Lockrey v Historic Houses Trust of New South Wales

The proceedings at first instance 11Mr Lockrey commenced proceedings against HHT in the Commercial List of the Equity Division seeking declaratory relief to the effect that, first, HHT had unreasonably withheld consent to the transfer of the lease, second, Mr Lockrey and Mr Shelhot were entitled to transfer the lease to Mr Lockrey alone despite the absence of HHT's consent, and, third, HHT's notice purporting to withhold consent was ineffective. 12Mr Shelhot was named as a defendant but filed a submitting appearance, except as to costs. He took no part in the proceedings at first instance or on appeal. 13The proceedings were heard by Stevenson J on 7 June 2012. For reasons published on 15 June 2012 (Lockrey v Historic Houses Trust of New South Wales [2012] NSWSC 654), his Honour dismissed Mr Lockrey's claims in their entirety. 14A summary of his Honour's conclusions was stated at paragraph [86] of the judgment (references to "the Act" in both the judgment and the lease itself are references to the Retail Leases Act): "In my opinion this analysis of the correspondence shows that:- (a) on 12 August 2009, HHT made a request under s 41(a) of the Act (and clause 3.8(c) of the Lease) for financial information concerning Mr Lockrey's financial standing; (b) that request was reasonable; (c) that request was not withdrawn or abandoned; (d) that request was never complied with; (e) accordingly, HHT is not deemed, by reason of s 41(d) of the Act (or clause 3.8(d) of the Lease) to have given its consent to any of the five requests made by Mr Lockrey to it for consent to the assignment, notwithstanding the fact that HHT did not respond to any of those requests, within 21 [sic; scil: 28] days 'either consenting, or withholding consent'; and (f) HHT was, on 18 November 2011, entitled to withhold its consent to the assignment by reason of Mr Lockrey's failure to comply to s 41 of the Act (and clause 3.8(c) of the Lease). That fact that HHT did not identify that matter, in its letter of 18 November 2011, as its basis for withholding consent is, for the reasons outlined above, irrelevant." 15Mr Lockrey appeals against the judge's refusal to grant the declaratory relief he sought. I should, at this point, set out a number of relevant provisions.

Applicable provisions 16The matters in contention between the parties arise under provisions of both the lease and the Retail Leases Act. The two sets of provisions cover very much the same ground. 17The relevant clause of the lease is clause 3.8: "(a) Subject to the remaining sub-clauses of this Clause 3.8 and Part 13 hereof the Lessee shall not assign or transfer this lease without the written consent of the Lessor (b) The Lessor can withhold consent only if: (i) the proposed transferee or assignee proposes to change the use of the Premises pursuant to Clause 3.1; or (ii) the proposed transferee or assignee has financial resources or business experience or retailing or restauranting skills inferior to those of the Lessee; or (iii) the Lessee has not complied with clause 3.8(c); (iv) the Lessee has not complied with the Act. (c) A request for the Lessor's consent to a transfer or assignment of this lease must be made in writing and the Lessee must provide the Lessor with such information as the Lessor may reasonably require concerning the financial standing and business experience and retailing and restauranting skills of the proposed transferee or assignee. (d) The Lessor must deal expeditiously with a request by the Lessee for the Lessor's consent and where the Lessee has complied with Clause 3.8(c) and the Act and the Lessor has not within 28 days after the request was made given notice in writing to the Lessee either consenting or withholding consent the Lessor is taken to have consented. (e) The Lessee has to pay in connection with any consent the Lessor's reasonable legal costs, the reasonable costs of obtaining any mortgagee's consent, the stamp duty and the registration fee for the transfer or assignment and the Lessor's reasonable costs of and incidental to the investigation of the respectability, responsibility, solvency, stature, experience and capabilities of the assignee or transferee." 18Particularly relevant provisions of the Retail Leases Act are s 39 and s 41 as follows: Section 39: "(1) The lessor is entitled to withhold consent to the assignment of a retail shop lease in any of the following circumstances (and is not entitled to withhold that consent in any other circumstances): (a) if the proposed assignee proposes to change the use to which the shop is put, (b) if the proposed assignee has financial resources or retailing skills that are inferior to those of the proposed assignor, (c) if the lessee has not complied with section 41 (Procedure for obtaining consent to assignment), (d) the circumstances set out in section 80E. (2) This section does not preclude any right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with the consent, so long as the lessor has substantiated those expenses to the lessee at the request of the lessee." Section 41: "A retail shop lease is taken to include the following provisions: (a) A request for the lessor's consent to an assignment of the lease must be made in writing and the lessee must provide the lessor with such information as the lessor may reasonably require concerning the financial standing and business experience of the proposed assignee. The lessee may provide the lessor with a copy of a statement in writing that contains the information that is contained in or required to complete the prescribed form that has been provided to the proposed assignee. The statement may be provided if the assignment is in connection with the lease of a retail shop that will continue to be an ongoing business. The layout of the statement need not comply with that of the prescribed form. (b) Before requesting the consent of the lessor to a proposed assignment of the lease, the lessee must furnish the proposed assignee with a copy of any disclosure statement given to the lessee in respect of the lease, together with details of any changes that have occurred in respect of the information contained in that disclosure statement since it was given to the lessee (being changes of which the lessee is aware or could reasonably be expected to be aware). The lessee may provide the proposed assignee with a copy of a statement in writing that contains the information that is contained in or required to complete the prescribed form. The statement may be provided if the assignment is in connection with the lease of a retail shop that will continue to be an ongoing business. The layout of the statement need not comply with that of the prescribed form. (c) For the purpose of enabling the lessee to comply with paragraph (b), the lessee is entitled to request the lessor to provide the lessee with a copy of the disclosure statement concerned and, if the lessor is unable or unwilling to comply with such a request within 14 days after it is made, paragraph (b) does not apply to the lessee. (d) The lessor must deal expeditiously with a request for consent and is taken to have consented to the assignment if: (i) the lessee has complied with paragraphs (a) and (b), and (ii) the lessor has not, within 28 days (or another period prescribed instead by the regulations) after the request was made or after the lessee complied with those paragraphs, whichever is the later, given notice in writing to the lessee either consenting or withholding consent. Note. Clause 20 of Schedule 3 provides that the form set out in Schedule 2A is taken to be prescribed for the purposes of section 41 until regulations are made prescribing the form and repealing Schedule 2A."

