PHAM and BAO
[2021] WASAT 29
•9 MARCH 2021
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: COMMERCIAL TENANCIES (COVID 19 RESPONSE) ACT 2020 (WA)
CITATION: PHAM and BAO [2021] WASAT 29
MEMBER: MS N OWEN-CONWAY, MEMBER
HEARD: 19 NOVEMBER 2020
DELIVERED : 9 MARCH 2021
FILE NO/S: CC 1085 of 2020
BETWEEN: THANH HOANG PHAM
First Applicant
THI KIM THU NGUYEN
Second Applicant
AND
WANQUN BAO
Respondent
Catchwords:
Eligible tenant - Code of conduct dispute - Rent relief - Order to pay money to landlord - Outgoings - Turns on own facts
Legislation:
Biosecurity Act 2015 (Cth)
Commercial Tenancies (Covid-19 Response) Act 2020 (WA), s 2, s 3, s 5, s 6, s 7, s 8(k), s 8(l), s 9, s 12, s 13, s 13(1), s 14, s 14(1), s 14(2), s 16, s 17, s 21, s 22, s 23, Pt 1, Pt 2, Pt 3, Pt 4, Pt 5 and Pt 6
Commercial Tenancies (Covid-19 Response) Amendment Regulations 2020 (WA), reg 2(1)(b)(ii), reg 2A, reg 5, reg 11(2), Sch 1, cl 2(1A)(b)(i), cl 2(1A)(b)(ii), cl 2(1)(a)(iii), cl 2(1)(b)(i), cl 2(1)(b)(ii), cl 4(d), cl 5, cl 7, cl 7(3), cl 10, cl 11
Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 3(1), s 12(1)(d)(ii)
Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth), s 8
Emergency Management Act 2005 (WA)
Public Health Act 2016 (WA)
State Administrative Tribunal Act 2004 (WA), s 6, s 9, s 13, s 13(1), s 15, s 15(1), s 6, s 17, s 32
Result:
Application successful in part
Category: B
Representation:
Counsel:
| First Applicant | : | Henrik Bendtsen |
| Second Applicant | : | Henrik Bendtsen |
| Respondent | : | In Person |
Solicitors:
| First Applicant | : | HLB Lawyers |
| Second Applicant | : | HLB Lawyers |
| Respondent | : | N/A |
Case(s) referred to in decision(s):
Nil
REASONS FOR DECISION OF THE TRIBUNAL:
Application
On 2 September 2020, the first named applicant, Mr Thanh Hoang Pham, and the second named applicant, Ms Thi Kim Thu Nguyen, made an application to the Tribunal. Mr Wanqun Bao is the respondent. The application is brought pursuant to s 16 of the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (the Act).
The applicants seek an order that the respondent pay to them money they assert is payable, pursuant to a lease between the parties.
The applicants are the owners of a property situated at Shop 13, 225 Illawarra Crescent, Ballajura, (premises) which comprises part of a lot of a strata titled property that operated, at least in part, as a shopping centre or cluster of shops. The applicants are the landlords of that property and the respondent is the tenant, the applicants having leased the property to the respondent pursuant to a lease executed by the parties and dated 30 December 2017 (lease). There is no issue that the respondent operates a Chinese style massage business from the premises (massage parlour).
The respondent opposes the applicants' application for the payment of money and instead contends that the Tribunal should order certain rent and outgoings, otherwise payable pursuant to the terms of the lease, be waived.
Jurisdiction
Section 16 of the Act and s 13 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) operate to confer jurisdiction upon the Tribunal to determine disputes as defined by the Act. Such disputes fall within the Tribunal's original jurisdiction (s 15 of the SAT Act). Section 17 of the Act confers specific powers upon the Tribunal to make orders in respect of disputes as defined by the Act. Section 16 of the SAT Act directs that the Tribunal deal with a matter falling within its original jurisdiction in accordance with the SAT Act and the Act. The Tribunal's statutory objectives include determining and resolving disputes 'fairly and according to the substantial merits' (s 9 of the SAT Act) and, to that end and in compliance with the requirement to comply with the rules of natural justice (s 32 of the SAT Act), the parties were afforded the opportunity to provide to the Tribunal and each other documents they intended to rely on, give oral evidence, crossexamine witnesses and make submissions during a final hearing.
The Coronavirus 19 pandemic and relevant State and Federal Government responses
On 18 March 2020, the Governor General declared a human biosecurity emergency for Australia pursuant to the Biosecurity Act 2015 (Cth). The declaration was made in response to the detection of Coronavirus 19 (COVID-19) in Australia and the need to control the spread of the same. The declaration was extended and remained in operation for the whole of the relevant period in this proceeding.
On 15 March 2020 the Western Australian Minister for Emergency Services declared a state of emergency for the whole of the State pursuant to the Emergency Management Act 2005 (WA) (EM Act). On 16 March 2020 the Western Australian Minister for Health declared a public health state of emergency for the whole of the State pursuant to the Public Health Act 2016 (WA) (Public Health Act). Both State declarations were made in response to the detection and need to control the spread of COVID19 within the State. Both State declarations have been extended from time to time and remained in operation for the whole of the relevant period of this proceeding (March to September 2020).
On 18 March 2020, the Mass Gathering Directions were pronounced pursuant to the Public Health Act. On 20 March 2020, the Mass Gathering Directions were revoked and replaced with the Mass Gathering Directions (No 2). On 30 March 2020 the Prohibited Gathering Directions revoked and replaced the Mass Gathering Directions (No 2). The Mass Gathering Directions, the Mass Gathering Directions (No 2) and the Prohibited Gatherings Directions placed restrictions on otherwise lawful conduct of people within the State, and from 30 March 2020, the Prohibited Gatherings Directions restricted social and other activities, so as to reduce and prevent the spread of COVID-19.
On 23 March 2020 the Closure of Certain Places of Business, Worship and Entertainment Directions (Closure Directions) were pronounced pursuant to the EM Act and the state of emergency declared on 15 March 2020. The Closure Directions required operators ('owner, occupier or person apparently in charge') of certain businesses to close those businesses to the public and to refrain from operating the same. The operation of a massage parlour was not included in the Closure Directions.
On 25 March 2020 the Closure of Certain Places of Business, Worship and Entertainment Directions (No 2) (Closure Directions 2) were pronounced pursuant to the EM Act and the state of emergency declaration made on 15 March 2020. The Closure Directions 2 contained additional directions to supplement the Closure Directions. The Closure Directions 2 directed:
5.Every owner, occupier or person apparently in charge of an affected place must close that place to the public for a period commencing at the beginning of the day after the day these directions are made and ending at midnight on 13 April 2020.
…
7.Affected place means any one of the following, whether operated on a profit or not-for-profit basis:
…
(f)a massage parlour[.]
On 30 March 2020 the Closure of Certain Places of Business, Worship and Entertainment Directions (No 3) (Closure Directions 3) was pronounced pursuant to the EM Act and the state of emergency declared on 15 March 2020, which did not alter the Closure Directions 2 in respect of the operation of the business of a massage parlour.
On 7 April 2020 the Closure Directions and the Closure Directions (2) and (3) were revoked.
On 7 April 2020 the Prohibited Gatherings Directions was revoked.
On 7 April 2020 the Closure and Restriction (Limit the Spread Directions) (Restriction Directions) was pronounced. Clause 10 of the Restriction Directions provides:
Every owner, occupier and person apparently in charge of an affected place must close that place to the public while these directions remain in effect.
Clause 14 of the Restriction Directions defined 'Affected place' to include:
…
(o) a massage parlour[.]
The Restriction Directions also restricted social and other activities to reduce and prevent the spread of COVID-19. The Restriction Directions were revoked and replaced but the operation of a massage parlour business continued to be restricted until, effectively, 6 June 2020, when the Closure and Restriction (Limit the Spread) Directions (No 4) was pronounced pursuant to the EM Act and the state of emergency declared originally on 15 March 2020.
