NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd

Case •

[2020] NSWSC 1378

•

09 October 2020

No judgment structure available for this case.

Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd [2020] NSWSC 1378
Hearing dates: 28 August 2020
Date of orders: 9 October 2020
Decision date: 09 October 2020
Jurisdiction:Equity
Before: Ward CJ in Eq
Decision:

1.   Declare that the Deed of Assignment (as defined in [2] of these reasons) is valid and enforceable as against the first defendant.

2.   Order, in lieu of specific performance of the Deed of Assignment referred to in Order 1, damages referable to [314] of these reasons.

3. Order that, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the first defendant pay interest on damages referred to in Order 2.

4.   Declare that the second cross-defendant was liable to the second cross-claimant for the sum of $492,130.19 owing as at 11 August 2020 comprised of rent, outgoings and other amounts payable and remains liable for such other amounts as fall due under the Lease and/or the Deed of Assignment after 11 August 2020.

5.   Order that the first defendant pay the costs of the plaintiff, second defendant and third defendant.

6.   In the event that the first defendant notifies the other parties within 14 days that it seeks rent relief under the COVID-19 regulatory scheme, direct the parties to attend a mediation within 28 days thereafter and for that purpose refer the parties to the Registrar for court-annexed mediation.

7.   Liberty to apply on three days’ notice.

Catchwords:

LAND LAW — Leases — Assignment of leasehold interest — Whether effective delivery of deed

EQUITY — Remedies — Specific performance — Where damages in lieu appropriate — COVID-19 pandemic — Operation of special COVID-19 regulations

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 100

Conveyancing (General Regulation) 2018 (NSW)

Conveyancing Act 1919 (NSW), ss 7, 128

Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), ss 7, 8, 8A

Corporations Act 2001 (Cth), s 127

COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW)

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

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

Retail Leases Act 1994 (NSW), s 87

Uniform Civil Procedure Rules 2005 (NSW), r 14.14

Cases Cited:

400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245

ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615

Barlow v Heneahe Pree Cha 211

Beesly v Hallwood Estates Ltd [1961] Ch 105

Boughton v Boughton 1 Atkyns 625

Case of Dean and Chapter of Fernes (1607) Davis 44b

Cecil v Butcher 2 Jac & W 565

Chamberlain v Staunton (1588) Cro Eliz 122; 1 Leon 140

Clavering v Clavering Pree Cha 235; 2 Vern 473

Clayton’s Case (1585) 5 Co Rep la

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; 110 ALR 608

Derby Canal Co v Wilmot 9 East 360

Doe d Garnons v Knight (1826) 5 B & C 671

Dougan v Ley (1946) 71 CLR 142; [1946] HCA 3

Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381

Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80; [1929] HCA 13

Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53

Gartside v Silkstone and Dodsworth Coal and Iron Co (1882) 21 Ch D 762

Goddard’s Case (1584) 2 Co Rep 4b

Hall v Baimbridge (1848) 12 QB 699

Hayward v Fulcher (1627) W Jones 166; Palmer 491

Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109

JC Williamson Ltd v Lukey (1931) 45 CLR; [1931] HCA 15

Johnson v Baker (1821) 4 B & Aid 440

Lavery v Purcell (1888) 39 Ch D 508

McMahon v Ambrose [1987] VR 817

Mowatt v Castle Steel and Iron Works Co (1886) 34 Ch D 58

Naas v Westminster Bank Ltd [1940] AC 366

Patel v Ali [1984] Ch 283; [1984] 1 All ER 978

Re Sarah Jane Sandilands (1871) LR 6 CP 411

Re Way’s Trusts (1864) 2 De GJ & S 365

Roberts v Roberts (1818) Dan 143

Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253

Shelton’s Case (1582) Cro Eliz 7; 78 ER 274

Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996

Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141

Taylor v Owners- Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9

Thoroughgood’s Case (1612) 9 Co Rep 136b

Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609; 2 All ER 941

Xenos v Wickham (1867) LR 2 HL 296

Texts Cited:

Les Termes de La Ley (John Rastell, 1708)

Pollock, F and F W Maitland, The History of English Law Before the Time of Edward I (Cambridge University Press, 1898, Vol II)

Seddon, Nicholas, Seddon on Deeds (2015, The Federation Press)

Stephen, James, Digest of the Law of Evidence (12th ed, 1936, MacMillan)

Wigmore, John Henry, Wigmore on Evidence (3rd ed. 1942, Little Brown)

Yale, D E C, “The Delivery of a Deed” (1970) 28(1) Cambridge Law Journal 52

Category:Principal judgment
Parties: NTT Australia Digital Pty Ltd (Plaintiff)
Cover Genius Services Pty Ltd (First Defendant)
Perpetual Trustee Company Ltd (Second Defendant)
Dexus Funds Management Ltd (Third Defendant)
Representation:

Counsel:
J Curtin (Plaintiff)
GP Gee (First Defendant)
G Farland (Second and Third Defendants)

Solicitors:
Sparke Helmore Lawyers (Plaintiff)
Rolland Ross Lawyers Pty Ltd (First Defendant)
HWL Ebsworth (Second and Third Defendants)
File Number(s): 2020/00195385
Publication restriction: Nil

Judgment

  1. HER HONOUR: This matter was referred to me for hearing from the Expedition List. The dispute the subject of the proceedings concerns the assignment of a lease of office premises at Clarence Street in the Sydney central business district (the Premises) and the impact of the COVID-19 pandemic on the business of the assignee and its ability or willingness to proceed with the assignment of the lease.

  2. By amended statement of claim filed on 25 August 2020, the plaintiff, NTT Australia Digital Pty Ltd (NTT), seeks an order for specific performance by the first defendant, Cover Genius Services Pty Ltd (CGS), of a deed of assignment signed by CGS in January 2020 (the Deed of Assignment), which provided for the assignment on and from 1 May 2020 to CGS of all NTT’s interest (as lessee) under a lease held by NTT in relation to the Premises (the Lease). NTT also seeks declaratory and other relief related to the Deed of Assignment (specifically, in relation to claimed rights to an indemnity for all amounts claimed by the head lessor, the second defendant, Perpetual Trustee Company Ltd (Perpetual)).

  3. By amended cross summons filed on 25 August 2020, Perpetual and the third defendant, Dexus Funds Management Ltd (Dexus) (Dexus as responsible entity of the Dexus Office Trust, and on behalf of Perpetual), claim payment from NTT, or in the alternative, CGS, in the sum of $492,130.19, being the rent, outgoings and other amounts payable under the Lease, as at 11 August 2020, along with interest. Perpetual and Dexus also seek other declaratory relief (as to which, see below). For convenience, I will in these reasons, unless the context otherwise requires, refer collectively to the second and third defendants as the Dexus entities.

  4. As between NTT and the Dexus entities, agreement has since been reached for the entry of consent orders disposing of the claim for relief against NTT (see below).

  5. It is relevant at the outset to note that CGS initially (but no longer) raised the doctrine of frustration in answer to the claim for relief by NTT. Its amended defence, abandoning the defence of frustration, was filed on 24 August 2020.

Background

  1. Perpetual (the custodian of the Dexus Office Trust) is the registered proprietor of the Premises. As noted above, Dexus is the responsible entity of the Dexus Office Trust. NTT is a technology and business consulting services company.

  2. On around 19 July 2013, NTT entered into the Lease of the Premises (located at Level 19, 45 Clarence Street, Sydney) with the Dexus entities for a term of eight years, commencing on 1 September 2013 and terminating on 31 August 2021. The lease term therefore now has less than twelve months to run.

  3. In or around July 2017, NTT, with the consent of the Dexus entities, entered into a sub-lease of the Premises with a third party known as Society One.

Assignment Proposal

  1. In or around August 2019, a proposed assignment of the Lease for the balance of its term was negotiated with Cover Genius Pty Ltd (CG). CG is an Australian company within the Cover Genius group of companies (the Cover Genius Group). The Cover Genius Group operates a global insurance technology business.

