Atma Investments Pty Ltd v The Astor
[2003] NSWADT 102
•05/16/2003
Set aside by Appeal: Set aside by Appeal on 6/11/2003
CITATION: Atma Investments Pty Ltd -v- The Astor [2003] NSWADT 102 DIVISION: Retail Leases Division PARTIES: APPLICANT
Atma Investments Pty Ltd
RESPONDENT
The AstorFILE NUMBER: 015106 HEARING DATES: 8/3/02, 21/3/02, 29/5/02, 3/6/02, 23/8/02 SUBMISSIONS CLOSED: 08/23/2002 DATE OF DECISION:
05/16/2003BEFORE: Hole M - Judicial Member APPLICATION: Claim for assignment of rights under a lease/ declaration lessor not entitled to withhold consent to an assignment of rights - Claim for declaration of rights, obligations and liabilities under a lease MATTER FOR DECISION: Principal Matter LEGISLATION CITED: Administrative Decisions Tribunal Act 1997
Retail Leases Act 1994CASES CITED: REPRESENTATION: APPLICANT
A Fernon, Barrister
RESPONDENT
G Burton, BarristerORDERS: 1.The Respondent to refund the balance of the security bond after deduction of the amount of any unpaid rent (if any) to the Applicant within 28 days of the date hereof.; 2. All material supplied on subpoena be returned.
REASONS FOR DECISION
1 The Applicant (the Lessee) has applied for certain orders in respect of a lease registered Bk 4232 No 204 dated 3 July 1998 (the Lease) between it and the Respondent (the Lessor) of premises being “The Astor Coffee Lounge, Ground Floor” 123 Macquarie Street, Sydney (the premises). The Lease is for a period of 4 years, with an option to renew for 4 years, commencing on 19 August 1998 and terminating on 18 August 2002.
2 The Lease was considered by Mr B Donald, Judicial Member, who made an order dated 16.11.01 that:-
- ‘Declare that the respondent is deemed to have consented to the proposed assignment of the Lease.’
3 The Lease is a lease to which the provisions of the Retail Leases Act 1994 applies being of a “Coffee Shop”.
4 The Lease provides that the permitted use is “Coffee Shop”.
5 The Tribunal has jurisdiction to consider the amended application filed on 21 November 2001 wherein the following Final Orders are sought:
- “FINAL ORDERS
a) The Respondent to pay damages to the Applicant in the sum of $197,103 forthwith; and
b) The Applicant surrender the said license agreement and lease to the Respondent pursuant S.72(1)(c)(ii); and that,
d) That the Respondent pay the applicants legal costs of these proceedings pursuant S 77A in the sum of $5,015.00c) The Respondent release the Applicant from any claims for any further moneys payable pursuant to the said lease S.72(1)(a)
- or in the alternative to a, b and c.
2) That pursuant to S. 77A the Respondent pay the legal costs of the Applicant in respect of the Application.
3) That the Respondent pay interest pursuant to S.72A.
4) Such further or other order pursuant to S.72(3) as this Honourable Tribunal sees fit.” (sic)
6 The written submissions made on behalf of the Applicant refer to the claim as being:-
- 1. The Applicant seeks damages for a breach of clause 6.5 of the Lease.
2. The damages sought are:
(a) The loss of sale to David Cowdrill $165,000
(b) The continuing loss of business (Sept – Dec 01) $ 6,206
(c) Rent paid (January – April 02 @ $2498.50) $ 9,994
(d) Security bond (per item 8 of the lease and remains
unpaid) $ 11,750
Total $192,950
Note rent from May 2002 – August 2002 (expiry of the lease) is reduced to $2,388 due to the termination of the storage
- room licence)
- The Lease term expired on 18 August 2002. It was purportedly terminated by the Applicant by letter dated 20/5/02 with
effect immediately. Even if not terminated at that date makes no difference. The security bond is still retained.
7 The jurisdiction of the Tribunal to award damages is set out at Section S72(1)(a) of the Retail Leases Act 1994.
8 Mr Stephen Taylor has been the representative of the Applicant throughout the proceedings, at all times during the period of the Lease prior to these proceedings being commenced, in the negotiations with the Lessor relating to the prospect of selling the business of the Applicant and in attempts to assign or transfer the interest in the Lease by the Applicant. A reference to him, where the context permits, is in that capacity.
CONDITIONS IN THE LEASE
9 Clause 6.1 of the Lease provides that the Lessee “…….shall not without the prior consent in writing………use the premises otherwise” than as a “Coffee Shop”.
10 Clause 6.5 sets out the regime where the Lessee may assign or transfer the Lease:-
- “6.5 Assignment, Subletting etc.
The Lessee will not during the continuance of this Lease assign, transfer, demise, sublet, part with or share the possession of or grant any licence or concession affecting or mortgage, charge or otherwise deal with or dispose of the Premises or any part thereof or any estate or interest therein or by any act or deed procure the Premises or any part thereof of any estate or interest therein to be assigned, transferred, demised, sublet, shared with or put into possession of any person or persons or to be the subject or any licence or concession or to be mortgaged, charged, or otherwise dealt with or disposed of PROVIDED THAT the Lessee may sublet, assign or transfer the Lease of the whole of the Premises subject to the Lessee obtaining the prior written consent of the Lessor which consent shall not be unreasonably withheld if:
- a) the Lessee gives the Lessor reasonable written notice of the proposed assignment or transfer;
b) …..”
11 Clause 15.2 sets out the hours of trading and includes the times 7am to12pm – “Monday through Sunday” and allows access 1 hour before and after actual trading hours.
