Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Cong v Ning [2021] NSWCATAP 292 Hearing dates: 7 June 2021 Date of orders: 28 September 2021 Decision date: 28 September 2021 Jurisdiction: Appeal Panel Before: T Simon, Principal Member D Robertson, Senior Member Decision: (1) The appeal is allowed in part. (2) Order (1) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied by replacing the words "$7,531.55 on account of rent arrears and other out of pocket expenses" with the words "$1,294.44 on account of rent arrears". (3) Order (2) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied to read "pursuant to s 72(2) of the Act, the office of the NSW Small Business Commissioner is directed to pay to the lessors the sum of $1,294.44 out of the security bond. The sum of $6,237.11 is to be retained by the Commissioner pending the determination of the balance of the proceedings. The balance of the security bond is to be paid to the lessees, Scott Shiguo Cong and Hong Zhao". (4) The lessors' claims for, rent for the period 1 May 2020 to 31 May 2020 in the amount of $2,929.11, $2,700 in respect of solicitors' costs, and $608 in respect of mediation costs, are remitted to the Consumer and Commercial Division of the Tribunal, differently constituted, for determination consistently with these reasons. Catchwords: LEASES AND TENANCIES – Retail leases – Rent and outgoings –- Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) - Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) – Whether tenant an "impacted lessee" – Operation of regulations in relation to "impacted lessees" WORDS AND PHRASES – "impacted lessee" Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Civil and Administrative Tribunal Rules 2014 (NSW) Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) COVID-19 Recovery Act 2021 (NSW) Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (NSW) Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 (NSW) Retail and Other Leases (COVID-19) Amendment Regulation 2020 (NSW) Retail Leases Act 1994 (NSW) Cases Cited: Collins v Urban [2014] NSWCATAP 17 Darzi Group Pty Ltd v Nolde Pty Ltd [2021] NSWSC 774 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Category: Principal judgment Parties: Scott Shiguo Cong and Hong Zhao (Appellants) Helen Ning and Max Fei (Respondents) Representation: Appellants in person Yan Chen (Solicitor) (Respondent) File Number(s): 2021/00083477 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 25 February 2021 Before: D Charles, Senior Member File Number(s): COM 20/32615; COM 20/50753 REASONS FOR DECISION 1. The parties to this appeal are the landlords and tenants under a retail lease. The appellants were the tenants/lessees. The respondents were the landlords/lessors. 2. The initial lease ran from 1 June 2014 to 31 September 2017. The tenants exercised an option for a further lease from 1 June 2017 to 31 May 2020. The further term expired on 31 May 2020 and the tenants apparently vacated the premises on that day. 3. Both the landlords and the tenants filed an application after the termination of the lease. The tenants sought orders that they did not have to pay amounts claimed by the landlords and for the return of the bond. The landlords sought payment of rental arrears and compensation for alleged breaches of the lease involving the sub-letting of car spaces and legal costs claimed to be payable pursuant to the terms of the lease. The rental arrears claimed by the landlords involved an amount of $1,294.44 in respect of rent not paid during 2017 and 2018 and an amount of $2,929.11 in respect of rent for May 2020. 4. The tenants asserted that they were "impacted lessees" within the meaning of the regulations enacted under the Retail Leases Act 1994 (NSW) relating to the COVID-19 pandemic. The tenants stated in their application: "The dispute started when we asked for rental relief due to suffering financial difficulties as a result of the pandemic. The lessors…refuse to reduce any rent." 1. It is apparent from the decision under appeal that the tenants alleged that the landlords' claim in respect of rent for May 2020 was "prescribed action" and prohibited under the regulations. 2. The tenants also asserted that the landlords had waived an increase in rent by reference to the Consumer Price Index in respect of one year of the lease. The landlords accepted that they had agreed that the tenants need not pay that rent increase during the relevant year but asserted that they had not agreed to waive that amount. The landlords alleged that they had only agreed that the tenants could pay the increase in the rent at the conclusion of the lease. 