From 6 June 2020 to date, restrictions have been imposed by the Restriction Directions and the subsequent directions made pursuant to the Public Health Act and/or the EM Act, on otherwise lawful conduct of people within the State restricting social and other activities to varying degrees, so as to reduce and prevent the spread of COVID-19.
The Tribunal finds that based upon the above, massage parlour businesses, such as that operated by the respondent, were closed to the public between the evening of 26 March 2020 to and including 5 June 2020. Consequently and obviously, there was no prospect that such a business could be in receipt of revenue earned in the operation of that business in that period. In addition, given the terms of the Mass Gathering Directions (No 2) and the Prohibited Gathering Directions, the Tribunal infers that the prospect of normal business and trade for a massage parlour business progressively reduced from at least 21 March 2020 until 26 March 2020 and was limited after 6 June 2020 and may have progressively increased from that time by reason of the various subsequent directions. The Tribunal draws these inferences as they are consistent with the documentary evidence adduced by the parties. (see below).
The Act
On 23 April 2020 the Act received Royal Assent. The long title of the Act recites that the Act responds to the 'impact of the COVID-19 pandemic on certain commercial leases, and for related purposes'. Part 1 of the Act has been in force and operation since 23 April 2020. Parts 4, 5, and 6 have been in force and operation since 24 April 2020 and Pt 2 and Pt 3 are deemed to have come into effect on and from 30 March 2020 (s 2 of the Act). The rights conferred by Pt 2 and Pt 3 are therefore expressed to have retrospective effect.
Part 2 of the Act contains the definitions applicable to the Act. The terms 'small commercial lease', 'lease', 'landlord', 'tenant' are defined by s 3 of the Act. None of these terms are controversial on the facts of this proceeding. The 'emergency period' commenced on 30 March 2020 and concluded on 29 September 2020, unless otherwise prescribed by any regulations. Following the operation of the Commercial Tenancies (Covid-19 Response) Amendment Regulations 2020 (WA), published in the Western Australian Government Gazette on 25 September 2020, the original emergency period was extended to 28 March 2021. The emergency period was 30 March 2020 to 28 March 2021.
The Act provides that the provisions of any lease are taken to be modified 'to the extent necessary to give effect to the operation of this Act' (s 6 of the Act) and is expressed to take effect 'despite anything to the contrary in any written law' (s 5 of the Act). Any agreement to modify, waive or exclude the operation of the Act is void (s 7 of the Act).
Part 3 of the Act is concerned with certain actions that might otherwise be open to a landlord under a small commercial lease and to prohibit that action. The prohibited action includes but is not limited to taking any action for the performance of obligations by the tenant or for any other remedy otherwise available to the landlord against the tenant at common law or under any written law (s 8(k) and s 8(l) and s 9 of the Act). Given the objectives and purpose of the Act, the Tribunal construes the definition of prohibited action referred to in s 8(k) and s 8(l) of the Act widely, so that the landlord of a relevant lease must not issue to a tenant a notice of default in respect of or issue a demand for payment of, unpaid rent and/or outgoings during the emergency period. In the event that a landlord has taken prohibited action in the emergency period, s 12 of the Act provides that the action is as valid and effective as it would have been but for the Act, but is 'taken to be stayed or suspended' until the end of the emergency period.
Part 4 of the Act provides that the regulations that may be made pursuant to s 13 and s 22 of the Act may adopt a 'code of conduct' by incorporation or reference and subsequent amendment thereof by regulation. Section 13(1) of the Act defines a 'code of conduct' to mean one 'relating to small commercial lease principles during the COVID-19 pandemic'.
Part 5 of the Act provides for the resolution of disputes. Relevantly, 'dispute' is defined for the purposes of Part 5 of the Act as follows:
(a)means a dispute between the parties to a lease … that arises out of, or in relation to, the operation of this Act; and
(b)includes -
(i)a code of conduct dispute; and
(ii)a financial hardship dispute[.]
A 'code of conduct dispute' is defined to:
[mean] a dispute that arises out of, or in relation to, the application of the adopted code of conduct[.]
and expressly includes a dispute:
… about the waiver or deferral of rent payable under a lease.
A 'financial hardship dispute' is defined as:
… a dispute between parties to a small commercial lease in the following situation -
(a)during the emergency period, the tenant has breached a small commercial lease by failing to pay rent or any other amount of money payable by the tenant to the landlord under the small commercial lease (including, without limitation, a requirement under the lease to pay all or any of the landlord's operating expenses); and
(b)the landlord claims that the breach was not the result of the tenant suffering financial hardship; and
(c)the landlord has not granted the tenant a waiver, deferral or reduction in respect of the unpaid rent or other unpaid amount of money.
The term 'financial hardship' is defined by s 14 of the Act and only for the purposes of Pt 5 of the Act and only in relation to a tenant as follows:
… in relation to a tenant, means financial hardship suffered by the tenant as a result of 1 or more of the following -
(a)a restriction imposed under a written law in response to the COVID-10 pandemic;
(b)changes in societal behaviour in response to the COVID-19 pandemic;
(c)any other consequence of the COVID-19 pandemic[.]
It is not in dispute in this proceeding and the Tribunal finds that this lease is a retail shop lease as defined by the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (CTRSA Act) and is a small commercial lease as defined by s 3 of the Act, and thereafter referred to as a 'lease'.
Section 17 of the Act confers in the Tribunal power to make orders 'to resolve the dispute or the proceedings'. The Tribunal is empowered to make 'any order that it considers appropriate to resolve the dispute or proceedings' within the parameters of the Act and the SAT Act.
The Tribunal is empowered by s 17(3)(a), (b), (e) and (f) of the Act to make the following orders in a general dispute, a code of conduct dispute and a financial hardship dispute:
(i)an order that the landlord or tenant pay money to a person specified in the order (s 17(3)(a) of the Act);
(ii)an order that the landlord or tenant do or refrain from doing a thing specified in the order (s 17 (3)(b) of the Act);
(iii)an order dismissing the proceeding (s 17(3)(e) of the Act);
(iv)an ancillary order that the Tribunal considers necessary to give any order made under the Act 'full effect' (s 17(3)(f) of the Act).
The Tribunal is empowered to consider 'any equitable claim or defence, and give any equitable remedy, that the Supreme Court may allow' (s 17(8) of the Act).
In the case of a code of conduct dispute, s 17(3)(c) of the Act empowers the Tribunal to make any order that the Tribunal considers 'appropriate to give effect to the code of conduct including, an order that a 'specified amount of rent payable under the lease be waived for a specified period or deferred and paid in a specified timeframe'. There is no specific power conferred upon the Tribunal to order that any outgoings be waived or deferred. As to an order that may be considered as 'appropriate' to resolve a code of conduct dispute for the purposes of complying with the overarching directive to the Tribunal stated in s 17(2) of the Act, the Tribunal must consider the factors referred to in s 17(4) of the Act. Section 17(4) identifies what the Tribunal 'must have regard to' in the case of a code of conduct dispute including an order made for the payment of money by the tenant to the landlord within the scope of s 17(4)(a) of the Act. These factors are:
(a)the financial impact of the COVID-19 pandemic on the tenant's business and capacity to meet the tenant's obligations under the lease; and
(b)the landlord's financial capacity; and
(c)the principles of proportionality and fairness, and any other relevant principles, set out in the adopted code of conduct.
In the case of a financial hardship dispute, s 17(5) of the Act provides that the Tribunal 'cannot' make an order terminating the relevant lease (as provided for by s 17(3)(d) of the Act) 'or any other order to the disadvantage of the tenant', unless the Tribunal is satisfied that the tenant's alleged breach was not the result of the tenant suffering financial hardship as defined (s 17(5)(a) of the Act). Further, the Tribunal 'must' make an order dismissing the application if satisfied that the tenant's alleged breach was the result of the tenant suffering financial hardship as defined, unless (as provided for by the operation of s 23 of the Act and reg 5 of the Regulations):
… the [Tribunal] considers it appropriate to make another type of order that is to the advantage of the tenant in order to resolve or determine the dispute or the proceedings.
