VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
CIVIL DIVISION
BUILDING AND PROPERTY LIST	
vcat reference No. BP778/2020	
CATCHWORDS	
LANDLORD AND TENANT – Section 251 of the Building Act 1993 – whether a landlord is required to reimburse a tenant for the costs of maintaining Essential Safety Measures associated with the demised premises – whether items of expenditure claimed by the tenant are referrable to maintaining Essential Safety Measures – whether appropriate to consider a defence based on s 5(1)(d) of the Limitations of Actions Act 1958 (Vic) in light of Lanigan v Circus Oz & Ors [2022] VSC 35 and Ajaimi v Giswick Pty Ltd [2022] VSC 131.
COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (‘the Regulations’); Assessment of rent relief – whether the landlord and tenant entered into an agreement for rent relief – whether agreement is contingent upon the execution of a deed – Masters v Cameron (1954) 91 CLR 353 considered – whether the payment of rental arrears by way of monthly instalments due at a future date constitutes a deferral of rent, as that phrase is understood under reg 13 of the Regulations – whether rent relief in the form of a deferral of rent requires a landlord to extend the term of the lease by the same period as the deferral of rent – whether a letter from the tenant’s accountant is sufficient evidence that the tenant is a SME entity for the purposes of establishing that the lease is an eligible lease. 	

APPLICANT	Izett St Pty Ltd (ACN 075 578 104)	
RESPONDENT	Applgold Pty Ltd (ACN 051 279 595)	
BEFORE	Deputy President E Riegler 	
HEARING TYPE	Hearing via video link (Zoom)	
DATE OF HEARING	11 March 2022	
LAST DATED FOR FILING MATERIAL	12 April 2022	
DATE OF ORDER and reasons	13 May 2022	
CITATION	Izett St Pty Ltd v Applgold Pty Ltd (Building and Property) [2022] VCAT 536	

Order

1.	The respondent must pay the applicant $49,972.89, being reimbursement of expenditure associated with maintaining Essential Safety Measures incurred by the applicant after 20 May 2014.
2.	The hearing of the applicant’s claim for reimbursement of expenditure associated with maintaining Essential Safety Measures incurred by the applicant prior to 20 May 2014 is struck out without adjudication on the merits, and with a right of reinstatement and a right to reapply.
3.	For the avoidance of doubt, Order 2 of these orders does not prevent the applicant from having this proceeding reinstated for the purpose of prosecuting its claim for reimbursement of expenditure associated with maintaining Essential Safety Measures incurred by it prior to 20 May 2014. 
4.	I find and declare:
(a)	that on 16 December 2020, the applicant and the respondent entered into an agreement for rent relief (‘the Agreement’), within the meaning of that phrase as stated in reg 10(6) of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (‘the Regulations’);
(b)	the Agreement provided, inter alia, that 30 percent of the rent payable over the nine months from April to December 2020 was deferred and payable in six monthly instalments commencing on 1 January 2021;
(c)	by reason of the Agreement deferring the payment of rent over a nine-month period, the term of the subject lease between the parties is extended by nine months, pursuant to reg 13 of the Regulations. 
5.	Cost reserved, with liberty to apply, subject to any claim for costs being filed with the Tribunal within 21 days of the date of receiving these orders.

E Riegler 
Deputy President			

APPEARANCES:		
For Applicant	Mr R Hay of senior counsel with Mr R Moore of counsel	
For Respondent	Mr S Hopper of counsel	

Reasons
introduction
1.	The applicant is the tenant (‘the Tenant’) of premises located at 29-31 Izett Street, Prahran (‘the Premises’), which it occupies pursuant to a lease dated 14 November 1996 (‘the Lease’). The respondent is the registered proprietor of the Premises and the landlord named in the Lease (‘the Landlord’). The Tenant operates a bespoke rental service, whereby it configures and fits out different areas within the Premises and then sub-lets those areas to sub-tenants.
2.	The Tenant and the Landlord have fallen into dispute in relation to two principal issues; namely: 
(a)	whether the Tenant is entitled to be reimbursed for expenses which the Tenant claims it incurred between 2010 and 28 June 2021 in carrying out maintenance of essential safety measures (‘ESMs’) pursuant to s 251 of the Building Act 2003 (Vic) (‘the Building Act’); and 
(b)	whether the Tenant is entitled to a nine-month extension to the term of the Lease pursuant to reg 13 of the COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic) (‘the COVID Regulations’). 
3.	Although the affidavit material filed in this proceeding and the submissions (both written and oral) advanced by the parties largely focus on the two issues identified above, recent; and inconsistent, decisions of the Supreme Court of Victoria have given rise to one further disputed issue. Specifically, the Landlord has raised, by way of defence to the claim for reimbursement of expenses associated with the maintenance of ESMs, that claims for sums paid on or before 9 May 2014 are statute barred under s 5(1)(d) of the Limitation of Actions Act 1958 (Vic) (‘the LOA Act’). 
4.	In reply, the Tenant submits that the LOA Act has no application and cannot be relied upon in this proceeding by reason of the decision of McDonald J in Lanigan Circus Oz & Ors. In that decision, his Honour found that the LOA Act did not apply to proceedings before the Victorian Civil and Administrative Tribunal (‘VCAT’). At the commencement of the hearing of this proceeding, Mr Hopper of counsel, who appeared on behalf of the Landlord, conceded that the VCAT was bound to follow Lanigan v Circus Oz & Ors – ‘at this stage’. 
