Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd

1. [1]

   PAYNE JA: The present dispute concerns the termination of a commercial lease during the COVID-19 pandemic. The lessor and respondent to the appeal, Alamdo Holdings Pty Ltd (“Alamdo”), was the registered proprietor of Unit 5 of a property in Hudson Avenue, Castle Hill. Mr Anthony Maurici is Alamdo’s sole director. The lessee of the Castle Hill property was Croc’s Franchising Pty Ltd (“Croc’s”), the first appellant. Croc’s is the franchisor of a chain of child play centres, which operate across Australia. The second appellant is Mr Aldons, one of Croc’s founders and directors. Mr Aldons agreed to guarantee Croc’s obligations under its lease agreement with Alamdo. The third appellant is Mr Cusdin, Croc’s other founder and director, who also acted as guarantor of Croc’s lease obligations.

2. [2]

   On 16 November 2017, Alamdo and Croc’s executed the following documents:

   1. (1)

      An Agreement for Lease of the Castle Hill premises (“AfL”);

   2. (2)

      A Memorandum of Lease in registrable form which purported to create a lease for 10 years (“the Lease Document”); and

   3. (3)

      An Incentive Deed by which Alamdo agreed to pay Croc’s a $250,000 contribution towards fit out.

3. [3]

   Alamdo did not register the lease [1] . Its failure to do so gave rise to issues below and on appeal. On 18 June 2018, Croc’s “entered into possession”. However, the actual occupant of the Castle Hill premises was Croc’s franchisee, Golden Rock & Hope Pty Ltd. Under a licence agreement, the franchisee was required to pay Croc’s the full amount of rent due to Alamdo.

4. [4]

   On 3 December 2020, Alamdo purported to terminate the lease and re-entered into possession of the Castle Hill premises. On 14 May 2021, Alamdo brought proceedings against the appellants, claiming damages for unpaid rent and outgoings, loss of bargain damages and a refund of part of the incentive payment it had made to Croc’s. The appellants filed a cross-claim, alleging that Alamdo’s termination was wrongful and amounted to repudiation, and that Croc’s was entitled to loss of bargain damages as a consequence of the wrongful termination.

5. [5]

   The primary judge (Stevenson J) delivered three judgments:

   1. (1)

      Challenge to COVID regulation: In Alamdo Holdings Pty Ltd v Croc’s Franchising Pty Ltd [2022] NSWSC 1746, the primary judge rejected Alamdo’s argument that Sch 5 to the Conveyancing (General) Regulation 2018 (NSW) was not authorised by the legislation under which it was made. There was no appeal from that judgment. The State of New South Wales intervened in that aspect of the proceedings, and filed a submitting appearance as second respondent to this appeal.

   2. (2)

      Primary judgment: In Alamdo Holdings Pty Ltd v Croc’s Franchising Pty Ltd (No 2) [2023] NSWSC 60, the primary judge found that Alamdo was entitled to terminate the lease and that it was entitled to damages for unpaid rent and loss of bargain. The primary judgment was delivered on 9 February 2023. Orders were made on 28 February 2023 as follows:

   3. (3)

      Costs: In Alamdo Holdings Pty Ltd v Croc’s Franchising Pty Ltd (No 3) (unreported, NSW Supreme Court, 8 March 2023), the primary judge ordered the appellants to pay 90% of Alamdo’s costs on an indemnity basis. In this appeal, the only challenge to those costs orders was derivative, and turned on the outcome of the challenge to the primary judgment.

Relevant facts

1. [6]

   On 11 March 2020, the World Health Organization declared COVID-19 a worldwide pandemic. After that date, the NSW government pursued various public health measures, which restricted the size of mass gatherings and prohibited or, at times, restricted indoor recreation centres like Croc’s playcentres from operation. The Commonwealth and NSW governments also introduced various measures to address the economic effects of the pandemic which are at the heart of this appeal.

2. [7]

   Until March 2020, there was no controversy between the parties about the lease. In March 2020, Croc’s fell behind on rent. It paid $8000 of the $26,083.20 in rent payable for March 2020, before paying no further rent until July 2020.

3. [8]

   On 14 March 2020, Mr Aldons and Mr Cusdin wrote to Mr Anthony Maurici asking for a two month rent abatement. Rent was due for the month of April, payable in advance on April 1 2020. Croc’s originally paid none of that rent, but in October 2020 paid rent up to 24 April 2020 (see [18] below).

4. [9]

   On 24 April 2020, Sch 5 of the Conveyancing (General) Regulation 2018 (NSW), headed “Commercial leases—COVID-19 pandemic special provisions”, came into force (“the First COVID Regulation”).

5. [10]

   On 28 April 2020, Mr Anthony Maurici wrote to Mr Aldons, making the following offer:

   1. (1)

      A 50% rent waiver from 24 April 2020 for the “period during which your business remains closed by Government mandate”;

   2. (2)

      Deferral of the balance until 24 months after the “lifting of the government ban on operation of your business”.

6. [11]

   Mr Aldons and Mr Cusdin did not respond to this offer. The primary judge found that the offer remained open throughout 2020.

7. [12]

   On 21 May 2020, Mr Maurici’s son, Mr Sebastian Maurici, asked Mr Aldons to pay outstanding rent from before the commencement of the “COVID legislation”. He also asked for Croc’s financial documents so he could process the rent abatement request:

8. [13]

   On 16 June 2020, Mr Aldons replied, sending a Business Activity Statement for the franchisee occupying the premises. In exchanges with Alamdo during early August, Mr Aldons insisted that it was the franchisee’s business information, rather than Croc’s, which would be provided. Mr Anthony Maurici maintained that he needed Croc’s financial information, not that of the franchisee.

9. [14]

   For example, on 7 August 2020, Mr Aldons wrote to Mr Sebastian Maurici:

10. [15]

    In cross-examination, Mr Aldons agreed that he “didn’t want to give Alamdo what it had been asking you for”. He also agreed that he had insisted Croc’s was “entitled to a rent reduction measured exactly in proportion to the reduction in sales” by the franchisee and that “All I have to show Alamdo is how much my franchisee’s sales have reduced”.

11. [16]

    On 11 August 2020, Mr Aldons forwarded to Alamdo a copy of Croc’s Jobkeeper application, which had been lodged with the ATO on 24 April 2020. Attached was a “monthly revenue summary” for the financial years ending 30 June 2019 and 30 June 2020. Those summaries showed total income for the period April to June 2019 of $623,455 and for the corresponding period in 2020, $172,566.21.

12. [17]

    On 29 September 2020, the parties submitted their dispute to mediation before the Small Business Commissioner (“the Commissioner”). The primary judge found that records of what was said at the mediation could not be admitted into evidence.

13. [18]

    On 1 October 2020, Croc’s paid Alamdo $29,963, discharging its rental arrears for the month of April 2020, but only up to 24 April 2020, the date the First COVID Regulation came into effect.

14. [19]

    On 13 October 2020, Mr Aldons sent Mr Anthony Maurici a request for a rent reduction for the period from 24 April 2020 to 30 September 2020. Mr Aldons included with this request more sales information about the franchisee’s performance and again asserted that Croc’s was entitled to a rent reduction in proportion to the franchisee’s drop in revenue. Attached to this correspondence was a letter from Mr Penn, Croc’s accountant, concerning Croc’s “[t]urnover as per accounting records”. The letter asserted that Croc’s total income for the period July to September had fallen from $656,604.33 in 2019 to $375,124.36 in 2020.

15. [20]

    In cross-examination, Mr Anthony Maurici explained that he thought there was no “v[e]racity” in this material as it was “the accountant’s information … based on information provided by Croc’s, and the information provided by Croc’s was not presented, it was only tabulated, as if that’s something that I have to accept”.

16. [21]

    On 24 October 2020, a further version of Sch 5 to the Conveyancing (General) Regulation came into force (“the Second COVID Regulation”). Clause 10 of the First COVID Regulation had provided that the version of Sch 5 which it brought into effect was repealed 6 months after its commencement. That limitation necessarily flowed from s 87(4) of the Retail Leases Act 1994 (NSW) which provided that regulations made thereunder expire on either a day that is six months after the day on which the regulation commences, or any earlier day decided by resolution of either House of Parliament.

17. [22]

    Mr Aldon sent further emails on 5 November 2020 and 10 November 2020 asking for updates about his rent reduction request and again setting out the franchisee’s financial position.

18. [23]

    On 10 November 2020, Alamdo sent Croc’s a notice under s 129 of the Conveyancing Act 1919 (NSW). The notice stated:

19. [24]

    On 17 November 2020, Mr Aldons replied:

20. [25]

    At this point, Croc’s engaged a solicitor, Ms Lauren Smyth. On 24 November 2020, she wrote a letter and forwarded some of Croc’s financial information to Mr Maurici, including Business Activity Statements for each quarter from September 2018 to June 2020. However, she in effect repeated the assertion that Croc’s was entitled to a rent reduction in proportion to the franchisee’s reduction in turnover.

21. [26]

    Ms Smyth also attached a 9 October 2020 confirmation by the ATO that Croc’s satisfied the decline in turnover requirements and was eligible for Jobkeeper.

22. [27]

    Correspondence between Ms Smyth and Mr Maurici continued into December 2020. Ms Smyth maintained that the position of the franchisee, rather than Croc’s itself, was what mattered.

23. [28]

    The primary judge found at [118]-[121]:

24. [29]

    Alamdo took possession of the premises on 3 December 2020 and purported to terminate the lease. The proceedings below were commenced on 14 May 2021. Alamdo eventually granted a new lease for the Castle Hill premises on 7 June 2022.

Factual challenge

1. [30]

   Before the primary judge, relying on Croc’s Business Activity Statements, Alamdo produced a calculation that showed that, despite a fall in income from 2019 to 2020, Croc’s nonetheless made a profit, excluding GST, of $19,690 for the quarter ending June 2020 and $79,120 for the quarter ending September 2020. The primary judge accepted as much:

2. [31]

   This was the only fact now relevantly challenged by the appellants under UCPR r 51.36(2) [2] . For the purposes of the appeal, the appellants created a table identifying additional liabilities and submitted that it showed that Croc’s “traded at a substantial loss if the wages and tax paid by Croc’s and the rent payable to Alamdo were taken into account” in the quarters ending June and September 2020.

3. [32]

   To the extent it matters, I find that Croc’s made a gross profit but a net loss in throughout 2020.

Conclusions of the primary judge

1. [33]

   In circumstances I will explain in greater detail below, the primary judge found that:

   1. (1)

      Croc’s had not proven that it was entitled to payments under the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) ("Jobkeeper Rules");

   2. (2)

      Croc's was not an "impacted lessee" within the meaning of the Second COVID Regulation as at 3 December 2020;

   3. (3)

      Clauses 5 and 6 of the Second COVID Regulation created pathways or exceptions by which a lessor might, by satisfying the preconditions contained in those clauses, be permitted to take "prescribed action" that was otherwise prohibited by cl 4 of the Second COVID Regulation;

   4. (4)

      Alamdo had satisfied the preconditions in cl 5 of the Second COVID Regulation prior to 3 December 2020 because it had renegotiated in good faith the rent payable under the lease; and, or alternatively, Alamdo was taken to have complied with cl 5 because Croc's had failed to provide Alamdo with evidence that it was an "impacted lessee";

   5. (5)

      Alamdo also satisfied the preconditions in cl 6 of the Second COVID Regulation prior to 3 December 2020, because there had been a mediation before the Commissioner and the Commissioner had given the requisite certificate; and

   6. (6)

      Alamdo was entitled to loss of bargain damages.

Notice of appeal and notice of contention

1. [34]

   In its notice of appeal, Croc’s advanced the following 24 grounds of appeal:

2. [35]

   Alamdo filed a notice of contention, containing the following four grounds:

3. [36]

   In written submissions the appellants characterised the 24 grounds as relating to 13 discrete issues. The respondent dealt with the issues under the same headings as those adopted in the appellants’ submissions.

4. [37]

   It is convenient to address the grounds of appeal by reference to those discrete issues, the first two of which travel together and were subject to a concession by Mr Potts SC, senior counsel for Alamdo.

Consideration

1. [38]

   On 9 April 2020, the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth) came into effect, permitting the Commonwealth to prescribe the payment of benefits to respond to the COVID-19 pandemic.

2. [39]

   On the same day the Jobkeeper Rules came into effect which created the “Jobkeeper” benefits scheme.

3. [40]

   Whether an entity qualified for the Jobkeeper scheme depended on s 7(1) of the Jobkeeper Rules, which on 3 December 2020 provided:

4. [41]

   There was no dispute that Croc’s satisfied pars 7(a) and 7(c). The dispute before the primary judge turned on whether it met par 7(b), the “decline in turnover test”.