So, if a landlord included a financial hardship dispute in an application and sought any order against the tenant for the payment of money payable under to the lease, pursuant s 17(3)(a) of the Act, the Tribunal could not grant that order where it found that the alleged breach is the result of financial hardship as defined. Further, in that scenario, the Tribunal is not compelled to (although it may) dismiss the application, but by reason of reg 5 of the Regulations, may make 'another type of order' that will appropriately resolve the dispute or proceedings. The Tribunal therefore must examine the connection between the alleged breach and the events listed in the definition of financial hardship.
Where the financial hardship dispute is combined with a code of conduct dispute, the Tribunal's power to order that the tenant's payment of rent is waived or deferred, provided for by s 17(3)(c) of the Act will usually enable the Tribunal to make an appropriate order to resolve the dispute or proceedings 'that is to the advantage of the tenant' (as provided for by reg 5 of the Regulations and s 17(5)(b) and s 23 of the Act). In making any order in the case of a code of conduct dispute, the Tribunal must consider the factors referred to in s 17(4) of the Act, including the principles identified in the code of conduct.
Section 21 of the Act permits the Tribunal to utilise its alternative dispute resolution powers of mediation and compulsory conference attendance to resolve the proceedings following and consequent on the agreement of the parties.
The code of conduct
On 25 September 2020, the regulations and the code of conduct were amended to clarify certain issues and to bring the code up to date with the changes to the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (JobKeeper rules). The code of conduct provides a statutory process for landlords and tenants, who meet certain criteria, to follow and allows for relief from the obligations to pay rent and outgoings pursuant to the lease, where those obligation accrue during the emergency period.
The code of conduct affords an 'eligible tenant' the opportunity to make a written request to the landlord for rent relief 'during the emergency period' in the form of waiver and/or deferral of rent. The written request 'must be accompanied' by, amongst other things sufficient and accurate information' that is reasonable in the circumstances to evidence the tenant as an eligible tenant in relation to a small commercial lease who has suffered a reduction in turnover in connection with the use of the leased premises during the emergency period. In a simple business, such as that of the respondent's business, an eligible tenant is one who has suffered a minimum 30% downturn in receipts/turnover during the third and fourth quarters of the 2019/2020 financial years (FY) and the first quarter of the 2020/2021 FY or for months in those quarters when compared to the same period in 2019 so as to satisfy the JobKeeper rules. There are other complex rules that apply to businesses of greater complexity but for the purposes of this proceeding the basic test is the focus of the application of the JobKeeper rules and the determination of eligibility.
What is sufficient and accurate information that is reasonable in the circumstances will vary depending on the facts, although some noted examples are provided. Clause 4 of the code of conduct provides that the parties 'must' 'cooperate', 'act reasonably and in good faith', be 'open', 'honest and transparent' in their conduct concerning the application of and compliance with the code of conduct. The parties must not make 'onerous demands' for information from each other and the notes identify what might be considered to fall within that phrase.
Clause 7 identifies what principles apply to offering and negotiating rent relief. Clause 10 identifies principles applicable to rent deferral. Clause 11 identifies the principles applicable to relief for outgoings payable pursuant to the lease. In the case of the latter, there is no requirement for an eligible tenant to request relief in respect of outgoings. The landlord is obliged to consider waiving the recovery of outgoings payable by an eligible tenant 'for the part of the emergency period that the tenant is not able to conduct their business at the … premises'.
The applicants' position and summary
The application originally sought an order that the respondent 'has to' pay to the applicants the following sums of money:
(a)'debts' that had been incurred prior to the emergency period totalling $725.14 comprised as follows:
(i)City of Swan rates $635.78 (4th instalment due 20 March 2020 for FY 2019/2020); and
(ii)electricity expense of $89.36 (due 27 March 2020);
(b)rent of $250 per week from 24 March 2020 to 7 September 2020, totalling $5,750;
(c)strata Company levies (strata levies) totalling $2,513.26;
(d)Water Corporation rates and usage for the months of April, June and August 2020, totalling $523.24; and
(e)City of Swan rates FY 2020/2021 totalling 1,595.10, (due 28 August 2020).
The total amount sought in the application is $11,106.74. The applicants' assert that the respondent is 'unable to demonstrate the downturn of the business' (Tribunal emphasis).
The applicants' revised position during the hearing (ts 39ff, 19 November 2020) is that the respondent is obliged to pay the applicants:
a)$125 per week or $250 per fortnight rent, being a 50% waiver of rent for the period 24 March 2020 to 14 June 2020 (12 weeks) totalling $1,500;
b)$250 per week of $500 per fortnight rent, for the period 15 June 2020 to 17 November 2020 (22 weeks) amounting to $5,500, less a credit of $250.00 paid 18 June 2020, and totalling $5,250;
c)outgoings:
(i)electricity in the sum of $623.69;
(ii)strata levies in the sum of $2,912.82;
(iii)Water Corporation rates and usage in the sum of $700.83;
(iv)City of Swan rates in the sum of $1,433.34; and
(v)less a credit of $179.87 (being a prepayment of land tax that was not due and payable at the date of payment by the tenant).
The total sum claimed by the applicants under the lease is $12,240.81. The applicants assert they did consider a waiver of payment of outgoings while the respondent's business was forced to close (26 March to and including 5 June 2020) but did not grant the same because they did not have sufficient income with which to pay the outgoings as and when they fell due while they were not in receipt of rent payable by the respondent pursuant to the lease.
Following the conclusion of the hearing, on 4 December 2020 the applicants, having terminated their legal representative's retainer, filed submissions whereby they claim rent in the sum of $9,070.13 as payable pursuant to the lease at the rate of $250 per week (that is, $500 per fortnight). The applicants claim additional outgoings to bring the claim up to date to November 2020. The total amount claimed by the applicants is $15,147.53. The applicants' final position is that there should only be in essence two weeks at a 50% waiver and not the 12 weeks as identified by the applicants' counsel on the afternoon of the date of the hearing.
The Tribunal has before it only the data for the respondent's business turnover for the months of April to September for 2019 and 2020. The evidence and information required for the Tribunal to determine of what rent or outgoings relief should be granted for the month of October 2020 and following are not before the Tribunal. Accordingly the Tribunal's orders are limited to the period of April to September 2020. The Tribunal is satisfied that the respondent has received JobKeeper for the month of October (Exhibit 2).
The respondent's position and summary
The respondent's position has fluctuated also.
The respondent's principal claim is that the applicants must apply a 100% waiver or reduction to the rent due between 24 March 2020 and 15 June 2020 because he asserts that is what was agreed on 18 June 2020 at a meeting between the respondent and Mr Pham. As to the outgoings, the respondent says that:
(a)the applicants have failed to give him the benefit of the $2,500 Synergy rebate to which the applicants are implicitly entitled and if applied then his liability for the electricity outgoings is reduced to zero;
(b)the applicants have failed to access a Water Corporation programme known as 'Water Assist' allegedly available to the applicants to reduce the cost of rates and usage;
(c)the applicants have failed to consider and grant the respondent a waiver of the obligation to pay the council rates and strata levies in the period in which the respondent's business was forced to close; and
(d)the applicants have wrongfully claimed interest on City of Swan rates and strata levies which the applicants have been charged.
The respondent also asserts that he should be relieved of the obligation to pay any of the applicants' outgoings as the applicants have not provided an operating expense statement (s 12(1)(d)(ii) of the CTRSA Act). On the facts of this proceeding Mr Pham stated that in the past, he sent the invoice for every outgoing to the respondent and until March 2020 the respondent paid the invoiced expense. The provision of the source document invoice is effectively the operating statement for each period for each outgoing.
