Multistar Pty Ltd v Popkorn Group Pty Ltd; Popkorn Group Pty Ltd v Multistar Pty Ltd

[2025] NSWCATCD 1

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:

Multistar Pty Ltd v Popkorn Group Pty Ltd; Popkorn Group Pty Ltd v Multistar Pty Ltd [2025] NSWCATCD 1

Hearing dates:

20 May 2024

Date of orders:

24 December 2024 (Amended 06 January 2025)

Decision date:

24 December 2024

Jurisdiction:

Consumer and Commercial Division

Before:

G Ulman Senior Member

Decision:

The Notice of Order issued 24 December 2024 is amended under Section 63 of the Civil andAdministrative Tribunal Act 2013, and should read as follows:

The new date for order (1) is 3 February 2025 replacing “31 January 2025.”

Typo error on Order (6) and paragraph page 55 Order (5).

(1)   In applications 2024/00021261 and 2024/00183545:

(2) Pursuant to section 72(1)(c)(ii) of the Retail Leases Act, 1994, Popkorn Group Pty Limited is to surrender to Multistar Pty. Limited possession of the premises known as 46 Erskine St, Sydney, New South Wales, by 4.00pm on 3 February 2025.

(3)   Within 14 days, Multistar Pty. Limited is to file and serve an affidavit of debt detailing the amount of rent paid and remaining unpaid under the lease for the period 20 May 2024 up to and including the date of the affidavit.

(4) In the event Popkorn Group Pty Limited and Mr Akash Deep wish to make an objection in relation to the calculation of the amount stated in the affidavit of debt, the objection, in the form of a written submission of no more than two A4 pages, must be filed and served within a further 7 days, and the Tribunal will then make a decision as to the amount the lessee and Mr Deep will be ordered to pay the lessor on the papers, as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013, unless persuaded that there should be oral submissions.

(5) In the event a party wishes to make a cost submission, it must file and serve a written submission of no more than four A4 pages within 21 days, any written submissions in reply of no more than four A4 pages in length must be filed and served within a further 21 days, and the Tribunal will then make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013, unless persuaded that there should be oral submissions.

(6)   If no cost submissions are filed and served within the time specified in the preceding order, then the order of the Tribunal is that Popkorn Group Pty Limited and Mr Akash Deep pay Multistar Pty Limited’s costs of and incidental to the proceedings.

Catchwords:

Retail Lease – COVID regulations and National Cabinet Mandatory Code of Conduct - claim by lessor for rent arrears and surrender of possession of leased premises – whether lessor renegotiated in good faith rent payable during the prescribed period - whether lessor engaged in unconscionable conduct – whether lease has been validly terminated - liability of the guarantor

Legislation Cited:

Retail Leases Act 1993

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

Cases Cited:

Darzi Group Pty Ltd v Noide Pty Ltd [2021] NSWSC 774

Tuon v Popo Big Bowl Noodles Pty Ltd; Popo Big Bowl Noodles Pty Ltd v Tuon [2022] NSWCATCD 172

Weiss v Agus [2024] NSWCATAP 51

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Multistar Pty Ltd
applicant/cross respondent
Popkorn Group Pty Ltd
Mr Akash Deep
respondents/cross applicants

Representation:

Mr D R S Creais
Solicitor for Multistar Pty Ltd
Mr SG Spring
Lay advocate for Popkorn Group Pty Ltd
and Mr Akash Deep
Solicitors:
Bartier Perry for Multistar Pty Ltd

File Number(s):

2024/00021261 and 2024/00183545

Publication restriction:

Nil

REASONS FOR DECISION

Introduction

1. There are two retail lease applications to be determined by the Tribunal. Application 2024/00021261 is a claim by Multistar Pty Ltd (lessor) against Popkorn Group Pty Ltd (lessee) and its guarantor, Mr Akash Deep (Mr Deep). Application 2024/183545 is a claim by the lessee against the lessor.

2. Both claims arise out of a lease dated 31 July 2018 (lease) by which the lessor leased to the lessee 46 Erskine Street, Sydney (premises). Mr Deep is the guarantor of the lessee’s obligations under the lease.

3. The lessee is still in occupation of the premises, the option under the lease having been exercised.

4. The lessor alleges that in breach of the lease, the lessee has failed to pay rent that is due and has also failed to provide a replacement bank guarantee, the original bank guarantee having been called on to pay for rent arrears.

5. The lessor is claiming from the lessee and Mr Deep unpaid rent in the amount of $185,341.70 plus $9727 per month for each month after 20 May 2024 that the lessee remains in possession of the premises, less any payments made. The lessor also seeks orders that the lessee surrender possession of the premises and pay the lessor’s costs.

6. Although it is the named applicant, the lessee’s application serves as a defence and cross claim on behalf of the lessee and Mr Deep. The lessee and Mr Deep dispute the amount claimed by the lessor on the basis that there has been a failure on the part of the lessor to comply with the New South Wales COVID-19 Regulations and with the National Cabinet Mandatory Code of Conduct—SME Commercial Leasing Principles During COVID-19 (Code). They seek an order that the lessor be perpetually barred from claiming any shortfall of the rent and outgoings said to be the difference between rent at the rate described by the Code and the amount claimed by the lessor. They also seek a declaration that by reason of the lessor’s unconscionable conduct, the lessee does not owe any rent shortfall.

7. A declaration is also sought that any termination notices given by the lessee prior to and including 31 October 2023 are of no effect, an order that the lessor register the lease when the rent is determined by a specialist retail valuer, and any other order under section 72 (3) of the Retail Leases Act (RL Act) the Tribunal sees fit to make.

8. An order was also sought that the lessee has validly exercised an option under the lease, but this is now unnecessary since the exercise of the option is not disputed by the lessor.

9. There is a history of litigation in the Tribunal between these parties dating back to 2021.

Background

10. The background events leading up to these proceedings are taken from the documents in exhibit AD-1 to Mr Deep’s 20 May 2024 statement. Both parties rely upon the documents in the exhibit.

11. The exhibit consists of the lease, correspondence (both letters and emails) between the parties and their respective legal representatives, invoices issued to the lessee by the lessor’s agent, the lessee’s BAS statements from January 2019 through to April 2020, and documents filed in earlier proceedings between the parties, including a transcript and a decision of the Tribunal made in those earlier proceedings.

12. The documents in the exhibit are not in chronological order. A number of the letters that are included refer to other correspondence that has not been included in the exhibit. Further, some of the correspondence is marked “without prejudice except as to costs” or similar. By including that correspondence in the exhibit without objection, and the parties representatives having referred to the correspondence in the course of the hearing and in written submissions, I have proceeded on the basis that any privilege that would otherwise attach to the correspondence has been waived by the parties.

The lease

13. The lease is expressed to be for a term of five years commencing on 31 July 2018 and terminating on 30 July 2023. The permitted use of the premises is described in the lease as “small licence bar and café.”