5.	Following the hearing of this proceeding on 11 March 2022, the Supreme Court of Victoria handed down its decision in Ajaimi v Giswick Pty Ltd. In that case, Osborne J heard an appeal of a VCAT proceeding which raised, by way of defence, that part of the claim was statute barred by reason of s 5(1)(d) of the LOA Act. Although the facts and the issues in the two Supreme Court decisions are different, the application of Lanigan Circus v Oz & Ors is uncertain, given the more recent decision of Osborne J.
6.	To reconcile that inconsistency, I invited the parties to advise or file any further submissions as to whether the defence based upon the LOA Act is to be pressed or alternatively, whether the position adopted at the commencement of this proceeding is to be maintained; namely, that the LOA Act did not apply to proceedings before the VCAT. Written submissions were subsequently filed, with the effect that each party posits a differing view as to the effect of Ajaimi v Giswick Pty Ltd. 
7.	Notwithstanding the comprehensive submissions made by each of the parties, I consider that the most appropriate course is to temporarily excise that part of the applicant’s claim, the subject of the limitation defence, and only determine the remainder of the claim unaffected by the limitation defence in this determination. Naturally, liberty will be given to the applicant to reinstate the proceeding to prosecute the undetermined part of its claim once further clarification is given by the Supreme Court of Victoria.   Accordingly, I will order that any claim for expenses associated with carrying out ESMs for the period up to and including 9 May 2014 remains to be determined and will not form part of this determination. 
the ESM Claim
Background
8.	The Tenant has leased and been in occupation of the Premises since 14 November 1996, with the Lease being renewed on several occasions, the last in 2020. 
9.	Since 1998, the Tenant has sublet spaces within the Premises to various subtenants. Notwithstanding those subleases, the Tenant maintained ongoing possession of: 
(a)	the structure and roof of the Premises; 
(b)	doors, entrances and exits of the Premises; 
(c)	stairways, hallways, passenger lift and lift shaft within the Premises; 
(d)	building amenities; 
(e)	the kitchen facility on the first level of the Premises; 
(f)	the upper two levels, being the topmost main floor together with the former foods lift overrun room on the fourth level; and 
(g)	an overflow pool, situated under the main pool on the first level. 
10.	From 1996 to 1998, the Tenant undertook various building work to the Premises, which included converting the top floor of the Premises into a five-bedroom residential dwelling and office (‘the Residential Dwelling’) and the lower two levels as commercial spaces. 
11.	On 7 September 1998, the Tenant was issued with an occupancy permit (No. 97-312), which listed various ESMs for the Premises (‘the Occupancy Permit’).
12.	From 1998 until 2019, the Tenant’s director, Gregory Taylor, occupied the Residential Dwelling. In or around August 2019, Mr Taylor vacated the Residential Dwelling and that area was converted into additional commercial space. According to Mr Taylor, no building permit was required to convert the Residential Dwelling into commercial space. Consequently, there does not appear to have been any occupancy permit issued for the change of use of the Premises.
The claim
13.	The Tenant contends that from 2010 to 2021 it has incurred expenses associated with maintaining essential safety measures, for which it seeks reimbursement from the Landlord, pursuant to s 251 of the Building Act. Details of those expenses are set out in Annexure A to the Tenant’s Points of Claim dated 6 August 2021 and total $119,446.37. As indicated above, given the current uncertainty as to whether the LOA Act applies to proceedings before the VCAT, only line items numbered 55 to 171 will be considered in this determination, with liberty given to the Tenant to pursue any further claim for items 1 to 54; once there is greater clarity as to the jurisdiction of the VCAT (if the parties cannot otherwise reach agreement). Line items 55 to 171 total $78,107.46 and are made up as follows:
Description	Amount	
AESG	$2,853.47	
OTIS	$45,708.75	
MFM	$14,108.96	
ADT	$15,106.28	
TORMAX	$330	
TOTAL	$78,107.46	
 
14.	Section 251 of the Building Act provides, in part:
(1)	If the owner of a building or land is required under this Act or the regulations to carry out any work or do any other thing and the owner does not carry out the work or do that then, the occupier of that building or land or any registered mortgagee of the land or the land on which the building is situated, may carry out the work would do the thing.
(2)	Subject to subsection (2A), an occupier may –
(a) 	recover any expenses necessarily incurred under subsection (1) from the owner as a debt due to the occupier; or 
(b)	deduct those expenses from or set them off against any rent due or to become due to the owner.
15.	Subject to the following, the Landlord concedes that it is liable to reimburse the Tenant in respect of any expenses necessarily incurred in maintaining the ESMs.
16.	Originally, the Landlord contested the items of expenditure which fell under the categories of expenditure described under sub-paragraphs 9(p) to (r) of the Tenant’s Points of Claim. However, prior to the hearing of this proceeding, the Landlord conceded that it was liable to pay for the expenditure described under subparagraphs 9(p) and (q), leaving only the expenditure items under subparagraph 9(r) in dispute. Those items relate to expenditure said to be incurred to maintain passenger lift emergency warning and communications systems and fire service controls. That expenditure has been paid to OTIS Elevator Company Pty Ltd and totals $68,942.13 over the whole period claimed. Of that amount, $45,708.75 has been paid after 15 May 2014, being the period unaffected by the Limitation of Actions defence (‘the OTIS Expenditure’). Additionally, the Landlord contests an expenditure item paid to TOMAX of $330.