  2. A document setting out the terms of the proposed assignment (the Assignment Proposal) was signed by CG (by its Chief Operating Officer, Mr Brenton Charnley). It had been prepared by Cushman Wakefield, real estate agents, on behalf of Society One (see the affidavit sworn on 17 August 2020 by Mr Angus McDonald, the Chief Executive Officer of CG, at [17]). The proposed assignee named in the Assignment Proposal was CG. I interpose to observe that, not only was CGS (which was only incorporated at around this time – see the affidavit sworn on 17 August 2020 by Mr McDonald at [11]) not a party to the Assignment Proposal, there is also no evidence that it was agreed to by CGS or by any of the parties to the subsequent Deed of Assignment.

  3. The Assignment Proposal included, as a condition precedent, the “[d]rafting and execution of a formal Deed of Assignment and Deed of Consent to Assignment being executed by all parties…”. The Assignment Proposal also provided that:

Notwithstanding this [Heads of Agreement], no legally binding agreement will be created between the parties until such time as both parties have executed the formal Assignment documents including those required by the Lessor.

  1. On or before 23 December 2019, CGS, which by then had both been incorporated and identified as the proposed assignee, entered into a licence agreement as licensee, with Society One, as licensor, to enable CGS to occupy part of the Premises (the Licence Agreement) until 30 April 2020. Although the commencement date of the Licence Agreement was specified as 23 December 2019, the Licence Agreement specified (by cl 2.1.1) that:

2.1.1   This agreement is subject to and conditional upon:

(a)    the Licensee [CGS] and Landlord [NTT] entering into a deed of assignment of lease over Level 19, 45 Clarence Street, Sydney, NSW 2000; and

(b)   the Licensee, Licensor [Society One], Landlord and Head Landlord [Perpetual] entering into a deed of consent to assignment,

on terms acceptable to the Licensor on or prior to the Commencement Date

(Condition Precedent).

  1. Those events did not happen by 23 December 2019 and, although cl 2.2.1 of the Licence Agreement provided that the Licensor (i.e., Society One) might waive the benefit of the Condition Precedent by notice in writing, there is no evidence that Society One waived the benefit of the Condition Precedent, in writing or otherwise. Rather, on 23 December 2019, Society One emailed CGS, stating that:

… it [the Licence Agreement] is not yet fully executed on our side we should be ready to exchange today at 3pm provided you have:

1.   A fully executed copy of the deed of consent to assignment

2.   A fully executed copy of the deed of assignment

3.   Bank Guarantee

4.   Insurance certificate.

  1. It appears that CGS did not provide the abovementioned documents to Society One on 23 December 2019 and it does not appear to be disputed that the Licence Agreement did not commence on that date.

  2. On 23 December 2019, Mr Charnley sent an email to solicitors at Sparke Helmore (acting for NTT) and HWL Ebsworth (HWLE) (acting for the Dexus entities) and others, in relation to the Assignment of Lease: “following up” on the execution of the lessor’s deed of consent to the assignment of lease; noting that Society One and “Cover Genius” (by which I understand him to be referring to CGS) had executed the Licence Agreement; and advising that “Cover Genius” wished to occupy the property prior to the Christmas break to enable it to do some works over the period. It is relevant, for reasons that will shortly become apparent, to note that the email also sought advice as to whether anything further was required “from either Society One or Cover Genius with respect to this”.

  3. It does not appear that there was a response to this email until 6 January 2020 when, by email sent at 2.43 pm, Ms Grace Mangraviti (of HWLE) forwarded to Mr Calvin Tay (of Sparke Helmore) an email attaching what was said to be the final version of the deed (of assignment) for his reference and noting her understanding that Mr Tay’s client (NTT) and the transferee “will execute the deed tomorrow”. At 3.09 pm that day, Mr Tay responded to the effect that he would need to obtain instructions on the further amendments discussed between the transferee and the landlord (which he said had not been provided to him nor previously highlighted).

Deed of Assignment

  1. The parties to the Deed of Assignment were named as Perpetual (as “Landlord” under the Lease), Dexus (as the “Responsible Entity”), NTT (as assignor, or “Tenant”) and CGS (as “Transferee”). The relevant clauses of the Deed of Assignment are as follows.

  2. Clause 2.1 provided for the assignment by NTT, as Tenant, to CGS, as Transferee or assignee, of all of its interest in and in relation to the Lease on and from the date of assignment (defined as 1 May 2020 – see cl 1.1 and Item 3).

  3. Clause 2.2 provided that Perpetual consented to the assignment by the Tenant of all its interest in and in relation to the Lease to the Transferee (again, CGS) without prejudice to the Landlord’s rights, powers and remedies under the Lease.

  4. Pursuant to cl 4.1, CGS was obliged to perform all the obligations of NTT as tenant under the Lease from 1 May 2020 and, pursuant to cl 4.3, CGS was to indemnify NTT with respect to CGS’ performance of its obligations as tenant under the Lease from 1 May 2020 (the CGS Indemnity).

  5. Clause 4.4(a) obliged CGS to provide a bank guarantee (the CGS Bank Guarantee) by 1 May 2020.

  6. Pursuant to cl 4.4(b), Perpetual was required to return to NTT the bank guarantee NTT had provided to Perpetual (the NTT Bank Guarantee) within 14 days of CGS providing the CGS Bank Guarantee.

  7. Pursuant to cl 5.3, NTT was obliged to indemnify Perpetual, as Landlord, with respect to any default or delay by CGS in the performance of its obligations under the Lease on and from 1 May 2020 and in respect of any default or delay by CGS in the performance of CGS’ obligations under the Deed of Assignment (the NTT Indemnity).

  8. Pursuant to cl 5.4, NTT was to be released from all claims by Perpetual arising out of the Lease (including under the NTT Indemnity, subject to an exclusion not relevant for present purposes) on the later of 1 May 2020 or the date that CGS provided the CGS Bank Guarantee.

  9. Clause 7 required CGS promptly to lodge for registration the transfer of lease effecting the assignment with the Land Title Registry.

  10. Clause 9.7 permitted execution of the Deed of Assignment in counterparts.

Execution of the Deed of Assignment

  1. It is not disputed that CGS signed the Deed of Assignment on 7 January 2020.

  2. At 1.57 pm on 7 January 2020, Mr Charnley emailed solicitors at Sparke Helmore and HWLE, copied to Ms Bree Clare (of CG), “following up” the status of the Deed of Assignment. Relevantly, this email said:

… We would like to execute this today so as to obtain access to the property. As you would be aware, we are already 2 weeks behind schedule for the property, as we’d hoped we’d have access prior to the break.

Could you please provide an update and please advise asap if there are any issues so we can look to resolve today.

  1. At 2.05 pm that day, HWLE responded to Mr Charnley advising that execution versions of the deed had been sent to Ms Clare (of CGS) and attaching a version of the deed for his reference. The email from Ms Mangraviti stated that this version was pending confirmation from the assignor (NTT) that the revised terms requested by CGS were “agreeable” (presumably, meaning “acceptable”) to NTT. The email noted that, “[w]e are yet to receive an update in this regard”.

  2. By email on 7 January 2020 sent at 3.06 pm, Mr Tay (of Sparke Helmore) then sent to Mr Charnley what he referred to as the “final form” of the “Deed of Consent and Assignment of Lease” provided by the lessor’s lawyers. Instructions were given for Mr Charnley to print four copies of this document and have “Cover Genius” (again, presumably there meaning CGS) sign them where indicated. This email went on to state:

Please return the document to me to be issued to NTT for their signature, and then to be forwarded to the landlord.

In the interim if you can also scan a copy of Cover Genius’ scanned document, it would assist.

I look forward to receiving finalised documents for further action.

  1. Pausing here, by reference to the above, CGS says that it did not provide its signed execution page in purported exchange of counterparts; rather, it says that the stated intention to execute in counterparts arose only on 8 January 2020, in response to a query from HWLE (as to which, see below).