The decision of the primary judge 19It was common ground before the primary judge that provisions applying pursuant to s 41 of the Retail Leases Act and provisions in clause 3.8 of the lease were substantially identical. There are two qualifications to this. The first is that clause 3.8 of the lease adds some words that do not appear in the corresponding provisions in s 41. Clause 3.8(b)(ii) purports to permit the lessor to withhold consent if the proposed transferee or assignee has business experience or restauranting skills inferior to those of the lessee, in addition to the grounds permitted by s 39(b). Clause 3.8(c) purports to require the lessee to provide the lessor with such information as the lessor may reasonably require concerning the retailing and restauranting skills of a proposed transferee or assignee, while s 41(a) imposes no such obligation in express terms (though, as a matter of construction of this particular lease, the relevant "business experience" of the proposed assignee, that s 41(a) requires the lessee to provide information about, might extend to retailing and restauranting skills). Section 7 of the Act makes any provision of a lease void to the extent that the provision is inconsistent with a provision of the Act. Thus, strictly, it is the provisions of the Act, rather than those of clause 3.8 that govern whether HHT is entitled to withhold consent. However, it is not submitted that, on the facts of the case, these differences between clause 3.8(c) and s 41 are material. The other qualification will be mentioned presently. 20The primary judge dealt first with a submission advanced by Mr Lockrey's counsel that there was, in truth, no assignment because Mr Lockrey and Mr Shelhot held as joint tenants and the purported transfer was, in substance, by one of them to the other. That submission was rejected for reasons emerging from Burton v Camden London Borough Council [2000] 2 AC 399. The clause 3.8(a) prohibition on transfer without consent therefore applied. This part of the decision is not challenged on appeal. 21The judge then addressed the question whether HHT was entitled to withhold consent to assignment. At trial, HHT put forward two matters as justifying its withholding of consent: first, that Mr Lockrey's sole financial resources were inferior to those of Mr Lockrey and Mr Shelhot together; and, second, that there had been no compliance with a requirement imposed by HHT for the provision of information concerning Mr Lockrey's "financial standing". 22The judge found that there was no evidence to support the first of these propositions. 23Remaining, therefore, was the question whether HHT was entitled to withhold consent because of a failure to provide information "reasonably required" by HHT concerning Mr Lockrey's "financial standing" (the quoted words are found in clause 3.8(c) of the lease and s 41(a) of the Retail Leases Act). As his Honour correctly observed, failure in this respect would mean that there was no deemed consent under s 41(d) or clause 3.8(d) and HHT had a basis for withholding consent by virtue of s 39(1)(c) and clause 3.8(b)(iii). 24The judge approached that part of the case by posing two threshold questions: (a) Did HHT reasonably require information concerning Mr Lockrey's financial standing? (b) Did Mr Lockrey comply with his obligation to provide that information? 25His Honour answered the questions "yes" and "no" respectively. 26It is convenient to set out extensive extracts from the judgment because they contain the text of most of the correspondence between the parties: "[54] Mr Lockrey's first request for consent to the assignment of Mr Shelhot's interest in the Lease was by letter dated 22 July 2009. [55] In reply, HHT wrote on 12 August 2009:- 'The HHT considers that Section 41(a) of the Act has not been complied with as HHT has not been provided with reasonable information concerning Mr Lockrey's financial standing and, at this stage, is unwilling to consent to the proposed assignment until it is provided. We therefore request the following information: Verifiable information regarding Mr Lockrey's financial standing A detailed proposal as to how Mr Lockrey proposes to clear his current indebtedness A statement regarding Mr Lockrey's proposed strategies to avoid future indebtedness.' [56] At the date this letter was sent, rental arrears under the Lease were $129,237.23. [57] In those circumstances, it was, in my opinion, reasonable for HHT to seek the information set out in its letter of 12 August 2009. Indeed the request for 'information concerning Mr Lockrey's financial standing' adopted the language used in s 41(1) of the Act and clause 3.8(c) of the Lease. [58] Mr Lockrey did not, at any stage, provide HHT with such information. " 27The judge then posed the question whether HHT had abandoned its request for information concerning Mr Lockrey's financial standing. He answered that question in the negative: . "[62] There was correspondence between Mr Lockrey and HHT concerning the question of HHT's consent to the assignment of the Lease from 27 July 2009 to 18 November 2011. During that period, Mr Lockrey made the five separate requests for consent, to which I have referred. [63] To consider Mr Folino-Gallo's submissions that HHT 'abandoned' its request for information concerning Mr Lockrey's financial standing, it is necessary to examine that correspondence in a little detail. [64] Mr Lockrey, through his solicitor, did not reply to HHT's letter of 12 August 2009 until 15 April 2010; some eight months later. [65] In the meantime, on 15 December 2009 HHT wrote Mr Lockrey acknowledging that rental arrears had been made up but that money was still outstanding. HHT's letter continued:- 'You have mentioned to Larissa Anstee that you would like Ramy Shelhot's interest in the lease to be assigned to you. The HHT would require assurances that the debt levels previously incurred by you never happen again before granting consent. Currently, you and Ramy Shelhot are jointly and severally liable for any breaches of the lease, including failure to pay outstanding monies. If Ramy Shelhot's interest is assigned to you then the HHT will have lost the security of Ramy Shelhot being a party to the lease, if the debts of the MOS Café reach unmanageable proportions. Accordingly, the HHT insists on a period of three months from when all outstanding debts are paid in which the HHT can assess and be assured that your financial standing and acumen are reasonably satisfactory to enable you to run the MOS Café as a sole proprietor before considering giving consent.' [66] On 15 April 2010 Mr Lockrey, through his solicitor, wrote to HHT:- 'It is our understanding that our client has currently paid all arrears of rent and has furthermore, consistently met the monthly rent payments required by you. In light of this we kindly request your consent to the assignment of the interest of Ramy Shelhot in the subject premises listed above to Paul Douglas Lockrey. Would you kindly prepare the necessary assignment documentation for signing by our Client and Ramy Shelhot.' [67] This letter represents Mr Lockrey's second request for consent to assignment. [68] On 7 May 2010 HHT replied, confirming that rent had been brought up to date and continuing:- 'However, as expressed in the HHT's letter to you of 12 August 2009 and the fourth paragraph of the HHT's letter to Mr Lockrey, the HHT still has concerns about the loss of security of Mr Shelhot's liability to pay any outstanding monies when his interest is assigned to Mr Lockrey if, for any reason, Mr Lockrey again falls behind in such payments. The initial MOS Café lease had three parties as the lessee, Paul Lockrey, Rami [sic] Shelhot and Natalia Maddelena Conti, all of whom were jointly and severally liable. The HHT therefore had a safety net as to the recovery of outstanding moneys. However, the HHT has lost that safety net with Mr Lockrey becoming the sole lessee. To assuage these concerns, the HHT will give its consent to the assignment on the condition that Mr Lockrey provides to the HHT a Bank Guarantee in the amount of 3 month's annual base rent. Considering the HHT's patience and leniency in dealing with this matter, the HHT does not consider this unreasonable in the circumstances.' [69] The reference in this letter to 'the initial MOS Café lease' was a reference to an earlier lease of the premises. [70] Mr Folino-Gallo relies upon this letter as showing that HHT had abandoned its 12 August 2009 request for financial information concerning Mr Lockrey's financial standing. [71] I do not read the letter that way. It seems to me that HHT was simply offering Mr Lockrey an alternative to providing financial information, namely the provision of a bank guarantee in respect of three months rent. Mr Folino-Gallo submits that HHT was not entitled to impose such a condition. That may be right, but I do not think it relevant. HHT was simply proposing a way forward without making any suggestion of entitlement." 28His Honour next referred to subsequent correspondence: "[72] Mr Lockrey did not respond to HHT's letter until 12 August 2010; some three months later. He did not accept HHT's proposal. He made a third request for consent to the assignment and sought to negotiate HHT's proposal concerning a bank guarantee as follows:- 'As an alternative, our client would endeavour to pacify the HHT's concerns by providing a Bank Guarantee in the amount of 3 months annual base rent as requested subject to the HHT's consent to extend the current option period by 3 years. In light of our client's demonstrated compliance with his financial obligations to the HHT, we do not believe that this is an unreasonable request.' [73] HHT replied on 27 September 2010 rejecting Mr Lockrey's proposal for a three year extension of the option in exchange for a bank guarantee and continuing:- 'As already stated in previous correspondence from the HHT, the HHT has a greater safety net in respect of the recovery of outstanding moneys with Mr Lockrey and Mr Shelhot as joint tenants. Despite the positive assurances given in your correspondence as to Mr Lockrey's financial status, the HHT is not convinced. The HHT has not received any information concerning the financial standing of Mr Lockrey that the HHT can definitively rely on and be confident with, especially as the MOS Café is only one Mr Lockrey's business ventures.' [74] This letter made clear that HHT still required Mr Lockrey to provide it with information concerning his financial standing. [75] Mr Lockrey did not reply to HHT's letter of 27 September 2010 until 25 May 2011; some eight months later. [76] On that date Mr Lockrey, by his solicitor, made his fourth request for consent to the assignment. [77] In that letter, Mr Lockrey's solicitor addressed the question of the 'Financial Standing of Mr Lockrey' as follows:- 'Mr Lockrey has been a Lessee of the premises known as part of the land comprised in Lot 101 Deposited Plan 834054 for some 15 years. During this time, Mr Lockrey has been party to 2 registered Leases and other collateral agreements in respect to leasing the subject premises which we can only surmise is as a result of the Lessor's knowledge of and assurance in Mr Lockrey's financial standing and his effective management of MOS Café. While our client concedes that there have been periods where arrears of rent have accumulated, we have been advised that these periods were mostly prevalent when the Lease was controlled by Mr Ramy Shelhot and Mr Paul Lockrey and since obtaining sole control of the management of the Lease, our client has managed to clear the arrears of rent and maintained the monthly rental payments.' [78] Thus, although Mr Lockrey, by his solicitor, made assertions as to his financial standing, he did not provide any 'verifiable information' or indeed any information about that subject. He did no more than assert, in effect, that HHT already had knowledge of his financial standing. [79] HHT replied to that letter on 24 June 2011 stating, amongst other things:- 'HHT will provide consent to assign the interest of Ramy Shelhot in the MOS Café lease to Paul Douglas Lockrey. This consent is on the basis of:

1. Settlement of $4,606.87 (inc. GST) in outstanding rent (+30 days) promptly payable to HHT;
2. Settlement of HHT legal costs ($5,228.52 inc. GST) pursuant to Clause 9.5(a) of the lease to ascertain audited statements and response to pest treatment promptly payable to HHT. Copies of Tax Invoices from Eakin, McCaffrey and Cox in respect of the aforesaid legal costs paid by HHT are enclosed herewith; and
3. Mr Lockrey responsible for all HHT costs in relation to the assignment.' [80] Mr Folino-Gallo submitted that, in this letter, HHT in fact provided consent to the assignment. I do not agree with that reading of the letter. In my opinion HHT was indicating that it would give consent if the matters referred to in the three numbered paragraphs were accepted by Mr Lockrey, and not otherwise. [81] It is true that HHT did not refer, in this letter, to its outstanding request for information concerning Mr Lockrey's financial standing. [82] However, again, I do not read the letter as evidencing abandonment by HHT of its requests for that information. [83] Rather, again, HHT was suggesting an alternative way of resolving the impasse that had developed between the parties. [84] Mr Lockrey, by his solicitor, sent a further letter on 12 October 2011, which represents Mr Lockrey's fifth, and final request for consent to the assignment. [85] HHT replied to that letter on 18 November 2011 concluding:- 'HHT will not consent to the assignment lease due to the outstanding rental arrears, outstanding payment of HHT legal fees and outstanding audited Annual Turnover Statement.'