17.	There are two aspects to the Landlord’s submission that it is not liable to pay for the OTIS Expenditure. These are: 
(a)	the OTIS Expenditure is not a cost associated with maintaining an essential safety measure because it is not an item that was listed as an ESM in the Occupancy Permit; and
(b)	even if the OTIS Expenditure is an ESM, the evidence and/or documents supplied in support of the claim for reimbursement of the OTIS Expenditure fails to distinguish between the cost of maintaining passenger lift emergency warning and communications systems and fire service controls on the one hand and general lift maintenance or repair on the other hand. 
Is the OTIS Expenditure a cost associated with maintaining an ESM?
18.	It is common ground that the Occupancy Permit did not expressly mention any ESM connected with the elevator within the Premises. Nevertheless, the Tenant submits that expenses associated with passenger lift emergency warning and communication systems and fire service controls are expenses associated with maintaining the ESMs for the Premises. 
19.	In support of that contention, the Tenant engaged Mr Shane Leonard, building surveyor, to give expert evidence on its behalf. Mr Leonard prepared a report dated 1 November 2021 in which he expressed an opinion as to whether the passenger lift emergency warning and communications systems and fire service controls listed in paragraph 9(r) of the Tenant’s Points of Claim are an ESM. He stated, in part: 
4.1.2.3	Passenger lift emergency warning and communications systems and fire service controls: - Lifts are required by Clause 9.1 of Australian Standard to have a communication system and as such must be maintained in working order to ensure passengers are not left unattended in the case of lift car failure and therefore are deemed an ESM. Furthermore, in accordance with Item 3, Part 9 of Schedule 9 of the Regulations Passenger lift fire service controls are nominated as an Essential Safety Measure.
20.	Mr Leonard then considered the description of invoices prepared or produced by the Tenant and concluded: 
…
e)	The Otis Elevator Co Pty Ltd (‘Otis’) invoices relate to on-going lift maintenance, whilst the maintenance of wear and tear of the lift would not be considered an ESM the continued checking of matters relating to the Passenger lift emergency warning and communications systems and fire service controls are a necessary ESM. Therefore, it is my view the invoices tendered by Otis that relate to the inspection of the following aspects of the lift operation as reasonable costs attributed to the maintenance of ESM’s: -
i.	Emergency Lighting, Alarms and Communication Check;
ii.	Door Operator (Ensuring the integrity of the fire isolated lift shaft); and
iii.	Inspection of the integrity of the fire isolated lift shaft.
Furthermore, the Otis invoice dated 10 December 2024 for the supply and installation of a Cellular Gateway System and Auto dialler is considered maintenance of an ESM as this installation was necessary to maintain the required communication system and replace obsolete unsupported equipment.
21.	The Landlord engaged Jayden Wood, building surveyor, to also provide expert opinion and respond to the matters raised by Mr Leonard in his report. Mr Wood prepared a report dated 23 February 2002, which set out his opinion. In response to the matters raised by Mr Leonard in paragraph 4.1.2.3 of his report (see above), Mr Wood stated, in part: 
3.4.1	I agree with the statement that Lift emergency warning and communication systems can be deemed by definition as an Essential Safety Measure and passenger lifts fire control are nominated as an essential safety measure within Schedule 9 of the Building Regulations.
3.4.2	However I am of the opinion that occupancy permit dated 7th September 1998 prepared by Jeff Uren does not list either as essential safety measure on page 2 of the occupancy permit.
3.4.3	Therefore it appears the relevant building surveyor at the time of issuing the occupancy permit determined that the lift emergency warning and communication systems and passenger lift fire controls were not a required essential safety measure.
3.4.4	Fire service controls were inserted via BCA 1996 Amendment 3 which was adopted in Victoria 1st July 1998. It is not known the date of the building permit however given the Occupancy permit was dated 7th of September 1998 my opinion is BCA 1996 amendment 2 or earlier versions were applicable to the design. With regards to the emergency warning and communication systems as at the time of construction emergency warning and communication systems as referenced in Section 9 of AS 1735.12-1999 is not required to be provided in a class 4 building.
22.	During oral evidence, both Mr Leonard and Mr Wood sought to clarify how their respective opinions differed on this issue. In that respect, the issue turned on the fact that the Residential Dwelling, which occupied the upper two floors, was a Class 4 building, as defined in the Building Code of Australia.  
23.	According to Mr Wood, at the time of building approval, it was likely that there was no requirement for emergency warning and communication systems for passenger lists within a Class 4 building. Therefore, the passenger lift which serviced the Residential Dwelling, being a Class 4 building, was not required to have an emergency warning and communication systems at the time of construction. Consequently, there was no requirement to list that as an ESM in the Occupancy Permit. 
24.	However, in 2019, the Residential Dwelling, being the Class 4 part of the Premises, was converted to office space, being a Class 5 building. As indicated above, there does not appear to have been any building approval obtained for that work or any occupancy permit or certificate of final inspection issued either for that work or for the change in use of the Premises. Consequently, Mr Hopper of counsel, who appear on behalf of the Landlord, submitted that in the absence of an occupancy permit detailing the change in use of the Premises, there was no regulatory provision deeming passenger lift fire service controls as an ESM.