3. The landlords claimed that the lessees had sub-let four car parking spaces which were included in the premises, the subject of the lease, and claimed damages in the amount of $24,960 in respect of loss of rent for those car parking spaces. The Decision 1. Following a hearing on 25 February 2021, the Tribunal delivered a decision by which the Tribunal dismissed the landlords' claim for compensation for breach of the lease by sub-letting car spaces, but awarded the landlords the sum of $7,531.55 which was to be paid out of the security bond. That amount consisted of four elements: 1. $1,294.44, described by the Tribunal as "the deficit in rent not paid by the Lessees to the Lessors for the period from 1 June 2017 to 31 May 2018"; 2. $2,929.11, described by the Tribunal as "the deficit in rent not paid by the Lessees to the Lessors for the period from 1 May 2020 to 31 May 2020"; 3. $2,700, described by the Tribunal as "solicitors' costs incurred by the Lessors of and incidental to enforcement action in consequence of default by the Lessees under the retail lease, whether non-payment of rent or breach of clause 10, sub-letting the four car parking spaces without permission of the Lessors"; 4. $608, described by the Tribunal as "the mediation costs in the present proceedings". 1. The tenants appeal against the orders of the Tribunal and challenge each element of the amount awarded. 2. The appeal was heard by telephone on 7 June 2021. Mr Cong represented the tenants. Ms Chen, solicitor, appeared for the landlords. Scope and nature of internal appeals 1. By virtue of s 80(2) of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), internal appeals from decisions of the Tribunal may be made as of right on a question of law, and otherwise with leave of the Appeal Panel. 2. In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question. 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it. 1. The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice because: 1. The decision of the Tribunal under appeal was not fair and equitable; or 2. The decision of the Tribunal under appeal was against the weight of evidence; or 3.Significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with). 1. In Collins v Urban [2014] NSWCATAP 17, the Appeal Panel stated at [76] that a substantial miscarriage of justice for the purposes of cl 12(1) of Schedule 4 may have been suffered where: … there was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance. 1. Even if an appellant from a decision of the Consumer and Commercial Division has satisfied the requirements of cl 12(1) of Schedule 4, the Appeal Panel must still consider whether it should exercise its discretion to grant leave to appeal under s 80(2)(b). 2. In Collins v Urban, the Appeal Panel stated at [84] that ordinarily it is appropriate to grant leave to appeal only in matters that involve: 1. issues of principle; 2. questions of public importance or matters of administration or policy which might have general application; or 3. an injustice which is reasonably clear, in the sense of going beyond merely what is arguable, or an error that is plain and readily apparent which is central to the Tribunal's decision and not merely peripheral, so that it would be unjust to allow the finding to stand; 4. a factual error that was unreasonably arrived at and clearly mistaken; or 5. the Tribunal having gone about the fact finding process in such an unorthodox manner or in such a way that it was likely to produce an unfair result so that it would be in the interests of justice for it to be reviewed. Material before the Appeal Panel 1. The Appeal Panel had before it on the hearing of the appeal: the Notice of Appeal dated 25 March 2021; the respondents' Reply dated 9 April 2021; submissions and documents filed by the appellants on 12 April 2021; a submission and the sound recording of the hearing filed by the appellants on 5 May 2021; documents filed by the respondents on 8 April 2021, 14 April 2021, 20 May 2021 and 4 June 2021; and reply submissions and documents filed by the appellants on 26 May 2021. Grounds of Appeal 1. At the commencement of the appellants' submissions at the hearing of the appeal, the Appeal Panel clarified with Mr Cong the tenants' grounds of appeal. Mr Cong identified that he maintained three grounds of appeal, in respect of each of which the appellants also sought leave to appeal, on the grounds that the decision was not fair and equitable and was against the weight of evidence. 2. Those grounds of appeal were: 1. That in determining that the appellants were not eligible for JobKeeper wage subsidy from the Commonwealth government during the COVID 19 pandemic, [and consequently not finding that the appellants were "impacted lessees" for the purposes of the relevant regulations] the Tribunal had applied an incorrect test. 2. That in determining that the appellants were liable for rent arrears, the Tribunal had failed to recognise that the landlord had agreed to waive a rent increase. 