AAMR Hospitality Group Pty Ltd v Goodpar Pty Ltd & Anor (Retail Tenancies) [2009] VCAT 2782 (13 February 2009)

Retail Tenancies List; Application for relief by tenant against allegedly unreasonable refusal of landlord to consent to assignment; Whether landlord required to act or to refrain from unreasonable refusal; Retail Leases Act Sections 60, 61 and 62; Claim for damages and declaration that assignor and guarantors no longer liable; Declaration to be made subject to assignment taking effect, Retail Leases Act 2003 Section 62

AAMR Hospitality Group Pty Ltd v Goodpar Pty Ltd & Anor (Retail Tenancies) [2009] VCAT 2782

1. Within 14 days of this day the parties must bring in short minutes to give effect to these reasons.
2. Adjourned to a directions hearing 9.30 am, 2 March 2009.
3. Costs reserved.

1. Goodpar Pty Ltd and Second Sandina Pty Ltd owned the property known as 179 Bridge Road, Richmond. By deed dated 7 February 2007 these companies let those premises to AAMR Hospitality Group Pty Ltd (which is applicant in this proceeding) for a term of five years commencing 1 February 2005. The lease granted AAMR options for two further terms of five years each making a maximum term of occupancy subject to any overholding of 15 years. The lease extended to the ground floor of 179 but specifically excluded the basement. The permitted use under the lease was 'restaurant'. The deed of lease was a form published by the Law Institute of Victoria headed 'Retail Leases Act 2003 Lease of Real Estate (With Guarantee and Indemnity) (Commercial Property)'. Two directors of AAMR, Messrs Hickey and Papile executed the deed as guarantors.
2. Clause 4 of the lease dealt with transfers and sub-lettings. It provided, inter alia:

4.1 The Tenant must not transfer this lease or sublet the Premises without the Landlord's written consent, and section 144 of the Property Law Act 1958 and clauses 9.1 do not apply.

4.2.1 subject to sub-clause 4.2.2, must not unreasonably withhold consent to a transfer of this leases or a sublease of the Premises in the Tenant has complied with the requirements of clause 4.3. If the Act applies, the Landlord may only withhold consent to a transfer of this lease in accordance with the Act.

4.2.2 may withhold consent at the Landlord's discretion if the Act does not apply, and a transfer of this lease would result in the Act applying, or applying if this lease is renewed for a further term.

4.3 To obtain the Landlord's consent to a transfer or sublease the Tenant must -

4.3.1 ask the Landlord in writing to consent to the transfer or sublease,

(a) in relation to each proposed new tenant or sub-tenant such information as the Landlord reasonably requires about its financial resources and business experience, and

(b) a copy of the proposed document of transfer or sublease.

4.3.3 remedy any breach of the lease which has not been remedied and of which the Tenant has been given notice.

4.4.1 the Tenant has complied with Clause 4.3, and

4.4.2 the Landlord fails to respond by giving or withholding consent with 28 days, then the Landlord is to be taken as having consented.

If the Act does not apply, the Landlord may request any additional information reasonably required to enable it to make a decision.

4.5 if the Landlord consents to the transfer or sublease, the Landlord, Tenant and new tenant or sub-tenant and the Guarantor must execute the documents submitted under sub-clause 4.3.2(b). The new tenant or sub-tenant and the directors of them if they are corporations must execute a deed binding each of them to carry out the obligations of the Tenant under this lease and a guarantee and indemnity in the form of clause 15.

1. On 19 November 2008 AAMR entered into a sale contract for the sale of the restaurant business at 179 Bridge Road with Second Ruth Pty Ltd as purchaser. The principal of Second Ruth Pty Ltd was Mr Teofanis Pitsounis. Mr Pitsounis was also the principal of Second Sandina Pty Ltd which was one of the two lessor companies which executed the 2007 lease. In the intervening period on 4 April 2007 Master Efthim of the Supreme Court ordered that Second Sandina Pty Ltd be wound up and appointed a Ms Erskine and Mr Goodin as liquidators. Mr Pitsounis and his wife applied on 19 April 2007 for an order that the winding up of Second Sandina be terminated. On 11 May 2007 Master Efthim dismissed the application.
2. Mr and Mrs Pitsounis made a further application on 2 July 2007 for a similar order. That proceeding eventually came on for hearing on 17 August 2007 and once again Master Efthim dismissed the application. A third application was filed seeking similar relief on 3 April 2008.
3. Following a further dismissal of this application the Pitsounises appealed to a judge of the Court, Robson J. His Honour made an order terminating the winding up of Second Sandina with effect from 3 June 2008. He did this based upon a number of undertakings made by Mr & Mrs Pitsounis to:

(a) pay $30,000 to the liquidators by 4.00 pm 30 May 2008;

(b) to procure the appointment of a solicitor Mr Kiatos as a director of Second Sandina and a certified practising accountant as its accountant;

(c) to procure the completion of a contract of sale for the property at 179 Bridge Road Richmond to which reference will be made below,

(d) to have Second Ruth Pty Ltd discontinue a separate proceeding and withdraw a caveat which it had lodged over the property at 179 Bridge Road Richmond;

(e) to have Second Sandina lodge any outstanding tax returns.