25.	I do not accept that the failure to mention passenger lift emergency warning and communications systems and fire service controls in the Occupancy Permit means that this is not an ESM. I have formed this view based on several factors. First, Mr Taylor gave evidence that the elevator serviced all floors of the Premises and is not confined to only servicing what used to be the Residential Dwelling. Therefore, it cannot be said that the passenger lift emergency warning and communications systems and fire service controls only ever related to a Class 4 building.
26.	Second, both experts accept that passenger lift emergency warning and communications systems and fire service controls would ordinarily be part of the ESMs for a Class 5 building containing a passenger lift. 
27.	Third, I do not accept that the failure to obtain building approval or an occupancy permit authorising the change in use from a Class 4 building to a Class 5 building obviates the requirement to maintain passenger lift fire service controls, as mandated by the Building Regulations 2006, which were in force at the time that the Residential Dwelling was converted into office space; and which state, in part: 
1202 	Definitions
In this Subdivision –
Essential safety measure means –
(a)	an item specified in Column 2 of Part 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 or 12 of Schedule 9 that is required by or under the Act or these Regulations in relation to a building or a place of public entertainment; or
(b)	any other item that is required by or under the Act or these regulations to be provided in relation to a building or place of public entertainment for the safety of persons in the event of fire and that is designated by the relevant building surveyor as an essential safety measure; or
(c)	any other item that is an essential safety measure within the meaning of Division 1 of Part 12 of the Building (Interim) Regulations 2005 as in force before the revocation;
28.	In my view, the Regulations deem Passenger Lift Fire Service Controls within a Class 5 building to be an ESM, irrespective of whether the relevant occupancy permit has it listed as an ESM or whether approval was given or an occupancy permit issued in respect of the change in use of the Premises. My finding is consistent with the objectives of the Building Act, which include:
to protect the safety and health of people who use buildings and places of public entertainment. 
29.	Therefore, I find that passenger lift emergency warning and communications systems and fire service controls, which are part of the Passenger Lift Fire Service Controls, to be an ESM of the Premises. Further, I accept Mr Leonard’s evidence that the supply and installation of a Cellular Gateway System and Auto dialler is considered maintenance of an ESM as this installation was necessary to maintain the required communication system and replace obsolete unsupported equipment. 
Are the OTIS Expenditure invoices/schedule related to maintaining an ESM?
30.	As indicated above, the Landlord submits that the description of work in the invoices listed in Annexure A to the Tenant’s Points of Claim does not fully particularise the nature of the work, the subject of each expenditure line item. Most of the line items relating to the OTIS Expenditure are simply described as OTIS: Maintenance Charge (quarterly). 
31.	Mr Moore of counsel, who appeared on behalf of the Tenant with Mr Hay of senior counsel, submitted that once it was proven that a loss has been incurred, it was sufficient for the Tribunal to do the best that it can in determining the measure of damages, based upon the evidence before it. Mr Moore further submitted that 20 to 25 percent of the total OTIS Expenditure could safely be attributed to the maintenance of ESMs.
32.	In contrast, Mr Hopper submitted that the claim was for a debt certain and in those circumstances, the onus was on the Tenant to prove that the expenditure was related to maintenance of an ESM. 
33.	Mr Moore drew my attention to several documents which illustrated the difficulty in isolating the work involved in maintaining the ESM from general maintenance or repair work associated with the passenger lift. Specifically, the invoices did not distinguish between those two components of work. Mr Moore submitted that, in all likelihood, maintenance of the ESM and general maintenance of the passenger lift was carried out at the same time by the same tradesperson during the same attendance.
34.	In my view, it is reasonable to infer that a component of the maintenance charges for the passenger lift related to maintenance of the passenger lift fire service controls. Further, I accept that it is virtually impossible to retrospectively ascertain how much of each invoice relating to the quarterly maintenance charges related to the maintenance of the ESM, as opposed to general maintenance or repair of the passenger lift. Consequently, I accept Mr Moore’s submission that at least 20 to 25 percent of the aggregate total is likely to have been attributed to the maintenance of that ESM. 
35.	In that respect, I accept the analogy advanced by Mr Moore that courts and tribunals sometimes have to adopt a pragmatic approach in assessing damages where it is otherwise impossible to calculate the precise quantum of damage or loss. Indeed, Deane J spoke of that pragmatic approach in Commonwealth v Amann Aviation:
Within the context of the principles laid down in Hadley v Blaxendale … the more particular rules for assessing damages for repudiation for breach of contract should be treated not ‘as rigid rules of universal application’ but as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation … without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept.
36.	With that in mind; and doing the best that I can with the evidence before me, I find that 22.5 percent of the aggregate amount attributed to the OTIS Expenditure constitutes expenditure incurred by the Tenant in maintaining the ESMs relevant to the passenger lift within the Premises.
37.	As indicated above, the aggregate amount of OTIS Expenditure said to have been incurred after 30 May 2015 is $78,107.46. I find this to be proven based on the affidavit material and submissions filed or made in this proceeding. Given my finding that 22.5 percent of the aggregate OTIS Expenditure is to be attributed to maintaining the ESM relevant to the passenger lift, I find that $17,574.18 is the amount that the Landlord must reimburse to the Tenant under this head of claim.
Tormax
38.	The Landlord also contests expenditure of $330, said to be evidenced in an invoice from Tormax. 
39.	In his report, Mr Leonard stated:
d.	The Tormax (“Tormax”) invoice relates to the inspection and maintenance of checking of ESM’s. This inspection relates to assessment and inspection of emergency lighting and exit signage which are nominated as ESM’s under Schedule 9 of the Regulations.
