Atma Investments Pty Ltd v The Astor Pty Ltd (RLD)

[2003] NSWADTAP 53

Appeal Panel - Internal

CITATION:	Atma Investments Pty Ltd v The Astor Pty Ltd (RLD) [2003] NSWADTAP 53
PARTIES:	APPELLANT Atma Investments Pty Ltd RESPONDENT The Astor Pty Ltd
FILE NUMBER:	039038
HEARING DATES:	01/09/03
SUBMISSIONS CLOSED:	09/01/2003
DATE OF DECISION:	11/06/2003
DECISION UNDER APPEAL:	Atma Investments Pty Ltd v The Astor [2003] NSW ADT 102
BEFORE:	Chesterman M - ADCJ (Deputy President); Montgomery S - Judicial Member; Weule B - Member
CATCHWORDS:	adequacy of reasons - leave to extend to the merits - relevant/irrelevant considerations - unreasonableness
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	015106
DATE OF DECISION UNDER APPEAL:	05/16/2003
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Retail Leases Act 1994
CASES CITED:	Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Atma Investments Pty Limited v The Astor Pty Limited [2001] NSWADT 212 Atma Investments Pty Limited v The Astor [2003] NSWADT 102 Butt v McDonald (1896) 7 QLJ 68 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 65 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Mackay v Dick (1881) 6 App Cas 251 Osmond v Public Service of New South Wales [1984] 3 NSWLR 447 R v Maxwell, Unreported, Court of Criminal Appeal of New South Wales, 23 December 1998 (BC9807450) Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
REPRESENTATION:	APPELLANT A Fernon, barrister RESPONDENT G Burton, barrister
ORDERS:	1 Set aside the decision under appeal; 2 Grant leave for the appeal to extend to the merits; 3 The matter to be relisted before the Appeal Panel for submissions by both parties on (a) the procedure now to be adopted and (b) subject to the Panel's conclusions regarding (a), the three matters set out in paragraph [121] of these reasons

1 This is an appeal by Atma Investments Pty Ltd (the Lessee) against the Tribunal’s dismissal of its application 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).

2 The Lease was one to which the provisions of the Retail Leases Act 1994 (the Act) applied.

3 The Final Orders sought by the Lessee were as follows:

FINAL ORDERS
Pursuant S.72(1) of the Retail Leases Act 1994, that the Applicant, Atma Investments Pty Limited, be restored to the position the Applicant would have been in if the sale of the business, and the consent to the assignment of lease, registered in the Land Titles Office Book 4232 No. 204, to Mr. Cowdrill, had not been unreasonably withheld by the Respondent, The Astor Pty Limited as follows:

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,

c) The Respondent release the Applicant from any claims for any further moneys payable pursuant to the said lease S.72(1)(a)

d) That the Respondent pay the applicants legal costs of these proceedings pursuant S 77A in the sum of $5,015.00

or in the alternative to a, b and c.

1) That pursuant S.71(1)(a) of the Retail Leases Act 1994, the Respondent, The Astor Pty Limited, pay damages to the Applicant Atma Investments Pty Limited in such amount as is considered reasonable by the Tribunal.

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.

4 The written submissions made on behalf of the Lessee outlined the claim as follows:-

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.

5 The matter was heard by Ms M Hole, Judicial Member, over five days within the period from 8 March to 23 August 2002. In her judgment, delivered on 16 May 2003 (Atma Investments Pty Limited v The Astor [2003] NSWADT 102), Ms Hole dismissed the Lessee’s claim for damages, but ordered that within 28 days the Lessor should refund the balance of the security bond after deduction of the amount of any unpaid rent.

The dealings between the Lessor, the Lessee and the Prospective Purchaser

6 The Lease was 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.

7 The Lease provided that the permitted use of the premises was that of ‘Coffee Shop’. Clause 6.1 provided that without the prior written consent of the Lessor, the Lessee should not use the premises otherwise than for this purpose.

8 On 11 February 2000, however, the Lessee’s representative was granted an On-licence (Restaurant) liquor Licence. The Licensee was identified as ‘Stephen Michael Taylor business owner ATMA Investments Pty Limited’. This application was widely advertised and the Lessor knew of the grant of the licence. No action was taken by it to have the licence cancelled.

9 This 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 that ‘Food must be available whenever liquor is consumed on the licensed premises’.

10 On behalf of the Lessee, Mr Taylor entered into negotiations with Mr David Cowdrill, on about 14 March 2001, to sell the business to an entity (‘the Prospective Purchaser’) which Mr Cowdrill represented. The business was described as ‘Licensed Cafe and Coffee Lounge’. The provisional purchase price was $165,000. The sale was to be subject to the approval of the Lessor to the assignment of the Lease and to approval of a Development Application to allow the Prospective Purchaser to operate a pizza oven.

11 An initial approach to the Board of the Lessor was headed ‘Application for assignment of lease from Stephen Taylor (Atma Investments P.L.) to the entity as described herein’ (this entity being the Prospective Purchaser).

12 Clause 6.5 of the Lease dealt as follows with assignment or transfer of 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) ...

