Lockrey v Historic Houses Trust of New South Wales
[2012] NSWSC 654
•15 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Lockrey v Historic Houses Trust of New South Wales [2012] NSWSC 654 Hearing dates: 7 June 2012 Decision date: 15 June 2012 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Consent to assignment was not unreasonably withheld
Catchwords: LANDLORD AND TENANT - Retail and commercial tenancies - retail lease - joint tenancy - transfer of lease - whether assignment of lease - consent to assignment from one joint tenant to the other - whether consent can be withheld Legislation Cited: Housing Act 1985 (UK)
Real Property Act 1900
Retail Leases Act 1994Cases Cited: Burton v Camden London Borough Council [2000] 2 AC 399
Indian Taj Pty Ltd (in liq) v Gilany [2004] NSWSC 1249
Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359Texts Cited: Bradbrook, Croft and Hay, Commercial Tenancy Law, 3rd ed (2009)
Butt, Land Law, 6th ed (2010)Category: Principal judgment Parties: Paul Lockrey (plaintiff)
Historic Houses Trust of New South Wales (first defendant)
Ramy Shelhot (second defendant)Representation: Counsel:
P Folino-Gallo and A Poljak (plaintiff)
J Darams (first defendant)
Solicitors:
Sydney Law Practice (plaintiff)
Eakin McCaffery Cox (first defendant)
Bartier Perry (second defendant)
File Number(s): SC 2012/75059 Publication restriction: Nil
Judgment
Introduction
These proceedings concern a transfer of a lease ("the Lease") in respect of the MOS Café in Phillip Street, Sydney ("the Café"). The Lease was made between the plaintiff, Mr Paul Lockrey ("Mr Lockrey") and the second defendant, Mr Ramy Shelhot ("Mr Shelhot") as lessees as joint tenants, and the first defendant, Historic Houses Trust of New South Wales ("HHT") as lessor.
In 2009, Mr Shelhot sold his interest in the café business ("the Business") to Mr Lockrey and executed a Transfer of Lease ("the Transfer") in Mr Lockrey's favour.
The issue in the proceedings is whether HHT's consent is necessary to that transfer and, if it is, whether it has been unreasonably withheld.
Mr Shelhot has played no active role in the proceedings. When the matter was called on for hearing Ms Wright, solicitor, informed the Court that Mr Shelhot submits to such order as the Court may make, apart from an order as to costs. Ms Wright then withdrew.
Background
The Lease is dated 31 October 2007 and registered number AD645948F. By the Lease HHT leased to Mr Lockrey and Mr Shelhot, as joint tenants, the Café for five years commencing 14 September 2007 (with an option to renew for a further five years).
Clause 3.8 of the Lease is in the following terms. In effect, the clause mirrors the provisions of s 39 and s 41 of the Retail Leases Act 1994 ("the Act"): -
"3.8 (a) Subject to the remaining sub-clauses of this Clause 3.8 and Part 13 hereof the Lessee shall not assign or transfer this lease without the written consent of the Lessor
(b) The Lessor can withhold consent only if:
(i) the proposed transferee or assignee proposes to change the use of the Premises pursuant to Clause 3.1; or
(ii) the proposed transferee or assignee has financial resources or business experience or retailing or restauranting skills inferior to those of the Lessee; or
(iii) the Lessee has not complied with clause 3.8(c);
(iv) the Lessee has not complied with the Act.
(c) A request for the Lessor's consent to a transfer or assignment of this lease must be made in writing and the Lessee must provide the Lessor with such information as the Lessor may reasonably require concerning the financial standing and business experience and retailing and restauranting skills of the proposed transferee or assignee.
(d) The Lessor must deal expeditiously with a request by the Lessee for the Lessor's consent and where the Lessee has complied with Clause 3.8(c) and the Act and the Lessor has not within 28 days after the request was made given notice in writing to the Lessee either consenting or withholding consent the Lessor is taken to have consented.
(e) The Lessee has to pay in connection with any consent the Lessor's reasonable legal costs, the reasonable costs of obtaining any mortgagee's consent, the stamp duty and the registration fee for the transfer or assignment and the Lessor's reasonable costs of and incidental to the investigation of the respectability, responsibility, solvency, stature, experience and capabilities of the assignee or transferee."
By an Asset Sale Deed dated 1 July 2009 ("the Sale Deed") Mr Shelhot agreed to sell to Mr Lockrey his interest in the Business for $355,328.76.