14. The lease has been signed by the lessor, the lessee and Mr Deep as guarantor for the lessee’s obligations under the lease.

15. The lease contains one option to renew for a period of five years. The option was exercised on 2 February 2023, but a new lease document has not yet been prepared. For the purposes of these reasons, a reference to “the lease” includes the option lease.

16. The initial rent payable under the lease was $100,826.24 plus GST. The annual rent increase was fixed at 5%. The lease also provided for a 5% per annum rent increase in the event the option is exercised. The lessee is required by the lease to pay the 38.13% of council rates, water, sewerage and drainage rates, and land tax for the premises.

17. Clause 5.1 of the lease requires the lessee to pay rent to the lessor by equal monthly instalments on the first day of each month. This obligation to pay rent is an essential term of the lease (clause 18.3 (a)(i)).

18. By clause 11.1(c), the lessee indemnifies the lessor against, and is required to pay to the lessor on demand, all costs and expenses incurred in connection with any default by the lessee under the lease, including legal costs.

19. Clause 23.1(a) of the lease requires the lessee to provide the lessor with a bank guarantee in the amount of $23,952 as security for its obligations under the lease. By clause 23.1(c), the lessor is permitted to call on the bank guarantee without notice to the lessee in the event of the lessee’s default under the lease and to use those proceeds to remedy the default. In the event of the bank guarantee being called upon by the lessor, the lessee is required to provide an additional or replacement guarantee (clause 23.1(c)).

20. The provision of the bank guarantee and a replacement bank guarantee are also essential terms of the lease (clause 18.3(a)(viii)).

21. By clause 18.4 of the lease, the lessor is permitted to treat the breach of an essential term as a repudiation of the lease and terminate the lease in the event of such breach if the breach has continued for at least 14 days. The lessor is also entitled to immediate possession of the premises.

22. Clause 22.16 of the lease provides that in the event of there being a retail tenancy dispute or retail tenancy claim arising between the parties, they must ensure that it is referred for mediation or lodged for determination in accordance with the RL Act.

23. By clause 24.2 of the lease, Mr Deep unconditionally and irrevocably guarantees to the lessor the performance of all of the lessee’s obligations under the lease. Clause 24.3(i) also requires him to indemnify the lessor against any claim, loss, liability, or expense incurred that was caused or contributed to by the lessee’s failure to comply with an obligation under the lease. Mr Deep was also required by clause 24.3(b) to pay on demand any money owing to the lessor under the indemnity.

The pandemic and post pandemic period

24. As a result of the New South Wales Government’s health orders introduced in March 2020 as a consequence of the COVID-19 pandemic, trading and movement restrictions were imposed in New South Wales.

25. On 7 April 2020, the National Cabinet adopted the Code.

26. The first of the New South Wales Government’s COVID regulations, the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW), came into force on 24 April 2020. For convenience, those regulations, together with the later COVID pandemic regulations will be collectively referred to as the (COVID regulations)

27. The COVID regulations prohibited lessors from taking “prescribed action” which included recovery of the leased premises, recovery of the whole or part of a security bond or termination of a commercial lease during the “prescribed period” against an “impacted lessee.” An impacted lessee was one who qualified for JobKeeper under the Commonwealth Government’s Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 and whose turnover in the 2018-2019 financial year was less than $50 million.

28. On about 20 August 2020, the lessee applied to the Small Business Commissioner for mediation of a dispute. The application describes the dispute as follows:

This dispute is about rent abatement, lease renegotiation and compensation. I have attempted contact to start a dialogue and begin negotiations with my landlord for over 2 months and have little to no response. I have called them multiple times with no response, happy to provide call records.

29. What actually preceded the mediation application in terms of rent negotiations between the parties is not readily apparent from the documents in exhibit AD-1.

30. Exhibit AD-1 contains a witness statement dated 17 April 2023 made by Mr David Creais (Creais statement), a partner with Bartier Perry, the lessor’s solicitors. The statement was prepared for earlier proceedings between the parties. In his affidavit, Mr Creais says that no rent was paid by the lessee between 31 March and 30 June 2020 and an amount of $7383.91 was paid by the lessee on 29 July 2020.

31. Also in Exhibit AD-1 is an undated letter from the lessor’s agent to the lessee that appears to have been written sometime after 3 July 2020 and before 9 September 2020.

32. The undated letter says that the tenant has failed to pay rent “during the period from 23 April to 24 April 2020” and… “the current amount outstanding for that period is $0.00.” A demand is then made for the amount outstanding. This is obviously a mistake.

33. The letter goes on to say that in relation to “the unpaid rent for the period after 24 April 2020 ($49,916.32) according to the leasing Regulations introduced on 3 July 2020, the tenant must provide to the Lessor true and fair accounting business records and financial information…. that is sufficient for the Lessor to verify that the tenant qualifies under the Regulations.” Evidence is also requested that the tenant qualifies for jobkeeper.

34. On 9 September 2020, HWL Ebsworth (HWL), who were then acting for the lessee, sent a letter to Mr Xu. HWL said that as a result of the pandemic and restrictions imposed by the government, the lessee’s business had seen a 60% reduction in gross revenue/turnover for the second quarter of 2020 as compared to its revenue in the 12 months between April 2019 March 2020. The lessee’s weekly revenue, they said, was around $6000, inclusive of GST. HWL requested rent relief for the lessee and an opportunity for a reasonable recovery. This request was said to be in accordance with the COVID regulations and the Code. Enclosed with the letter was the lessee’s Jobkeeper enrolment confirmation and Business Activity Statements for the period ending June 2019 through to June 2020.

35. There is no dispute that the lessee was an “impacted lessee” for the purposes of the COVID regulations.

36. What was being sought by HWL on behalf of the lessee was a rent waiver for the last week in April and for the months of May, June and July 2020, and a 60% rent waiver from August 2020 until the expiration of the rent relief prescribed under the COVID regulations.

37. In addition, HWL also requested an adjusted base rent from 1 January 2021 through to 30 June 2023, the end of the first term of the lease. They said the formula proposed would see a reduction in rent of not more than 50% of the current monthly base rent having regard to the lessee’s average gross turnover per month.

38. HWL also proposed that the lease be varied to suspend fixed rent reviews until the expiration of the lease term on 30 June 2023.

39. HWL sent an email to Mr Xu on 22 September 2020 asking if he had received any instructions in relation to their client’s request for rent relief. The same day Mr Xu replied saying that he had “reported (the) request to the landlord.”

40. On 12 October 2020, Mr Deep sent an email to the lessor’s agent asking to “please get (the) statements updated.” Three OSKO withdrawal payments are then listed in the email. The agent responded by email the same day saying he “will double check again.”

