Mr Klooger of Counsel, instructed by McCluskys Lawyers

1 The Flower Hotel is at 190 Bay Street, Port Melbourne. The freehold of the hotel is owned by Flower Hotel Nominees Pty Ltd (Flower Hotel), a company controlled by Mr Paul Whyte who now lives near Byron Bay in New South Wales.

2 By a lease dated 7 August 1998 Flower Hotel let the premises to Scalar Enterprises Pty Ltd. The 1998 lease was for a term of one year commencing 1 July 1998 and included options to renew for four further terms of three years each. By an Instrument of Assignment executed on 1 October 1998 with the consent of Flower Hotel, Scalar assigned its leasehold interest to The Hogan Corporation Pty Ltd which is the applicant in this proceeding.

3 By deed executed on 27 October 2000 Flower Hotel agreed with The Hogan Corporation to vary certain covenants of the lease and to extend it for a further period of three years from 1 July 1999. A further deed of renewal and variation was executed by Flower Hotel and The Hogan Corporation on 20 August 2002. This deed extended the term of the lease for three years from 1 July 2002. The deed provided that the lease term could be renewed after that three year period for two further terms of three years each. The effect then was that if all options to renew were exercised by the tenant or its successor, the lease terms could extend to 30 June 2011. The principal of The Hogan Corporation is Mr Andrew O'Brien. Last year he turned his attention to an enterprise or group of enterprises at Federation Square in the central city, in an area known as the Victorian Wine Precinct. These enterprises included what he described as `the award winning Restaurant Reserve'. His commitment to this new venture meant that he was unable to continue to devote himself to the management of the Flower Hotel. On 15 August 2003 The Hogan Corporation entered into a contract of sale for the business, licence and leasehold interest of the hotel with Millennium Automotives Pty Ltd for a price of $475,000. The contract was made conditional upon Flower Hotel's approval of an assignment of the hotel lease to Millennium.

4 John Willis and Co, the law firm acting for Millennium wrote to Flower Hotel's solicitors by letter dated 12 September 2003 seeking consent to the transfer on behalf of its client. The letter stated that the proposed nominee for the hotel was Mr Chris Pouniotis, a director of Millennium and holder of 50% of the shares. Mr Pouniotis' wife was the other director. Paragraph 6 of the letter stated:

Neither of the directors of Millennium Automotives Pty Ltd has a history of running a hotel and/or restaurant.

5 The letter enclosed Millennium's profit and loss statement and balance sheet for the year 2000/2001, 2001 tax returns for Mr and Mrs Pouniotis, Millennium's financial statements for 2001/2002, 2002 tax return for the Pouniotis family trust of which Millennium was apparently trustee and 2002 tax returns for Mr and Mrs Pouniotis. It also enclosed draft financial statements for Millennium for the year 2001/2002. The letter included some five references from:

(iv) Stewart Fenwick, Asian Law Group, 13 August 2003

(v) Professor Tim Lindsey, University of Melbourne, 15 August 2003.

We are seeking further references regarding our client's previous tenancy.

6 Bankruptcy searches for the directors were provided and the letter stated:

We are awaiting receipt of a copy business plan from our client's Accountant, and will pass this on.

7 In a further letter dated 18 September 2003 to Flower Hotel's solicitors, John Willis and Co stated that Millennium sought further renewal options so as to give security of tenure for at least 12 years. As it was the maximum term provided for was 30 June 2011. McCluskys, Flower Hotel's solicitors replied in a facsimile dated 25 September 2003 stating:

Our client has instructed us that it has concerns that your client does not have the experience in hotel and hospitality. Our client would like to speak directly with the directors of your client company and we would be pleased if you would provide us with contact name and telephone numbers which we could pass on to our client.

8 The meeting eventually took place after some tooing and froing some time in December. The meeting was attended by Mr Pouniotis on behalf of Millennium, Mr Whyte on behalf of Flower Hotel, the accountant for both Millennium and The Hogan Corporation, Mr Nickolaou and Mr O'Brien of The Hogan Corporation. Mr O'Brien left after a short time. Mr Whyte said he asked Mr Pouniotis what his future plans were for the hotel and that Mr Pouniotis described plans which centred upon obtaining the services of someone whom he regarded as a first class chef. The hotel/hospitality experience or lack of experience of the Pouniotises does not seem to have been discussed. Mr Pouniotis says that Mr Whyte spoke mainly of a development proposal which he had for the hotel.