  2. On 7 January 2020, by email sent at 5.12 pm (responding it would seem to the email of 3.09 pm on 6 January 2020), Ms Clare (of CGS) sent an email to Mr Tay (of Sparke Helmore), copied amongst others to Ms Mangraviti (of HWLE), with a PDF attachment, stating that “attached are the signed pages from Cover Genius – please let me know if you require anything further from our side”. The attached signed pages were four copies of the execution page each signed by the transferee (under an execution clause that notes that the document was executed in accordance with s 127 of the Corporations Act 2001 (Cth) (Corporations Act) by two directors of CGS).

  3. On 8 January 2020, there were a number of email communications between the various legal representatives, and others, in relation to the execution (and proposed electronic exchange of signed counterparts) of the Deed of Assignment. Relevantly, these communications included the following.

  4. At 9.01am, Ms Mangraviti (of HWLE) sent an email to Mr Tay (of Sparke Helmore) copied to a solicitor at HWLE (and not to anyone at CGS), asking whether Mr Tay’s client (it will be recalled, NTT), “intend[ed] to execute deed in counterpart [sic]” or whether his offices would “arrange to receive the original deed that Cover Genius have [sic] executed for tenant execution”. Mr Tay’s response, at 9:53 am, was that, “[m]y client intends to execute a counterpart. I will reply to all in separate cover regarding electronic exchange”. I interpose to note that this marks a clear distinction between contractual exchange and execution in the manner which, for the reasons below, I have found was here contemplated.

  5. Meanwhile, at 9.24 am, Mr Charnley (it will be recalled, of CGS) emailed Mr Tay of Sparke Helmore and Ms Mangraviti of HWLE, seeking their “assistance to obtain executed copies of these [the assignment of lease] today if possible” and stating that, “[a]s advised we are already 2.5 weeks behind in our works schedule and require access immediately” and asking that they let him know of “any issues or updates please”. At 9.57 am, seemingly responding to that email, Mr Tay communicated as follows:

Hi all

Brenton [Charnley] and Bree [Clare] – Received [sic] Cover Genius’ signed pages. Please confirm authority for me to collate them into the execution document to form Cover Genius’ counterpart copy. Please send the originals to my office so they can be collated and sent for safekeeping in due course.

The document is with my client [i.e., NTT] to sign. I am not sure of signatory availability and will follow up if I do not receive documents shortly.

All – Please [sic] also confirm parties agree to exchange this document by counterpart.

Grace [Mangraviti] – to allow Cover Genius to commence work, will the Lessor grant consent to Cover Genius to commence occupation pursuant to the temporary access licence now that the deed is in final form, with signed copies to follow as soon as possible after?

  1. In response to that 9.57 am email, at 10.01 am Ms Clare responded:

please [sic] proceed with collating and we agree to exchange document by counterpart.

Grace [Mangraviti], please let us know if this is at all possible.

  1. Then, at 10.16 am, in further email correspondence, Ms Clare emailed Ms Seon Griffin (a property manager at Dexus) and others stating, “… I’ve just spoken to Calvin and as we have signed, it is with NTT for execution (agreed by they are tracking down the directors currently), Is there anything else we can do in the meantime?” In response, Ms Griffin referred to the provision of the CGS Bank Guarantee, stating that “I assume that Cover Genius will not be preparing their bank guarantee until closer to the assignment date?”. Ms Clare responded to that by email, stating that:

… as per the license [sic] agreement, we have setup the bank guarantee of $143,235.00 with SocietyOne. This will then be amended for the full amount and changed over once the lease term begins.

[Emphasis added]

  1. On 8 January 2020 at 3.33 pm, after some communications in relation to the arrangements for interim occupation under licence between Society One and CGS, Mr Tay (of Sparke Helmore) sent an email to Ms Mangraviti (of HWLE) (copied to a number of people, including Ms Clare), attaching various execution pages of the Deed of Assignment and stating:

Please see attached signed counterparts of the deed of assignment signed by Cover Genius and NTT for electronic exchange.

Please provide a scanned copy of your client’s [i.e., the Landlord’s] signed deed to complete electronic exchange, and so we can date all original documents in due course.

I also attach a letter provided by NTT confirming consent to the scope of works undertaken by Cover Genius under the interim occupation licence as per the attached scope of works, as requested by Seon [Griffom of Dexus].

Please now confirm that the Lessor will provide access to Cover Genius to commence its works under the interim occupation licence.

  1. The attached execution pages attest to NTT’s execution as being in accordance with s 127 of the Corporations Act but it is not clear from the execution whether it was by two directors or by a director and company secretary (the two signatories being Mr Craig Goldberg and Mr Michael Miers).

  2. At 3.39 pm, in response to the 3.33 pm email, Ms Mangraviti (of HWLE) sent an email to Mr Tay (of Sparke Helmore), copied amongst others to Mr Charnley, in which Ms Mangraviti stated that, “[i]t is our client’s process to execute all original counterparts, this will typically take approximately four weeks and should not delay exchange or access”. The email goes on to state that Mr Tay was to arrange for the deeds to be couriered to HWLE’s offices and that, “[o]nce the original deeds are received, access can be arranged with our client. Our client has been in direct communication with Cover Genius in this regard”.

  3. Pausing here, NTT argues that this demonstrates that, from the lessor’s perspective, mutual exchange of deeds was not a requirement.

  4. On 9 January 2020, Ms Clare delivered the original copy of its executed counterpart deed to HWLE’s offices. That afternoon, Dexus confirmed that Society One had provided access passes to CGS’ fit-out team (Construction By Design), CGS taking occupation under licence by Society One.

  5. Construction By Design then carried out fit-out works of the Premises for CGS (at a cost of some $175,645.99), which works were completed on or about 4 February 2020 (see the affidavit sworn on 17 August 2020 by Mr McDonald at [30]). CGS staff moved into the Premises on or around 17 February 2020.

  6. Meanwhile, an issue had arisen as to the manner in which NTT had executed the deed. On 5 February 2020 at 3.37 pm, HWLE emailed Mr Tay (of Sparke Helmore), copied to various persons including Mr Charnley and Ms Clare, raising an issue as to whether what was described as “‘split execution’” (as noted above, execution purportedly pursuant to s 127 of the Corporations Act, by Mr Goldberg as director and Mr Miers as company secretary) amounted to proper execution under s 127 of the Corporations Act (apparently on the basis that the signatures did not appear on the same page of the document and were under different execution blocks). This email conveyed the lessor’s instructions to request three copies of the attached execution page to be properly executed by two directors, or one director and one company secretary, of NTT and for authority to be provided to replace the properly executed pages with the existing execution pages.

  7. Mr Tay’s response (at 3.57 pm) was, in effect, to dispute that the documents had not already been properly executed and to advise that all wet ink signatures had been provided for further action (which he said “should suffice to show [NTT]’s intention to be bound and your client would be able to rely on section 127 of the Act”).

  8. Again, pausing here, I note that this is a communication relied on by NTT as showing that NTT considered itself bound immediately on execution of the deed.

  9. On 6 February 2020, the General Counsel of CGS (Ms Silke Hermsen) emailed HWLE, requesting that a complete executed copy be emailed “for our records”.

  10. Notwithstanding NTT’s response in relation to the manner of execution, the lessor’s position remained that it required re-execution of the deed by NTT using “wet signatures” (see the email from HWLE on 7 February 2020 at 5.11 pm). It appears that NTT then indicated that the deed would be re-executed (see the email of 10 February 2020 from HWLE to CGS, indicating that counterparts would be “sent out for execution shortly”).

  11. This process of re-execution appears not to have occurred until around 21 February 2020. By email on 24 February 2020, HWLE confirmed that, once they received the re-executed deed, they would “arrange for execution by the landlord”. The re-executed documents were forwarded by Sparke Helmore to HWLE under cover of a letter dated 28 February 2020. It appears that these were then executed by Perpetual (as custodian of the Dexus Office Trust), as Landlord, and by Dexus, as “Responsible Entity”, with a March date appended thereto.

