JB Northbridge Pty Ltd v Winners Circle Group Pty Ltd

Judgment 1These proceedings concern a lease of commercial premises at 45-51 Main Street, Blacktown. The Lessee has been conducting a licensed hotel at the premises but following default in its arrangements with St George Bank, the bank appointed receivers and managers to the hotel business. Subsequently the Lessee was placed in liquidation. The lease permitted exercise of a renewal option and the option has been exercised. The validity of the exercise was contested in earlier proceedings but this Court ruled that the Lessee was entitled to a renewed lease and in January 2014 this year that new lease was registered. 2The receivers and managers wish to sell the business including, as part of that sale, the Lessee's leasehold interest. Disputes have arisen between the Lessor and the Lessee (acting through the receivers and managers) as to the requirements of clause 4 of the lease which deals with assignment. The Lessor has lodged a caveat to protect its right and the Lessee has sought to have the caveat removed. The proceedings commenced as an application by the Lessor for extension of a caveat and there were questions about whether the caveat could or should be maintained which no longer need concern the Court since the parties have agreed that undertakings will be given by the Lessee and that it has been accepted will obviate the need for continuation of the caveat. 3I set out the relevant parts of clause 4 of the lease (which lease is found at Tab 4 of Exhibit A1): 4.5 No Assignment The Lessee shall not during the continuance of this Lease assign or transfer the Lessee's interest in the Premises or this Lease or by any act or deed procure any assignment or transfer, except in accordance with the terms of this Lease. 4.6 Assignment 4.6.1 This Lease may be assigned or transferred if the Lessee requests the Lessor's consent to the assignment or transfer of this Lease in writing and shall furnish with that request: 4.6.1.1 information regarding the financial resources and financial standing and the business experience and retailing skills of the Ingoing Tenant; 4.6.1.2 particulars of the use of the Premises intended by the Ingoing Tenant; 4.6.1.3 confirmation that the Lessee has complied with paragraph 4.6.2 of this clause. 4.6.2 The Lessor is entitled to withhold consent to the assignment or transfer of this Lease in any of the following circumstances: 4.6.2.1 if the Ingoing Tenant proposes to change the use to which the Premises are put (unless the Lessor consents to the change of use); 4.6.2.2 if the Ingoing Tenant has financial resources and retailing skills that are inferior to those of the Lessee; 4.6.2.3 if the Lessee has failed to comply with the provisions contained in this clause for requesting and obtaining consent to the assignment or transfer. 4.6.3 If requested by the Lessor, the Lessee shall furnish to the Lessor such further information as the Lessor may reasonably require concerning the financial standing and business experience of the Ingoing Tenant. 4.6.4 The Lessor agrees to deal expeditiously with the Lessee's request for consent to assign or transfer this Lease. 4.6.5 The Lessee shall pay the Lessor's costs of and incidental to the giving of its consent. 4.6.6 Despite the present terms of this Lease the Lessor may require from the Ingoing tenant personal guarantors (as provide for in clause 19) or the provision of a Bank Guarantee for 6 months Rent (as provide for in clause 20). 4.6.7 If the Lease is assigned or transferred in accordance with this clause then, provided a suitable guarantee or Bank Guarantee is furnished to the Lessor by the assignee or transferee, the Lessor shall return the Lessee's Bank Guarantee. 4The only other term of the lease which may bear on the present dispute is found as part of clause 1.12: In the event of ambiguity all of the covenants clauses and words in this Lease shall be construed to widen and not restrict the powers rights and remedies of the Lessor. 5At the commencement of the hearing Mr T M Faulkner, counsel for the plaintiff, and Mr S B Docker, counsel for the defendant, agreed that the issues which need to be determined are whether, as a matter of construction of the lease: (1)The Lessor's positive consent is required by clause 4; (2)Clause 4.6.2 sets out the only reasons which would permit the Lessor to refuse consent; and (3)A requirement by the Lessor that the assignee provide a personal guarantee or bank guarantee as specified in clauses 19 and 20 of the lease respectively is a precondition to assignment of the lease to an assignee. 6Reference has been made in submissions to s 133B(1)(a) of the Conveyancing Act 1919 ("the Act") so I set out that subsection: 133B Covenants against assigning etc "(1) In all leases whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 containing a covenant, condition, or agreement against assigning, underletting, charging, or parting with the possession of demised premises or any part thereof without licence or consent, such covenant, condition, or agreement shall, notwithstanding any express provision to the contrary, be deemed to be subject: (a) to a proviso to the effect that such licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent, and..." 7I received detailed and helpful written submissions from Mr Faulkner and Mr Docker and they expanded on those submissions in the course of the hearing on Thursday. The matter has been expedited and the parties' solicitors and counsel have diligently worked to ensure that the Court was provided with the Court Book and submissions by the required time. 8In relation to above, in the course of oral submissions and on further reflection, Mr Docker conceded that the provision is a precondition. In my view that concession was appropriately made.