The appeal 29Mr Lockrey appeals on grounds set out in his notice of appeal filed on 11 July 2012. The parties agreed in advance of the hearing of the appeal that the grounds of appeal give rise to three questions: Question 1: Was HHT's request for information regarding Mr Lockrey's financial standing reasonable? Question 2: Was that request withdrawn or abandoned by HHT? Question 3: Did HHT unreasonably withhold its consent to assignment? 30In the course of argument, however, it became clear that certain grounds of appeal were not pressed and that the result of the appeal would turn on somewhat different considerations. One reason for this is that the judge made specific findings which identified five separate and distinct written requests for consent to assignment. At paragraph [54] of the judgment, he referred to the first request as having been made by Mr Lockrey's solicitors' letter of 22 July 2009. The second request is referred to at paragraph [67] (Mr Lockrey's solicitors' letter of 15 April 2010). The third request (12 August 2010) is referred to at paragraph [72] of the judgment. The fourth request was made on 25 May 2011 (paragraph [75] of the judgment). The fifth request was made on 12 October 2011 (paragraph [84] of the judgment). These findings are not challenged on appeal. 31The second reason why the result of the appeal will turn on considerations differing from those I have mentioned comes from the judge's findings about requests or intimations by HHT concerning information going to Mr Lockrey's financial standing. At paragraph [55] of the judgment, his Honour referred to a specific request by HHT for information about Mr Lockrey's financial standing. The request was contained in HHT's letter of 12 August 2009. It is plain that the request was intended by HHT to have a basis in provisions of the lease and the Retail Leases Act. In its letter of 27 September 2010, HHT stated that it had not received "any information concerning the financial standing of Mr Lockrey that the HHT can definitely rely on and be confident with, especially as the MOS Café is only one of Mr Lockrey's business ventures". Beyond that, the correspondence did not contain anything that could be construed as a request or requirement of HHT with respect to information concerning Mr Lockrey's financial standing. 32The significance of the two matters just mentioned will more readily be appreciated against the background of the statutory scheme concerning assignment of retail shop leases.

The lessee's right to assign 33The starting point in the analysis is that a lease is, of its nature, assignable by the lessee and that a right to alienate a leasehold interest is one of its normal incidents. The right may however, be regulated or restricted by provisions of the lease or by statute. 34Because the appeal centres on questions concerning information required by HHT concerning Mr Lockrey's "financial standing", the provisions that require attention are those relevant to that matter as it affects the question of assignment of the lease. 35Clause 3.8(a) of the lease regulates and restricts the lessee's right to assign. That clause provides that, subject to the other sub-clauses of clause 3.8, the lessee must not assign or transfer the lease without the written consent of the lessor. Subject to that, the common law right to assign prevails. 36Clause 3.8(b) then says that the lessor "can withhold consent only if" any of several situations exists. In a like way, s 39(1) of the Retail Leases Act says that a lessor "is entitled to withhold consent to the assignment of a retail shop lease" in any of several stated circumstances "and is not entitled to withhold that consent in any other circumstances". 37Relevant for present purposes is the circumstance in clause 3.8(b)(iii) and s 39(1)(c), that is, where the lessee has not complied with clause 3.8(c) or s 41. 38The only aspect of compliance with clause 3.8(c) or s 41 that is pertinent here comes from the part of each provision that imposes on the lessee an obligation to "provide the lessor with such information as the lessor may reasonably require concerning the financial standing ... of the proposed assignee" (these words appear in clause 3.8(c) and in the first sentence of s 41(a)).

