Goldfish Bar and Restaurant Pty Ltd v Roche Group Pty Ltd

Chronology of key facts

An aerial photograph of the Estate is reproduced below:
The photograph looks approximately south-west. As it shows, the Pavilion and the terrace in front of it face north. The northern edge of the Estate is bounded by Broke Road, running from east to west. The main entrance of the Estate is on Broke Road. That entrance cannot itself be seen in the photograph but there is a tree-lined laneway which can be seen heading towards the Pavilion from the north. On either side are vineyards and parkland.
Behind the Pavilion is a carpark used by staff and delivery drivers; access to that carpark is provided by an entrance on McDonalds Road, which borders the Estate to the west and runs into Broke Road on the north-western corner of the Estate. The Broke Road entrance laneway curves around to a customer carpark to the west of the Pavilion. That carpark can also be reached via the McDonalds Road entrance.
The lease the subject of these proceedings came into existence as a result of the exercise of an option granted pursuant to an earlier lease between RG as landlord and Goldfish Bar Pty Limited ("GB"), which previously operated the Restaurant as tenant. That original lease was for a five-year term from October 2015 to October 2020. The lease contained an option for a further five-year term.
GBR acquired the Restaurant from GB under a sale of business agreement in December 2019. RG consented to the transfer of the lease from GB to GBR. Ms Kerry Harman previously worked as a consultant to GB and manager of the Restaurant. She has worked full-time at the Restaurant since March 2018.
In the first quarter of 2020, on behalf of GBR, Ms Harman gave notice that she wished to exercise the option when the lease expired in October of that year. There followed some correspondence between Ms Harman and Mr Christian Smith, an employee of RG whose job title is "Property and Leasing Manager". Mr Smith proposed that the fresh lease contain some different terms. Eventually, this was not agreed and the current lease, which reflects the terms of the original lease, was executed.
Ms Harman gave evidence about the concerts RG has conducted since 2018. The concerts were (and are) held on Saturdays. Usually, the stage was set up facing the Pavilion and terraces from the north. The stage would thus block the access road to and from the main entrance on Broke Road, although access from McDonalds Road remained open.
The first evidence of RG's concert program for 2022 being notified to Ms Harman is an email of 21 July last year. Aside from three concerts in October and November (which did not, in the end, proceed), the email notified the following events for the first half of this year: 1. Saturday 29 January: "Summer Salt"; 2. Saturday 26 March: Rod Stewart; 3. Saturday 9 April: "Wine Machine".
At the time, the employee of RG who was responsible for the conduct of events on the Estate was Mr Srinivas Gopal. Mr Gopal was assisted by a more junior employee, Mr Shane Bolton. His job title was "Maintenance and Asset Manager" for the Estate. He was responsible for managing the physical arrangements for the conduct of the events. As will be seen, Mr Smith was also involved in communications with Ms Harman about the events.
According to Ms Harman's affidavit evidence, she attended a meeting with representatives of RG (including Mr Gopal and Mr Smith) on 14 October and was told that RG was planning to hold three events in January. This was because RG was seeking to make up for concerts which it had been unable to hold in 2020 and 2021 because of the COVID-19 pandemic. The RG representatives stated that fencing, barricades and other structures would be retained on the site for the whole of January to save costs. Ms Harman protested about the effect disruption of that sort would have on her business, but this question was not resolved.
On 20 October 2021, Ms Harman received a further email from RG advising that RG proposed to hold nine events in 2022. The event program was as follows: 1. 15 January: "Grapevine Gathering"; 2. 22 January: "Red Hot Summer"; 3. 29 January: Summer Salt; 4. 26 March: Rod Stewart; 5. 2 April: "Wildflower"; 6. 9 April: Wine Machine; 7. 23 April: TBC; 8. 15 October: TBC; 9. 5 November: TBC.
Site preparation for the Grapevine Gathering event on 15 January began on 7 January. Ms Harman had planned not to open the Restaurant on that day. The Broke Road entrance was closed on Monday 10 January. But then, at 9:34 am on Tuesday 11 January, Ms Harman received an email from Mr Smith advising that, due to recently imposed COVID-19 health restrictions, the concert had been cancelled. The email continued: Access to your premises by the public will not be restricted, you are free to trade as per your normal hours.