9 On 12 December, McCluskys wrote to John Willis and Co referring to the meeting and stating:

We advise that our client will not consent to the Assignment of the Lease as the Landlord does not believe the Assignee has sufficient business experience to meet the obligations under the lease.

11 The sale contract between The Hogan Corporation and Millennium had provided for settlement on 15 October 2003. Without reference to Flower Hotel, The Hogan Corporation and Millennium entered into an arrangement whereby The Hogan Corporation via the Pouniotises would manage the Flower Hotel whilst Mr O'Brien concentrated his attention on his Federation Square ventures. Millennium was to be entitled to part of the profits. I was told that that arrangement which persists till today, entailed moneys being banked into the account of The Hogan Corporation weekly with Millennium being authorised to withhold an amount equal to its profit share. Mr O'Brien said that his company remained responsible for the payment of rent. The arrangement between the two companies was I was told, reduced to writing but the agreement in question was neither discovered in this proceeding nor produced and put into evidence in the course of the hearing.

12 By letter dated 3 March 204 GPZ Legal, the law firm acting for The Hogan Corporation, sent McCluskys a `resume' for Mr Pouniotis. Despite the statement in the letter the previous year from John Willis and Co that neither Mr Pouniotis nor his wife had any restaurant or hotel experience, the resume said that Mr Pouniotis had undertaken managerial duties at the `French Bakehouse' from 1990 to 91 and acted as bar manager at the Michelangelo Restaurant from 1993 to 1994 and had been business administrator at Cyclops Pizza Bar from 1995 to 1997. The resume mentioned Mr Pouniotis' experience in the automotive industry from 1997 to 2003 and then surprisingly asserted that he had been bar manager at the Flower Hotel since June 2003. According to the evidence of Mr O'Brien, Mr Pouniotis did not take up those duties until late November or early December, though Mr O'Brien stressed that as a prospective purchaser and then as director of a purchaser company Mr Pouniotis was frequently at the hotel from June 2003 onwards.

13 The Hogan Corporation took its dispute with Flower Hotel to the Small Business Commissioner but a mediation arranged by the Commissioner in January 2004 failed to resolve the matter. In a letter dated 17 March 2004 McCluskys Lawyers wrote to the tenant's solicitors, GPZ Legal. They referred to the resume forwarded under cover of letter dated 3 March 2004, noted the statement from John Willis and Co dated 12 September 2003 to the effect that neither of the Pouniotises had a history of running hotels and/or restaurants and stated:

Mr Pouniotis' resume is not supported by any references and accordingly our client does not consent to the proposed assignment of the lease.

14 The letter also referred to Clause 3.13.2 of the lease which appeared to give the landlord a right of first refusal on a disposal of the tenant's leasehold interest and the hotel licence. The letter concluded:

We confirm that neither we nor our client have received such a written offer and request that your client provide the relevant details as set out at your earliest convenience.

15 On the same day, McCluskys posted a document styled `Notice Before Proceeding for Re-entry", threatening that the landlord would re-enter the premises unless The Hogan Corporation paid:

(i) The $5488.92 rent, Goods and Services Tax and interest of $44.58; $100 representing an outstanding insurance premium with 55c interest and costs of $480.

16 Following the issue of the certificate pursuant to Section 87 of the Retail Leases Act 2003 by a delegate of the Small Business Commissioner, the applicant company commenced this proceeding by an application filed with the Registrar on 28 May 2004.

