COVID-19 Emergency Response (Further Measures) Amendment Bill

Committee Stage

In committee (resumed on motion).

Title passed.

Sitting extended beyond 18:30 on motion of Hon. R.I. Lucas.

Bill recommitted.

Clause 4.

The Hon. R.I. LUCAS: I will move a motion and then explain what it is that I am attempting to do, but obviously I am in the hands of the majority of the committee. I move:

That new subclauses (2a) and (2b) of clause 4, page 5, after line 18, which were inserted be deleted and that new definition 'rent relief' clause 4, page 7, after line 2, also be deleted.

If I can just explain what I am asking the committee to do. I am asking the committee to reconsider the amendments that were moved and passed earlier this afternoon. As the government outlined earlier, these particular amendments were unacceptable to the government, and we have made it quite clear that, from the government's viewpoint, we could not accept the bill in this particular form. I will not go through the details again, which are on the public record in relation to the principle of proportionality which is inherent in the new subsection (2a). The government's position is on the public record both this morning and this afternoon. It is that principle that we just cannot accept.

What I have outlined to various members is that the government's position very strongly is that the parliament has a chance now to either affirm its position in relation to that and, in doing so, there will be no legislative provisions for the next three weeks until we reconvene on 3 June. We think that would be a worse set of circumstances than anything else that we could contemplate, that is, that there would be no riding instructions for the Small Business Commissioner and the Magistrates Court, as outlined by the government, to try to resolve the number of lease disagreements between landlords and tenants.

The government accepts that there is no perfect solution to this. That is why the government, as all other governments have, has moved away from the strict proportionality principle that the national cabinet outlined in the national code. We accept that there is no perfect system but we believe that this system is the best possible chance. But what we do say strongly to the committee is that they do have a chance to affirm, but they need to do so in the full knowledge that the government's position is that we cannot accept this particular principle. We believe that very many landlords out there in the community will be strongly opposed to this particular principle, and will be strongly opposed should it eventually be a part of the parliament-endorsed package. We are asking members to reconsider this particular amendment, and are doing so on the basis that the only alternative was, in essence, not to have any guidelines for the next three weeks until we can return to parliament on 3 June in an endeavour to resolve the situation.

It is not ideal; I accept that. It is not ideal that we are legislating on Thursday evening either. We accept that; however, this particular circumstance is complex. As I said, the Western Australian and Queensland governments have still not resolved how they are going to implement their versions of the national code. All we know is that they are not going to implement the national code word for word as it was originally outlined.

With that, we ask members not to continue to insist on the amendments that were moved earlier, which move to support the deletion, as I have moved this evening, in the interests of setting something down for impacted landlords and tenants over the coming weeks.

The Hon. K.J. MAHER: We are opposed to deleting the work previously done by this chamber. We think the amendment strikes the right balance between very big commercial landlords and sometimes very small commercial renters. What is uncontested throughout this debate is that the National Cabinet Mandatory Code of Conduct—SME Commercial Leasing Principles During COVID-19, which I think were released on 7 April and flagged about 30 March in a press conference by the Prime Minister, give primary consideration to this idea of proportionality. It is leasing principle No. 3 in particular that does that. It suggests that:

3. Landlords must offer tenants proportionate [rent] reductions in rent payable in the form of waivers and deferrals…based on the reduction in the tenant’s trade during the COVID-19 pandemic…

I think it is uncontested that the problem, as the government sees it, is that they do not want to give force to the national code of conduct in the way it is contemplated. This is because the South Australian government does not think that the idea of proportionality should have primacy and it is not the most important criterion to take into account.

We have a difference of view between the federal government and the code of conduct that does this and the South Australian government that thinks you should not have that as the most important part of it. That part is contested. What I think there is some contest on is what other states are doing. I am sure the Treasurer will correct me if he thinks I am misinterpreting what I am saying, but I think what the Treasurer was leading us to believe in this chamber is that all other jurisdiction have trouble with the national code and none of them like this idea of proportionality being the principle concern that should be looked at.