5. [42]

   The decline in turnover test was set out in s 8 [4] :

6. [43]

   The “actual decline in turnover test” was as follows. There was no dispute that Croc’s satisfied that test:

7. [44]

   The primary judge concluded:

8. [45]

   On appeal Alamdo accepted that, contrary to the primary judge’s finding, the first appellant was, in fact, an “impacted lessee” as at 3 December 2020 within the meaning of the regulation:

9. [46]

   This concession was correctly made. As originally enacted, the Jobkeeper scheme applied in the period from 30 March 2020 to 27 September 2020: see Jobkeeper Rules (as made) cll 5-6. On 16 September 2020, the scheme was extended to 28 March 2021 by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No 8) 2020 (Cth). That instrument introduced par 7(1)(c) and s 8B into the Jobkeeper Rules. Paragraph 7(1)(c) required that “for a fortnight beginning on or after 28 September 2020—the entity also satisfies the actual decline in turnover test (see section 8B) for the fortnight”. The “actual decline in turnover test” as defined in cl 8B required that the entity’s current GST turnover for the specified quarter fell short of its current GST turnover for the corresponding quarter in 2019. The specified quarter was the quarter ending on 30 September 2020 for a fortnight beginning before 4 January 2021, and the quarter ending on 31 December 2020 for a fortnight beginning on or after 4 January 2021.

10. [47]

    The explanatory statement for the amending instrument said [5] :

11. [48]

    When the Jobkeeper scheme was first created, a qualifying entity would receive the payments each fortnight for the remainder of the scheme. So long as an entity satisfied the “decline in turnover” test in cl 8 at some point before the end of the fortnight in which they applied for Jobkeeper, they were eligible. There was no requirement that the relevant “test time” fall within the fortnight in question. There was no machinery for revoking eligibility for Jobkeeper payments. This was because the scheme created an emergency short-term measure designed to mitigate the severe impacts on businesses, and ultimately employment, of the COVID-19 pandemic and associated lockdowns.

12. [49]

    When the Jobkeeper scheme was extended in September 2020, par 7(1)(c) and s 8B were inserted in order to revoke eligibility for the payments for entities whose actual income had recovered in the previous quarter. Eligibility would only be revoked if the entity’s income had in fact recovered over a sustained period. The construction advanced below by Alamdo, which was adopted by the primary judge, could result in an entity’s eligibility for the Jobkeeper scheme fluctuating from fortnight to fortnight. It is clear that this was not how the Jobkeeper scheme was intended to operate.

13. [50]

    It follows that the primary judge was led into error by Alamdo. On 3 December 2020, Croc’s was entitled to Jobkeeper as it had suffered a decline in turnover exceeding 30% in the quarter ending 30 September 2020 compared with the same quarter of the previous year.

14. [51]

    The primary judge’s findings at [166]-[173] (set out at [44] above) about whether Croc’s was an “impacted lessee” derived from the finding about Croc’s eligibility for Jobkeeper.

15. [52]

    By reason of the conclusion on the appellants’ first issue, the respondent correctly accepted that the primary judge should have concluded that Croc’s proved it was an “impacted lessee”.

16. [53]

    Grounds 3-6 of the appeal should be allowed.

17. [54]

    The issue at the heart of this appeal is the correct construction of the Second COVID Regulation, which was the applicable regulation at the time Alamdo terminated the lease on 3 December 2020. The Second COVID Regulation must be interpreted alongside the First COVID Regulation, which it replaced. As explained below, both Regulations were designed to reflect the “National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles during COVID-19” (“the National Code”). A court, when making a decision relating to the termination of a commercial lease must have regard to the leasing principles set out in the National Code: cl 7 of the Second COVD Regulation.

18. [55]

    On 7 April 2020, the so called “National Cabinet” adopted the National Code and State and Territory governments, including New South Wales, committed to implement legislative measures giving effect to it. This commitment was recorded in the National Code:

19. [56]

    The National Code’s purpose, in brief, was to impose a “set of good faith leasing principles for application to commercial tenancies … where the tenant is an eligible business for the purpose of the … JobKeeper programme”.

20. [57]

    The National Code contained the following “leasing principles”:

21. [58]

    Whilst the National Code contained goals which had by themselves only aspirational significance, as I have said, cl 7 of the First and Second COVID Regulations provided that a court “is to have regard to the leasing principles set out in the National Code of Conduct” when considering, relevantly “the termination of an impacted lease by a lessor”.

22. [59]

    Whilst the principles in the National Code were overlapping, and to some extent potentially inconsistent, it is clear that the Code expressly prohibited the termination of a commercial lease due to non-payment of rent during the COVID-19 pandemic period and during a reasonable subsequent recovery period. This matter was set out in leasing principle 1, which is the only paragraph of the National Code to address termination of a commercial lease due to non-payment of rent during the COVID-19 pandemic period.

23. [60]

    I will return to the terms of the National Code when addressing the critical questions of construction.

24. [61]

    To give effect to the National Code, the NSW government created the First COVID Regulation, which took effect on 24 April 2020. Whether or not a commercial tenant qualified for Commonwealth Jobkeeper assistance determined whether it was an “impacted lessee” under the NSW COVID Regulation. The First COVID Regulation had effect until 24 October 2020, being the maximum six month period for a regulation of this kind pursuant to s 87 of the Retail Leases Act 1994 (NSW). Clause 4 of the First COVID Regulation provided:

25. [62]

    An “impacted lessee” was defined as:

26. [63]

    Under cl 1, a “commercial lease” was any agreement to which the Conveyancing Act applied relating to the leasing of premises or land for commercial purposes. Pursuant to s 128 of the Conveyancing Act that included “an agreement for a lease where the lessee has become entitled to have his or her lease granted”. Thus as I explain at [131]-[149] below, the AfL and, the unregistered Lease Document together were an agreement under which Croc’s was entitled to have its lease granted. Because the Lease Document was unregistered, Croc’s leasehold interest in the premises was a tenancy at will implied under s 127(1) of the Conveyancing Act. Both the agreement for a lease and the tenancy at will were “commercial leases” for the purposes of the COVID Regulation.

27. [64]

    The “prescribed period”, under the First COVID Regulation, was six months after the day on which the regulation commenced, namely the period from 25 April 2020 to 24 October 2020: cl 1. The prescribed period was thus co-extensive with the entire life of the First COVID Regulation.

28. [65]

    On 3 July 2020, amendments to the First COVID Regulation commenced which effected changes to subcll 4(5) and (6). The parties referred to this as Regulation 1A. Neither party suggested that Regulation 1A affected the outcome of the appeal.

29. [66]

    On 24 October 2020, the First COVID Regulation expired. That same day, the Second COVID Regulation commenced, in substance replacing the First COVID Regulation but with some important changes in drafting. The relevant operative prohibition remained cl 4 which provided:

30. [67]

    There was a significant change in language between the First COVID Regulation and the Second COVID Regulation. The First COVID Regulation provided that "If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the commercial lease during the prescribed period consisting of”, inter alia, a failure to pay rent.

31. [68]

    The temporal consideration “during the prescribed period” appears at the end of the clause and, from its position, grammatically limits the phrase “breach of the commercial lease”. In the First COVID Regulation, the only temporal restriction is that the breach of lease must be during the prescribed period.

32. [69]

    In the Second COVID Regulation, the language is quite different: “During the prescribed period, a lessor must not take prescribed action against the impacted lessee on the grounds of a breach of the impacted lease occurring during the prescribed period consisting of”, inter alia, a failure to pay rent.

33. [70]

    The phrase “During the prescribed period” was inserted at the start of the subclause. But it still appeared, as in the First COVID Regulation, at the end of the clause as well. The second appearance conveys the same meaning as in the First COVID Regulation. The first appearance of the phrase, at the start of the clause, however, is significant. It limited the prohibition to prescribed action taken during the prescribed period. That limitation did not appear in the First COVID Regulation, which prohibited prescribed action whenever it occurred (so long as the breach took place during the prescribed period). Importantly, under the Second COVID Regulation, the prescribed period was defined as only the first two months of the Regulation’s lifespan. The clause 4 prohibition had work to do only for those two months. That temporal restriction makes the Second COVID Regulation quite different to the First COVID Regulation.

34. [71]

    An impacted lease was defined as follows:

35. [72]

    The prescribed period was:

36. [73]

    It was common ground that the lease between Alamdo and Croc’s was an impacted lease and that Alamdo’s termination of the lease on 3 December 2020 amounted to “prescribed action”.

37. [74]

    Following Alamdo’s concession that Croc’s was an “impacted lessee” as at 3 December 2020, the principal remaining issue in dispute was whether, as Croc’s submitted, Alamdo was prohibited by cl 4 from taking “prescribed action” by terminating the lease during the prescribed period (which included 3 December 2020) or whether, as Alamdo submitted, and the primary judge found, by complying with cll 5 and 6 of the COVID Regulation, Alamdo was permitted to take prescribed action on 3 December 2020 against Croc’s. Accordingly, the terms of cl 5 of the COVID Regulation must be considered.

38. [75]

    In the First COVID Regulation, cl 5 imposed on lessors an obligation to “renegotiate” rent and other terms of their leases with impacted lessees:

39. [76]

    On 3 July 2020, Clause 5 was amended. Neither party suggested that those amendments were material to the outcome of the case.

40. [77]

    In the Second COVID Regulation, cl 5 provided:

41. [78]

    Clause 10 of the First and Second COVID Regulations was in essentially the same terms. The First COVID Regulation stated: [6]

42. [79]

    Clause 6 of the First COVID Regulation required disputes to be submitted to mediation:

43. [80]

    Clause 6 was relevantly identical in the Second COVID Regulation. The only change was the replacement of the terms “lease” and “commercial lease” with “impacted lease”.

44. [81]

    The primary judge concluded that cl 5(1) and cl 6 created circumstances in which, notwithstanding the general prohibition in cl 4(1), “prescribed action” could be taken during the “prescribed period” by a lessor on the grounds of failure to pay rent, provided that the requirements of the succeeding subclauses of cl 5 (that is, engagement in good faith negotiation) first took place. His Honour found:

45. [82]

    The general principles relating to the interpretation of Acts of Parliament are applicable to the interpretation of delegated legislation: Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 398; [1996] HCA 36. That general law principle is expressly set out with respect to purposive interpretation, and the use of extrinsic materials, in s 32 and s 33 respectively of the Interpretation Act 1987 (NSW), which apply to “statutory rules”, a term defined in s 21 to include a regulation.

46. [83]

    Legislation is to be construed as a whole and in its context: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]. The same principle extends to regulations, and therefore the Second COVID Regulation: Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at [19].

47. [84]

    Clauses 4, 5 and 6 of the Second COVID Regulation should be construed so that they each have a coherent operation. Subordinate legislation should, however, be construed bearing in mind that often it will not have been drafted with the same care as an Act of Parliament: Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] per Leeming JA, Bathurst CJ and McColl JA agreeing.

48. [85]

    The present issue is whether, in the Second COVID Regulation, by restating one part of the prohibition on cl 4, “breach of the impacted lease consisting of a failure to pay rent during the prescribed period”, cl 5 provided an implicit “gateway” to avoid the prohibition in cl 4, by the use of the words “unless the lessor has complied with this clause”, and if so, the period for which that gateway applied.

49. [86]

    Given cll 4, 5 and 6 first came into effect as part of the First COVID Regulation, it is appropriate first to construe them in that context. Clause 4, in terms, created a blanket prohibition upon terminating the commercial lease of an impacted lessee for non-payment of rent during the prescribed period. From the outset the scheme of the Regulations included cll 5 and 6. They each referred to prohibitions which were similar to or overlapped with the prohibition in cl 4, but those overlapping prohibitions were expressly made conditional.

50. [87]

    Specifically, cl 5(1) provided that a lessor must not take or continue prescribed action on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period "unless the lessor has complied with this clause". Clause 6 provided that a lessor must not take specified actions, including the termination of a commercial lease, "unless and until" the Small Business Commissioner had certified that a mediation had failed. Similarly, the headings to each of cll 5 and 6 referred to obligations to take steps "before" certain action was taken.

51. [88]

    The "prescribed period" of the First COVID Regulation was the entire period that that regulation was to be in force. Clause 10 of the First COVID Regulation stated:

52. [89]

    The Explanatory Note to the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (being the regulation which inserted the First COVID Regulation) indicated that the object of the First COVID Regulation was to give effect to the National Code in the following ways, in that it:

53. [90]

    The problem at the heart of this case was, that from the beginning, the aims in sub-paragraphs (a) and (b) of the Explanatory Note were ambiguous and, perhaps, potentially inconsistent. Sub-paragraph (a), the “prohibition” and “regulation” of certain rights, co-exists with a legislative purpose in sub-paragraph (b) of requiring re-negotiation of rent before legal enforcement action, thereby implicitly recognising that enforcement action for non-payment of rent would be permissible, at least at some time in the future, following a good faith negotiation.

