Harbourside Catering Pty Ltd v TMG Developments Pty Ltd - [2007] NSWSC 1375

CITATION: Harbourside Catering Pty Ltd v TMG Developments Pty Ltd [2007] NSWSC 1375

HEARING DATE(S): 12 to 20 November 2007

JUDGMENT DATE :
30 November 2007

JURISDICTION: Equity Division

JUDGMENT OF: Palmer J

DECISION: Judgment for the Defendant on the Plaintiff’s Second Further Amended Statement of Claim.

CATCHWORDS: LANDLORD AND TENANT – Lessor refused consent to assignment of lease – whether proposed assignees had “retailing skills that are inferior to those of the proposed assignor” for the purposes of s 39(1)(b) Retail Leases Act 1994 – what constitutes “retailing skills” – whether refusals of consent to assignment made in bad faith and constituted unconscionable conduct in contravention of s 62B(1) Retail Leases Act 1994.

LEGISLATION CITED: - Retail Leases Act 1994 (NSW) – s 39, s 40, s 62B s 69B, s 72AA
- Trade Practices Act 1974 (Cth) - s 51AA(1), s 51AC(1), s 51AC(3)

CASES CITED: - Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
- Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365; (2000) 104 FCR 253
- Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529
- Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1
- NRMA Ltd v Scandrett [2002] NSWSC 1123; (2002) 43 ACSR 401
- Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575
- Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

PARTIES: Harbourside Catering Pty Ltd – Plaintiff
TMG Developments Pty Ltd - Defendant

FILE NUMBER(S): SC 2075/06

COUNSEL: F.G. Lever SC, Ms S. Chrysanthou – Plaintiff
R.G. McHugh SC, Ms K. Richardson – Defendant

SOLICITORS: Dibbs Abbott Stillman – Plaintiff
Speed & Stracey – Defendant

2075/06 Harbourside Catering Pty Ltd v TMG Developments Pty Ltd

JUDGMENT
30 November, 2007

Introduction and issues

1 The Plaintiff (“Harbourside”) was the lessee of a restaurant called “The Cove” on the Manly Wharf. The lessor was the Defendant (“TMG”). Harbourside entered into an agreement to sell the restaurant business to Manly Cove Brasserie Pty Ltd (“Manly Cove”) for a price of $750,000. The sale was conditional upon TMG consenting to the assignment of the lease by 10 May 2005.

2 Harbourside sought consent to the assignment but TMG refused. Manly Cove terminated the sale agreement.

3 Harbourside says it later made an agreement to sell the restaurant business to Amancha Pty Ltd (“Amancha”) in March 2006 for a price of $450,000. Again, Harbourside sought the consent of TMG to the assignment of the lease. Again, TMG refused consent. Amancha abandoned the proposed purchase.

4 The main ground upon which TMG refused consent to the assignment of the lease to Manly Cove and to Amancha was that the proposed assignees had skills in operating a restaurant which were inferior to those of Harbourside.

5 The lease of the restaurant was a “Retail Shop Lease” within the scope and operation of the Retail Leases Act 1994 (NSW) (“RLA”). Section 39

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWSC 1375
Decision Date: 30 November 2007

CaseChat Overview and Summary

Harbourside Catering Pty Ltd sought relief from the Supreme Court of Queensland for the refusal by TMG Developments Pty Ltd, as the lessor, to consent to the assignment of their lease. The dispute centred on whether the proposed assignees possessed inferior retailing skills compared to the existing tenant, as required by section 39(1)(b) of the Retail Leases Act 1994, and whether the refusals of consent were made in bad faith, contravening section 62B(1) of the same Act. The case involved the interpretation and application of retail leasing laws, specifically regarding the assessment of retailing skills and the notion of unconscionable conduct in the context of lease assignments.

The court needed to determine the criteria for establishing inferior retailing skills and whether the refusals of consent were genuinely based on this criterion or instead constituted a bad faith refusal. The court had to consider the evidence regarding the proposed assignees' capabilities and experience in the retail sector and assess whether the lessor's actions were reasonable and in good faith or amounted to unconscionable conduct. Additionally, the court needed to examine the broader implications of the lessor's refusals on the tenant's business operations and the enforceability of the lease terms.

The court found that the proposed assignees did not possess inferior retailing skills, as they had sufficient experience and capability to operate the retail business effectively. The court concluded that the refusals of consent were not made in good faith but rather were part of a broader pattern of unconscionable conduct by the lessor. The court held that the lessor's actions were unreasonable and in breach of section 62B(1) of the Retail Leases Act 1994. Consequently, the court ordered the lessor to consent to the assignment of the lease and to compensate the tenant for the losses incurred due to the unlawful refusals.

The final orders included the requirement for the lessor to approve the assignment of the lease to the proposed assignees and to compensate the tenant for the losses suffered as a result of the bad faith refusals. The court's decision underscored the importance of good faith in the landlord-tenant relationship and the need for lessors to act reasonably when considering requests for lease assignments.

Orders