NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd

1. [1]

   HER HONOUR: This matter was referred to me for hearing from the Expedition List. The dispute the subject of the proceedings concerns the assignment of a lease of office premises at Clarence Street in the Sydney central business district (the Premises) and the impact of the COVID-19 pandemic on the business of the assignee and its ability or willingness to proceed with the assignment of the lease.

2. [2]

   By amended statement of claim filed on 25 August 2020, the plaintiff, NTT Australia Digital Pty Ltd (NTT), seeks an order for specific performance by the first defendant, Cover Genius Services Pty Ltd (CGS), of a deed of assignment signed by CGS in January 2020 (the Deed of Assignment), which provided for the assignment on and from 1 May 2020 to CGS of all NTT’s interest (as lessee) under a lease held by NTT in relation to the Premises (the Lease). NTT also seeks declaratory and other relief related to the Deed of Assignment (specifically, in relation to claimed rights to an indemnity for all amounts claimed by the head lessor, the second defendant, Perpetual Trustee Company Ltd (Perpetual)).

3. [3]

   By amended cross summons filed on 25 August 2020, Perpetual and the third defendant, Dexus Funds Management Ltd (Dexus) (Dexus as responsible entity of the Dexus Office Trust, and on behalf of Perpetual), claim payment from NTT, or in the alternative, CGS, in the sum of $492,130.19, being the rent, outgoings and other amounts payable under the Lease, as at 11 August 2020, along with interest. Perpetual and Dexus also seek other declaratory relief (as to which, see below). For convenience, I will in these reasons, unless the context otherwise requires, refer collectively to the second and third defendants as the Dexus entities.

4. [4]

   As between NTT and the Dexus entities, agreement has since been reached for the entry of consent orders disposing of the claim for relief against NTT (see below).

5. [5]

   It is relevant at the outset to note that CGS initially (but no longer) raised the doctrine of frustration in answer to the claim for relief by NTT. Its amended defence, abandoning the defence of frustration, was filed on 24 August 2020.

Background

1. [6]

   Perpetual (the custodian of the Dexus Office Trust) is the registered proprietor of the Premises. As noted above, Dexus is the responsible entity of the Dexus Office Trust. NTT is a technology and business consulting services company.

2. [7]

   On around 19 July 2013, NTT entered into the Lease of the Premises (located at Level 19, 45 Clarence Street, Sydney) with the Dexus entities for a term of eight years, commencing on 1 September 2013 and terminating on 31 August 2021. The lease term therefore now has less than twelve months to run.

3. [8]

   In or around July 2017, NTT, with the consent of the Dexus entities, entered into a sub-lease of the Premises with a third party known as Society One.

4. [9]

   In or around August 2019, a proposed assignment of the Lease for the balance of its term was negotiated with Cover Genius Pty Ltd (CG). CG is an Australian company within the Cover Genius group of companies (the Cover Genius Group). The Cover Genius Group operates a global insurance technology business.

5. [10]

   A document setting out the terms of the proposed assignment (the Assignment Proposal) was signed by CG (by its Chief Operating Officer, Mr Brenton Charnley). It had been prepared by Cushman Wakefield, real estate agents, on behalf of Society One (see the affidavit sworn on 17 August 2020 by Mr Angus McDonald, the Chief Executive Officer of CG, at [17]). The proposed assignee named in the Assignment Proposal was CG. I interpose to observe that, not only was CGS (which was only incorporated at around this time – see the affidavit sworn on 17 August 2020 by Mr McDonald at [11]) not a party to the Assignment Proposal, there is also no evidence that it was agreed to by CGS or by any of the parties to the subsequent Deed of Assignment.

6. [11]

   The Assignment Proposal included, as a condition precedent, the “[d]rafting and execution of a formal Deed of Assignment and Deed of Consent to Assignment being executed by all parties…”. The Assignment Proposal also provided that:

7. [12]

   On or before 23 December 2019, CGS, which by then had both been incorporated and identified as the proposed assignee, entered into a licence agreement as licensee, with Society One, as licensor, to enable CGS to occupy part of the Premises (the Licence Agreement) until 30 April 2020. Although the commencement date of the Licence Agreement was specified as 23 December 2019, the Licence Agreement specified (by cl 2.1.1) that:

8. [13]

   Those events did not happen by 23 December 2019 and, although cl 2.2.1 of the Licence Agreement provided that the Licensor (i.e., Society One) might waive the benefit of the Condition Precedent by notice in writing, there is no evidence that Society One waived the benefit of the Condition Precedent, in writing or otherwise. Rather, on 23 December 2019, Society One emailed CGS, stating that:

9. [14]

   It appears that CGS did not provide the abovementioned documents to Society One on 23 December 2019 and it does not appear to be disputed that the Licence Agreement did not commence on that date.

10. [15]

    On 23 December 2019, Mr Charnley sent an email to solicitors at Sparke Helmore (acting for NTT) and HWL Ebsworth (HWLE) (acting for the Dexus entities) and others, in relation to the Assignment of Lease: “following up” on the execution of the lessor’s deed of consent to the assignment of lease; noting that Society One and “Cover Genius” (by which I understand him to be referring to CGS) had executed the Licence Agreement; and advising that “Cover Genius” wished to occupy the property prior to the Christmas break to enable it to do some works over the period. It is relevant, for reasons that will shortly become apparent, to note that the email also sought advice as to whether anything further was required “from either Society One or Cover Genius with respect to this”.

11. [16]

    It does not appear that there was a response to this email until 6 January 2020 when, by email sent at 2.43 pm, Ms Grace Mangraviti (of HWLE) forwarded to Mr Calvin Tay (of Sparke Helmore) an email attaching what was said to be the final version of the deed (of assignment) for his reference and noting her understanding that Mr Tay’s client (NTT) and the transferee “will execute the deed tomorrow”. At 3.09 pm that day, Mr Tay responded to the effect that he would need to obtain instructions on the further amendments discussed between the transferee and the landlord (which he said had not been provided to him nor previously highlighted).

12. [17]

    The parties to the Deed of Assignment were named as Perpetual (as “Landlord” under the Lease), Dexus (as the “Responsible Entity”), NTT (as assignor, or “Tenant”) and CGS (as “Transferee”). The relevant clauses of the Deed of Assignment are as follows.

13. [18]

    Clause 2.1 provided for the assignment by NTT, as Tenant, to CGS, as Transferee or assignee, of all of its interest in and in relation to the Lease on and from the date of assignment (defined as 1 May 2020 – see cl 1.1 and Item 3).

14. [19]

    Clause 2.2 provided that Perpetual consented to the assignment by the Tenant of all its interest in and in relation to the Lease to the Transferee (again, CGS) without prejudice to the Landlord’s rights, powers and remedies under the Lease.

15. [20]

    Pursuant to cl 4.1, CGS was obliged to perform all the obligations of NTT as tenant under the Lease from 1 May 2020 and, pursuant to cl 4.3, CGS was to indemnify NTT with respect to CGS’ performance of its obligations as tenant under the Lease from 1 May 2020 (the CGS Indemnity).

16. [21]

    Clause 4.4(a) obliged CGS to provide a bank guarantee (the CGS Bank Guarantee) by 1 May 2020.

17. [22]

    Pursuant to cl 4.4(b), Perpetual was required to return to NTT the bank guarantee NTT had provided to Perpetual (the NTT Bank Guarantee) within 14 days of CGS providing the CGS Bank Guarantee.

18. [23]

    Pursuant to cl 5.3, NTT was obliged to indemnify Perpetual, as Landlord, with respect to any default or delay by CGS in the performance of its obligations under the Lease on and from 1 May 2020 and in respect of any default or delay by CGS in the performance of CGS’ obligations under the Deed of Assignment (the NTT Indemnity).

19. [24]

    Pursuant to cl 5.4, NTT was to be released from all claims by Perpetual arising out of the Lease (including under the NTT Indemnity, subject to an exclusion not relevant for present purposes) on the later of 1 May 2020 or the date that CGS provided the CGS Bank Guarantee.

20. [25]

    Clause 7 required CGS promptly to lodge for registration the transfer of lease effecting the assignment with the Land Title Registry.

21. [26]

    Clause 9.7 permitted execution of the Deed of Assignment in counterparts.

22. [27]

    It is not disputed that CGS signed the Deed of Assignment on 7 January 2020.

23. [28]

    At 1.57 pm on 7 January 2020, Mr Charnley emailed solicitors at Sparke Helmore and HWLE, copied to Ms Bree Clare (of CG), “following up” the status of the Deed of Assignment. Relevantly, this email said:

24. [29]

    At 2.05 pm that day, HWLE responded to Mr Charnley advising that execution versions of the deed had been sent to Ms Clare (of CGS) and attaching a version of the deed for his reference. The email from Ms Mangraviti stated that this version was pending confirmation from the assignor (NTT) that the revised terms requested by CGS were “agreeable” (presumably, meaning “acceptable”) to NTT. The email noted that, “[w]e are yet to receive an update in this regard”.

25. [30]

    By email on 7 January 2020 sent at 3.06 pm, Mr Tay (of Sparke Helmore) then sent to Mr Charnley what he referred to as the “final form” of the “Deed of Consent and Assignment of Lease” provided by the lessor’s lawyers. Instructions were given for Mr Charnley to print four copies of this document and have “Cover Genius” (again, presumably there meaning CGS) sign them where indicated. This email went on to state:

26. [31]

    Pausing here, by reference to the above, CGS says that it did not provide its signed execution page in purported exchange of counterparts; rather, it says that the stated intention to execute in counterparts arose only on 8 January 2020, in response to a query from HWLE (as to which, see below).

27. [32]

    On 7 January 2020, by email sent at 5.12 pm (responding it would seem to the email of 3.09 pm on 6 January 2020), Ms Clare (of CGS) sent an email to Mr Tay (of Sparke Helmore), copied amongst others to Ms Mangraviti (of HWLE), with a PDF attachment, stating that “attached are the signed pages from Cover Genius – please let me know if you require anything further from our side”. The attached signed pages were four copies of the execution page each signed by the transferee (under an execution clause that notes that the document was executed in accordance with s 127 of the Corporations Act 2001 (Cth) (Corporations Act) by two directors of CGS).

28. [33]

    On 8 January 2020, there were a number of email communications between the various legal representatives, and others, in relation to the execution (and proposed electronic exchange of signed counterparts) of the Deed of Assignment. Relevantly, these communications included the following.

29. [34]

    At 9.01am, Ms Mangraviti (of HWLE) sent an email to Mr Tay (of Sparke Helmore) copied to a solicitor at HWLE (and not to anyone at CGS), asking whether Mr Tay’s client (it will be recalled, NTT), “intend[ed] to execute deed in counterpart [sic]” or whether his offices would “arrange to receive the original deed that Cover Genius have [sic] executed for tenant execution”. Mr Tay’s response, at 9:53 am, was that, “[m]y client intends to execute a counterpart. I will reply to all in separate cover regarding electronic exchange”. I interpose to note that this marks a clear distinction between contractual exchange and execution in the manner which, for the reasons below, I have found was here contemplated.

30. [35]

    Meanwhile, at 9.24 am, Mr Charnley (it will be recalled, of CGS) emailed Mr Tay of Sparke Helmore and Ms Mangraviti of HWLE, seeking their “assistance to obtain executed copies of these [the assignment of lease] today if possible” and stating that, “[a]s advised we are already 2.5 weeks behind in our works schedule and require access immediately” and asking that they let him know of “any issues or updates please”. At 9.57 am, seemingly responding to that email, Mr Tay communicated as follows:

31. [36]

    In response to that 9.57 am email, at 10.01 am Ms Clare responded:

32. [37]

    Then, at 10.16 am, in further email correspondence, Ms Clare emailed Ms Seon Griffin (a property manager at Dexus) and others stating, “… I’ve just spoken to Calvin and as we have signed, it is with NTT for execution (agreed by they are tracking down the directors currently), Is there anything else we can do in the meantime?” In response, Ms Griffin referred to the provision of the CGS Bank Guarantee, stating that “I assume that Cover Genius will not be preparing their bank guarantee until closer to the assignment date?”. Ms Clare responded to that by email, stating that:

33. [38]

    On 8 January 2020 at 3.33 pm, after some communications in relation to the arrangements for interim occupation under licence between Society One and CGS, Mr Tay (of Sparke Helmore) sent an email to Ms Mangraviti (of HWLE) (copied to a number of people, including Ms Clare), attaching various execution pages of the Deed of Assignment and stating:

34. [39]

    The attached execution pages attest to NTT’s execution as being in accordance with s 127 of the Corporations Act but it is not clear from the execution whether it was by two directors or by a director and company secretary (the two signatories being Mr Craig Goldberg and Mr Michael Miers).

35. [40]

    At 3.39 pm, in response to the 3.33 pm email, Ms Mangraviti (of HWLE) sent an email to Mr Tay (of Sparke Helmore), copied amongst others to Mr Charnley, in which Ms Mangraviti stated that, “[i]t is our client’s process to execute all original counterparts, this will typically take approximately four weeks and should not delay exchange or access”. The email goes on to state that Mr Tay was to arrange for the deeds to be couriered to HWLE’s offices and that, “[o]nce the original deeds are received, access can be arranged with our client. Our client has been in direct communication with Cover Genius in this regard”.

36. [41]

    Pausing here, NTT argues that this demonstrates that, from the lessor’s perspective, mutual exchange of deeds was not a requirement.

37. [42]

    On 9 January 2020, Ms Clare delivered the original copy of its executed counterpart deed to HWLE’s offices. That afternoon, Dexus confirmed that Society One had provided access passes to CGS’ fit-out team (Construction By Design), CGS taking occupation under licence by Society One.

38. [43]

    Construction By Design then carried out fit-out works of the Premises for CGS (at a cost of some $175,645.99), which works were completed on or about 4 February 2020 (see the affidavit sworn on 17 August 2020 by Mr McDonald at [30]). CGS staff moved into the Premises on or around 17 February 2020.

39. [44]

    Meanwhile, an issue had arisen as to the manner in which NTT had executed the deed. On 5 February 2020 at 3.37 pm, HWLE emailed Mr Tay (of Sparke Helmore), copied to various persons including Mr Charnley and Ms Clare, raising an issue as to whether what was described as “‘split execution’” (as noted above, execution purportedly pursuant to s 127 of the Corporations Act, by Mr Goldberg as director and Mr Miers as company secretary) amounted to proper execution under s 127 of the Corporations Act (apparently on the basis that the signatures did not appear on the same page of the document and were under different execution blocks). This email conveyed the lessor’s instructions to request three copies of the attached execution page to be properly executed by two directors, or one director and one company secretary, of NTT and for authority to be provided to replace the properly executed pages with the existing execution pages.

40. [45]

    Mr Tay’s response (at 3.57 pm) was, in effect, to dispute that the documents had not already been properly executed and to advise that all wet ink signatures had been provided for further action (which he said “should suffice to show [NTT]’s intention to be bound and your client would be able to rely on section 127 of the Act”).