54. [91]

    By cl 7, the First COVID Regulation required the Court to consider the leasing principles in the National Code.

55. [92]

    The first leasing principle in the National Code was that “Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)”. It is, however, correct that the remainder of the National Code, in particular, leasing principles 3-6, 11 and 13 envisaged that landlords would be encouraged to engage in negotiations about the payment of rent. Exceptions to the prohibition on terminating commercial leases for those who undertake good faith negotiations about reducing rents (cl 5) and engage in a mediation (cl 6) are likely consistent with those leasing principles.

56. [93]

    The ambiguity in the Explanatory Note and, to a lesser extent, the National Code, is reflected in the terms of the First COVID Regulation. On its face, the cl 4 prohibition upon termination of a commercial lease for non-payment of rent during the prescribed period was absolute, at least for so long as the lessee continued to be an impacted lessee. An absolute prohibition upon termination of a commercial lease during the COVID-19 pandemic period (or reasonable subsequent recovery period) for non-payment of rent is what, in terms, the first leasing principle in the National Code requires. The conduct prohibited by cl 5(1) and cl 6 in the First COVID Regulation, subject in each case to an exception, is overlapping with the cl 4 prohibition.

57. [94]

    The critical issue for the construction of the First COVID Regulation is whether a coherent application of cll 4 ,5 and 6 is available giving effect to the absolute prohibition in cl 4, for a period, while properly leaving work for cll 5 and 6 to do. It is clear that each of cll 5 and 6 prohibit certain conduct, relevantly termination of a commercial lease for non-payment of rent and that each provides a gateway to engage in that conduct. The words “unless” in cl 5 and “unless and until” in cl 6 make that clear. The question is whether the gateway in cll 5 and 6 should properly be seen as applying at a different time, after the absolute prohibition in cl 4 is spent.

58. [95]

    If so, cll 4, 5 and 6 the First COVID Regulation would operate so that a landlord was prohibited from taking any prescribed action, including terminating a commercial lease for non-payment of rent for the period the lessee continued to be an impacted lessee. When the First COVID Regulation was drafted, that period would end no later than 27 September 2020, the date on which the Jobkeeper scheme was originally to expire. The exception to the prohibition in cl 5, on the other hand, would permit the taking or continuation of prescribed action during the remainder of the prescribed period under the First COVID Regulation, which ran until 24 October 2020.

59. [96]

    An immediate issue in accepting this construction of cll 4, 5 and 6 of the First COVID regulation is that the “prescribed period” under the First COVID Regulation was the intended lifespan of the regulation. For this reason, the better view of the First COVID Regulation is the conclusion reached by the primary judge in resolving the constructional question. That conclusion was consistent with the principle described by Herzfeld and Prince in Interpretation (2nd ed, 2020, Thomson Reuters) at [5.210]: “if apparently inconsistent provisions cannot be construed in such a way that the apparent inconsistency disappears, one method of resolving the inconsistency is to subordinate a general provision to a more specific one dealing with the same subject matter”.

60. [97]

    This is perhaps a surprising outcome, having regard to the National Code’s clear prohibition upon termination of a commercial lease during the COVID pandemic period for non-payment of rent, and to the clear statement in the National Code that state legislation will be introduced to “give effect” to the National Code, for termination of a commercial lease to be permissible simply by conducting a good faith negotiation, for however fleeting a time (cl 5) or upon certification by the Small Business Commissioner that mediation has failed (cl 6).

61. [98]

    Whilst the construction of the First COVID Regulation I prefer is a matter properly to be taken into account as part of the context in construction the Second COVID Regulation, it is not a complete answer to the critical question of construction. The First COVID Regulation was introduced at the start of the global pandemic. The First COVID Regulation contained apparently inconsistent provisions which could only be resolved by subordinating the general provision in cl 4 to the more specific ones dealing with the same subject matter in cll 5 and 6. Quite different language was deliberately used in the Second COVID Regulation. The time periods during which cl 4 and cl 5 applied overlapped, but were no longer identical. I have concluded that, in context, which context properly includes the National Code, the Second COVID Regulation should not be understood as intending to enact the same inconsistent operation of cll 4, 5 and 6 as effected by the First COVID Regulation.

62. [99]

    On the critical question of construction I have concluded that the language used by the Second COVID Regulation is sufficiently different such that cll 4, 5, and 6 operate differently under the Second COVID Regulation compared to the differently worded provisions in the First COVID Regulation. Whilst due the two month overlap of cll 4 and 5, the ambiguity I have earlier described remained, the different wording of the Second COVID Regulation is sufficiently clear to lead me to conclude that the better construction of cll 4,5 and 6 is that the various overlapping prohibitions apply in a different way in the Second COVID Regulation and at different times.

63. [100]

    Clause 3 of the Second COVID Regulation provided that it “applies to the exercise or enforcement of rights under an impacted lease in relation to circumstances occurring during the prescribed period”. Importantly, as I have said, unlike the First COVID Regulation, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period. Clause 5(1) contained no such limitation. Therefore, even after the prescribed period, unless cl 5 was complied with, a landlord could not terminate a commercial lease for “breach of the impacted lease consisting of a failure to pay rent during the prescribed period”.

64. [101]

    The prescribed period was, according to the definition in cl 1 of the Second COVID Regulation, “the period beginning on the commencement of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 and ending at the end of 31 December 2020.” The Second COVID Regulation was to be repealed on 24 April 2021:

65. [102]

    Clause 7 of the Second COVID Regulation, much like clause 7 of the First COVID Regulation, provided:

66. [103]

    Clause 7 provides explicit direction to the Court to have regard to the National Code in considering whether to make a decision relating to the termination of an impacted lease by a lessor. That direction of necessity includes taking into account the National Code in construing the Second COVID Regulation for the purposes of making that decision. I would, in any event, treat the terms of the National Code as available extrinsic material in construing the Second COVID Regulation.

67. [104]

    Given the changes in language used from the First COVID Regulation, a coherent application can be given to cll 4 and 5 of the Second COVID Regulation, consistent with the leasing principles in the National Code in relation to the termination of a commercial lease due to non-payment of rent. This is achieved by treating the prohibition in cl 4 as applying during the prescribed period, equivalent to the COVID-19 pandemic period and reasonable recovery period in the leasing principles. Clause 5 should then be understood to provide both a prohibition and a gateway which extended to the period between 31 December 2020 and 24 April 2021, as long as the conditions in cl 5 were satisfied.

68. [105]

    Croc’s construction of the Second COVID Regulation better reflects the leasing principles in the National Code. As at 3 December 2020, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period. This is consistent with the principal prohibition in the National Code: “Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period”. Clause 5(1), which had no such time limitation, provided a separate prohibition, subject to an exception, which applied after 31 December 2020 and before 24 April 2021.The pathway provided by cl 5 was capable of independent operation for the period of almost four months during which the cl 4(2) prohibition would cease to apply. The commercial incentive for landlords to negotiate reductions in rent during the “COVID-19 pandemic period” and the “reasonable recovery period”, was that they could, after that period was over, after 31 December 2020 under the Second COVID Regulation, exercise their rights to terminate a commercial lease for non-payment of rent. That would be an incentive for landlords to negotiate rental reductions for the prescribed period in good faith, consistent with National Code leasing principles 3-6, 11 and 13.

69. [106]

    This construction of cl 4 on the one hand, and cl 5 on the other, provides a coherent and separate operation for the overlapping prohibitions. It best gives effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions: see Project Blue Sky at [70].

70. [107]

    The construction of the Second COVID Regulation I prefer better reflects the apparent purpose of the regulation and is coherent with the National Code. That construction also best gives effect to the purpose and language of those provisions while maintaining the unity of the Second COVID Regulation.

71. [108]

    I have concluded that cl 4 of the Second COVID Regulation provided a blanket prohibition during the prescribed period, which included 3 December 2020, on the taking of prescribed action, including the termination of a commercial lease for non-payment of rent. This is consistent with the National Code Leasing Principle 1. Clause 5 of the Second COVID regulation, also consistently with National Code Leasing Principle 1, provided a means by which, , after 31 December 2020 and before 24 April 2021 a lessor could rely on a commercial lessee’s non-payment of rent during the prescribed period as a basis to terminate the commercial lease but only:

    1. (1)

       if the good faith negotiation of the rent provided for in cl 5 had been undertaken; and

    2. (2)

       if the termination took place after the prescribed period.

72. [109]

    The same timing issue applies to cl 6 as applies to cl 5. That is, compliance with cl 6 is not a gateway out of the prohibition in cl 4(2) in the period prior to 31 December 2020. As at 3 December 2020, cl 4(2) of the Second COVID Regulation expressly applied only to prescribed action taken during the prescribed period, while cl 6 had no such limitation. The pathway provided by cl 6 was capable of operation for the period of almost four months during which cl 4(2) would cease to apply but cl 6 would continue to apply. It may be that cll 5 and 6 both needed to be satisfied if a commercial lease was to be terminated in the period between 31 December 2020 and 24 April 2021, but that issue does not need to be determined here.

73. [110]

    I would allow grounds 7, 8, 12 and 13 of the notice of appeal. Clauses 5(1) and 6 of the Second COVID Regulation did not, on 3 December 2020, create an exception to the prohibition in cl 4(2). As at 3 December 2020, cl 4(2) of the Second COVID Regulation prohibited the termination of the commercial lease by Alamdo for non-payment of rent by Croc’s during the prescribed period.

74. [111]

    Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the fourth issue does not strictly arise. Nevertheless, I have decided to address it relatively briefly: Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12]; Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 at [8].

75. [112]

    The primary judge concluded that Alamdo had complied with the requirements of cl 5. His Honour found:

76. [113]

    The primary judge held that Alamdo satisfied the onus of showing it had complied with all of its obligations under cl 5 after a request was made under cl 5(2). The appellants submitted that the primary judge’s finding that Alamdo negotiated in good faith was premised on his Honour’s construction of Alamdo’s 28 April 2020 offer, including the findings that it “remained open for 2020” and that the requests made by Croc’s to renegotiate rent during November 2020 “related to rent for a period for which ‘rent has been reduced, waived or deferred’, namely the entire period from 24 April 2020”. The appellants submitted each of those findings was wrong:

    1. (1)

       First, they submitted that the offer was not capable of applying for the entire period from 24 April 2020 because the offer only concerned the period up to the re-opening of the business. There was no offer of any reduction, waiver or deferral of rent after the business resumed trading on 1 July 2020.

    2. (2)

       Secondly, they submitted that the offer did not remain open for 2020, pointing to the correspondence between the parties after 28 April 2020.

    3. (3)

       Thirdly, they submitted that there was no suggestion the offer had ever been accepted, since Alamdo consistently maintained that Croc’s failed to provide various documents it conditioned the offer on.

    4. (4)

       Fourthly, the appellants submitted that “nothing resembling negotiations occurred after the mediation terminated on 29 September 2020, despite multiple requests by Croc’s under cl 5(2) of the COVID Regulation”. They submitted that those requests were made properly under cl 5(2), and that by failing to commence renegotiations within the requisite period, Alamdo failed to comply with cl 5(4) and was thus precluded by cl 5(1) from taking prescribed action.

77. [114]

    The appellants make no suggestion of an error in the principles adopted by the primary judge, namely that the requirement for Alamdo to negotiate in good faith had both a subjective element, being an absence of bad faith, and an objective element, being a basic standard of fair dealing and willingness to engage about relevant matters.

78. [115]

    I have set out the terms of the 28 April 2020 offer at [10] above. I would conclude that the offer made by Alamdo on 28 April 2020 was an offer to waive 50 per cent of the rent. This meant, on its proper construction, that if that offer were accepted, the waived rent would never be payable by Croc's. I would uphold ground 3 of the notice of contention. [7]

79. [116]

    The primary judge was correct to conclude that Alamdo's offer of 28 April 2020 remained open throughout 2020. The offer was not expressed as being limited in time and was never expressly or impliedly withdrawn. The appellants’ suggested limitation to the period before 1 July 2020 is an unduly narrow construction of the offer. The correspondence referred to by the appellants for the contrary proposition overlooks the fact that Alamdo's 28 April 2020 offer was itself preconditioned on the not unreasonable request for information establishing that Croc's was an “impacted lessee”. Subsequent requests by Alamdo for that same information do not amount to an express or implied withdrawal of the 28 April 2020 offer. Further, whilst in the 28 April 2020 offer Alamdo sought financial accounts for Croc’s business “at the premises”, subsequent correspondence made it clear that what Alamdo was seeking for this purpose was financial information that related to Croc’s business itself. Thus, the email of 10 August 2020 from Mr Maurici to Mr Aldons made it clear that he was seeking financial information relating to Croc’s business.