The Treasurer wanted us to believe that in two states—Western Australia and Queensland—it is so difficult to do this that they have not even implemented the code in any legislative or regulatory form. I had not had a good look at what other states were doing. The only one I have had a minor skim over the past hour or so is the Retail and Other Commercial Leases (COVID-19) Regulation 2020 under the Retail Leases Act of New South Wales. I cannot speak to what other states are doing, but I will read out regulation No. 7:

7 Obligation to renegotiate rent and other terms of commercial leases before prescribed action

This is obviously the step before, which gives an indication as to what would be the equivalent of the Small Business Commissioner, in terms of 'before prescribed action' is taken. Subparagraph (4) provides:

(4) The parties are to renegotiate the rent payable under, and other terms of, the commercial lease having regard to—

(a) the economic impacts of the COVID-19 pandemic, and

(b) the leasing principles set out in the National Code of Conduct.

Part (a) is entirely reasonable; that makes sense. It is uncontested that the national code of conduct give primacy to the idea of proportionality; however, there is an explanatory note in the regulations, and I will read that out:

Note. See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct.

In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover.

This is the exact language that we are using in our amendment. It is good enough for the biggest state in Australia to directly reference what was termed the mandatory national code of conduct. They do not just say, 'The principles there should apply.' They go further to talk about in particular leasing principle No. 3, the one that we all agree is the cornerstone of the national code of conduct; that is, proportionality. When we look further at what a tribunal or a court considers under the New South Wales regulations, this is what it says:

The Tribunal and any court, when considering whether to make a decision or order relating to any of the following, is to have regard to the leasing principles set out in the National Code of Conduct—

Again, everybody nodded their heads and we all agreed that the main principle in the national code of conduct is that of proportionality in leasing principle No. 3. In the New South Wales regulations, that applies to the recovery of possession of premises, the termination of a lease or the exercise or enforcement of another right. The New South Wales regulations go on to talk about amending the Conveyancing Act. Again, it says that, if the parties are to renegotiate commercial leases, the parties have regard to:

(a) the economic impacts of the COVID-19 pandemic, and

(b) the leasing principles set out in the National Code of Conduct.

It goes on to repeat:

Note. See leasing principles No. 3-5, 7-10 and 12 in the National Code of Conduct.

In particular, leasing principle No. 3 in the National Code of Conduct requires landlords to offer rent reductions, in the form of waivers or deferrals of rent, proportionate to lessees' reductions in turnover.

Again, it is the same language we use in our amendment. I am sure that if I have any part of this wrong the Treasurer will correct me, but it appears very clear from reading the New South Wales regulations in just in the last hour that it is not the case that all other jurisdictions have decided that what the national cabinet came to agree on and put out on 7 April as the national code is unworthy of being supported and that this idea of proportionality causes all sorts of difficulties.

I would invite the Treasurer to tell me what I have misunderstood from the New South Wales regulations, which in fact has this idea of proportionality from leasing principle No. 3 in the national code as its primary function, as we are seeking to do here. I just do not accept the Treasurer's threat that they will not implement any of this. If this amendment remains and the government does not implement it, it is on the government that people will miss out: it is not on any of us. It is not on crossbenchers, who are seeking to make a law better and to look after small commercial tenants. It is not on any of us who are doing that. It is on the government for doing that, and they will be the ones who are to blame for the intransigence of not passing this bill.

The Hon. M.C. PARNELL: When it comes to a situation of intransigence, what we have to consider is what we risk losing. If the government is true to their word and this council insists on keeping the proportionality clause in the bill, then the government is effectively saying that they will take no further action on this bill. They will send the lower house home and we will come back in three weeks and debate it. The question we then have to look at is: how important is this provision? Another way of looking at it is: how important are the things that we might either lose or delay for three weeks?

There are some things in this bill where it would be disappointing not to get them in train now. I do not think any of them are the end of the world, but it would be disappointing. There are some things in here that we did not like anyway but, in a spirit of cooperation, we let the government have them with a few minor tweaks. If we are looking at the totality of the COVID impact on society, one of the biggest areas has to be the shops, the owners of the premises where they operate, the small factories—the range of commercial and residential tenants.