41. On 16 October 2020, the agent sent an email to the lessee that simply reads, “Please see the attached as above.” There is no attachment to the email in exhibit AD-1

42. On 23 October 2020, Mr Xu sent an email to the lessee stating, “As requested by the landlord, we will hold a meeting with you some time next week. Would you please give us a date when you can come to discuss this matter in our office.”

43. Mr Deep replied by email on Monday, 26 October 2020. He thanked Mr Xu for his email and asked that he provide a “little more information on what is needed to be discussed” and that he was happy to come on Wednesday afternoon.

44. The same day, 26 October 2020, Mr Xu sent an email to Mr Deep. He said he was too busy to meet on Wednesday but could meet Thursday afternoon at 3 PM.

45. The evidence does not disclose whether that meeting ever took place or what rent relief negotiations took place, if any, between 26 October 2020 and 15 January 2021.

46. On 15 January 2021 the Deputy Registrar, Retail Tenancy Disputes, issued a certificate under section 68 of the RL Act. The schedule to the certificate states: “The lessor has not accepted the Registrar’s offer of mediation.” There are no documents in exhibit AD-1 that shed any light on the attempts made by the Deputy Registrar or the lessee to arrange the mediation or why, as stated in the certificate, the lessor did not accept the offer of mediation.

47. In application COM 21/15328 for interim orders dated 6 April 2021, Mr Deep applied to the Tribunal seeking, as against the lessor, an order “to force landlord to mediate, not lock me out and settle the matter according to the mandatory code of conduct.” According to the application, Mr Deep’s reasons for seeking that order were that the “landlord has not replied to the multiple letters and emails sent by my lawyers and myself. I’m worried that they will take legal action against my personal guarantee and lock me out.”

48. Exhibit AD-1 contains a letter from Mr Deep to the Tribunal dated 6 April 2021, which appears to have been included with the application. In the letter, Mr Deep explained how the pandemic was affecting his business. Amongst other things he said this:

My landlords have refused to negotiate my rent, they have not complied with the code of conduct or any of the government regulations under the code. My lawyers and me have sent them multiple letters and email to seek help with rent but there is no reply.

49. To this point. Exhibit AD-1 does not contain any letters or emails from the lessee’s solicitors or the lessee to the lessor seeking rent relief other than the HWL letter.

50. In the substantive retail lease application COM 21/12329 filed at the same time, Mr Deep, the applicant, claimed a total of $117,000 and sought a waiver of a portion of the rent, which he says he could not pay from April 2020 until March 2021.

51. Both applications were dismissed on 30 April 2021 with a Principal Member Rosser strongly encouraging the parties to attempt to resolve any ongoing disputes through mediation. In an affidavit filed in support of a 2023 application to the Tribunal (which is included in Exhibit AD-1), Mr Deep said that applications COM 21/15328 and COM 21/12329 were withdrawn as the lessor “refused to take part in those proceedings.” There are no documents in exhibit AD-1 that explain the basis for this statement.

52. On 27 April 2021, NJ Papallo Lawyers (NJ Papallo), acting for the lessee, sent a letter to Mr Xu. The letter was in response to a tax invoice dated 23 April 2021 sent to the lessee for what was said to be an outstanding balance of $83,182.78. In their letter, the solicitors said this:

Attached is a spreadsheet title “Popkorn Group Rental Position” which we believe more correctly represents the current position.

It is clear from the balance you allege is outstanding that you have failed in apply (sic) any relief under the Covid-19 Code of Conduct (and the related legislation).

We are instructed that you have continued to refuse to apply any relief notwithstanding both, our client and its previous lawyers, providing you with the requisite evidence that Popkorn Group Pty Ltd is ‘impacted lessee’ as defined by the relevant legislation.

Further to this, we note that the Lessor has refused to accept the Registrar’s offer of

mediation and in all material effect, refused to negotiate in any genuine manner.

Even if our client was in any arrears that occurred during the ‘prescribed period’, which we reject, your actions preclude you from taking any ‘prescribed action’ for the alleged arrears.

We suggest you update your records and reissue your Tenant Tax Invoice reflecting the actual position of the rental with the appropriate relief as required by the Covid-19 Code of Conduct.

….

Our tenant (sic) is also prepared to commence repayment of the deferred amount in accordance with the COVID-19 Code of Conduct.

53. The spreadsheet attached to NJ Papallo’s letter shows that for the period 31 March 2020 to 30 April 2021:

1. the total amount invoiced for rent was $129,391.50, inclusive of GST. with the lessee paying $46,209.91 during that period; and

2. the difference between those two amounts is $83,181.59, of which $41,590.13 is described as “waived” and $41,590.13 “deferred.”

54. On 21 October 2021 Mr Xu sent an email to the lessee that reads as follows:

Dear Tenants,

Further to the phones before.

Just remind you the owner’s instruction as below.

Rent reduction as (sic) 20% off for 4 months, for 1 April 2020 to 30 July 2020. Totally reduce rent $7,393.9.

All the other rent should be paid in full based on lease agreement.

Should you have question, please let us know.

Kind regards

Norris Xu

NJ Papallo replied on 27 October 2021. Their email reads as follows:

Dear Norris,

As you are aware, based on the figures provided to you last year, the concession below is not in accordance with the mandatory concessions required by the relevant legislation.

We suggest that you remind the landlord of its legal obligations and reissue any statements to properly reflect the requirements of the legislation.

Regards

David Papallo

55. There is no evidence of any further communication between the parties until February 2023, a gap of over 12 months.

56. On 2 February 2023, the lessee solicitors sent the notice of exercise of option to the lessor with a copy to the lessor’s agent. Mr Xu responded the same day by email stating that he will report to the lessor and seek instructions and update once he has a response.

57. The next communication between the parties is on 15 March 2023. On that date, Mr Creais sent a letter by email to NJ Papallo’s David Papallo. Mr Creais asserted that the lessee was in breach of the lease for non-payment of rent and that as at 1 March 2023 the sum of $251,382.75 was owing for the period 1 August 2019 through to 28 February 2023. A notice of termination of lease was enclosed with the letter.

58. The notice states that in breach of the lease, the lessee failed to pay rent instalments for the period 1 August 2019 to 28 February 2023, which was a breach of an essential term of the lease. The notice then went on to state that in accordance with clause 18.4 of the lease, the lessee considered the breach to constitute a repudiation of the lease by the lessee, and the lessor elects to terminate the lease ,which is to take effect from midnight on 23 March 2023.

59. On 15 March 2023, Mr Papallo sent an email to Mr Creais. Mr Papallo said that he had been instructed in the matter in early 2021 after the lessor had refused to participate in any mediation. Further, the amount claimed by the lessor had not been adjusted under the Code or related legislation. Mr Papallo asked Mr Creais to seek instructions He also said the notice and demand were invalid and unenforceable.