At 4.29 pm the following day, 12 January, Mr Smith forwarded another copy of his 11 January email to Ms Harman stating: We note that posts on your Facebook and Instagram pages state that you will be remaining closed this Saturday evening. As per the below email access to your premises by the public on Saturday 15 January … will not be restricted. We therefore expect you to be open for your minimum trading hours stated in Item 11 of the Schedule of your lease [12pm to 3pm and 6.30pm to 9.30pm]. … Failure to trade during these hours will be a breach of your lease. We look forward to seeing your business trading on Saturday as per the minimum hours.
Despite this threat, Ms Harman did not open the Restaurant on 15 January. She says that this was because it was impossible to organise staffing with that period of notice.
Meanwhile, on 13 January (at 4.10 pm) Mr Smith sent a further email to Ms Harman notifying her that the Red Hot Summer event scheduled for the following Saturday (22 January) had been cancelled "due to Public Health Orders". However, that cancellation was later withdrawn, and the event went ahead. So too did the Summer Salt event on 29 January. As a result, the Restaurant did not trade on those two days.
On 14 January, Mr Smith had advised that the Rod Stewart concert scheduled for 25 March had been cancelled. No complaint is made about this, and the Restaurant traded normally on that date and on surrounding days.
The first of the April events was to be the Wildflower event on Saturday 2 April. At 7:50 am on Wednesday 30 March Mr Smith sent Ms Harman an email that the event had been cancelled as a result of "adverse weather". He continued: As such access to your premises will not be restricted and you will be required to trade.
At 3:34 pm that afternoon, Ms Harman responded, stating that she had been advised by the Restaurant Manager of the cancellation and noting that the cancellation had not yet been recorded on RG's website nor had she received any written confirmation. Ms Harman indicated that the Restaurant would be unable to trade on 2 April.
Mr Smith replied by forwarding a copy of the 7:50 am email. He added: We understand that all other tenant's [sic; tenants] will be opening and we would not have an issue opening our restaurants in the Hunter with this amount of notice. We do not accept that you are unable to trade on Saturday.
The following Tuesday, 5 April, Mr Smith sent a further email notifying Ms Harman that the Wine Machine event scheduled for Saturday 9 April had been cancelled "due to inclement weather". Again, he indicated RG's expectation that the Restaurant would trade on that day as access by the public would not be prohibited. The final event, scheduled for 23 April, was cancelled by email on 14 April.
Ms Harman did not open the Restaurant on 2 April, again because, so she says, she was unable to obtain sufficient staffing in time. She did open the Restaurant on 9 and 23 April but says that the takings were adversely affected by a lack of notice as a result of previous bookings having to be cancelled.

Entitlement to conduct concerts

The lease defines the Estate as a whole as the "Land" and the Pavilion as the "Building". Pavilion E (the area actually leased by RG to GBR) is defined in the lease as the "Premises". The "Common Areas" are defined as "those areas of the Building made available by the Landlord from time to time for use by the Tenant in common with the Landlord and other occupiers and their Agents". The part of the terrace licensed for outdoor dining (which is included in the Common Areas) is defined as the "Licensed Area".
Clause 4.1 of the lease deals with the permitted use of, and access to, the Premises. It relevantly provides: The Tenant: (a) must not use the Premises for any purpose other than the Permitted Use; (b) acknowledges and agrees that no exclusive use is granted to the Tenant in respect of the Permitted Use; (c) must ensure that the Premises are in a presentable condition at all times; (d) must keep the Premises open for trading during the Minimum Trading Hours; (e) may only open the Premises for trading outside the Extended Trading Hours subject to compliance with any Laws in that respect and the payment on demand of any additional Costs incurred by the Landlord; and (f) is entitled to 24 hour access to the Premises 7 days per week subject to the Landlord's right to close the Building and prevent access to it in the event of a civil disturbance or an emergency.
The "Permitted Use" is defined as "bar and restaurant". The "Minimum Trading Hours" are defined as: Tuesday to Sunday 12.00pm to 3.00pm and 6.00pm to 9.30pm and all public holidays except Good Friday and Christmas Day
The landlord's covenant for quiet enjoyment is contained in clause 2.1 (emphasis added): Provided that the Tenant pays to the Landlord all moneys as and when due under this lease and duly and punctually observes all of the terms of this lease to be observed on the part of the Tenant it may, subject only to the rights reserved to the Landlord by the terms of this lease, peaceably possess and enjoy the Premises and use the Common Areas for the Term without any interruption or disturbance from the Landlord.
