This is the third article in our series regarding the introduction of the National Cabinet Mandatory Code of Conduct – SME (Code) by the Australian Government in April 2020 in response to the devastating effects of COVID-19. As noted in our article in June 2020, the Queensland Government passed the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Qld Regulation) in May 2020. The Qld Regulation is in effect for the period from 29 March 2020 to 31 December 2020. A landlord under an affected lease must not take ‘prescribed action’ during the ‘response period’, being the period from 29 March 2020 to 30 September 2020.
A recent case determined by the Supreme Court of New South Wales, Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd (No 2) [2020] NSWSC 1141 (Sneakerboy) found that the landlord was obliged to offer reduced rent to the tenant not only for the period in which the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) (NSW Regulation) was in force, but also for a ‘subsequent reasonable recovery period’ which, in that case, was six months.
For the reasons below, it seems unlikely the Queensland Courts will adopt a similar approach when applying the Qld Regulation.
Relevant issue determined in Sneakerboy
The Sneakerboy dispute has been played out in the Supreme Court since July 2020. Relevantly, in the most recent decision, the court was required to determine whether orders should be made concerning ongoing compliance with the Code and the NSW Regulation beyond the period in which the NSW Regulation was in effect.
In short, the landlord argued that, from the time the NSW Regulation is automatically repealed on 24 October 2020, the amount payable for rent by the tenant should be as per the lease in place pre-COVID-19. In disagreeing with the landlord’s contentions, the court considered the conflicting application of:
- regulation 7(3) of the NSW Regulation which requires that ‘a party to an impacted lease must, if requested, renegotiate in good faith the rent payable under, and other terms of, the impacted lease’ (i.e. could this have the effect of renegotiated terms remaining in place even after the NSW Regulation was repealed?); and
- clause 12 of the NSW Regulation, which automatically repeals the NSW Regulation six months from commencement. In this respect, the question was whether negotiations, which had not concluded before the NSW Regulation was automatically repealed, would give rise to any enforceable rights created during the period in which the NSW Regulation was in force.