60. On 17 March 2023, Mr David Creais responded by email to Mr Papallo. Mr Creais said that he was seeking instructions, but said that the lessor was entitled to rely on a breach of the lease for non-payment of rent during any period the COVID regulations do not apply, which he said included the period from 30 June 2022. Mr Creais went on to say that rent payable under the lease from 31 July 2022 until 30 July 2023 was $134,810.41 per annum, which equates to $11,234.20 per month. Mr Creais said that according to his instructions, since 31 July 2022 the lessee only paid six instalments of $4202, each and the lessor was entitled to terminate the lease without notice, relying on those breaches alone.

61. The parties, solicitors traded further emails. They argued over whether rent increases for 2020 and 2021 that were provided for under the lease were to be frozen for the duration of the pandemic and a reasonable subsequent recovery period, as asserted by the lessee’s solicitor, or allowed between 1 January and 12 July 2021 and from 14 March 2022 onwards, which were said by the lessor’s solicitor to be outside the prescribed periods under the COVID regulations. They also argued over how many rent payments were made by the lessee from July 2022 to February 2023.

62. In an email sent on 20 March 2023, Mr Papallo said he was instructed that due to the significant downturn in trade within the CBD, the lessee offered to pay a reduced amount going forward, to which, until the week prior to the email being sent, there was no objection to what had been received. While acknowledging that his client did not receive confirmation that the offer had been accepted, he said that this was not unusual in the circumstances where the agent or lessor often did not respond for months at a time, and on some matters, such as applying COVID concessions, no response was ever forthcoming.

63. Mr Creais replied by email the same day saying that he had no further instructions at present, but as soon as they were received he would let Mr Papallo know.

64. On 20 March 2023, Mr Deep filed two further applications, COM 23/13458 seeking an interim order, and 23/13461, a retail lease claim, seeking substantive orders. The interim order sought by Mr Deep was “to stop termination of the current lease.” The substantive application does not specify any orders sought. Presumably, it was to restrain the lessor on the final basis from terminating the lease, as the reasons given by Mr Deep for making the application were that “Notice for the termination of the lease has been issued without any prior notice” and “(he) tried to contact the landlord on multiple occasions without any response from them.”

65. On 21 March 2023, Principal Member Rosser, made a number of interim orders, including an order restraining the lessor from taking possession of the premises or otherwise interfering with the lessee’s occupation of the lease premises, on condition that the lessee pays rent and outgoings as and when they fall due. The order was to remain in force until 5:00 PM on 21 April 2023, when the application for interim orders was listed for hearing and the application for substantive orders was listed for directions.

66. On 21 April 2023, Senior Member Ellis SC made the following orders:

1. The name of the applicant is amended to Popkorn Group Pty Ltd.

2. The restraining order made on 21 March 2023 is discontinued.

3. The interim application is otherwise dismissed.

4. The applicant is to pay the respondent’s costs of this (interim) application, on the ordinary basis, as agreed or assessed.

67. In his reasons dated 26 April 2023, the Senior Member relevantly said this:

4. The submissions for the applicant raised a number of issues, including what rent was payable during the period to which the Mandatory Code of Conduct (Cth) and Regulations (NSW) applied during the pandemic, the validity of the rent increases, and the conduct of the parties. Submissions for the respondent referred to the obligation to pay rent, in clause 18 of the lease, the failure to pay rent, and the absence of any payment since the restraining order was made on 21 March 2023. Submissions in reply included the suggestion that discussions may lead to an agreement a (sic) to what amount is payable.

Consideration

5. It was agreed that COVID-19 restrictions and regulations ceased to have effect from 1 July 2022. The rent ledger suggests that the monthly rent was initially $7,216.68 and is now $8,402.19. The evidence is that the applicant has made eight payments of $4,202 from 5 July 2022 to 28 February 2023, a period of more than seven months. There are plainly arrears of rent arising from a post-pandemic period and the applicant has not made any payment of rent since the restraining order was made on 21 March 2023. Accordingly, there is a clear failure to pay rent which gives the respondent rights under the lease.

6. That being the case, the restraining order should not be continued and the (interim) application dismissed. The solicitors for the parties agreed that costs should follow the event.

68. On 30 April 2023, Principal Member Rosser made the following orders in both COM 23/13458 and COM 23/13461:

1. The application is dismissed because it is withdrawn.

2. The parties are strongly encouraged to attempt to resolve any ongoing disputes through mediation.

69. It appears that the Principal Member’s encouragement again fell on deaf ears.

70. On 1 June 2023, Bartier Perry sent a letter to NJ Papallo that detailed their costs and contained an offer to settle the cost order. In the letter, Bartier Perry referred to NJ Papallo’s 21 April 2023 letter and said the offer in that letter was rejected. A copy of that letter is not contained in exhibit AD-1 so it is not known whether the offer in the 21 April 2023 letter was in relation to rent, costs or both. Bartier Perry’s letter then sets out an offer, in relation to the cost order.

71. On 15 June 2023, NJ Papallo sent a letter to Bartier Perry. It is marked “without prejudice save as to costs.” The letter refers to Bartier Perry’s 1 June 2023 letter and contains a settlement offer said to be in response to the paragraph numbering in Bartier Perry’s 1 June 2023 letter.

72. The Bartier Perry letter of 1 June 2023 that is included in exhibit AD-1 says nothing about rent arrears, which suggests that there was a second letter from Bartier Perry of that date that was not included in the exhibit. The letter in exhibit AD-1 is an offer to settle the costs order made by the Tribunal on 21 April 2023.

73. Amongst other things, NJ Papallo’s 15 June 2023 says that the lessee has calculated a total amount owing to 30 June 2023 of $94,259.24. It refers to a spreadsheet attached. There is no spreadsheet attached to the letter.

74. About 27 July 2023, the lessor called on the $23,952 bank guarantee that the lessee had been provided as security in accordance with the terms of the lease. It received the full amount, which was applied in reduction of rent arrears. A replacement bank guarantee has not been provided by the lessee.

75. A letter dated 24 August 2023 from Bartier Perry to NJ Papallo, and marked “without prejudice except as to costs” refers to NJ Papallo’s 15 June 2023 letter. The Bartier Perry letter contains a settlement offer by which the lessor offers to accept the sum of $139,312.40 by instalments for rent outstanding from 1 April 2020 to 30 June 2022, with the first payment to be made on 31 August 2023 and the final payment on 31 December 2023. It was a term of the offer that the lease terminate on 31 August 2023. The letter also goes on to say this:

1. Monthly rent of $10,699.24 was used to calculate the amount of $139,312.40 notwithstanding that the lessor is entitled to $11,234.20;

2. The sum of $139,312.40 represents a discount of approximately 30% on the outstanding rent for the COVID-period;

3. The lessor is willing to forgo all entitlement to interest on outstanding rent; and

4. Acceptance of the offer will save the parties and the Tribunal the unnecessary time and costs involved in further legal proceedings.