39 Section 133B(1)(a) of the Conveyancing Act 1919 causes every lease provision requiring consent to assignment to operate subject to a proviso that such consent "is not to be unreasonably withheld". Section 43 of the Retail Leases Act, however, provides: "Section 133B (Covenants against assigning) of the Conveyancing Act 1919 does not apply to a retail shop lease to the extent that the section is inconsistent with this Act (or any conditions implied in a lease by this Act)." 40It is clear, in my opinion, that s 43 excludes the application of the s 133B(1)(a) proviso to clause 3.8(a). Section 39 sets out circumstances in which a lessor is entitled to withhold consent and states that there is no entitlement to withhold in any other circumstance. This leaves no room for the operation of the general criterion of reasonableness or unreasonableness upon which s 133B(1)(a) is based. If a s 39(1) circumstance exists, consent may be withheld. Otherwise, it may not be withheld; and this is so regardless of whether withholding would be reasonable.

Clause 3.8(c) and the first part of s 41(1)(a) 41In approaching the central question whether there has been compliance with clause 3.8(c) and s 41, I concentrate, for the moment, on clause 3.8(c) in its entirety and the first sentence of s 41(1)(a). 42Compliance with those provisions entails two actions by the lessee: first, communication to the lessor of a written request for consent to assign; and, second, provision by the lessee to the lessor of "such information as the lessor may reasonably require" concerning certain matters, one of which is the "financial standing" of the proposed assignee. 43Whether the first action has been taken in a particular case is a simple question of fact: did the lessee communicate with the lessor in writing and, if so, did the writing contain a request for the lessor's consent to assignment? The second aspect requires more detailed consideration. 44The first point to be made about that second aspect is that it necessarily contemplates action by the lessee separate from and subsequent to the making of the lessee's written request for consent to assign. This is because the "information" that must be given by the lessee is information that the lessor requires; and the lessor will have no occasion to require anything unless a request for consent has been made. This is not to say that the lessee, when delivering the written request, might not seek to pre-empt and streamline matters by offering, in an unsolicited way, information about the financial standing of the proposed assignee. If the lessee does that, the volunteered information will necessarily be taken into account in assessing whether any subsequent information request from the lessor is reasonable. 45This leads to the second point. The lessee comes under no obligation to furnish information about the proposed assignee unless required by the lessor to do so. 46Third, it is for the lessor to specify the information sought. Thus, in Indian Taj Pty Ltd v Gilany [2004] NSWSC 1249 at [22], for example, the lessor required, in respect of a proposed assignee that was a company, "two years accounts, two years tax returns from the company and an asset and liability statement of the company and all directors verified by statutory declaration". A reasonable degree of specificity of this kind is necessary and was, in that case, provided by describing the required information by reference to the content of particular documents. 47Fourth, the information that is required must be information "concerning" the particular person's "financial standing", that is, the state of his ability to meet financial commitments. A person's assets and liabilities will be relevant, as will matters of cash flow such as sources and amounts of regular income and requirements for and amounts of regular expenditure. Borrowing capacity may be a factor. In Re RHD Power Services Pty Ltd (1990) 3 ACSR 261, McPherson SPJ said (at 264) that "a person's ability to borrow without security may in some circumstances provide compelling evidence of his strong financial standing". 48Fifth, the permitted ambit of a requirement imposed by the lessor is that the information sought concerning financial standing be "reasonably required" in the sense of having some rational bearing on an objective assessment of relevant matters concerning the financial standing of the proposed assignee as that standing is material to the lease and the financial obligations it entails. An assessment of what is "reasonably" required will proceed in the way indicated by the following observation of Latham CJ in Opera House Investment Pty Ltd v Devon Buildings Pty Ltd [1936] HCA 14; (1936) 55 CLR 110 at 116: "The word 'reasonable' has often been declared to mean 'reasonable in all the circumstances of the case.' The real question, in my opinion, is to determine what circumstances are relevant. In determining this question regard must be paid to the nature of the transaction." 49Beyond that, two different views emerged in the course of submissions as to the ambit of the information that a lessor "may reasonably require" within the meaning of clause 3.8(c) of the lease and s 41(a). When considering a lease that is not regulated by the Retail Leases Act but contains (either expressly or by operation of s 133B(1)(a) of the Conveyancing Act) a proviso that the lessor will not unreasonably withhold consent to an assignment, the commercial desirability of the assignee is taken into account in deciding whether consent has been unreasonably withheld. In deciding that question, it is legitimate to take into account matters that bear upon the likelihood that the proposed assignee will be able to pay the rent and perform the other covenants that the lease imposes on a lessee for the balance of the term. 50However, it may be that for a lease that is regulated by the Act the ambit of the information that the lessor can "reasonably require" within s 41(a) is more limited. It may be that the limited grounds upon which a lessor is entitled to withhold consent to an assignment have the effect that the only information that a lessor may "reasonably require concerning the financial standing and business experience of the proposed assignee", is information that will enable the lessor to decide whether the proposed assignee has financial resources or business experience or retailing or restauranting skills inferior to those of the lessee. 51The difference between these two approaches to the ambit of the information that the lessor could reasonably require would show up in a situation where the existing lessee was a person of only marginal financial standing and indifferent retailing skills. If the second view of the ambit of the information that the lessor could reasonably require were correct, the lessor would not be able to use the opportunity of an assignment being requested to obtain a tenant that was superior to the tenant to whom the lessor was currently leasing the premises. Counsel for Mr Lockrey argued that the Act was beneficial legislation designed to protect tenants of retail premises, and that that purpose of the Act favoured the second of the two possible constructions. 52It is not necessary in this case to choose between these alternatives.