1. His Honour's order also noted that the Pitsounises had paid $323,000 to the liquidator to be used together with the sum of $30,000 to pay the creditors in full and meet the costs and expenses of the liquidation.
2. The Report as to Affidavit for Second Sandina signed on 4 April 2007 by Mr & Mrs Pitsounis as part of the liquidation process disclosed assets by way of land in the sum of $1,750,000 though somewhat confusingly valued a 50% share in the property at 179 Bridge Road, Richmond at $3.5m subject to a mortgage in favour of ANZ of $380,000. It also disclosed a fixed and floating debenture charge in favour of National Australia Bank Limited securing an unspecified amount of assets.
3. Consequent upon the liquidation a new company, Second Ruth Pty Ltd was incorporated on 3 August 2007. It was appointed trustee of the Pitsounis Family Trust of which Second Sandina Pty Ltd had formerly been trustee. Mr & Mrs Pitsounis were both directors of this company initially but Mrs Pitsounis ceased to be a director on 20 April 2008.
4. On 1 July 2008 a sale of the 50% interest in 1979 Bridge Road owned by Second Sandina to Brookwood Pty Ltd made at the insistence of the liquidators of Second Sandina Pty Ltd was completed. Brookwood is apparently controlled by the same interests that controlled the other 50% owner of 179 Bridge Road, namely Goodpar Pty Ltd. The sale proceeds of $1.8m were disposed of by using approximately $400,000 to pay off the ANZ mortgage. Mr Pitsounis said a further amount of $400,000 was spent on construction works at a property at 25 Ballantyne Street, East Burwood, which is owned jointly by Mr Pitsounis and his wife. The balance of $1,000,000 was held as a cash term deposit owned jointly by Mr & Mrs Pitsounis. It was, as I understand, common ground that the 50% interest in the freehold of 179 Bridge Road, Richmond, was an asset of the Pitsounis Family Trust of which Second Ruth Pty Ltd's now trustee. Balance sheets produced by Mr Topalides of Wallfield Accountants Pty Ltd show the term deposit as being held by Mr Theophanis as to a half share and not being part of the property of the family trust at all. The property at Ballantyne Street, Burwood is shown as owned as to half by Mr Pitsounis and not by the family trust. There was however no explanation as to how the net proceeds of sale of 179 Bridge Road came to be applied to the benefit of Mr & Mrs Pistons rather than the trust estate or how $400,000 in trust money was spent on property owned by the Pitsounises and not by the Trust.

We also enclose copy of disclosure statement which has been provided to the proposed assignee for your client pursuant to Sections 61(5A) and 62(1) of the Retail Leases Act 2003.

1. The letter sought a response 'by 4.00 pm Friday 12 inst'. A copy of the disclosure statement was also provided to the purchaser, Second Ruth Pty Ltd. AAMR received a series of notices from the Australian Taxation Office giving notice of intended legal action and garnishee proceedings etc. According to Mr Hickey the principal of AAMR:

It was negotiated with the Australian Taxation Office that in the event of the sale of the business the net proceeds of the sale of the business would be appropriated to reduction of the debt due to the Australian Taxation Office and it was the intention of the applicant so to do.

1. Upon instructions from his clients Mr Zervos responded to the application for consent to assign in a facsimile transmission dated 11 December 2008. The letter stated as follows:

Re: Our Clients: Goodpar Pty Ltd and Brookwood Pty Ltd

We acknowledge receipt of your letter dated 8 December 2008.

We note that your client has sold its business and that the Contract provides for settlement to take place on 19 December 2008.

In relation to your client's request for the Lessor to consent to the Transfer of the lease we make the following observations:

1. We have been advised by our client's Managing Agents that your client is in arrears of rent, rates and taxes in the sum of $29,787.12 including GST. We enclose herewith Tax invoice confirming same.

Further, our client's managing Agent has been informed by our client that it has paid the water rates, however, no proof of payment has been received by our client's Managing Agent. Therefore, it is assumed that it has not been paid.

1. In relation to the financial suitability of the incoming Tenant company, we are instructed that our client is not satisfied with the financial references provided.
2. Second Ruth Pty Ltd is a company that has an issue capital of ten (10) $1.00 ordinary shares and acts as the corporate trustee of the Pitsounis Family Trust. We note that the financial statements provided by the company's Accountant describes a net asset of $50.00.
3. Our client also questions the values associated with the fixed assets and intelligible assets referred to in the Accountant's Balance Sheet. Therefore, our client is not satisfied with the documentary evidence to support the incoming Tenant's financial position.
4. We note that you have been provided with a Statement of Assets and Liabilities certified by Mr John Topalidies of Wallfield Accountants Pty Ltd.
5. We have undertaken Land Title searches and note that Mr Theofanis Pitsonis (sic) is not the sole registered proprietor of the land and buildings referred to in the Statement of Assets and Liabilities.
6. As a consequence, our client is not prepared to accept the information provided in view of the fact that Angela Pitsounis is a joint proprietor on the subject properties and yet is not identified as a Guarantor for the Transfer of Leases.
7. Further, the incoming Tenant has not provided a proposed business plan as is required by the Retail Leases Act.
8. Under the circumstances, our client regrets to inform you that it cannot consent to the Transfer of Lease to Second Ruth Pty Ltd for the reasons set out above.