3. That the Tribunal should not have ordered the appellants to pay the respondents' legal and mediation costs. 1. Notwithstanding directions made by the Appeal Panel on 14 April 2021, the parties had not filed with the Appeal Panel all the relevant material that was before the Tribunal at first instance. Rather, each side had filed multiple bundles of statements, submissions and documents without any clear identification of what was before the Tribunal. 2. In the course of the hearing, the Appeal Panel was able to identify that certain documents had been before the Tribunal, including: two statements from the Australian Taxation Office recording the payment of JobKeeper wage subsidy to Hong Zhao, for April and May 2020; a statement from Centrelink recording the payment of Jobseeker to Hong Zhao for the period 23 March to 21 April 2020; and a letter from Thomas Accountant & Co Pty Ltd dated 6 November 2020. 3. Although we were told a full copy of the lease commencing 1 June 2017 was before the Tribunal, only the first two pages of that lease were included in the bundle provided to the Appeal Panel. A copy of the whole lease was filed by the appellants after the hearing. The appellants also filed a further set of submissions after the hearing. The appellants had not been granted leave to file those submissions and we have not taken them into account. 4. We will consider the grounds of appeal raised by the appellants in turn. Ground 1 – Eligibility for JobKeeper subsidy 1. The Tribunal held at paragraph [8]: As regards (2), the claim for May 2020 in the amount of $2,929.11, the Lessees argue that the Lessors' action to recover that amount is barred because they are "impacted lessees" and recovery of rent arrears is a "prescribed action" within the meaning of the Regulation. However, I am not satisfied on the available evidence that the Lessees have established that they were "impacted lessees". An "impacted lessee" means a person who qualifies for the job keeper scheme under ss 7 and 8 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth and the turnover is less than $50 million. It was not clear that the Lessees had qualified for the Job Keeper scheme; there was no evidence of such qualification for one lessee, Mr Cong, and the evidence of the other lessee, Ms Zhao, was inconsistent, because there was also evidence she had received payment for Job Seeker (not Job Keeper) in April 2020. The evidence of turnover from the Lessees was also insufficient to establish that any adverse effect on turnover was COVID-19 related, rather than performance related (in the latter respect, the Lessors led some evidence, mainly photographic evidence, to establish that the Lessees were conducting a closing down sale of the business in April/May 2020). 1. In our view there are at least three errors of law in that statement. (1) There was no requirement that a reduction in revenue or turnover be related to the pandemic. 1. The term "impacted lessee" was defined in regulation 4(1) of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (Regulation No 1) as in force in May 2020 as follows: (1) A lessee is an impacted lessee if— (a) the lessee qualifies for the jobkeeper scheme under sections 7 and 8 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 of the Commonwealth, and (b) the following turnover in the 2018–2019 financial year was less than $50 million— (i) if the lessee is a franchisee—the turnover of the business conducted at the premises or land concerned, (ii) if the lessee is a corporation that is a member of a group—the turnover of the group, (iii) in any other case—the turnover of the business conducted by the lessee. 1. Regulation No 1 was repealed on 24 October 2020 and replaced by the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (NSW (Regulation No 2). Clause 14 of Regulation No 2 provided: 14 Savings provision—impacted lessees (1) A reference in this Regulation to an impacted lessee extends to a person who was an impacted lessee under the repealed Regulation in relation to a breach of the impacted lease that occurred at any time during the first prescribed period. (2) To avoid doubt, a person who was an impacted lessee within the meaning of the repealed Regulation at any time during the first prescribed period is taken to be an impacted lessee for the whole of the first prescribed period. (3) In this clause— first prescribed period means the period from 24 April to 23 October 2020. repealed Regulation means the Retail and Other Commercial Leases (COVID-19) Regulation 2020. 