12 Clause 16 sets out the Essential Terms of the Lease including:-
- “16.1 Notwithstanding anything expressly or impliedly to the contrary herein contained:
it is hereby expressly agreed and declared that the covenants, terms and conditions by the Lessee contained or implied in:
- (i) ……. ;
(ii) clause 6 hereof inter alia relating to the use of and conduct of the Lessee’s business and relating to assignment, subletting or otherwise of the Premises; ……..
13 The Lease of ‘The Astor Room’ cafe is dated 3.7.1998 and operated as a coffee shop from that date.
14 Mr Stephen Taylor obtained a liquor licence on 11 February 2000, this license related to Mr Taylor’s operation of the premises being the ‘Astor Room’.
15 The Lessee’s representative entered into negotiations with Mr Cowdrill (the Prospective Purchaser), to sell the business described as “Licensed Cafe and Coffee Lounge” on about 14 March 2001 for the sum of $165,000 subject to the approval of the Lessor to the assignment of the Lease and to approval of a Development Application to allow Mr Cowdrill to operate a pizza oven. At that point of time the Lessee could only offer the business for sale and an assignment of the Lease where the use was “coffee shop”, although at that point of time the use may have evolved to “licensed café and coffee lounge”.
16 The Lessee advised the Prospective Purchaser that the next Board meeting of the Lessor was to be on 10 April 2001.
17 Mr Cowdrill was interviewed by the Board of the Respondent on 11 April 2001. It is submitted by the Applicant that Mr Cowdrill was approved as a person to whom the Lease could be assigned, that the Board indicated a preference to have a new lease, that the Board was satisfied with Mr Cowdrill’s retail and financial standing and that the Board would execute a development application addressed to Sydney City Council which provided for refurbishment of the premises including installation of a pizza oven.
18 A contract for the sale of the business was drawn up and forwarded by the solicitor for the Lessee to the solicitor for the Prospective Purchaser on 17 May 2001. This contract was not exchanged.
19 The Lessor executed a Development Application addressed to Sydney City Council on 8 June 2001 which was submitted to the Sydney City Council. The Council forwarded notices dated 15 June 2001 to neighbours inviting submissions in response to the application. The application was approved on 27 July 2001.
20 The General Administrator of the Board of the Respondent, Ms G Carpenter, forwarded a letter to the Prospective Purchaser. This letter notes that the Application for Development Approval had been signed on behalf of the Board of the Lessor. This letter also raises concerns with the Prospective Purchaser in relation to the “ … existing exhaust system to the Café for the pizza oven.” This letter also raises concerns about the need to ensure that there were no gaps in the insurance cover.
21 A Draft Lease and a Draft Licence were forwarded by the solicitors acting for the Respondent to the solicitor then acting for the Lessee on 3 July 2001.
22 The Development Approval included a condition of consent as:
- “2. Development must comply with the conditions and requirements of The Astor Pty Limited.”
23 The Lessee received notice of the Respondent’s change of heart by facsimile of 15 August 2001 from Ms Gail Carpenter, General Administrator of the Respondent, on behalf of the Board including a “Notice to Shareholders” dated 8 August 2001.
24 An Extraordinary General Meeting of the Respondent was called to be held on 9 August 2001 to consider (i.a.):
- “2. Discussing and Considering:
a) the pizza café development proposal;
b) whether the Company can and should refuse to enter into the lease with Mr Cowdrill;
d) whether the Company can and should include in the lease with Mr Cowdrill a term prohibiting the use of motor vehicles for deliveries to customers and requiring all deliveries to be by foot;c) whether the Company can and should include the lease with Mr Cowdrill a term limiting the hours of operation of the pizza café restaurant to 9.00pm each night;
and making any appropriate resolutions.
“That the proposed refurbishment and use of the basement café area in conformity with the Development Proposal of Mr David Cowdrill No. DA/01/00343 be approved subject to the imposition of any conditions by the City of Sydney and the negotiation of a lease in terms that are satisfactory to the Board and the solicitors for the company.”
The notice of this meeting included a copy of a letter dated 18 July 2001 from Mr Peter Kernaghan the Chairman of the Respondent to the shareholders and a copy of a letter dated 6 July 2001 from Mr Cowdrill to Mr Butera at the Sydney City Council.
25 On 15 August 2001 the Lessee forwarded a memorandum to the Chairman of the Lessor seeking written consent to the assignment of the Lease to Mr Cowdrill. This request sets out some requirements of clause 6.5 of the Lease and comments relating to those requirements. A further memorandum of the same date was also forwarded to the Chairman of the Lessor by the Lessee.
26 Ms G Carpenter forwarded a fax to the Lessee on 15 August 2001 requesting further information being “…….a copy of the Council Conditions (copy of the D.A)” and advising that “Your letter in regard to Assignment of Lease….” would be dealt with at the next Board meeting.
27 On 30 September 2001 the Lessee forwarded a fax to the Chairman of the Lessor indicating that the time period required to expire to establish deemed consent pursuant to section 41(d) of the Retail Leases Act 1994, being 42 days, had expired and requesting that the relevant documentation be prepared.
28 On 5 October 2001 the Lessee forwarded an e-mail to the Chairman of the Lessor offering to mediate the matter with the “Retail Tenancy Unit” and requesting a response by 12 noon on Monday 8 October 2001 failing which the Lessee would seek an urgent interim order from the Administrative Claims Tribunal.
29 On 5 October 2001 the Chairman of the Lessor forwarded a lengthy letter to Mr Stephen Taylor in response to the correspondence dated 15 August 2001 (being two memoranda), 19 September 2001 and 2 October 2001. This letter canvassed the correspondence, the need for clarification of a certain issue and the time elements of Section 41.
30 The letter dated 5 October 2001 referred to in the preceding paragraph advised the Lessee (i.a.) that “……. does not consent to the assignment of the Lease….”.
