Civil and Administrative Tribunal New South Wales Medium Neutral Citation: McKeon v Songlake Pty Ltd [2022] NSWCATAP 25 Hearing dates: 18 January 2022 Date of orders: 02 February 2022 Decision date: 02 February 2022 Jurisdiction: Appeal Panel Before: G Furness SC, Senior Member L Wilson, Senior Member Decision: Appeal dismissed. Catchwords: APPEAL-application of COVID-19 Regulations-unconscionable conduct under s62B Retail Leases Act 1994-conflict of interest Legislation Cited: Civil and Administrative Tribunal Act 2013 Retail and Other Commercial Leases (COVID-19) Regulation 2020 Retail Leases Act 1994 Cases Cited: Attorney-General (NSW) v World Best Holdings (2005) 63 NSWLR 557 Collins v Urban [2014] NSWCATAP 17 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Category: Principal judgment Parties: Philip McKeon (Appellant) Songlake Pty Ltd (First Respondent) John Wilcox (Second Respondent) Representation: Solicitors: Appellant Self-represented Teece Hodgson & Ward (First Respondent) No appearance (Second Respondent) File Number(s): 2021/00303735 Decision under appeal Court or tribunal: New South Wales Civil & Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: Not Applicable Date of Decision: 29 September 2021 Before: D Bluth, Senior Member File Number(s): COM 21/22055 REASONS FOR DECISION 1. In May 2020 the Appellant, a lessee in a retail lease, was evicted from his café in Nimbin and his lease was terminated by the Landlord for unpaid rent which had accumulated over many months. 2. On 29 September 2021 the Tribunal dismissed an application by the Applicant (the lessee and Appellant in these proceedings) for restitution on the basis that first, both his Landlord and his Agent (First and Second Respondents) engaged in unconscionable conduct in breach of s.62B Retail Leases Act 1994 (the Act) and, secondly that the Retail and Other Commercial Leases (COVID-19) Regulations, (the COVID-19 Regulations) passed on 24 April 2020 applied to the Appellant with the effect that his Lease could not be terminated. 3. For the reasons given below, we dismiss the appeal against the First and Second Respondents. 4. The facts can be briefly set out and are largely not in dispute. The Appellant ran a café and takeaway business in Nimbin in northern NSW. The Appellant entered into a lease with the First Respondent (referred to as the Landlord in this decision and the decision under appeal) for three years from 1 April 2017 with an option to renew for a further three years (the Lease). 5. On 2 July 2019 the parties entered into a variation of the Lease granting the Appellant further options to renew until 2029. The first option to renew was to be exercised by 31 December 2019. 6. The Second Respondent is a real estate agent in Nimbin (the Agent). Around January 2019, the Appellant engaged him, or his agency, to sell the café business and transfer the Lease. The Agent provided the Appellant with an estimate of $125,000 for the value of the business. At that stage, the lease was to expire on 31 March 2020. 7. The Appellant fell behind in paying the rent in October 2019 due to ill health and he ceased trading. His lawyer wrote to the then managing agent for the Landlord, Nimbin Lifestyle Real Estate on 21 October 2019 advising of the Appellant's circumstances and said that the Appellant had listed the business for sale. The Appellant expected to be unable to pay the November rent. If any rent was not paid, the debt would be cleared on the sale of the business. The Landlord instructed the then managing agent that it was fine for the Appellant not to pay the November rent on time. 8. The Agent (the Second Respondent) or his agency Nimbin Hills Real Estate Pty Ltd bought the business of the then managing agent of the building in which the Appellant's café was located, Nimbin Lifestyle Real Estate. On 30 November 2019, the Appellant was advised by Nimbin Lifestyle Real Estate that the business had been sold to Nimbin Hills Real Estate and rent was to be paid as directed by that new agency. 9. Thus, from that date, the Appellant knew that the Agent or agency he had engaged to sell the café was also the Agent or agency who was acting for the Landlord as managing agent. 10. The Landlord was not aware that the Agent was acting for the Appellant as well as the Landlord until April or May 2020. 11. The Appellant did not pay the rent for the months of November 2019 through to June 2020. The Appellant did not exercise the option to renew the lease in the time specified. 12. The Landlord instructed the Agent on 6 March 2020 to require the Appellant to vacate the café on the expiry of the lease on 31 March 2020. The Agent apparently did not do so. 13. The Appellant was served with a Notice of Termination dated 19 May 2020 for non-payment of rent. The Appellant then sought to negotiate with the Landlord to re-open the café on the basis that COVID-19 Regulations would allow the café to function. The Agent responded on behalf of the Landlord noting that the option to renew had expired; the out of time request was not accepted and requested the return of the keys. 14. The Appellant vacated the premises about 3 June 2020. The decision 1. First, the Tribunal found that a breach of s62B Retail Leases Act requires not just that a party to a lease acted unfairly or harshly but that there must be a 'high degree of moral obloquy' and referenced Attorney-General (NSW) v World Best Holdings (2005) 63 NSWLR 557 at 583. 