The respondent also asserted in his submissions filed on 10 November 2020, that as the previous anchor tenant for the shopping centre had ceased operating a business in the shopping centre in June 2018, the respondent could not operate his business seven days a week. He asserts that the respondent was supposed to be operating the respondent's business for seven days a week. The respondent reasons that he is not obliged to pay all of the outgoings or that the applicants should compensate the respondent for a portion of the outgoings. This is an issue that must be determined pursuant to an application made pursuant to the CTRSA Act. There is no such application before the Tribunal concerning this lease. The facts relied on are longstanding and this should not be now determined in the context of legislation that is intended to operate for a short period of time. Further there is no obligation imposed by the lease on the respondent to operate every day of the week.
As to the claim for rebates for electricity and Water Corporation rates and usage, there is no evidence to support the respondent's contentions concerning any rebate or credit available or provided to the applicants by Synergy or the Water Corporation. The internet links provided do not provide any information that support the respondent's contentions.
The respondent's submissions filed on 10 November 2020 sought a different outcome, as follows:
(a)all rent between 24 March and 7 September 2020 should waived save for:
(i)$250 paid on 18 June 2020;
(ii)$355 which is to be deferred to an unidentified date; and
(iii)$179.87 land tax prepaid.
(b)all electricity outgoings should be recalculated to the date of the hearing to nil because of the alleged entitlement by the applicant to a $2,500 credit by Synergy;
(c)all water usage and rates should be the subject of a 'Water Assist' application by the applicants which according to the respondent will entitle the applicants to an equal co-payment by the Water Corporation for every dollar the applicants pay up to $150 per month (that is a discount of 50% each month on the facts of this proceeding);
(d)the strata levies for the period 24 March to 5 June 2020 should be waived because the respondent could not operate his business because of the Directions;
(e)the respondent should be considered liable for the payment of $605.79 for the City of Swan rates for the 2019/2020 FY but only if all of the respondent's other contentions are accepted; and
(f)the applicants have wrongfully claimed interest.
As to (f) above, the respondent does not address the fact that the instalment method of payment of the City of Swan rates selected entitled the City of Swan to a deferred payment fee which makes the final instalment for the 2019/2020 FY, $635.78. The additional $29.93 is not an interest charge by the applicants pursuant to the lease. It is the City of Swan's charge to the applicants for the instalment method of payment of the rates, which the respondent is obliged to pay under the lease terms specifically and expressly.
The respondent makes no submissions concerning the City of Swan rates for the 2020/2021 FY (which is considerably lower than the rates for the 2019/2020 FY).
This is a similar proposal to that advanced to the applicants, via the Small Business Development Corporation (SBDC), by the respondent on or about 25 August 2020.
The respondent contends that there was an agreement on 18 June 2020 whereby Mr Pham, on behalf of the applicants, agreed to waive 100% of the rent between 24 March and 15 June 2020 and thereafter that the rent be reduced as referred to above for the balance of the emergency period.
The respondent did not alter his position on 4 December 2020 with the filing of his final submissions.
The history of the proceeding in the Tribunal
The proceeding was listed for an initial directions hearing on 24 September 2020, at which time orders were made to facilitate a resolution by mediation.
The parties attended mediation.
The Tribunal had arranged for both parties to have the benefit of interpreters (a Vietnamese interpreter for the applicants and a Mandarin interpreter for the respondent) during the mediation and the final hearing.
The proceeding was listed for one day. The parties were invited at the conclusion of the hearing to provide submissions in writing, in short form, so as to summarise their positions and arguments.
The applicants were legally represented at the hearing. This was fortunate because the Vietnamese interpreter organised by the Tribunal did not attend on account of being ill. A substitute Vietnamese interpreter did not attend until after 2 pm on the date of the hearing. Although invited to apply for an adjournment, so that they would not be disadvantaged by the non-attendance of a Vietnamese interpreter, the Tribunal was informed that Mr Pham wished to proceed and he would explain the proceedings to Ms Thu. Counsel for the applicants informed the Tribunal that Mr Pham spoke and understood a little English. The respondent also wished to proceed. The attendance of the Vietnamese interpreter after 2 pm improved the progress of the hearing significantly.
The documents before the Tribunal
•Exhibit 1
Part 1.a bundle of documents filed by the applicants comprising:
a)the application;
b)letter 1 July 2020 by Ms Xia, Certified Public Accountant (CPA), accountant for the respondent;
c)contract to lease the premises (retail premises) dated 30 December 2017 between the parties signed by Mr Pham and the respondent;
d)City of Swan rate notice 2020/2021 FY tax invoice;
e)Water Corporation service charges issued 21 April 2020, 27 May 2020, 27 July 2020 and 29 September 2020 for account no 904520602;
f)Richardson Strata Management Services notice of levies for the leased premises tax invoice dated 18 August 2020;
g)typed, undated note of rental arrears addressed to the respondent;
h)JobKeeper turnover calculations for the respondent for April, May, June and July 2019 and 2020;
i)letter 23 August 2020 from Ms Xia;
j)Certificate to Proceed issued by the SBDC;
k)email from SBDC to Mr Pham dated 25 August 2020 attaching contents of an email from a representative of the respondent to SBDC;
l)typed, undated note by applicants concerning monies claimed from the respondent (two pages);
m)City of Swan receipt dated 30 August 2019 concerning the payment of council rates for the leased property and other properties;
n)typed, undated note by applicants concerning 'Electricity Bills, from 01/04/2020 to 01/10/2020 are $445.74';
o)Richardson Strata Management notice of levies due 20 February 2020, 21 April 2020, 31 May 2020, 26 June 2020, 18 August 2020, 17 September 2020 and 20 October 2020 concerning electricity and attached electricity statements by Energy-Tec in each case;
p)City of Swan final reminder notice 15 September 2020;
q)typed, undated note by applicants concerning 'Rate Notice (Council Rates) 2020-2021: $1,595.10)';
r)typed, undated note by applicants concerning 'Water Corporation';
s)annotated Richardson Strata Management Services notice of levies due dated 14 September 2020;
t)typed, undated note by applicants concerning 'Standard monthly levy and interest';
u)typed, undated note by applicants concerning 'Debt prior to 30 March 2020 are $725.14';
v)typed, undated note headed 'Your DEFT payment details';
w)copy receipts 27 April 2018, 18 May 2018, 31 July 2018, 12 September 2018 for remedial massage from Yuewen Bao;
x)typed, undated submission;
y)typed, undated rent invoice claiming $7,070.13;
z)typed, undated document by applicants concerning 'outgoings';
ab)typed, undated submission;
ac)letter undated ANZ – loan repayment extension notice - variable rate;
ad)typed note by applicants to respondent response to message on 24 October 2020 at 10:31 am from respondent;
ae)typed note 23 October 2020 by applicants to respondent; and
af)email from Mr Pham - applicants' submissions;
Part 2.a bundle of documents filed by the respondent including:
a)letter dated 2 October 2020 from Ms Xia;
b)respondent's table of submissions and calculations;
c)print out of document headed 'Synergy Rebate';
d)copy photograph of text message from Mr Pham to respondent on 22 March 2020;
e)copy photograph of handwritten 18 June 2020;
f)copy handwritten note and submission;
g)letter 7 November 2020 from Ms Xia showing turnover change comparison for April to September 2019 and April to September 2020;
h)JobKeeper turnover calculations for respondent for August and September 2020;
i)handwritten receipt records for April 2019-August 2019 and for April 2020 to September 2020; and
j)copy SBDC information page, unknown date.
•Exhibit 2:
Copy Australian Taxation Office (ATO) printout for respondent recording JobKeeper benefit payment for April through to October 2020 (tax file number obliterated);
•Exhibit 3:
Copy photograph letter dated 22 June 2020 demand for payment issued by applicants to the respondent;
•Exhibit 4:
Copy further annotated version of a document 2 (f) in Exhibit 1 filed by the respondent;
•Exhibit 5:
Letter 30 October 2020 demand for payment of outstanding City of Swan rates by solicitor for the City of Swan;
•Exhibit 6:
Copy further annotated version of document 2(e) of Exhibit 1;
•Exhibit 7:
Email copy of text sent by the respondent to the applicants on or about 20 March 2020.