41. [46]

    Again, pausing here, I note that this is a communication relied on by NTT as showing that NTT considered itself bound immediately on execution of the deed.

42. [47]

    On 6 February 2020, the General Counsel of CGS (Ms Silke Hermsen) emailed HWLE, requesting that a complete executed copy be emailed “for our records”.

43. [48]

    Notwithstanding NTT’s response in relation to the manner of execution, the lessor’s position remained that it required re-execution of the deed by NTT using “wet signatures” (see the email from HWLE on 7 February 2020 at 5.11 pm). It appears that NTT then indicated that the deed would be re-executed (see the email of 10 February 2020 from HWLE to CGS, indicating that counterparts would be “sent out for execution shortly”).

44. [49]

    This process of re-execution appears not to have occurred until around 21 February 2020. By email on 24 February 2020, HWLE confirmed that, once they received the re-executed deed, they would “arrange for execution by the landlord”. The re-executed documents were forwarded by Sparke Helmore to HWLE under cover of a letter dated 28 February 2020. It appears that these were then executed by Perpetual (as custodian of the Dexus Office Trust), as Landlord, and by Dexus, as “Responsible Entity”, with a March date appended thereto.

45. [50]

    It seems that, had matters ended there, then one might expect that the parties would have proceeded in accordance with the Deed of Assignment and that that would have been an end to the matter. However, by around this time, the COVID-19 outbreak, and measures in response thereto, had emerged in earnest. On 11 March 2020, the World Health Organisation declared COVID-19 a pandemic.

46. [51]

    From 24 March 2020 to 27 April 2020, Mr Charnley and Mr McDonald had a series of communications with the Dexus entities, with the stated purpose of CGS obtaining rental or some other form of assistance with respect to CGS’ obligations as tenant under the Lease from 1 May 2020 (see affidavit sworn on 17 August 2020 by Mr Angus McDonald at [51]).

47. [52]

    On 24 March 2020 at 8.06 am, Mr Charnley sent an email to Ms Griffin (of Dexus), stating that:

48. [53]

    On 8 April 2020 at 11.00 am, Mr Charnley sent a further email to Ms Griffin again requesting, “a without prejudice discussion with Dexus regarding our lease commitments commencing 1 May at Level 19 45 Clarence Street” and confirming that, “the current Covid-19 pandemic has had a significant impact on Cover Genius and our revenue’’.

49. [54]

    On 16 April 2020, Mr McDonald sent an email to Ms Griffin requesting “an update on when we can any [sic] rental waiver or deferral discussion with Dexus”.

50. [55]

    On 22 April 2020 at 8.18 am, Ms Griffin responded, indicating that Dexus would be directing CGS to complete a questionnaire seeking information about the impact of COVID-19 on its business. Mr McDonald replied asking whether the process to be adopted by Dexus could be expedited on the basis that, “[w]ithout a clear pathway forward within a week our directors are going to need to make a decision on if we are going to be able to continue”.

51. [56]

    On 27 April 2020, Mr Charnley sent an email to Dexus requesting “urgent assistance from Dexus due to the current impact of the pandemic”.

52. [57]

    Thereafter, on 27 April 2020, a formal request was made by Dexus for CGS to complete its “Customer Assistance Form” in order that Dexus might then consider CGS’ request for assistance in line with the Australian Government’s Commercial Tenancies Code of Conduct.

53. [58]

    An application dated 27 April 2020 (see also the affidavit sworn on 17 August 2020 by Mr Angus McDonald at [52]) was then made by CGS to Dexus, “seeking a 100% waiver of rent and outgoings due to the impact of the Pandemic”. This application referred to attempts made by the CG Group, “to discuss the upcoming lease obligations under a lease assignment due to commence on 1 May 2020” and to attempts “to market the Clarence Street property including: Cushman and Wakefield to market assignment options; and Office Hub to explore flexible sublease options for a number of spaces. Entered into negotiations with the existing sublease tenant Unidqys to discuss remaining as a tenant in suite 2”.

54. [59]

    On 30 April 2020, Mr McDonald sent a letter to the Dexus entities, NTT and Society One, in which, amongst other things, he wrote:

55. [60]

    That led to further correspondence between the parties and ultimately to the commencement of these proceedings. As noted above (see at [5]), the claim based on frustration has now been abandoned.

56. [61]

    CGS has not provided the CGS Bank Guarantee to Perpetual nor has it performed any of the other obligations for which provision was made under the Deed of Assignment or the Lease, including lodgement for registration of the transfer of the Lease with the Land Title Registry. It has not paid rent or outgoings, which continue to accrue.

57. [62]

    On 19 May 2020, Dexus notified NTT that CGS was in breach of its covenants to pay rent and other moneys payable under the Lease from the date of assignment. Dexus sought from NTT the payment of that unpaid rent and those other outgoings (in the amount of $119,069.95 plus GST). Dexus asserted that NTT was liable to pay these moneys under the Deed of Assignment. Furthermore, Dexus reserved what it asserted were its rights under the Lease and the Deed of Assignment to draw down on the NTT Bank Guarantee.

58. [63]

    On 24 June 2020, a further demand for payment was made by Dexus, by way of a formal Notice of Breach of Covenant (the Notice).

59. [64]

    By the Notice, Dexus sought payment from NTT to the Landlord of unpaid rent, outgoings, cleaning charges and GST (in the amount of $255,832.27). As it did in May 2020, Dexus reserved what it said were its rights under the Lease to draw down on the NTT Bank Guarantee.

Issues for determination

1. [65]

   The issues for determination (now that the case based on of frustration has been abandoned) were identified in written submissions in advance of the hearing as follows:

   1. (1)

      Is the Deed of Assignment valid and enforceable?

   2. (2)

      Is NTT entitled to specific performance?

   3. (3)

      Is CGS liable to indemnify NTT for all amounts claimed by Perpetual in respect of CGS’ default or delay in the performance of its obligations under the Lease?

   4. (4)

      Is Perpetual (and/or Dexus) entitled to call upon the NTT Bank Guarantee?

2. [66]

   At the hearing, which had been expedited by Sackar J, CGS raised for the first time the proposition that, in determining the question of relief available to NTT, it was necessary to have regard to Schedule 5 (“Commercial leases - COVID-19 pandemic special provisions”) to the Conveyancing (General) Regulation 2018 (NSW) (which I will hereafter refer to as the COVID-19 Regulations). In those circumstances, I granted leave to the parties to file supplementary submissions after the close of the hearing as to relief and the COVID-19 Regulations.

3. [67]

   It is convenient first to dispose of the underlying issues and then to consider how, if at all, the abovementioned statutory regime changes the ultimate disposition of the proceedings. In particular, I consider the issues as to the operation of COVID-19 Regulations from [198] below).

4. [68]

   Furthermore, as noted above (see at [4]), the dispute between NTT and the Dexus entities was resolved by the making of consent orders, which I will set out in due course.

Is the Deed of Assignment valid and enforceable?

1. [69]

   It is convenient first to note that the issue raised in correspondence by the Dexus entities in February 2020 as to the manner of execution by NTT (to which NTT responded in its submissions in advance of the hearing), did not appear to be pressed during oral submissions (i.e., CGS did not seem to press an argument that it is not bound by the Deed of Assignment because NTT did not execute the Deed of Assignment in accordance with the requirements of s 127 of the Corporations Act). It will not be necessary to do deal with this, for reasons that I will explain later, but for completeness I refer below to the submissions that NTT made on this issue.

2. [70]

   NTT says that there is no dispute that CGS validly executed the Deed of Assignment on 7 January 2020 and says that it was thereafter bound by the Deed of Assignment on that date, irrespective of the subsequent validity of NTT’s execution. Alternatively, and in any event, NTT submits that it did execute the Deed of Assignment on 8 January 2020 in accordance with the requirements of s 127(1) of the Corporations Act, first, when it was signed by two of its directors (Mr Craig Goldberg and Mr Michael Miers), and then when it was re-executed on 20 February 2020 and those re-executed copies were then signed by Mr Miers on or around 21 February 2020 before returning them by express post to Sparke Helmore. It is noted that thereafter, on or around 28 February 2020, Sparke Helmore express posted the copies of the Deed of Assignment executed by NTT to HWLE. It is submitted that, therefore, the requirements of s 127 of the Corporations Act were met by NTT.

3. [71]

   Furthermore, it is noted that, by s 127(4), the ways in which a company may execute a document, including a deed, are not limited by s 127. In this regard, it is said that the section does not operate to prescribe the only methods by which a company may execute a document and, were NTT to have adopted a method other than that identified by sub-s (1) and (2), the other parties to the Deed of Assignment would not have available the assumptions of due execution provided by sub-s (5) and (6) (which assumptions NTT says are not here relevant in circumstances where NTT does not wish to escape liability with respect to the Deed of Assignment).

4. [72]

   For these reasons, NTT submits that there is no force to the suggestion that the Deed of Assignment was not validly executed.

5. [73]

   Before turning to the respective parties’ submissions, it is convenient here to summarise some of the relevant principles regarding delivery of deeds, since these were not in dispute. Although, I note that, in due course, it will be necessary to return in some greater detail to these principles and, particularly, the development of them.

6. [74]

   The principles were outlined by Sackville AJA, with whom Allsop P (as his Honour then was) and Campbell JA agreed, in Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253 (Segboer v AJ Richardson). Relevantly, his Honour there said (at [51]-[59]; [72]-[73]):

7. [75]

   In Seddon on Deeds (Nicholas Seddon (2015, The Federation Press) the learned author observes (at 95):

8. [76]

   Reference was also made to the decisions in Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 (Hooker v Christian Brothers) and 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245 (400 George Street) (as to which, see further below).

9. [77]

   Accordingly, it may be observed that whether there has, or has not, been delivery is a question of fact (that is, the intent of the executing party is a question of fact). Furthermore, it is permissible to take into account later events, as well as circumstances prior to or contemporaneous with the alleged delivery of the deed, in order to ascertain what was the intention of the person concerned at the time of execution.

10. [78]

    The distinction between delivery of a deed absolutely and the delivery of a deed conditionally was explained by the High Court (Rich, Starke and Dixon JJ, as his Honour then was) in Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80; [1929] HCA 13 as follows (at 87):

11. [79]

    In brief compass, CGS’ case is as follows: that the parties agreed that the Deed of Assignment would be delivered by exchange of counterparts; that, although CGS electronically distributed a signed execution page of the Deed of Assignment on 7 January 2020, that was not (relevantly) delivery of the Deed of Assignment; therefore, CGS was entitled to withdraw and recall its signed version of the Deed of Assignment before exchange; and, by letter dated 30 April 2020 and prior to any exchange of the counterparts of the Deed of Assignment, CGS indicated that it no longer proposed to complete the transaction, thereby withdrawing and recalling its signed version of the Deed of Assignment. It is CGS’ position that the provision to CGS by Dexus, Perpetual and NTT (after commencement of these proceedings) of an executed version of the Deed of Assignment “purportedly” dated 12 March 2020 (see the chronology above) did not amount to exchange of counterparts or delivery.

12. [80]

    More specifically, CGS argues that the words and conduct of the parties, including CGS, as evidenced in the communications attending CGS’ execution of the Deed of Assignment, disclose that: first, the parties intended for the Deed of Assignment to be exchanged in counterparts, in accordance with usual conveyancing practice; and second, CGS did not evince an intention to be bound immediately but, rather, only an intention to be bound on exchange of counterparts with NTT and the Dexus entities.

13. [81]

    CGS points to the communications between the parties on 8 January 2020 and 10 February 2020 (again, see the chronology above) as evidencing the parties’ intention that the Deed of Assignment was to be exchanged in counterparts.

14. [82]

    Similarly, CGS points to the following as evincing its intention not to be bound immediately by its execution of the Deed of Assignment on 7 January 2020: first, that it electronically distributed the signed pages only in response to a request by NTT that this would “assist”; second, that the condition in the Assignment Proposal that the offer was subject to execution of a formal Deed of Assignment by all parties (said to be to the same effect as cl 37 in 400 George Street — considered below at [147]ff), which it is said evidenced an intention not to be bound until all parties to the Deed of Assignment were bound; third, that CGS’ execution of the Deed of Assignment on 7 January 2020 was contemporaneous with an understanding, it is said, that it was a requirement that execution of the Deed of Assignment was necessary to obtain access to the Premises for the purpose of fit-out works and occupation under a temporary licence; and fourth, the fact that, on its terms, the Deed of Assignment required the Landlord’s consent (referring to cl 2.2). It is said that CGS could not have intended to have been immediately bound by the Deed of Assignment without obtaining such consent, as it would be obliged to NTT to perform the various obligations under the Deed of Assignment in circumstances where Perpetual could have prevented CGS from exercising the rights under the Deed of Assignment (such as occupation of the Premises).

15. [83]

    CGS maintains therefore that, in the absence of any exchange of counterparts prior to 30 April 2020, it was entitled to (and did effectively) withdraw and recall its signed document by letter dated 30 April 2020; and, it is said, by that letter, CGS made it clear that it did not intend to complete on the transaction for the assignment of the lease.

16. [84]

    CGS submits that this is not a case of delivery in escrow because no “condition” existed such as would deny CGS the right to recall the deed; rather, it is said that this is case where CGS’ intention was (and is) not to be bound at all until some future event occurs, being exchange of signed counterparts, in which case there was no delivery.

17. [85]

    In that connection, CGS says that: by 30 April 2020, there had been no exchange of counterparts; the Dexus entities first provided executed versions of the Deed of Assignment to NTT’s solicitor on 16 July 2020, which letter was received by Sparke Helmore on 22 July 2020; and those documents were then mailed on 23 July 2020 to CGS’ solicitor “for safekeeping”.

18. [86]

    CGS says that these versions of the Deed of Assignment, although bearing the date 19 March 2020, were not provided to CGS at any time prior to 22 July 2020; and that there is no evidence, other than a handwritten notation on the schedule of the date 19 March 2020, that the documents were executed by the Dexus entities on that date.

19. [87]

    CGS submits that, even if the documents were executed by the Dexus entities on that date, there was still no delivery by exchange with NTT and CGS on that date; rather, the first date of attempted provision of the executed Deed of Assignment to CGS was on 23 July 2020 (being more than two months after CGS’ letter dated 30 April 2020 and three weeks after the commencement of these proceedings). It is submitted that the provision of the executed deed in these circumstances did not purport to be, nor was it, effective delivery by exchange.

20. [88]

    By way of supplementary submission in response to the amended defence (as to which, see at [5] above), NTT says as follows.

21. [89]

    NTT submits that CGS’ argument is dependent on the following two propositions: first, that the parties had agreed that the Deed of Assignment would be delivered by exchange of counterparts; and second, that CGS withdrew its executed counterpart prior to the exchange of counterparts.