80. [117]

    None of the communications relied upon by Croc’s for the period after the mediation terminated on 29 September 2020 comprised a “second or subsequent request under subclause (2)” within the meaning of cl 5(3) of the Second COVID Regulation. The communications that Croc's now relies upon were no more than a re-assertion by Croc's of its claimed entitlement to rental relief calculated by reference to the turnover of the franchisee. That assertion was not correct.

81. [118]

    Following the conclusion of the mediation on 29 September 2020, the parties’ negotiations had reached an impasse by reason of Croc’s adherence to what it apparently now accepts as an incorrect view that it was entitled to rental relief calculated by reference to the reduction in turnover of its franchisee. The communications now relied upon by Croc's as new requests for rental relief again involved no more than a bare re-assertion of its position in that regard. Croc’s requests merely reiterated the incorrect legal assertion, either in terms or implicitly:

    1. (1)

       13 October 2020: Croc’s wrote to Alamdo requesting a “rent reduction between 24th April to end September in line with the code of conduct based on the proportionate drop in revenue experienced by the entity trading from the premises …”.

    2. (2)

       5 November 2020: Croc’s responded to Alamdo’s November rental invoice saying “have you calculated the rent due based on the information I’ve sent previously regarding sales and the downturn?”. The “information” referred to was information about the franchisee.

    3. (3)

       10 November 2020: Croc’s sent an email to Alamdo containing “sales information from the POS [the franchisee] for the previous months” to support Croc’s request that Alamdo “work out the rent payable based on the code of conduct in NSW”.

    4. (4)

       17 November 2020: Croc’s responded to Alamdo’s breach notice of 10 November with a request that Alamdo “calculate the rental due from April 24th to end November based on the information we have sent (sales)”. Again, the sales information Croc’s had already sent related to its franchisee, not Croc’s itself.

    5. (5)

       24 November 2020: Croc’s solicitor, Ms Smyth, sent Alamdo a letter asserting that Croc’s and its franchisee were “impacted lessees” and seeking a rental reduction based on the franchisee’s reduction in turnover:

82. [119]

    The primary judge was correct to conclude that, by reiterating the same inflexible and incorrect assertion that it was entitled to rental relief because of the franchisee’s reduced turnover, Croc’s did not make a “second or subsequent request under subclause (2)” within the meaning of cl 5(3) of the Second COVID Regulation.

83. [120]

    This issue was not pressed by the appellants.

84. [121]

    Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the sixth issue does not strictly arise. I will address it only briefly.

85. [122]

    The primary judge concluded at [255]-[259]:

86. [123]

    On its proper construction s 88 of the Retail Leases Act preserves, upon the repeal of the COVID Regulation, the accrued operation of the regulation for the period that it was in force. The section does not have the effect of indefinitely extending the emergency measures applied during the ''prescribed period". Such a construction would be directly contrary to the strict temporal limits for those measures required by s 87(4) of the Retail Leases Act which provides:

87. [124]

    I would reject ground 14.

88. [125]

    Given the conclusion that Alamdo complied with cl 5 of the Second COVID Regulation, this issue does not strictly arise. I will nevertheless address it briefly.

89. [126]

    Alamdo contended that the primary judge should not have rejected further evidence of the negotiations that occurred, being evidence of a further offer that Alamdo conveyed to Croc’s during the mediation. The primary judge concluded that such evidence was inadmissible because of s 19(3) of the Small Business Commissioner Act 2013 (NSW), which provides:

90. [127]

    Section 19(3) creates a species of statutory privilege and not an absolute bar to admissibility. “Not admissible” should be understood as meaning "not admissible over objection": Seltsam Pty Ltd v McGuinness (2000) 49 NSWLR 262; [2000] NSWCA 29 at [149]; Lazaris v R [2014] NSWCCA 163 at [97]; and Panayi v Deputy Commissioner of Taxation [2017] NSWCA 93; (2017) 319 FLR 228 at [39].

91. [128]

    The privilege created by s 19(3) is capable of waiver by a party’s conduct.

92. [129]

    The following statements, in subsequent open correspondence, demonstrate waiver of the statutory privilege by Croc’s:

    1. (1)

       In a letter to Alamdo dated 27 November 2020, Ms Smyth wrote:

    2. (2)

       In a letter to Alamdo dated 8 December 2020, Ms Smyth wrote:

93. [130]

    In addition, Croc’s, in advancing a positive case in its pleadings [8] and its submissions [9] , necessarily laid open to scrutiny the full nature of the parties' negotiations, including the offers made by Alamdo reflected in the correspondence cited immediately above. I would allow ground 2 of the notice of contention.

94. [131]

    Given the conclusion I have reached about the correct construction of the Second COVID Regulation, the seventh and eighth issues do not strictly arise. I will nevertheless address them together and briefly.

95. [132]

    Both parties accepted that the Lease Document purported to create a tenancy for a term longer than three years. The consequence of its non-registration was that, by reason of ss 41 and 53 of the Real Property Act 1900 (NSW), the Lease Document conveyed no legal leasehold estate to Croc’s. Instead, the only title granted to Croc’s was a monthly tenancy at will implied by s 127 of the Conveyancing Act.

96. [133]

    As such, Alamdo’s claim for loss of bargain damages did not rely on the Lease Document, but rather on cll 3.1 and 3.3(a) of the AfL. The word “Lease” was defined in the AfL to mean a lease of the Castle Hill premises in a form annexed to the AfL. Clause 3.1 provided that “the Landlord grants the Lease to the Tenant, and the Tenant accepts, the grant of the Lease from the Commencing Date”. Clause 3.3(a) provided that, from the Commencing Date, the parties were “bound by the Lease as if the Lease were completed, signed and delivered”.

97. [134]

    Pursuant to cl 3.2(a), Croc’s was obliged to give the “Relevant Items” including the signed lease, to Alamdo when the AfL was entered into, to be held by Alamdo in escrow pursuant to cl 3.2(b) pending the insertion of various details by Alamdo under cl 3.2(c). Pursuant to cl 3.2(d) Alamdo was obliged to, among other things, arrange for the Lease Document to be registered as soon as practicable after the Commencing Date was determined and to return a signed version to Croc’s. For reasons that were not explained, Alamdo failed to do so, and thus the Lease Document was never completed or registered.

98. [135]

    The primary judge held at [139] that the effect of cl 3.3(a) of the AfL was that Croc’s became bound by the lease “as if it had been registered”, relying on Leitz Leeholme Stud Pty Ltd v Robinson [1977] 2 NSWLR 544 at 547. His Honour also referred to Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252 and observed that the passage relied upon by the appellants did not deal with the enforceability of contractual rights of the parties under a contract giving rise to an unregistered lease.

99. [136]

    The primary judge held that Croc’s answer to the claim for loss of bargain damages depended upon its contentions as to the consequences of the lease not being registered, which his Honour rejected. He thus held that Alamdo was entitled to loss of bargain damages. The primary judge found:

100. [137]

     The appellants submitted that the above findings cannot be correct, both on a proper construction of the AfL and having regard to the authorities to which the primary judge referred.

101. [138]

     The appellants submitted that the starting point is Alamdo’s acceptance that cl 3.1 of the Lease Document was not effective to create a lease, and Alamdo’s consequent reliance on cll 3.1 and 3.3(a) of the AfL. If cl 3.1 was ineffective to create a lease, then so, it was submitted, were cll 3.1 and 3.3(a) of the AfL, since it was also an unregistered instrument purporting to create a lease for a term exceeding three years.

102. [139]

     Further, the appellants submitted that cl 3.3(a) of the AfL did not mean that the Lease Document was binding on Croc’s as though it was registered, but merely as though it was “completed signed and delivered”. They submitted that “completion, signing and delivery” is not equivalent to “registration”, since under the terms of the AfL separate obligations flowed from the fact of “completing, singing and delivering” on the one hand, and “registration” on the other.

103. [140]

     The appellants also submitted that the authorities relied on by the primary judge do not alter this conclusion. They said that in Leitz Leeholme, Glass JA held at 546 that an unregistered memorandum of lease may give rise to an executory agreement for a lease which is enforceable at law, but remains ineffective actually to create a lease at law. Mahoney JA similarly held at 548 that the unregistered memorandum in that case gave rise to rights “similar to those, which would be created by a contract to give such a lease”. The case, the appellants said, was not authority for the primary judge’s conclusion that cl 3.1 of the AfL created a lease at law.

104. [141]

     The appellants further submitted that the primary judge’s conclusion was contrary to Chan v Cresdon. At 256 the majority described the obligations which the lessor sought to enforce as “obligations which, at best, as between the landlord and the lessee, arise, not under the lease at law, but under an equitable lease which is the equivalent of the lease at law”. At 257 their Honours explained that what was enforceable was the “antecedent agreement, evidenced by the unregistered instrument, not the instrument itself”.

105. [142]

     The appellants further submitted that the primary judge did not identify which of Alamdo’s three proposed bases for its entitlement to terminate the lease he accepted:

     1. (1)

        a breach of an essential term by Croc’s;

     2. (2)

        repudiation of its obligation to pay rent; or

     3. (3)

        the express right in cl 15.3 of the Lease Document to determine the lease (if an event of default occurred).

106. [143]

     The appellants then challenged each of these proposed bases for termination. The substance of its argument was that each of the three bases was premised on the valid legal effect of the Lease Document. If the Lease Document never took effect as a lease at law, the appellants said, then it was impossible for Croc’s to breach its essential terms or repudiate the obligation to pay rent. Nor, if a legal lease was never created, could Alamdo avail itself of an express right to terminate. These arguments were clearly contingent on the appellants’ succeeding in their primary challenge: that the terms of the Lease Document were not enforceable because the Document created no legal lease.

107. [144]

     I would reject the appellants’ submissions. The primary judge was correct that by operation of the AfL, on and from the “Commencing Date” of 18 June 2018, contractual rights immediately arose in the terms recorded in the AfL and the Lease Document itself. These contractual rights bound the parties and existed in parallel to any rights which separately arose as incidents of any equitable or leasehold estate in the premises conveyed to Croc’s. The primary judge’s adoption of that approach was consistent with the principle that contractual and proprietary rights exist in parallel. This was explained in Leitz Leeholme at 547:

108. [145]

     I agree with the primary judge that Leitz Leeholme is a complete answer to the appellants’ arguments on non-registration of the lease. It is correct that the Lease Document did not create a legal lease, as Croc’s submitted. But the obligations created by the AfL, including in the terms of the Lease Document, were contractually enforceable.

109. [146]

     I also agree with the primary judge that the appellants’ reliance upon Chan v Cresdon is misplaced. That case turned upon the proper construction of a guarantee of obligations expressed to arise “under this lease” which were contained in an unregistered memorandum of lease. That clause was held, on its proper construction, to encompass a guarantee of rights which arose as an incident of the legal leasehold estate conveyed to the tenant and not any contractual rights between the parties arising under the memorandum of lease. The majority indicated (at 257), in respect of those contractual rights, that s 41 of the Real Property Act "does not avoid or render them inoperative", consistently with what had earlier been said in Leitz Leeholme.

110. [147]

     The complaint that Alamdo was not entitled to loss of bargain damages was derivative of the argument that the AfL and Lease Document did not create enforceable obligations. They did so, as explained above. Croc’s failure to pay rent was clearly a breach of that agreement, capable of sounding in damages.

111. [148]

     Finally, as explained, a commercial lease under the Second COVID Regulation included “an agreement for a lease where the lessee has become entitled to have his or her lease granted”. The agreement created by the AfL and Lease Document met that description.

112. [149]

     I would reject grounds 15 and 16.

113. [150]

     The appellants claimed that Alamdo had affirmed the lease on 30 November 2020 by sending a tax invoice for rent in December 2020 and demanding in a covering letter payment of arrears in rent.

114. [151]

     The primary judge found:

115. [152]

     I have concluded that the primary judge was correct. The specific rights and obligations in question were not mutually exclusive, or immediately inconsistent, in the sense required to put Alamdo to election. See: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656; and Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 406 ALR 632 at [48]-[53]. There is no meaningful difference between the concepts of "'waiver" and "election": Delor Vue at [39]; Agricultural & Rural Finance v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [56]-[62].

116. [153]

     On the hypothesis here being addressed, Alamdo had a right to terminate the Lease for continuing breaches of essential terms of the lease. In addition, Alamdo had both:

     1. (1)

        an entitlement to receive rent for the month of December 2020 due on 1 December 2020 without demand: cl 4.1 of the Lease Document; and

     2. (2)

        an obligation to render a tax invoice in respect of that upcoming payment against the possibility it would become due: cl 6.2(c) of the Lease Document.

117. [154]

     Alamdo’s right to receive rent was not contingent on its exercise of some act that was inconsistent with its maintenance of a right to terminate the lease. Alamdo had not sought, was not offered and did not accept any part payment of rent for December 2020. The obligation on Croc’s to pay rent arose immediately on 1 December 2020 without demand for the entire month of December 2020.

