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Supreme Court 23 August 2024

Dr N Kalokerinos Pty Ltd v Jain

[2024] NSWSC 1069

Other
APPEALS 19 REGULATION APPLICATION FOR LEAVE TO APPEAL CROSS APPEAL “APPEAL ON A QUESTION OF LAW”

Citation: Dr N Kalokerinos Pty Ltd v Jain [2024] NSWSC 1069
Court: Supreme Court of New South Wales
Date: 23 August 2024
Judge(s): Campbell J

Background

The lessor (a company referred to here as DNK) leased commercial premises at Shellharbour to the lessee for use as a restaurant. The lease commenced in August 2020 for a three-year term. In November 2021, DNK purported to terminate the lease for various breaches, including failure to pay the correct rent promptly, and re-entered the premises in December 2021 by changing the locks.

The lessee commenced proceedings in NCAT's Commercial and Consumer Division claiming that the termination was unlawful, relying centrally on the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (the 2021 COVID Regulation). DNK ran its own cross-application seeking compensation. At first instance, the Senior Member found the 2021 COVID Regulation did not apply to the lessee. On appeal, the NCAT Appeal Panel reversed that finding and substantially reduced the damages awarded to DNK.

DNK then sought leave to appeal to the Supreme Court on questions of law under s 83 of the NCAT Act, and the lessee filed a cross-appeal challenging the Appeal Panel's treatment of make-good damages for kitchen tiles.

Legal Issues

  • Whether the protections in clauses 6B and 6C of the 2021 COVID Regulation were conditional on the lessee first providing information under clause 6A as a condition precedent
  • Whether the lessee qualified as an "impacted lessee" under the 2021 COVID Regulation
  • Whether the Appeal Panel erred by finding that the first-instance tribunal constructively failed to exercise jurisdiction in not addressing the lessee's argument about an admission in the points of defence
  • Whether the Appeal Panel erred in treating the admission in DNK's points of defence as equivalent to an agreed fact
  • Whether the lessee's obligation to repair kitchen tiles arose under the lease covenant relating to demised premises (clause 7.2) or the strata common property covenant (clause 18.7.1.4), and the consequential application of s 133A of the Conveyancing Act 1919 (NSW) to limit make-good damages

Decision

Ground 1 (DNK's appeal): Interpretation of clause 6A of the 2021 COVID Regulation

Campbell J dismissed this ground. The court held that the lessee's obligation to provide information about impacted lessee status under clause 6A(1) did not crystallise until the lessor actually requested that information under clause 6A(2)(b). Until such a request was made, the protections in clauses 6B and 6C were not conditional on the lessee volunteering that information. The court found this reading consistent with the regulation's protective purpose, with the definition of financial stress in the underlying National Cabinet Code of Conduct, and with Darke J's analysis of cognate legislation in Todarello Property Investments Pty Ltd v GJ Kalra Pty Ltd [2021] NSWSC 1678 (at [37]-[39]).

Ground 2 (DNK's appeal): Constructive failure to exercise jurisdiction

The court rejected this ground. While acknowledging that a tribunal's failure to address a clearly material argument can constitute jurisdictional error under the principle in Dranichnikov, the court held that the Senior Member did address the lessee's claim to be an impacted lessee, albeit on the basis of a legal misdirection as to the effect of clause 6A. In any event, any error in the Appeal Panel's finding on this issue was not material to the outcome, given the Appeal Panel's separate and sufficient resolution of the underlying factual question (at [44]-[47]).

Ground 3 (DNK's appeal): Treatment of the admission in the points of defence

DNK argued that the Appeal Panel erred in treating its admission in the points of defence as equivalent to an agreed fact under s 191 of the Evidence Act 1995. The court rejected this ground. The court found that the Appeal Panel did not hold that s 191 literally applied; rather, it drew an analogy and treated the admission as a weighty evidential matter consistent with the NCAT guiding principle under s 36 of the NCAT Act. The Appeal Panel was empowered under s 80(3) to decide facts for itself on rehearing, and the admission, made after full exchange of evidence by legally represented parties, warranted significant weight. Documentary evidence also independently established that the lessee had received specified COVID relief benefits (at [55]-[68]).

Cross-appeal Grounds 1 and 2: Kitchen tile make-good damages and s 133A of the Conveyancing Act

The court allowed the cross-appeal on this issue. Both at first instance and before the Appeal Panel, it was never in dispute that the kitchen formed part of the demised premises, not the common property. The obligation to repair the kitchen tiles could therefore only arise under clause 7.2, and clause 18.7.1.4 (the common property covenant) had no application. The court found that the Appeal Panel's conclusion was vitiated by a significant misapprehension of the lessee's case, amounting to either a constructive failure to exercise jurisdiction or an error of law of the kind where only one conclusion was reasonably open on the evidence (at [88]). Because section 133A of the Conveyancing Act applies to clause 7.2 as a covenant to keep premises in repair, and the tiles had not been repaired or replaced by the hearing date, DNK was limited to the actual diminution in value of the premises rather than the full cost of replacement. As no evidence of actual diminution was established, the court awarded nominal damages of $100 for that breach (at [89]-[90]).

