 August 2021 at paragraph 24.
The Respondents say that when the Applicant requested rent relief pursuant to the Regulation it did not specify the rent relief that it was seeking. They say they requested financial documentation from the Applicant which was not provided. The Applicant did however provide a letter from their accountant stating that the annual turnover was $300,000 but the Respondents say they did not give any weight to this letter because the business had only been operating since January 2000 and for the nine months the Applicant had been in business, it could not have an annual turnover.[4]
[4]Statement of Sa-Ath Doeuk filed 21 September 2021 at paragraphs 23 - 27.
The Respondents also say that they were surprised the Applicant proceeded with the rent review claim because;[5]
(a)pursuant to the lease the Applicant was granted a rent-free period from 22 January 2020 to 21 March 2020; and
(b)they had negotiated, through the agent, an agreed 5% rent waiver to apply to the monthly rental for two months from 22 May 2020 to 21 July 2020 without the Applicants having to provide financials or supporting evidence of loss.
[5]Statement of Sa-Ath Doeuk filed 21 September 2021 at paragraph 29.
The Respondents also state that the Applicant advised that they had only commenced trading in March 2020 and there were no financial records from previous years for comparison of turnover.[6] The Respondent further states that from the financial documents provided by the Applicant, the average monthly sales were as follows;
(a)April 2020 to June 2020 $14,749.67 pm.
(b)July 2020 to September 2020 $35,651.00 pm
The Respondents say there was no decrease in turnover and that the Applicant is not entitled to any rent reduction relief.[7]
[6]Statement of Sa-Ath Doeuk filed 21 September 2021 at paragraph 46.
[7]Statement of Sa-Ath Doeuk filed 21 September 2021 at paragraph 49.