The hearing, the evidence and the findings
The agreed facts concerning the rent payable pursuant to the lease
It is and was at all material times common cause that:
1)the parties had entered into a lease on 30 December 2017 and that the respondent was obliged to pay to the applicants rent, in the sum of $840 per fortnight or $420 per week, together with water, drainage and sewer rates, local authority rates, interest charges on outstanding rates and taxes, water consumed, electricity, gas and telephone services consumed in the premises, strata company levies amongst others of the landlords' operating expenses or outgoings, pursuant to that lease;
2)at some stage after the lease was executed, the parties orally agreed that the rent to be paid by the respondent was reduced to $800 per fortnight or $400 per week and the terms of the lease were orally varied to that extent; and
3)in 2018 the parties orally agreed that the rent to be paid by the respondent was further reduced to $500 per fortnight or $250 per week and the terms of the lease were orally varied to that extent.
At all material times after the variation of the lease in 2018, the rent payable under the lease was $500 per fortnight or $250 per week.
COVID-19 and the impact on the parties at the outset
Mr Pham for the applicants gave evidence that he emailed himself a copy of a text that he received from the respondent on or about 20 March 2020. The content of that text is contained in an email from Mr Pham to the Tribunal dated 19 November 2020 (Exhibit 6). There is no dispute that Exhibit 6 is an accurate copy of the respondent's text to Mr Pham on or about 20 March 2020. That text provides:
Dear Hoang
Due to the recent COVID-19 pandemic, we would like to ask for rent and strata fee for 4 weeks for now to support my business in financial hardship.
In last two weeks, my massage shop income have a significant impact and total revenue dropped 80%. The number of client dropped because of (sic) they are not comfortable and felt risk of virus on people to people transmission. Many staffs are not comfortable at work due to consideration of a high risk of virus transmission. In response to the latest Social Distancing Rules declared by the Prime Minister today to slow down spread of Covid-19, It informed to comply with the 1.5 m between individuals and minimum 4 square metres per person of indoor space, that means I am unable to continue my massage operations in your premises. I also received a notice from Australia national therapy association to suggest all members to close business until the virus period passed.
There are 120 people have confirmed for Coronavirus in WA so far compared to 2 weeks ago (4 people positive). It has growth 30 times. WA government will lockdown the boards (sic) next Tuesday and many shops already temporary closed for fighting the virus from this week. I can see the circumstance is getting worse and affect most small business owners on next few weeks.
The circumstance is tough and I plan to close my business for 4 weeks from next week. I highly appreciate you can remove the rent and strata fee for 4 weeks for now to survive my business. I acknowledge my circumstance might affect your income but we are all at wars and I have try [sic]my best.
On the basis of the declared state of emergency and the declared state of public health emergency on 15 and 16 March 2020 respectively, and the Directions referred to above, the Tribunal finds on the balance of probabilities that the facts as stated by the respondent in this text concerning the reduction of turnover and customer patronage for his business from March 2020, are generally true. There was no evidence to suggest otherwise and no challenge to these facts from the applicants.
The respondent's text amounts to a written request for rent relief in respect of a period partially beyond the emergency period. It is not a written request for rent relief made 'during the emergency period'. The respondent, in effect, seeks a waiver of 100% of the rent and 100% of the strata levies for that same period (four weeks). The value of the proposed waived strata levies is $353 per calendar month. The value of the proposed waived rent is $1,000 (at $250 per week).
In response, Mr Pham sent a text to the respondent on 22 March 2020 at 6:47 pm indicating that the applicants agreed that some relief should be provided and he stated:
Dear
…
I am following up the news every day, you don't have to tell me. I understand the situation in Australia now. What I can do now is only reduce the rent by half to $125/week, strata levies and all outgoings you still have to pay (no free). Government is going to support small business, whereas I got nothing. Thanks.
In the context of the request, the Tribunal concludes that the applicants through Mr Pham, proposed to waive 50% of the rent payable pursuant to the lease for four weeks. The applicants rejected the respondent's proposal for 100% waiver of rent for four weeks and 100% waiver of the strata levies of one month.
There was no concluded agreement of variation to the terms the lease concerning the rent of an enduring nature or for any period beyond four weeks from 22 March 2020. There was no concluded agreement of variation to the terms of the lease concerning outgoings at all. There was no concluded agreement of a 50% waiver of rent for four weeks. It was offered by the applicants but never accepted by the respondent.
It is obvious from the State and Federal government actions and the Directions, that March 2020 was a period of rapid response and change. The length of time and extent to which the COVID-19 pandemic would affect trade, commerce and general activities was unknown as at 22 March 2020. In light of this conclusion, the respondent's proposal and the applicants' refusal and counter proposal was made in an attempt to deal with the immediate future and a pending or anticipated government prohibition on the respondent operating his business to prevent the spread of COVID-19 in the State. In other words, it was an arrangement for a short interim position. There is no evidence that the respondent ever accepted the applicants' counter proposal. Notwithstanding, the applicants did apply a 50% waiver to the rent payable pursuant to the lease for 12 weeks, largely because the COVID-19 pandemic and its economic impact was not short lived.
It is also implicit from Mr Pham's text to the respondent on 22 March 2020, that he was aware that the respondent would likely be provided with some temporary State and/or Federal Government benefit or relief but he and his wife, as the landlords, would not likely obtain such benefit or relief.
COVID-19 rent relief after March/April 2020 and requests
As it was not disputed, Mr Pham gave evidence and the Tribunal finds that the respondent has paid only $250 in rent since 22 March 2020 (on or about 18 June 2020) and has not paid any money by way of outgoings.
Mr Pham denied that he agreed to a 50% waiver of the rent for longer than four weeks from 22 March 2020 (ts 46, 19 November 2020) but did not deny that the applicants had granted that waiver for 12 weeks, as things transpired. It was put in crossexamination to Mr Pham that the applicants had promised or represented to the respondent by letter dated 22 June 2020 that the respondent would only need to pay rent at the reduced or waived rate of $125 per week or $250 per fortnight for the whole of the emergency period or at least up to the date of the hearing. It was further put to Mr Pham that the applicants had resiled from that position by increasing the rent to $250 per week or $500 per fortnight from 15 June 2020. Mr Pham was asked why the applicants had changed their position (the question assuming a change of position).
Mr Pham stated that he had lost his employment; the applicants are required to pay interest to their bank for borrowings secured by mortgage in respect of the premises and the rent was already low and reduced from the original $420 per week or $840 per fortnight. Mr Pham elaborated that the applicants were aware that the respondent was able to and was operating the massage parlour business from about 15 June 2020 onwards and that the respondent was in receipt of JobKeeper payments (of $1,500 per fortnight).
As to the text exchange between the respondent and Mr Pham on 20 and 22 March 2020 for the reasons referred to above, the Tribunal finds that the Mr Pham did not expressly promise or represent that the applicants waived 50% of the rent payable under the lease indefinitely. The Tribunal finds that the applicants' promise or representation made on 22 March 2020 was to grant the respondent a 50% waiver of rent for four weeks only. Because of the express words of the texts, the Tribunal finds that no implicit promise or representation arose from the same that the 50% waiver of rent would continue beyond the four week period that had been expressly proposed by the respondent in his text to Mr Pham on about 20 March 2020.
As to the letter dated 22 June 2020, it is expressly provided for that the applicants had granted a waiver of 50% of the rent until 15 June 2020 and thereafter they expressly state:
As from 30 June 2020 we require you to pay rent $500.00 fortnightly.