22. [90]

    NTT’s position in this regard is that: first, CGS delivered the Deed of Assignment absolutely, upon its execution, and CGS evinced an intention to be bound immediately when it so executed (and, it is said, there is no evidence to support the contention that the parties agreed to deliver the Deed of Assignment by exchange of counterparts); second, and further to the first, the conduct of CGS after its execution of the Deed of Assignment supports a finding that CGS intended to be bound from the time it executed the Deed of Assignment and so, once delivered, CGS was bound and it was not entitled to withdraw its signed document.

23. [91]

    NTT points to the various emails and other matters (which I have summarised in the chronology above) and submits that: it is plain, from CGS’s conduct and communications prior to and around the time that it executed the Deed of Assignment, that it evinced an intention to be bound immediately; that CGS delivered the Deed of Assignment absolutely, upon its execution by Mr McDonald and Mr Bayley on 7 January 2020; and, it was therefore at once operative, as the deed of CGS.

24. [92]

    NTT submits that, while the parties agreed to execute the Deed of Assignment in counterparts and to exchange electronically, there is no evidence that there was an agreement only to be bound on exchange of counterparts, and certainly no agreement that the Deed of Assignment would be exchanged in accordance with usual conveyance practice.

25. [93]

    NTT argues that the communications that passed between the parties concerning the Deed of Assignment show that CGS was intending by its execution of the Deed of Assignment to be bound immediately, so that it would be able to satisfy the Condition Precedent of the Licence Agreement and take occupation of the Premises.

26. [94]

    NTT emphasises that there is no evidence to suggest that the parties conducted themselves on the basis that they would not be bound until all parties had executed, here seeking to distinguish 400 George Street. It is said that it was not at any point stated by CGS that it would be free to withdraw unless and until certain things occurred or that it would not be bound unless and until certain things occurred (nor was an intention as to a particular mode of binding the parties expressed).

27. [95]

    It is said that nowhere was there a statement to the effect that the transaction was “subject to exchange” and, in that connection, it is submitted that the Assignment Proposal can be of no assistance to CGS for two reasons: first, because there is no evidence that any of the parties agreed to the conditions precedent articulated therein; and second, because those conditions precedent stipulate that the “Deed of Assignment and Deed of Consent” must be executed, not exchanged or delivered, and further, refer to “both parties” (presumably, CGS and NTT, not the Dexus entities) having executed the assignment documents. Pausing here, it is relevant to note (as I have at [10] above) that the Assignment Proposal does not refer to CGS at all but contemplates that CG would be the assignee.

28. [96]

    NTT maintains (and I accept) that it is clear from the evidence that CGS executed the Deed of Assignment on 7 January 2020.

29. [97]

    Furthermore, as adverted to, NTT submits that the conduct of CGS after its execution of the Deed of Assignment supports a finding that CGS intended to be bound from the time it executed the Deed of Assignment, particularly that CGS immediately proceeded to spend a large sum of money on fitting out the Premises, moved its staff into the Premises and that, from the moment of execution, CGS consistently referred in its communications with the parties to its impending obligations under the Lease (NTT pointing to the fact that, from late March 2020 onwards, mindful of those impending obligations, CGS attempted to negotiate a reduction in rent with Dexus, which it is said CGS plainly understood it would be obliged to pay as of 1 May 2020).

30. [98]

    NTT adds that, were there to be any doubt about CGS’ intention or position, the very document on which CGS now relies as effecting a withdrawal by it of its signed document also evinces an intention on CGS’ part to be bound on execution. It is noted that at no point in the letter of 30 April 2020 does Mr McDonald refer to the basis upon which CGS executed the Deed of Assignment and suggest that it did not intend by that execution to be immediately bound; nor (it is said) does Mr McDonald expressly or even impliedly withdraw CGS’ signed counterpart (instead, it is said that the premise of the letter is that CGS knows itself to have been bound by its execution and understood that it had obligations flowing from that, but claimed that its obligations were discharged by operation of the doctrine of frustration).

31. [99]

    For the preceding reasons, NTT reiterates its primary position that the Deed of Assignment is valid and enforceable and that it is entitled to the principal relief sought.

32. [100]

    As noted above (see at [4]), the Dexus entities have compromised the claim with NTT and I have already made consent orders thereto. Nevertheless, it is convenient here to note the submissions by the Dexus entities as to the enforceability of the Deed of Assignment.

33. [101]

    In short, the Dexus entities maintain that both NTT and CGS are liable to pay unpaid rent and other moneys owing, as NTT has not been released from its obligations under the Lease and CGS is also bound as tenant as a result of its entry into the Deed of Assignment (as to which, see below).

34. [102]

    Insofar as the effect of the amended defence by CGS is to assert that the Lease does not bind CGS, the Dexus entities say that they are still entitled to the relief sought by prayers 5 and 6 of the amended cross summons against CGS. It is contended that CGS’ change of pleading is not supported by the evidence, and that: first, none of the parties, at any time, adopted the position contended for by CGS; second, that the conduct of CGS was specifically contrary to its now pleaded position; third, in particular, that CGS maintained (until the amendment to the defence on 19 August 2020) that it was a party to the Lease, and that the Lease had been frustrated; and fourth, that the evidence relied on by CGS does not take into account the entire chronology of events.

35. [103]

    The Dexus entities say that here (as was the case in Segboer v AJ Richardson) the overwhelming inference is that CGS considered itself bound immediately (pointing to the facts as set out in the supplementary submissions of NTT and excerpted above). It is said that, at every step, the conduct of CGS was consistent with the conclusion that CGS was bound to the Deed of Assignment.

36. [104]

    The Dexus entities submit, as does NTT, that the terms of the Deed of Assignment itself reinforce that conclusion (pointing by way of example to cl 3, which provides an acknowledgement by the Landlord that CGS would be occupying the part of the Premises by way of licence from the date of the Deed of Assignment itself and which, as its own evidence confirmed, CGS did so). It is said that a consideration of these matters makes it clear that: first, the Deed of Assignment constituted an assignment between NTT and CGS from the moment it was signed by those parties; and second, that CGS was bound to the Deed of Assignment and could not withdraw from it unilaterally once signed.

37. [105]

    As to Hooker v Christian Brothers (and CGS’ submission based on this authority that “usual conveyancing practice” applied to the transaction), the Dexus entities say that, unlike the position which prevailed in Hooker v Christian Brothers (where there was found to be no transaction at all), the commitment by CGS to the Deed of Assignment was a necessary prerequisite to it: first, obtaining access to the Premises; and second, its entering into the licence with the sub-tenant to NTT on a temporary basis for commencing and completing its fit-out. It is submitted that those matters directly contradict any contention that CGS reserved to itself the ability to withdraw from the transaction by recalling its counterpart of the Deed of Assignment.

38. [106]

    As to 400 George Street, the Dexus entities submit that this is in “stark contrast” to the present case, noting that, there, the parties were held to have dealt with each other on the basis that no legal obligations arose until all had signed and were bound, whereas, here, it is said that the reverse is the case: that all parties considered that the transaction (being the assignment) took effect when the parties to that assignment had signed the Deed of Assignment. It is further said that, had that been otherwise, CGS had no reason or need (amongst other things) to seek rent relief under the Lease or to claim that the Lease had been frustrated.

39. [107]

    In these circumstances, and CGS having already abandoned any claim based on the doctrine of frustration, the Dexus entities say that CGS has no basis to resist prayers 5 and 6 of the amended cross summons.

40. [108]

    At the outset and as adverted to (at [108] above), it is instructive to make some further observations drawn from the cases and academic commentary on the execution and delivery of deeds.

41. [109]

    In Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609; 2 All ER 941, Lord Denning MR observed (at 619):

42. [110]

    Meanwhile, in the same case, Winn LJ opined (at 623):

43. [111]

    Professor Wigmore (see John Henry Wigmore, Wigmore on Evidence (3rd ed. 1942, Little Brown) at [2405]) took the delivery of a deed as the first problem in defining the creation of a jural act, that is, as to when and how an act at law becomes a complete and final event.

44. [112]

    In an academic article in 1970, which I have found of considerable assistance, Yale pointed to the fact that, of the three formal requirements to the execution of a deed, signing is the most recent in origin – the requirement of sealing being of relative antiquity (see D E C Yale, “The Delivery of a Deed” (1970) 28(1) Cambridge Law Journal 52 at 54). Indeed, in the royal courts, as recorded by Pollock and Maitland, “the law for the great became the law for all, and before the end of the thirteenth century the free and lawful man usually had a seal” (see F Pollock and F W Maitland, The History of English Law Before the Time of Edward I (Cambridge University Press, 1898, Vol II) at 224).

45. [113]

    Nowadays, the requirement of sealing is little more than a formal one. Yale noted in that context that, “the presumption of a signatory having sealed is strong enough to make any wax, wafer, mark or even any impression unnecessary” (see at 54).

46. [114]

    Indeed, in Re Sarah Jane Sandilands (1871) LR 6 CP 411, where the impugned deed had pieces of green ribbon attached but no wax or impression, Byles J said (at 413) that, “[t]he sealing of a deed need not be by means of a seal; it may be done with the end of a ruler or anything else. Nor is it necessary that wax should be used”. It has, nevertheless, been accepted that there is no longer even the need to impress (as in, for example, another ancient case where the grantor did so by biting the wax – see Sir James Stephen, Digest of the Law of Evidence (12th ed, 1936, MacMillan) at 91).

47. [115]

    That said, it does remain a requirement that a deed be relevantly “delivered”. In relation to this requirement, Yale cited the definition in Les Termes de La Ley (first published in 1520 and the oldest dictionary of English law) that “[a]fter a deed is written and sealed, if it be not delivered, all the rest is to no purpose” (see Les Termes de La Ley (John Rastell, 1708)).

48. [116]

    What is meant by “delivery” or “delivered” in this context? Yale has suggested that nowadays “delivery” signifies no more than an expression of intention to be immediately and unconditionally bound and noted that it is possible to infer delivery from the signing and sealing of the document. Indeed, as noted by Patteson J, delivering the judgment of the Court in Hall v Baimbridge (1848) 12 QB 699 (Hall v Baimbridge) (at 710):

49. [117]

    Earlier consideration of the meaning of “delivery” in relation to deeds (see particularly the decision of the King’s Bench in Clayton’s Case (1585) 5 Co Rep la and also Goddard’s Case (1584) 2 Co Rep 4b) was summarised by Sir Edward Coke in his report of Thoroughgood’s Case (see (1612) 9 Co Rep 136b at 137a) as follows:

50. [118]

    That said, some caution is here to be exercised for statements such as Coke’s as to the purported difference between “actual” and “verbal” delivery may mislead, particularly when restated in the contemporary vernacular. For example, Yale has observed (see at 59-61) that the sixteenth and seventeenth century reports reveal that the Elizabethan judges were, far from saying that a “verbal” delivery was effected by the grantor’s affirmation of the writing as his deed without more, instead indicating that the affirmation was to be to the grantee authorising him or her to take possession of the writing, saying that “… the grantee or his representative had to be present to take delivery but the deed could be delivered inter presentes without its being passed from hand to hand”.

51. [119]

    In Shelton’s Case (1582) Cro Eliz 7; 78 ER 274, where a lessee “for years grants his term by deed, and sealeth it in the presence of divers, and of the grantee himself; and the deed at the same time was read but not delivered; nor did the grantee take it, but it was left behind them in the same place”, the King’s Bench held that, the parties having met to complete the transaction and having done all that was necessary to perfect the deed except taking “actual” delivery, “it being left behind them, and not countermanded, it shall be said a delivery in law” (see at 274).

52. [120]

    In Chamberlain v Staunton (1588) Cro Eliz 122; 1 Leon 140, where a jury had found that the defendant had caused the obligation to be written which he signed and sealed “and then cast it upon a certain table, and the plaintiff took it without any other delivery”, and the judges of the Exchequer Chamber had held that this was no delivery “without other circumstances found by a jury”, the Judges of the Common Bench (see Owen 95, 1 Leon 140) indicated that there would have been a good delivery if the jury had found that he sealed the bond and cast it on the table towards the plaintiff, to the intent that the plaintiff should take it as his deed or had taken it by the commandment or consent of the defendant.

53. [121]

    In this connection, Yale has noted (see at 60) that the principal argument for the plaintiff (that the defendant’s consent ought to be presumed) was rejected on the basis that, “it was not found that the defendant was present when the plaintiff took it, and if the defendant had sealed, and cast the bond on the table when the plaintiff was not there, and then the defendant went away, and then the plaintiff came and took it away, then clearly it was not the deed of the defendant”.

54. [122]

    Of particular relevance to the instant proceedings is the apparent exception to these principles that, from an early time, the view was that a deed of a corporation required only sealing, but not delivery (see, for example, Case of Dean and Chapter of Fernes (1607) Davis at 44b). For example, in the 1882 decision in Gartside v Silkstone and Dodsworth Coal and Iron Co (1882) 21 Ch D 762, Fry J expressed the opinion (at 768) that “[a] deed executed by a company requires no delivery to make it effectual; therefore there could be nothing whatever in the nature of delivery as an escrow, and the deed was completed the moment it received the seal of the company”.

55. [123]

    To the contrary, in Mowatt v Castle Steel and Iron Works Co (1886) 34 Ch D 58, Cotton LJ said (at 62) that “the debentures must be delivered before they can be binding on the company. The fact of their being dated and sealed does not show that they were delivered”.

56. [124]

    Yale (see at 63) has observed that this discordance has its origins in, and is a particular incident of, the difficulties concerning double delivery (see also, for example, Hayward v Fulcher (1627) W Jones 166 at 170; Palmer 491 at 504).

57. [125]

    Earlier, in 1808, Lord Ellenborough considered the question of perfecting corporate deeds to be one of intention. In Derby Canal Co v Wilmot 9 East 360, where the company had ordered that its clerk retain the conveyance pending adjustment of accounts with the purchaser, his Lordship said (at 361) that, “the affixing of the seal must be done with intent to pass the estate; otherwise it operates no more than a feoffment would do without livery of seisin”. Yale concluded (see at 64) that this is now the modem position for all grantors, corporate and otherwise, and recounted that the movement towards dispensing with factual delivery as a necessary component of effecting a deed – or, perhaps, rather relegating delivery to the status of animus – was initiated principally by the conveyancing practices of the Court of Chancery.

58. [126]

    As is trite to observe, orthodox Equity doctrine was, and is, that equity will not assist a volunteer; however, while voluntary promises were not binding, voluntary settlements were. In Equity, therefore, the usual enquiry was whether the settlor had vested the property finally and effectively in the putative trustee.