Jurisdiction of the Tribunal in these Proceedings

The power of the Tribunal to hear and determine proceedings is to be found in the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) and the enabling Act.[8]
[8]QCAT Act s 9.
The Application filed by the Applicant on 5 March 2021 was a Notice of dispute – Retail Shop Leases Act 1994. (RSL Act). The RSL Act provides that a “retail tenancy dispute” means;[9]
any dispute under or about a retail shop lease, or about the use or occupation of a leased shop under the retail shop lease, regardless of when the lease was entered into.
A retail shop lease is defined to include a lease of a retail shop but which definition does not include certain other specified types of leases not relevant to these proceedings.[10]
[9]RSL Act Schedule Dictionary.
[10]RSL Act s 5A.
A party to a retail tenancy dispute may apply to the Tribunal for an order to resolve the dispute.[11] The dispute referred to in the Application relates to the “Permitted Use” and a claim for Covid-19 rent reduction.
[11]RSL Act s 64.
The dispute relating to the “Permitted Use” is a retail tenancy dispute and is therefore within the jurisdiction of the Tribunal but for reasons already explained it is unnecessary for the Tribunal to consider this issue.
The second dispute relates to the Covid-19 rent reduction claim which is based on the Regulation and associated provisions in Rules prescribed by the Commonwealth Government. The question then becomes whether the Covid-19 rent reduction claim is within the Tribunal’s jurisdiction.
The Applicant requested on 7 July 2020 and 9 September 2020 the Respondents provide Covid-19 rent relief but was unsuccessful in obtaining the relief following negotiations and at a mediation conducted by QSBC.
The Regulation provides the Tribunal with jurisdiction to hear and decide “eligible lease disputes”[12] and provides that a person may apply to the Tribunal. An eligible lease dispute applies to an “affected lease dispute” which in general terms relates to a retail shop lease binding on the lessee at the commencement of the lease and who is a SME entity eligible for the JobKeeper scheme.[13]
[12]The Regulation s 42.
[13]The Regulation s 21 and 5.
The Applicant, on the evidence, satisfies the following requirements as to whether it has an “affected lease” within the meaning of the Regulation in that;[14]
(a)the Applicant’s lease is a retail shop lease;
(b)the lease is binding on the Applicant as at the commencement date of the lease; and
(c)the Applicant under the lease is a SME entity;
but, it is necessary to determine whether or not the Applicant satisfies that part of the definition of “affected lease” relating to the Applicant being eligible for the JobKeeper scheme.[15]
[14]The Regulation s 5(1).
[15]The Regulation s 5(1).
Eligibility for the JobKeeper scheme is in accordance with the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cwth). (the Coronavirus Regulation)[16] An entity, such as the Applicant, qualifies for the JobKeeper scheme in accordance with the following provisions;[17]
(1) For the purposes of paragraphs 6(1)(b) and 11(1)(c), an entity qualifies for the jobkeeper scheme at a time if:
(a) on 1 March 2020, the entity carried on a business in Australia, or was a non‑profit body that pursued its objectives principally in Australia; and
(b) the entity has satisfied the decline in turnover test at or before the time (see section 8).
[16]The Regulation s 5 (5). The Coronavirus Regulation is an instrument made under the Coronavirus Economic Response Package (Benefits) Act 2020 (Cwth) for jobkeeper payments intended to assist businesses affected by the Coronavirus to cover the cost of wages of their employees. The job keeper scheme starts on 30 March 2020 and ends on 27 September 2020. A business can also be entitled to a job keeper payment of $1500 per fortnight for one business participant who is actively engaged in operating the business.
[17]The Coronavirus Regulation s 7.
The decline in turnover test (referred to in the above quote) is set out in the following provision;[18]
(1) An entity satisfies the decline in turnover test at a time (the test time) if:
(a) the entity’s projected GST turnover for a turnover test period in which the test time occurs falls short of the entity’s current GST turnover for a relevant comparison period (the comparison turnover); and
(b) the shortfall, expressed as a percentage of the comparison turnover, equals or exceeds the specified percentage for the entity (see subsection (2)).
[18]The Coronavirus Regulation s 8.
The meaning of “the comparison turnover” (referred in the above quote) is explained in the following provisions;[19]
(7) For the purposes of this section:
(a) the turnover test period must be:
(i) a calendar month that ends after 30 March 2020 and before 1 October 2020; or
(ii) a quarter that starts on 1 April 2020 or 1 July 2020; and
(b) the relevant comparison period must be the period in 2019 that corresponds to the turnover test period.
[19]The Coronavirus Regulation s 8(7).
The Coronavirus Regulation also provided an alternative test to the decline in income test by the following provisions;[20]
(5) An entity also satisfies the decline in turnover test if:
(a) an alternative decline in turnover test determined by the Commissioner under subsection (6) applies to the entity; and
(b) the entity satisfies the alternative test.
(6) The Commissioner may, by legislative instrument, determine that an alternative decline in turnover test applies to a class of entities, if the Commissioner is satisfied that there is not an appropriate relevant comparison period for the purpose of an entity in the class of entities satisfying the decline in turnover test under subsection (1).
[20]The Coronavirus Regulation s 8(5) & (6).
The Applicant’s evidence provided to the Tribunal at the hearing is that it qualified as a small business entity (SME) and was in receipt of JobKeeper from the Australian Taxation Office for the period from 28 May 2020 to 9 July 2020 for an employee, Liting Zhang.[21] Other evidence included the Applicant’s BAS statements from April 2020 to September 2020 and bank statements from Bankwest for the period from 21 January 2020 until 6 April 2020.[22] The bank statements from Bankwest recorded income by borrowings from individuals and some other minor payments but did not contain any financial deposits from the business undertaking or trading. Presumably the $1500.00 JobKeeper payments were made into separate accounts or nominated accounts of Liting Zhang. While the lease provided for the commencement date of 22 January 2020, there is evidence that the shop premises were not officially opened until about 30 April 2020 or within the following seven (7) days.[23]
[21]Notice of dispute filed 5 March 2021 exhibit C17.
[22]Notice of dispute filed 5 March 2021 exhibit B2.
[23]Notice of dispute filed 5 March 2021 exhibit C1 at paragraph 2.
The Applicant did not provide evidence relating to a number of matters including;
(a)any documents or statements of evidence of how it came to be entitled or to obtain the JobKeeper payments from the ATO for its employee, Liting Zhang; and
(b)any documents or statements of evidence relating to whether or not it had been in business and trading in the preceding financial year from 1 April 2019 until 1 October 2019. If the Applicant had been in business and trading in 2019 it provided no documents of any turnover for that year or for any period trading in 2019 for comparison purposes with the Covid-19 rent reduction period being claimed from the Respondents.
(c)any documents or statements of evidence whether it had made an application to the ATO for an alternative decline in turnover test and whether or not the Commissioner had, by legislative instrument, determined that the alternative decline in turnover test applies to the Applicant.
In determining whether or not the Applicant’s lease is an “affected lease” within the definition of the Regulation, the Tribunal needs evidence that the Applicant is eligible for the JobKeeper scheme. There is evidence that at 1 March 2020 the Applicant had a lease of retail shop premises commencing on 22January 2020 but there is also evidence that it did not “officially start” to trade until at least 30 April 2020. Assuming for the moment that the Applicant was carrying on business in Australia as at 1 March 2020[24] (about which there is some doubt) there is no evidence that the Applicant had satisfied the decline in turnover test as part of the entitlement to the JobKeeper scheme[25] That is, there was no evidence of the Applicant’s turnover in 2019 which corresponded to the same period after 30 March 2020 and before 1 October 2020 in which the Applicant was seeking access to JobKeeper scheme.[26] Accordingly, there is no evidence before the Tribunal to satisfy the “decline in turnover test” which is required to establish the entitlement to the job keeper scheme.[27]
[24]The Coronavirus Regulation s 7(1)(a).
[25]The Coronavirus Regulation s 7(1)(b).
[26]The Coronavirus Regulation s 8(7).
[27]The Coronavirus Regulation s 7(1).