118. [155]

     The terms of the invoice and covering email did not amount to an unequivocal act by Alamdo sufficient to convey any election to affirm the lease. Each of those communications contained an express reservation of Alamdo’s rights to terminate the lease. So much was also reinforced by the terms of the Lease Document, which recorded the parties' agreement that the demand by Alamdo of rent would not be a waiver of any earlier breach by Croc's: cl 15.5(c).

119. [156]

     I would reject ground 24.

120. [157]

     I will deal with the appellants’ tenth issue and ground 1 of the notice of contention together as they raise related issues.

121. [158]

     It was common ground below that prior to 3 December 2020 Croc's had not paid the full amount of rent due for the month of April 2020. By ground 1 of its notice of contention, Alamdo asserted that the non-payment of the April 2020 rent was a continuing fundamental breach of the lease which entitled it to terminate. That breach arose on 1 April 2020, outside of the "prescribed period", and was therefore beyond the scope of the First and Second COVID Regulations.

122. [159]

     Alamdo submitted that nothing in the First and Second COVID Regulations precluded termination for that ongoing fundamental breach as at 3 December 2020. Croc’s sole reply to this contention was that Alamdo had irrevocably elected at an earlier time not to terminate on that ground, and the appellants expressly conceded below in final address that Alamdo was entitled to terminate the lease for that breach "unless the doctrine of election bites".

123. [160]

     The appellants submitted that the primary judge should have concluded that Alamdo had irrevocably elected at an earlier time not to terminate on the ground of non-payment of the full amount of April 2020 rent.

124. [161]

     In relation to this claim the primary judge found that:

125. [162]

     The decision referred to by the primary judge of Darke J in Todarello Property Investments Pty Ltd v GJA Kalra Pty Ltd [2021] NSWSC 1678, was directly on point. There Darke J found:

126. [163]

     Alamdo’s purported termination on 3 December 2020 was entirely based upon breaches consisting of failures to pay rent during the prescribed period. Alamdo did not seek to rely upon non-payment of rent on 1 April 2020. For essentially, the same reasons as Darke J in Todarello I would reject ground 1 of the notice of contention.

127. [164]

     If it were necessary to do so, I would accept that Alamdo elected to affirm the lease in the present case by acceptance of part payment of the April 2020 rent. That is, as I have found on issue 9, Alamdo did not waive Croc’s ongoing breaches during the prescribed period, but Alamdo did waive the breach constituted by failure to pay the rent due before the prescribed period. The history of the April rent payment was as follows:

     1. (1)

        On 27 March 2020, Mr Maurici emailed Mr Aldons attaching an invoice for the April 2020 rent;

     2. (2)

        Rent of $26,083.20 was due on 1 April 2020 and not paid on that date;

     3. (3)

        On 28 April 2020, Mr Anthony Maurici emailed Mr Aldons offering a 50% waiver of rent from 4 April 2020 and a deferral of 50% to be paid during the 24 months following the lifting of restrictions affecting Croc’s business;

     4. (4)

        On 21 May 2020, Mr Sebastian Maurici emailed Mr Aldons seeking financial information and payment of the remaining rent for March 2020 and up to 24 April 2020;

     5. (5)

        On 30 June 2020, Mr Sebastian Maurici emailed Mr Aldons attaching an invoice for July rent and saying “As discussed, please bring your rent up to date for March and April”;

     6. (6)

        On 13 July 2020, Croc’s paid $5,000 in rent to Alamdo;

     7. (7)

        On 10 August 2020, Mr Anthony Maurici emailed Mr Aldons demanding further financial information and the payment of rent up to 24 April 2020;

     8. (8)

        On 28 August 2020, Mr Sebastian Maurici emailed Mr Aldons attaching an invoice for September rent and demanding payment of rent for March and April 2020;

     9. (9)

        On 1 October 2020, Alamdo received a further late payment of rent for March and April 2020 (credited to 24 April 2020) in the sum of $29,963;

     10. (10)

         On 13 October 2020, Croc’s wrote to Alamdo requesting a rent reduction from 24 April 2020 to the end of September 2020 calculated by reference to the drop in revenue of the franchisee, rather than Croc’s.

128. [165]

     I conclude by reference to items (7), (9) and (11) that Alamdo sought and was paid the April 2020 rent up to 24 April 2020. Assuming this is a case where Croc’s failure to pay rent on 1 April 2020 entitled Alamdo to forfeiture and re-entry, Alamdo, with the knowledge of all the circumstances, elected to waive that particular entitlement and affirm the lease by a communicated act, being the acceptance of April rent up to 24 April 2020. This was an “unequivocal recognition of the continued existence of the lease” which amounted to “a waiver of that [power]” to forfeit the lease: Owendale Pty Ltd v Anthony (1967) 117 CLR 539 at 556-557. With full knowledge of its rights, Alamdo elected to waive its entitlement to terminate on grounds of non-payment of rent that accrued before the prescribed period. It follows that those grounds for termination were no longer available when Alamdo purported to terminate on 3 December 2020.

129. [166]

     For this additional reason I would reject ground 1 of the notice of contention and allow ground 23 as it related to the April rent.

130. [167]

     Again, given the conclusion I have reached about the correct construction of the Second COVID Regulation the 11th issue does not strictly arise. I will nevertheless address it briefly.

131. [168]

     Croc’s complained that the primary judge failed to deal with its arguments about the scope of cl 11 of the AfL.

132. [169]

     At [309], the primary judge found, in addressing Chan v Cresdon:

133. [170]

     Croc’s submitted that this passage showed the primary judge assumed, erroneously, that cl 11 of the AfL guaranteed the relevant obligations, without any real analysis.

134. [171]

     Clause 11 of the AfL, being the guarantee on which Alamdo expressly relied, was relevantly in the following terms:

135. [172]

     It was, and remains, common ground that the reference to “clause 22" was an obvious error and should be construed as “clause 20”.

136. [173]

     I have concluded that cl 11 of the AfL had the effect that those guarantees were given in respect of all obligations of Croc’s under the AfL. The effect is that the cl 11 guarantee should be read by inserting cl 20 of the Lease Document, but replacing the word "Lease" with ”AfL” where it appeared in clause 20.1 of the Lease Document. Read in that way, clause 20.1 as applied to the AfL included broad guarantees of Croc's payment of money "under this AfL", performance and observance of its obligations "contained in this AfL" and the payment of damages arising from breach of Croc's obligations "contained or implied in this AfL".

137. [174]

     Croc's obligations under the lease on which Alamdo sued, including its obligations to pay money and otherwise observe the terms of the lease, owed their existence as contractual obligations to the terms of the AfL. That was the effect of cl 3.3 of the AfL.

138. [175]

     I would reject grounds 17 and 22.

139. [176]

     Given the conclusion I have reached about the correct construction of the Second COVID Regulation the twelfth issue does not strictly arise. I will nevertheless address it briefly.

140. [177]

     The primary judge held at [306]-[324]:

141. [178]

     The construction of cl 20.10 adopted by the primary judge accords with the text of the clause, including in particular by giving work to do to each of the phrases "Minimum Guarantee Period" and "Guarantee Release Period". There was no error in the adoption of that construction.

142. [179]

     The primary judge correctly adopted a construction of cl 20.10(b) as effecting a change, or stepping down, in the scope of the guarantees after the initial two-year period, such that during the "Minimum Guarantee Period", the guarantees extended to every obligation to pay money, the performance of every obligation of Croc's and all obligations of Croc's to pay damages.

143. [180]

     On the hypothesis that this issue arose, the primary judge was correct to conclude that the guarantors were not released from their obligations as guarantors. I would reject grounds 18, 19, 20 and 21.

144. [181]

     Croc’s submitted that if, as I have found, the Court accepted that Alamdo had no lawful right to terminate the lease and re-enter possession, then it repudiated the agreement in the AfL and Lease Document. Croc’s submitted that “[b]y treating the AfL and Lease Document as at an end after the repudiation had occurred, Croc’s accepted the repudiation and is thus entitled to damages for loss of bargain”.

145. [182]

     The difficulty with this ground is that by reason of late filing of the cross-claim, the parties contemplated that there would be a separate hearing about damages if the cross-claim succeeded. Accordingly, a number of issues have not been litigated before the primary judge.

146. [183]

     I have found that Alamdo was precluded from terminating the lease only by reason of a regulatory prohibition. The Second COVID Regulation did not have the effect of modifying the terms of the lease, but was instead premised upon the existence of certain rights, and sought to restrict the exercise of those rights in specific circumstances. This raises a significant potential issue in relation to any damages claim by Croc’s. It was only by operation of the Second COVID Regulation that Alamdo was not entitled to exercise rights it would otherwise be legally entitled to enforce. Any damages claim would need to address the effect of the Second COVID Regulation. Whilst no doubt an injunction may have been available to prevent termination of the lease on 3 December 2020 had it been sought, no express rights to damages for breach are conferred by the Second COVID Regulation. As to any implied rights to damages for breach of the Second COVID Regulation, Alamdo had obligations under the COVID Regulations to negotiate in good faith if requested to do so. I have found that it complied with those obligations. It may be, on the correct construction of the Second COVID Regulation, Croc’s is not entitled to damages for wrongful termination of the lease. The terms of cl 9 pf the Second COVID Regulation, which provide that the “rules of equity and of common law” are not excluded from applying to the determination of a dispute concerning the termination of a commercial lease by a lessor may raise additional issues. As neither the Court below nor this Court has heard argument on this issue, this Court is not in a position to resolve that question.

147. [184]

     Two further matters were raised by Alamdo in written submissions which are antecedent to the calculation of damages and not adequately addressed by Croc’s on this appeal. The first was that Alamdo’s conduct, in acting upon an incorrect understanding of the Second COVID Regulation, did not give rise to a repudiation by way of anticipatory breach: see DTR Nominees Pty Ltd v Mona Pty Ltd (1978) 138 CLR 423 at 432. Alamdo’s conduct was arguably in accordance with the AfL and the Lease Document. It was only by reason of the Second COVID Regulation that the termination of the lease was impermissible. As best I can tell from the record below, the parties did not litigate the question of whether, had what I have found to be the correct construction of the Second COVID regulation been explained to Mr Maurici, Alamdo would nevertheless have gone ahead with the termination. This Court is not in a position to resolve that question.

148. [185]

     The second issue raised by Alamdo was that Croc's was at all material times in continuing breach of essential terms of the lease and Croc’s had not shown itself ready and willing to perform so as to be capable of accepting any repudiation of the lease by Alamdo. As made clear in Foran v Wight (1989) 168 CLR 385 at 397-402, a plaintiff, being unable to prove actual performance, has to prove that the defendant has refused to perform (thereby dispensing with performance by the plaintiff) and that the plaintiff was ready and willing to perform and would have performed but for the dispensation. In this context readiness and willingness denotes ability, as well as disposition, to perform. Repudiation by one party amounting to a waiver of performance by the other party does not entitle that party to enforce the contract on the notional footing that he or she has actually performed his or her part of the contract. Proof of readiness and willingness goes to the existence of the cause of action. At all times Croc’s position was that it would only pay rent if Alamdo offered Croc’s the waivers and deferrals to which Croc’s was “entitled”, based on the decreased turnover of its franchisee. Croc’s had no such “entitlement”. Croc’s was entitled to a good faith negotiation of rent. It received that. I doubt that Croc’s proved it was ready, willing and able to fulfil its obligations under the AfL or the tenancy at will. I have concluded, however, that as the matter was not properly litigated below or in this Court the entire question of damages, if any, payable to Croc’s, should be remitted to the Equity Division.

Conclusion and orders

1. [186]

   For the foregoing reasons I propose the following orders:

   1. (1)

      Appeal allowed.

   2. (2)

      Set aside orders 1 and 2 of Stevenson J dated 28 February 2023 and all orders dated 8 March 2023 and in lieu thereof order:

   3. (3)

      First respondent to pay the appellants’ costs of the appeal.

2. [187]

   STERN JA: I agree with the orders proposed by Payne JA and with his Honour’s reasons. The short reasons set out below are intended merely to provide some short elaboration of my reasons for concurring with Payne JA as to the key issue, being the construction of the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (NSW), which introduced what Payne JA calls the “Second COVID Regulation” on 24 October 2020.

3. [188]

   For convenience, I will use the terms defined in the judgment of Payne JA.

4. [189]

   The construction adopted by Payne JA properly takes account of both the language and purpose of the Second COVID Regulation. It gives each of cll 4, 5 and 6 work to do. It gives due weight to the significant difference between the language of cl 4 in the First and Second COVID Regulations.