1. Solicitors acting for AAMR filed the present application in the Tribunal on 5 January 2009. The application sought interlocutory and final injunctions restraining the lessors from re-entering the -premises or forfeiting the lease and a declaration that a notice under Section 146 of the Property Law Act was void and of no effect, further, a declaration as to amounts owing under the lease. None of these prayers for relief was as I understood it, pursued at the final hearing. Further relief was sought by way of a declaration that the lessors were unreasonably withholding their consent to the proposed transfer of lease to Second Ruth, a declaration that AAMR was entitled to transfer the lease without consent, a declaration that AAMR and its guarantors 'are persons to whom s.62 of the Retail Leases Act 2003 applies' together with damages and costs.

1. Mr Lloyd appeared on behalf of the applicant company. He referred to the provisions of Clause 4 of the lease which I have quoted above and then to Sections 60 to 62 of the Retail Leases Act. Since these provisions are of central importance to the present proceeding I set them out:
   1. When the landlord can withhold consent to an assignment

(1) A landlord is only entitled to withhold consent to the assignment of a retail premises lease if one or more of the following applies -

(a) the proposed assignee proposes to use the retail premises in a way that is not permitted under the lease;

(b) the landlord considers that the proposed assignee does not have sufficient financial resources or business experience to meet the obligations under the lease;

(c) the proposed assignor has not complied with reasonable assignment provisions of the lease;

(d) the assignment is in connection with a lease of retail premises that will continue to be used for the carrying on of an ongoing business and the proposed assignor has not provided the proposed assignee with business records for the previous 3 years or such shorter period as the proposed assignor has carried on business at the retail premises.

(2) Section 144 of the Property Law Act 1958 does not apply to or with respect to a retail premises lease to which this Act applies.

1. Procedure for obtaining consent to assignment

(1) A retail premises lease is taken to provide as set out in this section.

(2) A request for the landlord's consent to an assignment of the lease must be in writing and the tenant must provide the landlord with such information as the landlord reasonably requires about the financial resources and business experience of the proposed assignee.

(3) Before requesting the landlord's consent, the tenant must give the proposed assignee -

(a) a copy of any disclosure statement given to the tenant concerning the lease; and

(b) details of any changes of which the tenant is aware, or could reasonably be expected to be aware, that have affected the information in the disclosure statement since it was given to the tenant.

(5) For the purpose of complying with subsection (3), the tenant may ask the landlord to give the tenant a disclosure statement that is current from a specified date that is within 3 months before the statement is given and, if the landlord does not give the tenant such a statement within 14 days -

(a) the tenant is not required to comply with that subsection; and

(b) the landlord is guilty of an offence and liable to a fine not exceeding 10 penalty units.

(5A) If the assignment is in connection with the lease of retail premises that will continue to be used for the carrying on of an ongoing business, the tenant must give the landlord and the proposed assignee a disclosure statement in the form prescribed by the regulations (but the layout of the statement need not be the same as the prescribed disclosure statement).

(6) The landlord must deal expeditiously with a request for consent and is taken to have consented to the assignment if -

(b) the landlord has not, within 28 days after the request was made, given written notice to the tenant consenting or withholding consent.

(a) a tenant gives a landlord and proposed assignee a copy of a disclosure statement in accordance with section 61(4); and

(b) the disclosure statement does not contain any information that is false, misleading or materially incomplete.

(2) None of the following persons are liable to perform any obligations under the lease or to pay to the landlord any money in respect of amounts payable by the proposed assignee -

1. According to Mr Lloyd the application by way of letter dated 8 December 2008 was a proper application in terms of the lease and the provisions of the Retail Leases Act Mr Lloyd complained on behalf of his client that the lessor's letter dated 11 December 2008_:_

Failed to indicate what information the [lessors] required as to the financial resources and business experience of the proposed transferee ...

1. He complained that the lessors would not 'put their cards on the table'. He submitted that the refusal of consent as described in the letter of 11 December was unreasonable because it failed to particularise the lessors' lack of satisfaction with the financial references provided or the misgivings expressed as to the values associated with the fixed assets in the balance sheets. Nor according to Mr Lloyd had adequate particulars been given of the allegation that the lessors were not satisfied that the documentary evidence to support the incoming tenants financial position. According to Mr Lloyd the fact that Mr Pitsounis was not the sole owner but rather joint owner of a number of the assets disclosed in the statements of assets and liabilities prepared by Mr Topalidies of Wallfield Accountants Pty Ltd could be accommodated 'by dividing by half the sums attributable to the land and adjusting the rest of the document accordingly'. He said that since Mrs Pitsounis was not a director of Second Ruth there was no requirement that she should be a guarantor and there was no requirement under the Retail Leases Act for Second Ruth to provide a business plan.
2. According to Mr Lloyd the reasonableness or otherwise of the lessor's refusal to consent to the assignment had to be judged in light of well known authorities including International Drilling Fluids Limited v Louisville Investments (Oxbridge) Limited [1986] Ch 513; Tomsca Ltd v Franklins Limited [2001] NSWSC 1205; (2001) 10 BPR 19,077; Scarcella v Linkmarf Management Services Pty Ltd (in liq.) (2005) NSWCONV R 56-106; Lecoz v Inomimata Pty Ltd (1999) V Con R 58 - 539 at [22]; Bradbrook, Croft and Hay Commercial Tenancy in Australia, 3rd Edition 460-1. He submitted that in so far as the was relevant and applicable the proposed transfer of lease:

Should be considered in the light of the purpose and objectives of the legislation, which include the promotion of small business enterprises.