It is a huge issue, so this is one that we need to get right. It is interesting that we now have this additional information from the Leader of the Opposition that, despite assurances that no other state would have a bar of proportionality, New South Wales has written it into their regulations in the same way that the Legislative Council has said, 'We will support proportionality.'

As I said earlier, there is pain to be shared and it will need to be shared fairly. If you were to take as a group the group in total of landlords, there will be a whole range of big and small, and in a group of tenants, a range of big and small, but I can tell you that most of the tenants are going to be less wealthy than most of the landlords. Whilst no one size fits all, the idea of proportionality as accepted by the national cabinet and accepted by New South Wales seems to be a reasonable starting point with the loopholes and the exemptions that we have written into those provisions. So the Greens see no reason to change the position that we took an hour or so ago and we will continue to support the inclusion of this amendment in the bill.

The Hon. C. BONAROS: I think we have just highlighted the problem with rushing into discussions and recommittals. During the interim period when we last debated this bill, an hour or whatever it was ago, I have been having discussions with the Leader of the Government and the Leader of the Opposition. I do not for one minute doubt the Treasurer's insistence on this provision, but of course we sit down and we are handed a document from the opposition that now shows that proportionality does exist in another jurisdiction, and that does not seem to be consistent with the advice that we have received so far.

We are in a bit of a bind because the advice that we are receiving is not consistent. Whilst I do not doubt the Treasurer's insistence on his position, I am not convinced, on the basis that we have just received advice that New South Wales has the very provisions that we are saying that we cannot afford to have here when an hour or so ago we were told that those provisions do not exist elsewhere. I have to agree with the Hon. Mark Parnell that we cannot afford to get this wrong. If that means that we have to sit here a bit longer and keep going on this provision to try to come up with something that everyone can agree to then I am afraid that that is what we are going to have to do.

I would at least like a response from the Treasurer in relation to the provisions that have just been pointed out by the Leader of the Opposition and whether we knew of their existence and how it is that we have advised members that there is no such provision in any other jurisdiction and now found out that there are such provisions in New South Wales.

Again, I am going to remind members that there are two easy fixes here: we proceed with the bill now and then a set of regulations comes in that are going to be subject to a disallowance motion, so you still end up in the same mess. The alternative is also that the courts, irrespective of what the Leader of the Opposition says, can still take into consideration proportionality even under the government's proposal or the proposal that is being put by the opposition.

So I do not think we have reached any outcome in the time that has been made available, but I would like the Treasurer to clarify the information that has just been provided by the Leader of the Opposition in relation to New South Wales and his understanding of those provisions in the regulations.

I make the point again: we have a set of regulations here that now can be the subject of a disallowance motion, and if the opposition is not willing to budge then I am sure that is what we are going to see. If the government is not going to budge, then I do not know what we are going to see. But I do not think that we can declare this issue resolved right now until we have some more answers specifically in relation to the New South Wales example that has just been provided and in relation to resolving this issue, which is going to be a lot more problematic than what we anticipated.

The Hon. R.I. LUCAS: I will respond to the issue in relation to New South Wales. The regulations in New South Wales say that, during a process of renegotiation, they shall have regard to the issue of proportionality, or leasing principle No. 3 in the national code. What we are being asked here is quite different. What that is saying is: as you are negotiating, freely entering negotiations between two parties, you have regard to the leasing principles.

They have carefully chosen words from the New South Wales government. They could have said 'implement the national code', as I think the Leader of the Opposition urged me to do in a letter a few weeks ago. However, it says, 'As the two parties are negotiating, they should have regard to'. What we are being asked to support here are guidelines for the final decision-maker at the Magistrates Court, in terms of determining the issue of dispute between the landlord and the tenant.

In determining the issue finally, the issue of proportionality is the issue that is pre-eminent. The Leader of the Opposition is quite frank about it: he said that it is given greater prominence, or pre-eminence, than the government believes it should have, and that is correct. We do not support that as being the main issue, for the reasons we have outlined. The notion that a 50 per cent loss in turnover, and a 50 per cent loss of rent, means a 50 per cent loss in net income for a landlord is nonsense. In many respects, it can be 100 per cent, or it could be much more than that, depending on how they are structured financially.