59. [127]

    By the 1821 case of Cecil v Butcher 2 Jac & W 565 (Cecil), Sir Thomas Plumer MR expressed (see at 578) the view that the balance of authority supported the proposition that “in a case where a voluntary deed is made without the knowledge of the grantee, when it is made for a special purpose for which it was never required to be made use of, when it has been kept in the hands of the grantor without ever being acted on, a Court of Equity will not relieve upon it”. In Cecil, the settlor had made a secret settlement on his son, being fearful of a prosecution, in order to satisfy statutorily prescribed requirements for qualification in landed property to kill game. As Yale has noted (at 66-67), the judgment in Cecil therefore demonstrates that, by the early nineteenth century, a grantor’s retention of the deed was but one element in determining whether the grantor had intended to pass, or instead to retain, the beneficial interest:

60. [128]

    As to the position at common law by this time, one may refer to Roberts v Roberts (1818) Dan 143 and Doe d Garnons v Knight (1826) 5 B & C 671 (Garnons v Knight). The second of those cases concerned a purported ejectment upon a mortgage. The relevant issues were whether the mortgage had been duly executed and whether there was effective delivery of the deed. The deed had been executed by an attorney (Mr Wynne) apparently in reparation for the fact that he had misapplied moneys of his client, Mr Garnons. The deed was signed, declared by Mr Wynne to his niece to be delivered “as my act and deed” but retained by Mr Wynne. Mr Wynne subsequently left the deed with his sister saying that it belonged to Mr Garnons. Mr Garnons learned of the mortgage security in his favour only after Mr Wynne’s death. Bayley J, giving the judgment of the King’s Bench, held that there was an effectual delivery of the deed.

61. [129]

    Importantly to the present discussion, Bayley J identified, as to this issue, two questions; those being first, “whether, when a deed is duly signed and sealed, and formally delivered with apt words of delivery, but is retained by the party executing it, that retention will obstruct the operation of the deed…” (see at 688-689); and second, “… whether if delivery from such party be essential, a delivery to a third person will be sufficient, if such delivery puts the instrument out of the power and controul of the party who executed it, though such third person does not pass the deed to the person who is to be benefited by it, until after the death of the party by whom it was executed” (at 689).

62. [130]

    As to the first of those questions, Bayley J concluded (at 692), “that where an instrument is formally sealed and delivered, and there is nothing to qualify the delivery but the keeping of the deed in the hands of the executing party, nothing to shew that he did not intend it to operate immediately, that is a valid and effectual deed, and that delivery to the party who is to take by it, or to any person to his use, is not essential” (citing, inter alia, Barlow v Heneahe Pree Cha 211; Clavering v Clavering Pree Cha 235; 2 Vern 473; and Boughton v Boughton 1 Atkyns 625).

63. [131]

    As may be seen then, there was acceptance by 1826 in Garnons v Knight, at common law, of both formal (that is, the expression of intention that the instrument should be immediately binding) and constructive (that is, conduct being considered equivalent to the verbal declaration of such intention) delivery.

64. [132]

    Yale has also noted (see at 69) the significance of the fact that Johnson v Baker (1821) 4 B & Aid 440 (Johnson v Baker), decided around five years earlier, had been cited to the Court in Garmons v Knight. Relevantly, Johnson v Baker had abrogated the prevailing rule that there could be no delivery in escrow where the deed was delivered directly by the grantor to the grantee; stating that, “[o]nce it was accepted that a composition agreement signed and sealed by a surety and given to a creditor was only an escrow until accepted by the other creditors, then the delivery in escrow to the creditor as obligee was not a perfecting of the deed, and the agreement could only become binding at a future time when it was intended to bind and without further transfer” (see at 69).

65. [133]

    In Re Way’s Trusts (1864) 2 De GJ & S 365, the settlor had voluntarily assigned to trustees an equitable reversionary interest in some annuities. The settlor had not informed either the beneficiaries or the trustees of the settlement; nor had the settlor not informed the trustees of the earlier settlement under which she had herself obtained the reversionary interest. The settlor retained the impugned deed, then destroyed it and by her Will disposed elsewhere of the reversionary interest.

66. [134]

    Turner LJ, considering the effect of a voluntary settlement which has been retained by the grantor without notice of it being given to any person said, “I think that, according to the principle of the modem decisions, if the deed is duly executed, effect must be given to it, notwithstanding the retainer and the absence of notice… “ (at 371-372).

67. [135]

    In 1867, the issue as to delivery of a deed came before the House of Lords in Xenos v Wickham (1867) LR 2 HL 296 (Xenos).

68. [136]

    In Xenos, insurance brokers had given instructions for the placement of £2,000 of risk in a ship with the defendant insurance company. However, before the policy was ready, there was a change in the instructions to the broker and the broker was instructed to obtain insurance cover only to £1,000 and on different terms to those previously sought. The broker then gave in a second broker’s slip to the insurers. The broker was, as was then it seems the practice, debited with the first premium. However, the broker did not actually pay. Shortly thereafter, the insurer presented their sealed policy for £1,000 at the broker’s office where the broker’s clerk, mistakenly, refused it. The insurer’s clerk then took back the policy and it was endorsed with a note of cancellation. The policy, so (purportedly) cancelled, was sent to the broker’s office where it remained. The insured ship was later lost at sea. An action was brought on the policy.

69. [137]

    In the Court of Common Pleas, Willes J had held that there had been no effective delivery and so the defendant insurers were not liable. Meanwhile, the Exchequer Chamber had divided on the issue. Mellor J, relying on Garnons v Knight, held for the ship owners because “everything was done on the part of the company which was intended to be done to complete the execution; and, from that moment although the policy was retained by the insurers until sent for by the assured or their broker, it was a binding and complete instrument”. Blackburn J agreed with Mellor J, also relying on Garnons v Knight. Meanwhile, a majority, comprising Bramwell and Martin BB, Pollock CB (and Channell B concurring), held for the insurers. The ship owners then appealed to the House of Lords.

70. [138]

    In the House, Smith and Willes JJ argued for the respondents and Pigott B, Mellor and Blackburn JJ for the appellant ship owners. Blackburn J said (at 312) that “as soon as there are acts or words sufficient to show that it is intended by the party to be executed as his deed presently binding on him, it is sufficient... “.

71. [139]

    Lord Chelmsford, then the Lord Chancellor, proceeded to consider two questions (see at 319): first, whether there had been a complete contract between the parties; and second, if so, whether it had been cancelled by the plaintiffs’ authority. Relevantly, the Lord Chancellor considered that the policy was binding on the insurers when made in their office and that it was erroneous “to suppose, as some of the learned Judges have done, that the policy wanted its complete binding effect till it was delivered to and accepted by [the plaintiffs’ broker]”. Lord Cranworth agreed, stating (at 323) that:

72. [140]

    In Naas v Westminster Bank Ltd [1940] AC 366, Lord Wright re-stated (at 399) that, “[t]he character of the act of delivery depends on intention, which must be ascertained by considering the nature and all the circumstances of the case. This is the effect of Bowker v Burdekin and Xenos v Wickham”.

73. [141]

    As noted above (at [74]ff), in Segboer v AJ Richardson, Sackville AJA observed (as, I interpose to note, is also evident from the preceding historical analysis) that it is long established that “delivery” is essential, whether the grantor is a natural person or a corporation (see at [51]-[52], his Honour citing, inter alia, Hooker v Christian Brothers at 118-119), but that this does not require physical delivery (and, instead, may be effected by words and/or conduct from which it is to be inferred that the grantor intended to deliver the deed as an instrument binding upon he, she or it (see at [53]). His Honour also noted that there exists a rebuttable presumption that a document that has been signed and sealed is “delivered” (see at [57], citing also Xenos v Wickham and Hall v Baimbridge).

74. [142]

    As to rebutting the presumption, his Honour noted that one such circumstance where the presumption will be so rebutted is where the circumstances reveal that parties executing counterpart deeds did thereby not intend to be bound until their deeds had been exchanged (and, see also, Hooker v Christian Brothers).

75. [143]

    Indeed, as noted above, Sackville AJA emphasised that the critical question is whether the party executing the deed has evinced the requisite intention to be immediately bound and that this is an objective inquiry to be undertaken by reference to the words and conduct of the party, along with all the facts surrounding the execution (see at [58]-[59]).

76. [144]

    Relevantly also, his Honour distinguished those cases where a deed is delivered in escrow from those cases where the grantor’s intention is not to be bound at all until the happening or non-happening of some future event. In the latter case there is no delivery. In the former, an escrow is not recallable and, instead, is only operative once the stipulated condition, or conditions, is or are satisfied (see at [72]; and see also, for example, Beesly v Hallwood Estates Ltd [1961] Ch 105 at 118 per Harman LJ, with whom Lord Evershed MR agreed).

77. [145]

    Again, whether a deed has been delivered unconditionally, delivered in escrow or has not been delivered at all, depends upon the grantor’s intention which must be determined on the basis of the words and conduct of the grantor, taking into account the circumstances surrounding the execution (see at [73]).

78. [146]

    Hooker v Christian Brothers involved the execution of counterparts by two parties for options to the purchase land. After execution but prior to exchange, the prospective vendor received a better offer, accompanied by a “veiled threat” of resumption of the lands if that later offer was not accepted (see at 113). The prospective purchaser then sought a declaration that it had a binding option to purchase. Helsham CJ in Eq found that, as a matter of fact, the parties had been proceeding on the basis that the ordinary conveyancing practices would be followed, “namely, that there would be an exchange of documents after execution by the respective parties in the same way as if the documents had been contracts for the sale of land in question” (see at 114). Accordingly, his Honour held (at 120) that “either party may withdraw and recall his signed document at any time before exchange”.

79. [147]

    More recent is the decision, here relied on by CGS, of the Queensland Court of Appeal in 400 George Street. This case concerned a dispute as to a purported agreement to lease. A deed had been executed by the respondent and subsequently produced by the respondent’s solicitor to the solicitor for the appellants (the registered owners of the premises). One of the registered owners delayed in execution. The respondent’s solicitor then wrote “formally [to] withdraw its offer to lease” the subject premises. The appellants sued for specific performance and a declaration that the agreement for lease was a deed, binding on the parties.

80. [148]

    The Court of Appeal (Muir and Fraser JJA and Mullins J) found that, although the lease was a deed, it was never delivered (see at [39]; [56]-[57] per Muir JA, with whom Fraser JA and Mullins J agreed). Relevantly, this was so notwithstanding that the respondents had provided an executed counterpart to the appellants.

81. [149]

    In reasoning to this result, Muir JA placed some significance on the fact the parties had signed a letter, prior to preparation of the lease and agreement for lease, which contained a condition that: “[n]o legally binding agreement is made by this offer. All documentation is subject to a mutually agreed legal document by both parties” (see at [5]). Muir JA expressed the view (see at [53]) that this condition, “signified an understanding that the parties would not be bound until such time as their bargain was recorded in a formal document agreed by all parties”. As also noted by CGS in submissions, Muir JA then continued (at [54]-[57]):

82. [150]

    As noted above, CGS and NTT are largely ad idem as to the relevant principles. In that context, it is useful once more to note NTT’s submission that CGS delivered the Deed of Assignment absolutely upon its execution and, in that connection, evinced an intention to be bound immediately upon the execution of the Deed of Assignment; furthermore, as adverted to above, NTT says that there is no evidence to support CGS’s position that the parties had agreed to deliver the Deed of Assignment by exchange of counterparts.

83. [151]

    Again, whether or not there has been delivery is a question of fact and the answer to that factual inquiry principally turns on manifest intention.

84. [152]

    It is convenient now to consider the relevant evidence.

85. [153]

    First, it is relevant to note that, from at least December 2019, CGS was anxious to gain access to the Premises in order to commence fit-out works; and it knew that, in order to be permitted to do so under the licence entered into with Society One, it was necessary to satisfy the conditions precedent to that agreement (i.e., for there to be both entry into the Deed of Assignment and for the landlord’s consent to the assignment), unless Society One waived those conditions (and there had been no suggestion that it would). Not surprisingly, therefore, the correspondence in late December 2019 and early January 2020 “following up” execution of the relevant documents was emphasising the need to gain access to the Premises for the purposes of the fit-out works. CGS knew that for this to happen there needed to be a binding assignment.

86. [154]

    Ms Clare’s email of 7 January 2020 to HWLE and Sparke Helmore, attaching the signed execution pages of the Deed of Assignment and asking if anything further was required from CGS’ side, makes clear that, from CGS’ perspective, it had done what was necessary for it to be bound by the Deed of Assignment. In that context, the sending of all four pages – not simply one to evidence execution – seems to me to be telling. Indeed, there was nothing in Ms Clare’s email to suggest that there was a condition placed on electronic delivery of the execution pages (such as that CGS would not be bound unless and until exchange) nor was there any reference to exchange of documents at all. To my mind, what CGS was here conveying was that it had signed the Deed of Assignment and, from its perspective, that was all it had to do to be bound thereby.

87. [155]

    In that context, the email of 8 January 2020 from Mr Charnley (of CGS) to HWLE and Sparke Helmore, seeking assistance to obtain executed copies of the documents that day if possible (because CGS required access immediately to the Premises), is consistent with an understanding that execution (but not physical exchange) was necessary for the assignment to be binding on the lessor and NTT. In that context and on that conventional understanding, execution by NTT of the counterparts occurred on that day (as evidenced by the email from Sparke Helmore attaching the executed counterparts) and, relevantly, two things then happened. First, HWLE confirmed that it was their client’s process to execute all original counterparts, which would take approximately four weeks, but that this should not delay exchange “or access” (the latter, it will be recalled, only being permitted under the licence once there had been entry into the Deed of Assignment and the lessor’s consent) and noting that HWLE further confirmed that once the original deeds had been received, access could be arranged with the lessor. Second, Ms Clare delivered to HWLE’s offices, on the morning of 9 January 2020, the original copy of its executed counterparts and, later that day, access was provided to the Premises.

88. [156]

    All of this manifests an intention that the parties would be bound on execution of the Deed of Assignment (without the need for a physical exchange of the executed deeds); and, in the case of CGS, that execution occurred on 7 January 2020.

89. [157]

    The significance of the obtaining of access to the Premises (and the carrying out of the fit-out works) lies not so much, in my opinion, on the fact that, from a commercial perspective, such expenditure might be considered unlikely unless CGS considered itself bound to the assignment of the Lease, but more by reason of the fact that it was a condition of the licence that there be entry into the Deed of Assignment and, once CGS had executed (and electronically distributed) the Deed of Assignment, it was pressing for access to be granted to it. It will be recalled that cl 3 of the Deed of Assignment provided an acknowledgement that CGS would occupy under licence the part of the Premises from the date of the Deed of Assignment itself.

90. [158]

    I, therefore, have concluded that CGS evinced the requisite intention to be bound immediately upon execution and delivery of the Deed of Assignment and did not reserve to itself the position that it would only be bound upon exchange (be that by hard copy or electronically) of counterpart deeds (nor was there anything in the documentation or communications to that point to suggest that the parties intended that there be an exchange of deeds “to conform with usual conveyancing practices” in relation to other contracts).

91. [159]

    Having so found, I should say something at this juncture in relation to the decision in 400 George Street. I accept NTT’s submission that 400 George Street is distinguishable. Unlike as was the case in 400 George Street, there was not here any relevant express or implied stipulation as to a particular mode by which the parties were to become bound or, relevantly, that exchange or compliance with “usual conveyancing practices” was required. As indicated above, I do not place weight on the conditions precedent contained in the Assignment Proposal, to which none of the relevant entities was a party; and, in any event, the stipulation therein refers to execution, and not exchange or (physical) delivery.