Section 41(b) 53Section 41(b) of the Retail Leases Act has no counterpart in the lease. Compliance with s 41(b) is therefore a component of the compliance with s 41 envisaged by s 39(c) but there is no corresponding component of compliance with clause 3.8(c) of the lease. I shall return to s 41(b).

54These provisions are, in substance, the same. Each imposes on the lessor a requirement to "deal expeditiously" with a request for consent to assign. Each goes on to say that, if the lessee is in a state of relevant compliance (that is, compliance with clause 3.8(c) or s 41(a) and (b)), consent to assign is deemed to have been given at the expiration of a particular period of 28 days. The period is, however, slightly differently defined in the lease and in the Act. Clause 3.8(d) of the lease says that the deemed consent arises if there has been no grant or withholding of consent within 28 days after the making of the request for consent. Under s 41(d), the deemed consent arises if there has been no grant or withholding within 28 days after the later of the making of the request for consent and compliance with s 41(a) and (b). That inconsistency is dealt with by s 7 of the Act which, as already noted, causes provisions of the Act to override those of a lease and to make lease provisions void to the extent of any inconsistency. 55Consent to assign may thus arise in one of two ways: by being granted by the lessor or by the effluxion of time after the happening of certain events. Only if the lessee does not comply with clause 3.8(c) or s 41(a) and (b) will consent not eventuate. The mismatch between the respective compliance requirements (clause 3.8(c) in the case of the lease and the corresponding s 41(a) of the Act plus s 41(b) which is not replicated in the lease) means that it is possible for deemed consent to arise under the lease in circumstances where it does not arise under the Act. That, for reasons to be explained presently, is a possibility that may be left to one side in this case. 56It should, however, be noted that the question of compliance with clause 3.8(c) or s 41(a) and (b) is, under clause 3.8(d) or s 41(d), to be judged in the period after the request for consent is made. To the extent that compliance entails provision of information about the financial standing of the proposed assignee, therefore, the only information relevant to the compliance question can be that to which the obligation following on from the request for consent extends. The relevant words are: "A request for the lessor's consent to an assignment of the lease must be made in writing and the lessee must provide the lessor with such information as the lessor may reasonably require ..." [emphasis added] 57The contemplated action of the lessee is action in response to a requirement of the lessor of whom a request for consent to assignment has been made.

58Any obligation to provide HHT with information about Mr Lockrey's "financial standing", whether under clause 3.8(c) or the first sentence of s 41(a), was an obligation of Mr Lockrey and Mr Shelhot. They were the "lessee" as joint tenants. They were also the intending assignors. 59The making of each of the five written requests for consent to assign identified by the primary judge enabled HHT to require information concerning the financial standing of Mr Lockrey, he being the proposed assignee. On each of five occasions, HHT could have imposed on Mr Lockrey and Mr Shelhot an obligation to provide information about that matter. 60HHT acted with a view to imposing such an obligation on one occasion only. By its solicitors' letter of 12 August 2009, it required: "Verifiable information regarding Mr Lockrey's financial standing A detailed proposal as to how Mr Lockrey proposes to clear his current indebtedness A statement regarding Mr Lockrey's proposed strategies to avoid future indebtedness." 61This requirement might be validly imposed only if and to the extent that the information it sought was information concerning Mr Lockrey's "financial standing". 62The second and third items in the letter of 12 August 2009 did not relate to information "concerning the financial standing of" Mr Lockrey. Each sought information about his proposed future conduct. 63The first of the three items raises a different question, that is, whether there was in truth a proper delineation of "such information as the lessor may reasonably require concerning the financial standing of" Mr Lockrey. 64As I have said, it is for the lessor to specify the information it requires. Once it has done so, it is possible to make a judgment whether the specified information is "reasonably" required. HHT's letter of 12 August 2009 did not identify any particular information as being required by HHT. On the face of the communication, HHT's requirement related to the totality of the information in existence concerning Mr Lockrey's "financial standing", except any part of that totality that did not answer the "verifiable" description (whatever that description meant). It was thus for the recipient of HHT's communication to identify every conceivable fact concerning Mr Lockrey's "financial standing", to make a judgment whether that fact was "verifiable" and, if it was "verifiable", to add it to the collection of facts to be communicated in satisfaction of the requirement. 65I do not think that "verifiable information regarding Mr Lockrey's financial standing" qualifies as a description of information "concerning" his "financial standing" that is "reasonably" required by HHT. It lacks the essential quality of specificity to which a lessee on whom a requirement is imposed is entitled. That being so and having regard to what is said at [63] above, HHT's letter of 12 August 2009 did not cause Mr Lockrey and Mr Shelhot as lessor to become subject to any obligation under clause 3.8(c) or s 41(a) with respect to the provision of information regarding Mr Lockrey's financial standing.