31 The Lessee advised the Chairman, by memorandum dated 5 October 2001, that several items in the letter dated 5 October 2001 from the Chairman to the Lessee were incorrect or misstated.
HISTORY OF MATTER IN THE TRIBUNAL
32 The Applicant filed an Application in the Tribunal on 1 November 2001, seeking urgent interim orders and final orders.
33 The application filed on 1 November was heard by Mr B Donald, Judicial Member on 6 November 2001 and the matter was adjourned to 16 November 2001.
34 A Certificate was issued by the Registrar of Retail Tenancies Disputes on 12 November 2001 that mediation had failed to resolve the dispute.
35 On 16 November 2001 the matter was heard by Mr B Donald and he made three declaratory orders and further directions.
36 On 21 November 2001 the Applicant filed an amended application, this application sought final orders set out at Attachment 2 thereof and in paragraph 5 hereof.
37 On 5 December 2001 Mr B Donald considered the submissions of the parties to jurisdiction and declared that the Tribunal has jurisdiction.
38 Written submissions from the Applicant and the Respondent filed on 30 November and 28 November respectively were received as to the jurisdiction of the Tribunal.
39 On 13 December 2001 the matter was heard by Mr B Donald following submissions from the representatives of both the Applicant and the Respondent, the declaratory order made on 16 November 2001 referred to in number 2 of those orders was confirmed and the other two declaratory orders made on 16 November 2001 were vacated. At this hearing the Respondent sought leave to issue summonses to produce documents, leave was given. Directions were also made that financial records of the Applicant as detailed in the transcript be produced. The matter was then relisted for hearing on 30 January 2002.
40 Summonses to Produce were filed by the Respondent and served on the Applicant dated 9 November 2001, the Applicant objected to the summons and a direction was made on 13 December 2001 that financial records be produced by 21 January 2002. The Respondent had access to the documents produced by the Applicant for the first time on 9 January 2002.
41 An application to vacate the hearing listed for 30 and 31 January 2002 was made by the Respondent, this was listed before me on 18 January 2002. The hearing dates were vacated. Directions were made including (i.a.):
- “that any “expert reports” to be relied on by the Applicant to be served and filed by 5 March 2002.”
and then the matter was set down for hearing on 8 March 2002 and 14 March 2002. The 14 March date was subsequently varied to 21
March 2002.
42 The Applicant sought to issue 47 Summons to Produce to various parties. On 28 February 2002 the matter was relisted before me as to whether the 47 Summons should be issued to the various parties. The form of the summons and the submissions of Mr Taylor and the representative of the Respondent were considered and orders were made on 1 March 2002:
- 1 All the Summonses as sought should not be issued in the present form.
2 The Applicant may wish to have Summonses issued which will be within the requirements of the general principals for the issue of a Summons.
3 The Summonses as sought are divisible into four categories and these are dealt with separately.
- i) Summons addressed to Gail Carpenter who is an employee of the auditor of The Astor Pty Limited.
Any fresh Summons ought to be directed to the Auditor and omit the schedule and paragraphs 1, 2, 3, 4, 7, 8 and 11. Paragraph 5 ought to be restricted and not require expression of an understanding. Paragraph 6, 9 and 10 would be within the general principles relating to the production of documents requested through a summons.
- A Summons may be directed to the Proper Officer of the Respondent and in this regard the Summons ought to be restricted to the first paragraph of the schedule. Items 6, 9 and 10 and item 5 ought to be restricted as referred to in the first category at Order 3i.
iii) Summonses directed individually to John Nicholas Gleeson, Bruce Gordon Smith, Henry Bruce Herron, Leonie Helen Neale and Peter John Kernaghan being Summons required to be issued to those parties on behalf of the Applicant in their capacities as Directors and Chair of the Respondent. A fresh summons may to be directed to the Company. iv) 38 Summonses directed to Leonie Helen Neale, Peter John Kernaghan, Henry Bruce Herron, Bruce Gordon Smith, John Nicholas Gleeson, Alexander Malcolm MacCormick, Thomas Ross Charles Cropper, Joan May Winston, John Freeman, Sir Tristan Venus AC Antico, Thomas Essington Breen, Kevin Michael Fitzgerald, Stephen Borness, Heather Patricia Hindle, Jeffrey Mark Darling, Sarah Lisa Blair, John Kenneth Dobler, Marlene Dobler, Kenneth Edward Cowley, Henry Bruce Herron, Isabel Susannah Herron, Dr Kenneth Neale, Kalomira Gleeson, Angela Catsoulis, Mary Anne Brophy, Hermann Franz Randolph Wein, John Raymond Nankervis, Amanda Jane Nankervis, Trevor William Scott, Margeret Jennifer Scott, Lillian Austen, David Levering, Cathie Schnitzler, Nicholas Burton Taylor, Heather Lawrie, James Christopher Sloman, Jeffrey Jackson and Pamela Jackson. These Summonses ought not be issued as the items in the Schedule and item 1, 3, 5, 6, 7, 8 and 9 are items that would more properly be directed to the Company. Items 2 and 4 have no apparent relevance to the issues.
5. In the event that the Applicant wishes to issue fresh Summonses then they ought to be issued no later than close of business on Friday, 1 March 2002.
43 The matter was heard on 8 March 2002, 21 March 2002, 29 May 2002, 3 June 2002 and 23 August 2002. Final written and oral submissions were received on 23 August 2002.
THE LEASE
44 The term of the Lease expired on 18 August 2002. The option was not exercised.
USE
45 The Lease provided that the use was “Coffee Shop”. The Lessee’s representative applied for a liquor license which was granted on 11 February 2000 as an On-licence (Restaurant) Licence. The Licensee being ‘Stephen Michael Taylor business owner ATMA Investments Pty Limited’. The application was widely advertised and the Lessor knew of the grant of the Licence. No action has been taken by the Respondent to cancel this licence.