  12. It seems that, had matters ended there, then one might expect that the parties would have proceeded in accordance with the Deed of Assignment and that that would have been an end to the matter. However, by around this time, the COVID-19 outbreak, and measures in response thereto, had emerged in earnest. On 11 March 2020, the World Health Organisation declared COVID-19 a pandemic.

COVID-19 and subsequent events

  1. From 24 March 2020 to 27 April 2020, Mr Charnley and Mr McDonald had a series of communications with the Dexus entities, with the stated purpose of CGS obtaining rental or some other form of assistance with respect to CGS’ obligations as tenant under the Lease from 1 May 2020 (see affidavit sworn on 17 August 2020 by Mr Angus McDonald at [51]).

  2. On 24 March 2020 at 8.06 am, Mr Charnley sent an email to Ms Griffin (of Dexus), stating that:

... as of 1 May NTT and Society One will assign their lease to Cover Genius and in preparation for this I am reaching out to request a without prejudice discussion with Dexus regarding our lease commitments. The current economic environment has had an impact on Cover Genius and we’d like to get on the front foot with Dexus to discuss options with regards to rent payments that will commence 1 May...

  1. On 8 April 2020 at 11.00 am, Mr Charnley sent a further email to Ms Griffin again requesting, “a without prejudice discussion with Dexus regarding our lease commitments commencing 1 May at Level 19 45 Clarence Street” and confirming that, “the current Covid-19 pandemic has had a significant impact on Cover Genius and our revenue’’.

  2. On 16 April 2020, Mr McDonald sent an email to Ms Griffin requesting “an update on when we can any [sic] rental waiver or deferral discussion with Dexus”.

  3. On 22 April 2020 at 8.18 am, Ms Griffin responded, indicating that Dexus would be directing CGS to complete a questionnaire seeking information about the impact of COVID-19 on its business. Mr McDonald replied asking whether the process to be adopted by Dexus could be expedited on the basis that, “[w]ithout a clear pathway forward within a week our directors are going to need to make a decision on if we are going to be able to continue”.

  4. On 27 April 2020, Mr Charnley sent an email to Dexus requesting “urgent assistance from Dexus due to the current impact of the pandemic”.

  5. Thereafter, on 27 April 2020, a formal request was made by Dexus for CGS to complete its “Customer Assistance Form” in order that Dexus might then consider CGS’ request for assistance in line with the Australian Government’s Commercial Tenancies Code of Conduct.

  6. An application dated 27 April 2020 (see also the affidavit sworn on 17 August 2020 by Mr Angus McDonald at [52]) was then made by CGS to Dexus, “seeking a 100% waiver of rent and outgoings due to the impact of the Pandemic”. This application referred to attempts made by the CG Group, “to discuss the upcoming lease obligations under a lease assignment due to commence on 1 May 2020” and to attempts “to market the Clarence Street property including: Cushman and Wakefield to market assignment options; and Office Hub to explore flexible sublease options for a number of spaces. Entered into negotiations with the existing sublease tenant Unidqys to discuss remaining as a tenant in suite 2”.

  7. On 30 April 2020, Mr McDonald sent a letter to the Dexus entities, NTT and Society One, in which, amongst other things, he wrote:

...The Lease Assignment was due to commence and take effect on 1 May 2020.

[…]

CGS has no lease with any of those parties [Perpetual, Dexus and NTT] and has a mere contractual licence with Society One to occupy a portion of the Leased Premises until 30 April 2020.

The Lease Assignment is complex as it is a sub / sub tenancy proposal with NTT the primary tenant still remaining obliged to Perpetual for the lease with Society One in a secondary liability position.

[…]

It is obvious that had the Pandemic been present at the time of entry of the licence and the Lease Assignment, then CGS would not have executed those contracts as it would not have been able to raise the bond amounts nor satisfied [sic] the payment terms. This is clearly an unforeseen event in the original contract bargains made and is not as a result of the fault of CGS nor any other party to this notice. The Pandemic and the following government travel bans have created a situation not contemplated at the time the parties entered into the agreements.

CGS as a result of the Pandemic’s impact has attempted discussions with Dexus in the spirit of the Pandemic code of conduct and to prevent frustration of the licence and the Lease Assignment as follows:

[,,,]

CGS has not been able to find a replacement for the deed of assignment and given the force majeure nature of the Pandemic’s impact on CGS’s financial position it has no other option but to notify the parties addressed in this letter that it does not intend to proceed with the Lease Assignment as it is not financially able to meet the obligations due to the Pandemic and the government travel bans which have frustrated the contracts.

  1. That led to further correspondence between the parties and ultimately to the commencement of these proceedings. As noted above (see at [5]), the claim based on frustration has now been abandoned.

  2. CGS has not provided the CGS Bank Guarantee to Perpetual nor has it performed any of the other obligations for which provision was made under the Deed of Assignment or the Lease, including lodgement for registration of the transfer of the Lease with the Land Title Registry. It has not paid rent or outgoings, which continue to accrue.

  3. On 19 May 2020, Dexus notified NTT that CGS was in breach of its covenants to pay rent and other moneys payable under the Lease from the date of assignment. Dexus sought from NTT the payment of that unpaid rent and those other outgoings (in the amount of $119,069.95 plus GST). Dexus asserted that NTT was liable to pay these moneys under the Deed of Assignment. Furthermore, Dexus reserved what it asserted were its rights under the Lease and the Deed of Assignment to draw down on the NTT Bank Guarantee.

  4. On 24 June 2020, a further demand for payment was made by Dexus, by way of a formal Notice of Breach of Covenant (the Notice).

  5. By the Notice, Dexus sought payment from NTT to the Landlord of unpaid rent, outgoings, cleaning charges and GST (in the amount of $255,832.27). As it did in May 2020, Dexus reserved what it said were its rights under the Lease to draw down on the NTT Bank Guarantee.

Issues for determination

  1. The issues for determination (now that the case based on of frustration has been abandoned) were identified in written submissions in advance of the hearing as follows:

  1. Is the Deed of Assignment valid and enforceable?

  2. Is NTT entitled to specific performance?

  3. Is CGS liable to indemnify NTT for all amounts claimed by Perpetual in respect of CGS’ default or delay in the performance of its obligations under the Lease?

  4. Is Perpetual (and/or Dexus) entitled to call upon the NTT Bank Guarantee?

  1. At the hearing, which had been expedited by Sackar J, CGS raised for the first time the proposition that, in determining the question of relief available to NTT, it was necessary to have regard to Schedule 5 (“Commercial leases - COVID-19 pandemic special provisions”) to the Conveyancing (General) Regulation 2018 (NSW) (which I will hereafter refer to as the COVID-19 Regulations). In those circumstances, I granted leave to the parties to file supplementary submissions after the close of the hearing as to relief and the COVID-19 Regulations.

  2. It is convenient first to dispose of the underlying issues and then to consider how, if at all, the abovementioned statutory regime changes the ultimate disposition of the proceedings. In particular, I consider the issues as to the operation of COVID-19 Regulations from [198] below).

  3. Furthermore, as noted above (see at [4]), the dispute between NTT and the Dexus entities was resolved by the making of consent orders, which I will set out in due course.

Is the Deed of Assignment valid and enforceable?

  1. It is convenient first to note that the issue raised in correspondence by the Dexus entities in February 2020 as to the manner of execution by NTT (to which NTT responded in its submissions in advance of the hearing), did not appear to be pressed during oral submissions (i.e., CGS did not seem to press an argument that it is not bound by the Deed of Assignment because NTT did not execute the Deed of Assignment in accordance with the requirements of s 127 of the Corporations Act). It will not be necessary to do deal with this, for reasons that I will explain later, but for completeness I refer below to the submissions that NTT made on this issue.