17 Under cover of a letter dated 20 July 2004 GPZ as solicitors for The Hogan Corporation provided what it described as `the current financial position of the incoming tenant'. This was in the form of an extract from the Australian Securities and Investments Commission with respect to Millennium Automotives Pty Ltd and a document headed `Statement of Assets and Liabilities' for `Chris and Vicky Pounitios'. This last document has a number of facsimile imprints on it including `Premier Finance Broking' a finance brokerage which according to Mr Pouniotis was associated with Mr Nickolaeou who was accountant both to his family and the interests of Mr O'Brien, the principal of The Hogan Corporation Pty Ltd. This document showed the Pouniotises as having assets of $920,000 and liabilities of $247,500. It valued the Pouniotises residence at Preston at $500,000, disclosed cars worth $50,000 and furniture worth $75,000. There was a large sum ascribed to `antique cars' and $100,000 ascribed to superannuation. Aside from the various facsimile transmission impressions and the fact that the document was forwarded initially under a letter dated 15 July 2003 by John Willis and Co and on forwarded by GPZ under cover of letter dated 20 July 2004 was undated.

18 Points of claim were appended to the application which sought the following orders:

(a) An order that the Respondent [that is Flower Hotel] take all necessary steps and do all necessary things to effect its consent to the assignment of the Lease from the Applicant to Millennium Automotives Pty Ltd.

(c) Such further or other orders that the Tribunal, in exercise of its powers under the Retail Leases Act 2003 deems fit.

19 In September 2004 the respondent filed points of defence joining issue on a number of matters and alleging at paragraph 13:

That at no material time has proper evidence been provided to the respondent that the applicant is respectable, responsible, solvent, fit and suitable within the meaning of Clause 1.11 of the lease.

20 At the hearing Flower Hotel contended that the evidence showed that the Pouniotises and their company did not have the hospital industry experience or the financial substance to meet the obligations cast upon the tenant by the lease.

21 It is common ground that the hotel falls within the definitions of `retail premises' employed in the various retail tenancy statutes in force in Victoria in recent years. It is important to determine which of those statutes governs the assignment or attempted assignment of the lease. The current retail tenancies legislation, the Retail Leases Act 2003 contains Part 7 which deals inter alia with the assignment of retail premises leases. The Retail Leases Act came into force on 1 May 2003. Section 11(1) provides that the 2003 Act applies to retail premises leases entered into after its commencement or renewed after its commencement. Section 119 of the Act provides that leases governed by the Retail Tenancies Reform Act 1998 prior to its repeal continue to be governed by its terms despite the repeal. The most recent term of the hotel lease commenced when a deed of renewal and variation was entered into in 2002 after the commencement of the Retail Tenancies Reform Act 1998 but prior to its repeal with effect from 1 May 2003. Assignments of leases governed by the 1998 Act are dealt with in Section 22 of that statute. The section provides as follows:

(1) If a retail premises lease requires the consent of the landlord to an assignment of the lease or a sub-leasing of the premises, and the tenant has--

(a) requested the landlord in writing to consent to an assignment of the lease or a sub-leasing of the premises; and

(b) given the landlord the name and address of the proposed assignee or sub-tenant together with at least two references as to the financial circumstances of the proposed assignee or sub-tenant and at least two references as to the business experience of the proposed assignee or sub-tenant and a copy of the proposed deed of assignment or sub-lease--

and the landlord fails to give the tenant notice in writing consenting or withholding consent within 21 days after the tenant has done the things referred to in paragraphs (a) and (b), the landlord is to be taken to have consented.

(2) A landlord must not unreasonably withhold consent to an assignment of the lease or a subletting of the premises.

(3) If under Part 3 it is determined that a landlord has unreasonably withheld consent to an assignment of a lease or a sub-letting of premises, the assignment or sub-letting may be done without that consent.

(4) A provision in a retail premises lease is void to the extent that it purports to prevent the assignment of the lease.

(5) A provision in a retail premises lease is void to the extent that it imposes unreasonable terms, conditions or requirements as a prerequisite to the granting by the landlord of consent to an assignment of the lease.

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

(7) If a retail premises lease has been assigned, the landlord and the tenant referred to in subsection (1) continue to be subject to all the rights, liabilities and obligations under that lease subject to any indemnities provided under this Act, the lease or the assignment of the lease.

(8) If a tenant referred to in sub-section (1) has assigned a retail premises lease and the lease is renewed after that assignment, the tenant is not subject to any rights, liabilities or obligations under the renewed lease.