66Let it be assumed that, contrary to the opinion just expressed, the information requirement communicated by HHT on 12 August 2009 was within the boundaries allowed by clause 3.8(c) and s 41(a). It may be accepted that no information was ever provided in response to the requirement. Does it follow that that is the end of the matter? 67It is at this point that the making of five separate requests for consent to assign becomes relevant. It is sufficient to examine the last two requests, dated 25 May 2011 and 12 October 2011. 68Mr Lockrey's request of 25 May 2011 (the fourth request) was conveyed by his solicitors' letter of that date. The letter raised at the outset the matter of Mr Lockrey's financial standing. His solicitors said, in effect, that HHT's knowledge about financial performance over a fifteen year period under leases to which Mr Lockrey had been one of several tenants, coupled with Mr Lockrey's success in clearing arrears of rent after Mr Shelhot's departure, should give HHT sufficient comfort about Mr Lockrey's financial standing. In its response of 24 June 2011, HHT did not raise the matter of financial standing in any way. Rather, it said that HHT "will provide" consent to assign "on the basis of" three stated matters, being payment by Mr Lockrey of $4,606.87 outstanding rent, $5,228.52 legal costs associated with particular items and HHT's apparently unquantified legal costs in relation to the assignment. 69Mr Lockrey's fifth request was conveyed by his solicitors' letter of 12 October 2011. That letter is not set out in the primary judge's reasons. It referred to HHT's letter of 24 June 2011 and dealt with the three matters there raised. As to the first, it was said that the lessee was not aware of any current rent arrears and sought confirmation that rent was up to date (more than three months had passed since the allegation of arrears). As to the second matter, it was noted that the request for $5,228.52 referred to summaries of the legal work involved but the summaries had not been provided, with the result that a decision could not be made about the request unless the summaries were given. In relation to the third matter, the solicitors said that Mr Lockrey acknowledged responsibility for HHT's legal costs in relation to the assignment. Neither in this letter of 12 October 2011 nor in HHT's response of 18 November 2011 (set out at paragraph [85] of the judgment below) was there any reference to information concerning Mr Lockrey's financial standing. 70The requirement for the provision of "such information as the lessor may reasonably require concerning the financial standing" of the proposed assignee can only arise from and in connection with a request for the lessor's consent to assignment. In relation to neither the fourth request (25 May 2011) nor the fifth request (12 October 2011) did HHT communicate any such requirement. Indeed, in the letter of 24 June 2011 responding to the fourth request (of 25 May 2011), HHT made it plain that its consent would be given if three particular conditions were satisfied. None of those conditions related to information concerning Mr Lockrey's financial standing. Nor did the response dated 18 November 2011 to the fifth request (of 12 October 2011) seek to impose any requirement concerning such information. It conveyed a refusal or withholding of consent. 71It is probably not particularly useful to ask whether the original information requirement communicated by HHT's letter of 12 August 2009 was abandoned by HHT. The more pertinent question is whether, in response to the request for consent to assign made on 25 May 2011 or that of 12 October 2011, HHT took advantage of the opportunity that the request gave it to impose a requirement with respect to the provision of information regarding Mr Lockrey's financial standing. 72The answer is that HHT did not do so. By its response to the fourth request (25 May 2011), it showed that a need for information about Mr Lockrey's financial standing no longer existed. It indicated that only three things (each involving the payment of money) stood between Mr Lockrey and the grant of consent. HHT's response to the fifth request gave three reasons for the refusal of consent. None of them had anything to do with failure to provide information concerning Mr Lockrey's financial standing. 73In relation to each of the fourth request and the fifth request, no obligation of the lessee to provide information arose under clause 3.8(c) or s 41(a). The fact that no information about Mr Lockrey's financial standing was provided following the making of those requests is therefore irrelevant to the question whether there was, in relation to the requests, compliance with clause 3.8(c) or s 41(a).