Section 127 of the Corporations Act

  1. NTT says that there is no dispute that CGS validly executed the Deed of Assignment on 7 January 2020 and says that it was thereafter bound by the Deed of Assignment on that date, irrespective of the subsequent validity of NTT’s execution. Alternatively, and in any event, NTT submits that it did execute the Deed of Assignment on 8 January 2020 in accordance with the requirements of s 127(1) of the Corporations Act, first, when it was signed by two of its directors (Mr Craig Goldberg and Mr Michael Miers), and then when it was re-executed on 20 February 2020 and those re-executed copies were then signed by Mr Miers on or around 21 February 2020 before returning them by express post to Sparke Helmore. It is noted that thereafter, on or around 28 February 2020, Sparke Helmore express posted the copies of the Deed of Assignment executed by NTT to HWLE. It is submitted that, therefore, the requirements of s 127 of the Corporations Act were met by NTT.

  2. Furthermore, it is noted that, by s 127(4), the ways in which a company may execute a document, including a deed, are not limited by s 127. In this regard, it is said that the section does not operate to prescribe the only methods by which a company may execute a document and, were NTT to have adopted a method other than that identified by sub-s (1) and (2), the other parties to the Deed of Assignment would not have available the assumptions of due execution provided by sub-s (5) and (6) (which assumptions NTT says are not here relevant in circumstances where NTT does not wish to escape liability with respect to the Deed of Assignment).

  3. For these reasons, NTT submits that there is no force to the suggestion that the Deed of Assignment was not validly executed.

Relevant principles as to delivery of deeds

  1. Before turning to the respective parties’ submissions, it is convenient here to summarise some of the relevant principles regarding delivery of deeds, since these were not in dispute. Although, I note that, in due course, it will be necessary to return in some greater detail to these principles and, particularly, the development of them.

  2. The principles were outlined by Sackville AJA, with whom Allsop P (as his Honour then was) and Campbell JA agreed, in Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253 (Segboer v AJ Richardson). Relevantly, his Honour there said (at [51]-[59]; [72]-[73]):

51.   The appellant’s argument that the guarantee had not been delivered proceeded on the assumption that the guarantee was a deed. It is long established law that delivery is essential to a deed: R J A Morrison, H J Goolden, R F Norton, Norton on Deeds (2nd ed, 1928), at 10; Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263, 28 WAR 124, at [23]-[24], per Steytler J (with whom McKechnie and Hasluck JJ agreed).

52.   It is common ground that delivery is required where a deed is executed, not only by an individual but by a corporation: see Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers (1977) 2 NSWLR 109, at 118-119, per Helsham CJ in Eq: A J Bradbrook, “The Delivery of Deeds in Victoria” (1981) 55 ALJ 267, at 270-272.

53.   The requirement for delivery has its origins in the symbolic significance of a manual transfer of a document: A J Bradbrook, at 267. But for at least two centuries, the requirement of “delivery” has been capable of being satisfied without physical delivery or transfer of the deed to the promisee or anyone else. Norton on Deeds states (at 13) that:

“Delivery may be effected by words alone, or without words by the acts or conduct of the party, from which it can be inferred that he intended to deliver the deed as an instrument binding on him.”

54.   It is for this reason, that it held in Xenos v Wickham (1867) LR 2 HL 296, that a deed can be delivered even though it never leaves the possession of the party executing it: see at 323, per Lord Cranworth. Indeed, there is much older authority to that effect: see, for example, Doe d Garnons v Knight (1826) 5 B & C 671; 108 ER 250; Hall v Palmer (1844) 3 Hare 532; 67 ER 491; Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564; Re Way’s Trusts (1864) 2 De G J & S 365; 46 ER 416.

55.   In Xenos v Wickham, Blackburn J (whose opinion was upheld by the House of Lords) stated (at 312) the principles as follows:

“no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to shew that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: ‘I deliver this as my deed;’ but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well. And it is clear on the authorities, as well as the reason of the thing, that the deed is binding on the obligor before it comes into the custody of the obligee, nay, before he even knows of it ...”

56.   This passage was approved by the Privy Council in Macedo v Stroud [1922] 2 AC 330, at 337, per Viscount Haldane; see also Stromdale & Ball Ltd v Burden [1952] Ch 223, at 230, per Danckwerts J. Since no physical delivery of a deed is required, some caution should be exercised before using the expression “constructive delivery” in the present context: cf Peel Valley Mushrooms Ltd v Corporate Investment Australia Funds Management Ltd [2000] NSWSC 958; 35 ACSR 535, at 542 [22]-[25], per Santow J.

57.   Blackburn J stated in Xenos v Wickham that the mere affixation of the seal does not render a document a deed. But a document in the form of a deed which has been signed and sealed is presumed to have been delivered: Hall v Bainbridge (1848) 12 QB 699; 116 ER 1032. The presumption may be rebutted, for example where the circumstances show that the parties executing counterpart deeds did not intend to be bound until the deeds were exchanged: Hooker v Christian Brothers.

58.   The question in the present case is not (as the primary Judge seems to have thought) whether, on the evidence, the guarantees had been delivered to the Developer. Physical delivery is not required for a deed to be effective. The critical question is whether the party executing the deed has evinced an intention to be bound immediately.

59.   In Xenos v Wickham, it was said that the question of whether a party had evinced an intention to be bound by a deed was a question of fact for the jury: at 309, per Piggott B; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70, at 78, per Tadgell J. Both parties in the present case accepted that the Bank’s intention, for the purpose of determining whether the deed had been delivered, was to be ascertained objectively by reference to the words used by and conduct of the Bank and the facts attending the execution. This approach is consistent with the statements of principle in Norton on Deeds and in Xenos v Wickham, where Blackburn J emphasised the significance of the acts or words of the promisor: see also Ansett v Comptroller, at 79, citing Bowker v Burdekin (1843) 11 M & W 128, at 147; 152 ER 744, at 751, per Parke B: Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310, at 355, per Kennedy J

[…]

72.   A deed can be delivered in escrow. The effect is that the deed is not recallable, but equally is not operative until a particular condition is satisfied: Beesly v Hallwood Estates Ltd [1961] Ch 105, at 118, per Harman LJ (with whom Lord Evershed MR agreed): Federal Commissioner of Taxation v Taylor [1929] HCA 13; 42 CLR 80, at 87-88, per Rich, Starke and Dixon JJ; Ansett v Comptroller of Stamps, at 79. Delivery of a deed in escrow is to be distinguished from a case where the grantor’s intention is not to be bound at all until some future event occurs, in which case there is no delivery. An example is where a party to a conveyancy transaction executes a deed and returns it to his or her solicitor in the expectation that, in accordance with usual conveyancing practice, the deed will not be operative until exchange: Hooker v Christian Brothers, at 118, Bradbrook, at 269.

73.   Whether a deed has been delivered unconditionally, delivered in escrow or not delivered at all depends on the executing party’s intention. This question, as I have already indicated, is to be determined on the basis of the words used by and the conduct of the promisor, taking into account the circumstances attending the execution of the deed.

  1. In Seddon on Deeds (Nicholas Seddon (2015, The Federation Press) the learned author observes (at 95):

1.   if the parties have agreed that exchange of counterparts is to be the method of executing a deed, then the contract rules about constructive exchange apply;

2.   in addition, there may be a further issue of whether delivery has occurred, that is, whether the requisite intention to be immediately bound has been established.

Normally completion of exchange will also manifest the requisite intention for delivery. Conversely, before completion of exchange, the parties are not bound except (if at all) by an escrow.

  1. Reference was also made to the decisions in Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 (Hooker v Christian Brothers) and 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245 (400 George Street) (as to which, see further below).

  2. Accordingly, it may be observed that whether there has, or has not, been delivery is a question of fact (that is, the intent of the executing party is a question of fact). Furthermore, it is permissible to take into account later events, as well as circumstances prior to or contemporaneous with the alleged delivery of the deed, in order to ascertain what was the intention of the person concerned at the time of execution.

  3. The distinction between delivery of a deed absolutely and the delivery of a deed conditionally was explained by the High Court (Rich, Starke and Dixon JJ, as his Honour then was) in Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80; [1929] HCA 13 as follows (at 87):

When a deed between parties is executed by one of them it is a question of fact whether he dehvered it absolutely in the first instance, or conditionally with the intent that it should not take effect as his deed until the other parties had also executed it. (See per Creswell J in Cumberlege v. Lawson (1857) 1 CB (NS) 709 at pp 724 and 726.