13 Mr Cowdrill was interviewed by the Board of the Respondent on 11 April 2001. The Board’s minutes of the meeting state that ‘it was resolved to accept Mr David Cowdrill as purchaser of the Astor Room Café and tenant of the Astor Pty Ltd’. The Board indicated that it would prefer to grant a new lease to the Prospective Purchaser and to accept a surrender of the existing lease from the Lessor.

14 On 17 May 2001, 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. In the covering letter, it was noted that the Lessor was proposing to grant a new lease to the Prospective Purchaser. This contract was never executed.

15 Early in June 2001, the solicitor for the Lessor forwarded a draft lease to the Prospective Purchaser. This draft lease described the permitted use as ‘Restaurant/Coffee Lounge’.

16 On 8 June 2001, Mr Cowdrill forwarded a Development Application to Sydney City Council. It was signed on behalf of the Board of the Lessor. The proposed alterations described in the application included the installation of a pizza oven. The existing use was stated to be ‘Café/Restaurant’.

17 In an undated letter to Mr Cowdrill, apparently written about this time, the Board noted that it was indicated in the application that the existing exhaust system would be used for the pizza oven. It stated that it would assume that architects retained by Mr Cowdrill had checked that this system would be adequate for his purposes.

18 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. The approval stated that the development must comply with the conditions and requirements of the Lessor.

19 The minutes of a meeting of the Board of the Lessor on 11 July 2001 include the following entry:-

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.

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.

Copies of Mr Cowdrill’s references also to be included in the Shareholder Pack.

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.”

20 The minutes of a meeting of the Board on 8 August 2001 include the following entries:-

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.

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.

21 On the same day, the Board sent out a Notice to Shareholders containing the text of this resolution. It also sent a copy of this notice by fax to Mr Taylor and it notified Mr Cowdrill that it would not permit him to install a wood-burning pizza oven.

22 An Extraordinary General Meeting of the Astor Pty Ltd was held on 9 August 2001, in order to consider (inter alia) the following item:

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;

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;

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;

and making any appropriate resolutions.

3. To consider and if thought fit, to adopt the following resolution:

“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.”

23 The minutes of that meeting record the following resolutions:-

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.

24 On 10 August 2001, solicitors for the Lessor wrote to solicitors for Mr Cowdrill advising that the Lessor would not be proceeding with the proposed lease to Mr Cowdrill.

25 In a fax dated 14 August 2001 to his solicitors, Mr Cowdrill indicated that he and Mr Taylor had ‘decided to pursue assignment of the Lease… since the board of The Astor withdrew the new lease’. He also raised the issue of clause 15.2.2 of the Lease with his solicitor. He indicated that if the Lease was to be assigned to him, he would ‘require’ that this clause be deleted.

26 Clause 15.2 provided as follows:-

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.

27 In the hearing at the Tribunal, Mr Cowdrill testified however that at the time he was willing to accept the terms of the existing lease on assignment, as he felt satisfied that if the Lessor attempted to implement clause 15.2.2 then unless he had been offending in some way he could show that to be harassment. He further testified that he had had a similar reaction to the inclusion of a clause in the same terms (clause 6.1A) in the draft new lease that had previously been offered to him.

28 It was put to Mr Cowdrill in cross-examination that his statement to his solicitor that he ‘required’ the deletion of clause 15.2.2 showed that this was a precondition of his accepting an assignment. He replied that this was incorrect, as it ‘wasn’t a crunch point’. He had tried to get the equivalent clause (6.1A) removed from the draft lease to him, but he thought that he could ‘deal with it’, and if it had not been removed from the draft lease, that would not have prevented him from going ahead with that transaction.

29 On 15 August 2001 Mr Taylor, to the knowledge of Mr Cowdrill, forwarded a memorandum to the Chairman of the Lessor seeking written consent to the assignment of the Lease to Mr Cowdrill. This request explained the Lessee’s position in relation to the requirements set out in clause 6.5 of the Lease (these are outlined above at [12]). In particular, it stated that the proposed assignee did not propose to change the use of the premises from that of a licensed restaurant. The Secretary of the Lessor acknowledged receipt.

30 On the same day, Mr Taylor sent a second fax to the Chairman, purporting to ‘remind’ him that the Lessor had ‘approved the application to the Licensing Court of New South Wales to change the usage of the premises… to become a licensed restaurant’ and that this application had been approved with effect from 11 February 2000.

31 It would appear that on 18 September 2001, before a Board meeting scheduled for that date, the Secretary of the Lessor told Mr Taylor on the telephone that she did not have his request for assignment. He said that he faxed a copy to her that evening.

32 On 18 September 2001, in a meeting commencing at 6 p.m., the Board of Directors of the Lessor resolved 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.

33 On 30 September 2001, the Lessee sent a fax to the Chairman of the Lessor indicating that the time period required to establish deemed consent under s 41(d) of the Act, namely, 42 days, had elapsed since his request for assignment dated 21 August. He indicated that the sale of the Lessee’s business to the Prospective Purchaser would take place at the earliest opportunity and requested that the Chairman instruct the Lessor’s solicitors to prepare the relevant documentation for the assignment of the lease.

