Miramax Pty Limited v Mang Yu Lo [2021] NSWCATCD 12

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Miramax Pty Limited v Mang Yu Lo [2021] NSWCATCD 12 Hearing dates: 29 April 2021 Date of orders: 17 May 2021 Decision date: 17 May 2021 Jurisdiction: Consumer and Commercial Division Before: D Bluth, Senior Member Decision: 1. The applicant to pay to the respondent the sum of $8,954.50 within 7 days of publication of this Decision. Catchwords: LEASES AND TENANCIES - Retail leases - COVID-19 Regulation Legislation Cited: Retail and other Commercial Leases (COVID-19) Regulation (No. 3) 2020 (NSW) Category: Principal judgment Parties: Miramax Pty Limited (Applicant) David Mang Yu Lo (Respondent) Representation: Link Lawyers (Applicant) File Number(s): COM 20/45587 Publication restriction: Nil

REASONS FOR DECISION 1. The applicant is the landlord of premises in Drummoyne. 2. The respondent is the tenant of those premises pursuant to a lease expiring on 30 June 2020. 3. The respondent conducts a dental surgery in the premises in accordance with the terms of the lease. 4. Dental surgery is not a use covered pursuant to Schedule 1 of the Retail Leases Act 1994 as the issue between the parties relates to the Mandatory Code of Conduct for SME Commercial Leasing Principles during COVID-19 for the National Cabinet the Retail and other Commercial Leases (COVID-19) Regulation (No. 3) 2020 ["the Code"]. The parties agree to submit to the jurisdiction of this Tribunal. 5. Pursuant to the lease the respondent paid to the applicant the sum of $19,434.00 to be held by the applicant as bond. 6. The applicant claims from the respondent rent in arrears for the last 3 months of the term amounting to $17,219.25. 7. The respondent paid to the applicant the sum of $3,000.00 on account of rent. 8. The applicant seeks an order from the Tribunal to deduct the sum of $17,219.25 from the bond held and to return to the respondent the balance namely $2,214.75. 9. During the last 3 months of the term between 1 April and 30 June 2020, the respondent sought rental abatement, waiver and concessions from the applicant pursuant to the Code. 10. The purpose of the Code is to impose a set of good faith leasing principles for application to commercial tenancies between landlords and tenants. These principles apply to negotiating amendments in good faith to existing leasing arrangements and to aid the management of cash flow for SME tenants and landlords on a proportionate basis. 11. The Leasing Principles state that in negotiating and enacting appropriate temporary arrangements under the Code of Conduct, the following leasing principles should be applied as soon as practicable on a case-by-case basis: 1. Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period). 2. Tenants must remain committed to the terms of their lease, subject to any amendments to their rental agreement negotiated under this Code. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant under this Code. 3. Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals (as outlined under "definitions"," below) of up to 100% of the amount ordinarily payable on a case-by-case basis, based on the reduction in the tenant's trade during the COVID-19 pandemic period and a subsequent reasonable recovery period. 1. From the evidence I note that as the lease term was coming to an end the respondent approached the applicant on or about 16 April 2020 to discuss the rent for the last 3 months and to make arrangements for lease expiry and vacating the premises. 2. Subsequently, there were discussions between the parties about these matters including the proposed sale of the dental surgery [equipment only] by the respondent. 3. The respondent did not pay the 3 months' rent outstanding on the due dates but did pay $3,000.00 on account. 4. On 20 May 2020, the respondent approached the applicant for rent reduction as waiver in accordance with the Code. This was following stalled negotiations for the sale of the dental surgery and lease negotiations with the applicant of behalf of a new tenant for the premises to carry on a dental surgery. 5. The respondent wrote to the applicant on 20 May 2020 stating: "I am advised by the Small Business Commissioner to serve you a letter for rental negotiations. As you have previously verbally objected to any rental reductions during our discussion, please reply to this letter to confirm your decision". 1. Subsequently, the applicant's then lawyer Mr Alex Lee sent an email to the respondent on 22 May 2020 which in summary stated: 1. The Code is not mandatory. 2. The business of the respondent (dental surgery) is not substantially or adversely impacted by COVID-19, and therefore the Code does not apply. 3. The respondent was in serious breach of the lease by only making part payment of the outstanding rent and that pursuant to the terms of the lease the applicant is entitled to terminate the lease forthwith and that they strongly recommend that the respondent pay all arrears of rental immediately without further delay. 1. At the hearing, the applicant represented by Mr Terry Leung of Link Lawyers maintained that the respondent is not entitled to seek a rent reduction pursuant to the Code, principally due to the requirement of good faith and the respondent had not demonstrated good faith by his failure to pay the rent outstanding, seeking rent reduction and negotiating a lower rent for any incoming tenant who was purchasing his dental surgery equipment. 2. It is the Tribunal's view that in the context of COVID-19 at the time, the actions of the respondent did not demonstrate a lack of good faith. The actions of the respondent appear to be in accordance with the usual tenant requests at the time of great pressure on the commercial world. 3. Rather, the Tribunal in examining the conduct of the applicant through its then lawyer notes the denial of the right of the respondent to seek to utilise the Code and yet the Code was established to be so utilised and referring to potential breach and termination of the lease, which is in direct conflict with Principal 1 of the Code, that leases are not to be terminated. The Tribunal is of the view that it is the applicant that has not acted in good faith in these negotiations. In fact the applicant rejected any form of rent concession. 4. The Tribunal finds that the Code applies and the respondent is entitled to seek the benefit of the Code. The Code expresses as a guide rental waiver of up to 50% and rent deferrals to be amortised over the balance of the lease term. However, such deferral is not applicable to these facts as the lease ended on 30 June 2020. 5. The Tribunal is of the opinion that a rent waiver of one third, a rent deferral of one third and rent payment of one third is reasonable in all the circumstances of case of this nature. As there should be no rent deferral, then only a rent waiver of one third is to apply. 6. As the 3 months outstanding amounts to $20,219.25, a one third reduction brings this to $13,479.50. The respondent has paid $3,000.00 so the balance due is $10,479.50. The applicant holds a bond of $19,434.00, so the applicant should provide a tax invoice to the respondent of $10,479.50 and remit the balance of the bond, namely $8,954.50 to the respondent. All amounts are GST inclusive.