46 The liquor licence was issued as a conditional licence, one of the conditions was that there be seating in the “Restaurant” for 44 persons. A further condition was “Food must be available whenever liquor is consumed on the licensed premises”.
47 An On-licence (Restaurant) Licence was granted pursuant to the Liquor Act 1982, and authorises the Licensee to sell liquor on the premises, but only for consumption on those premises.
48 As at 11 February 2000 the permitted use of the premises had expanded from “Coffee Shop” to “Coffee shop, Restaurant with Liquor Licence”.
49 Considerable evidence was given as to what constituted the use that the shop could be put to as a result of the attaining of the liquor licence. The Applicant’s evidence being directed to a wide range of food being available. The Respondent sought to limit the interpretation to the food as described on the menu provided with the Application for the liquor licence being:
- Astor Room Café
9241 1996
“Licensed to dine or drink
Soup with toasted Turkish bread $7.50
Minestrone
Soup of the day
Pasta served with a fresh garden salad $13.50
Penne with diced ham & in a classic Italian tomato sauce
Linguini with grilled vegetables and pesto
Fettucinne with Italian sausage, chilli, fresh tomato, parsley and extra virgin olive oil
Spaghetti with herb lemon chicken, fresh mushrooms, shallots in a cream sauce
Salads
Caesar salad; $9.00
Greek Salad; $9.00
Char grilled chicken caesar salad; $10.50
Antipasto; roast capsicum, aubergine, artichokes, s/d tomato, mushroom, cheese $10.00
Toasted Turkish breads
Astor, leg ham, cheese, roast tomato $8.00
Bennelong: tuna, artichoke, olive paste, rocket $8.50
Macquarie St; chicken, roast tomato, basil mayo, lettuce $8.50
Governor; rare roast beef, Spanish onion, horseradish, cheese $8.50
Bush; steak, grain mustard, caremelised onion, tomato, lettuce $10.50
Phillip Lane; chicken, avocado, bacon, roast tomato, mayo, lettuce $10.50
Botanic Gardens; pesto, grilled aubergine, artichokes, s/d tomato, mushroom, cheese $10.00
Breakfast till 12 noon
Bacon, Eggs, Toast with Coffee $7.50
Bacon & Egg Roll $4.00
Raisin Toast, Toast with jam, vegemite or peanut butter $2.50
Cakes, tarts and muffins on display from $3.00
Daily specials on the blackboard!”
- This menu was superceded and eventually became:
Breakfast
(till noon)
DrinksBacon, eggs, toast Tea or Coffee $8.50
Bacon & Egg Roll $4.50
Raisin toast, or toast with spreads $3.50
Short black, machiatto $2.50
flat white, cappuccino, mocha $3
English breakfast, earl Grey, peppermint,
chamomile, bancha $2.80
Soft drinks from $3.50
Milkshakes, chocolate,
vanilla or strawberry $4
Toasted Turkish breadsLunch
Soups
Minestrone soup with toast $8.50
Chicken with traditional dumplings
$8.50
Astor : ham, cheese, roast tomato $9
Macquarie St ; chicken, roast tomato,
basil mayo, lettuce $9.50
Governor ; rare roast beef, Spanish
onion, horseradish, cheese $9.50
Phillip Lane ; chicken, avocado, bacon ,
roast tomato, mayo, lettuce $12
Botanic Gardens ; pesto, aubergine,
cheese, artichokes, s/d tomato,
mushroom, $11
- Pasta
Linguini with grilled vegetables and
pesto & side salad $14.50
Fettucinne with Italian sausage,
chilli, fresh tomato, parsley and extra
virgin olive oil $14.50
Spaghetti with herb lemon chicken,
fresh mushrooms & shallots in a
cream sauce $14.50
Linguini with chicken, bacon, tomato
& basil $14.50
- Specials
Morrocan lamb, steamed rice $14
Indian chicken curry, steamed rice $14
- Salads
Antipasto plate $12.
Caesar salad $10
Char grilled chicken caesar salad $12.
Greek salad $10
Beers
Hahn Light, Cascade Light $4
Fosters Lager, Victoria Bitter $4
Crown Lager, Hahn Premium, $4.5
Cascade Premium, Tooheys Dry $4.5
RedsWhites
# Murphy’s Lore Sem/Chard ’00
Trentham Cliffs ( House wine ) $5 / $20
Xanadu Secession Sem/Chard ’00
Margeret River WA $5.5 / $22
Tim Adams Riesling ’99,
Clare Valley SA $6 / $24
Swan Bay Sauvignon Blanc Sem
Drysdale Geelong VIC $7.5 / $30
Xanadu Semillon ’99
Margaret River WA $7.8 / $33
Andrew Harris Chardonnay ’99,
Mudgee NSW $6 / $24
Allandale Chardonnay ’00
Hunter Valley NSW $6 / $24
# Xanadu Secession Cab Shiraz ’99
Margeret River WA ( House wine ) $5 / $20
Trentham Estate Merlot ’99
Trentham Cliffs NSW $6 / $24
Willows Cab Sauvignon ‘98’
Barossa Valley SA $7.8 / $33
Pepper Tree Shiraz ’99
Hunter Valley NSW $7.8 / $33
Grant Burge Filsell Shiraz ’99
Barossa Valley SA $9 / $38
- Astor Room Café
9241 1996
- Constructed in 1923, ‘The Astor’ was the tallest building of it time and the first such structure constructed with reinforced steel. It was also Australia’s first co-operatively owned residential apartment complex.
- ‘The Astor’ has been (and still is) home for many famous and intriguing characters.
To this day, ‘The Astor” retain it’s unique sense of quality and restraint.