34 Section 41(d) provides as follows:-

A retail shop lease is taken to include the following provisions:

(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.

35 It seems to have been common ground that the Lessee had complied with paragraphs (a) and (b) of s 41.

36 On 5 October 2001, having apparently received no communication from the Lessor on these matters, Mr Taylor sent an e-mail to the Chairman of the Lessor offering to mediate the matter with the Retail Tenancy Unit. He requested 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’ (sic).

37 On 5 October 2001, the Chairman of the Lessor sent a lengthy letter to Mr Taylor. This letter canvassed various aspects of the recent correspondence between the parties.

38 Three significant assertions were made in this letter. The first was that it was not until the fax of 18 September (though the Chairman put the date at 19 September) that Mr Taylor indicated that the Prospective Purchaser, as assignee, proposed to establish a ‘gourmet pizza parlour’ in the premises. It followed that the 42-day period specified by s 41 of the Act had not yet expired since the relevant request for assignment. Secondly, because the use stated in the Lease was ‘coffee shop’, this would clearly involve a change of use. Thirdly, the Lessor would not consent to assignment to the Prospective Purchaser for this changed use.

39 The Lessee, in a memorandum dated 5 October 2001, disputed the first two of these assertions.

40 With the parties now at odds with each other, the Lessee filed an application in this Tribunal on 1 November 2001, seeking urgent interim orders and final orders. There was a preliminary hearing before Mr B Donald, Judicial Member, on 6 November.

41 A copy of a letter from Mr Cowdrill to the Lessee, bearing the date 5 November 2001, was admitted into evidence in the proceedings before Ms Hole. Omitting formal parts, the text of this letter was as follows:-

It is with regret that I must advise you that I am unable to proceed with the purchase of the Astor Room Café.

You are aware that the lessor gave approval to my proposal in April of this year, but since then I have been refused both a new lease, that was originally offered and assignment of the existing lease. More than six months have passed since initial approval of me as assignee and I am still uncertain as to wether (sic) this transaction can be completed.

Having witnessed today the proceedings in the ADT, I am of the opinion that the lessor’s conduct would make future trading conditions difficult to say the least and probably quite unpleasant.

The delaying tactics of the lessor have to date caused me considerable loss in wages and profits, not to mention design, legal and out of pocket expenses. They have been, by their conduct, entirely responsible for the collapse of the sale.

I wish you well and will no doubt see you soon. Thank you and good luck in your future endeavours.

42 During Mr Cowdrill’s evidence before Ms Hole, the fact that this letter was dated one day earlier than the hearing before Mr Donald was mentioned, but not investigated. It appears to have been accepted by the parties that the letter must have been written on 6 November 2001.

43 Mr Cowdrill testified before Ms Hole that, as he said in this letter, he withdrew because ‘I considered that I had entered into a hostile environment when I saw the approach being taken by The Astor at the original ADT hearing’. At that time he knew that, at least according to the Lessee, the Lessor was deemed, as a matter of law, to have given consent to the assignment. He believed that before this hearing he did not realise that the Lessor did not accept that there had been a deemed consent. He added: ‘The first time that I really felt that The Astor board were opposed to the thing proceeding was in the ADT on the 6th or 5th November’.

44 On 12 November 2001, the Registrar of Retail Tenancy Disputes issued a certificate stating that mediation had failed to resolve the dispute.

45 On 16 November 2001, Mr B Donald, Judicial Member, heard the Lessee’s application for an urgent interim order. In an ex tempore judgment on the same day, he made three declaratory orders, two of which were later vacated at the request of both parties. This judgment is not reported.

46 The order which remained on foot was a declaration that the respondent Lessor was deemed to have consented to the proposed assignment of the lease.

47 Mr Donald noted, at paragraph [10] of his judgment, that the Lessor did not dispute having consented to the change of user from a coffee shop so as to include use as a licensed restaurant. At [12 – 13], he held that the Lessee’s application of 15 August 2001 was a valid application for consent and that by virtue of the lapse of time consent was deemed to have been given, in terms of both the lease and s 41 of the Act.

48 Subsequently, the Lessor lodged an appeal against this decision. But it abandoned this appeal at the hearing of the present appeal.

49 On 21 November 2001 the Applicant filed an amended application, seeking final orders as set out at [3] above. On 5 December 2001 Mr Donald, having considered written submissions of the parties, gave judgment declaring that the Tribunal had jurisdiction to determine the matters raised in the amended application (Atma Investments Pty Limited v The Astor Pty Limited [2001] NSWADT 212).

50 At some later point of time, the Lessee ceased trading in the premises. In a letter dated 20 May 2002, it purported to terminate the Lease with immediate effect.

51 The Lessee contended that, in addition to preventing the proposed transfer of its business and assignment of the Lease to the Prospective Purchaser, the Lessor’s conduct caused a loss of sales in the business and a diminution of its value.

The judgment under appeal

52 For present purposes, the significant elements of Ms Hole’s judgment of 16 May 2003 (Atma Investments Pty Limited v The Astor [2003] NSWADT 102) are as follows.