Cross-appeal Ground 3: Costs of the Appeal Panel proceedings

The court did not need to consider this ground separately, having allowed the cross-appeal on Grounds 1 and 2. The court made a consequential order for costs of the Appeal Panel proceedings in the lessee's favour (at [91]).

Orders Made

  • Leave granted to DNK to appeal on Grounds 1, 2 and 3; appeal dismissed
  • Leave granted to the lessee to cross-appeal on Grounds 1 and 2; leave refused on Ground 3; cross-appeal allowed
  • Order 4 of the Appeal Panel set aside and varied: DNK's damages award substituted from $60,025.34 to $4,134.53 (comprising $4,034.53 for conceded items and $100 nominal damages for the kitchen tile breach)
  • Order 5 of the Appeal Panel set aside: DNK ordered to pay the lessee's costs of the appeal to the Appeal Panel
  • DNK to pay the lessee's costs of the appeal and cross-appeal to the Supreme Court
  • Liberty granted to either party to apply for a special costs order by lodging written submissions by 20 September 2024

Key Takeaways

  • Under the 2021 COVID Regulation, the protections in clauses 6B and 6C shielding an impacted lessee from prescribed action were not conditional on the lessee proactively supplying information under clause 6A(1). That obligation to provide information arose only once the lessor made a request under clause 6A(2)(b); the lessee had the option, but not the duty, to volunteer it earlier (at [37]-[38]).

  • A lessee's receipt of specified COVID relief payments (such as the micro-business grant or JobSaver) was sufficient to establish status as an "impacted lessee" under the 2021 COVID Regulation, without requiring the lessee to formally invoke the regulation's protections in advance (at [65]).

  • Where legally represented parties in NCAT proceedings exchange points of claim and points of defence after full evidence has been filed, a clear admission in the points of defence carries significant evidentiary weight. The Appeal Panel was entitled to treat such an admission as analogous to an agreed fact and to afford it substantial weight in its own fact-finding on rehearing, consistent with the NCAT guiding principle under s 36 of the NCAT Act (at [57]-[64]).

  • Section 133A of the Conveyancing Act 1919 applies to a lease covenant requiring a lessee to keep demised premises in repair. Where the premises have not been repaired or replaced by the time of hearing, a lessor is limited to proving actual diminution in the value of the premises; if no such diminution is proved, only nominal damages are recoverable (at [80]-[83], [89]-[90]).

  • In an appeal by way of rehearing before the NCAT Appeal Panel, a significant misapprehension of the case put by a party, such as attributing a lessee's repair obligation to a common property covenant when the disputed area was unambiguously part of the demised premises, can constitute an error of law sufficient to vitiate the Appeal Panel's conclusion (at [88]).

Legislation and Cases Referenced

Legislation
- Civil and Administrative Tribunal Act 2013 (NSW) , ss 36, 38, 80, 83
- Civil Procedure Act 2005 (NSW), s 56
- Conveyancing Act 1919 (NSW), s 133A
- Conveyancing General Regulation 2018 (NSW), Sch 5
- Evidence Act 1995 (NSW) , s 191
- Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020
- Retail and Other Commercial Leases (COVID-19) Regulation 2021 , cll 3, 4, 5, 6, 6A, 6B, 6C, 6D, 9A
- Retail Leases Act 1994 (NSW) , ss 85, 87
- Uniform Civil Procedure Rules 2005 (NSW), rr 12.6, 14.23
- Civil and Administrative Tribunal Rules 2014

Cases
- Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33
- Australian Gaslight Co. v Valuer General (1940) 40 SR (NSW) 126
- Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
- Bulga Cole Management Pty Ltd v Hope Wine Group Pty Ltd [2020] NSWSC 1783
- Chen v The Owners Corporation – Strata Plan No 55792 [2020] NSWSC 151
- Day v SAS Trustee Corporation [2021] NSWCA 71
- Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; (2003) 77 ALJR 1088
- Fisher v Non-Conformist Pty Ltd [2024] NSWCA 32
- Hope v Bathurst City Council (1980) 144 CLR 1
- Jain v Dr N Kalokerinos Pty Ltd [2023] NSWCATAP 141
- Jaycar Pty Ltd v Lombardo [2011] NSWCA 284
- Liddell Coal Operations Pty Ltd v Hector [2021] NSWCA 47
- Lustre Hoisery Ltd v York (1935) 54 CLR 134; [1935] HCA 71
- Midcoast Petroleum Pty Ltd v Keldros Pty Ltd [2019] NSWSC 970
- Minister for the Environment, Heritage and the Arts v PGP Developments Pty Ltd (2010) 183 FCR 10; [2010] FCA 58
- Peacock v Repatriation Commission [2007] 161 FCR 256; [2007] FCAFC 156
- Todarello Property Investments Pty Ltd v GJ Kalra Pty Ltd [2021] NSWSC 1678