2. The Tribunal characterised the Appellant's claim as follows: 'at its highest the Applicant's claim in this regard is that the Landlord failed to negotiate and that he blames the Agent for this, hence the application under s 62B'. The Tribunal found there was no evidence to support that claim. Further, the Tribunal found the "Landlord was not for turning, not going to negotiate and allow a belated exercise of option and whatever perceived or real conflict of interest that the Agent might have had at one time acting for both the landlord and tenant, this did not in any way influence the ultimate outcome of no further lease for non-payment of rent and the Termination Notice'. 3. The Landlord, the Tribunal found, was entitled to act in its interests and take a view as to whether it wished to continue a relationship with the Appellant. Therefore, the Respondents did not act unconscionably in breach of s 62B. 4. Further, the Tribunal found that the Appellant could never have been in a position to exercise the option to renew the lease because he was overdue in payment of the rent. The Lease provided that to be able to exercise the option, no rent or outgoings could be overdue for payment. 5. Secondly, the Tribunal found that the COVID-19 Regulations operated on impacted leases from April 2020. The breach of lease by the Appellant related to non-payment of rent before the introduction of the COVID-19 Regulations. Thus, termination of the lease was permitted. 6. The evidence before the Tribunal, relied upon in the Appeal, was the Lease, Variation of the Lease, Company Extract for Songlake Pty Ltd, Company Extract for Nimbin Hills Real Estate Pty Ltd, Agency Agreement for Sale of Business, letter dated 24 January 2019 to the Landlord from Nimbin Hills Real Estate, letter dated 21 October 2019 to Nimbin Lifestyle Real Estate from the Appellant solicitor, tax invoice and trust account statement to the Appellant from his solicitor dated 11 June 2019, emails from the Appellant's solicitor to the Appellant dated 10 and 23 May 2020, letter dated 30 November 2019 to the Appellant from Nimbin Lifestyle Real Estate, commercial property guide from Nimbin Hills Real Estate website, undated letter, presumably after 3 June 2020, from Nimbin Hills Real Estate to the Appellant, email from Susanna Holroyd dated 25 May 2020, photo of the window of Nimbin Hills Real Estate, letter from Appellant to the Landlord dated 20 May 2020 and letter dated 22 May 2020 from Nimbin Hills Real Estate to the Appellant. 7. A witness statement of Angelica McCall, a director of the Landlord dated 22 July 2021 and a statement by the Agent which had been before the Member below, was also tendered. The Legislation and Regulation 1. Section 62B of the Act is, relevantly, as follows: 62B Unconscionable conduct in retail shop lease transactions (1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. … (3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to— … (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and … (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and (i) the extent to which the lessor unreasonably failed to disclose to the lessee— (i) any intended conduct of the lessor that might affect the interests of the lessee, and (ii) any risks to the lessee arising from the lessor's intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and (j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and (k) the extent to which the lessor and the lessee acted in good faith. … (5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease. (6) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person fails to renew the lease or issue a new lease. (7) For the purpose of determining whether a lessor has contravened subsection (1) or whether a lessee has contravened subsection (2)— (a) the Tribunal must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention, and … 1. Section 72AA of the Act, which was not mentioned in the decision below, gives the Tribunal the power to make orders in unconscionable conduct claims. 2. The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (Regulation No 1) was in force from 24 April 2020. 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). There were subsequent regulations which extended the period of operation, however, for the purpose of this matter Regulation No 1 is the only relevant regulation. 3. The object of subsequent Regulations (for example No.7) is to limit the exercise of certain rights by a lessor under retail and certain other commercial leases for a breach of the lease if the lessee is a business that qualifies for certain grants due to the impact of the COVID-19 pandemic and the breach is a prescribed breach that occurs between the prescribed period. The "prescribed period" for the purposes of Regulation No 1 was from 24 April to 23 October 2020. 4. The COVID-19 Regulations defined "prescribed action" to include the eviction of the lessee and it provided that there was an obligation on lessors to renegotiate rent and other terms of commercial leases before taking the prescribed action. 5. The term "impacted lessee" was defined in regulation 4(1) (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. 