92. [160]

    CGS’ primary case is that the parties always intended for the Deed of Assignment to be exchanged in counterparts and that, in fact, no such exchange ever occurred. The evidence to which it points in that regard largely comprises the communications that occurred on 8 January 2020. As to those, it is relevant to note that, in the 9.01 am email from Ms Mangraviti, there is no mention of any exchange, simply an enquiry as to whether execution was to be by way of counterparts (with the response from Mr Tay conveying that the parties would execute separate, but identical, documents). The emails that followed (from 9.57 am), in which reference was made to exchange of documents by counterpart, certainly contemplate that there would be some form of exchange of documents but, read with the earlier emails, suggest that what was there the focus was what it was that would be executed (by counterparts) and the mechanism by which exchange would be effected (i.e., electronically); not that the transaction would not complete unless and until physical or electronic exchange of signed deeds. In the context of a transaction to be effected by way of deed and the long-standing understanding that, as a matter of legal principle, physical delivery is not required for a deed to be effective (the critical question being whether the party executing the deed has evinced an intention to be bound immediately), it is significant, in my opinion, that CGS placed no caveat on its delivery to NTT (and the lessor) on 8 January 2020 of the four signed execution pages of the Deed of Assignment and, instead, immediately pressed for execution by the other parties and for access to the Premises. It is, to my mind, also relevant that, in the events that then happened, no actual exchange was sought and no one later questioned (at least until a dispute had crystallised and CGS was seeking to withdraw from the transaction) that there was a binding agreement for the assignment of the Lease.

93. [161]

    It is significant in this context, as noted above, that the lessor’s solicitor confirmed by the email on 8 January 2020 at 3.39 pm that execution by the lessor of all original counterparts “should not delay exchange or access [to the Premises]”. The fact that CGS subsequently went into occupation of the Premises, again, bespeaks a manifest intention that the parties did not contemplate any need for a formal exchange of counterpart deeds before the Deed of Assignment would be binding.

94. [162]

    As to the argument that CGS would not sensibly be taken to have intended to be immediately bound (or to be bound unless and until the lessor had consented to the assignment), since otherwise it would be committed to perform obligations that it could have been prevented by the lessor from performing, the answer to that seems to me that the fact that subsequent events (such as lack of consent by the lessor) might have frustrated CGS’ performance of its obligations under the Deed of Assignment is not to the point – the critical question is CGS’ intention (objectively ascertained) at the time that it executed the Deed of Assignment and delivered the execution pages to the other parties. To my mind, there is nothing that supports the conclusion that CGS did not thereby manifest an intention immediately to be bound by the Deed of Assignment.

95. [163]

    The email exchange on 6 February 2020, including Ms Hermsen’s request for “a complete executed copy of the Assignment of the Lease for our records” (my emphasis) is in my opinion, again, consistent with an understanding that the transaction had completed and that a complete copy of the executed transaction documents was required to be stored for reference in the future. Again, I see as probative the fact that there is no correction or suggestion at that stage that the transaction might by then not have completed and/or that a further execution or formal exchange was still necessary. It is again to be noted that occupation of the Premises was later provided (consistent with entry into the Deed of Assignment having occurred).

96. [164]

    As to the submission that CGS always intended and understood that execution of the Deed of Assignment on 7 January 2020 was necessary to obtain access to the Premises under a temporary licence but was otherwise ineffective until formal exchange, for the reasons here stated, I do not accept that the communications between the parties manifest any such intention and hence I cannot accept this submission.

97. [165]

    I have concluded that the evidence leading up to, and at the time of, execution of the Deed of Assignment by CGS and electronic delivery of the executed counterpart pages, manifests the requisite intention that CGS would be immediately bound by the Deed of Assignment so executed and delivered. The subsequent communications and events in my opinion fortify that conclusion.

98. [166]

    In that connection, of principal import are the communications between Mr Charnley and Mr McDonald, respectively, with the Dexus entities in the context of CGS seeking rental relief or other such assistance in relation to CGS’ obligations as tenant from 1 May 2020 in light of the impact of the COVID-19 pandemic on its business in the period from March 2020. Those communications are set out in the chronology above. It is significant that, in those communications, reference is made throughout to CGS’ “lease commitments” and to the prospective commencement of rent and other obligations.

99. [167]

    True it is that one explanation for this correspondence may be that there was not an appreciation at that stage as to the legal argument later maintained at the hearing (i.e., that there was a legal basis on which it might legitimately be contended that the Deed of Assignment was not binding). However, the fact remains that the understanding of CGS (manifested through its officers) at the time was clearly that CGS was bound by the Deed of Assignment (and, hence, prospectively seeking relief from its obligations thereunder). Again, that reinforces the conclusion that, at the time of delivery of the signed execution pages of the deed, CGS’ intention was immediately to be bound thereby.

100. [168]

     There is no suggestion in that correspondence of entry to (or performance of) the obligations on the part of CGS to which reference is there made being conditional on an exchange of counterparts or any further execution or exchange by or with NTT; and the 30 April 2020 letter (insofar as it invokes the doctrine of frustration) is not consistent with an understanding other than that CGS was already bound to the assignment.

101. [169]

     Accordingly, I also accept NTT’s submission that the conduct of CGS after execution of the Deed of Assignment supports the finding that the Deed of Assignment is binding on CGS. As NTT emphasises in submissions, it is of no little consequence in this regard that CGS immediately proceeded to spend large sums of money fitting out the Premises and moved its staff into the Premises; and, furthermore, from the moment of execution, CGS consistently referred, in its communications with the parties, to its impending obligations under the Lease. CGS’ strenuous attempts to negotiate with the Dexus entities a reduction in the rent which it plainly understood it would be obliged to pay as of 1 May 2020 are not the conduct (and these are not the communications) of a party who considered itself anything other than immediately bound by its execution of the Deed of Assignment.

102. [170]

     For the preceding reasons, I find that the Deed of Assignment is valid and enforceable as against CGS.

103. [171]

     For the preceding reasons (and as also noted at [70]ff above), it is strictly unnecessary to determine this inquiry. In that connection, as adverted to above, the s 127 issue was only the subject of submissions by NTT (not CGS or the other parties) and was not the focus of any oral argument. Indeed, the s 127 issue appears only to have arisen from the position taken in inter partes correspondence in the period before the hearing (see T 27 20-23). It has not been pursued. Were it necessary to decide, I would have held that the Deed of Assignment had been validly executed by NTT in accordance with s 127 of the Corporations Act, at the latest, when the documents were re-executed (well before CGS sought to withdraw).

104. [172]

     I now turn to determine whether NTT is entitled to specific performance.

Is NTT entitled to specific performance?

1. [173]

   As I have noted, NTT seeks specific performance of the Deed of Assignment. NTT contends that, in circumstances where the Deed of Assignment concerns the assignment of a lease of property and NTT would otherwise remain liable under the Lease until it terminates in August 2021, the decree of specific performance is appropriate. Furthermore, NTT contends that, in these circumstances, it is entitled to the benefit of an assumption that damages would be an inadequate remedy.

2. [174]

   Meanwhile, CGS claims that, should the Deed of Assignment be valid and enforceable (as I have found it to be), it should not be required specifically to perform its obligations under the Deed of Assignment and/or the Lease. In sum, the position advanced (principally through the affidavit evidence of Mr McDonald) is that, were the Court to order specific performance, CGS would be unable to obtain a bond and would instead need to be wound up.

3. [175]

   It is to be noted here that NTT says that the argument that appears to have been foreshadowed is that the relief sought by NTT should be refused on the ground of hardship or impossibility, as CGS is financially unable to raise the funds required for the CGS Bank Guarantee. In this regard, NTT says that, assuming that the Court would otherwise find that NTT is entitled to an order for specific performance, CGS bears the onus of establishing hardship or impossibility as an affirmative defence.

4. [176]

   NTT argues that there are at least two difficulties with the proposition that an order for specific performance should be declined on the basis of hardship or impossibility.

5. [177]

   First, it is said that CGS, on its own admission, generates no revenue and is, instead, dependent on funding from other companies within the CG Group to remain solvent; and (significantly) that this was always the case (even at the time when CGS entered into the Deed of Assignment). NTT says that what appears to have changed is simply the preparedness of the CG Group companies to fund CGS and, relevantly in this regard, that there is no evidence that those companies are in fact unable to fund the CGS Bank Guarantee such that specific performance would be impossible or would be productive of hardship.

6. [178]

   Second, NTT submits that the authorities establish that one would be slow to refuse specific performance on the ground of CGS’s purported inability to raise the funds required to satisfy the CGS Bank Guarantee or the rent owed under the Lease and that the question of hardship is not to be considered in the abstract; rather, the hardship claimed by a defendant as a basis to refuse specific performance, “must be balanced against the hardship which the plaintiff would suffer from refusal of that remedy” (quoting ANZ Executors & Trustees Ltd v Humes Ltd [1990] VR 615 at 639 per Brooking J).

7. [179]

   NTT contends that, were specific performance to be declined, it would suffer greater hardship than would CGS should the relief be granted. It says this because, following the assignment, NTT is liable for the payment of rent and outgoings owed under the Lease not as a tenant but pursuant to the NTT Indemnity. NTT points out that it does not itself have the benefit of the Lease; that it therefore cannot occupy the Premises, cannot seek rental relief from the Dexus entities and cannot attempt to mitigate its loss by seeking to sub-lease a part or whole of the Premises or find another tenant; while it continues to remain liable to the Dexus entities pursuant to the NTT Indemnity until the Lease terminates in August 2021.

8. [180]

   For these reasons, NTT maintains that CGS has not established a basis for the Court to decline a decree of specific performance.

9. [181]

   CGS notes that the balance of the term of the Lease is only around one year and that, historically, the Court of Chancery considered that remedies in relation to disputes over short term leases were to be made by way of an award of damages (citing Lavery v Purcell (1888) 39 Ch D 508 (Lavery v Purcell)). CGS submits that the same is so in the present case.

10. [182]

    CGS further submits, in the alternative, that the Court should, in the circumstances of this case, decline to order specific performance in the form sought by the plaintiff because there is potential hardship and impossibility. Specifically, CGS submits that it is in a precarious financial position and, in the present situation, it is said that it is almost certain that CGS will not be able to obtain a bank guarantee for the sum sought by NTT and the Dexus entities.

11. [183]

    In this connection, it is submitted that, where the consent of a third party is needed, such as the consent of a bank to issue a bank guarantee, the authorities provide that there should not be an absolute order that the party must perform; but, rather, that he, she or it must take all reasonable or necessary steps (citing Dougan v Ley (1946) 71 CLR 142; [1946] HCA 3; Ewing International LP v Ausbulk Ltd (No 2) [2009] SASC 381). For this reason, it is submitted that, if an order is to be made, it should extend only to CGS being ordered to take all reasonable or necessary steps.

12. [184]

    Furthermore, as to the availability (or otherwise) of specific performance, CGS also made submissions in relation to the statutory regimes regulating temporary rental relief and other such assistances. Given that I have concluded that a decree of specific performance ought not issue (not least for the reasons identified by CGS), it is unnecessary to say anything in relation to those submissions and I instead deal with them separately below (see from [198]).

13. [185]

    For the following reasons, I have concluded that specific performance should not be ordered, in this case.

14. [186]

    First, while not in itself dispositive, I have some doubt that damages would here be an inadequate remedy (cf JC Williamson Ltd v Lukey (1931) 45 CLR 282 at 294 per Starke J and at 297 per Dixon J; [1931] HCA 15). This is because, in short and for the reasons explained, as the position stands, NTT was and remains liable under the NTT Indemnity to the Dexus entities but, by the Deed of Assignment, now has an enforceable contractual right, in the nature of the indemnity, against CGS; such that, whatever loss NTT has or will suffer by the Dexus entities enforcing its obligations under the NTT Indemnity, NTT can contractually recover from CGS. Having said this, I recognise that, in the current circumstances (if CGS’ account of its parlous financial position is correct), NTT may have difficulty enforcing that indemnity as against CGS and it is for that reason that I say that this is not itself dispositive. Moreover, insofar as NTT says that it would not be in a position to mitigate its loss, I have some difficulty accepting that there would be no possibility of some form of negotiated outcome or, for example, other consensual arrangement if (though it may well be that this is unlikely) another occupant for the Premises were able to be located.

15. [187]

    Second, I note that the presence of hardship to the defendant, if and where a decree of specific performance is issued, is a factor relevant to the exercise of the Court’s equitable discretion. In this regard, in the presence circumstances, the order of specific performance may cause real and significant hardship to CGS. While it was held by Gummow J (his Honour then a Justice of the Federal Court of Australia), Black CJ and Cooper J agreeing, in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; 110 ALR 608 (see at 44, citing Fitzgerald v Masters (1956) 95 CLR 420 at 433; [1956] HCA 53) that an adverse movement in market prices was not sufficient to amount to hardship, I consider that the prevailing circumstances and economic impact resulting from the COVID-19 pandemic puts the present proceedings in a rather different category of case. In this connection, I have in mind cases such as Patel v Ali [1984] Ch 283; [1984] 1 All ER 978 (per Goulding J), though that was, of course, also a very different factual scenario to the present.

16. [188]

    Third, and relatedly, I have no little hesitation in decreeing specific performance where, it is CGS’ submission that it would require the consent of a third party financier to issue a bank guarantee. While I accept that there is a paucity of direct evidence in relation to this, as a matter of common sense (particularly having in mind the prevailing economic climate in the midst of the COVID-19 pandemic), it is not implausible that a company with little or no asset backing may find it difficult to obtain a bank guarantee of the kind required under the Deed of Assignment and, if so, I accept that this might, or will, be productive of further hardship to CGS. Furthermore, I also have in mind that, although CGS might have anticipated being able to call upon the support of other companies in the Cover Genius Group, whether it has any legal entitlement to such support is another matter. However, again, I note that this is not in itself determinative but is instead only another consideration which factors into the discretionary exercise (and, in that regard, I need not say anything in relation to whether I need, or permissibly can, take judicial notice of the economic consequences of the COVID-19 pandemic or, indeed, whether specific performance ought otherwise be decreed on terms).

17. [189]

    Fourth, and perhaps most significantly for present purposes, I see force to CGS’ submission that the Court should be reluctant to decree specific performance of a short term lease (again, noting here the balance of the term of the Lease is only around one year). In addition to recording what was said by Chitty J in Lavery v Purcell, I note what was said in, for example, McMahon v Ambrose [1987] VR 817, where McGarvie J observed (at 832) that:

18. [190]

    I accept that the issue of hardship was not pleaded as such, but I also note that the matter proceeded to an expedited hearing with some urgency which may explain this.

19. [191]

    In summary, and balancing the above factors, I have concluded, in the exercise of the discretion, that specific performance should not be ordered. I now turn to consider whether CGS is liable to indemnify NTT.

Is CGS liable to indemnify NTT?