‘Dumb Waiters’ were installed to service all apartments with food prepared here on the basement level.
The floor of The Astor Room Café has been left exposed as our testament to that first pour of concrete and as a mark of respect to those who have traded their wares here over the years.
The developer was Mr John O’Brien who at the time was in residence in Macquarie Street in the gracious property known as ‘Wyoming’ which still stands on the corner of Hunter Street. ‘Concrete Constructions’ were the builders and ‘Esplin & Mould’ the architects.
The murals on the café walls which were created by Sydney artist Annie Day, are abstracted elements of the architectural structure of ‘The Astor’.
Annie’s Tromp L’oeil portrait on the eastern wall is based on the work titled ‘Woman in a Green Bugati’ by Tamara de Limpicka.
(sic)Annie Day has a considerable reputation as a portrait painter. She has hung her work in both the Portia Geech and Doug Moran Portrait Prizes (both former residents of ‘The Astor’)
50 The evidence of the Respondent served to disclose, apart from anything else, that it knew of the Licence and took no steps to restrict the meals as served, and no action to limit the meals as served or the type of meal or description of meal as served or which could be served following or granting of the liquor license until the change of heart referred to in paragraph 23 above.
51 By 11 February 2000 the Applicant was able to offer for sale the food as described in the application for the liquor licence by the Lessor being as secondly set out in paragraph 49 above.
52 The Respondent provided to the Tribunal a report by Mr Steven Robert Layman (Architect and Town Planner). Mr Layman gave evidence at length and his evidence was subject to extensive cross examination on behalf of the Applicant. Under the circumstances the issues canvassed in his report became largely irrelevant. Mr Layman tried valiantly to distinguish the use in the Liquor Licence Application as “Restaurant/Coffee Shop” to mean “Coffee Shop with a Liquor Licence”. Mr Layman’s credentials are sufficient to support his knowledge as to the distinction between a coffee shop and a restaurant, ultimately this was not an issue that required addressing. The issue was:-
- ‘Would a restaurant serve pizzas?’
- There was no evidence provided to show that restaurants do not
serve pizzas.
53 The existing use of the premises as at the time of consideration by the Lessor of the Prospective Purchaser, the signing of the Application for Development and the Extraordinary General Meeting of 9 August 2001 had become ‘Restaurant/Café’.
RESPONDENT’S HISTORY OF MATTER
54 The Board of the Respondent interviewed the Prospective Purchaser on 11 April 2001.
55 The minutes of the meeting of 11 April, 2001 of the Board of Directors of the Lessor record:-
- “6.30pm – an interview was held with Mr David Cowdrill in
relation to his purchase of the Astor Room Cafe, and subsequent
lease with the Astor Pty Ltd.”
and
- “Astor Room Cafe: Resolved to accept Mr David Cowdrill as purchaser of the Astor Room Cafe and tenant of the Astor Pty Ltd.”
56 The Respondent endorsed it’s consent on 6 June 2001 to the Application for Development D/01/00343 to be made by Mr Cowdrill the Prospective Purchaser.
57 The minutes of the meeting of 11 April 2001 were signed off by the Chairman, without amendment, on the date of the meeting of 9 May 2001.
58 The Application for Development shows that there is to be an internal refurbishment of an existing Cafe and that the existing use is “Cafe/Restaurant”.
59 The solicitor for the Lessor forwarded a Draft Lease to the Prospective Purchaser in July 2001. This draft lease, Exhibit R, disclosed the use as:
- “Restaurant/Coffee Lounge.”
60 The minutes of the meeting of the Board of Directors of the Lessor held on 11 July 2001 were signed off by the Chairperson without amendment on the date of the meeting of the 8 September 2001 (probably should be 8 August 2001). These minutes include (i.a.) the following:-
“GENERAL BUSINESS:
Extraordinary General
Meeting:
Following receipt of Shareholder Requisitions for an Extraordinary General Meeting it was RESOLVED that this be set for 7.00pm in The Astor Meeting Room on Thursday 9 August 2001.
Copies of Mr Cowdrill’s references also to be included in the Shareholder Pack.Secretary to arrange for notices to be forwarded together with copies of existing and proposed leases, DA and the letter received from Mr David Cowdrill in response to questions raised by the Board.
In addition to the matters raised in the requisition, a further motion in the following terms to be included on the agenda:-
“That the proposed refurbishment and use of the basement café area in conformity with the Development Proposal of Mr David Cowdrill No. DA/01/00343 be approved subject to the imposition of any conditions by the City of Sydney and the negotiation of a lease in terms that are satisfactory to the Board and the solicitors for the company.””
61 The minutes of the meeting of the Board of Directors of the Lessor held on 8 August 2001 were signed off by the Chairperson without amendment on the date of the meeting of the 19 September 2001. These minutes include (i.a.) the following:-
“Pizza Mario: It was noted that the Development Application has been approved by Council and it was RESOLVED that Ms Gail Carpenter obtain a copy of this approval.”
and
- “ Astor Café & Extraordinary General Meeting: Discussion was held in relation to the Extraordinary General Meeting schedule for 9 August 2001.
RESOLVED that, in light of the fact that a significant number of Shareholders have expressed a negative opinion concerning the proposed use of the Astor Café premises as a restaurant which serves woodfire oven pizza’s, the proposal will not proceed.”
62 An Extraordinary General Meeting of the Astor Pty Ltd was held on 9 August 2001 signed off by the Chairperson on 17 October 2002 (sic) those minutes record (i.a.) :-
“PIZZA CAFE DEVELOPMENT: RESOLVED that the meeting approve and adopt the Board’s resolution that the lease for the Pizza Cafe proposal not proceed. FURTHER RESOLVED that the Board be congratulated on listening to the Shareholders and being responsive to their wishes.”