22 In Heinsen v LoPresti (unreported 21 August 2003) at [52] I considered the operation of Section 22 of the Retail Tenancies Reform Act. I accepted the tentative conclusion proposed by Dr Croft in his work on retail tenancies that any restriction on the assignment of retail premises lease was to be regarded as unreasonable per se according to the terms of sub-section (5) to the extent that it went beyond the matters referred to in sub-section (1) of Section 22, viz. the financial circumstances of the proposed assignee and the proposed assignee's business experience. I see no reason to modify those views. In any event, the objections taken by Flower Hotel in the present instance do not appear to go beyond the scope of the matters implicit in Section 22(1).

23 Next I should make reference to what has become a locus classicus as to the more general common law rules relative to assignments, namely a well known passage from the judgment of Balcombe LJ as a member of the English Court of Appeal in International Drilling Fluids Limited v Louisville Investments (Uxbridge) Ltd [1986] 1 Ch 513, 599-21:

(1) The purpose of a covenant against assignment without the consent of the landlord, such consent not to be unreasonably withheld, is to protect the lessor from having his premises used or occupied in an undesirable way, or by an undesirable tenant or assignee: per A.L. Smith L.J. in Bates v Donaldson [1896] 2 QB 241, 247, approved by all the members of the Court of Appeal in Houlder Brothers & Co Ltd v Gibbs [1925] Ch 575.

(2) As a corollary to the first proposition, a landlord is not entitled to refuse his consent to an assignment on grounds which have nothing whatever to do with the relationship of landlord and tenant in regard to the subject matter of the lease: see Houlder Brothers & Co Ltd v Gibbs, a decision which (despite some criticism) is binding on this court: Bickel v Duke of Westminster [1977] QB 517. A recent example of a case where the landlord's consent was unreasonably withheld because the refusal was designed to achieve a collateral purpose unconnected with the terms of the lease is Bromley Park Garden Estates Ltd v Moss [1982] 1 WLR 1019.

(3) The onus of proving that consent has been unreasonably withheld is on the tenant: see Shanly v Ward (1913) 29 TLR 714 and Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547, 564.

(4) It is not necessary for the landlord to prove that the conclusions which led him to refuse consent were justified, if they were conclusions which might be reached by a reasonable man in the circumstances: Pimms Ltd v Tallow Chandlers Company [1964] 2 QB 547, 564.

(5) It may be reasonable for the landlord to refuse his consent to an assignment on the ground of the purpose for which the proposed assignee intends to use the premises, even though that purpose is not forbidden by the lease: see Bates v Donaldson [1896] 2 QB 241, 244.

(6) There is a divergence of authority on the question, in considering whether the landlord's refusal of consent is reasonable, whether it is permissible to have regard to the consequences to the tenant if consent to the proposed assignment is withheld. In an early case at first instance, Sheppard v Hongkong and Shanghae Banking Corporation (1872) 20 WR 459, 460, Malins V. - C. said that by withholding their consent the lessors threw a very heavy burden on the lessees and they therefore ought to show good grounds for refusing it. In Houlder Brothers & Co Ltd v Gibbs [1925] CH 575, 584, Warrington L.J. said:

"An act must be regarded as reasonable or unreasonable in references to the circumstances under which it is committed, and when the question arises on the construction of a contract and outstanding circumstances to be considered are the nature of the contract to be construed, and the relations between the parties resulting from it."

In a recent decision of this court, Leeward Securities Ltd v Lilyheath Properties Ltd (1983) 271 EG 279 concerning a sub-letting which would attract the protection of the Rent Act, both Oliver L.J. and O'Connor L.J. made it clear in their judgments that they could envisage circumstances in which it might be unreasonable to refuse consent to an underletting, if the result would be that there was no way in which the tenant (the sub-landlord) could reasonably exploit the premises except by creating a tenancy to which the Rent Act protection would apply, and which inevitably would affect the value of the landlord's reversion. O'Connor L.J. said, at p.283:

"It must not be thought that, because the introduction of a Rent Act tenant inevitably has an adverse effect upon the value of the reversion, that that is a sufficient ground for the landlords to say that they can withhold consent and that the court will hold that that is reasonable."

