COVID-19 Disease Emergency (Commercial Leases) Bill 2020 (No 19)

May 7, 2020

[4.19 p.m.]

 

Ms ARMITAGE (Launceston) - Mr President, I thank the Leader for the briefings today. The department has clarified the concerns raised by the other presenters this morning.

 

The spirit of this legislation is to get people working together in good faith to mutually beneficial ends. The principles of this bill are to, as best as possible, assist our small and medium enterprises operating in leased premises, with the overall objective being to reignite economic activity to feed back into expenses and overheads. This is an absolute priority for the Government and I support any measure which is conducive to this goal.

 

I note the concerns, of particularly the Property Council in briefings this morning and feel most of the issues were adequately covered by the department. I accept the inclusion of oral agreement is somewhat unusual and rare, but that oral agreements are binding. Many leases will have oral components as part of them, whether it is regarding a change of trading hours and that oral agreements are often put in place to avoid redoing a whole lease.

 

I support the inclusion of Part 6 which requires parties to go through negotiation, mediation and arbitration to resolve disputes. Of course, these alternative methods of dispute resolution should always be considered prior to taking legal action, however, making this a requirement expressed by this bill will ensure both parties have good reason and incentive to work with each other in good faith.

 

These are laudable objectives and I believe few will disagree these are good solid principles to abide by at any time and not just through the coronavirus crisis. Therefore, without sounding too cynical, most would also agree these alternatives methods of dispute resolution will not always work. I would like to know what measures the Government will have in place once the financial hardship cessation day comes and lessees can begin imposing more significant contractual terms such as termination, eviction, right of entry and so on. When this time comes, and hopefully it is not that far away, how will appeals and legal action be managed through our legal system? Given the very wide-ranging and unique sets of circumstances all kinds of tenants and landlords have and will suffer during the coronavirus, it will be likely legal proceedings relating to tenancies during this stressful time will be more protracted than usual and the evidence required to support or dispute claims will likely take longer to obtain.

 

Part 4 requires in negotiation proceedings that landlords or tenants are expected to provide sufficient and accurate information. The code of conduct defines this as information generated from an accounting system and information provided to or received from a financial institution that impacts the timeliness of the parties making decisions with regard to the financial stress caused as a direct result of the COVID-19 event. However, I question whether this definition is prescriptive enough.

 

Sufficient and accurate information is not necessarily complete information which may consequently place parties on an uneven footing in the negotiation process. Inserting an obligation to act in good faith to the bill may go some way to ameliorating this but the national code expressly states its purpose is to impose a set of good faith leasing principles of application to commercial tenancies. The obligation to act in good faith cannot be escaped because it is not mentioned in one specific part of this legislation. Moreover, the obligation to act in good faith is already a well-established and long-standing principle of contract law so inserting the words 'good faith' into clause 12 is probably of little material value.

 

Under clause 12, parties must provide information which is reasonably necessary to conduct negotiations in order to obtain information or to determine eligibility to receive financial assistance. However, both the legislation and national code of conduct give little guidance on what 'reasonable' actually means in this context. Information which might be reasonable to disclose for these purposes may also be unreasonable to disclose if, for example, it also relates to matters such as commercial in confidence.

 

This highlights an inherent tension in the parties' own interests and the purpose of this legislation.I realise there is also an obligation for parties not to engage in misleading or deceptive conduct, however, this still does not provide any guidance on what accurate or, more to the point, sufficient information needs to contain in order to be complete and offer a fair negotiation process to occur. Feedback, obviously, reveals a great deal of concern regarding misleading conduct by either or both parties.

 

Of course, this legislation requires parties to start at the beginning of the negotiation process and work in good faith, but the only remedy to working in bad faith, uncooperatively or in a misleading manner is to continue through the process mandated by this legislation up towards legal proceedings. My point here is there appears to be no inbuilt mechanisms to seek out and prevent malfeasance in this legislation until it gets to the point of costly and time-consuming legal action. This could be asking for a disaster a bit later on down the track. Part 4 of the bill provides lessors cannot punish protected lessees for ceasing normal trading through the financial hardship period, including levying penalties or to seek to reclaim damages after the financial hardship period ends.

 

Clause 14 outlines that for lessees who cease trade, cease to remain open or carry on usual business, amongst other things, cannot be punished by the lessor during or after the financial period and recovery period have elapsed. However, there appears to be no guidance, either in this bill or in the national code, as to whether a cessation of business activity needs to be coronavirus related, and if so, what criteria should be used to determine this. This could allow for the possibility of a lessee to have the protection of the code, and to simply walk away from their responsibilities under their lease.

 

I suggest that some sort of guidance to cessation of business activity being related to the coronavirus could be inserted into this bill, perhaps simply by reference to the same criteria a business needs to fulfil to be eligible for the JobKeeper subsidy, in order to provide lessors with more options should lessees walk away. I would appreciate your comments, Leader, on that matter. The national code of conduct also states that the code will be supported by state-based industry code administration committees. Can the Leader provide for Hansard, for the people sitting on this committee, and how its members and chairperson will be appointed.

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