53 First, she held (at [89] and, it would seem, at [73]) that no written request for assignment to the Prospective Purchaser was made to the Board of the Lessor prior to its meeting on 11 April 2001. The resolution at that meeting was that the Board accepted the Prospective Purchaser as a purchaser of the Astor Room Café and a tenant of the Lessor. Ms Hole added, at [95], that if a written request for assignment had been made and had been approved, any subsequent revocation would have been actionable.

54 Consistently with paragraph [10] of Mr Donald’s unreported judgment of 16 November 2001, Ms Hole held, at [94], that on 15 August 2001, when the request for consent to assignment was made, the existing use on which the Lessor could rely was that of a restaurant/coffee lounge, including a liquor licence.

55 She referred, at [50], to evidence from the Lessor that it took no steps to restrict the range of meals served by the Lessee in the licensed restaurant.

56 At [64 – 65], she recorded a finding that, during the period when the Lessor was negotiating with the Prospective Purchaser for the grant of a new lease, the Lessor knew that a pizza oven was to be installed in the premises and took steps to reassure itself that the exhaust system had been checked and found suitable for a pizza oven by architects employed by the Prospective Purchaser.

57 At [96] (see too [75] and [92]), she appeared also to hold that there was either actual consent to the assignment by the Board in its resolution of 18 September 2001, or deemed consent under s 41(d) of the Act. She added that ‘this was not an unreasonable consent on the basis of the suggestion that any consent to a change of use should not be constituted thereby’.

58 Also at [96], she indicated that it was correct for the request for consent of 15 August to refer to the use of the premises as a licensed restaurant. The next sentence of her judgment reads as follows:-

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.

59 At [97], Ms Hole noted, as was not disputed, that a draft contract for the sale of the Lessee’s business to the Prospective Purchaser for the sum of $165,000 had been drawn up, but no binding agreement had been reached. She also found that the Prospective Purchaser had become aware that ‘a deemed consent to the assignment to him had occurred’.

60 Her judgment refers more than once to the questions of what caused the Prospective Purchaser to withdraw from the assignment of the Lease and whether, in the light of Mr Cowdrill’s concerns regarding clause 5.2.2 of the Lease and its equivalent (clause 6.1A) in the draft new lease, the Prospective Purchaser would ever have agreed to accept an assignment.

61 The following are the relevant passages in Ms Hole’s judgment:-

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.

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.

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.

97. The Prospective Purchaser … 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.

62 At [102 – 103], Ms Hole held as follows:-

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.

63 She also held (at [98]) that the financial information provided by the Lessee was insufficient to support a finding that the sales or the value of its business had decreased as a result of the Lessor’s conduct and (at [99]) that in any event any loss of business suffered by the Lessee occurred because it ‘chose to cease trading’.

64 Having regard to these matters, Ms Hole dismissed the Lessee’s claim for damages.

The Lessee’s grounds of appeal

65 The Lessee’s Notice of Appeal set out 13 alleged errors of law in the Tribunal’s judgment. It sought leave under s 113(2)(b) of the Administrative Decisions Tribunal Act 1997 to extend the appeal to a review of the merits. It put forward five reasons why leave should be granted.

66 At the hearing of the appeal, Mr Fernon, counsel for the Lessee, indicated that nos. 1 and 8 of the alleged errors of law were not pressed. He addressed the remaining eleven errors. It appeared to us that in these reasons they could most conveniently be dealt with as, in effect, six distinct grounds of appeal. We put on one side, for the moment, the application for leave to extend to the merits.

Ground (1): The Tribunal’s characterisation of the Lessee’s request to the Board in April 2001

67 This ground of appeal brings together nos. 2 – 4 and 7 in the Lessee’s list of alleged errors of law. It relates to the Tribunal’s conclusion that prior to 11 April 2001 the Lessee did not convey a written request to the Lessor for assignment of the Lease to the Prospective Purchaser.

68 It was submitted that this finding should not have been made as the Lessee had not been put on notice that the matter was in dispute and neither party had been invited to make submissions on the matter. Furthermore, the finding could not reasonably have been made in the light of evidence that was before the Tribunal, notably the ‘Application for assignment of lease from Stephen Taylor…’ referred to at [11] above. In consequence, Mr Fernon contended, the Tribunal did not give proper consideration to the possibility, to which it referred in its judgment at [95], that any subsequent revocation of an acceptance of the request would have been ‘actionable’.

69 In our opinion, even if this issue should, in the light of the evidence, have been given closer consideration, on the basis of submissions invited from both parties, it cannot provide grounds for any challenge to the Tribunal’s findings.

70 One reason for this ruling is that the Lessee did not bring a case explicitly based on it having formally requested consent to an assignment in April 2001. No claim to this effect was made in the written submissions to the Tribunal. In Mr Fernon’s oral submissions, there was a passing reference to the Board having approved an ‘assignment’ to the Prospective Purchaser on 9 April, but no mention of a prior written request.