To the opposite effect are the dicta, obiter but nevertheless weight, of Viscount Dunedin and Lord Phillimore in Viscount Redegar v Harwood [1929] AC 72, 78, 82. There are numerous other dicta to the effect that a landlord need consider only his own interests: see, eg. West Layton Ltd v Ford [1979] EWCA Civ 1; [1979] QB 593, 605, and Bromley Park Garden Estates Ltd v Moss [1982] 1 WLR 1019, 1027. Those dicta must be qualified, since a landlord's interests, collateral to the purposes of the lease, are in any event ineligible for consideration: see proposition (2) above. But in my judgment a proper reconciliation of those two streams of authority can be achieved by saying that while a landlord need usually only consider his own relevant interests, there may be cases where there is such a disproportion between the benefit to the landlord and the detriment to the tenant if the landlord withholds his consent to an assignment that is unreasonable for the landlord to refuse consent.

(7) Subject to the propositions set out above, it is in each case a question of fact, depending upon all the circumstances, whether the landlord's consent to an assignment is being unreasonably withheld: see Bickel v Duke of Westminster [1977] QB 517, 524, and West Layton Ltd v Ford [1979] EWCA Civ 1; [1979] QB 593, 604, 606-607.

24 His Lordship's formulation was adopted and applied by McDonald J of the Supreme Court of Victoria in Arborl Pty Ltd v Chow (1992) V Conv R 54-429 at page 65,063.

25 Mr Pennell noted that objections based upon the financial standing of Millennium and the Pouniotises, its controllers, were raised only when Flower Hotel filed its points of defence in this Tribunal. He said these matters formed no part of the discourse between Flower Hotel, the Hogan Corporation and Millennium prior to that point. Until then the sole objection raised by Flower Hotel was based upon lack of business experience, hence said Mr Pennell:

The Tribunal is not required to consider any other ground upon which the respondent may now rely in refusing its consent other than the grounds upon which consent was refused. That is, Millennium having insufficient business experience.

26 I reject that submission. The general rule is that the exercise of contractual powers is judged objectively, that is, the step taken by a party to the contract may be justified in later proceedings by reference to any material objectively available at that time whether the party was aware of that point and relied upon it when he, she or it took the action. Shepherd v Felt and Textiles of Australia Limited [1931] HCA 21; (1931) 45 CLR 359. The High Court of Australia regarded this general principle as applying to the issue of consent to leasehold assignments, Secured Income Real Estate (Australia) Limited v St Martin's Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596. That principle was applied by the Full Court of the Supreme Court of Queensland in J A McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qb R 121.

27 It follows that I should as a matter of law consider both Flower Hotel's objections based on alleged lack of business experience and financial standing.

28 At the outset of his final submissions Mr Pennell said that his client placed reliance on the deemed consent provided for by Section 22(1) of the Retail Tenancies Reform Act. He submitted that the material sent to Flower Hotel by John Willis and Co in September 2003 was sufficient to meet the requirements of the sub-section and more than 21 days elapsed before any response was made.

29 Mr Klooger vigorously objected to Mr Pennell's reliance on the deemed consent provisions. He noted that this point was unpleaded and was raised for the first time in final submissions. The pleaded case made by the applicant was that the proposed assignment was governed by the provisions of the Retail Leases Act 2003. For the reasons given above this cannot be so and Mr Pennell implicitly conceded as much. It need hardly be pointed out that this argument is quite inconsistent with the basis upon which the application was conducted until the applicant's final address. The premise of the application until then was that no consent had been forthcoming and the Tribunal was being asked to compel Flower Hotel to consent or in effect substitute its consent for the consent which Flower Hotel refused to give. There is no hint of any deemed consent. In Geelong Building Society (in liquidation) v Encel [1996] VicRp 44; [1996] 1 VR 594 the Full Court of the Supreme Court declined leave to an appellant building society to amend its pleadings so as to rely upon a clause in its guarantee to meet a defence which had been successfully taken at trial. The Court declined to allow the amendment, it seems upon the assumption that the amendment if allowed would be a `killer point'. The Court concluded that it would be wrong to allow such a point to be raised so late. Here, the new point was raised at a somewhat earlier stage, albeit at the very end of the trial process and after the respondent had closed its case. Mr Pennell made no application to amend his pleadings. In my view, when the entire proceeding had been conducted until that very late stage upon a different assumption, there would be an injustice to the respondent which could not be remedied by costs if this new point were now allowed. In my view, I should not consider it.