If it is dehvered absolutely in the first instance, it is at once operative, as the deed of the person who so executed it, in spite of the fact that he dehvered it upon the faith of the other parties executing it. Of course, if in such a case the other parties fail in the event to execute it, rehef in equity is available to the party who executed it upon the faith of the others doing so. (see Carew’s Case (No 2) (1855) 7 De G M. & G 43; Luke v South Kensington Hotel Compa, (1879) 11 Ch

If on the other hand the person who first seals the deed delivers it as an escrow intending it to become his deed when and not before the other parties execute it, then, upon the condition being fulfilled, the deed becomes effectual to give title as from its first delivery…

CGS’ submissions

  1. In brief compass, CGS’ case is as follows: that the parties agreed that the Deed of Assignment would be delivered by exchange of counterparts; that, although CGS electronically distributed a signed execution page of the Deed of Assignment on 7 January 2020, that was not (relevantly) delivery of the Deed of Assignment; therefore, CGS was entitled to withdraw and recall its signed version of the Deed of Assignment before exchange; and, by letter dated 30 April 2020 and prior to any exchange of the counterparts of the Deed of Assignment, CGS indicated that it no longer proposed to complete the transaction, thereby withdrawing and recalling its signed version of the Deed of Assignment. It is CGS’ position that the provision to CGS by Dexus, Perpetual and NTT (after commencement of these proceedings) of an executed version of the Deed of Assignment “purportedly” dated 12 March 2020 (see the chronology above) did not amount to exchange of counterparts or delivery.

  2. More specifically, CGS argues that the words and conduct of the parties, including CGS, as evidenced in the communications attending CGS’ execution of the Deed of Assignment, disclose that: first, the parties intended for the Deed of Assignment to be exchanged in counterparts, in accordance with usual conveyancing practice; and second, CGS did not evince an intention to be bound immediately but, rather, only an intention to be bound on exchange of counterparts with NTT and the Dexus entities.

  3. CGS points to the communications between the parties on 8 January 2020 and 10 February 2020 (again, see the chronology above) as evidencing the parties’ intention that the Deed of Assignment was to be exchanged in counterparts.

  4. Similarly, CGS points to the following as evincing its intention not to be bound immediately by its execution of the Deed of Assignment on 7 January 2020: first, that it electronically distributed the signed pages only in response to a request by NTT that this would “assist”; second, that the condition in the Assignment Proposal that the offer was subject to execution of a formal Deed of Assignment by all parties (said to be to the same effect as cl 37 in 400 George Street — considered below at [147]ff), which it is said evidenced an intention not to be bound until all parties to the Deed of Assignment were bound; third, that CGS’ execution of the Deed of Assignment on 7 January 2020 was contemporaneous with an understanding, it is said, that it was a requirement that execution of the Deed of Assignment was necessary to obtain access to the Premises for the purpose of fit-out works and occupation under a temporary licence; and fourth, the fact that, on its terms, the Deed of Assignment required the Landlord’s consent (referring to cl 2.2). It is said that CGS could not have intended to have been immediately bound by the Deed of Assignment without obtaining such consent, as it would be obliged to NTT to perform the various obligations under the Deed of Assignment in circumstances where Perpetual could have prevented CGS from exercising the rights under the Deed of Assignment (such as occupation of the Premises).

  5. CGS maintains therefore that, in the absence of any exchange of counterparts prior to 30 April 2020, it was entitled to (and did effectively) withdraw and recall its signed document by letter dated 30 April 2020; and, it is said, by that letter, CGS made it clear that it did not intend to complete on the transaction for the assignment of the lease.

  6. CGS submits that this is not a case of delivery in escrow because no “condition” existed such as would deny CGS the right to recall the deed; rather, it is said that this is case where CGS’ intention was (and is) not to be bound at all until some future event occurs, being exchange of signed counterparts, in which case there was no delivery.

  7. In that connection, CGS says that: by 30 April 2020, there had been no exchange of counterparts; the Dexus entities first provided executed versions of the Deed of Assignment to NTT’s solicitor on 16 July 2020, which letter was received by Sparke Helmore on 22 July 2020; and those documents were then mailed on 23 July 2020 to CGS’ solicitor “for safekeeping”.

  8. CGS says that these versions of the Deed of Assignment, although bearing the date 19 March 2020, were not provided to CGS at any time prior to 22 July 2020; and that there is no evidence, other than a handwritten notation on the schedule of the date 19 March 2020, that the documents were executed by the Dexus entities on that date.

  9. CGS submits that, even if the documents were executed by the Dexus entities on that date, there was still no delivery by exchange with NTT and CGS on that date; rather, the first date of attempted provision of the executed Deed of Assignment to CGS was on 23 July 2020 (being more than two months after CGS’ letter dated 30 April 2020 and three weeks after the commencement of these proceedings). It is submitted that the provision of the executed deed in these circumstances did not purport to be, nor was it, effective delivery by exchange.

NTT’s submissions

  1. By way of supplementary submission in response to the amended defence (as to which, see at [5] above), NTT says as follows.

  2. NTT submits that CGS’ argument is dependent on the following two propositions: first, that the parties had agreed that the Deed of Assignment would be delivered by exchange of counterparts; and second, that CGS withdrew its executed counterpart prior to the exchange of counterparts.

  3. NTT’s position in this regard is that: first, CGS delivered the Deed of Assignment absolutely, upon its execution, and CGS evinced an intention to be bound immediately when it so executed (and, it is said, there is no evidence to support the contention that the parties agreed to deliver the Deed of Assignment by exchange of counterparts); second, and further to the first, the conduct of CGS after its execution of the Deed of Assignment supports a finding that CGS intended to be bound from the time it executed the Deed of Assignment and so, once delivered, CGS was bound and it was not entitled to withdraw its signed document.

  4. NTT points to the various emails and other matters (which I have summarised in the chronology above) and submits that: it is plain, from CGS’s conduct and communications prior to and around the time that it executed the Deed of Assignment, that it evinced an intention to be bound immediately; that CGS delivered the Deed of Assignment absolutely, upon its execution by Mr McDonald and Mr Bayley on 7 January 2020; and, it was therefore at once operative, as the deed of CGS.

  5. NTT submits that, while the parties agreed to execute the Deed of Assignment in counterparts and to exchange electronically, there is no evidence that there was an agreement only to be bound on exchange of counterparts, and certainly no agreement that the Deed of Assignment would be exchanged in accordance with usual conveyance practice.

  6. NTT argues that the communications that passed between the parties concerning the Deed of Assignment show that CGS was intending by its execution of the Deed of Assignment to be bound immediately, so that it would be able to satisfy the Condition Precedent of the Licence Agreement and take occupation of the Premises.

  7. NTT emphasises that there is no evidence to suggest that the parties conducted themselves on the basis that they would not be bound until all parties had executed, here seeking to distinguish 400 George Street. It is said that it was not at any point stated by CGS that it would be free to withdraw unless and until certain things occurred or that it would not be bound unless and until certain things occurred (nor was an intention as to a particular mode of binding the parties expressed).

  8. It is said that nowhere was there a statement to the effect that the transaction was “subject to exchange” and, in that connection, it is submitted that the Assignment Proposal can be of no assistance to CGS for two reasons: first, because there is no evidence that any of the parties agreed to the conditions precedent articulated therein; and second, because those conditions precedent stipulate that the “Deed of Assignment and Deed of Consent” must be executed, not exchanged or delivered, and further, refer to “both parties” (presumably, CGS and NTT, not the Dexus entities) having executed the assignment documents. Pausing here, it is relevant to note (as I have at [10] above) that the Assignment Proposal does not refer to CGS at all but contemplates that CG would be the assignee.

  9. NTT maintains (and I accept) that it is clear from the evidence that CGS executed the Deed of Assignment on 7 January 2020.