1. Regulation No 2 was repealed on 1 January 2021 and replaced by the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 (NSW) (Regulation No 3). Clause 14 of Regulation No 3 provided: 14 Savings provision—impacted lessees (1) A reference in this Regulation to an impacted lessee extends to a person who was an impacted lessee under a repealed Regulation in relation to a breach of the impacted lease that occurred at any time during which the repealed Regulation was in force. (2) To avoid doubt, a person who was an impacted lessee within the meaning of a repealed Regulation at any time during which the repealed Regulation was in force is taken to be an impacted lessee for the whole of the period during which the repealed Regulation was in force. (3) In this clause— repealed Regulation means the following— (a) the Retail and Other Commercial Leases (COVID-19) Regulation 2020, (b) the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020. 1. The Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (JobKeeper Rules), as enacted in April 2020 and in force during May 2020, governed the eligibility for the JobKeeper wage subsidy. Clause 7 provided: 7 When an entity qualifies for the JobKeeper scheme (1) For the purposes of paragraphs 6(1)(b) and 11(1)(c), an entity qualifies for the JobKeeper scheme at a time if: (a) on 1 March 2020, the entity carried on a business in Australia, or was a non‑profit body that pursued its objectives principally in Australia; and (b) the entity has satisfied the decline in turnover test at or before the time (see section 8). 1. The basic decline in turnover test was set out in clause 8(1)-(4) of the JobKeeper Rules. Clause 8(1) provided: (1) An entity satisfies the decline in turnover test at a time (the test time) if: (a) the entity's projected GST turnover for a turnover test period in which the test time occurs falls short of the entity's current GST turnover for a relevant comparison period (the comparison turnover); and (b) the shortfall, expressed as a percentage of the comparison turnover, equals or exceeds the specified percentage for the entity (see subsection (2)). 1. Pursuant to sub-clauses (2) to (4) the specified percentage for a business with revenue less than $1 billion which is not a registered charity was 30%. 2. There was no requirement in the JobKeeper Rules in May 2020 that any reduction in revenue be related to COVID-19. The only requirement of the JobKeeper Rules was that there be a reduction in revenue of at least 30%. (2) The receipt of Jobseeker was not necessarily inconsistent with an entitlement to payment under the JobKeeper scheme. 1. The documents which the parties agreed were put before the Tribunal disclose that Ms Zhao was receiving both Jobseeker payments and JobKeeper subsidy for a short period. The respondent landlords did not point to any provision of the relevant legislative provisions to suggest that the receipt of Jobseeker payments was necessarily inconsistent with the receipt of payments under the JobKeeper scheme during the same period. 2. In any event, the evidence before the Tribunal disclosed that Ms Zhao had been receiving JobKeeper payments during periods when there was no evidence to suggest she was also receiving Jobseeker. In particular, Ms Zhao was not receiving Jobseeker during May 2020 when the tenants ceased to pay rent. (3) It was sufficient that one of the tenants was eligible for payments under the JobKeeper scheme. 1. Under the JobKeeper Rules, as in force in May 2020, where a business was conducted as a partnership, a partner in the partnership was entitled to claim JobKeeper as an "eligible business participant", but only one partner was able to do so (see clauses 11(3) and 12(2) of the JobKeeper Rules). 2. Where a business was conducted by joint tenants in partnership it would therefore not have been possible for both tenants to quality for the JobKeeper scheme. The definition of "impacted lessee" should not be interpreted so as to exclude businesses conducted as a partnership. It follows that it cannot be said to be necessary that both of two joint tenants must establish that they qualify for JobKeeper before the lease can be described as an "impacted lease" and the tenants as an "impacted lessee". 3. The tenants did not claim that they were conducting business in partnership, rather they asserted that Ms Zhao was conducting business at the premises as a sole trader. Ms Zhao qualified for JobKeeper. We see no reason why her co-tenant should also be required to qualify for JobKeeper in order that the appellants qualify as an impacted lessee. 