40.	In his report, Mr Wood stated that he disagreed with Mr Leonard’s opinion as to what the Tormax invoice represents. He stated: 
This appears to be works to an exit door which is considered an ESM however the location of this is not known, therefore I am unable to determine if it is an ESM or not.
41.	I prefer the evidence of Mr Leonard on this issue. In my view, his opinion is more definitive and provides a better assessment of what the Tormax invoice relates to. Therefore, I will allow the full amount of that invoice of $330.
Conclusion on ESM Claim
42.	Having regard to:
(a)	the approach I have adopted in limiting the ESM Claim to the line items of expenditure numbered 55 to 171, pending further clarification as to the operation of the LOA Act;
(b)	the fact that the Landlord does not contest the expenditure relating to AESG, MFM and ADT; and
(c)	my findings in relation to the OTIS Expenditure and the Tormax invoice
I find that the Tenant is entitled to be reimbursed $49,972.99, for expenditure  incurred after 15 May 2014 related to maintaining the ESMs, calculated as follows:
Description	Amount	
AESG	$2,853.47	
OTIS Expenditure	$17,574.18	
MFM	$14,108.96	
ADT	$15,106.28	
TORMAX	$330	
TOTAL	$49,972.89	
The lease extension claim
43.	The Tenant claims that it is entitled to a nine-month extension to the Lease term by reason of an agreement made with the Landlord to pay deferred rent. In essence, the Tenant submits that the indulgence on the part of the Landlord to allow the Tenant to repay rent in arrears at a future date constitutes a deferral of rent, as that phrase is understood in the COVID Regulations.
44.	In contrast, the Landlord submits that the rent relief agreed between the parties only contemplates a waiver of rent. It contends that the agreement to repay the component of rent which fell outside the rent relief provided is merely an arrangement to repay arrears of rent by way of monthly instalments. 
The regulatory regime
45.	In Filomeno Nominees Pty Ltd v Crown Group Pty Ltd, the Tribunal helpfully set out the regulatory regime under which rent relief may be afforded to tenants of eligible leases. In that case, Forde SM stated:
The COVID-19 Regime
1.	On 7 April 2020 the National Cabinet announced a Mandatory Code of Conduct SME Commercial Leasing Principles During COVID-19. These leasing principles were given effect in Victoria through the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) (the Act) and the Regulations. 
2.	The Regulations were pronounced on 1 May 2020 and taken to have come into operation on 29 March 2020.
3.	Amending regulations were introduced on 29 September 2020 to extend and modify the operation of the Regulations. Significant changes were made to reg 10.
4.	The Regulations provide a mechanism whereby a tenant with an “eligible lease” as defined in s 13 of the Act, is entitled to avail itself of a rent relief regime and protection from eviction in certain circumstances.
46.	In this case, the relevant provisions of the COVID Regulations are, in part: 
10	Rent Relief
(1)	A tenant under an eligible lease may request rent relief from the landlord under the eligible lease.
…
…
(4)	A landlord’s offer of rent relief under subregulation (3) must be based on all the circumstances of the eligible lease and -
(a)	relate to up to 100% of the rent payable under the eligible lease during the relevant period; and
(b)	provide that not less than 50% of the rent relief offered by the landlord must be in the form of a waiver of rent, unless a landlord and tenant otherwise agree in writing; and
…
(6)	Rent relief under this regulation may be given effect by a landlord and tenant by –
(a) 	a variation to the eligible lease; or 
(b)	any other agreement between them it gives effect to the rent relief, either directly or indirectly. 
…
13	Extension of the term 
(1) 	An eligible lease is taken to provide as set out in this regulation. 
(2) 	If the payment of any rent is deferred by variation of an eligible lease or an agreement mentioned under regulation 10 (6), the landlord under the eligible lease must offer the tenant under the eligible lease and extension to the term of their eligible lease on the same terms and conditions that applied under the eligible lease before the commencement of these Regulations. 
(3) 	The extension offered under subregulation (2) must be equivalent to the period for which rent is deferred, unless a landlord and a tenant agree in writing that this regulation does not apply to their eligible lease. 
16	Payment of deferred rent
(1)	An eligible lease is taken to provide as set out in this regulation.
(2)	If any rent is deferred by variation to the eligible lease or an agreement as mentioned under regulation 10 (6) –
…
(b)	a landlord and tenant must vary the eligible lease or otherwise agree so that tenant must pay the deferred rent to the landlord amortised over the greater of –
(i)	the balance of the term of the eligible lease, including any extension to that term, as provided under regulation 13 or otherwise; and
(ii)	a period of no less than 24 months;
…
(4)	Subregulation (2) does not apply if a landlord and tenant agree otherwise in writing.
The Tenant’s claim
47.	Mr Hay submitted that the Lease was an eligible lease, as defined in s 13 of the COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic). That provision states, in part;
13	Meaning of eligible lease
(1)	An eligible lease is a retail lease or a non-retail commercial lease or licence –
(a)	that is in effect on the day the first regulations made under section 15 come into operation; and
(b)	under which the tenant is, on or after the commencement of the first regulations made under section 15 –
(i)	an SME entity; and
(ii)	an employer who qualifies for the jobkeeper the scheme and is a participant in the jobkeeper scheme.