71 Our second and more substantial reason derives from a consideration of what subsequently occurred. It may well be that the initial approach to the Board of the Lessor took the form of a request for an assignment. This request may or may not have been sufficient under the terms of the Lease and/or the Act. But after it was made, three significant developments occurred: (a) the Lessor, to the Lessee’s knowledge, replied that it wished to give a new lease to the Prospective Purchaser, rather than consenting to an assignment; (b) there was no claim by the Lessee that there was a deemed consent six weeks after the alleged request; and (c) both the Lessee and the Prospective Purchaser agreed to the transaction proceeding by way of a new lease to the Prospective Purchaser.

72 For these reasons, Ground (1) of the appeal is rejected.

Ground (2): The Tribunal’s findings regarding the Lessor’s response to the request for assignment dated 15 August 2001

73 This ground of appeal brings together nos. 5, 6 and 9 in the Lessee’s list of alleged errors of law. It relates to the Tribunal’s finding, at [75], [92] and [96], that either the Board of the Lessor gave actual consent to the assignment of the Lease in its resolution of 18 September 2001, or there was deemed consent on 30 September 2001 under s 41(d) of the Act. This conclusion was accompanied by the statement, at [96], that ‘this was not an unreasonable consent on the basis of the suggestion that any consent to a change of use should not be constituted thereby’.

74 In the Lessee’s Notice of Appeal and written submissions, it was argued that these findings were made without consideration of a considerable quantity of evidence, notably the letter of 5 October 2001, indicating that the Lessor, through the actions of its Board and its shareholders, had refused to give express consent to the assignment and had disputed the claim that there was deemed consent.

75 It was claimed on the Lessee’s behalf that the true position was as follows. First, the Lessor did not expressly consent to an assignment at any time. Secondly, it in fact ‘refused an assignment’ or, to quote from point 6(c) in the Notice of Appeal, it had been guilty of a ‘failure to give effect to a deemed consent to an assignment of the lease’. Thirdly, the Lessor’s refusal, in this sense, to grant an assignment constituted a breach of an implied contractual duty to the Lessee to provide ‘co-operation’.

76 Our observation regarding the first of these points is that the Board resolution of 18 September 2001 may well have demonstrated an intention to give express consent. But the judgment did not consider whether the content of the resolution was communicated to the Lessee, in writing (as envisaged in the concluding words of s 41(d) of the Act), or otherwise. It appears not to have been communicated and therefore, in our opinion, was probably not effective. On this matter, therefore, though not for the reasons advanced, the Lessee’s submission appears correct.

77 As to the second of these contentions, the first point to be made is that, as Ms Hole stated in her judgment and had been previously held by Judicial Member Donald, there was almost certainly a deemed consent on 30 September 2001, by virtue of the operation of s 41(d). The only reason for not holding to this effect would be that the Board resolution of 18 September had already provided express consent. But as just indicated, we do not think that the resolution had this effect.

78 The statement in Ms Hole’s judgment at [96] that ‘this was not an unreasonable consent on the basis of the suggestion that any consent to a change of use should not be constituted thereby’ is not easy to interpret. We take it to mean that the Lessor was entitled to assert that any consent on its part, whether express or deemed, did not include consent to a change of user. If this is the correct interpretation, the statement, in our opinion, is quite correct.

79 As we see it, what the Lessor did, through the Board’s letter of 5 October 2001 to the Lessee and its shareholders’ resolution of 17 October, was to refuse to let the Lessee and the Prospective Purchaser have the benefit of its deemed (or express) consent. It claimed that it was entitled to do this on the ground that the Prospective Purchaser’s proposed pizza restaurant involved a change of use.

80 The Tribunal’s judgment, in the later sentence from [96] that is quoted in the present judgment at [58] above, affirmed the Lessee’s argument that this ground of refusal was not open to the Lessor, because the conduct of a pizza restaurant would not involve a change of use. In this sense, the Tribunal in fact held that the Lessor ‘refused an assignment’ to the Prospective Purchaser. To quote from point 6(c) in the Notice of Appeal, the Tribunal did in effect rule that the Lessor had been guilty of a ‘failure to give effect to a deemed consent to an assignment of the lease’.

81 The third of the Lessee’s contentions was not elaborated in the Notice of Appeal or the Lessee’s written submissions, but was a significant component of the oral argument put to us by Mr Fernon, counsel for the Lessee. He submitted that the Lessor’s refusal to grant an assignment constituted a breach of an implied contractual duty to the Lessee to provide ‘co-operation’. He relied on two cases and also on passages in Carter, J W and Harland, D J, Contract Law in Australia, 3rd Ed, Butterworths, 1996, paras 627, 1809 and 1810.

82 The first of these cases was Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596. Mr Fernon referred to the following passage in the judgment of Mason J, at 607:-

But it is common ground that the contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract. As Lord Blackburn said in Mackay v Dick ((1881) 6 App Cas 251 at 263):
“as a general rule… where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectively be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to co-operate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract. As Griffith CJ said in Butt v McDonald ((1896) 7 QLJ 68 at 70-71):
“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

83 The second case to which Mr Fernon referred was Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349. Here Sheller JA (with whom Powell and Beazley JJA agreed) held as follows, at 368:-

Moreover, the common law imposes a duty on the parties to a contract to co-operate in achieving the objects of the contract:… Sir Anthony Mason has said that such cases come close to a recognition of the good faith doctrine described as “loyalty to the contract itself”. But such an obligation cannot over-ride the express provisions of the contract.