63 The Annual General Meeting was held on 17 October 2001.
The following item was considered:-
- “ASTOR CAFE There was lengthy discussion on the proposed assignment of Mr Taylor’s lease to Mr Cowdrill for the purpose of establishing a pizza restaurant and delivery point in place of current Astor Café. Many residents objected to the potential noise nuisance and loss of quiet enjoyment given the proposed change in operating hours. Others believed such change of purpose did not reflect the correct values of The Astor.
Whilst not an agenda item, following discussions on the matter, the following resolution was passed:-
UNANIMOUSLY RESOLVED the Board be directed not to approve the assignment of Mr Taylor’s lease to any proposed tenant who would establish a pizza production unit in the leased premises.”
64 The Lessor agreed to accept the Prospective Purchaser as “tenant” of the Astor Room on 11 April 2001. The Lessor signed the Application for Development Approval. The Lessor knew that the use of the premises was a restaurant/cafe as at the date of the granting of the Liquor Licence. The Lessor knew that there was to be a pizza oven to be installed in the premises and was concerned to ensure that the existing exhaust system was adequate and that the insurance needed to be considered prior to the operation beginning (i.e. commencing to cook pizzas). The Lessor had forwarded a draft lease to the Prospective Purchaser disclosing the use as “Restaurant/Coffee Lounge”.
65 The Lessor, by way of letter (undated), this is the letter referred to in paragraph 20, advised the Prospective Purchaser:-
- “The Application for Development Approval for re-
development of the basement at The Astor, which has been
signed on behalf of the Board, indicates the use of the
existing exhaust system to the Café for the pizza oven.
The Board assumes that your architects have checked that
the existing system is adequate for your purposes and that
it will satisfy the requirements of all the relevant
authorities.
This letter is to confirm our recent conversation in which I
told you that the Astor will not be responsible for
maintenance, alteration or replacement of any part or all of
the exhaust system, including the ductwork. All
maintenance, and any repairs, additions or replacements
will be entirely to your account and once your tenancy
ends, will remain the property of the Astor.
We should also check before you begin your operation that
Your insurers and the Astor’s insurers have a clear
understanding of the extent of the building’s insurance and
that covering your operation. We must be certain that
there are neither any gaps in the insurance cover of the
café and the building nor that any aspect of your insurance
and that of the Astor overlap.”
66 There was considerable evidence adduced as to whether the cooking of a pizza and the ingredients required were within the use as permitted.
67 As at 11 April 2001, the ‘use’ had become Restaurant/Coffee Shop with availability of alcohol pursuant to the On-licence (Restaurant) Licence.
68 At the meeting of the Board of Directors of the Lessor on the 11 April, 2001 consent was not given to the “assignment” of the Lease. The Board had consented to Mr Cowdrill being the “purchaser” and the “tenant”. This was sufficient for the Lessee to consider that a sale of the business to the Prospective Purchaser would be able to proceed and that it could expect that the sale would not be frustrated by the Lessor or by the later refusal to assign the lease or grant a new lease.
69 The decision of the Board of Directors of the Lessor made on 8 August 2001, did not have regard to the effect of its decision made on 11 April 2001. The consequences of proceeding to consent to the Application for Development and the issue of a draft lease, then purporting to resolve that the “proposed use of the Astor Cafe premises as a restaurant which serves woodfire oven pizza’s ........... will not proceed” was ill conceived and cavalier.
70 The Lessee had been led to believe that the sale to the Prospective Purchaser was acceptable to the Lessor and that the contract, had it been exchanged with the Prospective Purchaser, disclosed that there was to be a new lease (in the terms of the draft lease submitted by the Lessor) and was otherwise unconditional. After the decision of the Board of Directors dated 8 August 2001, subsequently ratified by the Extraordinary General Meeting on 9 August 2001, the Lessee would have had to negotiate rescission of the contract if it had been exchanged.
71 The subsequent attempt of the Lessee to use the provisions of section 41(d) Retail Leases Act 1994 to establish consent to assignment caused the Board of Directors to resolve on 18 September 2001 that:-
“B Smith review documentation (including e mail from S Taylor) and, subject this review (sic), the Board to confirm assignment emphasising this does NOT constitute consent to change of use.”
This further confirms that the Board of Directors considered that “assignment” of the Lease was to happen. There is no indication that
the Lessor was aware of the time imperative running in relation to correspondence from the Lessee dated 15 August 2001.
If the Board had taken a decision then, to refuse the assignment, the relevant provisions of clause 6.5 would have needed to be addressed specifically.
ASSIGNMENT OF LEASE
72 Section 41(d) of the Retail Leases Act 1994 provides:-
- “A retail shop lease is taken to include the following provisions:
a) …
b) …
c) …
d) The lessor must deal expeditiously with a request for consent and is taken to have consented to the assignment if the lessee has complied with paragraphs (a) and (b) and the lessor has not within 42 days after the request was given notice in writing to the lessee either consenting or withholding consent.”
73 Clause 6.5 of the Lease requires that any assignment or transfer be subject to obtaining the written consent of the Lessor and that the consent shall not be unreasonably withheld if (i.a.) the Lessor gives reasonable “written notice” of the proposed assignment or transfer. Prior to 15 August 2001 there was no written notice given by the Lessee to the Lessor of a proposed assignment or transfer. The relevant correspondence between the Lessee (Applicant) and the Lessor (Respondent) and between the solicitor for the Prospective Purchaser and the solicitor for the Lessor was directed to the negotiation and preparation of a new lease.
74 By Memorandum dated 15 August 2001 the Lessee requested that the Lessor consent to an assignment of the Lease. This was faxed to the Chairman of the Lessor on that date and, for the purposes of Section 41, commenced time running provided that Section 41(b) had been complied with. The 42 days after the request being made expired on 30 September 2001.