1. He referred to the Lecoz decision at [18].
2. He submitted that the lack of substantial capitalisation for Second Ruth should not be regarded as fatally inappropriate in the context of the small business. He referred to Lecoz at [29].
3. According to Mr Lloyd, Second Ruth Pty Ltd was in no worse case as to its financial substance than the incumbent tenant, AAMR. Moreover, Second Ruth's sole director, Mr Pitsounis would grant a guarantee. According to Mr Lloyd it was not explained how the liquidation of Second Sandina 'might impact upon Second Ruth or impinge its financial standing, other than by innuendo'. He noted that there was no evidence from any person directly associated with the lessor companies - the people behind them, merely an affidavit sworn on their behalf by their company's solicitor. He said that since there had been a request for consent to assign which had been unreasonably withheld AAMR was entitled to transfer the lese without consent. He referred to Bradbrook, Croft and Hay 453 [15.9]. He said that since AAMR had given the lessors and Second Ruth a disclosure statement 'in accordance with s.61 of the Act' 'it follows that s.62 of the Act should apply to the applicants and the guarantors'.
4. According to Mr Lloyd in unreasonably withholding consent to assignment the lessors had breached Clause 4.2.1 of the lease, hence the applicant was entitled to damages. Clause 4.2.1 he said a covenant not to withhold consent rather than a mere proviso. He referred to Yared v Spier [1979] 2 NSWLR 291, 294 and Bradbrook, Croft and Hay 454 [15.9]. According to Mr Lloyd his client had been denied the use of proceeds of sale amounting to $150,000 since 19 December 2008. He said that interest on AAMR's liability to the Commissioner of Taxation reaches in the order of $340,000 accrued at the rate of 14.69% per annum or alternatively he said interest might be awarded at the official bank rate or the short term deposit rate at the of $150,000 which according to the affidavit of AAMR's principal, Mr Hickey, was 4.8%. Mr Lloyd did not suggest there was any evidence indicating that the lessors were aware of the interest obligation to the Commissioner of Taxation.

1. Mr Coady of Counsel appeared on behalf of the respondents. He said it was common ground that the lease was governed and regulated by the Retail Leases Act 2003. He referred to Sections 60 and 61 of that statute contending that the provisions of Section 60 were for the benefit of the landlord and permitted withholding of consent to a transfer if one or more of the matters referred to in paragraphs (a) to (d) was entailed. He submitted there was nothing in the section which obliged the landlord to act reasonably. He said that Clause 61 deemed certain provisions to be in the lease, in fact Clause 4 of the lease to some degree covered the same ground. He continued:

It is submitted, that a proper construction of relevant provisions of the lease is that it does not purport to expand on the obligations required of a landlord under the lease.

1. According to Mr Coady by the operation of Section 60(1):

The landlord was entitled to withhold consent if the landlord considered that the proposed assignee did not have sufficient financial resources or business experience to meet the obligations under the lease, and by operation of Section 60(2), an inferred statutory liability for the landlord not to unreasonably withhold consent, is excluded from the operation of the Act

1. Hence, he said a lessor was entitled to decline consent if it considered that the proposed assignee 'does not have either appropriate financial resources or business experience'.
2. According to Mr Coady the proper analysis of Clause 4.2 of the lease was that the first sentence of Clause 4.2.1 dealt with the situation where the relevant lease was not regulated by the Retail Leases Act. The balance of Clause 4.1 which began with the words 'if the Act applies, ...' dealt with the situation where the lease was regulated. Mr Coady noted that Clause 4.3.3 of the lease required a tenant proposing to assign to remedy any breaches. He continued:

It is conceded that the tenant has since remedied breaches relating to payment of rent which existed in December 2008.

1. The criterion of reasonableness referred to in the first half of Clause 4.2.1 hence, he said, applied only where there was an unregulated lease which was not the situation here.
2. Accordingly said Mr Coady, the relief relative to the proposed assignment should be denied.
3. Mr Coady said that his clients had responded expeditiously to the request for consent by their solicitor's letter dated 11 December. He continued:

Accordingly, the provisions of Section 61(6) of the Act and Clause 4.4 [dealing with deemed consents] have no application in the present proceedings.