5. [190]

   I consider that there is ambiguity on the face of the Second COVID Regulation as to how cll 4, 5 and 6 interacted. It is therefore appropriate to have regard to extrinsic material which may bear upon construction: s 34(1)(b)(i) of the Interpretation Act 1987 (NSW). As to the purpose of the Second COVID Regulation, the terms of the National Code, adopted on 4 April 2020, make it clear that the intention was that the National Code would be:

6. [191]

   The Second COVID Regulation was a regulation enacted to meet that purpose. That is also apparent from the Explanatory Note to the Second COVID Regulation, which states that:

7. [192]

   The Explanatory Note to the First COVID Regulation had made it clear that it was enacted to give effect to the National Code.

8. [193]

   Moreover, a note under subcl 4(2) of the Second COVID Regulation stated:

9. [194]

   Similar notes referencing principles in the National Code could be found after subcll 4(3), (4), (5), 5(6) and (8). Whilst s 35(2) of the Interpretation Act makes it clear that such notes are not part of the Regulation, they are material that is capable of assisting in the ascertainment of the meaning of the Regulation. Thus, whilst they would only be given relatively little weight, they further support my conclusion as to the purpose of the Second COVID Regulation. In this regard paragraph 1 of the Leasing Principles in the National Code, referenced in the note under subcl 4(2) of the Second COVID Regulation, was the only paragraph that addressed termination of a commercial lease due to non-payment of rent (as Payne JA observes at [59]). It set out the principle that landlords “must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)”.

10. [195]

    Clause 7 of the Second COVID Regulation, the terms of which are set out in Payne JA’s judgment at [98], makes it clear that the Court should have regard to the leasing principles in the National Code when construing the Second COVID Regulation when considering questions such as are raised in the present cases.

11. [196]

    Having regard both to both the language and purpose of the Second COVID Regulation, it is apparent that the drafter:

    1. (1)

       intended the period of operation of cl 4 on the one hand, and cll 5 and 6 on the other, to be different. That is abundantly clear from the terms of subcl 4(1), which limited the operation of cl 4 to “during the prescribed period”. There was no such limitation in cll 5 or 6; and

    2. (2)

       intended subcl 4(2) to mean what it said, being that during the prescribed period there was a prohibition on prescribed action, including for a breach of an impacted lease by reason of a failure to pay rent which occurred during the prescribed period. Subclause 4(2)(a) made express and specific provision for that prohibition to apply as regards a breach consisting of a failure to pay rent. Unlike cl 5, subcl 4(2) did not include any exception to its prohibition on the taking of prescribed action.

12. [197]

    Whilst there was some overlap between the operation of cll 4 and 5 during the prescribed period, the construction adopted by Payne JA gives those clauses a coherent operation, with each clause having work to do. Clause 4(2) set out a prohibition which applied during the prescribed period. Subclauses 5(2) to (8) set out and regulated steps which could be taken during the prescribed period (or after). However, compliance with those subclauses did not enable any relaxation of the prohibition in subcl 4(2), which applied during the prescribed period. Subclause 5(1) set out a conditional prohibition that covered only the taking of prescribed action on account of a breach consisting of failure to pay rent, prohibited both the taking and continuation of prescribed action, and was not limited in effect to the prescribed period. Steps taken during the prescribed period under subcll 5(2) to (8) would be relevant to whether the conditions upon which prescribed action could be taken or continued under subcl 5(1) were satisfied, and would thus be relevant to whether a lessor could take prescribed action after the prohibition in subcl 4(2) ceased. Whilst there is some overlap, as is well recognised, subordinate legislation should be construed bearing in mind that often it will not have been drafted with the same care as an Act of Parliament: Environment Protection Authority v Orchard Holdings (NSW) Pty Ltd (in liq) (2014) 86 NSWLR 499; [2014] NSWCA 149 at [44]-[45] (Leeming JA, Bathurst CJ and McColl JA agreeing).

13. [198]

    The First COVID Regulation was plainly enacted in a context of some urgency and disruption. By the time that the Second COVID Regulation was enacted, it was clearly seen as appropriate expressly to limit the operation of cl 4, but not cll 5 or 6, to a defined period less than the period of operation of the Regulation as a whole. That is not unexpected in an evolving situation such as that within which it was made. In these circumstances, and accepting the construction of the First COVID Regulation as set out in the reasons of Payne JA at [96], the construction of cl 4 of the Second COVID Regulation should be approached in the context of, but need not in my judgment be tethered to, that of cl 4 of the First COVID Regulation.

14. [199]

    BASTEN AJA: This is an appeal from a decision of Stevenson J concluding that the respondent, Alamdo Holdings Pty Ltd (Alamdo), was entitled to terminate a commercial lease for non-payment of rent by the lessee and first appellant, Croc’s Franchising Pty Ltd (Croc’s). [10] I agree with Payne JA, except with respect to the proper construction of the “Second COVID-19 Regulation”, which is critical to the outcome of the appeal, the other grounds being unsuccessful. The issue concerns the relationship of cl 4(2) with cll 5 and 6. Croc’s submitted that cl 4(2) constituted an absolute prohibition on the lessor taking any prescribed action, including the termination of an impacted lease, on the ground of “a failure to pay rent”. The alternative construction, for which Alamdo contended, was that cl 5 provided a mechanism by which the party to an impacted lease could avoid the prohibition in cl 4 if the ground for taking prescribed action were a “failure to pay rent during the prescribed period”, and so long as cl 6 was also complied with. The latter construction complies with the relevant principles of statutory interpretation (including common sense) and should be accepted. The appeal should be dismissed.

15. [200]

    While the relevant statutory instrument has been referred to above as the “Second COVID-19 Regulation”, the instrument in question was Schedule 5 to the Conveyancing (General) Regulation 2018 (NSW), and was titled “Schedule 5 Commercial leases – COVID-19 pandemic special provisions”. It, and its predecessor, will be referred to below as the first and second versions of Schedule 5, the first being that which commenced on 24 April 2020 and the second that which commenced on 24 October 2020.

16. [201]

    It is desirable to identify at the outset the principles of statutory interpretation which must be applied. To give context to the discussion of relevant principles of statutory interpretation (and at the risk of repetition) it is convenient to set out the key prohibitions in cll 4 and 5, and cl 6 in full, as first promulgated:

Legal principles

1. [202]

   As a matter of general law, principles of statutory interpretation apply to delegated legislation. [11] That general law principle is itself adopted with respect to purposive interpretation and the use of extrinsic materials in s 32 and s 33 respectively of the Interpretation Act 1987 (NSW), which apply to “statutory rules”, a term defined in s 21(1) to include a “regulation”, and thus a schedule to a regulation.

2. [203]

   However, courts are conscious that subordinate legislation is not always drafted by parliamentary counsel, and may not adopt conventions regularly applied in drafting statutes. [12] In the present case, the Court may take judicial notice of the fact that many steps were taken in haste at the outbreak of the Covid-19 pandemic. [13] Further, as the notes to cl 4(1) and cl 5(1) set out above reveal, they were intended to give effect to “leasing principles” prepared by a body called the National Cabinet. [14] The leasing principles were not entirely coherent and pursued potentially conflicting purposes. These factors allow a court greater than usual leeway in construing the language of the instruments to achieve the stated or apparent purposes. [15]

3. [204]

   Before identifying the applicable principles of statutory construction, it is necessary to state the nature of the constructional choice which is required to be made. Absent that step, the relevant principles cannot be identified. Having taken that step, and the relevant principles identified, those principles must be applied in construing the relevant provision.

4. [205]

   To identify the constructional choice it is sufficient to note that cl 4(1) (later cl 4(2)) imposed an unqualified prohibition on a lessor under an impacted lease terminating or taking enforcement action based on a breach of the lease. Clause 5(1) imposed a conditional prohibition on a lessor under an impacted lease terminating the lease for non-payment of rent. The issue was whether a purported termination by the lessor (Alamdo) during the operation of the second version of Schedule 5, having complied with the condition in cl 5(1), was effective, despite the unqualified prohibition in cl 4.

5. [206]

   Many judgments start by reciting the following statement in the joint reasons in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT): [16]

6. [207]

   That passage would not assist in this case. The Schedule contained three provisions which could not operate harmoniously (or, perhaps, at all), and which contained no indication as to their internal hierarchy. To the extent that no hierarchical principle was stated, one must be implied. However, as will be seen, the language of the qualified prohibitions, though not the language of the absolute prohibition, suggested the hierarchy, consistently with that which would be implied by accepted principles of statutory interpretation.

7. [208]

   Further, a coherent operation is not established by finding a specific situation where one provision may have operation although, generally, it has none. In any event, that exercise contains an implicit hierarchical principle, because a similar approach may be taken to each of the three provisions. Indeed, if one seeks to maximise the operation of all three provisions, full effect should be given to cl 5, because it only operated in respect of one specific matter of several dealt with in cl 4, so that cl 4 would always have had a range of operations even if not in the area in which cl 5 operated.

8. [209]

   The reasoning adopted by Croc’s was that the most general provision (cl 4) should be given full effect and the specific provisions squeezed in so that they may operate if perchance an area can be found for them at some time or in some circumstance. For reasons which will be explained, that is contrary to established principles of statutory construction and contrary to authorities where similar problems have arisen.

9. [210]

   Before addressing those principles, one other characteristic of the clauses in the Schedule should be noted. Many statements of the governing principle are expressed in relation to power-conferring provisions. The question in those cases is whether the most general conferral operates according to its terms, or must be read down so as to give effect to a more specific but qualified, limited or restricted conferral of power. By contrast, the Schedule assumed that a power exists (the power of a lessor to terminate a lease) and imposed constraints on the operation of that power. For reasons which will be explained, the situation is not in principle different in relation to a provision conferring a power, although it is the restriction, not the conferral of power which is to be addressed.

10. [211]

    There is no doubt that the fundamental issue in this case is to establish a hierarchy in order to determine which clause will prevail. This exercise was identified in the joint reasons in Project Blue Sky Inc v Australian Broadcasting Authority: [17]

11. [212]

    Some guidance may be obtained in determining a hierarchy of provisions from a statement by Dixon CJ in Commissioner for Railways (NSW) v Agalianos, [18] cited with approval in the joint reasons in Project Blue Sky, that “the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed.”

12. [213]

    One principle which has been identified, but quite rarely discussed, is to read the statutory instrument as one would any other document, “that is, from the beginning onwards”. As explained by Priestley JA in Patman v Fletcher’s Fotographics Pty Ltd: [19]

13. [214]

    In this case, reading the Schedule in the order in which provisions appear requires the reader to put himself or herself in the shoes of the drafter. It requires an attempt to understand the logic by which the drafter constructed the document and why cl 4 was followed by cll 5, 6 and 7. If, as suggested below, there is a clear answer in the National Code, the Schedule can be construed in a constructive, rather than a destructive, manner: that is, one starts with the assumption that the drafter had a clear purpose and believed it had been transposed into the instrument to be construed. That that is the correct approach was identified in 1942 by Jordan CJ in Hall v Jones:, [20] stating “that a Court is entitled to pay the Legislature the not excessive compliment of assuming that it intended to enact sense and not nonsense”.

14. [215]

    Pearce and Geddes identified the ‘read as written’ approach as “consistent with the rule that, in the event of a conflict between two sections in an Act, the later section prevails”. [21] An example of the application of that approach may be found in Ross v The Queen, [22] where the question was whether a person convicted summarily for an indictable offence had a right of appeal to the Queensland Court of Criminal Appeal. Section 673 of the Criminal Code (Qld) provided that:

15. [216]

    Gibbs J noted that, if the words of s 659 “were given the fullest operation of which they are capable, they would render the provisions of s 673 entirely nugatory – since every person summarily convicted of an indictable offence would be deemed to have been convicted of a simple offence, there would never be a case in which an appeal could be brought under s 673”. [23] Gibbs J continued:

16. [217]

    As can be seen, if this principle were applied, cl 5 would prevail.

17. [218]

    There is longstanding authority in favour of a “common sense” approach to statutory interpretation. For example, in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [24] Mason and Wilson JJ, quoting DC Pearce, stated that “[t]he rules [of statutory interpretation] … are no more than rules of common sense, designed to achieve this object”, the object being “in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole”. “Common sense” in this context may be understood as invoking the common practices by which the meaning of any written document is discovered; it therefore underpins the ‘read as written’ approach.

18. [219]

    There is another basis on which cl 5 should prevail. That is the well-established (and common sense) principle that a specific provision will qualify a general provision. Whereas such principles as ‘the later provision prevails’ have been rarely applied, this principle has been widely applied and provides the default mechanism for resolving intractable conflicts, especially (but not only) within a single instrument.