76. There was no response from the lessee or its solicitors to that letter.

77. On 31 October 2023, Bartier Perry sent a letter to the lessor marked for the attention of Mr Deep. The letter stated that the sum of $210,353.56, inclusive of GST, was owing by the lessee in unpaid rental instalments including $35,387.73 for the period 1 August to 31 October 2023. The letter also stated that money received in respect of the lease had been applied to the earliest default under the lease. The letter then went on to say that there was an obligation to replace the original bank guarantee that had been called on but no additional or replacement bank guarantee had been provided. Bartier Perry said the lessor was entitled to immediately terminate the lease for breach. A notice of termination of the lease, also dated 31 October 2023 (termination notice), was enclosed with the letter.

78. The termination notice reads as follows:

NOTICE OF TERMINATION OF LEASE

To: Popkorn Group Pty Ltd ACN 606 602 877

46 Erskine Street, Sydney NSW 2000

And c/- N J Papallo Lawyers

Level 5, 350 Kent Street, Sydney NSW 2000

From: Multistar Pty Ltd ABN 23 072 013 275

Level 9, Sun Tower, 591 George Street

Sydney NSW 2000

RE: Lease from Multistar Pty Ltd to Popkorn Group Pty Ltd of 46 Erskine

Street, Sydney NSW 2000 dated 4 September 2018

Popkorn Group Pty Ltd ACN 606 602 877 (Lessee) is the Lessee of the

premises commonly known as 46 Erskine Street, Sydney (Premises) from

Multistar Pty Limited ABN 23 072 013 275 (Lessor).

The Lessee has committed a breach of an essential term of the lease of the

Premises which is dated 4 September 2018 (Lease).

The particulars of the breach are that:

1. the Lessee has failed to pay rental instalments totalling $35,387.73 which

fell due and payable under the Lease for the period from 1 August 2023 up

to and including 30 October 2023, and

2. the Lessee has failed to provide to the Lessor an additional or a

replacement bank guarantee for $35,387.73 pursuant to clause 23 of the

Lease;

both of which are breaches of an essential term in accordance with clause 18

of the Lease (Breach).

In accordance with clause 18.4 of the Lease, the Lessor considers that the

Lessee’s Breach, which has continued for at least 14 days, constitutes a

repudiation by the Lessee of the Lease.

Because of the Lessee’s Breach of an essential term and its repudiation of the

Lease, the Lessor elects to terminate the Lease. The termination will take

effect from midnight (12.00 am) on 7 November 2023.

Date: 31 October 2023

For and on behalf of Multistar Pty Limited

David R S Creais, Solicitor

79. On 6 November 2023, in NJ Papallo sent a letter to Bartier Perry. In relevant part, the letter reads as follows:

1. The Landlord has called in the Bank Guarantee (BG) provided by our client in

the sum of $23,952.00 on or about 27 July 2023. No notification was received

from the Landlord or its Agent in this regard either prior or since that date. We

submit that the BG should not have been applied to any disputed amounts.

2. Notwithstanding, the application of the BG has been applied in the updated

spreadsheet attached to this letter.

3. Our client has calculated the rental for the Covid Period amount using the

attached BAS and the Tenant Trust Ledger Report provided as Exhibit DC-1 in

the NCAT proceedings referred to at Item 2 in the June Letter. On these

calculations, a shortfall payment of $55.33 is outstanding with a deferred

amount payable of $76,350.38.

4. Our client has calculated a total amount owing from 1 July 2022 to 30

November 2023 of $95,861.84.

5. Our client believes that the total of $172,267.55 (Total Amount) is the total

amount currently owing to the Landlord having correctly and in good faith

applied the relevant principles of the Commercial Leasing Principles during COVID-19 (and related legislation etc “the COC”).

80. The letter then goes on to offer a repayment of the $172,267.55 by instalments.

81. On 21 December 2023, Bartier Perry sent a letter to Mr Deep. In the letter he was informed that the lessor was owed rent under the lease of $210,353.56, inclusive of GST, for the period 31 July 2018 to 31 October 2023, and that as the lessee’s guarantor, he was required to pay that sum to the lessor immediately.

82. On 21 December 2023, NJ Papallo sent a letter marked “without prejudice save as to costs” to Bartier Perry. The letter refers to Bartier Perry’s email of 7 December 2023 and notes the contents of the letter dated 15 June 2023. A copy of the 7 December 2023 email is not in Exhibit AD-1. NJ Papallo say that they have been unable to reconcile figures in the email with those of the lessee’s accountant, a discrepancy that “is approximately $35,000 when applying (the lessor’s) proposed 30% reduction in the Covid period.”

83. NJ Papallo’s letter contains a settlement offer that is said to be based on an amount that is yet to be clarified and agreed upon, but is described as the “Total Agreed Sum.” The offer is in two parts. The first part of the offer is that the parties provide a full reconciliation of their respective calculations and agree to negotiate in good faith to reach the Total Agreed Amount. The second part of the offer is that the lessee will pay the Total Agreed Amount by the following instalments:

1. $50,000 within three business days of acceptance of the offer;

2. a further payment within 21 business days of the issue of a lease and disclosure documents. The 21 days is to allow the lessee to commence the process of obtaining finance. Once finance is obtained, the lessee agrees to provide the entirety of the finance for a new bank guarantee and the balance “remain against the Total Agreed Amount”; and

3. any amount then remaining is to be paid in 12 equal monthly instalments commencing one month after the expiry of the 21 days referred to in the preceding paragraph.

84. That was the last of the correspondence between the parties contained in exhibit AD-1 prior to the commencement of these proceedings.

85. The lessor’s application that is now before the Tribunal was filed on 8 January 2024. The lessee’s application was filed on 17 May 2024.

86. There is no evidence of any attempt by either party to apply for a further mediation of their dispute prior to the filing of these applications. The only section 68 certificate in evidence is the one that was issued by the Deputy Registrar on 15 January 2021.

Jurisdiction

87. It is not in dispute that the Tribunal has jurisdiction under the RL Act to determine the dispute between the parties. Nevertheless, I add this for completeness.

88. Relevantly, a “retail shop” is defined in section 3 of the RL Act to mean premises that “are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre).” The list of prescribed businesses is found in Schedule 1 of the Retail Leases Regulation 2022. Included within that list are businesses described as “small bars with a maximum patron capacity of 120” and “restaurants, cafeterias….and other eating places.”

89. The lease describes the use of the premises as “small licence bar and café.”

90. There is no direct evidence from the lessee describing the business that it conducts from the premises. However, in his 17 April 2023 statement, Mr Creais says he understands that the lessee operates a café/restaurant from the premises.

91. On the basis of the description of the use of the premises in the lease and Mr Creais statement, I am comfortably satisfied that the use of the premises wholly or predominantly falls within the businesses description “restaurants, cafeterias….and other eating places” found in Schedule 1 of the RL Regulation.