1. Mr Coady said that even if contrary to his primary submission there was an obligation on the lessors to act reasonably or not to act unreasonably they had discharged that obligation. He said the onus to prove that his clients had acted unreasonably, the person who made the allegation, namely AAMR. He referred to Secured Income Real Estate (Australia) Limited v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 609 per Mason J (as he then was) and Hogan Corporation Pty Ltd v Flower Hotel Nominees Pty Ltd [2004] VCAT 2273 page 8. He said the obligations of landlord and tenant should be determined by their intentions as manifested in the lease contract. He referred to Cathedral Place Pty Ltd v Hyatt of Australia Limited [2003] VSC 385 [23] per Nettle J (as he then was). Referring to Sir Anthony Mason's judgment in the Secured Income case he submitted that a refusal of consent where there were doubts that the assignee could or would pay the rent promptly would not be capricious or arbitrary [1979] HCA 51; (1979) 144 CLR 596, 610. He said that in this context capriciously or arbitrarily were to be regarded as synonymous with 'unreasonably'. A lessor had proved enough to justify its refusal of consent if its conclusions were such as might be reached by a reasonably person in the circumstances Hogan Corporation [4] Pimms Limited v Tallow Chandlers Company [1964] 2 QB 547, 564. According to Mr Coady the lessor's determination could be justified by any material objectively available at the time the decision was made. He referred to the case [26]; ; and the case. He also referred to an unreported decision of Smith J in

Were relevant only to the issue of financial suitability and were material commercial issues suitable to inform [the lessors] and appropriate to support a refusal of the request for consent.

1. There were also a number of matters which emerged in the affidavit material filed in support of the ultimately successful application to halt the liquidation of Second Sandina before Robson J which according to Mr Coady were relevant considerations for the lessors in determining to refuse consent.

35.1. At 20 April 2007, those advising Mr Pitsounis claimed that three business - Zorba's Souvlaki, Hollywood Palace and Hollywood Pizza, had a value of $1.25 million (22), but independent corporate business brokers valued the businesses at or about 30 May 2007 at $215,374 (27).

35.2. Second Samdina Pty Ltd, ("the company") at all material times operating as trustee of the Pitsounis Family Trust (Pitsounis Affidavit 4 April 2008 (3)) had not filed income tax returns for seven years (Erskine 23);

35.3. That the company was fully indemnified by trust assets. A replacement trustee, namely Second Ruth Pty Ltd was (in February 2008) in the process of being appointed as trustee of trust (69)

35.4. On or about 23 May 2007, a Report as to Affairs was received by the liquidator (25);

35.5. In May 2007 there were discussions between the staff of the liquidator and consultants for the sale by the company of the three businesses under a terms contract of sale to be secured by a registered mortgage of property owned by Mr and Mrs Pitsounis-Mihalis (26).

35.6_._ Since the liquidator was appointed the three businesses had been traded by her through the service of the directors. The directors were required to account to her in respect of cash received on a regular basis (29).

35.7_._ By letter of 13 June 2007, the liquidator referred to irregularities in the reconciliations provided to her by the directors. (30)

35.8. By letter dated 28 June 2007 the solicitors for the liquidator wrote to the solicitor for the company requiring information that was outstanding in respect of trading activities of the three businesses. (36)

35.9. By letter dated 29 June 2007, the liquidators solicitors wrote to the solicitor for the company requiring provision of an account on a daily basis for the takings of the business ... .. noted that the directors had not banked any takings since 6 June 2007: (38)

35.10. By letter of 18 July 2007 solicitors for the liquidator wrote to solicitor for the company noting with concern that much of information sought by liquidator had not been provided and noted that there had been no banking since 17 June 2007. The letter said a locksmith would be in attendance and if proceeds of business together with documentation required was not provided, the locks to the three businesses would be changed: (41)

35.11. The solicitor for the company advised by email on 20 July 2007 that CGU Insurance had been paid $6170 in respect of liabilities of the company incurred prior to liquidators appointment, but the amount had not been disclosed in the affidavit material provided to the liquidator: (44)

35.12. The second application brought by Mr Pitsounis to have the liquidator removed, was dismissed by consent and costs on indemnity basis ordered against the applicants: (48)

35.13. The liquidator had been advised by her solicitor of information provided by solicitor for the company of an intention to apply to set aside judgment against the company by Leo Dimos and Associates in the County Court: (49)

35.14. On 30 October 2007 there was a creditors' meeting relating to the company. Advice was given to the meeting that clients of the solicitor were seeking to refinance the property (at 179 Bridge Road Richmond) and discharge the amounts owing to the creditors of the company in fill. (53)

35.15. The liquidator told the solicitor for the company that a letter of offer was required within 2 weeks of the meeting failing which she would be obliged to proceed to sell the company's interest in the property (54).

35.16. A letter regarding the last matter was sent on 30 October 2007 advising the liquidator would have no alternative but to seek to sell the property if an unconditional offer was not received by 13 November 2007: (55)

35.17 By letter of 18 December 2007 the liquidator received enquiry from Mr Zervos, solicitor for Landlord, enquiring about sale of property at Bridge Road (60)

35.18. On 16 January 2008, solicitors for the liquidator received letter of offer from solicitor for landlord offering to purchase land for $1.85 million (63)

35.19. By letter dated 3 February 2008, solicitor for company advised liquidator that company debt to bank secured over property was $385,400 and debt had been paid out on 30 January 2008 (69)

35.20. By letter 4 February 2008, Mr Zervos for landlord enquired about finalization of acquisition of company's interest in Bridge Road (70)

35.21. On 12 February 2008 solicitor for the company enquired of solicitor for liquidator about his proposal for transfer of land from the company to Second Ruth Pty Ltd (74)

35.22. By letter of 15 February 2008 the solicitors for the liquidator stated to solicitors for the company that if its clients were ready, willing and able to pay the costs and creditors of liquidation then they should arrange for a sum of money to be placed in trust no later than 18 February 2008 (78). At no time was money paid to trust for benefit of creditors and costs of administration (79).