I think that most people, in the discussions I have had with people who are accepting, know that the landlord's argument that the notion that there is strict proportionality from turnover to rent relief to the net income or profitability of a landlord does not make sense at all. No-one is accepting that particular argument. The landlords are accurate in terms of what it is.

The New South Wales regulatory code says that as you are negotiating you should have regard to it, and the lawyers in this chamber know that 'regard' means that you have to take into consideration but ultimately do not have to be bound by it. There is no obligation, there is no compulsion and there is no enforceability. What we are talking about here, in essence, is trying to guide the final decision-maker at the Magistrates Court, and that is a principle that the landlords are up in arms about.

As I said earlier today, I reject the notion that in most cases it is a big, ugly landlord and a little, defenceless tenant. In some cases, you have big, ugly tenants and a smaller, defenceless landlord. If you have Solomon Lew as a tenant on one side, saying, 'I'm not going to pay any rent for the next six months,' and you are a mum-and-dad investor with a suburban shopping centre with six shops and you happen to have one of his outlets in it, you as the landlord are very much the weaker party in that negotiation. So there are bad eggs on both sides of the equation, both on the landlord's side and on the tenant's side.

The government's position in relation to this is quite clear: we either affirm or we do not, and we send it down to the House of Assembly and they can then decide whether or not they are going to support or not support whatever the bill is that is before the house. However, I can make it clear that the government's position is that if this amendment is in there we cannot support this amendment. So the choice that members are making tonight is, in essence, to say that we sadly are not going to be in a position to give guidelines to the Small Business Commissioner, and ultimately the Magistrates Court, in terms of trying to settle these things until the parliament sits again. That would be an even worse set of circumstances for everybody than what people are concerned about in relation to the issues of it.

I have heard nobody at the moment arguing, other than saying that it was in the national code, that what the government is putting is not a reasonable proposition. We are saying that the Small Business Commissioner, and ultimately the Magistrates Court, should listen to the arguments, decide the relative merits of the lessor and the lessee and then make a judgement. Yes, as the Hon. Connie Bonaros has indicated, it is possible for the Magistrates Court, under the 'any other matters' provision, to give consideration to the national code, or indeed anything that the Magistrates Court might wish. However, there are other issues that the court has to take into consideration, namely, the financial positions of the lessor and the lessee, and some other issues as well.

I would urge members to rethink this particular provision. I think that our positions are all pretty well-known now, in terms of the particular amendment. We can test the committee's view again as to whether or not they are now prepared to support a deletion of these two particular provisions.

The CHAIR: Do you want to stand up, so I know what you want to do, or do you want to sit there and have me read your mind?

The Hon. K.J. MAHER: I am actually going to be helpful. I am going to move an amendment.

The Hon. I. PNEVMATIKOS: I need to seek some clarity here. If the issue is in terms of negotiations where factors like proportionality are a consideration, one would expect when it goes before an arbitrator or a decision-maker, they would have regard to the various criteria that the parties used in attempting to negotiate this process. For the sake of consistency, I would have thought that the proportionality argument, amongst other arguments, needs to travel throughout the process from the negotiation stage through to the arbitration and decision-making stage otherwise an arbitrator or a decision-maker is making a decision in a vacuum.

The Hon. K.J. MAHER: This may take a bit of toing and froing but I am going to suggest that we amend the bill as it currently stands, which was amended earlier today. Subsection (2a) in clause 4 currently reads:

(2a) Any rent relief ordered by a court under regulations made under this section, should, as far as practicable and in the absence of the circumstances set out in subsection (2b), be proportionate to the reduction in turnover of the business…

There is more after that. I am going to move an amendment to suggest that any rent relief ordered by a court under regulations made under this section is to have regard to the leasing principles set out in the national code of conduct. I think that takes into account what the Treasurer mentioned before—'having regard to'—which he seemed very enamoured with as a term that lawyers use. I think that gives faith to having regard to the national code of conduct which has proportionality as its primacy. Therefore, I will move to delete all words in clause 4, subsection (2a) after the word 'section' and replace with 'is to have regard to the leasing principles set out in the national code of conduct'.

Progress reported; committee to sit again.