4. Each of the regulations in force between April 2020 and 3 July 2021, ie Regulation No 1, Regulation No 2 and Regulation No 3, defined "prescribed action" as follows: prescribed action means taking action under the provisions of a commercial lease or seeking orders or issuing proceedings in a court or tribunal for any of the following— (a) eviction of the lessee from premises or land the subject of the commercial lease, (b) exercising a right of re-entry to premises or land the subject of the commercial lease, (c) recovery of the premises or land, (d) distraint of goods, (e) forfeiture, (f) damages, (g) requiring a payment of interest on, or a fee or charge related to, unpaid rent otherwise payable by a lessee, (h) recovery of the whole or part of a security bond under the commercial lease, (i) performance of obligations by the lessee or any other person pursuant to a guarantee under the commercial lease, (j) possession, (k) termination of the commercial lease, (l) any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State. 1. As in force during May 2020, Clause 7 of Regulation No 1 provided: 7 Obligation to renegotiate rent and other terms of commercial leases before prescribed action (1) A lessor under a commercial lease must not take or continue any prescribed action against an impacted lessee on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. [Note omitted] (2) If an impacted lessee is a party to a commercial lease, any party to the lease may request the other parties to renegotiate the rent payable under, and other terms of, the commercial lease. (3) A party to a commercial lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the commercial lease. (4) The parties are to renegotiate the rent payable under, and other terms of, the commercial lease having regard to— (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. 1. The "prescribed period" for the purposes of Regulation No 1 was the period from 24 April to 23 October 2020. 2. Regulation 7 was amended with effect from 3 July 2020 by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 (NSW) (the Amendment Regulation). Regulation 7 thereafter provided: 7 Obligation to renegotiate rent and other terms of commercial leases before prescribed action (1A) This clause applies to a commercial lease to which an impacted lessee is a party (an impacted lease). (1) A lessor under an impacted lease must not take or continue any prescribed action against the impacted lessee concerned on grounds of a breach of the impacted lease consisting of a failure to pay rent during the prescribed period unless the lessor has complied with this clause. Note— This clause does not prevent parties to an impacted lease coming to agreements relating to the lease. For example, an impacted lessee may voluntarily agree to pay full rent during the prescribed period. The clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)–(4). (2) Any party to an impacted lease may request the other parties to renegotiate the rent payable under, and other terms of, the impacted lease. (3) A party to an impacted lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the impacted lease. (3A) An impacted lessee must give the lessor the following in respect of the impacted lease— (a) a statement to the effect that the lessee is an impacted lessee, (b) evidence that the lessee is an impacted lessee. (3B) If the impacted lessee does not comply with subclause (3A), the lessor is taken to have complied with this clause. (4) The parties are to renegotiate the rent payable under, and other terms of, the impacted lease having regard to— (a) the economic impacts of the COVID-19 pandemic, and (b) the leasing principles set out in the National Code of Conduct. 1. Clause 13 of the Amendment Regulation provided: 13 Evidence of impacted lessee status—savings provision (1) The amendments to clause 7 made by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 extend to renegotiations commenced but not completed before the commencement of the amendments. (2) For the avoidance of doubt, the amendments do not extend to a matter for which a retail tenancy claim has been made under section 71 of the Act. 1. Clause 9 of each of the Regulations in force between 24 April 2020 and 3 July 2021 provided: 9 Tribunal and court consideration of National Code of Conduct leasing principles The Tribunal and any court, when considering whether to make a decision or order relating to any of the following, is to have regard to the leasing principles set out in the National Code of Conduct— (a) the recovery of possession of premises or land from an impacted lessee, (b) the termination of an impacted lease by a lessor, (c) the exercise or enforcement of another right of a lessor under an impacted lease. 