35.23. By letter 21 February 2008 solicitors for the company threatened to seek injunction proceedings to restrain sale of property interest at 179 Bourke Road: and stated their intention to pay sum of $245,000 into court in satisfaction of all claims. (81) At no time pursuant to this letter did solicitor pay any money into court. (82)

35.24. On 29 February 2008 a contract of sale prepared by liquidator was sent to Zervos as solicitors for purchaser: (85)

35.25. By letter of 3 March 2008, solicitors for company said previous applications to terminate liquidation had been made in haste and that a number of errors had been made. (86)

35.26. By letter of 4 March 2008 the solicitors for the company told solicitors for liquidator that the solicitor now acted for Second Ruth Pty Ltd which was the new trustee of the Pitsounis Family Trust and provided a copy of trust deed and deed of appointment dated 14 February 2008: (88)

35.27. By letter of 13 March 2008 the solicitors for the companies (trustees) to solicitors for liquidator stated they were waiting for response from ANZ Bank in respect to a proposal sent to lawyers for ANZ; They said they had secured funding in the sum of $300,000 settlement of which was expected to take place within 5 days and requested undertaking not to deal with "trust property": (94)

35.28. By facsimile of 19 March 2008 the solicitors for the liquidator requested Zervos Lawyers to sign the contract of sale and provide deposit as soon as possible (99)

35.29. By letter of 28 March 2008 the solicitors for Second Ruth as new trustee of trust, said Second Ruth would provide all funds required to pay out the creditors of Second Samdina. (100)

35.30. By letter of 20 March 2008, the solicitor for Second Ruth and Second Sandina said proceedings would be commenced in the court by his client on following Wednesday (101)

35.31. On 4 April 2008, solicitors for liquidator received (service of) proceedings commenced by Mr and Mrs Pitsounis (105)

1. Mr Coady said there was no evidence that a refusal of consent:

Was motivated by any issue other than the considered view as to the financial suitability of the transferee.

1. He said a consideration of the statements and liabilities provided as exhibits to Mr Pitsounis' affidavit failed 'to indicate an appropriate level of recording assets and liabilities for relevant entitles'.

1. In reply Mr Lloyd submitted that the true construction of Clause 4.2.1 of the lease was that the first half of the clause applied to all assignments whether the relevant lease was governed by the Retail Leases Act at all. The situation where the lease was unregulated was he submitted dealt with by Clause 4.2.2 which entitled the landlord to withhold consent at its discretion.

1. I turn first to the issue of the true construction at Clause 4 of the lease. Mr Lloyd's submission that Clause 4.2.1 operated in circumstances where the lease was regulated by the Retail Leases Act 2003 and Clause 4.2.2 operated where it was not, was persuasive. Clause 4.2.2 gives the lessor, where the clause operates, a complete discretion as to whether to grant or withhold consent. Clause 4.1 of the lease excludes Section 144 of the Property Law Act 1958 which is the only restriction on a lessor's discretion to withhold consent where no special statutory regime regulates a lease. The circumstances in which Clause 4.2.2 operates are two fold, first, the discretion exists 'if the Act does not apply'. There is a second requirement introduced by the conjunctive word 'and'' both requirements must be made out for the sub-clause to operate. The second requirement for the untrammelled discretion is that 'a transfer of this lease would result in the Act applying, or applying if this lease is renewed for a further term'. At first blush the thought that a lease initially unregulated by the statute could become regulated is surprising; but this rather surprising situation can arise. If a lease of what would otherwise be retail premises is granted initially to a listed corporation (as that expression is defined in the Corporations Act) then the lease which would otherwise have been regulated would not be because the premises in question would be deemed not to be retail premises. Section 4(1)(2)(c). If however the listed corporation assigned the lease to a private individual or a small proprietary company the premises would become retail premises and hence there must at least be the possibility that the lease would then become regulated. Something like this happened by operation of corresponding provision of earlier retail tenancies legislation in Victoria in (2000) VCon R 54-614. Clearly a lessor happy enough to enter into an unregulated lease may find the retrospective imposition of the including for instance a prohibition on the recovery from the tenant of Land Tax inconvenient. It may be thought therefore that Clause 4.2.2 is aimed at coping with this somewhat outré but nevertheless conceivable eventuality. How then are these provisions to be read together? The first half of Clause 4.2.2 is expressed to be . This sub-clause in certain limited circumstances described above gives the lessors an untrammelled discretion to withhold consent to assignment. The natural meaning of the introduction therefore is that this paragraph, Clause 4.2.1 applies generally except where Clause 4.2.2 applies. In all other circumstances the obligation upon the lessor not unreasonably to withhold consent exists. The second half of the clause provides a further restriction on the lessor's powers, namely that in the case of a regulated lease, any refusal of consent must be in accordance with the terms of the Act. The scheme of the on these matters is to regulate a lessor's power to regulate or block assignments. In those circumstances it does not seem to me that for the lease to add an additional constraint on the lessor's discretion, namely an obligation not to act unreasonably is to provide something inconsistent with the (cf There is no question of invalidity for this half of the sub-clause. I observe that this Law Institute standard form does not direct itself as some standard forms do to maximise the powers and discretions and minimise the liabilities of the party expected to proffer the standard form, in this case, the landlord to the maximum extent permitted by law. The default clause of this lease, Clause 7.1.1 imposes an obligation on a landlord wishing to forfeit the lease to serve a demand for rent. The general conveyancing law, of the imposes that obligation with respect to non-rental breaches but not according to its own terms, for rental breaches of covenant. In the context of a standard form such as this there is no reason therefore to baulk at an interpretation that enhances the position of the tenant at the expense of the landlord's discretion.