75 The Board of Directors considered the Memorandum dated 15 August 2001 from the Lessee and confirmed assignment of the Lease on the basis that there was no consent to change of use.
76 The Prospective Purchaser referred to the prospect of his acceptance of an assignment of the Lease on the basis of the Lease including clause 15.2.2. Clause 15.2 provides:-
- 15.2.1. To operate only during those hours permitted by law, ordinance or regulation and subject thereto, to trade or operate
from Monday through to Sunday each week during the term hereby granted from 7 am to 12 pm with access to the Premises
being restricted to one hour before and one hour after actual trading hours.
15.2.2. The Lessor reserves the right to alter the hours of trade in the event that the Lessee’s use of the Premises during the
permitted trading hours causes a significant disturbance to the residents of the Building.
77 The Prospective Purchaser raised the issue of clause 15.2.2 with his solicitor, that if the then existing lease was assigned to him, that his requirement was that this clause be deleted. This was raised on 14 August 2001. The Prospective Purchaser gave evidence as to his willingness to accept the then existing lease on assignment as he felt satisfied that if the Lessor attempted to implement clause 15.2.2 then he could show that to be harassment. He also attested that he was operating on that premise. He further attested that the inclusion of clause 6.1A in the Lease was not to his liking, this clause included the word “disturbance” and related to the use of the premises. The Prospective Purchaser chose to withdraw from the negotiations with the Lessee on 6 November 2001.
78 During the course of the negotiations between the Respondent and the Prospective Purchaser a disclosure statement was forwarded to the Prospective Purchaser referring to the use as “Restaurant/Coffee Lounge”.
FINANCIAL RECORDS
79 The Applicant and the Applicant’s representative did not provide comprehensive financial records. Pursuant to section 73A of the Administrative Decisions Act and section 128 of the Evidence Act a certificate was issued to Mr Stephen Taylor.
80 The Applicant and the Respondent provided affidavits to the Tribunal from valuers in relation to the value of the business of the Applicant as conducted on the premises subject of the Lease.
81 The Respondent was not provided with financial records of the Applicant that permitted an accurate valuation of the assets of the business at the date of the initial negotiations with the Prospective Purchaser or at a time when it could fully comprehend the nature of the Applicant’s potential loss.
82 The evidence concerning the manner in which the Applicant’s representative paid staff, ordered goods and paid creditors consisted of records constructed by the Applicant’s representative and in some instances were of little assistance. It is clear that the records of the Applicant as they applied to the Astor Room are exceedingly unclear.
83 The Applicant’s representative submitted that the proposed price of the sale of the business and lease term to the Prospective Purchaser in the sum of $165,000 was a fair price. The price being representative of the opportunity for the Prospective Purchaser to continue the Applicant’s trade and expand it to other, perhaps more viable, sales of food.
84 It is essential that the Applicant, as far as possible, disclose sufficient financial information to allow the Respondent, and the Tribunal, to be able to determine the possible loss or potential loss that may have been suffered.
85 The Applicant ceased trading of his own volition and from that time was operating on the basis of paying the rent only. It is not possible to determine with some accuracy the income based on the use then being undertaken in respect of any time past when the Applicant ceasing to trade.
86 The Applicant’s representative’s application for a liquor licence included reference to:-
- “16. I have annexed to this affidavit a copy of my current menu. From time to time the menu is changed, however, the annexed menu generally reflects the nature and scope of meals served in my restaurant. That will not change as a result of the grant of this authority.
The meals shown on the menu are available until generally one and half hours prior to the close of the restaurant. I understand that food must be available over the whole of the time that liquor is served in the restaurant. I undertake that a selection of meals, although not as extensive as that shown on the full menu, will be available over the whole time that liquor is supplied upon the premises.
17. I have not done an actual comparison of the percentage of receipts from the sale of meals and receipts of the sale of liquor. I am, however, aware that the sale of liquor constitutes approximately 30% of my total takings.
18. I am aware that if the authority is granted I must maintain proper and accurate records that show the total monthly liquor sales and the total monthly food sales. I further understand that those records must be made available for inspection by any police officer or special inspector at any reasonable time.”
87 The Respondent sought by summons directed to Magoulias & Associates, Certified Practicing Accountants who had assisted the Applicant with various accounting services, the following documents:
“Copies of all financial records of Atma Investments Pty Limited in your possession, custody or control that relate to The Astor Room, 123-125 Macquarie Street Sydney (“The Astor Room”) for the financial year 2000 to 2001 and for the period from July 2001 to date including the following:
- 1) management accounts including but not limited to computerised or manual records, ledgers, journals or cash books;
2) trading records including but not limited to all Financial Statements, deposit books and cheque books and Income Tax Returns of Atma Investments Pty Limited;
3) asset schedules including but not limited to details of bank balances and details of any current liabilities such as creditors;
4) depreciation schedules or stocktake records;
5) records of trading stock and wages including details of hours worked by the Principals of Atma Investments Pty Limited in relation to The Astor Room;
6) print-outs from cash registers detailing sales together with any other record of sales.”
88 The response to the summons referred to in the previous paragraph was to the effect of:
- 1) Financial statement for 1999 provided, other years we do not have.
2) Income Tax Return for 1999 provided, other years we do not have.
3) Object to provide these records, considered to be irrelevant and not relevant to proceedings.
4) Provided.
89 On 11 April 2001 the Board of Directors of the Respondent approved the Prospective Purchaser as a person that they would accept as purchaser of the Astor Room Café and tenant of the Astor Pty Ltd. There was no written request directed to the Respondent by the Applicant to assign the Lease in accordance with clause 6.5 of the Lease at this point of time.