The respondent had no basis to put to Mr Pham that the applicants had promised an indefinite 50% waiver of rent on 22 March 2020 or 22 June 2020. It appears that the applicants' decision to extend the 50% waiver of rent to 15 June 2020 payable pursuant to the lease was made by them unilaterally and without the need for a request from the respondent. The period of the waiver takes into account the whole of the period during which the respondent was prohibited from operating his massage parlour business by the Directions.
The letter dated 22 June 2020 must also be considered in the context of a meeting between the parties on 18 June 2020. For the reasons referred to below, the Tribunal finds that at that meeting, although the respondent gave evidence (and Mr Pham agreed) that the respondent had proposed a further 50% waiver of the rent in the period 22 March 2020 to 15 June 2020 (that is a 100% waiver in that period), the applicants did not agree to the same. The Tribunal finds that Mr Pham was informed of the respondent's proposal at that meeting, noted it by recording on Exhibit 4 '-1250 rent?', so that he could discuss it with his wife, and then responded in terms that the applicants declined to provide any further rent relief in the period of 24 March to 15 June 2020 and/or thereafter.
The respondent gave evidence that it was expressly agreed that the applicants would waive the rent totally in the period 24 March to 15 June 2020. The respondent relied heavily on Exhibit 7 and a reference to CCTV recording that was not submitted to the Tribunal. The Tribunal is not persuaded that Exhibit 7 places any different complexion on the Tribunal's found facts. The Tribunal finds that there was no agreement, promise or representation by the applicants at any time to waive 100% of the rent from 24 March to 15 June 2020 and/or that the rent would be waived by 50% or any amount at all after 15 June 2020. On the contrary the Tribunal finds that the applicants' letter to the respondent dated 22 June 2020 informed the respondent that the applicants sought rent pursuant to the lease at $500 per fortnight from 30 June 2020 and that the 50% waiver of the rent applied to the period between 24 March and 15 June 2020. The terms of that letter are consistent with Mr Pham's evidence and are inconsistent with the respondent's evidence.
Viewed in the correct context referred to above, the Tribunal finds that the applicants had not resiled from the interim 50% waiver granted on 22 March 2020 for four weeks, save that - to the benefit of the respondent - they continued the waiver until 15 June 2020. Their reason for not continuing after that date are:
(a)the rent was already significantly reduced and low prior to 20 March 2020;
(b)Mr Pham had lost his employment in January 2020;
(c)notwithstanding (a) and (b) above the applicants waived 50% of the rent to alleviate the downturn in the respondent's business because of the COVID-19 pandemic and the forced close of his business by the Directions;
(d)the applicants were bound to pay interest on their ANZ Bank loan secured by a mortgage of the premises, albeit that the payment of the accrued interest was deferred until 30 October 2020 and at an additional capitalised interest cost as identified in the ANZ Bank document (Exhibit 1 document 1(ac));
(e)the ANZ Bank's deferral of payments to 30 October 2020 at the additional cost did not enable the applicants to grant the respondent a 100% (or even a 50%) waiver of the rent in the period 24 March 2020 to 15 June 2020 as they would be left without a source of income with which to pay the deferred interest to the ANZ Bank, in circumstances that they had no entitlement to COVID-19 related benefits (unlike the respondent) or any employment income;
(f)by 22 June 2020, the applicants knew that the respondent had reopened and was operating his business from about 15 June 2020; and
(g)by 18 June 2020, it seems, that the applicants knew that the respondent was in receipt of JobKeeper payments (ts 49, 19 November 2020).
In summary, the applicants weighed the impact of COVID-19 on the financial circumstances of both parties and arrived at the granted waiver of 50% of the rent in the period 22 March to 15 June 2020 and no more.
The Tribunal finds there is no agreement to waive any further rent after 30 June 2020 and that the applicants wrote to the respondent on 22 June 2020 that rent payable under the lease of $500 per fortnight was to resume on 30 June 2020. The Tribunal finds that the applicants have not changed their minds on anything that they granted except, as stated above, in the respondent's favour they extended the 50% waiver of rent to 15 June 2020 - eight more weeks.
Request for rent relief
The respondent has not changed his position from 20 March 2020 save that he has catered for the continuance of the COVID-19 pandemic. In short, his text on 20 March 2020 was a request in writing for rent relief in the form of 100% waiver for four weeks from about 24 March (when the next rental instalment was due) until 20 April 2020. At the meeting on 18 June 2020 the respondent, in a rudimentary written form, made a further written request for 100% rent waiver for the period 24 March 2020 to 15 June 2020. He did this by adding or causing Mr Pham to add to Exhibit 4 the reference of '-1250 Rent?' and to Exhibit 7 his statement of what he should owe to the applicant, the implication being the balance should be waived by the applicants. This written request was made during the emergency period in compliance with cl 5 of the code of conduct. Exhibit 7 must be read in conjunction with Exhibit 4 and together they represent the respondent's statement that all he should pay in rent to 15 June is $2,650 comprised of the $4,100.85 claimed in rent at the rate of $250 per week (ie 50%) and all out goings noted on Exhibit 4, less the $250 he paid to the respondent on or about 18 June 2020.
On 25 August 2020 and through the representative of the SBDC, the respondent made a further written request for relief in the additional form of waiver of all electricity charges, strata levies and water rates and usage charges. In this email the respondent concedes the 100% waived rent he has sought should only operate between 24 March and 8 June 2020 and asserts that thereafter 50% of the rent should be waived for an indeterminate period. This written request was made during the emergency period in compliance with cl 5 of the code of conduct.
The Tribunal finds that the respondent's accountant's letters dated 1 July 2020 and 23 August 2020 with the attached JobKeeper calculations were received by the applicants on or about the dates they are dated.
Issues raised by the applicants
The nature of the dispute
The applicants asserted that the application was a 'financial hardship dispute'. The application seeks an order that the respondent 'has to' pay certain monies for rent and outgoings under the terms of the lease. At the commencement of the hearing the applicants' counsel rejected the proposition that the applicants' application was a 'code of conduct' dispute and submitted it was a financial hardship dispute.
The applicants did not address the definition of a 'financial hardship dispute'. In their application the applicants assert that the respondent, as at 2 September 2020, being the date of the application to the Tribunal, had not 'demonstrated' or 'proved to … [the applicants] that he had suffered a downturn in business'. Although the applicants have asserted that the proof to them of the respondent's 'downturn in business' has been insufficient, the Tribunal is not satisfied that the applicants' claim that the respondent's failure to pay rent and operating expenses pursuant to the lease was not the result of:
(a)a restriction imposed under a written law in response to the COVID-10 pandemic;
(b)changes in societal behaviour in response to the COVID-19 pandemic;
(c)any other consequence of the COVID-19 pandemic …
The Tribunal must be so satisfied of that fact in order to conclude that the dispute before the Tribunal is a financial hardship dispute as defined. The Tribunal concludes that the applicants' application does not include a code of conduct dispute.
Can the Tribunal make an order to waive the rent in this proceeding?
As the application is in the Tribunal's view a code of conduct dispute, the Tribunal is empowered to make an order to waive or defer the rent that is otherwise payable pursuant to the lease pursuant to s 17(3)(c) of the Act subject to s 17(4) of the Act. No deferral has been sought save as identified in the respondent's submissions, which is minimal, and no argument has been advanced for the same.
Can the Tribunal make an order to waive any outgoings?
Regardless of the nature of the dispute, the Tribunal is not empowered to make any order to specifically waive outgoings. However, given the principles to be applied by s 17(4) of the Act and cl 7 and cl 11 of the code of conduct, the Tribunal may exercise its discretion when waiving rent to waive a greater percentage of rent than is reflected by the reduction in the tenant's turnover to balance the outgoings to be paid by the tenant. Clause 7 of the code of conduct does not require the waiver of rent to be strictly in accordance with the downturn in a tenant's turnover (see cl 7(3) of the code of conduct). A significant factor in making orders is to balance the landlords' financial capacity and the tenant's capacity to meet its obligations under the lease. That is, a balance needs to be found on the evidence so that both parties may financially survive the COVID-19 pandemic. In achieving that outcome, the Tribunal must consider the applicants' financial capacity including their capacity to withstand all their commitments as landlords and the respondent's capacity to trade through and out of the emergency period.