The Sale Deed contained the following provisions: -
"3 CONDITIONS PRECEDENT
(a) The obligation of the Parties to complete this Deed is subject to and conditional upon the occurrence of the following:
...
(iv) the Landlord having provided consent to the transfer by the Vendor of his interest in the Lease to the Purchaser...
7 LEASE AND LICENCE
7.1 The Purchaser warrants to the Vendor that the Purchaser has made an application to the Landlord to have the Vendor released from all obligations to the Landlord pursuant to the Lease.
...
7.3 Until the Vendor has been released from the Lease in accordance with clause 7.1 the Purchaser shall indemnify the Vendor against any liability under the Lease as from the Completion Date. Further the Purchaser shall indemnify the Vendor as from the Completion Date in respect of any liability howsoever arising against the Vendor in connection with the Liquor Licence. The Parties acknowledge that the indemnities hereby given will be deemed secured by the Company Charge, the Beltmar Charge and the Business Mortgage."
On the same day Mr Shelhot executed the Transfer.
Since August 2009 Mr Lockrey has had sole responsibility for managing the Business and for managing the obligations of the Lease including payment of rent and other fees.
Between 27 July 2009 and 12 October 2011 Mr Lockrey, through his solicitor, made five requests of HHT to transfer the Lease from the names of Mr Lockrey and Mr Shelhot as joint tenants to Mr Lockrey alone.
I will discuss the detail of those requests, and HHT's response to them, below.
Ultimately, on 18 November 2011 HHT stated that it did not consent to the transfer or assignment of the Lease.
Retail Leases Act 1994
It is common ground that the Lease is subject to the Act.
Section 39 of the Act provides: -
"39 Grounds on which consent to assignment can be withheld
(1) The lessor is entitled to withhold consent to the assignment of a retail shop lease in any of the following circumstances (and is not entitled to withhold that consent in any other circumstances):
(a) if the proposed assignee proposes to change the use to which the shop is put,
(b) if the proposed assignee has financial resources or retailing skills that are inferior to those of the proposed assignor,
(c) if the lessee has not complied with section 41 (Procedure for obtaining consent to assignment)..."
Section 41 of the Act provides, relevantly: -
"41 Procedure for obtaining consent to assignment
A retail shop lease is taken to include the following provisions:
(a) A request for the lessor's consent to an assignment of the lease must be made in writing and the lessee must provide the lessor with such information as the lessor may reasonably require concerning the financial standing and business experience of the proposed assignee.
...
(d) The lessor must deal expeditiously with a request for consent and is taken to have consented to the assignment if:
(i) the lessee has complied with paragraphs (a) and (b), and
(ii) the lessor has not, within 28 days (or another period prescribed instead by the regulations) after the request was made or after the lessee complied with those paragraphs, whichever is the later, given notice in writing to the lessee either consenting or withholding consent."
As I have mentioned, these provisions are, in effect, replicated in clause 3.8 of the Lease.
Does the Transfer constitute an Assignment?
Mr Folino-Gallo, who appeared for Mr Lockrey, submitted that it was not necessary for Mr Lockrey to seek HHT's consent to the Transfer pursuant to clause 3.8 of the Lease. This was, Mr Folino-Gallo submitted, because, by reason of the joint tenancy between Mr Lockrey and Mr Shelhot, and despite its title, the Transfer was not, in truth a transfer or assignment but represented a release by Mr Shelhot in favour of Mr Lockrey of his interest as joint tenant in the Lease.
Mr Folino-Gallo submitted that, in the events that have happened, the situation is equivalent to that which would arise had Mr Shelhot died, and his interest in the Lease passed to Mr Lockrey pursuant to Mr Lockrey's right of survivorship.
Mr Folino-Gallo submitted that by reason of s 101 of the Real Property Act 1900, the Registrar General of the Land and Property Information department is able to register Mr Lockrey as sole proprietor of the Lease.
Release or assignment?
Mr Folino-Gallo put his argument as follows: -
"The Plaintiff contends that the proposed transaction is not an assignment of lease. The four unities required for a joint tenancy mean that each joint tenant is one who totum tenet et nihil tenet; that is, he or she holds the whole and yet nothing. Put simply, each joint tenant is seised of the whole of the estate or interest. Thus it is impossible for a joint tenant to 'assign' an interest to another joint tenant. This is so because no interest passes from the purported assignor to the purported assignee - the receiving joint tenant actually receives nothing that he or she does not already have."
The "four unities" to which Mr Folino-Gallo referred to were those of title, interest, possession and time (for instance see Butt, Land Law, 6th ed (2010) at [14 05]).