84 At 369, Sheller JA stated that a duty of good faith may by implication be imposed on parties to a contract, and that there was no reason why such a duty could not be imposed as part of a lease.

85 Ultimately, the argument made for the Lessee on this matter, as we understood it, was that the Tribunal erred in law by not giving any consideration to the existence of this implied duty binding the Lessor to co-operate with the Lessee so as to bring about the assignment, once the Lessor was deemed by law to have consented to it. Had the Tribunal given due consideration to this matter, it would have found that in fact the Lessor breached this duty.

86 In response to these propositions, Mr Burton, counsel for the Lessor, made two arguments.

87 First, he said, the actual decision in Alcatel involved a finding that there was, in the circumstances of the case, no implied duty of co-operation. We do not treat this as a compelling argument, as the statements of principle that we have quoted are potentially applicable here irrespective of whether they were applied in that case.

88 Secondly, he contended that at first instance the Lessee did not make any argument to the effect that an implied duty of co-operation arose within the Lease and was of significance for the Lessee’s claim. Having read the written submissions and the transcript of oral argument at first instance, we agree that the principles which we have just outlined were not cited to the learned Member. It was, however, put to her, in clause 79 of the Lessee’s written submission, that the Lessor was in breach of the Lease, once it was deemed by statute to have consented to the assignment, in so far as it refused to ‘recognise or agree to be bound by’ the deemed consent. In our opinion, this sufficiently embraced an argument that a Lessor, once consent to an assignment has occurred, has an obligation not to obstruct the progress of this transaction.

89 As we read Ms Hole’s judgment, therefore, she did not give consideration to an important element of the Lessee’s case. This omission was in our view an error of law.

Ground (3): Failure to consider loss of opportunity as a head of damages for breach of contract

90 This Ground was no. 10 in the Lessee’s list of alleged errors of law. It relates to two propositions in the Tribunal’s judgment. The first, at [102], was that because the Lessee’s contract with the Prospective Purchaser was never exchanged, it could not be said to have suffered loss as a result of the Lessor’s ‘refusal of consent’ to the assignment. (For reasons just given, the phrase ‘refusal to grant an assignment’ better describes the Lessor’s conduct than ‘refusal of consent’.) Secondly, at [103], the Tribunal stated that the issue of loss of opportunity was irrelevant to the issues to be determined. The text of these two paragraphs is quoted in full at [62] above.

91 At first instance and on appeal, the principal authority relied on by the Lessee was Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 65. Here, the Commonwealth invalidly purported to terminate a three-year contract for aerial coastal surveillance with Amann, an aviation company, thereby depriving it of the prospect of obtaining a renewal of the contract once the three-year period had expired. The High Court held (with McHugh J dissenting) that in assessing the damages to be awarded to Amann for breach of contract, account should be taken of the prospect that the contract would have been renewed.

92 At 91-92, Mason CJ and Dawson referred to the basic principle, deriving from Hadley v Baxendale (1854) 9 Ex 341 at 354; 156 ER 145 at 151, that the damages awarded for breach of contract should comprise

… such damages as arise naturally, that is, according to the usual course of things, from the breach, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach.

93 At 92, they held as follows, in a passage specifically relied on by Mr Fernon:-

If it be right to suppose that the loss of a prospect of securing a renewal of the contract was within the contemplation of the parties as a probable result of the breach, then… Amann is entitled to compensation which takes into account the value of the loss of the prospect of securing a renewal of the contract.

94 Mr Fernon referred us also to other passages in their Honours’ judgments – for example, in the judgment of Deane J at 118-126 – where the principle that damages for breach of contract may extend to the value of a lost expectation or ‘chance’ of a specific benefit is endorsed and explained.

95 The Lessor’s response, as we understood it, was that, because Mr Cowdrill would not in any event have taken an assignment of the lease because of his concerns about cl 15.2.2 (see [25 – 28] above), the Lessee in fact suffered no loss of opportunity or expectation. It was accordingly correct for the judgment to state, at [103], that the issue of loss of opportunity was irrelevant.

96 As we read the judgment, however, two separate reasons were advanced for reaching this conclusion. One was the learned Member’s finding of fact (at [103]) regarding Mr Cowdrill’s concerns about clause 15.2.2. We will return to this matter later in these reasons. The other was the following statement, at [102]:-

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.

97 In our opinion, this statement is at odds with the High Court’s judgment in Amman. It is contrary to the proposition that where a breach of contract by one party deprives the other party of an opportunity or expectation of deriving a benefit – for example, as claimed here, through entering into a beneficial contract with a third party – the loss of that opportunity or expectation will be a legitimate head of damages, provided other relevant conditions for recovery can be satisfied.

98 For these reasons, we agree with the Lessee’s contention that the Tribunal erred in law in dealing with the issue of loss of opportunity.