The landlord's reservations of rights are set out in clause 2.2 (emphasis added): In addition to any other rights of the Landlord as provided by the terms of this lease, the Landlord expressly reserves the rights: (a) to alter the tenancy mix of the Building; (b) to use or to grant rights of occupation to use any parts of the Land or the Building including the Common Areas for any purpose, including any business which may compete with the Permitted Use; (c) to change the name of the Building or any part of it and/or the number of the Premises from time to time during the Term without any obligation to compensate the Tenant for any Costs the Tenant may incur arising from that change; (d) to install, maintain, use, repair, alter, replace and/or to pass or convey gas, water sewerage, heat, oil, electricity or other power and heated or cooled air through, any pipes, ducts, conduits, cables or wires leading through or into the Premises; (e) to grant easements or enter into any arrangement or agreement with any owner, lessee, tenant, occupier or other person interested in any land adjacent to or near the Land or any Authority for the purpose of providing: (i) any Service; (ii) public or private access to and/or egress from the Land; and/or (iii) support of existing or future structures erected on or from adjoining land; (f) to subdivide or otherwise deal with the Land; (g) to hold concerts or other events on the Land on up to 4 days each year at which times access to the Premises by the general public may be restricted or prohibited, and the Tenant must provide its consent to any easement, arrangement, agreement or dealing within 5 Business Days of receipt of a request from the Landlord provided that the easement, arrangement, agreement or dealing will not have any material and adverse effect on the Tenant's rights and obligations under this lease.
It is convenient to deal first with whether the reference to "year" in clause 2.2(g) is to a calendar year or a lease year. There is no direct guidance on this question in the lease.
Counsel for RG submitted that the natural meaning of the word "year" in the context of the clause was "lease year". Counsel pointed out that the lease began in October 2020, only ten weeks before the end of the 2020 calendar year. Counsel suggested that it was an unlikely construction which would have permitted RG to hold as many as four events during that period.
The COVID-19 pandemic was still in its relatively early stages from October to December 2020. There is no suggestion that RG was actually contemplating holding four events during the period. In fact, the lease was not formally executed until August 2021, well after the 2020 financial year had already expired. I think the suggested concern is unrealistic.
Furthermore, a similar problem arises with a calendar year approach, because the term of the lease was five and a half years. Counsel for RG did not explain how a "calendar year" interpretation would work during the last six months of the lease.
Counsel for GBR pointed out that the definition section of the lease in fact contains "Lease Year" as a defined term. Counsel submitted that, had the parties intended the term "year" in clause 2.2(g) to mean "lease year" they would have used the defined term. Their failure to do so indicated that "year" meant "calendar year".
Counsel for GBR next relied on the course of negotiations between the parties. The new lease proposed by Mr Smith in the course of those negotiations provided, among other things, for an annual event limit per calendar year. The submission was that this represented the views of the parties. But counsel for RG pointed out that the proposal was rejected; if anything, in counsel's submission, this would be a factor going the other way on the construction issue: see Walker Group Constructions Pty Ltd v Tzaneros Investments Pty Ltd (2017) 94 NSWLR 108 at [114]-[120].
Finally, counsel for GBR pointed out that the other premises in the Pavilion would (presumably) have included a similar four-event annual limit and those other leases would not necessarily have begun on the same date as the lease to GBR. Counsel submitted that interpreting the annual limit as four events per calendar year would give a more commercially sensible operation to the (presumed) system of leases as a whole. Counsel for RG pointed out, however, that there was no evidence about the terms of the other leases.
To my mind, the reference in the lease to "each year" tends to suggest a calendar year, especially when the term of the lease was not divisible into years. In any event I think that counsel's first argument, based on the failure to use the defined term "Lease Year", is decisive (compare Lioncrest Capital Holdings Pty Ltd v O'Shaughnessy [2022] NSWSC 1410 at [27] per Darke J). I do not find it necessary to address counsel's other arguments.