90 At the Extraordinary General Meeting of the Respondent held on 9 August 2001 the company approved and adopted the Board’s resolution made on 8 August 2001 that the proposed use of the Astor Café premises as a restaurant which serves woodfire oven pizzas would not proceed. The Respondent negotiated with the Prospective Purchaser a proposed new lease of the premises the subject of the Lease. These negotiations included the use of the premises as being “Restaurant/Coffee Lounge”.
91 The Prospective Purchaser did not enter into a contract with the Applicant for the purchase of the business either including the residual term of the Lease or the prospect of negotiation of a new lease. The negotiations between the Prospective Purchaser and the Respondent disclosed that the Prospective Purchaser was concerned that the provisions in the Lease which related to trading hours were unsatisfactory for his purposes. The Prospective Purchaser was also concerned about the inclusion in the proposed new lease of a reference to “disturbance” in the terms of the new lease relating to the use of the premises.
92 The Applicant wrote to the Respondent requesting consent to the assignment of the Lease to the Prospective Purchaser on 15 August 2001. This request complied with the requirements of clause 6.5 of the Lease and was considered by the Board of Directors on 18 September 2001 when it was resolved that subject to review of B Smith the Board confirm assignment emphasising that this did not constitute consent to change of use. The time period stipulated in section 41(d) of the Retail Leases Act 1994 which had been invoked by the Applicant’s request of 15 August 2001 expired on 30 September 2001.
93 The wish of the Prospective Purchaser that clause 15.2.2 of the Lease be varied in the event of an assignment to him of the Lease was not formally put to the Board. The evidence of the Prospective Purchaser was that he would not have proceeded with an assignment on the basis of a straight assignment.
94 The use of the premises at the time of the Lease was “Coffee Shop”. The Respondent was aware of and did not object to the application by the Respondent’s representative for a liquor licence which was an On-licence (Restaurant) Licence. The negotiations between the Respondent and the Prospective Purchaser including the submission of a draft lease included reference to the use as being “Restaurant/Coffee Lounge”. The Development Application submitted to the local council, and signed by the Respondent, disclosed the existing use as “Café/Restaurant”. At the time of the formal written request invoking the provisions of section 41(d) of the Retail Leases Act 1994, i.e. at 15 August through to 30 September 2001, the existing use which the Applicant could rely on as being approved by the Respondent was “Restaurant/Coffee Lounge” including an On-licence liquor licence.
95 The action taken by the Respondent on 9 August 2001 although within the law and the documentation was cavalier, lacked any consideration of the effect of the action upon the Applicant and the Prospective Purchaser. In the event that a written request for assignment of the Lease had been made by the Applicant then the suggestion that any approval to such an application which might have been given on 11 April 2001 could be revoked would have been actionable.
96 The actual consent or deemed consent given on 18 September 2001 by the Board or pursuant to the expiry of the statutory period pursuant to section 41(d) of the Retail Leases Act 1994 on the 30 September 2001 was not an unreasonable consent on the basis of the suggestion that any consent to a change of use should not be constituted thereby. The use was as at that time “Restaurant/Coffee Lounge” and therefore the request to assign the Lease dated 15 August 2001 correctly referred to the use as a licensed restaurant. Therefore the proposed assignment to the Prospective Purchaser would have permitted that purchaser to continue with the use as it was which did not restrict the type of food to be served at the restaurant and could not be said to definitely exclude the cooking of pizzas.
97 The Prospective Purchaser had intended to exchange a contract for the purchase of the business with the Applicant at the price of $165,000 and was aware that a deemed consent to the assignment to him had occurred. The Prospective Purchaser gave evidence that he chose to withdraw from the negotiations to enter into binding arrangements with the Applicant on 6 November 2001 as he considered that he had entered into a hostile environment when he saw the approach being taken by the Respondent at the initial foray into the Tribunal.
98 The financial information provided by the Applicant directed to:-
- a) the income of the business; and
b) the value of the business,
did not provide the Respondent or the Tribunal with information that could be relied on for the purposes of either assessing any loss of business or the value of the business. The figure arrived at between the Applicant and the Prospective Purchaser was a commercial figure which reflected the opportunity provided to the Applicant where the Prospective Purchaser considered that he would be able to operate a commercially viable business on his terms. The evidence provided by the valuer on behalf of the Applicant was to the effect that the value was nil and the evidence provided by the valuer on behalf of the Respondent disclosed that he was unable to provide an accurate valuation.
99 The loss of business alleged by the Applicant was not caused as a result of the Respondent agreeing or not agreeing to assign the Lease. The Applicant chose to cease trading.
100 Pursuant to the terms of the Lease the Applicant was required to pay the rent under the Lease through to the expiry of the Lease in the absence of any agreement otherwise.
101 The security bond provided pursuant to the terms of the Lease was provided for the purposes of complying with clause 17 of the Lease as in earnest of performance of the Lessee’s obligations under the Lease. This includes payment of rent.
102 The proposed contract between the Applicant and the Prospective Purchaser was not exchanged and the Applicant was not in a position to enforce the contract. In the absence of an exchanged contract and rescission of that contract the Applicant could not be said to have suffered loss as a result of a refusal of consent to the assignment of the Lease.
103 The legal representatives of the Applicant and the Respondent made extensive submissions as to the issues and drew attention to relevant case law to the issues that they believed should be addressed. Ultimately the issues of an estoppel and loss of opportunity were irrelevant to the issues that needed determination as set out above.
104 For the foregoing reasons I make the following orders:
- 1. The Respondent to refund the balance of the security bond after deduction of the amount of any unpaid rent (if any) to the Applicant within 28 days of the date hereof.
2. All material supplied on subpoena be returned.
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