30 Even if I were wrong and this point ought properly to be considered, it should nevertheless fail for lack of proof of a number of the matters required to establish the deemed consent provided for by Section 22(1). Without going in detail to the references which were forwarded under cover of the letter, I am prepared to assume that at least two of them relate to Millennium's business experience and to relate to its financial circumstances. The source of this material was a law firm acting for Millennium. The section requires the material to be given by the tenant. It may well be that evidence could be given establishing that John Willis and Co were acting as agent for the tenant in submitting that material. That evidence was not placed before me. The letter of 12 September 2003 does not appear to enclose a form of the proposed deed of assignment, certainly reference is made to `the executed transfer of lease documents' and one may speculate that such document had already been submitted. As it is however that matter has not been proven.

31 I put the Section 22(1) point aside.

32 Mr Pennell submitted that all necessary information with regard to Millennium's financial resources and business experience had been furnished by the following means:

(a) In a conference between the respondent and Millennium in December 2003;

(b) A letter from GPZ Legal dated 3 March 2004 enclosing the applicant's business experience;

(c) A letter from GPZ Legal dated 20 July 2004 enclosing financial details of the Millennium;

(d) Confirmation that Chris Pouniotis had been employed as a manager of the business from July 2003;

(e) A letter dated 12 September 2003 enclosing Millennium's financial position;

(f) The respondent will be aware of Chris Pouniotis' involvement with the Capital Hotel as manager.

33 Mr Pennell further submitted that Flower Hotel could not refuse its consent `on grounds that have nothing to do with the landlord and tenant relationship'. These extraneous matters were in his submission, a desire by Flower Hotel to redevelop the hotel site and requests made for further financial information in relation to the sale of the business and from the tenant. He referred to International Drilling Fluids Limited v Louisville Investments (Uxbridge) Limited [1986] 1 Ch 513, 519-21; J.A. Macbeth Nominees Pty Ltd v Jenkins Corporation Pty Ltd [1992] 2 Qd R 121, 132; Le Coz v Innominata Pty Ltd (200) V Conv R 58-539. Mr Pennell said therefore that Flower Hotel's refusal was not the conclusion that a reasonable man would have reached. He said there was no basis for the suggestion that Millennium did not have the necessary business experience, its directors were experienced both in hospitality and the motor car trades and the Pouniotises were managing the Flower Hotel at the moment. He said there was no evidence of prejudice to Flower Hotel `by reason of Millennium not paying rent or defaulting under its obligations under the lease'. He referred to Secured Income Real Estate (Australia) Limited v St Martin's Investment Pty Ltd; the International Drilling case and the Le Coz case.

34 To adopt paragraph (4) of the well known formulation of Balcome LJ in the International Drilling case, a reasonable landlord in Flower Hotel's position could properly conclude that Millennium and those behind it, the Pouniotises, lacked the financial substance for one to be confident that Millennium could perform its obligations under the lease.

35 Ms Wills, a director of flower hotel and the officer responsible for the company's administrative affairs, made adverse comment on what she regarded as the media profitability shown by Millennium. On the other hand she agreed that she had no knowledge of any bad credit events such as unsatisfied judgments in favour of unpaid creditors or the like. In final address Mr Pennell submitted as Mr Pouniotis had said that Millennium was trustee of a discretionary trust. As such the taxation law rendered it economically necessary for it to distribute its profits rather than retain them.