48.	Mr Hay chronicled the various requests for rent relief made by the Tenant and offers for rent relief made by the Landlord over the period April until December 2020, which he submitted culminated in a concluded agreement reached on 16 December 2020 (‘the Agreement’). Further details of those requests and offers are set out in the affidavit material filed by the parties.
49.	According to Mr Hay, the Agreement is evidenced by the (final) offer made by the Landlord, which was set out in correspondence dated 14 December 2020. That correspondence stated, in part: 
…
Offer
Without prejudice to our client’s view that Izett has not demonstrated it has suffered a turn over reduction of 70% for the period between 1 October 2020 and 31 December 2020, on a commercial basis and in a final effort to resolve this dispute without further expense and inconvenience to our client, Applgold Pty Ltd  is willing to ‘split the difference’ between its repeated offer and your offer of 10 December 2020 (which we calculate at a total waiver of $135,195.24.)
Our client offers to grant Izett rent relief totalling $125,000 between 1 April 2020 and 31 December 2020, with the unpaid portion to be re-cooped in 6 equal payments between 1 January 2021 to 1 June 2021 (Final Offer). This Final Offer will remain open for 7 days and expire at 4 PM on 21 December 2020. This is our clients final offer and is made on a “take it or leave it” basis. It will not be repeated and will not be negotiated further.
Should the Final Offer be accepted, Applgold will document the above changes by way of a deed of variation to the current lease.
50.	In its reply email dated 16 December 2020, the Tenant stated: 
We maintain that Applgold is still failing to offer the minimum amount required under the Regulations.
That said Izett agrees to:
-	rent relief totalling $125,000 between 1 April 2020 and 31 December 2020
-	payment of the unpaid portion of rent to be in 6 equal payments between 1 January 2021 to 1 June 2021.
51.	Mr Hay submitted that the agreement to repay the unpaid portion of rent, spanning the period 1 April 2020 to 31 December 2020 (nine months) constitutes a deferral of rent. Consequently, he submitted that reg 13 of the COVID Regulations compels the Landlord to offer the Tenant an extension to the term of the Lease on the same terms and conditions that applied under the Lease and for the period for rent is deferred (nine months).
The Landlord’s defences 
52.	The Landlord contends that it has three defences: 
(a)	First, it says that the evidence does not establish that the Tenant is a SME (an enterprise with an annual turnover of less than AUS50 million).
(b)	Second, even if the COVID Regulations have been invoked, any agreement that was reached was subject to documentation and not binding until recorded in a deed.
(c)	Third, if there is a binding agreement for rent relief, the agreement was an agreement for:
(i)	70 percent rent relief under the COVID Regulations, all by way of waiver; and
(ii)	an indulgence to pay the remaining 30 percent of unpaid rent over six months, which was an indulgence unrelated to the Tenant’s entitlements under the COVID Regulations.
Findings
Is the Tenant a SME entity?
53.	Mr Hay referred to several documents to evidence or support the Tenant’s contention that it is a SME entity. Specifically, by correspondence dated 12 May 2020, WGC Business Advisors Pty Ltd, the accounts for the Tenant, stated: 
We write to advise that we act as the accountants and tax agents of Izett St Pty Ltd acting on its own right and in its capacity as sole trustee of the Izett Trust ABN 85 464 698 567 (“IZETT”).
In our capacity as IZETT’s accountants, financial advisors and tax agents we have been requested to advise you that IZETT:
(a)	meets the definition of an SME Entity as that term is defined in the COVID-19 Omnibus (Emergency Measures) Act 2020 and the Guarantee of Lending to Small and Medium Enterprises (Coronavirus Economic Response Package Act 2020 and Rules (the Act’s”). In arriving at our assessment, we have had to apply the aggregate turnover tests contained in the Division 328 of the Income Tax Assessment Act 1997 (“ITAA 1997”) as modified by The Acts.
Our review has concluded IZETT is an SME Entity as its turnover, when aggregated with any connected or affiliated entities, as those terms are defined in the ITAA 1997, is below the relevant $50m turnover threshold for the year ended 30 June 2019; and
(b)	qualifies for, is registered for and participates in the JobKeeper Scheme as set out in the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 and the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020.
54.	Mr Hay submitted that even if the Tribunal was not satisfied that there was sufficient evidence to substantiate that the Tenant was a SME entity, the conduct of the Landlord prevented it from denying that fact. Specifically, Mr Hay referred to several documents, where the Landlord had informed the Tenant that the Landlord accepted that the Tenant was a SME entity, within the meaning of that term as defined in reg 13 of the COVID Act. Mr Hay submitted that in those circumstances, the Landlord is estopped from denying that the Tenant was a SME entity. 
55.	Mr Hopper submitted that the WG’s Business Advisors Pty Ltd letter merely expressed an opinion and was not evidence of a fact. I do not accept that proposition. The letter documents that the accountants have reviewed the financial status of the Tenant and have found that its revenue is less than $50 million.
56.	In my view, the letter from WGC Business Advisors Pty Ltd, reinforced with the sworn evidence of Gregory Taylor, is sufficient to satisfy me, on the balance of probabilities, that the Tenant is a SME entity, which I find to be the case. Given that finding, it is unnecessary for me to consider Mr Hay’s submission that the Landlord it estopped from denying that fact.
Was the Agreement binding?
57.	The Landlord contends that the parties did not intend to be bound immediately upon entering into the agreement on 16 December 2020, until recorded in a deed.