The landlord considers that the proposed assignee does not have sufficient financial resources ... to meet the obligations under the lease.

1. Mr Coady noted the absence from Section 60(1) of either a positive obligation upon the part of a landlord to act reasonably or a negative prohibition against a landlord or lessee for acting unreasonably when deciding to withhold consent to a proposed assignment. These provisions stand in contrast to the express provision of the now repealed Section 22(2) of the Retail Tenancies Reform Act 1998 that 'a landlord must not unreasonably withhold consent to an assignment of the lease ...'. The provisions in Part 7 of the Act represent a re-formulation of the provisions relative to assignments of retail leases. So far as I am aware, aside from Section 62 to which I will refer in due course, these provisions have not been reformulated in the new statute to achieve any particular new policy objective other than perhaps to follow the text of some interstate model. Accordingly there must be a certain reluctance to accept a view that the new provisions have created a fundamentally different regime from the one which existed under the 1998 Act and for that matter under Section 16(2) of the Retail Tenancies Act 1986. Nevertheless, as the High Court of Australia has in recent years frequently stressed that the prime guide to the operation of a statute is to be found in the words employed by Parliament rather than in any encrusted jurisprudence which has been attached to the relevant section of the statute or general notions as to what the section means. It would seem sufficient based simply upon the words in Section 60 for a landlord to sustain a refusal to consent to an assignment to prove that the landlord 'considers' the assignee to have insufficient financial resources. The test on its face is an entirely subjective one. These lessors would, on this view, make good their position and repel the applicant's claims simply by showing that they did in fact hold the opinion that their legal advisers assert, namely, a view that Second Ruth did not have sufficient financial resources to meet the obligations under the lease. The objective correctness of that view would be nothing to the point.

60(1) A landlord is only entitled to withhold consent to the assignment of a retail premises lease if one or more of the following applies -

(b) The landlord reasonably considers that the proposed assignee does not have sufficient financial resources ... to meet the obligations under the lease.

1. This reading necessarily entails adding a word to the text which is not in fact there. In Thompson v Goold and Co [1910] AC 409, 420 Lord Mersey famously declared_:_

It is a strong thing to read into an act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do.

1. His Lordship's famous statement was recently applied by the Victorian Court of Appeal in Commissioner of State Revenue v Australian Football League (2006) 14 VR 35. As with many hallowed statements of the law, the principle can be clearly laid down but the application may be problematic. What would constitute the 'necessity' which might justify the addition of words to the Parliamentary text. In Birmingham v Corrective Services Commissioner of New South Wales (1988) 15 NSWLR 292, 302 McHugh JA (as he then was) said that words in a statute may be given a strained construction 'to give effect to the purpose of the legislation' if it appears that Parliament had inadvertently failed to deal with an eventuality. See also Pearce and Geddes Statutory Interpretation in Australia (5th Edition) 412 [2.28].
2. An example of reading extra words into the text of the statute which at least textually is quite close to the present situation is to be found in the decision of the Court of Appeal in Transport Accident Commission v Bausch [1998] 4 VR 249. In Bausch's case the claimant Mr Bausch was seeking to have set aside a determination of the Commission and the Administrative Appeals Tribunal on review that he sustained his injuries in an accident which occurred while he was driving to his home from his place of employment. Section 36 of the Administrative Appeals Tribunal Act 1984 required a body whose decision was being reviewed by the Tribunal to provide a statement of its reasons for determination and (Section 36(1)(b):

Every other document or part of a document that is in the possession or under the control of the person [that is the decision maker] and is considered by the person to be relevant to the review of the decision by the Tribunal. (emphasis added)

The Court found that the statement provided by the Commission omitted a material document being a police report. Batt JA referred to Section 36(1)(b) and stated:

To my mind, the words which I have last quoted are to be interpreted as referring to consideration by the decision maker acting reasonably: cf, for example Brounstein v Accidental Death Insurance Co (1861) 1 B and S 782; [1861] EngR 995; 121 ER 904 (a case of contract, not statute). [Emphasis in the original.]