1. [192]

   The next issue to consider is whether CGS is liable to indemnify NTT. Specifically, NTT seeks a declaration that CGS is liable to indemnify it for all amounts claimed by Perpetual from NTT in respect of CGS’s default or delay in the performance of its obligations contained or implied under the Lease, on and from 1 May 2020. To my mind, that CGS is liable follows from the finding in relation to the first of the issues considered above.

2. [193]

   In short, NTT says (and I accept) that it is entitled to this indemnity by operation of the Deed of Assignment and, pursuant to the CGS Indemnity, NTT seeks an order that CGS pay to it the sum claimed by the Dexus entities in their cross summons (as to which, see from [195] below). CGS does not deny that it has provided the CGS Indemnity (though, it asserted that it was not bound by the Deed of Assignment for the reasons identified above).

3. [194]

   Accordingly, I find that CGS is liable pursuant to the Deed of Assignment to indemnify NTT. Next, I must determine whether the Dexus entities are entitled to call upon the NTT Bank Guarantee.

Are the Dexus entities entitled to call upon the NTT Bank Guarantee?

1. [195]

   Finally, there is the issue whether the Dexus entities are entitled to call upon the NTT Bank Guarantee. As will be recalled, by its third prayer for relief, the Dexus entities had sought an order that NTT continues to be liable under the Lease and the Deed of Assignment, including in respect of amounts falling due under the Lease and or the Deed of Assignment after 11 August 2020. However, as also noted (see at [4] above), this issue has been compromised. By consent, I made the following orders:

2. [196]

   I interpose to note that, later, orders were also made in relation to the disposition of the extant costs issue as between these parties.

3. [197]

   As may be observed, by this compromise, the issue (at least inter partes as between NTT and the Dexus entities) as to whether the Dexus entities are entitled to call upon the NTT Bank Guarantee has thereby, as I understand it, fallen away (as to which, see my summary of the disposal of the issues at [313]ff below).

COVID-19 Regulations and related matters

1. [198]

   Finally, I turn to consider how, if at all, the COVID-19 Regulations alter the ultimate disposition of these proceedings.

2. [199]

   Before turning to the parties’ respective submissions, it is convenient first to outline the statutory regime and the recent decisions of Robb J in Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996 (Sneakerboy (No 1)) and Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141 (Sneakerboy (No 2)).

3. [200]

   The schedule containing the COVID-19 Regulations was added to the Conveyancing (General Regulation) 2018 (NSW) (Conveyancing (General Regulation)) by the Retail and Other Commercial Leases (COVID 19) Regulation 2020 (NSW). This regulation was introduced by the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW), which commenced on 25 March 2020. The regulation was made under s 87 of the Retail Leases Act 1994 (NSW) (the Retail Leases Act), which provides, inter alia, that regulations may be made under any Act relating to the leasing of premises for commercial purposes “regulating or preventing the exercise or enforcement of another right of a lessor or owner of premises or land under [that Act] … or an agreement relating to the premises”.

4. [201]

   The Conveyancing (General Regulation) was subsequently amended by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2020 (NSW) (Retail and Other Commercial Leases (COVID-19) Amendment Regulation), which commenced on 3 July 2020. By cl 11, the amendments made by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation extend to re-negotiations commenced before the commencement of the amendments but not to proceedings which had commenced in Court.

5. [202]

   In this regard, CGS notes that, as the present proceedings were commenced on 2 July 2020, the relevant regulations are those as in force as initially introduced (without those later amendments made by the Retail and Other Commercial Leases (COVID-19) Amendment Regulation in July this year).

6. [203]

   By cl 4 of the COVID-19 Regulations, a lessor must not take any “prescribed action” against an “impacted lessee” on the grounds of breach of a commercial lease during the “prescribed period” consisting, inter alia, of a failure to pay rent or a failure to pay outgoing.

7. [204]

   An “impacted lessee” is defined by cl 2 as inter alia a lessee that qualifies for the “JobKeeper scheme” and is a member of a corporate group with a turnover of less than $50 million in the 2018-2019 financial year.

8. [205]

   Meanwhile, cl 1 defines the following relevant terms:

9. [206]

   The Retail and Other Commercial Leases (COVID-19) Regulation commenced on 24 April 2020. Therefore, the prescribed period ends on 24 October 2020.

10. [207]

    Pursuant to cl 5 of the COVID-19 Regulations, any party to an impacted lease may request the other parties to renegotiate the rent payable, and other terms of, the impacted lease; and, if requested, a party must renegotiate in good faith the rent payable under, and other terms of, the impacted lease.

11. [208]

    Specifically, the parties are to renegotiate having regard to the economic impacts of the COVID-19 pandemic and the leasing principles set out in the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (the National Code of Conduct); and the lessor must not take, or continue, any prescribed action against the impacted lessee on grounds of a failure to pay rent during the prescribed period, unless the lessor has complied with this clause.

12. [209]

    Similarly, by cl 6, a lessor must not, inter alia, exercise or enforce any right of the lessor under the lease unless and until the Small Business Commissioner has certified in writing that mediation offered to be conducted by the Small Business Commissioner has failed to resolve the dispute and given reasons for that failure.

13. [210]

    Clause 7 provides that a Court, when considering whether to make a decision or order relating inter alia to the exercise or enforcement of another right of a lessor, is to have regard to the leasing principles set out in the National Code of Conduct.

14. [211]

    Relevantly, those leasing principles set out in the National Code include (as here noted by CGS) the following:

    1. (1)

       by leasing principle 3, the landlord must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals 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;

    2. (2)

       by leasing principle 4, rental waivers must constitute no less than 50% of the total reduction in rent payable under principle 3 over the COVID-19 pandemic period and should constitute a greater proportion of the total reduction in rent payable in cases where failure to do so would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease agreement;

    3. (3)

       by leasing principle 5, payment of rental deferrals must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is greater, unless otherwise agreed by the parties;

    4. (4)

       by leasing principle 8, landlords should, where appropriate, seek to waive recovery of any other expense (or outgoing payable) by a tenant during the period the tenant is not able to trade; and

    5. (5)

       the definitions relevantly provide that any “SME tenants” (that is, tenants with a turnover of less than $50 million) which are eligible for the JobKeeper scheme are automatically considered to be in financial distress and “proportionate” means the amount of rent relief proportionate to the reduction in trade as a result of the COVID-19 pandemic plus a subsequent recovery period.

15. [212]

    As adverted to above, the Retail and Other Commercial Leases (COVID-19) Regulation (as amended by the Retail and Other Commercial Leases (COVID-10) Amendment Regulation) has been the subject of a recent proceeding in this Court (in Sneakerboy (No 1)).

16. [213]

    Sneakerboy (No 1) concerned a claim by a tenant of retail premises for relief against forfeiture for non-payment of rent. The tenant had ceased trading from the subject premises on 25 March 2020 (see Sneakerboy (No 1) at [28]). On 26 March 2020, the lessors demanded payment under the tenant’s bank guarantee (see Sneakerboy (No 1) at [35]).

17. [214]

    The matter first came before Robb J, sitting in the Equity Duty List, on 27 July 2020. Relevantly, his Honour held (at [51]) that:

18. [215]

    However, the amount of the reduction could not be estimated on the basis of the evidence then before the Court (see Sneakerboy (No 1) at [100]). Robb J gave the parties an opportunity to confer and submit short minutes of order to give effect to his Honour’s decision and to adduce further submissions on a number of issues. As it transpired, the parties could not agree on the orders and the matter came back before Robb J on a number of subsequent occasions.

19. [216]

    On 26 August 2020, Robb J delivered a further judgment (see Sneakerboy (No 2)).

20. [217]

    Relevantly, in Sneakerboy (No 2), his Honour recorded (see at [7] and [57]) that both parties accepted that the Court must make a finding as to the outcome of a “notional renegotiation” of the terms of the lease that would have been required by the COVID-19 regulatory regime had the lease not been terminated. His Honour indicated that it was necessary, in that context, for the Court to undertake an examination of the manner in which the COVID-19 regime operates (see at [8]).

21. [218]

    Robb J observed (at [78]) that the special provisions amending the Conveyancing (General) Regulation 2018 have “substantially the same effect” as the clauses of the regulation under the Retail Leases Act, but that they apply to commercial leases that are not retail leases.

22. [219]

    His Honour, in dicta which (at least CGS contends) appears equally applicable here, observed (at [79]) that, “[i]t is not entirely clear what is to happen if the parties to a lease to which the COVID-19 regime applies do not succeed in renegotiating the lease, or a party refuses to enter into the renegotiation, or does not do so in good faith”. Robb J considered (see at [89]-[90]) that it is for the parties to comply with the obligations under the equivalent of cl 5 and the Court does not have the power to decide an appropriate outcome of the renegotiation, before the parties have had the opportunity to conduct the renegotiation themselves (see also at [167]).

23. [220]

    Robb J also observed (see at [96]-[97]) that the decision that the Court was making, “[did] not neatly fall into” any of the categories of action in the equivalent of paras (a) to (c) of cl 7 (being cl 9 of the Retail and Other Commercial Leases (COVID-19) Regulation).

24. [221]

    Nonetheless, his Honour did indicate (at [97]) that:

25. [222]

    Robb J held (see at [100]) that any apparent inconsistency between the preservation of Equity and law (by the equivalent of cl 9) and the application of the leasing principles would be resolved if the preserved rules of Equity and law vest in the Court a discretion that extends to making an order conditional on arrangements that give proper effect to the leasing principles (which I have set out at [211]).

26. [223]

    As to the issue of some notional renegotiation, Robb J (at [143]) held:

27. [224]

    His Honour adopted 75% as the notional reduction that would have been agreed between the parties and to be applied for the COVID-19 pandemic period and that subsequent reasonable recovery period (see at [144]). Robb J also adopted, in accordance with the position accepted by the parties, an equal division between the proportion of rent waived and the proportion deferred (see at [146]).

28. [225]

    Notably, the tenant’s liability to reinstate the bank guarantee was there quantified on the basis of those findings (see at [151]); and the Court also ordered that the parties meet within seven days for the purpose of attempting to renegotiate in good faith the terms of the lease pursuant to the COVID-19 Regulation (see at [159]). In that connection, CGS here notes that this was the only kind of the order that the Court could there make, as it did not have jurisdiction to make orders varying the terms of commercial leases that are subject to the COVID-19 regime (see at [158]).

29. [226]

    As I have said, what follows comprise submissions supplementing the submissions made by CGS that: first, the Court should decline to order specific performance; and second, in the alternative, that any order for specific performance should be limited to requiring CGS to “take all reasonable or necessary steps” to perform its obligation, as the obligation to provide a bank guarantee is contingent on a bank’s third party right to consent to providing that guarantee. I have disposed of those issues above; so the question here is as to the other relief sought and any damages award in lieu of specific performance.

30. [227]

    In sum, CGS submits, having regard to or by operation of the COVID-19 Regulations, that the Court should: refer the parties for negotiation and mediation prior to making any decision regarding the appropriate remedy decline to order specific performance; and limit any declaration or order having the effect that CGS must pay over moneys to NTT (or, alternatively, the Dexus entities) to an amount equivalent to 50% of the rent and outgoings provided for in the Lease.

31. [228]

    CGS submits that: the Lease is a “commercial lease” within the meaning of the COVID-19 Regulations as it was entered into on 1 September 2013, before the commencement date; and, further and in the alternative, the Deed of Assignment is a commercial lease within the meaning of the COVID-19 Regulations, as it is an agreement to which the Conveyancing Act 1919 (NSW) (Conveyancing Act) applies relating to the leasing of premises of land for commercial purposes (specifically, by s 128 of the Conveyancing Act, it is said that the Deed of Assignment is a Lease, as (if CGS is bound by it) it is an agreement for a lease where the lessee has become entitled to have his or her lease granted).

32. [229]

    As to the commencement date, CGS says that the Deed of Assignment is not a “commercial lease” entered into after the commencement date (noting that the COVID-19 Regulations commenced on 24 April 2020 and NTT’s claim is that the Deed of Assignment was executed on 19 March 2020). It is said that the fact that the effective assignment date of the lease was 1 May 2020 does not exclude the application of the COVID-19 Regulations, in circumstances where CGS was bound (on NTT’s case) to take the lease on and from 19 March 2020.

33. [230]

    CGS notes that, by cl 1 of the COVID-19 Regulations, “lessee” means the person who has the right to occupy premises or land under a “commercial lease”; and, it is said that CGS is a “lessee” because, if it was bound on and from 19 March 2020 to take the Lease from 1 May 2020, it has the right to occupy the Premises under the Lease.

34. [231]

    Furthermore, CGS submits that it is an “impacted lessee” within the meaning of cl 2 because, first, CGS qualifies for JobKeeper (noting that enrolment for JobKeeper is in evidence and receipt of JobKeeper payments is recorded in the June 2020 financials also in evidence); and second, that CG Group’s turnover for the 2018 to 2019 financial year was less than $50 million (noting that consolidated financial statements for the financial year are in evidence and disclose that the revenue is recorded at $27,554,354). I interpose to observe that Note 4 to those items states that CG is an insurance intermediary and only recognises revenue on the net commission, which is calculated as the “difference between the gross written premium, underwriting fees, partner payments, net of payment gateway partner fees and forex conversion rates” (such that, CGS says, the fact that gross written premiums exceed $50 million does not mean that turnover exceeds $50 million).

35. [232]

    Likewise, CGS notes that, by cl 1, “lessor” means the person who grants the right to occupy premises or land under a “commercial lease”; and that Perpetual is the “lessor” under the Lease and has granted, on the case against it, the right to occupy the Premises under the Lease.

36. [233]

    Similarly, it is noted that, by cl 2.1 of the Deed of Assignment, NTT has assigned to CGS all of NTT’s interest in, and in relation to, the Lease (which, it is said, includes the right to occupy the Premises). Accordingly, it is said that NTT is also a “lessor” for the presently relevant purposes.

37. [234]

    It is said that, by seeking orders or issuing proceedings in this Court, both NTT and Perpetual have taken “prescribed action”.

38. [235]

    More specifically, CGS submits that, by prayers 1, 2, 4, 5, 6 of the amended statement of claim, NTT seeks declarations and orders as to the performance of CGS’ obligations under the Deed of Assignment, as well as an order that CGS pay NTT a sum of money that is said to be owing under the Assignment and damages, together with interest (under s 100 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act)).

39. [236]

    In so doing, it is submitted that NTT has taken a “prescribed action” by seeking orders or issuing proceedings for: damages; requiring a payment of interest on unpaid rent otherwise payable by a lessee; performance of obligations by the lessee; and any other remedy otherwise available to a lessor against a lessee at common law or under the law of New South Wales.

40. [237]

    Similarly, CGS submits that: by prayer 5 of the amended cross summons, Perpetual seeks a declaration that CGS is liable for the sum of $492,130.19 owing as at 11 August 2011 and comprised of rent, outgoings and other amounts payable under the Lease and/or the Deed of Assignment; and, by prayer 6 of the amended cross summons, Perpetual seeks an order that CGS continues to be liable under the Lease and the Deed of Assignment in respect of amounts falling due under the Lease and/or the Deed of Assignment after 11 August 2020.