The next question is whether reasonable notice was given of the cancellations of the events scheduled for 15 January, 2 April, 9 April and 23 April. Otherwise, it is agreed that those dates would count towards the four-day limit for the 2022 year.
The evidence during the hearing showed that the Restaurant's clientele was a mixture of people who had made prior bookings and "walk ins" who came in on the day without having made a booking. Counsel for RG noted that the Restaurant had in fact traded on 9 and 23 April. It had not traded on 15 January or 2 April.
Counsel accepted that there was nothing that he could say about the cancellation of the 2 April event, which happened only four days beforehand. But counsel maintained the position, albeit somewhat faintly, that sufficient notice had been given for the cancellation of the other events. Counsel submitted that, in spite of Ms Harman's evidence, I should not be satisfied that it had been impractical to open on 15 January.
The difficulty with this submission is that it fails to give full effect to the rights secured to GBR under the lease. RG was obliged to exercise its powers, including the power under clause 2.2(g), in such a way as to give GBR the benefit of the lease: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. Especially was this so when GBR was not merely entitled, but obliged, to operate the Restaurant. Even if GBR could have obtained the staff needed to operate the Restaurant on 15 January (and I am not sure that is so) and GBR could have opened the Restaurant to take advantage of walk ins, that was not enough. GBR had to be given a reasonable opportunity to attract customers by bookings. So much was in effect conceded by RG in agreeing that reasonable notice had to be given of cancellation.
Ms Harman gave evidence that bookings formed an important part of the Restaurant's business and that some bookings were taken months in advance. She also gave evidence that when notified that an event was to be held on that date, she blocked out that date in the Restaurant's diary. As a result, prospective customers were told that the Restaurant would not be opening on 15 January. This evidence, not surprisingly, was not contested.
In my view, it is clear that to cancel the 15 January event on only five days' notice was clearly unreasonable. Indeed, counsel accepted that four days' notice was insufficient for the cancellation of the 2 April event. It was not necessary to explore exactly how much business the Restaurant could have done if it opened on 15 January. Five days was on no view a sufficient period to offer advance bookings, and the takings must inevitably have been less than if there had been a full period for advance bookings.
This means that the four event days to which RG was entitled in 2022 were exhausted on 2 April. It is unnecessary to consider the reasonableness of the notice given of cancellation of the events of 9 and 23 April.
The final issue is the question of reasonable notice for notifying events for the purposes of clause 2.2(g). Counsel for GBR contended that six months was the reasonable minimum period of notice for the holding of an event. Counsel referred to evidence from Ms Harman which showed examples of some bookings being taken between five and twenty-four months in advance. Counsel submitted that the circumstances required that there should be "ample" notice and that in the past RG had provided at least six months' notice in most cases.
Counsel for RG submitted that a two month notice period was reasonable, although RG was prepared to agree to a three month period. There were two aspects to the submission. First, counsel submitted by reference to evidence from RG's witnesses that a reasonable degree of flexibility was required in order to meet the requirements of promoters and other vagaries such as the pandemic. Second, counsel criticised the evidence in support of GBR's claim for a six month period. Counsel observed that GBR's evidence did not descend into detail about the percentage of customers who were walk ins, or, the percentage of bookings which were made more than six months in advance. Counsel submitted that in the circumstances the reference to very long booking periods was no more than a series of isolated possibilities and did not justify the view that six months was always necessary.
I feel the force of the submission made by counsel for RG. In my view GBR has failed to establish that a minimum period of six months for bookings is reasonable.
But it does not follow that I should declare that two months, or three months, is a reasonable period. The difficulty is that reasonableness depends upon all of the relevant circumstances. Those circumstances may include the previous dealings between the parties. Seasonal factors may also be relevant: there may be periods of time during the year when the booking demand is greater than it is at other times. Ms Harman's evidence referred in particular to advance bookings being taken for weddings and for end of year Christmas parties. In the end, I am not sure that there is one reasonable notice period which applies in all circumstances.
I appreciate that both parties have joined in asking the Court to determine a reasonable notice period. Clearly that level of certainty would be desirable from both parties' points of view. But in the absence of agreement between the parties, I do not think it can be imposed. If the parties are unable to agree one, the issue will simply have to be left to be determined on a case-by-case basis if it arises in future.

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Cases Cited (3)