58.	In Masters v Cameron, Dixon CJ, McTiernan and Kitto JJ expressed the following seminal statement: 
Where the parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiations shall be dealt with by a formal contract, the case may belong to any or three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be the case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. 
59.	Mr Hay also referred me to the judgment of McLelland J in Baulkham Hills Private Hospital Pty Ltd v GR Securitie Pty Ltd, where his Honour elucidated what has been referred to as the fourth category or class of negotiation:
There is in reality a fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich and Dixon JJ in Sinclair Scott & Ltd v Naughton (1929) 43 CLR 310 at 317, namely ‘one where the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing by consent additional terms.
60.	Mr Hay submitted that the language used in the Agreement leaves little doubt that the parties intended to be immediately bound. He stated: 
28.	… The case falls into either the first class of agreement referred to in Masters v Cameron or the fourth class – most likely the first class.
29.	The agreement made in December 2020 permitted the applicant to pay rent for the period one April to 31 December 2020 in monthly instalments commencing on 1 January 2021 with the last payment on 1 June 2021. This was the deal about which the respondent’s solicitors, Piper Alderman, said “Good to have the deal done”. The applicant has paid the deferred rent in six instalments. 	
61.	Mr Hopper submitted that a concluded agreement was never reached because not all terms were settled. Specifically, Mr Hopper argued that the offer made by the Landlord was contingent upon the parties entering into a formal deed. Mr Hopper referred to in number of documents which he submitted evidence a clear intention that any agreement was contingent upon the parties executing a deed.
62.	Having considered those documents, I find that they do not state that any agreement was contingent upon the parties executing a deed. In fact, those documents, which largely represent pre-contractual negotiations, indicate that the production of a deed was an adjunct to any concluded agreement. For example, in the email dated 18 June 2020 from the Landlord’s solicitors to the Tenant, the Landlord purported to accept what it believed was an offer made by the Tenant. That email states, in part:
We confirm our client accepts your offer and elects to accept the option for Izett St. Pty Ltd to amortise the payment of the deferred rent over the following two years. All other terms of the lease are to remain in place and full effect.
…
A short deed of variation that is to be signed by both parties and appended to the current Lease will be provided to you shortly.
63.	The final paragraph of the extract of that email cited above does not stipulate that acceptance of the Tenant’s offer was contingent upon the Tenant signing a deed of variation. This is evident from the fact that the preceding paragraph accepts the offer without qualification. 
64.	In my view, the offer contained in the Landlord’s email correspondence dated 14 December 2020 and the acceptance of that offer by the Tenant in its email correspondence dated 16 December 2020 constitutes a concluded agreement. The reference in the Landlord’s offer dated 14 December 2022 that the Landlord will document the above changes by way of a deed of variation to the current lease, must be read in context. It reflects one aspect of what the COVID Regulations contemplate; namely, that rent relief will be given effect by variation to the eligible lease. Viewed objectively, those words are purely mechanical and simply reflect the parties’ intention to further document the Agreement as an adjunct to the Lease via a deed of variation. However, the failure to do that does not, in my opinion, result in the Agreement being void or of no effect. 
65.	Although not determinative, my finding is reinforced by subsequent correspondence from the Landlord’s solicitors dated 16 December 2021, where they state: ‘Good to have the deal done…’. That statement predates the production of any deed. 
66.	Consequently, I find that the Agreement is binding on the parties, notwithstanding that the parties did not execute a deed of variation to the Lease. 
Was the indulgence to pay the remaining 30 percent of unpaid rent over six months a deferral of rent?
67.	Mr Hay submitted that it was immaterial how the parties sought to categorise or express their agreement that 30 percent of unpaid rent would be repaid over six months. He drew my attention to the definition of defer in the New Shorter Oxford English Dictionary, which states: 
put off (an action or procedure, an event, matter or question, a person) to some later time, delay, postpone …
68.	Mr Hay also drew my attention to a draft deed prepared by the Landlord, which purported to record the Agreement (‘the Deed’). The Deed was sent to the Tenant on 18 December 2020 but was never executed, principally because the Tenant contended that it sought to introduce terms which were not part of the Agreement. The Deed expressly defined the phrase deferred rent as: 
Deferred Rent means the amount of $40,037.68, being 30% of the Rent due under the Lease during the Relief Period.
69.	Section 3 of the Deed stated, in part:
3.	Rent Deferral
If during the Relief Period the Tenant otherwise performs in compliance with the Tenants obligations under the Lease and this document, the Landlord agrees to extend the time for payment of the Deferred Rent otherwise payable during the Relief Period on the terms and conditions of this document.
…
3.3	Payment of Deferred Rent
(a)	During the Amortisation Period, the Tenant must pay the Deferred Rent in monthly instalments to the Landlord determined in accordance with the following formula:
…
(b)	The Tenant must pay the monthly instalments of the Deferred Rent at the same time and in the same manner as instalments of Rent under the Lease, with the first monthly instalment payable on 1 January 2021.
70.	Mr Hopper submitted that the Deed could not be taken into account as it amounted to post-contractual conduct. He argued that established authority made it clear that post-contractual conduct could not be considered to ascertain the intention of the parties at the time when they made their contract. 