74Section 41(b) has no counterpart in clause 3.8. It imposes upon a lessee a requirement that must be satisfied before a request for consent to assignment is made of the lessor. The lessee must "furnish" to "the proposed assignee" a copy of a disclosure statement in relation to the lease, if such a statement was given to the lessee. This matter received no attention in the proceedings before the primary judge but it was accepted upon appeal that such a statement had been given to Mr Lockrey and Mr Shelhot in connection with the creation of the lease in 2007. Like documents of title where there are co-owners (Official Trustee in Bankruptcy v Kioussis [2000] NSWSC 248; (2000) 10 BPR 18,021 at [15]), the statement must be taken to have been in the joint possession of Mr Lockrey and Mr Shelhot; and any copy of the statement would likewise be in their joint possession. 75Having regard to s 41(b), an element of the inquiry made necessary by s 39(1)(c) ("if the lessee has not complied with section 41") is whether the "lessee" (Mr Lockrey and Mr Shelhot) furnished to the "proposed assignee" (Mr Lockrey) the particular document required by s 41(b), that is, a copy of the statement received by both of them in 2007. 76It is accepted that Mr Lockrey and Mr Shelhot did not stand together with such a document held in the hands of both of them and then move their hands so that the document remained in Mr Lockrey's hands alone. It is also accepted that no like procedure was undertaken - indeed, that nothing at all was done in relation to a copy of the 2007 statement. Does this mean that there was a failure to "furnish" the document as contemplated by s 41(b) and therefore a failure to comply with s 41(b)? 77In the particular context, "furnish" obviously means "give" or "deliver". In a case where one person is to "furnish" a document to another, it will ordinarily be necessary for the first person to put the second into possession of the document to the exclusion of the first. It is, of course, possible for this to happen even if the second person already has a copy or a replica of the document or is already aware of its contents. 78The position must be different where two persons together have possession of a document and the requirement is that they should "furnish" it to one of them. The person who is not the one to whom the document is to be furnished could obviously relinquish possession so that sole possession was assumed by the person to whom the document is to be furnished. But that action would not put the document into the possession of the other person who already had joint possession of it. One cannot obtain possession of something that is already in one's possession, whether the existing possession is sole or joint. 79In the particular context, therefore, performance of the s 41(b) condition was impossible. What follows? 80Conscious as I am of the risk that resort to a Latin maxim may suggest inattention to principle (Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222; (2010) 243 FLR 177 at [181] per Young JA), I think that this is a case of lex non cogit ad impossibilia (the law does not compel a man to do that which he cannot possibly perform). 81The relevant principle is illustrated by R v Justices of Leicestershire (1850) 15 QB 88; 117 ER 391. A Court of Quarter Sessions had refused to hear an appeal of bastardy because the putative father had not served notice on the mother. Such service was a statutory prerequisite to the hearing of an appeal. The mother had died. The judgment of the Queen's Bench was: "We are of opinion that, as the duty of the appellant to give such notice was cast upon him by the law, not by his own voluntary act, he is excused from performing that duty by its becoming impossible by the act of God; and that the Court of Sessions ought to have heard the appeal." 82On a like basis, Palmer J observed in Re Trim Perfect Australia Pty Ltd; National Australia Bank Ltd [2005] NSWSC 972; (2005) 55 ACSR 237 at [22] that a statutory provision cannot "be construed so as to invalidate a proceeding for failure to perform an antecedent act which was, at the relevant time, impossible of performance". The requirement in that case was that a pre-action notice be given to a "farmer" in relation to enforcement of security. The relevant "farmer" was a company that had been dissolved. 83In the present case, the impossibility of any furnishing by Mr Lockrey and Mr Shelhot to Mr Lockrey alone of a document already in the joint possession of both of them means that there was no action that could possibly be taken to comply with s 41(d). Lack of action directed towards the result specified in the section therefore does not mean that the condition the section imposes has not been satisfied. Rather the condition is, in the circumstances, inoperative.

84On the view I have expressed at [65] above, Mr Lockrey and Mr Shelhot, as the lessee, never became subject to an obligation to provide HHT with information about Mr Lockrey's financial standing. If that view is correct (and having regard to the conclusion that s 41(b) is inoperative), consent to assignment was deemed by clause 3.8(d) and s 41(d) to have been given after the expiration of twenty-eight days from the making of the first request for consent to assignment, that is, the request dated 22 July 2009. 85If the view expressed at [65] above is incorrect, the position is that no deemed consent arose in consequence of the first request but that deemed consent arose at a later time - that is, upon the expiration of twenty eight days from the making of the fourth request (the request of 25 May 2011). HHT imposed no requirement for information in consequence of the fourth request and, as discussed, the s 41(b) condition was inoperative, with the result that clause 3.8(d) and s 41(d) deemed consent to have been given after twenty-eight days. The same analysis holds good for the fifth request but is irrelevant if deemed consent had arisen at an earlier time. 86The question whether withholding (or, as I consider it to be, purported withholding) of consent was unreasonable does not arise. The provisions concerning consent to assignment do not raise the issue of the reasonableness or unreasonableness of a withholding. 87I should add that it would, in my opinion, be incorrect to analyse the facts of this case as if they involved what counsel for HHT termed an "ongoing conversation" or negotiation between lessor and lessee. The statutory scheme is clear. A lessor must "deal expeditiously" with a request for consent. A lessee wishing to assign is assured that, if an application for consent is made in writing, he or she will know within twenty-eight days whether there is to be any requirement from the lessor for information about the financial standing of the proposed assignee. If no such requirement is imposed within that period, deemed consent will arise and there will be no basis for the imposition of any subsequent requirement. It is also clear from the statutory scheme that there is nothing to prevent successive requests by a lessee concerning a single proposed assignee. The lessor must deal with each on its merits and may or may not seek to impose a requirement for information concerning financial standing. It is inconsistent with this philosophy to adopt the "ongoing conversation" approach to a chain of correspondence particularly where, as here, it extends over a period of years.

Disposition 88I propose orders as follows:

1. Appeal allowed.
2. Set aside the orders made in the Equity Division on 15 June 2012.
3. Declare that the appellant and the second respondent are entitled to transfer to the appellant the lease dated 31 October 2007 registered number AD645948F notwithstanding that the first respondent has not by any act of the first respondent consented to such transfer.
4. Order that the first respondent pay the costs of the appellant and the second respondent of the appeal and of the proceedings below.

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