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. The Tribunal's decision involved the exercise of "discretion". To succeed with his appeal, the Appellant must establish error in the Tribunal's exercise of discretion on a question of law. The recognised grounds on which the exercise of the Tribunal's discretion may be disturbed provide (Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274, at 45): (1) The decision-maker made an error of legal principle; (2) The decision-maker made a material error of fact; (3) The decision-maker took into account an irrelevant matter; (4) The decision-maker failed to take into account a relevant matter, or; (5) The decision-maker arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning. 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). Notice of Appeal 1. A Notice of Appeal was filed on 26 October 2021. The Grounds of Appeal were stated to be in respect of questions of law only. The first ground was that the Tribunal erred in law as to the application of the COVID-19 Regulations. The Appellant stated that the eviction notice was dated 19 May 2020 and therefore within the prescribed period set by the COVID-19 Regulations. It appears that the Appellant relied on the correspondence from his lawyer to the Agent on 19 October 2019 stating that he would pay any rental arrears from the sale of the business. The Appellant asserted that he was permitted to trade under a monthly tenancy during the prescribed period and that the Landlord had rejected a reasonable offer of 'restitution'. 2. The second ground was that the Tribunal finding that the conduct of the Landlord who 'poaches a tenant's agent with the lure of lucrative management contracts, in brazen violation of an "unfair tactics" provision of the Retail Leases Act 1994 and "conflict of interest" prohibitions of a Regulation and an industry Code of Practice, a landlord who then instructs, with disingenuous intent, the agent to evict the tenant, that this is not conduct tainted with a "high degree of moral obloquy" is an error of law. The Landlord's reply 1. The Landlord supports the orders made by the Tribunal and sets out additional reasons for the orders made by the Tribunal. It submits that neither ground identified any appealable error. 2. In relation to the first ground of appeal, the Landlord submits that the COVID-19 Regulations, which gave legal effect to certain aspects of the Code of Conduct in NSW, did not oblige a lessor to renew a lease and did not prohibit the termination of a lease for a failure to pay rent that took place prior to the commencement of the Regulation on 24 April 2020. 3. The Landlord submits that it had decided some months earlier to bring the lease to an end in March 2021. Further, that there were significant breaches of the Lease prior to the COVID-19 pandemic, in that rent had not been paid for months and the Appellant had failed to exercise the option. In any event, the Appellant would have been prevented from exercising the option because he had not paid rent. Finally, the Landlord had reasonable doubts about the Appellant's ability to pay the rent or sell his business. 4. Further, the restrictions on lessor action only applied in favour of an 'impacted lessee' as defined in regulation 4. There is no evidence that the Appellant was an 'impacted lessee'. 5. The Landlord submits that the second ground of appeal is not an appeal on a question of law alone and therefore the Appellant needs leave to appeal. The Landlord submits that the Appellant is inviting the Appeal Panel to make findings of fact and form opinions or draw inferences from facts that were not made by the Tribunal and which were not open to the Tribunal on the evidence before it. 6. The Landlord submits that leave should not be granted as none of the requirements of clause 12 of Schedule 4 of the NCAT Act are satisfied. 7. Turning then to the substance of the second ground of appeal. The Landlord submits that it is necessary for the Appellant to show conduct demonstrating a 'high degree of moral obloquy' on the part of the Landlord. It refers to the uncontested evidence of Ms McCall that she was not aware in November 2019 that the Second Respondent or any associated entity was acting for the Appellant. Even if she was aware, the Landlord submits that that would not constitute unconscionable conduct within the meaning of s 62B. There was no evidence of undue influence and no benefit to the Landlord at the Appellant's expense. 8. In short, the Landlord submits it was amply justified in its decision to end the lease, was entitled to instruct the Second Respondent, as its agent, to end the lease and no question of unconscionable conduct arises, irrespective of any conflict of interest which might have affected the Second Respondent. Submissions 1. The Agent did not participate in the appeal. 2. Detailed submissions were made by the Appellant and the Landlord which expanded upon the matters set out in the Notice of Appeal and Reply. At the hearing, the Appellant and the Landlord relied on their written submissions. To the extent that those written and oral submissions raise additional matters, we set them out here. 3. First, an issue which was agitated in submissions but ultimately was resolved during the hearing was whether the Appellant complied with Directions made on 29 June 2021 to the effect that if any party wished to question a witness it must notify the relevant party at least 7 days before the hearing. 4. The Appellant accepted at the hearing that he did not notify the Landlord that he wished to question Ms McCall. 5. Secondly, in relation to the COVID-19 Regulations, the Appellant additionally submitted that he was an 'impacted lessee', although we note that there was no evidence before us in support of that submission. 