71.	In contrast, Mr Hay submitted that the Deed could be taken into account in construing the terms of the Agreement, notwithstanding that the preparation of the document amounted to post-contractual conduct. He referred me to an extract of Hayden on Contract, which stated:
In Australia there has been a division about whether there is another exception – that is, subsequent conduct as an informal admission. There is no doubt that post-contractual conduct can be an admission that there was a contract. And a post-contractual admission that a contract contains a particular term is admissible. The present question is whether post-contractual conduct can amount to admission that a provision has a particular construction.
72.	Mr Hopper further submitted that the Agreement comprised two elements; namely, rent relief and secondly, repayment of arrears in rent. He argued that this was clear from the words used by the Tenant in its email to the Landlord accepting the Landlord’s offer. Specifically, those words were: 
That said Izett agrees to:
-	rent relief totalling $125,000 between 1 April 2020 and 31 December 2020
-	payment of the unpaid portion of rent to be in 6 equal payments between 1 January 2021 1 June 2021
73.	Mr Hopper submitted that the second paragraph of the extract of the email cited above made no mention of the six equal payments between 1 January 2021 to 1 June 2021 being in the form of ‘rent relief’. Therefore, he argued that that aspect of the Agreement was expressly isolated and distinguished from what constituted the rent relief. Mr Hopper submitted that the second element of the Agreement constituted an instalment plan to repay rent in arrears.
74.	Mr Hopper referred to various documents comprising the negotiations between the parties where the Landlord specifically stated that it would not entertain an extension of the Lease term. He argued that those pre-contractual statements were entirely consistent with what the parties had finally agreed upon.
75.	Mr Hopper further submitted that it was agreed between the parties that, for the purpose of negotiation, both proceed on the basis that the Tenant had experienced a 70 percent reduction in turnover. He contended that rent relief was to be given commensurate with that 70 percent reduction in turnover, which is what occurred, albeit, wholly in the form of a waiver of rent. Mr Hopper argued that there was no component of the rent relief representing a deferral of rent, even though the Regulations permitted 50 percent of the rent relief to be offered in the form a waiver of rent, unless the parties otherwise agreed in writing.  Therefore, he submitted that none of the 30 percent of unpaid rent could form part of the rent relief because it was not commensurate with a reduction in turnover. 
76.	I do not accept that proposition. In my view, there is nothing in the regulations which prevent parties from giving greater rent relief than a tenant’s downturn in turnover. In other words, the regulations do not prevent a landlord and tenant from agreeing to provide rent relief partly in the form of a waiver and partly in the form of a deferral of rent where the total rent relief is greater than the tenant’s downturn in turnover. Ultimately, it is a matter for the parties to reach whatever agreement they feel is appropriate in the circumstances.
77.	In my view, a plain reading of the offer and acceptance, which comprise the Agreement, indicate that the intention of the parties was to waive approximately 70 percent of the rent between April and December and defer 30 percent of the rent for that nine-month period. I am not persuaded that the Agreement somehow hived off the deferral of rent so that it no longer formed part of the overall rent relief given to the Tenant. I have formed this view based on several factors. 
78.	First, the Landlord included the obligation to repay rent within the offer made in its correspondence dated 14 December 2020. It was open for the Landlord to have separated that obligation into a separate demand for payment, which may have given greater weight to the argument that the repayment of rent in arrears was distinct to the overall rent relief afforded to the Tenant.
79.	Second, the words in the offer dated 14 December 2020 do not expressly state that the repayments were not to be treated as part of the rent relief given by the Landlord. Again, it was open for the Landlord to have expressly stated that within the offer.
80.	Third, the subsequent conduct of the Landlord in preparing a deed which expressly identified the repayment of rent in arrears as a deferral of rent is indicative of the Agreement containing a term to that effect. Alternatively, it is a post-contractual admission by the Landlord that the Agreement contains such a term. In that sense, the subsequent conduct is not considered for the purpose of construing the terms of the Agreement but rather, establishing whether the Agreement contains a term that 30 percent of the rent is to be deferred. This approach seems to be consistent with established authority where a contract is only partly in writing. For example, in County Securities Pty Ltd v Challenger Group Holdings Pty Ltd, Spigelman CJ expressed the principle as follows:
In my opinion, subsequent conduct, especially how a contract for purchase and sale was settled, is relevant, on an objective basis, to the identification of the subject matter of the contract or the determination of necessary terms, as distinct from deciding the meaning of words.
81.	Fourth, it is apparent from the documents produced by the parties that the parties approbated and reprobated on the question of deferral of rent. For example, some of the offers expressly contemplated deferral of rent while others made no mention of deferral of rent. 
82.	Therefore, I do not accept that statements extracted from historical offers made during the negotiation process – that the Landlord was not disposed to grant an extension to the lease term – necessarily informs what the parties ultimately agreed upon.
83.	Fifth, if the Landlord had not intended to defer the payment of rent, then one might reasonably expect there to have been an immediate demand for payment of rent in arrears, being the flip-side of an agreement to defer payment of rent. There is no evidence of that in the documents produced by the parties. 
84.	In conclusion, I find that the intention of the parties, evidenced in the Agreement, was to give the Tenant rent relief partly in the form of a waiver of rent and partly in the form of a deferral of rent. Further, I find that rent was deferred for a nine-month period spanning from April to December 2020. 
85.	That being the case, it is not contested that if the rent relief given to the Tenant was found to include a deferral of rent, the Tenant is entitled to an extension of the lease term for a period commensurate with the period rent was deferred, which in this case is nine months.

DATED 13 May 2022

E Riegler
Deputy President