1. In our view the tenants were "impacted lessees" within the meaning of the JobKeeper Rules as in force in May 2020, as one of the lessees had qualified for the JobKeeper scheme. 2. As the tenants were impacted lessees, the lessor was required to negotiate a reduction in rent in accordance with the National Code of Conduct, that is the "National Mandatory Code of Conduct – SME Commercial Leasing Principles during COVID-19" adopted on 7 April 2020. 3. Presumptively, in accordance with the Code of Conduct, the tenants were entitled to a reduction in rent proportionate to their reduction in revenue, half of which was to be waived and half of which was to be deferred until the end of the lease (because the lease came to an end before the end of the pandemic). However, we need not determine whether the principles set out in the Code give rise to any enforceable rights on the part of the tenants (cf Darzi Group Pty Ltd v Nolde Pty Ltd [2021] NSWSC 774 (Darzi Group) at [143]). 4. The evidence which the parties put before the Appeal Panel suggested (although it did not conclusively establish) that the landlords had declined to negotiate with the tenants on the basis that the tenants had not provided sufficient evidence that they were "impacted lessees". 5. We note the analysis of the COVID-19 legislation by Robb J in Darzi Group at [103]-[144], and in particular at [134], in relation to the evidence required to be provided by "impacted lessees" to establish they were such. 6. The regulation in force at the time of the initial hearing and the hearing of the appeal (Regulation No 3) has been repealed. However, s88 of the RLA, inserted by the COVID-19 Recovery Act 2021 (NSW), which commenced on 25 March 2021, provides: Savings of protections granted during COVID-19 pandemic (1) The Retail and Other Commercial Leases (COVID-19 Regulation (No 3) 2020 continues to apply, despite the repeal of that regulation, to anything occurring in relation to a lease while the lease was an impacted lease within the meaning of that regulation. 1. We have noted above the transitional provisions in clause 14 of each of Regulation No 2 and Regulation No 3. 2. It is apparent that any prohibition on prescribed action by the landlords (including action to recover rent) in respect of the non-payment by the tenants of rent during May 2020 will continue to apply pursuant to those provisions and s 88 of the RLA. We note that Robb J in Darzi Group at [125] suggested that the landlord's failure in that case to re-negotiate the rent in good faith had the effect that it "will be perpetually barred from taking any prescribed action to recover from [the tenant] the shortfall in rent paid". 3. In light of the errors in paragraph 8 of the Tribunal's decision which we have identified above, it is clear that the question of whether the landlords were prohibited from taking action to recover the rent for May 2020 was not determined according to law. 4. It is necessary to set aside the order in relation to the payment of rent for May 2020 and remit to the Consumer and Commercial Division for determination consistently with these reasons the question whether the landlords are entitled to pursue proceedings to recover that rent. Issues that will arise on such re-hearing will include: whether or not the landlords complied with the requirements of regulation 7(3); whether the provisions of regulations 7(3A) and (3B) were applicable in the circumstances; and, if so, whether the tenants had complied with the requirements of regulation 7(3A). 5. The Appeal Panel does not have before it the necessary information to make an assessment of those issues or the appropriate final orders and has not heard from the parties in that regard. Ground 2 – rent arrears 1. In reaching the conclusion that the tenants were liable for the unpaid rent in respect of the period between 1 June 2017 to 31 May 2018 (a period which was not affected by the COVID-19 pandemic) the Tribunal accepted the landlords' evidence that the agreement between the tenants and the landlords was that payment of the rental increase would be deferred and that the parties did not agree that the rental increase would be waived. That is a finding of fact, in respect of which the appellants require leave to appeal. 2. The tenants' submissions in respect of this ground of appeal went no further than asserting that Ms Ning had lied to the Tribunal, and that the Tribunal had referred to the wrong year as being the year in which the rent increase had not been paid. 3. There is nothing in the material before the Appeal Panel to suggest that the Tribunal's finding, that the agreement between the parties was that payment of the rent increase would be deferred rather than waived, was against the weight of evidence or not fair and equitable. 