19. [220]

    Thus, if apparently inconsistent general and specific provisions cannot be construed textually to resolve the conflict, one should infer that the drafter intended that the general provision be subordinate to the more specific one dealing with the same subject matter. [25] Indeed, in Smith v The Queen, [26] the High Court held that the principle would “dictate” the outcome, observing:

20. [221]

    In The Ombudsman v Laughton, [27] Spigelman CJ stated in classical terms the principle that the general is subservient to the specific:

21. [222]

    The application of the principle in Laughton is instructive. Mr Laughton brought proceedings against the Ombudsman in the Government and Related Employees Appeals Tribunal (GREAT), challenging the Ombudsman’s refusal to appoint him to a vacant office. The right of appeal was created by s 20 of the Government and Related Employees Appeals Tribunal Act 1980 (NSW). The Ombudsman sought to rely upon a statutory immunity from “any civil or criminal proceedings in respect of any act, matter or thing done or omitted to be done for the purpose of executing [the Ombudsman Act 1974 (NSW)] or any other Act unless the act, matter or thing was done, or omitted to be done, in bad faith”. Section 32 of the Ombudsman Act provided that the Ombudsman might employ staff “under and subject to” the Public Sector Management Act, which, as the Chief Justice noted, brought with it a right of appeal against the decision of the Ombudsman under s 20 of the GREAT Act. [28]

22. [223]

    The Ombudsman relied upon a reading of the legislation not dissimilar to the approach adopted by Croc’s in the present case. This was summarised and rejected by Spigelman CJ in the following passage:

23. [224]

    As will be seen below, Croc’s approach would, in the language of the Chief Justice, deprive cl 5 of almost all of its intended content.

24. [225]

    A case involving an instrument strikingly similar to the Schedules, where a statute enacted a prohibition in two different forms, is No 20 Cannon Street Ltd v Singer & Friedlander Ltd. [29] The case concerned the operation of two UK statutory instruments known as the Counter-Inflation (Business Rents) Orders. The orders required that a “standard rate” be calculated which was payable but could not be exceeded during a “standstill period”. The two provisions were as follows:

25. [226]

    Megarry J reasoned as follows: [30]

26. [227]

    Although no one referred to this case in the course of argument, the approach adopted by Megarry J is clearly apposite and entirely persuasive. It applied the same principle which the High Court had stated in Smith should “dictate” the outcome. Its adoption would be fatal to Croc’s’ submissions, the result of which, in Megarry J’s language, is “absurd”.

27. [228]

    Before turning to the provisions in the present case, it is necessary to say a little about the obligation contained in s 33 of the Interpretation Act to prefer a construction that would promote the purpose or object underlying the Act or statutory rule to one that would not promote that purpose or object.

28. [229]

    Purposes can be identified at different levels of generality or specificity within a statutory scheme. Thus, a statutory scheme may itself have a purpose which can be identified at a high level of generality, whereas specific provisions may reveal more specific purposes, or aspects of the general purpose. As will be noted shortly, the Schedule identified their own objects, namely, to give effect to the arrangements proposed under the National Code. The National Code, however, identified a number of mechanisms for protecting lessees from the adverse economic effects of lockdown during the pandemic, each of which was separately reflected in a clause of the Schedule. What the National Code did not prescribe, however, was the interrelationship of the various steps which had been agreed upon by National Cabinet as appropriate. The State Schedule giving effect to the Code, however, had to reconcile the potentially conflicting purposes. That element of reconciliation must be understood as an underlying purpose of the Schedule.

29. [230]

    There is one further matter of moderate importance in the present case. There were two versions of Schedule 5; each was limited to a period of six months as required by its empowering legislation. Although the actions of Alamdo were taken while the second version of Schedule 5 was in force, there had been a material change to cl 4 in what was otherwise a re-enactment of the first version. On one view, Alamdo’s construction of the key provisions was more powerful in relation to the first than the second version of Schedule 5. Accordingly, it becomes necessary to consider what weight should be given to the interpretation of the first version of Schedule 5 in determining the operation of the second.

30. [231]

    Herzfeld and Prince have stated that “[i]n the absence of any contrary intention, where words in one statute are used in a subsequent statute to deal with the same subject matter along the same lines (i.e. in pari materia) it is presumed that the words have the same meaning in the subsequent statute as in the earlier statute”. The presumption arising from re-enactment need not depend upon an earlier judicial decision as to the meaning of the statute. [31] Accordingly, it will be appropriate to address the proper construction of the first version of Schedule 5 and then to determine whether the limited changes made in the second version were intended to affect the overall operation of cll 4 and 5, their application at the time of the second version of Schedule 5 being the critical issue in the present case.

Construing the second version of Schedule 5

1. [232]

   The application of the principles discussed above may be assisted by restating the provisions in question, although they have been set out by Payne JA. The next step is to identify the purpose of Schedule 5 and of the specific provisions within it. That course requires reference to the first version of Schedule 5.

2. [233]

   The first version of Schedule 5, promulgated on 24 April 2020, contained 10 clauses. Two provisions may be noted briefly. Clause 10 merely provided for the repeal of the Schedule six months after the day on which it commenced, in compliance with the empowering provision, being s 87(4) of the Retail Leases Act 1994 (NSW). Clause 9 preserved “the rules of equity and of common law” and was not referred to in the course of this proceeding.

3. [234]

   Two other provisions were of peripheral relevance. Clause 3 read as follows:

4. [235]

   The other provisions should be addressed in the order in which they appear in the Schedule. Clause 1 contained important definitions, two of which were central to the operation of the Schedule:

5. [236]

   Clause 2 was also definitional, providing a meaning for the term “impacted lessee”, again by reference to the economic effects of the Covid-19 pandemic.

6. [237]

   It remains to identify the content of the four operative provisions of the Schedule, namely cll 4, 5, 6 and 7. In accordance with the principle that the document should be read in the order in which it is written, relevant parts of these provisions are set out in that order below.

7. [238]

   The first operative provision, cl 4, relevantly provided:

8. [239]

   The following aspects of cl 4, in its original form, should be noted. First, cl 4(1) identified three categories of breach with respect to which the lessor must not take any prescribed action. The next provision, cl 5 was only concerned with one category of breach, namely (a), a failure to pay rent.

9. [240]

   Secondly, the definition of “prescribed action” set out above was comprehensive, containing 12 paragraphs, including a final paragraph covering “any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State”. As will be seen, while cl 5 applied to “prescribed action”, cll 6 and 7 departed from this language in identifying conduct to which they applied.

10. [241]

    Thirdly, although cl 4(1), consistently with cl 3, was limited to breaches which occurred during the “prescribed period”, the prohibition on action by the lessor with respect to such a breach, was not limited to action which might have been taken during the prescribed period. Reading the words in isolation, the prohibition could continue after the prescribed period, preventing the lessor from relying upon a breach, so long as the breach occurred during the prescribed period. However, because the prescribed period was six months, and the Schedule only operated for six months, that eventuality could not arise. [32]

11. [242]

    Fourthly, subcl 4(2) prohibited a rent increase. Although the phrase “during the prescribed period” qualified the time at which the lessee must be an impacted lessee, it may be inferred that the rent increase must not have occurred during that time either. In its terms, however, subcl (2) did not identify any temporal limit on the prohibition it imposed. That changed in the second version of Schedule 5.

12. [243]

    Subclause (3) operated in tandem with subcl (2), and referred to the prohibited rent increase. It expressly prohibited prescribed action taken “after the prescribed period”. It appears to have been included from an abundance of caution, as it might have been inferred that a prohibited rent increase could not give rise to prescribed action. Further, by way of marked similarity with the provisions considered in No 20 Cannon Street, noted above, it is difficult to give subcl (3) any function which is not covered by subcl (1), unless, contrary to initial impressions, subcl (1) did not operate after the prescribed period. However, why the drafter thought that was relevant in circumstances where the Schedule and the prescribed period were coterminous is unclear. There is no need to resolve this issue in the present case: rather, its significance is that it suggests that a strict textual reading of the Schedule is inappropriate.

13. [244]

    The second operative provision, cl 5, read as follows:

14. [245]

    Four aspects of cl 5 are significant. First, the prohibition in cl 5(1), though not the order of the phrases, is identical to the prohibition contained in the chapeau to cl 4(1). The only difference from the prohibition in cl 4(1) is that in cl 5(1) it is limited to a ground identified in par (a) of cl 4(1), namely a failure to pay rent.

15. [246]

    Secondly, the prohibition in cl 5(1), is qualified by the final words, providing an exception where the lessor has complied with this clause (the exception).

16. [247]

    Thirdly, like cl 4(1), the first limb of cl 5(1) (the prohibition) is not temporally limited: both were to continue for the life of the Schedule. The two prohibitions being coterminous, if the general were to prevail, the specific would be rendered nugatory. However, that cannot have been the intention of the drafter, with the consequence that the specific provision should prevail and cl 4(1)(a) must be read down as subject to the specific exception set out in the immediately succeeding cl 5. As explained by the High Court in Smith, that conclusion is “dictated” by the principle that the general must be subject to the specific.

17. [248]

    Fourthly, that conclusion is supported by a purposive approach to the question of construction. Although the notes contained in the respective clauses were not part of the Schedule, they were extrinsic material to which regard may properly be given. [33] Significantly, the “leasing principles” in the National Code of Conduct identified in notes within cl 4 (being No 1, 6, 11, 13 and 14) did not overlap with the principles identified in notes to cl 5 (being No 3-5, 7-10).

18. [249]

    Clauses 6 and 7 may be considered together. Clause 6 has been set out above in full and need not be repeated; cl 7 provided:

19. [250]

    Clause 6 differed from cll 4 and 5 in that the prohibition was not identified by reference to “prescribed action” but by reference to three categories of action, although the categories covered most of the defined prescribed actions. The significance for present purposes is the fact that the prohibition was subject to a qualification introduced by the phrase “unless and until”.

20. [251]

    The prohibition in cl 6, although not stated by reference to the defined term “prescribed action”, effectively covered the field of conduct so defined. That this was intended may be inferred from cl 7, requiring the court to “have regard to the leasing principles set out in the National Code of Conduct”, in dealing with the same conduct as that identified in cl 6. Thus, although differently expressed, cl 6 reflected the full extent of the prohibition in cl 4(1), but rendered it subject to compliance with a condition. If cl 4(1) were to prevail, cl 6 would be deprived of effect and its purpose, and the relevant leasing principles, frustrated.

21. [252]

    The significance of cl 7 was that, in circumstances which mirrored (and were relevantly identical with) the prohibited conduct covered by cl 6, it envisaged that there might be action taken in a court, and required the court to have regard to the leasing principles in the National Code. This clause did not constitute a direction as to how to construe the Schedule of which it formed part, but gave direction as to matters to be borne in mind in exercising a jurisdiction which it assumed existed with respect to conduct encompassed by some prescribed actions. That was not consistent with cl 4(1) being an absolute prohibition on the taking of any such action.

22. [253]

    Clause 7 of the second version of Schedule 5 was to the same effect as cl 7 set out above.

23. [254]

    Because Croc’s contention that priority be given to cl 4(1) must have failed during the operation of the first version of Schedule 5, its case for giving priority to what became cl 4(2) in the second version required that there be a change in the language or structure sufficient to demonstrate an intention to reverse a major feature of the scheme in a manner not acknowledged, nor justified by any change to the National Code. To determine whether such a contention can be supported, it is necessary to identify the changes made.

24. [255]

    First, some changes to the form of the first version were made while it was still operative, that is by way of amendments made on 3 July 2020. One such change was to insert in cl 5 a new subcl (1A) which read as follows:

25. [256]

    The purpose of this change was entirely stylistic. Clause 5(1) had been awkward in referring generally to a “lessor under a commercial lease” who was not to take action against “an impacted lessee”. The inclusion of the defined term, “impacted lease”, permitted cl 5(1) to be simplified so that it referred to a “lessor under an impacted lease”. It was then possible to replace the generic term “commercial lease” with “impacted lease” in other parts of cl 5. When the second version of Schedule 5 was enacted, the definition of “impacted lease” was taken out of cl 5(1A) and given its appropriate position amongst the definitions in cl 1. Other changes to cl 5 were retained.

26. [257]

    Because the newly defined term was placed in cl 5 and applied (initially) only to cl 5, the terms of cl 4(1) were not varied to limit the term “lessor” to a lessor under an impacted lease, but that fact had no relevant consequence. The form of cl 4 was simplified in the second version. The critical change relied on by Croc’s arose from the fact that the second version of Schedule 5 was to continue for a period of six months from the day it commenced (cl 10), but the “prescribed period” terminated “at the end of 31 December 2020”. The prescribed period was thus limited to a period of a few days more than two months, while the Schedule operated for six months. Clause 4 was changed so that the unqualified prohibition which had been contained in cl 4(1) was then contained in cl 4(2) and was limited to the prescribed period. Clause 4, as amended, commenced as follows:

27. [258]

    There were thus three changes, of which two did no more than tidy up the language: the words “if a lessee is an impacted lessee” were removed and the prohibition was varied so that it no longer prohibited action “against the lessee” but against “the impacted lessee”. Secondly, where the prohibition related to the grounds of a breach “of the commercial lease” under the former Schedule, the revised version picked up the newly defined term and referred to “a breach of the impacted lease”. It is clear that neither of these changes was intended to alter the operation of the provision.