92. Accordingly, I find that the premises constitute a “retail shop” as defined under the RL Act, that each claim that is now before the Tribunal is a “retail tenancy claim” as defined in section 70 of the RL Act, and the Tribunal has jurisdiction to determine the claims and make orders in accordance with the provisions of Division 3 of the Act.

COVID regulations

93. The Appeal Panel in Weiss v Agus [2024] NSWCATAP 51 (Weiss) provided the following convenient summary of the COVID regulations and the Code at [72]:

The provisions of the COVID 19 Regulations and Code of Conduct are summarised as follows:

(1)   The lessee must be an “impacted lessee” (cl. 4 of the COVID Regulations). An “impacted lessee” is a lessee who qualifies for either the JobKeeper grant (prior to 14 July 2021): the COVID-19 Micro-business Grant; the COVID-19 Business Grant; or the Job-Saver payment; and has a turnover of less than $50 million in the 2020/2021 financial year. One relevant consideration is the “decline in turnover test.” Principles applicable to the “decline in turnover test” are set out in SuperBurrito at [128]-[170].

(2)   From 3 July 2020, the lessee must provide evidence to the lessor that it falls within the definition of “impacted lessee” (Cl. 7 (3A) of the COVID Regulations).

(3)   If the lessee was an “impacted lessee” the lessor was precluded from taking any “prescribed action” against the lessee on the grounds of a breach of the lease due to failure to pay rent during the “prescribed period” (Cl. 6 of the COVID Regulation, but subject to Cl. 7 of the COVID Regulations).

(4)   If the lessee was an “impacted lessee” the parties were to renegotiate the rent payable and other terms of the lease having regard to (a) the economic impacts of the COVID 19 pandemic; and (b) the leasing principles set out in the Code of Conduct (cl 7 of the COVID Regulations).

(5)   If parties could not agree on renegotiated terms, they were to participate in a binding mediation, including before NSW Office of Small Business before the lessor could take a prescribed action against an impacted lessee during the prescribed period, subject to certain exceptions (cl. 9 of the COVID 19 Regulations).

(6)   Lessors must offer lessees proportionate reductions in rent payable in the form of waivers and deferrals of up 100% of the amount ordinarily payable, on a case by case basis, based on the reduction in the lessee’s trade during the COVID 19 pandemic period and a subsequent reasonable recovery period (cl. 3 of the Code of Conduct).

(7)   Rental waivers must constitute no less than 50% of the total reduction in rent payable under principle 3 over the COVID 19 pandemic period and a subsequent reasonable recovery period and should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement. Regard must also be given to the lessor’s ability to provide such additional waivers. Lessees may waive the requirement for a 50% minimum waiver by consent (cl. 4 of the Code of Conduct).

(8)   Payment of rent deferrals must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is greater, unless otherwise agreed by the parties (cl.5 of the Code of Conduct).

(9)   Repayments should not commence until the end of the COVID 19 pandemic or the existing lease expiring (whichever is earlier) and taking into account a reasonable subsequent recovery period (cl. 9 of the Code of Conduct).

(10)   Lessees should be given the opportunity to extend the lease for the equivalent period of the rent waiver and/or rent deferral period (cl. 12 of the Code of Conduct).

(11)   Lessors are to agree to a freeze on rent increases (except for leases based on turnover rent) for the duration of the COVID 19 pandemic and a reasonable subsequent recovery period (cl. 13 of the Code of Conduct).

94. The Appeal Panel went on to say this at [73] –[74]:

73 The operation of cl. 7 and cl. 9 of the COVID Regulations was considered in detail in Wellness Bodycare in the context of what, if any, powers the Tribunal had under the RL Act to order damages in favour of a tenant or order that a tenant not be liable to pay rent or outgoing arrears if the COVID Regulations and Code of Conduct was not complied with by a lessor. Many of the principles are and relevant authorities are referred to in Wellness Bodycare at [41]-[57].

74 The applicable principles are summarised as follows:

(1)   The Code of Conduct could produce three potential outcomes: (1) negotiation in good faith which resulted in agreement; (2) negotiation in good faith which did not result in agreement; and (3) either no negotiation or no negotiation in good faith (Wellness Bodycare at [43]).

(2)   By reason of cl. 9 of the Code of Conduct, a court or tribunal is only required to have regard to the Code of Conduct in three situations, each involving a claim by a lessor against a lessee, and does not refer to a claim by a lessee against a lessor (Wellness Bodycare at [42]).

(3)   If there was an agreement, there would be no need for legal proceedings and the agreement would be binding as there would be a variation of the terms of the lease (Jamaican Coffee at [261]). If there was a failure by the lessor to comply with the COVID 19 Regulations and the Code of Conduct, there may be no bona fide negotiation. However, if there was a bona fide negotiation but no agreement, there is no power of the Tribunal under s 72 of the RL Act to make orders varying the terms of the lease such that the rent was waived or deferred (Jamaican Coffee at [262]-[263] applying Sneakerboy (No 2) at [84]).

(4)   If a lessor was taking action against a lessee for recovery of rent arrears, the lessee could raise as a defence (in whole or part) to the lessor’s claim that the lessor had failed to negotiate in good faith in accordance with the provisions of the COVID 19 Regulations and Code of Conduct (Wellness Bodycare at [48] applying Darzi at [139]; Superburrito at [86]-[90]).

(5)   A lessor taking possession in circumstances where it was prohibited from doing so under the COVID 19 Regulations and Code of Conduct will be a repudiation of the lease that gives the lessee a contractual cause of action against the lessor for damages. However, the lessee bears the onus of establishing that the lessor had repudiated, and the loss caused by the repudiation (Superburrito at [86]-[91]).

(6)   A lessee can raise as a cause of action against a lessor under s 62B of the RL Act that the landlord had engaged in unconscionable conduct by reason of a failure to comply with the COVID 19 Regulations and Code of Conduct. The lessee would not only be obliged to establish that the conduct was unconscionable, but also the appropriate remedy (Superburrito at [263]-[269]).

95. There is no dispute that under the COVID regulations, the prescribed periods were 28 April 2020 to 13 March 2021 and 13 July 2021 to 30 June 2022 (prescribed period).

96. The lessee also conceded in the earlier proceedings COM 23/13458 before Senior Member Ellis SC that the prescribed period during which landlords were prohibited from undertaking certain “prescribed actions” unless there had been negotiations between the parties, ceased on 30 June 2022.

97. Notwithstanding the cessation of the prescribed period, a tenant’s rights under the COVID regulations in relation to non-payment of rent prior to 30 June 2022 have been preserved by section 88 of the RL Act which reads as follows:

88 Savings of protections granted during COVID-19 pandemic

* Unmatched round brackets in next paragraph *

(1) The Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 continues to apply, despite the repeal of that regulation, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that regulation.