4. The ground of appeal relating to the payment of rent in respect of the period 1 June 2017 to 31 May 2018 in the amount of $1,294.44 is dismissed. Ground 3 – payment of legal and mediation costs 1. The Tribunal determined that these costs were payable pursuant to two specific provisions of the lease, clauses 5.1.3 and 5.1.8. 2. Although the parties did not provide a full copy of the lease to the Appeal Panel prior to the hearing, as we have noted above, a full copy was provided by the appellants shortly after the hearing. 3. We consider it appropriate to refer to the terms of the lease despite the inappropriate manner of its provision, because, in our view, there can be no prejudice to the landlords arising from its receipt. 4. One of the matters by reference to which the landlords sought the recovery of legal costs was the alleged default of the tenants in the payment of rent for May 2020. We have set aside the Tribunal's findings in that regard. That conclusion leads to the question whether the legal costs, or part of the legal costs, were not recoverable. 5. Without reference to the relevant clauses of the lease, we would have been unable to determine that the correct application of the relevant clauses would not have resulted in a different outcome concerning the appellants' liability for those costs. Thus, if we had not been provided with a full copy of the lease, the awards in respect of legal costs and mediation fees would have been set aside and those claims remitted for reconsideration. Consideration of the relevant clauses could only improve the landlords' position. 6. Clause 5.1 of the lease relevantly provides: "The lessee must pay to the lessor or as the lessor directs: … 5.1.3 the reasonable cost to the lessor of remedying a default by the lessee. … 5.1.8 if the lessee defaults, the lessor's reasonable legal costs relating to the default. 1. The requirement in each case is that there have been an actual default giving rise to remediation costs or legal costs. 2. As we have set aside the findings of the Tribunal in relation to the tenants' failure to pay rent for May 2020, it is possible that at least part of the landlords' legal costs will not be recoverable pursuant to clause 5.1.3 or 5.1.8 because the tenants may not be found to have been in default by reason of the non-payment of rent, or alternatively, because the recovery of legal costs in respect of the non-payment of rent during May 2020 may itself be found to be "prescribed action". The same position will apply with respect to the claim for mediation costs. 3. Accordingly, it is appropriate to set aside the orders for the payment of $2,700 in respect of legal costs and $608 in respect of mediation costs and remit the issue of the appellants' liability to pay the respondents those amounts to the Consumer and Commercial Division of the Tribunal to be determined afresh in light of the ultimate outcome of the proceedings. Costs 1. Both parties sought an order for payment of the costs of the appeal. 2. The amount in issue on the appeal was $7,531.55. Accordingly, rules 38 and 38B of the Civil and Administrative Tribunal Rules 2014 (NSW) are not applicable to this appeal and, pursuant to s 60 of the NCAT Act, special circumstances are necessary before we can make an order for costs. 3. We do not find there are special circumstances and, accordingly, we decline to make an order for costs. Orders 1. Our orders are: 1. The appeal is allowed in part. 2. Order (1) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied by replacing the words "$7,531.55 on account of rent arrears and other out of pocket expenses" with the words "$1,294.44 on account of rent arrears". 3. Order (2) made by the Tribunal in proceedings COM 20/32615 and COM 20/50753 on 25 February 2021 is varied to read "pursuant to s 72(2) of the Act, the office of the NSW Small Business Commissioner is directed to pay to the lessors the sum of $1,294.44 out of the security bond. The sum of $6,237.11 is to be retained by the Commissioner pending the determination of the balance of the proceedings. The balance of the security bond is to be paid to the lessees, Scott Shiguo Cong and Hong Zhao". 4. The lessors' claims for, rent for the period 1 May 2020 to 31 May 2020 in the amount of $2,929.11, $2,700 in respect of solicitors' costs, and $608 in respect of mediation costs, are remitted to the Consumer and Commercial Division of the Tribunal, differently constituted, for determination consistently with these reasons. ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 September 2021