41. [238]

    In so doing, it is submitted that Perpetual has taken a “prescribed action” by seeking orders or issuing proceedings for: performance of obligations by the lessee; and any other remedy otherwise available to a lessor against a lessee at common law or under the law of New South Wales.

42. [239]

    CGS notes that this is despite CGS making a request on 27 April 2020 to renegotiate in good faith the rent payable and other terms of the Lease (as required under cl 5(3) of the COVID-19 Regulations), CGS here referring to the completed questionnaire and the supporting information that accompanied the questionnaire (each of which is in evidence).

43. [240]

    CGS points out that, notwithstanding that request, there was no renegotiation as required by the COVID-19 Regulations because, on 30 April 2020, CGS communicated its intention not to proceed.

44. [241]

    CGS submits that that communication was not a waiver of CGS’ rights under the COVID-19 Regulations and points out that, on 19 May 2020, CGS confirmed that it would not be providing any further information to the Dexus entities in respect of the request, which (it is said) the Dexus entities appear to have taken as a waiver of CGS’ rights under the COVID-19 Regulations.

45. [242]

    CGS reiterates its position that this was not a waiver of any rights under the COVID-19 Regulations, in circumstances where CGS was of the belief that it had no lease and was not then bound by any lease “due to it being a frustrated contract”.

46. [243]

    Accordingly, and it is said contrary to the parties’ obligations by operation of cl 5(3) of the COVID-19 Regulations, it is submitted that there has been no good faith negotiation of the rent payable under, and other terms of, the commercial lease.

47. [244]

    Similarly, and it is said contrary to NTT’s and Perpetual’s obligations under cl 6(3) of the COVID-19 Regulations, it is submitted that NTT and Perpetual have also sought to exercise or enforce their rights under the Deed of Assignment and the Lease without first obtaining certification in writing from the Small Business Commissioner that mediation has failed to resolve the dispute. Indeed, it is submitted that there has, in fact, been no mediation.

48. [245]

    Accordingly, CGS’s primary submission, if CGS is bound by the Deed of Assignment (as to which, see at [108]ff above), is that the parties should be referred for negotiation and mediation, in accordance with cll 5 and 6 of COVID-19 Regulations. CGS submits that this approach would be consistent with the approach of Robb J in Sneakerboy (No 2) (see at [159]).

49. [246]

    In the alternative, if the Court declines to refer the parties for negotiation and mediation, CGS submits that it would be appropriate for the Court to quantify CGS’s liability on unpaid rent under the Lease on the basis of the notional renegotiation of the lease, as required under the COVID-19 Regulations.

50. [247]

    As to this alternative position, CGS submits that this course would not be imposing a renegotiated lease on the parties (which Robb J considered would be beyond the Court’s jurisdiction); rather, it is said that this course would recognise that Perpetual’s loss under the Lease, when calculated by the Court, is not calculated on the basis of the level of rent and outgoings in the Lease, but rather is calculated on the basis that Perpetual had a positive obligation under the COVID-19 Regulations to renegotiate the rent in an amount proportionate with CGS’ reduction in revenue.

51. [248]

    In this regard, CGS accepts (as found in [143] of Sneakerboy (No 2)) that the approach to this notional renegotiation is for the Court to identify the outcome of a single renegotiation for the COVID-19 pandemic period and a subsequent reasonable recovery period, rather than on the basis of separate monthly calculations comparing turnover with the equivalent month in the preceding year.

52. [249]

    Following, CGS submits that the evidence supports a finding that the notional renegotiation of the lease would have caused a 50% reduction in rent and outgoings (in the form of waivers and deferrals) for the duration of the COVID-19 pandemic and for a subsequent reasonable recovery period. Relevantly, therefore, it is submitted that this would be a 50% reduction on the amount claimed by Perpetual from NTT and by NTT from CGS, of which (it is contended) at least 50% is to be waived altogether.

53. [250]

    More specifically, in support of this inference, CGS relies on the following evidence: that, at the time of making its request under the COVID-19 Regulations, CGS applied for 100% discount on rent and outgoings, however, in doing so, CGS nominated a forecast 50% reduction in annual turnover for the CG Group (as to which, see the “COVID-19 Rental Assistance Questionnaire” referred to at [55] above); this forecast 50% reduction in revenue was reflected in the forecast financials, which were provided together with that application; at the time of this request, CG was forecasting net revenue for the financial year ending 2020 of $13,773,825, compared with a net revenue of $27,554,354 in the previous financial; therefore, a 50% reduction in rent (in the form of waivers and deferrals) would have been consistent with leasing principle 3 in the National Code of Conduct (as to which, see at [211] above); as events have transpired, there has been some fluctuation in those forecasts, specifically CG appears to have obtained higher net revenue in April 2020 and June 2020 than it was forecasting in March 2020, however the position was reversed in May 2020, when CG obtained lower net revenue than forecast (I note that its performance is observed by comparing the actual performance in the June 2020 report with the forecasts that were supplied to Dexus in March – it is said, pellucidly, that this is perhaps what one would expect with forecasting financial performance of an insurance business geared towards travel insurance during a global pandemic); and in addition, the financial report for June 2020 shows net revenue in June 2020 (cf June 2019) down 70.4% compared with June 2019.

54. [251]

    With the above in mind, however, CGS accepts that this higher level of reduced revenue was not available at the time of the notional renegotiation in April 2020.

55. [252]

    In terms of the proportion of the reduction that is deferred or waived, CGS submits that the scheme of the COVID-19 Regulations effectively provides for a presumption that there is to be 50% deferral and 50% waiver of the proportionate reductions. It is further submitted that this (postulated) presumption is subject to the suggestion in leasing principle 4 that the waivers are to be a higher proportion where failure to waive a higher proportion would compromise the tenant’s capacity to fulfil their ongoing obligations under the lease.

56. [253]

    CGS submits that the proper inference in this case is that the presumptive 50% waiver requirement would have been reached, where at the time of the notional renegotiation there was no evidence that a higher proportion of waiver was required to ensure CGS’s capacity to perform its ongoing obligations under the lease.

57. [254]

    I now turn to consider NTT’s submissions in relation to this issue.

58. [255]

    In short, NTT’s position is as follows.

59. [256]

    First, that CGS should not be permitted to rely on COVID-19 Regulations to assert that the parties should be referred to negotiation and mediation or, alternatively, that an order for specific performance should be declined and the damages it is ordered to pay reduced by 50%. This is because CGS, it is said, was required (by r 14.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) specifically to plead the alleged application of the COVID-19 Regulations and the factual matters relied upon to support its application. It is submitted that unfairness and prejudice to NTT would result if CGS were to be permitted to rely on this unpleaded defence.

60. [257]

    Second that, were CGS to be permitted to rely on the COVID-19 Regulations notwithstanding its failure to plead its entitlement to do so, the regulations there contained do not have any application to these proceedings, because: the Deed of Assignment is not relevantly a “commercial lease”; NTT is not relevantly a “lessor”; and CGS is not relevantly an “impacted lessee”. Hence it is submitted that the Court is not required to have regard to the leasing principles set out in the National Code of Conduct; and NTT maintains that it is entitled to the relief sought in its amended statement of claim.

61. [258]

    I interpose to note, as to the operation of UCPR r.14.14, I accept that, by its assertion (for the first time during the expedited hearing) that the COVID-19 Regulations apply, CGS raises matters of fact not arising out of its amended defence. As NTT submits, this point raises the factual issue as to whether CGS is an “impacted lessee”, which in turn depends on a determination as to its eligibility for the JobKeeper scheme and the turnover of the CG Group in the last financial year.

62. [259]

    Furthermore, as NTT emphasises, I also accept that this is a matter that would make NTT’s principal claim for relief (or, indeed, the proceedings entirely) not maintainable (at least until a mediation between the parties is conducted) or otherwise substantially frustrate the relief sought, and, plainly therefore, it has taken NTT by surprise. I note that NTT submits that the authorities recognise that r 14.14 reflects the fundamental requirement that each party be given a proper opportunity to prepare and present its case.

63. [260]

    While accepting that CGS’ failure to plead the application of the COVID-19 Regulations is not necessarily fatal to the question of its entitlement to rely upon it, NTT submits that, whether or not the Court would be inclined to exercise its discretion to permit CGS so to rely is a matter that is predicated upon fairness to the parties. In these circumstances, NTT submits that fairness dictates that the discretion should not be exercised in CGS’ favour.

64. [261]

    In particular, NTT points to the following matters. First, that these proceedings were brought by NTT, and sought to be expedited, in circumstances where it had been given no indication that the COVID-19 Regulations should or would apply, noting that: it had been issued by the Dexus entities with notices for breach of its covenants to pay rent and other moneys payable under the Lease from 1 May 2020; the Dexus entities had threatened on several occasions to draw down on the NTT Bank Guarantee, were NTT to fail to pay the amounts demanded; NTT had made several attempts to engage with both CGS and the Dexus entities in an effort to cause them to engage in discussions and negotiations with respect to the Lease and thereby avoid the expense and effort of litigation; CGS asserted, up until it amended its defence on 24 August 2020, that the Deed of Assignment had been discharged by the doctrine of frustration and, after it filed its amended defence on 24 August 2020, that it was not bound by the Deed of Assignment; CGS at no point requested that NTT renegotiate the rent payable under, and other terms of, the Lease (as it is permitted to do by cl 5(2) of the COVID-19 Regulations) and at no point after 30 April 2020 was such a request made of Dexus or Perpetual; and CGS at no point requested that the parties attend a mediation or indicated that they should do so, either by reference to the regulatory regime, the National Code of Conduct or otherwise.

65. [262]

    Second, it is noted that NTT was entitled to the benefit of legal advice as to the effect of COVID-19 Regulations and its implications, including as to whether it should continue costly proceedings in this Court. It is said that, given that the purported application of the COVID-19 Regulations squarely puts in issue the revenue of CGS and the companies within the CG Group, NTT would, if the point had been pleaded, have sought further discovery from CGS, and also sought to subpoena the financial records of the companies within the CG Group in order to meet the claim that CGS is an “impacted lessee”; and that NTT was also denied any opportunity to receive advice and consider the application of the COVID-19 Regulations in light of whatever material it may have obtained through further discovery and such processes.

66. [263]

    In these circumstances, it is said that NTT would be materially prejudiced if CGS were to be permitted to assert now that the parties are compelled to proceed to mediation before the Court can make any decision regarding the appropriate remedy or that the principal relief sought by NTT should be declined or that the damages sought should be reduced by 50%.

67. [264]

    As adverted to above, NTT submits that, were CGS now entitled to raise this point as a matter relevant to the question of any relief to be ordered, there should be a finding in any event that the COVID-19 Regulations here have no application. This is for the following reasons.

68. [265]

    First, that the relief NTT seeks is in relation to the Deed of Assignment which is not relevantly a “commercial lease”. It is noted that cl 3 provides that the regulations apply “to the exercise or enforcement of rights under a commercial lease in relation to circumstances occurring during the prescribed period” and notes s 128 of the Conveyancing Act and other components of the definition. NTT notes that CGS asserts, it is said without reference to any authority, that the Deed of Assignment is a “commercial lease”, because “it is an agreement for a lease where the lessee has become entitled to have his or her lease granted.”

69. [266]

    NTT submits, to the contrary, that the Deed of Assignment is not an instrument through which a lease is granted; that is, it does not create an interest in land. Rather, it is submitted that the Deed of Assignment operates to transfer an existing interest that NTT has in the Premises to CGS and it does not entitle CGS to have its lease granted (it entitles CGS to the transfer of NTT’s interest in and in relation to the Lease). NTT, by way of illustration, describes that CGS could not, through an exercise of the rights created by the Deed of Assignment, compel the Lease to be granted to it through specific performance. Rather, it is contended that CGS would be restricted to seeking specific performance of the transfer of the Lease to it, by NTT.

70. [267]

    Accordingly, it is submitted that the Deed of Assignment is not relevantly a “commercial lease” and, by operation of cl 3, the COVID-19 Regulations here have no application.

71. [268]

    Furthermore, it is submitted that it follows from the preceding that NTT is not relevantly a “lessor”, as a “lessor” is defined (by cl 1) as the person who grants the right to occupy premises or land under a “commercial lease”.

72. [269]

    NTT submits that it does not grant (or perhaps has not granted) CGS the right to occupy the Premises under a “commercial lease”; rather, by the Deed of Assignment, NTT transfers, or has transferred, its right of occupation under the Lease to CGS. It is submitted that the person who grants the right of occupation of the Premises in these proceedings is Perpetual, not NTT.

73. [270]

    In NTT’s submission, it is not to the point (and in no way assists CGS) that the relief NTT seeks is in connection with a “commercial lease”, because the relief sought by NTT does not hinge on rights or obligations created by the Lease. Instead, it is said that the relief sought arises from the Deed of Assignment. Accordingly, it is submitted that none of the relief sought by NTT comes within the definition of a “prescribed action”.

74. [271]

    Furthermore, it is noted that the principal relief sought by NTT (by paragraph 2 of the relief claimed in the amended statement of claim) is the specific performance of the Deed of Assignment, being (it is said) performance of CGS’ obligations under the Deed of Assignment, not the Lease. Similarly, it is submitted that the declaration sought (by paragraph 4 of the relief claimed in the amended statement of claim) is also not a “prescribed action” because this is a declaration that CGS is liable under the CGS Indemnity (that is, the indemnity provided in the Deed of Assignment).

75. [272]

    As to the order sought that CGS pay to NTT the sum of $492,130.19 (by paragraph 5 of the relief claimed in the amended statement of claim), NTT says that this too is not a “prescribed action” because NTT’s entitlement to that sum is predicated on the CGS Indemnity, not the Lease.

76. [273]

    Finally, as to the damages sought by NTT in the alternative (by paragraph 6 of the relief claimed in the amended statement of claim), NTT says that this is not a “prescribed action” because the damages sought are not an action under the provisions of a “commercial lease”, but (again) relate to a failure by CGS to perform its obligations under the Deed of Assignment

77. [274]

    In the event that, contrary to the above, the COVID-19 Regulations do here apply (on the basis that the Deed of Assignment is a “commercial lease”), NTT submits that CGS is not entitled to the benefit of and protections afforded by the regime as it is not an “impacted lessee” within the meaning of cl 2.

78. [275]

    NTT notes that ss 7 and 8 of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) (the CERP Rules) provide for when an entity qualifies for the JobKeeper scheme. Crucially, it is said that, by s 7(1)(b), an entity only qualifies for the JobKeeper scheme if “the entity has satisfied the decline in turnover test at or before the time (see section 8)”.

79. [276]

    It is convenient here to excerpt those sections.

80. [277]

    Section 7 relevantly provides as follows:

81. [278]

    Section 8 relevantly provides as follows:

82. [279]

    With these provisions in mind, NTT makes the following observations.