Can the Tribunal make an order that the respondent pay the applicants?
Prima facie, the Tribunal is empowered to make an order that the respondent pay money to the applicants but where the nature of the dispute is a code of conduct dispute the Tribunal must have regard to the factors prescribed by s 17(4) of the Act. Clause 7 and cl 11 of the code of conduct are the most significant in this proceeding.
Is the respondent an eligible tenant?
The applicants have at all times, until the morning of the hearing, denied that the respondent had established to their satisfaction that the respondent was and is an eligible tenant. Relevantly in this proceeding, is that a sole trader such as the respondent who has suffered a 30% reduction in his turnover in the third and fourth quarters of 2019/2020 FY and the first quarter of 2020/2021 FY in comparison to the same period in 2019 (or for the months in those periods) qualifies for JobKeeper payments. The Tribunal finds that on fact the applicants knew and it was obvious to them that being compelled to close his business in the period 26 March to 5 June 2020 reduced the respondent's turnover by 100% for those months. Little written accounting or other information should have been required to reasonably satisfy the applicants of the fact of a 100% downturn of the respondent's turnover in that period and that it was an inevitable conclusion that the respondent was at all material times eligible for the JobKeeper benefits pursuant to the JobKeeper rules and therefore was an eligible tenant.
Further, the applicants' filed documents contain the respondent's accountant's letters of 1 July 2020 and 23 August 2020 which attach the JobKeeper calculations for each month referred to in each of the respondent's accountant's letters, which the Tribunal finds were received by the applicants on or about those dates.
The applicants' submissions assert that the respondent's accountant's letters and the JobKeeper calculations contain statements that were not true and accurate. The applicants identified a number of challenges to the data provided by the respondent's accountant.
The first objection is that the accountant is the respondent's daughterinlaw. The fact that the respondent's accountant is his daughter-in-law is not a basis to reject the contents of the JobKeeper calculation documents, the accountant's letters or the accountant's implicit opinion that the contents of the JobKeeper calculations are true and accurate. The JobKeeper calculations for the months of April and May 2020 are consistent with the fact that the respondent was prevented from trading in the period 26 March to 5 June 2020. The Tribunal finds the source documents (the handwritten takings of the respondent's business for the months of April to September 2019 and 2020) are also consistent with the JobKeeper calculation documents. No objection was raised by the applicants to these handwritten takings and the Tribunal finds them to be true and accurate.
The second objection is that the accountant's information was not accompanied by a copy of the Australian Business Number (ABN) for 'Sister Professional Chinese Massage'. The respondent has an ABN as identified in Exhibit 2. The respondent's ABN at any time is a fact that the applicants could easily have satisfied themselves by utilising the public Australian Securities and Investments Commission search function. This is no basis to reject the information contained in the source documents, the JobKeeper calculations and the respondent's accountant's letters of 1 July and 23 August 2020.
The third objection is that the JobKeeper calculations were undertaken on the respondent's accountant's forms and should have been provided on 'the correct forms'. There is no evidence before the Tribunal that the form of the JobKeeper calculations rendered the information in any way incorrect or false.
The fourth objection is that the business name 'Sister Professional Chinese Massage' was operated by the respondent's son in 2018 and they rely on the various receipts in that period issued in the respondent's son's name. There is no evidence put before the Tribunal that the business name 'Sister Professional Chinese Massage' is a registered business name or the subject of an ABN reference to any one person. The Tribunal does not accept that objection.
The applicants' fifth objection is that they refer to the fact that the 2018 receipts given by the respondent's son Yuewen Bao contain GST. The Tribunal finds that this is an irrelevant fact and has no impact on the Tribunal's finding that the accountant's letters of 1 July and 23 August 2020 and the JobKeeper calculations.
The Tribunal finds that the respondent is an eligible tenant as defined and informed the applicants in July and August 2020 of the reduction in turnover of the respondent's business and provided reasonable information to support the same on 1 July and 23 August 2020. There is no reasonable basis for the applicants to have made demands for more or different information to establish the respondent's reduction in turnover or his status as an eligible tenant, particularly as the applicants were aware the respondent was compelled to close his business between 26 March and 5 June 2020.
Further Findings
The Tribunal finds that the respondent operated a massage parlour business from the premises which was required to close by the Directions between 26 March and 5 June 2020 resulting in a 100% loss of trade in April and May 2020. The Tribunal finds that the applicants were aware of the same. The Tribunal also finds thereafter there was a reduction in the turnover of the respondent's business until the end of September 2020 as stated below and that the applicants had sufficient accurate information for them to assess the likely truth of the respondent's allegations of a need for rent relief under the code of conduct. The Tribunal finds that the text on 20 March 2020 was a written request for rent relief that continued after 31 March 2020 and further that the request was again made in Exhibit 4 on 18 June 2020 and by email on 25 August 2020 via the SBDC. For the reasons referred to above the Tribunal finds that the respondent's accountant's letters dated 1 July 2020 and 23 August 2020 and the attached JobKeeper calculations are authentic and true as to their contents.
The respondent's accountant has relied on those receipt totals in assessing the comparative reduction in turnover between April to September 2019 and April to September 2020 on a monthly basis. The figures referred to in the respondent's accountant's letter of 7 November 2020 are reflective of the source document receipts noted above and the accountant's letters of 1 July 2020 and 23 August 2020 and the attached JobKeeper calculations attached thereto.
The comparative reduction in turnover for April to September 2019 and April to September 2020 is demonstrated by the table in the respondent's accountant's letter of 7 November 2020. The Tribunal finds that the takings and turnover for each month in April to September 2019 and April to September 2020 as provided for in the handwritten takings documents and the JobKeeper calculations are true and correct and accurately and truthly represented by the following table:
| Month | 2019 Turnover | 2020 Turnover | Turnover change (%) |
| April | $2,890.00 | 0 | -100 |
| May | $3,005.00 | 0 | -100 |
| June | $3,150.00 | $1,450.00 | -53 |
| July | $2,540.00 | $1,405.00 | -44 |
| August | $2,840.00 | $1,609.00 | -43 |
| September | $3,650.00 | $2,090.00 | -42 |
There is no issue between the parties, and the applicants' counsel conceded, that the respondent is a tenant under a small commercial lease, his turnover was less than $50 million per annum and the respondent's business turnover was achieved by him operating his business from the leased premises, as is required by cl 2(1)(a)(iii) of the code of conduct, in order for the respondent to be eligible to make a request for a rent relief pursuant to the code of conduct. The Tribunal finds that the respondent meets the definition of eligible tenant as provided for by the code of conduct as explained above.
The Tribunal finds that the respondent did receive the following sums by way of JobKeeper payments:
April 2020 $3,000
May 2020 $3,000
June 2020 $3,000
July 2020 $3,000
August 2020 $4,500
September 2020 $2,400
The basis of the respondent's JobKeeper receipts is not clear. However as the respondent stated in his text on 20 March 2020 that his employees had left and as the amounts for each month amount to $1,500 per fortnight (August 2020 having three fortnights), the Tribunal concludes that the respondent's entitlement to the JobKeeper payment is based upon nominating himself as the 'business participant' whereby one business owner is permitted to claim the JobKeeper payment under the JobKeeper rules. In effect, the respondent as the business proprietor did receive more in June to September 2020 than the business turned over in the same period in 2019. As the respondent did not claim for any employees the whole of the JobKeeper payments have been available to the respondent to discharge what is his sole and personal liability as the tenant under the lease. Ordinarily where eligible employees are retained by a business in receipt of JobKeeper the benefit of JobKeeper received would not be able to be taken into account as those funds must be paid to the eligible employees of the business. However in the case of a business with no employees and one business participant receiving JobKeeper benefits for that business participant, the Tribunal should have regard to that receipt when considering the factors referred to in s 17(4) of the Act. This is particularly so, when the business participant is also the tenant.