36 The gravamen of the concerns that a reasonable landlord would have about Millennium and its proposal to take over the Flower Hotel would be its under capitalisation. Mr Whyte on behalf of the landlord expressed the view that the price of $475,000 for the leasehold licence and other assets was excessive. This was put by Counsel for Flower Hotel, Mr Klooger in cross-examination. I could not reach a conclusion as to the correctness or otherwise of that assertion. Nevertheless, there was no suggestion from the applicant or Mr Pouniotis that Millennium or the Pouniotises had any equity to inject to meet any part of that purchase price. Mr Pouniotis at one stage during cross-examination appeared to suggest that Millennium held finance approvals for a loan of the entire purchase price from some unnamed financial institution. Later in re-examination, he suggested that about half the price was to be covered by `vendor terms'. The fact remains however that there was to be no equity involved. The debt finance from a bank or other financial institution was to be made against a guarantee mortgage over the Pouniotises' residence in Preston. It will be recalled that the undated and unsigned statement of assets and liabilities valued this property at $500,000 and showed it as encumbered by an existing mortgage in the sum of $237,000. As it was however, Mr Pouniotis under cross-examination expressed the view that $500,000 was an overgenerous valuation of his house.

37 Mr Pennell's submissions about the status of Millennium as a trustee company implicitly accepted that it was no source of equity itself. The result then would be that Millennium as tenant would be burdened by a very heavy debt, whether that debt was owed to a bank or financial institution or to the applicant company or a mixture. Without a cushion of equity the inevitable disruptions to trade which every small business suffers could rapidly turn into a solvency crisis.

38 I am unable to give much favourable weight to the Pouniotises' statement of assets and liabilities. Aside from its lack of verification either by the Pouniotises or any financial adviser and its lack of a date, some of the assets seem dubious as realisable values, such as $75,000 for furniture and $150,000 for antique cars. There is no valuation to vouch for these things. The assets also include a sum of $100,000 for superannuation which in accordance with the Federal legislation governing superannuation is not available simply to be drawn upon in the same way as a credit balance in a bank account could be.

39 With some hesitation I conclude that the respondent's objections to the lack of hotel and hospitality industry experience on the part of Millennium and its principals is also justified. The initial material submitted in the letter of September 2003 from John Willis and Co denied that either director had any hotel or hospitality industry experience. Some six months later a `resume' for Mr Pouniotis was forthcoming which claimed experience in a number of restaurants. The time delay and the circumstances in which that material was forthcoming would raise legitimate concern in the mind of a reasonable landlord. That concern would be heightened by the lack of verifiability in the information contained with no contact addresses for any individual who could speak as to Mr Pouniotis' capacity in the hospitality industry. Under cross-examination Mr Pouniotis was unable to add any significant particulars. The business plan and landlord references promised by John Willis and Co in September 2003 have never materialised. Whilst Mr Pouniotis has been involved in managing the Flower Hotel in recent months, as manager he attracted an official warning from the Licensing Inspector threatening further action if any of the infringements described were repeated. The warning referred to three occasions, namely on the 13th of February 2004, the 27th of February 2004 and the 17th of July 2004. In each case the complaint was that the required number of crowd controllers had not been provided. Whilst the regulatory regime for licensed premises is but a pale shadow of the one which existed under for instance, the Licensing Act 1958, Mr Whyte rightly observed that the hotel trade remains highly regulated and the issue of crowd controllers represents a new complication additional to the regulatory issues that existed a generation ago. The official warning which represents a threat to the very existence of the hotel's licence indicates how important competence and expertise in managing licensed premises is and a reasonable landlord would be entitled to regard the administration of the warning as a large black mark against Mr Pouniotis and negating any positive effect that his period of management at the hotel would otherwise have created.

40 The evidence does not show that Flower Hotel was actuated by some extraneous motive or motives. My Whyte said that his redevelopment proposed would not necessitate the terminating of the present lease or any renewal thereof. The fact that as Mr Pouniotis says Mr Whyte spoke to him about it in December 2003 shows that it was not part of a `hidden agenda'. Section 60(1)(d) of the Retail Leases Act 2003 specifically contemplates that three years financial records may be required from the Assignor. That statute does not apply here but it shows that the financial performance of the sitting tenant is not irrelevant to the landlord/tenant relationship. In any event the profitability of the hotel is a necessary element in the equation in a consideration of the assignee's ability to perform the tenant's covenants under the lease. It is therefore a relevant consideration.

41 It follows that the present application must fail.

42 I have heard no submissions as to costs and so I will reserve them.