28. [259]

    The third change was to commence subcl (2) with the words “During the prescribed period”. On one view, that was a deliberate limitation on the earlier operation of cl 4(1), now cl 4(2); on another view, there was no effective change at all, because cl 4(1) had only ever operated during the prescribed period. The need to make that limitation express resulted from the prescribed period under the second version of Schedule 5 not being coterminous with the life of the Schedule.

29. [260]

    The argument in favour of reading the new provision as making a significant variation was weakened by consideration of subsequent subclauses of cl 4. Thus, former subcll (2) and (3) (now (3) and (4)) read as follows:

30. [261]

    One change common to both these revised provisions was to omit the opening words in the former provisions namely, “if, during the prescribed period, a lessee under a commercial lease is an impacted lessee”, being words which were rendered otiose by the adoption of the definition of “impacted lease”.

31. [262]

    Whether by intention or serendipity, subcl (4), with a prohibition limited to the balance of the life of the Schedule after the prescribed period, now had work to do, when formerly it appeared to be totally subsumed within subcl (1). Otherwise, each subclause of cl 4 was varied so as to take advantage of the definition of “impacted lease”, a step not taken when the first version of Schedule 5 was amended.

32. [263]

    Croc’s submissions with respect to the effect of the change to cl 4(1) (now cl 4(2)) encountered significant obstacles. First, there is no doubt that a distinction was made when the second version of Schedule 5 was promulgated between the operation of the prohibition on taking prescribed action under cl 4, and other controls which were to continue to operate throughout the life of the Schedule. However, Croc’s focused on one consequence of the change, namely that, assuming the prohibition in cl 4 had previously rendered cll 5 and 6 (and arguably cl 7) nugatory, those clauses now had some work to do which they did not have available to them prior to the change.

33. [264]

    However, the fact that the three later provisions (cll 5, 6 and 7) would have had work to do during a period when the prohibition in cl 4(2) did not operate, provides no basis for inferring an intention that they should have no work to do with respect to a period when cl 4(2) did operate. In other words, the fallacy in giving priority to the general provision over the specific is not removed by finding some other work for the specific provisions to do.

34. [265]

    On the other hand, if it is to be assumed that cll 5,6 and 7 had work to do during the first version of Schedule 5, it was necessary for Croc’s to explain the dramatic change in the operation of provisions which were untouched in their terms in the second version of Schedule 5. The only remaining peg upon which Croc’s could hang its submissions was extrinsic material providing support for the limited operation (if any) of the specific provisions. As will be seen, there was no extrinsic material reflecting such a change and the existing material supported a contrary conclusion as to the intended hierarchy of the provisions.

35. [266]

    The purpose of legislation may be gathered from (i) the language of the statute, (ii) internal extrinsic material, such as headings to sections and notes, [34] (iii) the legislative history, and (iv) contextual matters. In the present case, the inquiry must focus on the first version of Schedule 5; there is no new material relating to the changes in the second version beyond the change in language, which is neutral as to the underlying purposes of the key provisions.

36. [267]

    The first version was accompanied by an “Explanatory Note to the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW)”, to which consideration may be given pursuant to s 33 of the Interpretation Act. The Explanatory Note indicated that the “object” of the Regulation was to give effect to the National Code, so that the Regulation:

37. [268]

    Two aspects of this statement may be noted. First, the Explanatory Note identified a single generic “object” of the Schedule and identified, conjunctively, the quite separate and distinct purposes of (i) prohibition, (ii) regulation and (iii) a requirement to renegotiate rent and other terms of a lease. The Explanatory Note envisaged that the “prohibition” and “regulation” of the lessor’s enforcement rights would co-exist with a legislative purpose requiring re-negotiation of rent before legal enforcement action, thereby implicitly recognising that enforcement action for non-payment of rent would be permissible after a good faith negotiation. This description was undoubtedly reflected in the Schedule; it assisted in resolving the issue of construction to the extent that it demonstrated an intention to accommodate each of these purposes within the Schedule.

38. [269]

    Secondly, the “leasing principles” set out in the National Code were themselves silent as to the intended interrelationship of the various principles. That is unsurprising: conflicting principles may coexist, and their resolution will require a weighing process. The same is true of matters to which regard should be had, as prescribed by cl 7. An analogous function is served by Pt 6 of the Civil Procedure Act 2005 (NSW), and in particular s 58, which requires the courts to “have regard to” the overriding purpose (set out in s 56) of facilitating the “just, quick and cheap” resolution of the real issues in proceedings. Those three elements will often be in tension, but all must be addressed. In contrast, a rule in the form of a prohibition cannot be given any effect in an area where there is an inconsistent licence or liberty to act, unless one can be read as qualifying the other. Neither the Explanatory Note nor the leasing principles in the National Code supported the contention that cl 4 in the first version of Schedule 5 was to be given an absolute operation so as to deprive (or even diminish the effect of) the subsequent clauses. The Explanatory Note thus identified several purposes, in support of a singular object, but did not put them in a hierarchy. Nevertheless, it denied the possibility that some were to be disregarded or given no effect.

39. [270]

    The separate and distinct purposes of each of cll 5, 6 and 7 can be located in the leasing principles: each should be given effect in accordance with its own apparent purpose. The first leasing principle was that “[l]andlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)”. The leasing principles 3-6, 11 and 13 all envisaged that landlords would be encouraged to engage in negotiations about the payment of rent. Exceptions to the prohibition on terminating commercial leases for those who undertook good faith negotiations about reducing rents (cl 5) and engaged in a mediation (cl 6) were consistent with the latter principles. If cl 5 failed to provide an exception to the operation of cl 4, a re-negotiated rent would remain unenforceable and the purpose of cl 5 would be substantially frustrated.

40. [271]

    The internal intrinsic material also provided assistance in resolving the issue of hierarchy. Whilst, pursuant to s 35 of the Interpretation Act, headings to clauses and notes are not parts of the Schedule, they can be relied on as extrinsic material, pursuant to s 34. Consistently with the qualification of the specific prohibition in cl 5, namely termination of a commercial lease “unless” the identified condition had been satisfied, the heading to cl 5 referred to steps to be taken “before” prescribed action was taken. Further, the note to cl 5(1) stated that “[t]he clause prevents the lessor taking unilateral prescribed action without complying with the requirements set out in subclauses (2)–(4).” In other words, prescribed action would be available if the requirements of subcll (2)–(4) were complied with.

41. [272]

    Clause 6 was also in the form of a prohibition subject to a condition introduced by the words “unless and until”. Clause 6 provided that a lessor must not take specified actions, including the termination of a lease, "unless and until" the Small Business Commissioner had certified that a mediation had been undertaken but failed to resolve the dispute. Like the heading to cl 5, the heading to cl 6 referred to steps to be taken “before” prescribed action “can be taken”.

42. [273]

    Thus, both cl 5 and cl 6 contained internal indications that expressly permitted the taking of action prohibited by cl 4(1): it was not possible to give them effect unless they qualified so much of the prohibition in cl 4 as fell within their compass.

43. [274]

    On the assumption that cll 4, 5 and 6 operated contemporaneously, as they undoubtedly did throughout the operation of the first version of Schedule 5, and for the period during which cl 4(2) operated under the second version, giving cl 4(1) and later cl 4(2) primacy would have rendered cll 5(1) and 6 nugatory.

44. [275]

    Finally, cl 7, requiring the court to have regard to the leasing principles set out in the National Code of Conduct when considering action prohibited by cl 4, would also be rendered nugatory if there were an absolute prohibition on prescribed actions.

45. [276]

    Accordingly, the only reading of cll 4-7 which would allow the provisions to operate coherently identifies cl 4(1) as a statement of the prohibition, followed by the qualifications expressed in cll 5 and 6, with a recognition in cl 7 that a court may be required to assess a prescribed action and, in doing so, should have regard to the leasing principles which gave rise to both the prohibitions and the qualifications thereon.

46. [277]

    During periods when both operated, to give primacy to cl 4(1) (later cl 4(2)) would deprive cl 5(1) of effect and thus frustrate its purpose and the relevant leasing principles.

47. [278]

    The appellants resisted the proposition that cll 5 and 6 qualified the absolute prohibition in cl 4(2) on the basis that, had that been the intention, the drafter could readily have so stated. That the drafter did not expressly take that course may be conceded: however, that does no more than identify the problem, namely that the drafter did not expressly identify in cl 4 the interrelationship of the three provisions. But that interrelationship is clear from the language of cl 5 and cl 6, as well as the internal extrinsic material. To read cl 4 in isolation from the provisions which follow it is an impermissible approach to its construction.

48. [279]

    Indeed, it is not only the relationship with cl 4 which was in issue; the relationship between cl 5 and cl 6 also needed to be identified. Just as cl 4 can only be properly construed when read cumulatively with the succeeding provisions, and not in isolation, it would appear, as the respondent accepted, that cll 5 and 6 must also be read cumulatively, and the conditions attached to the prohibitions in each satisfied if the lessor were to be entitled to take a prescribed action.

Conclusions

1. [280]

   Clauses 4, 5 and 6 all came into effect as part of the first version of Schedule 5. Clause 4, in terms, created a blanket prohibition upon terminating the commercial lease of an impacted lessee for non-payment of rent during the prescribed period. Clause 4 operated for the time the Schedule was in operation, which was six months, ending on 23 October 2020.

2. [281]

   The fact that there was contemporaneity of operation throughout the first version of Schedule 5, required the conclusion, according to Croc’s submission, that cll 5 and 6 had no effective operation during that period. That construction of the first version of Schedule 5 is absurd and cannot be accepted. It follows that, on Croc’s case, the operation of cl 4(1), now cl 4(2), changed with the enactment of the second version. Thereafter, it must have obtained a new primacy merely because there would later be some work which cll 5 and 6 could do without qualifying cl 4(2); that is, not during the prescribed period, but after it terminated.

3. [282]

   Croc’s’ submission ignored the first eight months during which the Schedule had effect and relied on the fact that during the last four months cll 5 and 6 would have had work to do, when cl 4(2) did not operate, to contend that therefore cl 4(1) (then cl 4(2)) should be given primacy at all times. Croc’s simply did not address the consequence that during the eight months of operation of the Schedule, cll 5, 6 and 7 had no operation.

4. [283]

   Even if it were permissible to take the second version of Schedule 5 in isolation, the fact that cll 5 and 6 (and cl 7) could have work to do after the end of the prescribed period, when cl 4(2) had ceased to operate, did not demonstrate that they had no work to do during the prescribed period.

5. [284]

   A coherent application can be given to cll 4, 5, 6 and 7 of the second version of Schedule 5, consistent with the leasing principles in the National Code, by reading them as a package. Thus, cl 5(1), while repeating one of the prohibitions in cl 4, did so in order to qualify it, but only in part. Clause 6, in contrast, was not so limited, but imposed its own separate condition, cumulatively on cl 5.

6. [285]

   Thus, each of those provisions was in the form of a prohibition, subject to a condition. Specifically, cl 5(1) provided that a lessor must not take or continue prescribed action on grounds of a breach of the commercial lease consisting of a failure to pay rent during the prescribed period "unless the lessor has complied with this clause". The fact that cl 5(1) mirrored the prohibition in cl 4(2)(a), demonstrated that the element of overlap was intentional and was intended to isolate that aspect of the various prohibitions in cl 4 which was to be qualified.

7. [286]

   This construction of the second version of Schedule 5 gives effect to the objects set out in the Explanatory Note and the leasing principles in the National Code of Conduct, which continued to be identified in the notes in the second version in precisely the same terms as in the first version.

8. [287]

   Croc’s proposed operation of the second version of Schedule 5 would be contrary to principle, inconsistent with authority and would defy common sense. No such conclusion was tenable while the first version was in force; [35] yet the amendments to the scheme made by the second version demonstrated no change to the underlying purpose or objects of the Schedule.

9. [288]

   The primary judge correctly held that, as at 3 December 2020, cll 5(1) and 6 of the second version of Schedule 5 created two qualified exceptions to the prohibition in cl 4(2). Clause 4(2) did not prohibit the termination of the lease by Alamdo for non-payment of rent, if the conditions in cll 5(1) and 6 were satisfied. Grounds 7, 8, 12 and 13 should be rejected.

Orders

1. [289]

   It follows that the appeal should be dismissed; Croc’s and the individual appellants must pay Alamdo’s costs in this Court.