The Tribunal finds that the applicants have limited income (Mr Pham not being employed any longer). There is no evidence or information that the applicants have any equity in the three properties they own and lease as the borrowings for the acquisition of the same are secured by those properties. The Tribunal finds that Mr Pham was a reliable and truthful witness of fact. He gave evidence that he and his wife do not receive any income from the other properties they lease that is not already committed to repayment of borrowings and interest and outgoings on those properties. In short, they have no equity in the properties and receive no discretionary income from leasing the same so as to be able to support themselves and pay the outgoings on the premises when not also in receipt of rent and outgoing payments from the respondent.
Further, as the applicants have not paid the outgoings that the respondent is obliged to pay pursuant to the lease, the Tribunal infers that the applicants do not have the funds to pay those outgoings.
The Tribunal concludes that the applicants' financial circumstances are precarious without the receipt of all of the rent and outgoings payable by the respondent pursuant to the lease and that they cannot financially bear any further burden by being liable for the outgoings for the premises without the contribution the respondent must make pursuant to the lease.
The Tribunal finds that the rent and outgoings otherwise payable pursuant to the lease is that as identified in the tables referred to in paragraphs [115] and [116] below.
Consideration
The parties have never reached agreement on rent relief for the emergency period despite the respondent, as an eligible tenant making two written requests for the same during the emergency period. The Tribunal finds that the applicants have granted some rent relief which the respondent asserts is inadequate. The Tribunal finds that the applicants did consider waiving the respondent's obligation to pay outgoings but did not grant the respondent any relief despite his request.
In applying the principles of the code of conduct and in particular cl 7(3), the Tribunal considers that the rent relief should be commensurate with the reduction of the respondent's turnover in the period April to September 2020. There is no evidence or information before the Tribunal concerning the respondent's business turnover in October 2020 and following. However, cl 7(3A) of the code provides a guide for the parties for relief on an ongoing basis. No deferral of rent is sought by either party. The Tribunal concludes that 100% of the rent relief should be by waiver as neither party has suggested otherwise (save for a minor amount referred to in the respondent' submission). In considering whether any further rent relief should be ordered to reflect a defacto waiver of outgoings that the respondent asserts should have been given by the applicants, the Tribunal concludes that no further rent relief should be granted in the April to September 2020 period because:
(a)while the applicants are the proprietors of three properties, the Tribunal concludes that the applicants do not have a significant income arising from the same, all three being the subject of borrowings;
(b)the evidence and information concerning the applicants' finances although scant does not persuade the Tribunal that the applicants can financially withstand the waiver of obligation to pay rent and outgoings otherwise payable pursuant to the lease;
(c)the applicants have passed on to the respondent all benefits that they have received in terms of the outgoings and there is no information that persuades the Tribunal that the applicants are entitled to any Synergy rebate (as the electricity for the premises is billed to the strata company) or any benefit from the Water Corporation;
(d)the applicants have not paid the outgoings in respect of the premises and the Tribunal infers that this is because the financial circumstances are such that they cannot afford to do so because the respondent has not paid the same or any rent pursuant to the lease;
(e)Mr Pham lost his employment in January 2020;
(f)the respondent's income has been supplemented by the JobKeeper benefits which he has received personally as a business participant; and
(g)the respondent has no employees and therefore no employment costs in the period April to September 2020, which represents a saving of expenses to the respondent's business while in receipt of JobKeeper benefit.
In considering the factors referred to in s 17(4)(a), (b) of the Act, the principles of the code of conduct and the principles of proportionality and fairness, the Tribunal concludes that the rent relief should be by waiver pursuant to s 17(3)(c)(i) of the Act in proportion to the reduction in the respondent's business turnover for the months of April to September 2020 when compared with the same period in 2019 and no more. The Tribunal shall order that all other monies due pursuant to the lease should be paid by the respondent pursuant to s 17(2)(a) of the Act.
The Tribunal concludes that the following instalments of rent payable by the respondent to the applicants pursuant to the lease on the following dates are waived and the following amounts are payable:
| Date: | Rent Payable pursuant to Lease | % rent waived as ordered | $ amount rent waived as ordered | Amount Payable by respondent following waiver as ordered |
| 07/04/20 | 500 | 100 | 500 | 0 |
| 21/04/20 | 500 | 100 | 500 | 0 |
| 05/05/20 | 500 | 100 | 500 | 0 |
| 18/05/20 | 500 | 100 | 500 | 0 |
| Sub-Total: | 2,000 | 2,000 | 0 | |
| 02/06/20 | 500 | 53 | 265 | 235 |
| 16/06/20 | 500 | 53 | 265 | 235 |
| 30/06/20 | 500 | 53 | 265 | 235 |
| Sub-Total: | 1,500 | 795 | 705 | |
| 14/07/20 | 500 | 44 | 220 | 280 |
| 28/07/20 | 500 | 44 | 220 | 280 |
| Sub-Total: | 1,000 | 440 | 560 | |
| 11/08/20 | 500 | 43 | 215 | 285 |
| 25/08/20 | 500 | 43 | 215 | 285 |
| Sub-Total: | 1,000 | 430 | 570 | |
| 08/09/20 | 500 | 42 | 210 | 290 |
| 22/09/20 | 500 | 42 | 210 | 290 |
| Sub-Total | 1,000 | 420 | 580 | |
| Total: | $6,500 | 4,085 | 2,415.00 | |
| (250 paid) | ||||
| $2,165.00 |
The Tribunal finds upon the basis of Exhibits 1 and 4 and the applicants' submissions dated 4 December 2020 the following amounts are due owing and payable by the respondents to the applicants as outgoings pursuant to the lease.
| Outgoings: | Amount: |
| City of Swan, Council Rates 2019/20 | 635.78 |
| Sub-Total | $635.78 |
| City of Swan – Council Rates 2020/21 | 398.79 |
| Sub-Total | $398.79 |
| Strata Levy: | |
| April | 353.00 |
| May | 353.00 |
| June | 353.00 |
| July | 353.00 |
| August | 353.00 |
| September | 353.00 |
| Sub-Total | $2118.00 |
| Interest on Strata fees charged by Strata Company | |
| April – September 2020 | 62.38 |
| Sub-Total | $62.38 |
Electricity: | |
| March | 89.36 |
| April | 84.14 |
| May | 60.80 |
| June | 53.37 |
| July | 66.11 |
| August | 85.66 |
| September | 95.66 |
| Sub-Total | $535.10 |
Water Corporation | |
| March | 171.77 |
| May | 171.77 |
| July | 178.93 |
| September | 178.36 |
| Sub-Total | $700.83 |
Orders
On the basis of the information and evidence before the Tribunal the following orders are made in this proceeding:
1.Pursuant to s 17(3)(c)(i) of the Commercial Tenancies (Covid-19 Response) Act 2020 (WA), the rent payable by the respondent to the applicants pursuant to the lease between them dated 31 December 2017, in the period 31 March to 30 September in the sum of $4,085.00 is waived.
2.Pursuant to s 17(2)(a) of the Commercial Tenancies (Covid-19 Response) Act 2020 (WA), the respondent shall pay to the applicants the sum of $2,165.00 by 31 March 2021, being unpaid rent due, owing and payable pursuant to the lease between the parties dated 31 December 2017.
3.Pursuant to s 17(2)(a) of the Commercial Tenancies (Covid-19 Response) Act 2020 (WA), the respondent shall pay to the applicants the sum of $4,450.88 by 31 March 2021, being unpaid outgoings due, owing and payable pursuant to the lease between the parties dated 31 December 2017.
I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.
MS N OWEN-CONWAY, MEMBER
9 MARCH 2021
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