Based on the evidence discussed about the decline in turnover test, the Tribunal is not satisfied that the Applicant has established that the lease from the Respondents for the shop premises to commence on 22 January 2020 is an “affected lease” within the meaning of s 5 of the Regulation. As the Applicant has not established that the lease is an “affected lease”, the provisions of the Regulation and the Coronavirus Regulation do not apply to this lease.[28] As those Regulations have no application to the Applicant’s lease there is no enabling Act/Regulation available to give jurisdiction to the Tribunal. The Tribunal finds it does not have jurisdiction to hear and determine the Applicants claim for Covid-19 rent relief.
[28]The Regulation s 21.
However, that is not the end of the jurisdictional issue. The Coronavirus Regulation provides an “alternative test” to the “decline in turnover test”. This alternative test can apply, for example, to entities who may not have traded in 2019 and therefore have no turnover for that year. In that case the Coronavirus Regulation provides for the alternative test if the Taxation Commissioner determines that the alternative decline in turnover test applies to the entity and that the entity satisfies the alternative test. In those circumstances the Commissioner, by legislative instrument, determines that the alternative turnover test applies. However, this alternative test does not assist the Applicant in these proceedings. There is no evidence that the Applicants ever relied on any alternative test,[29] nor is there any evidence the Taxation Commissioner determined that there was any alternative test relevant to the Applicant, nor is there any evidence that the Commissioner has, by legislative instrument, made a determination that an alternative decline of turnover test applies to the Applicant. Accordingly, the Tribunal is not satisfied on the evidence that the alternative test method was adopted or could be used the Applicant. Accordingly, the Tribunal is not satisfied that the Applicants have established that the lease for the shop premises is an “affected lease” and the provisions of the Regulation and the Coronavirus Regulation do not apply to this lease. Accordingly, there is no enabling Act/Regulation available to give the Tribunal jurisdiction of the Applicant’s disputed claim. In these circumstances, the Tribunal is not satisfied that it has jurisdiction to hear and determine the Applicant’s claim for Covid-19 rent relief.
[29]The Coronavirus Regulation s 8(5) & (6).
The Tribunal finds that it does not have jurisdiction to hear the Applicants claim for the Covid – 19 rent relief. As this is the only remaining issue in dispute between the parties the Tribunal dismisses the Applicant’s Notice of dispute – Retail Shop Leases Act 1994 for lack of jurisdiction.