6. Finally, the Landlord additionally submitted that the submissions of the Appellant in relation to its state of mind and intentions are not based on any evidence and should be rejected. Consideration 1. We have carefully considered the submissions of the Appellant. His submission is that the Tribunal was wrong as to its application of COVID-19 Regulations and s 62B Retail Leases Act. It should have found that the COVID-19 Regulations applied to him and thus he should not have been evicted. The conduct of the Landlord and the Agent which ended with his eviction was unconscionable within the meaning of s 62B Retail Leases Act. 2. As the Appellant is self-represented, we have considered whether there are any (other) questions of law available to him. 3. For the reasons given below, we are not persuaded that there was any error of law by the Tribunal. In our view, the Tribunal made no error of legal principle, it did not make a material error of fact and did not take into account what it should not have and did take into account what it should have. The decision was not unreasonable. 4. In essence, the Appellant is asking the Appeal Panel to substitute its views for those of the Tribunal. 5. In the absence of being satisfied that the findings of the Tribunal were wrong, the Appeal Panel cannot substitute its own views for that of the Tribunal. 6. While the Appellant did not claim there were grounds other than on a question of law for his appeal, we have considered whether any of the matters identified in Collins set out above apply. In our view, this case turns on the facts, rather than any issue of principle or public importance. No error of fact is discernible and while the result will be disappointing to the Appellant, it was not unfair or unjust. First ground of appeal 1. It is clear from the Appellant's submissions and his Notice of Appeal that his primary dispute is with the Landlord, rather than the Agent. While he is aggrieved that his Agent was also the Landlord's agent, it was the action of the Landlord in maintaining the engagement of the agent and terminating the Lease about which he is primarily concerned. 2. The COVID-19 Regulations apply to the conduct of lessors and not that of agents. It limits what lessors can do when there is a breach of the lease. The Appellant does not, and fairly, could not submit that a correct application of the COVID-19 Regulations would result in any breach or wrong doing by the Agent. 3. This ground of appeal is misconceived against the Agent and is rejected. 4. We do not accept that the Tribunal made any error in its application of the COVID-19 Regulations. The Tribunal found that the Notice of Termination of the Lease, which was given after 23 April 2020, was based on events occurring largely before that period, that is the non-payment of rent from November 2019 and thus fell outside the COVID-19 Regulations. To find otherwise would be contrary to the purpose of the Regulations which was to protect, among others, lessees who were impacted by the pandemic. 5. In the event we are wrong in that finding, there was no evidence before the Tribunal that the Appellant was an 'impacted lessee' within the meaning of the Regulation. Thus, there was no evidence that the Regulation applied to the Landlord evicting him. As stated above, he asserted before us that he was an 'impacted lessee' without providing any evidence to support that claim. 6. The first ground of appeal in relation to the Landlord is dismissed. The second ground of appeal 1. It was common ground between the parties that there was no error by the Tribunal in finding that 'moral obloquy' was necessary to find unconscionable conduct under s.62B. 2. In relation to the Second Respondent, the Notice of Appeal states that the Landlord's management contract with the Agent contravened, among other provisions, the Property and Stock Agents Regulation 2014 which provides that an agent should not act so as to place the agent's interest in conflict with the client's interest. 3. The Appellant appears to be claiming that the Agent had a conflict of interest and thus contravened the Property and Stock Agents Regulation 2014, which is sufficient to amount to unconscionable behaviour under s.62B. 4. Section 62B concerns contraventions by lessors, not agents. Thus, whether or not the Agent had a conflict of interest and contravened Property and Stock Agents Regulation 2014, is of no relevance to the claim against the Agent for unconscionable conduct. 5. The second ground of appeal against the Second Respondent is misconceived and rejected. 6. The evidence before the Tribunal was that the conduct of the Landlord in respect of the Lease and the Appellant was unremarkable. The Appellant did not pay the rent for some months and did not exercise the option to extend the Lease in time. The Landlord declined to extend the Lease out of time when requested by the Appellant and terminated the Lease. 7. The Tribunal was satisfied that any perceived or real conflict of interest did not influence the ultimate outcome. 8. The decision of the Tribunal was open to it on the facts it found, no material factual error has been found and the fact finding process was fair and considered the merits of the case. Oder 1. For the above reasons we make the following order: 1. Appeal dismissed. ********** 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. 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