Ground (4): The Tribunal’s treatment of the question of the value of the Lessee’s business

99 This Ground was no. 11 in the Lessee’s list of alleged errors of law. The Lessee submitted that the Tribunal’s judgment contained inadequate reasons for its conclusion that no figure could be determined for the value of the Lessee’s business.

100 The evidence that the Tribunal considered is set out in its judgment at [79 – 88]. Its ruling, at [98], was, as we read it, based on two findings. In each of them, the possible receipt of a ‘commercial figure’ that the Prospective Purchaser appeared willing to pay because it had plans to develop the business on its own terms was put on one side. The first finding was that, according to the valuer’s report tendered by the Lessee, the value of its business was nil. The second was that the valuer employed by the Lessor was not given sufficient financial information to enable a value to be determined.

101 In support of this ground of appeal, Mr Fernon referred to the requirements of s 89(5) of the Administrative Decisions Tribunal Act 1997 regarding written reasons for a Tribunal decision. These are that the reasons must set out (a) material findings of fact, referring to the evidence or other material on which those findings were based; (b) the Tribunal’s understanding of the applicable law; and (c) the reasoning processes that led the Tribunal to its conclusions.

102 Mr Fernon also referred to Court of Appeal decisions dealing with the judicial duty to give reasons, notably Osmond v Public Service of New South Wales [1984] 3 NSWLR 447 and R v Maxwell, Unreported, Court of Criminal Appeal of New South Wales, Spigelman CJ, Sperling and Hidden JJ, 23 December 1998 (BC9807450). In the latter case, the Court emphasised the special need for full reasons to be provided where there is a significant lapse between the conclusion of a hearing and the delivery of judgment. In the present case, this period was nearly nine months.

103 We have reviewed the relevant paragraphs of the Tribunal’s judgment with these requirements in mind. In our opinion, adequate reasons are given for the conclusions that it reached at [98]. We reject this ground of appeal.

Ground (5): The Tribunal’s treatment of the circumstances in which the Lessee ceased trading

104 This Ground was no. 12 in the Lessee’s list of alleged errors of law. The Lessee submitted, relying on the same authorities and the same reasoning as it invoked in relation to Ground (4), that the Tribunal’s judgment contained inadequate reasons for its conclusion that the Lessee ceased trading of its own accord.

105 In relation to this issue, the Tribunal’s judgment contains two short pronouncements. The first, at [85], is that the Lessee ‘ceased trading of its own volition’. The second, at [99], is that the Lessee’s loss of business occurred, not because of the Lessor’s ‘agreeing or not agreeing to assign the Lease’, but because the Lessee ‘chose to cease trading’.

106 We would agree that these reasons are very brief. But the issue at stake is a simple one: that is, whether or not the reason for the Lessee’s cessation of trading was that it chose this course of action. In the appeal, no alternative explanation was put before us, and we were not told what evidence or other material put before the Tribunal at first instance should, in the Lessee’s submission, have been reviewed in the judgment. Since a contrary explanation has not been put before us, not even on a prima facie basis, we are bound to assume that the only evidence before the Tribunal on this relatively straightforward issue of fact was sufficient to support the finding that it made. Accordingly, we reject this ground of appeal.

Ground (6): The Tribunal’s findings as to the reason or reasons why the Prospective Purchaser withdrew from the proposed purchase of the Lessee’s business

107 This Ground was no. 13, the last item, in the Lessee’s list of alleged errors of law. In its Notice of Appeal, the Lessee asserted that the Tribunal erred in failing to provide reasons, or adequate reasons, (a) for its finding that the Prospective Purchaser withdrew from the proposed purchase of the Lessee’s business on account of Mr Cowdrill’s concerns about the provisions of the Lease relating to alteration of trading hours in the event of disturbance (i.e., clause 15.2.2), and (b) for its rejection of Mr Cowdrill’s evidence to the contrary.

108 In his written and oral submissions for the Lessee, Mr Fernon took this line of argument to the further stage of contending that the Tribunal’s finding on this issue could not in fact be supported by the evidence put to it. He contended that because Mr Cowdrill was an independent witness with no interest in the proceedings, there was no basis on which his evidence could be rejected, and that the clear tenor of his oral evidence was that his concerns regarding clause 15.2.2 were not the cause of his withdrawal from the transaction.

109 The four relevant passages in the Tribunal’s judgment are reproduced at [61] above. The first of them, comprising the whole of paragraph [77] of the judgment, appears within a section headed ‘Assignment of Lease’. The remaining three, comprising the whole of [91] and [93] and part of [97], appear in a section headed ‘Findings’.

110 Mr Fernon drew our attention to some of the apparent contradictions within these passages. He pointed out that the third sentence of [77], referring to Mr Cowdrill’s evidence of having been willing to ‘accept the then existing lease on assignment’, appears to be contradicted by three other passages in the judgment. These are the first sentence of the same paragraph, and two statements, also referring to his evidence, in [91] and [93] respectively. These three passages all refer to evidence by Mr Cowdrill regarding his concerns about the Lessor’s power, in clause 15.2.2, to alter trading hours on the ground of alleged ‘disturbance’.