1. Were the same words to be read into Section 61(b) of the Retail Leases Act then the enquiry would be not merely whether the lessors 'considered' that Second Ruth Pty Ltd has inadequate financial resources but whether this was a reasonable finding for the lessors to make.
2. The statute considered in Bausch's case is textually quite similar to Section 60 of the Retail Leases Act, nevertheless the context in which the decision in Bausch's case was made was quite different. The central question in Bausch's case was in what circumstances Mr Bausch sustain his injuries. The provisions in Section 36 of the Administrative Appeals Tribunal Act were mere machinery provisions to ensure that the Tribunal in hearing a review proceeding would have available to it something which might be regarded as the equivalent of the 'Appeal Book' to which the Court of Appeal would have available in a civil appeal. Here, the question as to whether the words reasonably or 'acting reasonably' should be read into Section 60(1)(b) of the Retail Leases Act arises at the very heart of the question to be adjudicated, namely whether or not the lessor's refusal of consent to assign was lawful. It seems more reasonable in dealing with the tangential question such as the contents of the to consider that Parliament may have inadvertently omitted something than it is to suppose that on the very central question to be considered in that part of the statute Parliament has omitted an important material question to be considered.

(a) a tenant gives a landlord and proposed assignee a copy of a disclosure statement in accordance with section 61(4); and

(b) the disclosure statement does not contain any information that is false, misleading or materially incomplete.

(2) None of the following persons are liable to perform any obligations under the lease or to pay to the landlord any money in respect of amounts payable by the proposed assignee -

1. Mr Lloyd contended the evidence demonstrated that AAMR had given the lessors and the proposed assignee AAMR a copy of the relevant disclosure statement which did not contain any information that was misleading or materially incomplete.
2. There are a number of difficulties with this submission. The first is the inaccurate cross-reference in Section 62. It refers to the tenant giving a disclosure statement to the lessors and Second Ruth 'in accordance with s.61(4)'. As part of the package of retrospective amendments to the 2003 Act made in 2005 Section 61(4) was repealed, however it was replaced in the same terms by Section 61(5A) which provides:

(5A) If the assignment is in connection with the lease of retail premises that will continue to be used for the carrying on of an ongoing business, the tenant must give the landlord and the proposed assignee a disclosure statement in the form prescribed by the regulations (but the layout of the statement need not be the same as the prescribed disclosure statement).

1. No argument has been put to the effect that the disclosure statement actually given was other than in accordance with Section 61(5A). Accordingly this part of AAMR's case appears to be made out subject to its dealing with the mistaken cross-reference. Mr Coady submitted that the inaccurate cross-reference was fatal to the operation of Section 62 or it would follow any other instance. Dr Croft in his work Retail Leases Victoria suggests that the problem caused by the inaccurate cross-reference could be 'saved' by Section 17 of the Interpretation of Legislation Act 1984 'so that the triggering provision should be taken to refer to subs 61(5A)' 15,531 (Service O). Section 17 is a fairly elaborate provision dealing with a number of possibilities. Extracting only those elements which are relevant to the present circumstances it provides as follows:

A reference in an Act to... that Act or any provision of that Act ... shall, unless the contrary-intention appears, be construed

(a) if the Act, ... or provision in question has been amended, as a reference to the Act, ... or provision as amended and in force for the time being

(b) if the Act ... or provision in question has been re-enacted or remade (with or without modification), as a reference to the Act ... or provision as re-enacted or re-made and in force for the time being.

1. Accordingly where Section 62 refers to Section 61(4) that reference can be taken to be to its 'remade' version, namely Section 61(5A) but this does not exhaust the drafting problems which arise. The exoneration from liability for tenants and guarantors seems to operate merely upon the giving of the disclosure statement. Read literally the section appears to discharge the tenant and guarantors from liability under the lease whether the assignment occurs or not. The section appears to operate according to its literal terms if, for instance, a disclosure statement is given and an arrangement for assignment 'falls over' because of repudiation by either the assignor or the assignee accepted by the other side or if the parties simply agree to set the agreement to assign aside. This would be a bizarre result. By reference to what I said earlier in these reasons about Lord Mersey's famous formulation of the dangers of adding words to the text of statutes, I am nevertheless convinced that it is necessary in the present case to regard as implied and therefore necessary to add to Section 62 a provision that the exoneration of the tenant and guarantors occurs only when and if the assignment contemplated by the giving of the disclosure statement becomes effective. This is a point made fairly elliptically by Dr Croft on the same page of his work on Retail Leases Victoria where he says 'the operation of s.62 of the 2003 Act is immediate, implicitly on the assignment becoming effective'. Any relief in favour of AAMR under Section 62 should be expressed to be effective only upon the assignment becoming effective.
2. Finally I turn to the claim by AAMR for damages. For the reasons given above I have accepted that there is here a covenant on the part of the lessors not unreasonably to withhold their consent to the assignment to Second Ruth Pty Ltd. Upon the findings which I have made this is what they did. I have no calculations of the losses said to have been incurred by AAMR. Given that there is no evidence to suggest that the lessors were aware of AAMR's arrangements with the Commissioner of Taxation, in particular the arrangements for the accrual of interest, the interest charged by the Commissioner is not an appropriate measure of the lessor's liability and damages. Rather the much lower rate for term deposits, namely 4.8% appears to be the proper measure of damage.

1. I have heard no submissions on costs and hence I will reserve that question.