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TENANT FILES FOR INTERLOCUTORY INJUNCTION DESPITE FAILURE TO COMPLY WITH THE RENT RELIEF AGREEMENT

Global Fashion Service Pty Ltd v ESR Investment Nominees 3 (Australia) Pty Ltd (Building and Property) [2021] VCAT 224 (16 March 2021)

This is a case where the tenant and landlord entered into a rent relief agreement pursuant to the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020.  The tenant seeks an injunction but the landlord contends that there is no serious issue to be tried due to the tenant’s failure to comply with the agreement which justifies the re-entry in the premises by the landlord.

Facts:

The Applicant (‘the Tenant’) is the tenant of premises located at 309 Fitzgerald Road, Derrimut (‘the Premises’), which is owned by the Second Respondent (‘the Landlord’).  In this proceeding, the Tenant seeks an interlocutory injunction to restrain the Landlord from re-entering the Premises. 

On 16 April 2020, the Tenant purported to make a request for rent relief pursuant to Reg 10 of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (‘the Principal Regulations’).

On 15 June 2020, the First Landlord made an offer for rent relief in the form of a letter of that date. That offer was accepted by the Tenant on 11 July 2020 (‘the Rent Relief Agreement’). According to the Landlord, the Rent Relief Agreement reduced the monthly rent during the period 29 March to 29 September 2020 from $249,112.26 plus GST to $117,082.76 plus GST.

Consequently, by default notice dated 22 December 2020, the Landlord purported to re-enter the Premises on the ground that the Tenant had failed to provide a bank guarantee in accordance with the provisions of the Lease. That prompted the Tenant to issue this proceeding on 8 January 2021, seeking an interim or interlocutory injunction restraining the Landlord from re-entering the Premises.

The initial ground relied upon by the Landlord to justify re-entry was confined to a failure to provide a bank guarantee. The Landlord now contends that it is entitled to re-enter on the ground that the Tenant has failed to pay full rent, in addition to the failure to pay outgoings, GST and to deliver up a bank guarantee as security for its performance under the Lease.

Mr Peters, counsel for the Landlord, submitted that there is no serious issue to be tried because the Tenant’s arguments are premised on it having protection under the regulations. Mr Peters submitted that the Tenant lost the protection that it may have had under the Principal Regulations either because it had failed to comply with the Rent Relief Agreement or because the term of the Rent Relief Agreement had expired and no fresh request for rent relief had been made. He specifically referred to reg 9(1) of the Second and Third Regulations, which provide that the protection offered under the regulations is subject to the Tenant paying the amount of rent or outgoings in accordance with the Rent Relief Agreement.

The Tenant contends that there are genuine disputes as to what is payable under the Rent Relief Agreement sufficient to raise a serious issue to be tried. Furthermore, the tenant submits that those disputes cannot be summarily determined within the context of an interlocutory application.

Issue: Is there a serious issue to be tried?

Law:

  • COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020- REG 9 (Non-payment of rent or outgoings during relevant period) : (1) A tenant under an eligible lease is not in breach of any provision of the eligible lease that relates to payment of rent or outgoings if they do not pay the amount of rent or outgoings required to be paid under the eligible lease during the relevant period and only if—

(b) during the relevant period, pay an amount of rent or outgoings in accordance with—

     (ii) any other agreement mentioned in regulation 10(6)(b)

  • COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020- REG 10 (Rent relief)

(6) Rent relief under this regulation may be given effect by the landlord and tenant by—

(a) a variation to the eligible lease; or

(b) any other agreement between them that gives effect to the rent relief, either directly or indirectly.

Analysis:

Despite both parties making reference to the 15 June 2020 letter as constituting the Rent Relief Agreement, it appears that each party has a different interpretation on what that letter means. The Landlord contends that the reduced rental was to apply from April 2020. On the other hand, Mr Carlile submitted that the reduced rental was to apply from the date the Tenant signed the 15 June 2020 letter; namely, 11 July 2020. He argued that the Rent Relief Agreement operated prospectively.

There are serious issues to be tried concerning the terms of the Rent Relief Agreement, which include what is to be paid under that agreement and when that agreement was to end.

There are serious issues as to the validity of that agreement, given that the parties seem to have conducted themselves in a manner inconsistent with its stated terms. Finally, there are issues to be tried as to what are the parties’ rights or obligations if it is found that the Rent Relief Agreement expired on 29 September 2020 or is of no effect. Questions arise as to whether the initial request for rent relief survives and if so, whether that means that the protection against re-entry given under reg 9 of the Principal Regulations continues to operate until 29 March 2021.

The balance of convenience favours the granting of an injunction. First, granting the injunction maintains the status quo that existed for a significant part of 2020. Second, re-entry would cause the considerable if not irreparable damage to the Tenant’s business. Third, the injunction is limited in its operation, in that the obligations of the Tenant essentially reset on 29 March 2021. After that time the full amount of monthly rent and outgoings is due and payable. Finally, although the Landlord is substantially out of pocket compared to what it would have received for rent and outgoings absent the Principal Regulations, that situation will not materially change if an interlocutory injunction is granted.

Conclusion: Until further order, the Second Respondent, its employees, servants and agents are restrained from re-entering or to seek to recover the demised premises.

 

 

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