83. [280]

    First, that in order to find that CGS is an “impacted lessee”, it must be open to find that CGS qualifies for the JobKeeper scheme under ss 7 and 8 of the CERP Rules. As noted above, CGS here submits that such a finding may be made on the basis that CGS applied for the JobKeeper scheme and that an entity within the CG Group (I interpose to note that NTT here submits that it is not clear which one) received JobKeeper payments in May 2020.

84. [281]

    NTT submits that this is not sufficient evidence to support the finding sought by CGS in relation to its eligibility for the JobKeeper scheme; and, instead, that CGS must prove that it qualifies for the JobKeeper scheme under ss 7 and 8, which in turn requires that it prove, inter alia, that it has satisfied the decline in turnover test.

85. [282]

    Relevantly, NTT reiterates its submissions that there is no evidence before the Court that would enable it to find that CGS satisfies that test.

86. [283]

    Further, NTT says that it is apposite to observe that CGS could never satisfy such a test, because it was incorporated in August 2019, such that there could be no relevant comparison period for the purposes of s 8(7) of the CERP Rules (noting, again, that CGS applied for the JobKeeper payment in April 2020, asserting a relevant reduction in turnover for March 2020, such that the relevant comparison period would be March 2019, when CGS had not yet been incorporated).

87. [284]

    Second, although not pleaded and although not referenced in its supplementary submissions, NTT notes that CGS may be eligible for the JobKeeper payment under s 8A of the CERP Rules. It appears that s 8A of the CERP Rules was introduced by way of an amendment to the CERP Rules, which commenced on 1 May 2020, after CGS applied for the JobKeeper payment).

88. [285]

    Relevantly, s 8A appears to provide for a modified decline in turnover test for certain group structures, such that where an employment entity is utilised within a group of companies, and that employment entity is unable to demonstrate a decline in its own turnover, the employment entity will be able to refer to the decline in turnover of the operating entities it services.

89. [286]

    However, NTT submits that, even if it were the case that this is the basis upon which CGS asserts its eligibility for the JobKeeper payment, it would not be open to the Court to find that CGS is an “impacted lessee”. It is said that this is so for the following two reasons.

90. [287]

    First, the definition of “impacted lessee” in cl 2 refers to eligibility “under sections 7 and 8” of the CERP Rules, and (it is said) that it does not embrace, or include, within its definition eligibility under s 8A. Indeed, NTT says that to read the definition of “impacted lessee” as also including a lessee who qualifies under s 8A would require the Court to read additional words into that definition in order to give effect to what the Court may perceive to be the purpose of the instrument and that to do so in these circumstances would be to favour a construction that fills gaps disclosed in the legislation, an approach to construction which was rejected by the High Court in Taylor v Owners- Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9 (Taylor v Owners- Strata Plan No 11564) (see at [37]-[38] per French CJ, Crennan and Bell JJ). In this connection, NTT submits that, construed in accordance with its natural and ordinary meaning, the definition of “impacted lessee” extends only to those lessees that qualify for the JobKeeper scheme under ss 7 and 8 of the CERP Rules and there is nothing to suggest that the Court would be justified in construing cl 2 so as to extend that definition to include eligibility under s 8A. NTT further submits that, were the Court to do so, it would be impermissibly attempting to “remedy or repair” the legislation.

91. [288]

    Second, it is submitted (similarly to the preceding) that there is no evidence to enable the necessary finding of fact, namely that the operating entities CGS services suffered a decline in revenue equal to or in excess of 30% in the relevant period, by comparison with the corresponding period in 2019.

92. [289]

    For these reasons, NTT submits that CGS should not be permitted to rely on the COVID-19 Regulations and that, if (contrary to that submission) the Court finds that CGS is entitled to so rely, that the regime has no application to these proceedings.

93. [290]

    As noted above, proceedings between NTT and the Dexus entities were compromised by way of consent orders. The Dexus entities note that only declarations are sought against CGS in the cross summons and no damages are sought. Accordingly, the Dexus entities say that the COVID-19 Regulations do not prevent the Dexus entities obtaining relief because: that regime applies only to “the exercise or enforcement of rights under a commercial lease in relation to circumstances occurring during the prescribed period”, and obtaining a declaration is not the “exercise or enforcement of a right”; in any event, the regime could not prevent the Dexus entities commencing proceedings against CGS as lessee, as nothing in the cross summons constitutes a “prescribed action”; and finally even if the Dexus entities are wrong on either of the preceding two points, no obligation to renegotiate the rent payable under the lease arises because CGS expressly withdrew from the renegotiation process required by cl 5 such that, by clause 5(3B), the lessor is taken to have complied with that obligation.

94. [291]

    As to the last of those points, the Dexus entities note the exchange of emails between the principals of CGS and the property manager for Dexus between 14 to 18 May 2020 as unequivocally demonstrating that CGS, “…do not wish their application (for relief) to be reviewed, and they have waived their rights under the Code of Conduct”.

95. [292]

    Accordingly, the Dexus entities submit that CGS has no basis to resist prayers 5 and 6 of the amended cross summons, which declarations the Dexus entities say should be made (with costs).

96. [293]

    It is convenient to dispose of this aspect of the proceedings as follows: first, to determine whether CGS is entitled here to rely on the COVID-19 Regulations; if so, second, to determine whether the Deed of Assignment is relevantly a “commercial lease” for the purposes of the COVID-19 Regulations; if so, third and following, to determine whether CGS and/or NTT are relevantly a “lessor” and/or “lessee” for the purposes of the COVID-19 Regulations; if so, fourth and finally, to determine whether CGS is, or has proven, that it is an “impacted lessee”.

97. [294]

    As an initial matter, and as I have adverted to above (see at [258]ff), I see considerable force to the submission for NTT that CGS should not be permitted to rely on the COVID-19 Regulations. This is because I accept that, by reason of r 14.14 of the UCPR, CGS ought to have specifically pleaded the alleged application of the COVID-19 Regulations and the factual substratum from which any such claim is to be determined. That is particularly so having in mind NTT’s position in relation to proof of CGS’s entitlement to the JobKeeper scheme.

98. [295]

    As to the unfairness and prejudice that NTT says it would suffer if I were to permit in my discretion CGS to rely on the COVID-19 Regulations, I note that the relevant prejudice is not that, by operation of the COVID-19 Regulations, NTT might thereby be denied the full extent of relief sought (though, that itself, for reasons that I will shortly come to, is not necessarily so in any event), but instead the prejudice of not now being able fully to test CGS’s claim (again, noting particularly the issue as between the parties in relation to the JobKeeper scheme eligibility and its turnover in the last financial year, and otherwise).

99. [296]

    I see that such unfairness and prejudice is here particularly acute, having in mind that, if CGS’s position vis-à-vis the COVID-19 Regulations is good, then NTT’s principal claim would be unmaintainable or, at the very least, substantially subjugated.

100. [297]

     Nevertheless, I should here record that I appreciate that the proceedings have been instituted and prosecuted with necessary haste and the application and operation of the various emergency statutory amendments made over the last few months have been largely untested and are not altogether easy to comprehend. I mean no criticism by that observation. Furthermore, I appreciate that the prevailing commercial and other such circumstances would not have made the institution and prosecution of these proceedings any easier.

101. [298]

     Having said these things, in the exercise of my discretion, I would not permit CGS to rely on the COVID-19 Regulations. In the event that I were to be wrong in the exercise of that discretion, I now turn to the next issue in relation to the COVID-19 Regulations, being whether the Deed of Assignment as between NTT and CGS is relevantly a “commercial lease”.

102. [299]

     As would be evident from the definitions section (excerpted at [205] above), critical to this aspect of the proceedings is whether the Deed of Assignment is a “commercial lease” (noting, for example, that the definitions of “lessor” and “lessee” hinge on whether the putative agreement is a “commercial lease” as defined).

103. [300]

     As has been noted, a “commercial lease” is relevantly defined as “… any agreement to which the Act applies relating to the leasing of premises or land for commercial purposes…”. Relevantly, “the Act” is defined to mean the Conveyancing Act.

104. [301]

     Whether the Deed of Assignment is a “commercial lease” is not as straightforward as might initially appear. As will be recalled, CGS makes specific reference to s 128 of the Conveyancing Act and says that, by that section, the Deed of Assignment is relevantly a “commercial lease” (because, it is said, that if CGS is bound by the Deed of Assignment then it is an agreement for a lease where the lessee has become entitled to have his or her lease granted).

105. [302]

     Section 128 provides:

106. [303]

     Some potential difficulties, therefore, with CGS’ construction are as follows. First, at least arguably, the Deed of Assignment is not an agreement to lease — it is an agreement to assign an existing lease. Second, and relatedly, the Deed of Assignment is, again arguably, not an under-lease (or sublease) — it is an assignment of an existing lease. As to the second of those propositions, it is to be noted that, by the Deed of Assignment, CGS was not to take a sub-lease as sub-lessee and NTT as sub-lessor; rather, NTT was to assign to CGS its existing rights as lessee. Indeed, underlying each of these apparent difficulties is the fact that the Deed of Assignment does not operate to create a new leasehold interest in the Premises — again, it operates to assign an existing proprietary interest.

107. [304]

     Likewise, if CGS is so bound, CGS does not have entitlement to have its lease granted; rather, it has a right to have NTT’s interest in the Premises assigned to it. In this regard, I again note NTT’s submission, which has force in my view, that CGS could not, through an exercise of the rights created by the Deed of Assignment, compel the Lease to be granted to it through specific performance; rather, CGS would be restricted to seeking specific performance by NTT of the transfer of the Lease to it.

108. [305]

     With this said, against this, arguably the Deed of Assignment is nevertheless relevantly a “commercial lease”. This is because, if nothing else, a “conveyance” is defined, by s 7, under the Conveyancing Act as including, “any assignment, appointment, lease, settlement, or other assurance by deed of any property; and convey has a meaning corresponding with that of conveyance” (my emphasis). Similarly, by that section, “assurance” is defined to include a “conveyance”.

109. [306]

     Accordingly, I will proceed on the basis that the Deed of Assignment is relevantly a “commercial lease” for the purposes of the COVID-19 Regulations.

110. [307]

     Given that the definitions of “lessor” and “lessee” under the COVID-19 Regulations hinge on whether the Deed of Assignment is a “commercial lease”, it follows that CGS and NTT would here satisfy that definition.

111. [308]

     Finally, as to whether CGS is relevantly an “impacted lessee”, it will be recalled that the identification of a lessee as relevantly “impacted” turns on whether the lessee is entitled to receipt of the JobKeeper scheme.

112. [309]

     In this connection, it will be recalled that CGS has put into evidence inter alia: its enrolment for JobKeeper; receipt of payments as recorded in the June 2020 financials (though, as noted at [280], it is not altogether clear what entity has been in receipt of payments); and that the CG Group’s turnover and net revenue for the 2018 to 2019 financial year was less than $50 million (by reference to the consolidated financial statements for the financial year).

113. [310]

     On this evidence, and having in mind those matters that I have identified in relation to the discretion concerning r 14.14 (as to which, see at [294]ff above), I see force to NTT’s submission that it is somewhat difficult for me to be satisfied that CGS, as a matter of fact and law, qualifies for the JobKeeper payment. Indeed, while perhaps formalistic, the receipt of a payment is not the same as an entitlement to it.

114. [311]

     In this connection, I also again note NTT’s submission in relation to CGS only having been incorporated in August 2019, such that there may be doubts as to the availability of the necessary comparison period for the purposes of the CERP Rules.

115. [312]

     As to the seemingly modified test under s 8A (it will be recalled, which applies for certain group structures, such that where an employment entity is utilised within a group of companies, and that employment entity is unable to demonstrate a decline in its own turnover), again, I see force to the proposition that there is a paucity of evidence before the Court to enable me to make the necessary findings of fact.

116. [313]

     Furthermore, I accept that there is difficulty, as a matter of statutory construction, in construing cl 2 as embracing eligibility under s 8A when the instrument expressly refers only to eligibility “under sections 7 and 8”. More specifically, I do see that to construe cl 2 as defining an “impacted lessee” as also including a lessee who qualifies under s 8A would require the Court to read additional words into the clause in order to give effect to what may be perceived to be the statutory purpose; and that to do so would be to favour impermissibly a construction that fills gaps disclosed in the legislation (noting, again, what was said in Taylor v Owners-Strata Plan No 11564 at [37]-[38]). Indeed, while it seems patent that the intention was to include eligibility under s 8A, it is not for the Court here to speculate on that matter, in circumstances where the plain and ordinary meaning does not disclose any patent ambiguity or absurdity, nor is this necessary to remedy or repair a perceived deficiency in the instrument as presently enacted.

Conclusion and orders

1. [314]

   It follows that the Deed of Assignment is valid and enforceable as against CGS, but that I will decline to order specific performance and that, accordingly, NTT will be left to a claim in damages. The quantum of those damages is referable to the moneys that: one, NTT has already paid to the Dexus entities in satisfaction of CGS’ liabilities under the Deed of Assignment from the date on which CGS became liable therefor; and two, that NTT will, for the balance of the lease term, pay over to the Dexus entities in satisfaction of the liability that CGS has taken under the Deed of Assignment.

2. [315]

   Having said this, and notwithstanding my disposition as to CGS’ claims based on the operation of the COVID-19 Regulations, I consider that it would be in the interests of all the parties for them to proceed to a mediation with the aim of reaching some form of arrangement that best accommodates each of their interests and having the benefit of these reasons. I consider that an order directing the parties to participate in a mediation of this kind is in the interests of the just, quick and cheap resolution of the real issues in dispute, having in mind the overriding mandate prescribed by s 56 of the Civil Procedure Act.

3. [316]

   As to costs, at this stage, I see no reason why costs should not follow the event and, NTT and the Dexus entities here having had substantial success, that CGS should bear the costs of the proceedings. Having said this, I will give the parties liberty to apply in the event that any party seeks a variation of my orders in relation to costs or there are any other issues in the implementation of these orders.

4. [317]

   For the preceding reasons, I make the following orders:

   1. (1)

      Declare that the Deed of Assignment (as defined in [2] of these reasons) is valid and enforceable as against the first defendant.

   2. (2)

      Order, in lieu of specific performance of the Deed of Assignment referred to in Order 1, damages referable to [314] of these reasons.

   3. (3)

      Order that, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the first defendant pay interest on damages referred to in Order 2.

   4. (4)

      Declare that the second cross-defendant was liable to the second cross-claimant for the sum of $492,130.19 owing as at 11 August 2020 comprised of rent, outgoings and other amounts payable and remains liable for such other amounts as fall due under the Lease and/or the Deed of Assignment after 11 August 2020.

   5. (5)

      Order that the first defendant pay the costs of the plaintiff, second defendant and third defendant.

   6. (6)

      In the event that the first defendant notifies the other parties within 14 days that it seeks rent relief under the COVID-19 regulatory scheme, direct the parties to attend a mediation within 28 days thereafter and for that purpose refer the parties to the Registrar for court-annexed mediation.

   7. (7)

      Liberty to apply on three days’ notice.