111 The most significant statement made by the Tribunal within these three passages is in [93]. It is that the Prospective Purchaser ‘would not have proceeded with an assignment on the basis of a straight assignment’.

112 A further contradiction, not specifically mentioned by Mr Fernon, is apparent when this statement is compared with the last sentence of [97]. This sentence is as follows:-

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.

113 On behalf of the Lessor, Mr Burton argued that the Tribunal’s reasons in relation to this issue were entirely adequate. He acknowledged that, in the course of the Tribunal’s review of evidence, its judgment referred, at [77], to testimony by Mr Cowdrill that appeared to support the Lessee’s contentions. But he pointed out that a statement to the opposite effect, at [93], appeared under the heading ‘Findings’ and contended that this unambiguously set out the Tribunal’s conclusion, reached on a consideration of all the evidence. It was, he said, a conclusion that the Tribunal could legitimately draw from documents – notably, the fax dated 14 August 2001 from Mr Cowdrill to his solicitors, referred to at [25] above – even though it differed from what he said in his oral evidence.

114 In our judgment, these contentions by Mr Burton are not sufficient to withstand Mr Fernon’s argument that, on this crucial issue of fact, the Tribunal’s judgment is inconclusive to a worrying degree. The apparent contradictions within these four passages cannot be resolved, as Mr Burton argued, simply by saying that the Tribunal made a finding in [93] which is in some sense paramount.

115 There are two reasons for this. One is that, even though the statement in [93] appears within a section headed ‘Findings’, it is not expressed as a finding, but as a summary of evidence given by Mr Cowdrill. The other, more significant, reason is that the key sentences in [97], also purporting to reflect Mr Cowdrill’s evidence, are either directly contradictory to it or, at the very least, establish an independent reason for the Prospective Purchaser’s withdrawal which was not duly taken into account in the ultimate decision of the Tribunal.

116 For these reasons, we consider that the Lessee has established a failure by the Tribunal to provide adequate reasons in support of its conclusion – which is itself not stated with sufficient certainty – that the Prospective Purchaser’s decision to withdraw from its proposed purchase of the Lessee’s business was attributable to concerns about the terms of clause 15.2.2 rather than, as the Lessee has submitted, to the hostile attitude of the Lessor to the Prospective Purchaser as demonstrated at the Tribunal hearing in November 2001.

117 This, in our judgment, constitutes an error of law requiring our intervention.

Issues arising from these conclusions

118 Out of the six grounds of appeal that we have considered, we have upheld three – nos. (2), (3) and (6). In our opinion, these rulings require us to set aside the decision of the Tribunal.

119 These rulings also warrant our granting leave, under s 113(2)(b) of the Administrative Decisions Tribunal Act 1997, for this appeal to extend to the merits of the Tribunal’s decision.

120 The combined effect of our rulings can be summarised as follows. The Tribunal did not give sufficient consideration to a contention by the Lessee that, once the deemed consent by the Lessor was operative pursuant to s 41(d) of the Act, the Lessor was in breach of contract through failing to co-operate with the Lessee and the Prospective Purchaser in effecting the assignment of the Lease. The Tribunal also did not sufficiently deal with the argument that, although the Lessee never had a binding contract with the Prospective Purchaser, it could put forward its loss of the expectation that such a contract would materialise as a head of damages for the alleged breach of contract by the Lessor. Finally, the Tribunal did not make a sufficiently clear finding, supported by sufficient reasons, regarding the factors causing the Prospective Purchaser to withdraw from its proposed acceptance of the assignment of the lease.

121 As we view the matter, these errors precluded the Tribunal from giving proper consideration to a line of reasoning which, if accepted, would warrant judgment for the Lessee. This is as follows: (a) that the Lessor’s conduct in resisting the assignment after it had been deemed by law to have given its consent to this transaction constituted a breach of its contractual duty of co-operation to the Lessee; (b) that this breach of duty was in fact the cause of the Prospective Purchaser’s decision to withdraw from the assignment; and (c) that in consequence the Lessee suffered damages, capable of assessment, for its loss of expectation of a sale of its business for $165,000 to the Prospective Purchaser.

122 We consider that before we can conduct a review of the documentary and oral evidence to determine if the Lessee has established a case along these or similar lines, we should receive further submissions. This has been a complex appeal, and in our opinion it was scarcely feasible for counsel to foresee what would be the outcome of our deliberations on the errors of law alleged and to provide full submissions on the issues of merits that might then arise.

123 Our provisional conclusion is that the submissions now to be made to us should be limited solely to the three matters outlined in the penultimate paragraph. But we are prepared first to take submissions on the question of whether, in the circumstances, this is an appropriate procedure to adopt.

124 The orders that we make at this stage of this appeal are accordingly (1) that the decision under appeal should be set aside; (2) that leave for the appeal to extend to the merits should be granted; and (3) that the matter should be relisted before us for submissions by both parties on (a) the procedure now to be adopted and (b) subject to our conclusions regarding (a), the three matters set out in [121] above.