(1A) The Retail and Other Commercial Leases (COVID-19) Regulation 2022 continues to apply, despite the repeal of that regulation, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that regulation.

(2) Schedule 5 to the Conveyancing (General) Regulation 2018 continues to apply, despite the repeal of that Schedule, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that Schedule.

(3) The regulations may provide for exemptions from this section.

The claims

98. In their respective applications, both parties have filed points of claim. The document filed on behalf of the lessee and Mr Deep includes their defence to the lessor’s claim.

99. The lessor’s claim against the lessee is based on the lessee’s breach of the lease for failing to pay rent and provide a replacement bank guarantee.

100. The claim against Mr Deep is pursuant to the guarantee he gave to the lessor of the lessee’s obligations under the lease, and the indemnity he agreed to provide to the lessor for any loss occasioned by the lessee’s breach of the lease.

101. No doubt with the intention of pre-empting what the lessee might have to say, the lessor also asserted that in satisfaction of its obligations under the COVID regulations, it conducted negotiations in good faith with the lessee and waived rent of $59,705.31 (inclusive of GST) for the period 1 April 2020 to 30 June 2022.

102. The lessor seeks the following orders from the Tribunal:

1. An order for payment by the lessee and Mr Deep of $185,341.40 (including GST up to 6 November 2023) plus $9727 per month (excluding GST) after 20 May 2024 for each month the lessee remains in possession less payments made in that period by the lessee;

2. Costs of the application in accordance with clauses 11.1(c) and 24.4(b) of the lease, or alternatively under section 60 of the Civil and Administrative Tribunal Act 2013; and

3. An order pursuant to section 72(1)(c)(ii) of the Retail Leases Act 1994 (NSW) requiring the lessor to surrender possession of the premises to the lessee.

103. In short, the lessee and Mr Deep deny the amounts claimed by the lessor, taking into account what they described as “the real impact of COVID-19 and the lockdowns had on their business.” They also deny that the lessor conducted rent relief negotiations in good faith. They say that the amount of $59,705.31 was unilaterally imposed as a waiver of rent and insignificant, and an agreement should have been reached with greater amounts waived and payments including varying the terms of the lease to include deferrals

104. The orders and declarations being sought by the lessee and Mr Deep as articulated in written submissions filed on their behalf following the hearing, are not identical to the relief claimed in their points of claim. No objection to this difference has been taken by the lessor, so the Tribunal will proceed on the basis that the lessee is seeking the following orders and declarations as stated in the submissions. They are:

1. The lessor be perpetually barred from claiming any shortfall in rent and outgoings being the difference paid by the lessee at the rate described by the Code and that claimed by the lessor by an order under 72(b) of the RL Act;

2. The lessee does not owe any shortfall in rent being the difference paid by the lessee at the rate described by the Code and that claimed by the lessor in its application by an order under 72AA(b) of the RL Act;

3. A declaration that: -

1. the lessee’s option notice dated 1 February 2023 was validly exercised giving a right to the further term;

2. any termination notice(s) dated prior to and including 31 October 2023 are of no effect;

3. an order the Small Business Commissioner appoint a Specialist Retail Valuer to determine for the Current Market Rent for the option Lease as at the relevant date in the Lease;

4. an order the lessor register the lease with the determined rent when that determination is handed down by the Specialist Retail Valuer;

5. any other order the Tribunal sees fit to give full effect under 72(3) of the RL Act in the Lessee’s cross-application; and

6. costs.

Evidence and hearing

105. At the hearing, Mr Creais appeared for the lessor and Mr Spring, a lay advocate, appeared for the lessee and Mr Deep.

106. The lessor’s evidence consists of Mr Xu’s affidavit. It is an affidavit of debt in which Mr Xu details the amount of rent said to be owing by the lessee. The lessor also relies on the documents in exhibit AD-1.

107. The lessee also relies on the documents in exhibit AD-1. Exhibit AD-1 is an exhibit to Mr Deep’s statement dated 20 May 2024. Mr Deep’s affidavit was objected to by Mr Creais on the basis that it consisted of submissions rather than evidence. The statement was accepted on the basis that it was Deep’s personal submission only and not evidence.

108. Neither Mr Deep nor Mr Xu was cross-examined

Submissions

109. Written submissions in chief and in reply were filed by Mr Creais and Mr Spring. Mr Spring also filed a supplementary written submission.

110. The following is a summary of Mr Creais’ submissions in chief:

1. As at 31 October 2023, unpaid rent owed by the lessee was $210,353.56. This amount included $35,387.73 for the period 1 August to 31 October 2023.

2. As at 31 October 2023, the lessee, in breach of the lease, failed to pay rent owing under the lease for the period 1 August to 31 October 2023, and failed to provide a replacement bank guarantee.

3. The lessor was therefore entitled to terminate the lease pursuant to clauses 18.3(a) and 18.4.

4. A letter of demand and notice of termination were served on the lessee on 31 October 2023 in respect of unpaid rental and requiring the lessee to vacate the premises by 12.00 AM on 7 November 2023.

5. The lease was validly terminated.

6. By its solicitors letter dated 6 November 2023, the lessee admits that unpaid rent was $172,267.55 including $95,861.84 for the period 1 July 2022 to 30 November 2023.

7. By clauses 24.2 and 24.3 of the lease, Mr Deep guaranteed the lessee’s obligations under the lease and indemnified the lessor against loss and expense incurred by reason of the lessee’s breach of its obligations under the lease. A demand for payment dated 21 December 2023 was served on Mr Deep, the lessee’s guarantor for unpaid rent. The demand has not been met and the breaches continue. An order is sought that Mr Deep and the lessee pay the amount claimed by the lessor for outstanding rent.

8. The prescribed periods during which the lessors were prohibited from undertaking certain “prescribed actions” unless there had been negotiations between the parties, were 20 April 2020 to 13 March 2021 and 13 July 2021 to 30 June 2022. That prohibition ceased from 1 July 2022, which was conceded by the lessee in the earlier proceedings COM 23/13458.

9. The lessee was therefore only entitled to rent reductions during the period from 20 April 2020 (the lessor accepts 1 April as a convenient starting date) to 30 June 2022 (COVID-19 period).

10. Rent increases were prohibited under the Covid regulations from 20 April 2020 to 13 March 2022.

11. The lessor acknowledges that during the COVID-19 period, the Code and COVID regulations require the parties to a lease to renegotiate in good faith rent payable and other terms of the lease.

12. The lessor has participated in good faith negotiations in respect of the rent during the COVID-19 period.

13. That there was a failure to agree or that offers made that do not strictly mirror the examples in the Code nor a failure to mediate does not amount to a lack of good faith.

14. The lessor has been without the expected rental income for a significant period of time and has not locked out the lessee.