Is there a Valid Claim for Rent Reduction Assuming the Tribunal has Jurisdiction

In the event that assuming the Tribunal’s decision that it does not have jurisdiction is wrong, the Tribunal intends to decide whether the Applicant has a valid claim for Covid-19 rent reduction for the period from March 2020 to December 2020 and then for a prohibition on rent increases during the remainder two years of the lease.
The Applicant relies upon various documents provided in evidence including JobKeeper statements in 2020, BAS statements, Bankwest bank statements and correspondence from its Accountant.
The Respondents deny that the Applicant has a valid claim for rent reduction and rely upon the following;
(a)financial information sought from the Applicant is still missing;
(b)the Applicant was granted under the lease a rent-free period from 22 January 2020 to 21 March 2020;
(c)the parties negotiated a 5% rent waiver from 22 May 2020 to 21 July 2020;
(d)there are no financial records from the previous years for comparison of turnover;
(e)average increase in turnover of sales from April 2020 to June 2020 has increased from $14,749.67per month to $35,651.00 per month in the period from July 2020 to September 2020. There has been no decrease in turnover.
The Applicants rely upon the Retail Shop Leases and Other Commercial Leases (Covert – 19 Emergency Response) Regulation 2020 (the Regulation) as the basis for the Covid-19 rent reduction claim. However, as has already been explained above the Applicant is unable to establish that the lease with the Respondents is an “affected lease” within the meaning of the Regulation.[30] That is because the Applicant failed to provide any evidence to the Tribunal of any decline in turnover or to provide any evidence of the alternative test determined by the Taxation Commissioner in the event that it did not have any turnover in 2019. Accordingly, the Regulation and the Coronavirus Regulation has no application to the Applicant’s lease.[31] The Tribunal finds that the Applicant does not have a claim for rent reduction under the Regulation or under the Coronavirus Regulation. The Applicant’s claim is dismissed.
[30]The Regulation s 5(1)
[31]The Regulation s 21.
Further grounds exist for dismissing the Applicant’s claim. The evidence before the Tribunal establishes that the Applicants turnover during 2020 increased. There was no evidence of any reduction of turnover in the Applicant’s business through to September 2020. Secondly, the Applicants claim for no rent increases from December 2020 the next two years of the term of the lease is not a matter that comes within the purposes of the Regulation.
The main purpose of the Retail Shop Leases and Other Commercial Leases (COVID- 19 Emergency Response) Regulation 2020 (the Regulation) was to mitigate the effects of the COVID-19 emergency on lessors and lessees under affected leases during 2020 and to establish a process of resolving affected lease disputes.
The Tribunal finds that the Applicant has not made out any entitlement to a rent reduction in accordance with the Regulation. The Tribunal dismisses the Applicants Notice of dispute-Retail Shop Leases Act 1994 filed on 5 March 2021.

Costs

The Respondent’s seek their costs of this Application on an indemnity basis.
The general principle for costs in the Tribunal is that each party usually bears its own costs of the proceedings.[32]
[32]QCAT Act s 100.
The Tribunal has a discretion to order a party to pay all or a stated part of the costs of another party to the proceedings if the Tribunal considers the interests of justice require it to make the order.[33] However, before exercising its discretion the Tribunal can have regard to a number of matters specified in s 102(3)(a) to (f).
[33]QCAT Act s 102.
The Respondents have successfully defended Applicants proceedings. However, that is not, by itself, sufficient reason for awarding costs.
No evidence has been provided to the Tribunal by the Respondents in respect of any of the matters referred specified in s 102(3). Nor is there any evidence or submission as to why it would be in the interests of justice to require the Applicant to pay the Respondent’s costs. Nor is there any evidence
The Respondents seek an order for costs on an indemnity basis. Whether costs should be awarded on a solicitor and own basis or on an indemnity basis is not explained by any evidence or submissions before the Tribunal. There are no details provided of the costs incurred or how costs have been incurred including the total amount incurred for cost. If there is a solicitor and client agreement as to costs that is not in evidence.
The Tribunal is not satisfied that it should depart from the general rule that each party to the proceedings must bear the parties a costs for the proceedings.
The Tribunal dismisses the Respondents costs application.