  10. Furthermore, as adverted to, NTT submits that the conduct of CGS after its execution of the Deed of Assignment supports a finding that CGS intended to be bound from the time it executed the Deed of Assignment, particularly that CGS immediately proceeded to spend a large sum of money on fitting out the Premises, moved its staff into the Premises and that, from the moment of execution, CGS consistently referred in its communications with the parties to its impending obligations under the Lease (NTT pointing to the fact that, from late March 2020 onwards, mindful of those impending obligations, CGS attempted to negotiate a reduction in rent with Dexus, which it is said CGS plainly understood it would be obliged to pay as of 1 May 2020).

  11. NTT adds that, were there to be any doubt about CGS’ intention or position, the very document on which CGS now relies as effecting a withdrawal by it of its signed document also evinces an intention on CGS’ part to be bound on execution. It is noted that at no point in the letter of 30 April 2020 does Mr McDonald refer to the basis upon which CGS executed the Deed of Assignment and suggest that it did not intend by that execution to be immediately bound; nor (it is said) does Mr McDonald expressly or even impliedly withdraw CGS’ signed counterpart (instead, it is said that the premise of the letter is that CGS knows itself to have been bound by its execution and understood that it had obligations flowing from that, but claimed that its obligations were discharged by operation of the doctrine of frustration).

  12. For the preceding reasons, NTT reiterates its primary position that the Deed of Assignment is valid and enforceable and that it is entitled to the principal relief sought.

Dexus entities’ supplementary submissions

  1. As noted above (see at [4]), the Dexus entities have compromised the claim with NTT and I have already made consent orders thereto. Nevertheless, it is convenient here to note the submissions by the Dexus entities as to the enforceability of the Deed of Assignment.

  2. In short, the Dexus entities maintain that both NTT and CGS are liable to pay unpaid rent and other moneys owing, as NTT has not been released from its obligations under the Lease and CGS is also bound as tenant as a result of its entry into the Deed of Assignment (as to which, see below).

  3. Insofar as the effect of the amended defence by CGS is to assert that the Lease does not bind CGS, the Dexus entities say that they are still entitled to the relief sought by prayers 5 and 6 of the amended cross summons against CGS. It is contended that CGS’ change of pleading is not supported by the evidence, and that: first, none of the parties, at any time, adopted the position contended for by CGS; second, that the conduct of CGS was specifically contrary to its now pleaded position; third, in particular, that CGS maintained (until the amendment to the defence on 19 August 2020) that it was a party to the Lease, and that the Lease had been frustrated; and fourth, that the evidence relied on by CGS does not take into account the entire chronology of events.

  4. The Dexus entities say that here (as was the case in Segboer v AJ Richardson) the overwhelming inference is that CGS considered itself bound immediately (pointing to the facts as set out in the supplementary submissions of NTT and excerpted above). It is said that, at every step, the conduct of CGS was consistent with the conclusion that CGS was bound to the Deed of Assignment.

  5. The Dexus entities submit, as does NTT, that the terms of the Deed of Assignment itself reinforce that conclusion (pointing by way of example to cl 3, which provides an acknowledgement by the Landlord that CGS would be occupying the part of the Premises by way of licence from the date of the Deed of Assignment itself and which, as its own evidence confirmed, CGS did so). It is said that a consideration of these matters makes it clear that: first, the Deed of Assignment constituted an assignment between NTT and CGS from the moment it was signed by those parties; and second, that CGS was bound to the Deed of Assignment and could not withdraw from it unilaterally once signed.

  6. As to Hooker v Christian Brothers (and CGS’ submission based on this authority that “usual conveyancing practice” applied to the transaction), the Dexus entities say that, unlike the position which prevailed in Hooker v Christian Brothers (where there was found to be no transaction at all), the commitment by CGS to the Deed of Assignment was a necessary prerequisite to it: first, obtaining access to the Premises; and second, its entering into the licence with the sub-tenant to NTT on a temporary basis for commencing and completing its fit-out. It is submitted that those matters directly contradict any contention that CGS reserved to itself the ability to withdraw from the transaction by recalling its counterpart of the Deed of Assignment.

  7. As to 400 George Street, the Dexus entities submit that this is in “stark contrast” to the present case, noting that, there, the parties were held to have dealt with each other on the basis that no legal obligations arose until all had signed and were bound, whereas, here, it is said that the reverse is the case: that all parties considered that the transaction (being the assignment) took effect when the parties to that assignment had signed the Deed of Assignment. It is further said that, had that been otherwise, CGS had no reason or need (amongst other things) to seek rent relief under the Lease or to claim that the Lease had been frustrated.

  1. As to the last of those points, the Dexus entities note the exchange of emails between the principals of CGS and the property manager for Dexus between 14 to 18 May 2020 as unequivocally demonstrating that CGS, “…do not wish their application (for relief) to be reviewed, and they have waived their rights under the Code of Conduct”.

  2. Accordingly, the Dexus entities submit that CGS has no basis to resist prayers 5 and 6 of the amended cross summons, which declarations the Dexus entities say should be made (with costs).

Determination

  1. It is convenient to dispose of this aspect of the proceedings as follows: first, to determine whether CGS is entitled here to rely on the COVID-19 Regulations; if so, second, to determine whether the Deed of Assignment is relevantly a “commercial lease” for the purposes of the COVID-19 Regulations; if so, third and following, to determine whether CGS and/or NTT are relevantly a “lessor” and/or “lessee” for the purposes of the COVID-19 Regulations; if so, fourth and finally, to determine whether CGS is, or has proven, that it is an “impacted lessee”.

Is CGS entitled to rely on the COVID-19 Regulations?

  1. As an initial matter, and as I have adverted to above (see at [258]ff), I see considerable force to the submission for NTT that CGS should not be permitted to rely on the COVID-19 Regulations. This is because I accept that, by reason of r 14.14 of the UCPR, CGS ought to have specifically pleaded the alleged application of the COVID-19 Regulations and the factual substratum from which any such claim is to be determined. That is particularly so having in mind NTT’s position in relation to proof of CGS’s entitlement to the JobKeeper scheme.

  2. As to the unfairness and prejudice that NTT says it would suffer if I were to permit in my discretion CGS to rely on the COVID-19 Regulations, I note that the relevant prejudice is not that, by operation of the COVID-19 Regulations, NTT might thereby be denied the full extent of relief sought (though, that itself, for reasons that I will shortly come to, is not necessarily so in any event), but instead the prejudice of not now being able fully to test CGS’s claim (again, noting particularly the issue as between the parties in relation to the JobKeeper scheme eligibility and its turnover in the last financial year, and otherwise).

  3. I see that such unfairness and prejudice is here particularly acute, having in mind that, if CGS’s position vis-à-vis the COVID-19 Regulations is good, then NTT’s principal claim would be unmaintainable or, at the very least, substantially subjugated.

  4. Nevertheless, I should here record that I appreciate that the proceedings have been instituted and prosecuted with necessary haste and the application and operation of the various emergency statutory amendments made over the last few months have been largely untested and are not altogether easy to comprehend. I mean no criticism by that observation. Furthermore, I appreciate that the prevailing commercial and other such circumstances would not have made the institution and prosecution of these proceedings any easier.

  5. Having said these things, in the exercise of my discretion, I would not permit CGS to rely on the COVID-19 Regulations. In the event that I were to be wrong in the exercise of that discretion, I now turn to the next issue in relation to the COVID-19 Regulations, being whether the Deed of Assignment as between NTT and CGS is relevantly a “commercial lease”.

Is the Deed of Assignment a “commercial lease”?

  1. As would be evident from the definitions section (excerpted at [205] above), critical to this aspect of the proceedings is whether the Deed of Assignment is a “commercial lease” (noting, for example, that the definitions of “lessor” and “lessee” hinge on whether the putative agreement is a “commercial lease” as defined).

  2. As has been noted, a “commercial lease” is relevantly defined as “… any agreement to which the Act applies relating to the leasing of premises or land for commercial purposes…”. Relevantly, “the Act” is defined to mean the Conveyancing Act.