15. Although entitled to do so after 13 March 2022, the lessor did not increase the rent until 1 July 2022 from when the lessee was obliged to pay the increased monthly rent for the month of July 2022, for the 12- month period 31 July 2022 to 30 July 2023, and from 31 July 2023 to 30 July 2024.

16. The lessor’s application commencing these proceedings claims rent of $210,353.56. This is based on the following:

(a) If the COVID regulations and the Code do not apply:

(i) Rent for the period 31 July 2018 to

30 October 2023                                 $648,229.22

Less

(ii) Rent received during the period

31 July 2018 to 31 October 2023        $378,170.35

Balance

(iii) Unpaid rent                                    $270,058.87

Comprising:

a. $199,017.70 for the COVID-19 period; and

b. $71,041.17 for the period 1 July 2022 to 31 October 2023.

(b) In good faith and satisfaction of its obligations, the lessor applied a 30% reduction of the outstanding rent for the Covid 19. ($270,058.87) for the period 1 April 2020 to 30 June 2022, which comes to $59,705.31, reducing the amount originally claimed to $210,353.56.

17. The affidavit of Mr Xu dated 20 May 2024 recalculates the total amount owing as at 7 May 2024 to be $251,857.71 as per the tenant ledger annexed to his affidavit. After deduction of the 30% discount of $59,705.31, the amount Mr Xu says is owing comes to $192,152.40, including GST.

18. The lessor does not, however, claim GST on seven months’ rent from 1 November 2023 to 31 May 2024. This reduces the amount outstanding to $245,046.71 less the 30% discount of $59,705.31 which brings the total amount claimed to $185,341.40.

19. The lessor also claims $9727 per month for the number of months after 20 May 2024 that the lessee remains unlawfully in possession of the premises, less payments made during that period.

111. The matters raised in Mr Spring’s three written submissions overlap. I therefore propose to treat them as one submission.

112. Mr Spring does not take issue with the calculation of the rent the lessor claims to be owing by the lessee except insofar as the amount owing in respect of the prescribed period has not, he submits, been adjusted in accordance with what he describes as the “basic formulas of the code.” This he describes as “the difference in lease rent and that under the Code, and applied on a monthly basis.” What amount that formula would produce he does not say, although Mr Spring submitted that the calculation can be done by way of a supplementary submission if the Tribunal so orders.

113. Mr Spring acknowledges that the lessor is now claiming $185,341.40 and says that in November and December 2023, the lessee, in good faith, offered $172,267.55 to settle the dispute, a difference, he observed, of $13,073.85.

114. Mr Spring’s written submissions contain numerous case references and extracts from cases. Although light on detail when it comes to identifying the facts relied upon to support the assertions made, the following can be distilled from the submissions as a basis for the assertion that the lessor failed to negotiate in good faith the rent payable during the prescribed period and in so doing engaged in unconscionable conduct:

1. The COVID-19 Regulations mandated an obligation to negotiate the rent and other terms in good faith. This requires the parties to:

1. take part in meetings at reasonable times;

2. share relevant information without delay;

3. respond to proposals from the other party or representatives without delay;

4. genuinely consider all proposals, and give the reasons for any responses;

5. recognise the other party or representative and negotiate with them; and

6. behave in a way that is consistent, fair, and not a negative influence on the process.

2. Both the lessee and lessor relied upon the unchallenged statement of Mr Deep and the documents in exhibit AD-1 to that statement.

3. There was no genuine good faith negotiation or attempted resolution of the dispute, including participating in a mediation, by the lessor during the COVID period.

4. The lessor readily admits it refused to attend mediation multiple times.

5. The 30% rent abatement in the amount of $59,705 was unilaterally imposed by the lessor without regard to the COVID regulations and the Code, and only in August 2023.

6. The lessor was in breach of clause 22.16 of the lease by refusing to mediate.

7. In breach of the COVID regulations, the lessor called up the bank guarantee the lessee had provided as security under the lease.   

8. The lessor unfairly used silent treatment to build a debt and attempt to terminate the lease with a late application to the Tribunal.

9. The lessor attempted to shift the COVID-19 risk onto the lessee by disregarding the Code, which specifically places COVID-19 risk on lessors.

10. The lessor ignored retail industry practice regarding the leasing of retail shops during the COVID-19 period as required by section 78 of the RL Act.

11. While a court or tribunal does not have power to void or vary a lease under the Covid regulations Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) NSWSC 1141 [2020] at [84] (applied in Jamaican Coffee Kitchen Pty Ltd trading as Dushan & Shelby Trust v M20 Pty Ltd [2022] NSWCATAP 203 at [249] - [250]), a lessor who failed to comply with its obligation under the Code to renegotiate rent in good faith is perpetually barred from recovering shortfalls in rent (Darzi Group Pty Ltd v Noide Pty Ltd [2021] NSWSC 774 at [142]).

167. Provision will be made in the orders for the parties to make submissions on the question of costs. For the benefit of the parties, my preliminary view only, and subject to anything the lessee and Mr Deep wish to say, is that the lessor is entitled to an order for costs on the basis that Rule 38 of the Civil and Administrative Tribunal Rules 2014 applies and the lessor has been successful in the proceedings. If no submissions are filed, costs will follow the event.

Orders

171. These are the orders of the Tribunal in applications 2024/00021261 and 2024/183545 :

1. Pursuant to section 72(1)(c)(ii) of the Retail Leases Act, 1994, Popkorn Group Pty Limited is to surrender to Multistar Pty. Limited possession of the premises known as 46 Erskine St, Sydney, New South Wales, by 4:00pm on 3 February 2025.

2. Within 14 days, Multistar Pty. Limited is to file and serve an affidavit of debt detailing the amount of rent paid and remaining unpaid under the lease for the period 20 May 2024 up to and including the date of the affidavit.

3. In the event Popkorn Group Pty Limited and Mr Akash Deep wish to make an objection in relation to the calculation of the amount stated in the affidavit of debt, the objection, in the form of a written submission of no more than two A4 pages, must be filed and served within a further 7 days, and the Tribunal will then make a decision as to the amount the lessee and Mr Deep will be ordered to pay the lessor on the papers, as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013, unless persuaded that there should be oral submissions.

4. In the event a party wishes to make a cost submission, it must file and serve a written submission of no more than four A4 pages within 21 days, any written submissions in reply of no more than four A4 pages in length must be filed and served within a further 21 days, and the Tribunal will then make a decision on the papers as permitted by section 50(2) of the Civil and Administrative Tribunal Act 2013, unless persuaded that there should be oral submissions.

5. If no cost submissions are filed and served within the time specified in the preceding order, then the order of the Tribunal is that Popkorn Group Pty Limited and Mr Akash Deep pay Multistar Pty Limited’s costs of and incidental to the proceedings.   

**********

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: 16 May 2025