Court examines Sportsgirl’s $2.3m rent relief claim
A legal appeal will decide if fashion retailer Sportsgirl can avoid paying $2.3 million in rent and interest because of the pandemic’s impact on its flagship Bourke Street Mall store in Melbourne.
Sportsgirl’s landlord took the clothing retailer to the Supreme Court last year claiming unpaid rent of $2,307,409.09 plus interest, but the court backed Sportsgirl’s assertion its claim for COVID rent reduction should be heard in commercial arbitration.
The landlord is appealing the ruling in a case that will be heard on November 4.
If the appeal falls in Sportgirl’s favour, it may open the way for other retailers to claim similar rent relief because they couldn’t access their shops as a result of lockdowns or other government restrictions.
The long-running case was precipitated by Great Union, the owner of the Centrepoint building in Bourke Street Mall, suing the retailer for millions of dollars in outstanding rent that it failed to pay at its flagship store in the 10 months between April and December 2020.
Centrepoint’s operations manager Jason Hopp declined to comment because the matter was before the courts. Sportsgirl was contacted for comment.
Sportsgirl contends that government restrictions in response to the COVID-19 pandemic constituted a relevant alteration to the ‘means of access’ to the building.
The retailer, controlled by wealthy businesswoman Naomi Milgrom, claimed an “abatement of payments” clause in its lease entitled it to reduced rent and any dispute should be decided by arbitration.
It said the lease clause stipulated it was able to reduce the rent if the means of access to the premises were altered, which it said was the case because of COVID-19.
“Sportsgirl contends that government restrictions in response to the COVID-19 pandemic constituted a relevant alteration to the ‘means of access’ to the building,” the company said in court documents.
But Great Union argued physical access to the shop was unchanged and the retailer was not entitled to abatement or arbitration.
“The applicant (Great Union) claimed that the primary judge erred in construing the lease in question as providing for all issues arising under the Rent Abatement Claim to be referred to arbitration,” Supreme Court justices Stephen McLeish, Anthony Kennedy and Cameron Macaulay said in granting the landlord leave to appeal.
The court will now rule on whether Melbourne’s lockdowns altered the “means of access” to the Sportsgirl store, a clause common in commercial leases that potentially opens the way for similar claims from other tenants who were unable to pay rent.
Great Union is said to be in discussions with tech giant Apple to replace Sportsgirl as the main tenant in the Centrepoint building.
If the landlord’s negotiations are successful, Apple may open a trademark, glass-box shopfront in the Mall next to the signature David Jones Menswear store.
Sportsgirl and Great Union are not the only high-profile businesses at loggerheads over COVID related rent.
Sydney-based Fortius Funds Management sued billionaire Solomon Lew’s Just Group claiming $3.5 million in unpaid rent, interest and other fees at four premises in its MidCity Centre shopping complex in Sydney’s Pitt Street Mall. Fortius declined to comment.
Just Group, which operates the Just Jeans, Peter Alexander, Portmans and Smiggle shops in the centre, filed a cross-claim against Fortius. Both parties settled the commercial dispute out of court this year.
Lew was a trenchant critic of landlords during the pandemic, refusing to pay rents at some stores.
Just Group’s parent company, Premier Investments, of which Lew is the largest shareholder, said earlier this year it will close its four stores in MidCity by July next year.
