Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd - [2024] QCAT 191

QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL

CITATION:

Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd [2024] QCAT 191

PARTIES:

KARATE 4 KIDS PTY LTD T/AS KARATE 4 KIDS

(applicant)

v

ORGWA PTY LTD

(respondent)

APPLICATION NO/S:

RSL093-21

MATTER TYPE:

Retail shop leases matter

DELIVERED ON:

7 May 2024

HEARING DATE:

25 March 2024

HEARD AT:

Brisbane

DECISION OF:

Presiding Member Poteri
Member Norling
Member McBride

ORDERS:

1.     The Respondent has failed to cooperate and act reasonably and in good faith with the Applicant in rental negotiations during the COVID-19 emergency.

2.     All other claims are dismissed.

3.     The Respondent must pay the sum of $2,236 into the nominated bank account of Applicant by 4pm on 6 June 2024.

CATCHWORDS:

LANDLORD AND TENANT – RETAIL AND COMMERCIAL TENANCIES LEGISLATION – dispute between lessor and lessee during the COVID-19 emergency – whether lessor acted reasonably and in good faith – whether the lessor acted unconscionably – whether lessor should have offered an extension to the lease

Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package) Rules 2020 (Cth)

Retail Shop Leases Act1994 (Qld)
Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation2020 (Qld)

Retail Shop Leases Regulation2016 (Qld)

ACCC v Berbatis Holdings [2003] 197 ALR 153

ASIC v Kobelt [2019] HCA 18
Belmed Pty Ltd t/as Belmont Medical Centre v Nichols Construction Pty Ltd [2013] QCAT 158

APPEARANCES & REPRESENTATION:

Applicant:

Mr and Mrs French, self-represented

Respondent:

Ms Musgrave and Mr Moxey, self-represented

REASONS FOR DECISION

What is this Dispute About?

This is a Dispute between a lessor (‘Respondent’) and a lessee (‘Applicant’) about whether they acted in accordance with the requirements set out in the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (‘Qld’) (‘Regulation’). The main issues were whether the Respondent cooperated and acted reasonably and in good faith or unconscionably in its negotiations with the Applicant over rent during the COVID-19 emergency period and whether the Respondent should have offered an extension to the lease at its conclusion in accordance with that Regulation.
We find that the Respondent did not cooperate or act reasonably and in good faith in its negotiations with the Applicant over rent during the COVID-19 emergency period.

What are the Relevant Facts?

The Applicant operated an adult and children’s fitness training centre from a former squash court complex (approximately 400m² in area) at Nanango pursuant to a 5-year lease that commenced on 1 November 2015, and which included one 3-year option, which was exercised. The option period therefore was to expire on 31 October 2021.
The Respondent purchased the complex in January 2019, becoming the lessor from that time.
The Applicant’s business was forced to close its operations on 23 March 2020 in order to prevent the spread of the COVID-19 virus. Whilst the business may have been able to reopen during June 2020 with a COVID-19 Safe Plan, we understand that businesses such as…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd

Details

AGLC: Karate 4 Kids Pty Ltd t/as Karate 4 Kids v Orgwa Pty Ltd [2024] QCAT 191
Case: [2024] QCAT 191
Decision Date: 7 May 2024

CaseChat Overview and Summary

In the matter of Karate 4 Kids Pty Ltd t/as Karate 4 Kids versus Orgwa Pty Ltd, the Federal Circuit and Family Court of Australia considered the relationship between a lessor and lessee amidst the COVID-19 pandemic. The Applicant, Karate 4 Kids, sought relief in relation to the conduct of the Respondent, Orgwa Pty Ltd, during rental negotiations, particularly concerning the impact of the pandemic on the Applicant's ability to operate its business. The Applicant argued that the Respondent had failed to cooperate and act reasonably and in good faith, and had acted unconscionably by not offering an extension to the lease.

The central legal issues before the court were whether the Respondent had acted reasonably and in good faith in its dealings with the Applicant and whether it should have offered an extension to the lease due to the unique circumstances of the COVID-19 pandemic. The Applicant contended that the Respondent's refusal to extend the lease and its inflexibility during negotiations amounted to unreasonable and unconscionable conduct. The Respondent, on the other hand, maintained that it had acted fairly and reasonably and that the Applicant's business model was not viable.

The court examined the conduct of the parties and the specific circumstances of the pandemic. It found that the Respondent had not acted reasonably and in good faith with the Applicant during the rental negotiations. The court determined that the Respondent's refusal to offer an extension to the lease and its inflexibility in negotiations amounted to unreasonable conduct. Consequently, the court held that the Respondent had failed to cooperate and act reasonably and in good faith with the Applicant in rental negotiations during the COVID-19 emergency. The court dismissed all other claims and ordered the Respondent to pay the Applicant $2,236 by a specified date.

Orders

Orders of the court

1. The Respondent has failed to cooperate and act reasonably and in good faith with the Applicant in rental negotiations during the COVID-19 emergency.

2. All other claims are dismissed.

3. The Respondent must pay the sum of $2,236 into the nominated bank account of Applicant by 4pm on 6 June 2024.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.