  3. Whether the Deed of Assignment is a “commercial lease” is not as straightforward as might initially appear. As will be recalled, CGS makes specific reference to s 128 of the Conveyancing Act and says that, by that section, the Deed of Assignment is relevantly a “commercial lease” (because, it is said, that if CGS is bound by the Deed of Assignment then it is an agreement for a lease where the lessee has become entitled to have his or her lease granted).

  4. Section 128 provides:

128      Definitions

For the purposes of this Division and Divisions 3 and 4—

Lease includes an original or derivative under-lease, also a grant at a fee farm rent, or securing a rent by condition, and an agreement for a lease where the lessee has become entitled to have his or her lease granted.

Lessee includes an original or derivative under-lessee, a grantee under such a grant as aforesaid, his or her executors, administrators, and assigns, a person entitled under an agreement as aforesaid, and the executors, administrators, and assigns of a lessee.

Lessor includes an original or derivative under-lessor, a grantor as aforesaid, a person bound to grant a lease under an agreement as aforesaid, and the executors, administrators, and assigns of a lessor.

Under-lease includes an agreement for an under-lease where the under-lessee has become entitled to have his or her under-lease granted.

Under-lessee includes any person deriving title through or from an under-lessee.

  1. Some potential difficulties, therefore, with CGS’ construction are as follows. First, at least arguably, the Deed of Assignment is not an agreement to lease — it is an agreement to assign an existing lease. Second, and relatedly, the Deed of Assignment is, again arguably, not an under-lease (or sublease) — it is an assignment of an existing lease. As to the second of those propositions, it is to be noted that, by the Deed of Assignment, CGS was not to take a sub-lease as sub-lessee and NTT as sub-lessor; rather, NTT was to assign to CGS its existing rights as lessee. Indeed, underlying each of these apparent difficulties is the fact that the Deed of Assignment does not operate to create a new leasehold interest in the Premises — again, it operates to assign an existing proprietary interest.

  2. Likewise, if CGS is so bound, CGS does not have entitlement to have its lease granted; rather, it has a right to have NTT’s interest in the Premises assigned to it. In this regard, I again note NTT’s submission, which has force in my view, that CGS could not, through an exercise of the rights created by the Deed of Assignment, compel the Lease to be granted to it through specific performance; rather, CGS would be restricted to seeking specific performance by NTT of the transfer of the Lease to it.

  3. With this said, against this, arguably the Deed of Assignment is nevertheless relevantly a “commercial lease”. This is because, if nothing else, a “conveyance” is defined, by s 7, under the Conveyancing Act as including, “any assignment, appointment, lease, settlement, or other assurance by deed of any property; and convey has a meaning corresponding with that of conveyance” (my emphasis). Similarly, by that section, “assurance” is defined to include a “conveyance”.

  4. Accordingly, I will proceed on the basis that the Deed of Assignment is relevantly a “commercial lease” for the purposes of the COVID-19 Regulations.

Is either of NTT and/or CGS relevantly a “lessor” and/or “lessee”?

  1. Given that the definitions of “lessor” and “lessee” under the COVID-19 Regulations hinge on whether the Deed of Assignment is a “commercial lease”, it follows that CGS and NTT would here satisfy that definition.

Is CGS, or has CGS proven that it is, an “impacted lessee”?

  1. Finally, as to whether CGS is relevantly an “impacted lessee”, it will be recalled that the identification of a lessee as relevantly “impacted” turns on whether the lessee is entitled to receipt of the JobKeeper scheme.

  2. In this connection, it will be recalled that CGS has put into evidence inter alia: its enrolment for JobKeeper; receipt of payments as recorded in the June 2020 financials (though, as noted at [280], it is not altogether clear what entity has been in receipt of payments); and that the CG Group’s turnover and net revenue for the 2018 to 2019 financial year was less than $50 million (by reference to the consolidated financial statements for the financial year).

  3. On this evidence, and having in mind those matters that I have identified in relation to the discretion concerning r 14.14 (as to which, see at [294]ff above), I see force to NTT’s submission that it is somewhat difficult for me to be satisfied that CGS, as a matter of fact and law, qualifies for the JobKeeper payment. Indeed, while perhaps formalistic, the receipt of a payment is not the same as an entitlement to it.

  4. In this connection, I also again note NTT’s submission in relation to CGS only having been incorporated in August 2019, such that there may be doubts as to the availability of the necessary comparison period for the purposes of the CERP Rules.

  5. As to the seemingly modified test under s 8A (it will be recalled, which applies for certain group structures, such that where an employment entity is utilised within a group of companies, and that employment entity is unable to demonstrate a decline in its own turnover), again, I see force to the proposition that there is a paucity of evidence before the Court to enable me to make the necessary findings of fact.

  6. Furthermore, I accept that there is difficulty, as a matter of statutory construction, in construing cl 2 as embracing eligibility under s 8A when the instrument expressly refers only to eligibility “under sections 7 and 8”. More specifically, I do see that to construe cl 2 as defining an “impacted lessee” as also including a lessee who qualifies under s 8A would require the Court to read additional words into the clause in order to give effect to what may be perceived to be the statutory purpose; and that to do so would be to favour impermissibly a construction that fills gaps disclosed in the legislation (noting, again, what was said in Taylor v Owners-Strata Plan No 11564 at [37]-[38]). Indeed, while it seems patent that the intention was to include eligibility under s 8A, it is not for the Court here to speculate on that matter, in circumstances where the plain and ordinary meaning does not disclose any patent ambiguity or absurdity, nor is this necessary to remedy or repair a perceived deficiency in the instrument as presently enacted.

Conclusion and orders

  1. It follows that the Deed of Assignment is valid and enforceable as against CGS, but that I will decline to order specific performance and that, accordingly, NTT will be left to a claim in damages. The quantum of those damages is referable to the moneys that: one, NTT has already paid to the Dexus entities in satisfaction of CGS’ liabilities under the Deed of Assignment from the date on which CGS became liable therefor; and two, that NTT will, for the balance of the lease term, pay over to the Dexus entities in satisfaction of the liability that CGS has taken under the Deed of Assignment.

  2. Having said this, and notwithstanding my disposition as to CGS’ claims based on the operation of the COVID-19 Regulations, I consider that it would be in the interests of all the parties for them to proceed to a mediation with the aim of reaching some form of arrangement that best accommodates each of their interests and having the benefit of these reasons. I consider that an order directing the parties to participate in a mediation of this kind is in the interests of the just, quick and cheap resolution of the real issues in dispute, having in mind the overriding mandate prescribed by s 56 of the Civil Procedure Act.

  3. As to costs, at this stage, I see no reason why costs should not follow the event and, NTT and the Dexus entities here having had substantial success, that CGS should bear the costs of the proceedings. Having said this, I will give the parties liberty to apply in the event that any party seeks a variation of my orders in relation to costs or there are any other issues in the implementation of these orders.

  4. For the preceding reasons, I make the following orders:

  1. Declare that the Deed of Assignment (as defined in [2] of these reasons) is valid and enforceable as against the first defendant.

  2. Order, in lieu of specific performance of the Deed of Assignment referred to in Order 1, damages referable to [314] of these reasons.

  3. Order that, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the first defendant pay interest on damages referred to in Order 2.

  4. Declare that the second cross-defendant was liable to the second cross-claimant for the sum of $492,130.19 owing as at 11 August 2020 comprised of rent, outgoings and other amounts payable and remains liable for such other amounts as fall due under the Lease and/or the Deed of Assignment after 11 August 2020.

  5. Order that the first defendant pay the costs of the plaintiff, second defendant and third defendant.

  6. In the event that the first defendant notifies the other parties within 14 days that it seeks rent relief under the COVID-19 regulatory scheme, direct the parties to attend a mediation within 28 days thereafter and for that purpose refer the parties to the Registrar for court-annexed mediation.

  7. Liberty to apply on three days’ notice.

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Decision last updated: 09 October 2020

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