Mr Folino-Gallo made reference to the decision of the House of Lords in Burton v Camden London Borough Council [2000] 2 AC 399 and, in particular, to the statement of Lord Millett as follows: -
"My Lords, the word 'assignment' is not a term of art. It denotes any conveyance, transfer, assurance or other disposition of property from one party to another. The essence of an assignment is that it operates to transfer its subject matter from the ownership of the assignor to that of the assignee. A lease is not an assignment, because it does not transfer any pre-existing property from the lessor the lessee, but creates a new interest and vests it for the first time in the lessee. A purported assignment of the interest of one joint tenant to the other joint tenant does not constitute an assignment, because each of the joint tenants is already the owner of the whole. The so-called assignor has no separate interest of his own which is capable of being transferred to the other and which the other does not already own. None of this, of course, applies to a tenant in common, because he has a separate and distinct interest of his own which he can assign either to a third part or to his co-owner."
The above passage is cited in Bradbrook, Croft and Hay, Commercial Tenancy Law, 3rd ed (2009) at [5.15], where it is stated that Lord Nicholls in the same case held "similarly".
However, Lord Millett was in dissent in Burton v Camden LBC.
Lord Nicholls, and the other Law Lords held that, in a statutory context very similar to the present, a deed of release from one joint tenant of a lease to the other was an "assignment" of the lease for the purposes of the United Kingdom Housing Act 1985 ("the UK Act") (which provided that the tenancy in question was "not capable of being assigned").
Their Lordships' decision did not depend upon a peculiar United Kingdom statutory definition of "assignment" (the term was undefined in the UK Act) and provides powerful guidance to the correct result in this case.
This is because their Lordships rejected the precise argument that Mr Folino-Gallo put to the Court in this matter.
The similarity between the facts in this case and those in Burton v Camden LBC emerges from the speech of Lord Nicholls. His Lordship said: -
"The difference between a release and an assignment is familiar to property lawyers, although less so now than formerly. The difference was important at a time when use of appropriate words of limitation could be crucial. As your Lordships were reminded, the distinction can be traced at least as far back as the days of Coke on Littleton. But this ancient distinction does not provide the answer to the issue before your Lordships' House. The legal concept relied upon for Miss Burton is that a joint tenant, as distinct from a tenant in common, has nothing to transfer to the other tenant, because each already owns the whole. I have to say that this esoteric concept is remote from the realities of life. It should be handled with care, and applied with caution.
...
In the context of a lease, 'assign' normally connotes the transfer of the lease from one person to another. The simplest example is a transfer of a lease from one person to another. Another example is a transfer of a lease from A to A and B. The present case is different because the transaction under consideration did not involve the introduction of a new tenant. The present case concerned a transfer of the legal estate from A and B to A alone. What was involved was that one of the existing tenants should cease to be a tenant. The difference is not material. Here also, as a matter of ordinary usage, such a transfer of a lease, changing the identify of the tenants, would be regarded as an assignment. Consistently with this, in Varley v. Coppard (1872) L.R.7 C.P. 505 one of two joint lessees assigned his estate and interest in the leased property to the other lessee. The court (Willes and Keating JJ.) held this was a breach of a covenant not to assign the demised premises. The fact that the assignee was already a tenant was not regarded by anyone as negativing a breach of the covenant against assignment. In that case the joint lessees held the lease as tenants in common, not joint tenants. On the point now under consideration that difference is immaterial. In each case the identity of the lessees is changed.
I can see nothing in the statutory context to indicate that 'assign' in section 91 should be given a more limited meaning and not apply where one joint tenant drops out." (emphasis added).
In my respectful opinion, his Lordship's reasoning provides the answer to this case.
In substance, Mr Shelhot has transferred or assigned (I find those expressions to be equivalent in the present context) his interest in the Lease to Mr Lockrey. Indeed the document he executed is actually called a Transfer of Lease.
For the reasons articulated by Lord Nicholls, my opinion is that the expression "assign" where it appears in s 41 of the Act, and its analogue in clause 3.8 of the Lease, includes "a transfer of the legal estate from A and B to A alone" in a situation where, as here, "one joint tenants drops out".
As in Burton v Camden LBC, in the present case, the transaction sought to be carried out was one whereby the tenancy, formerly vested in Mr Lockrey and Mr Shelhot jointly, will be vested in Mr Lockrey alone. There was, in my opinion an "assignment" in respect of which HHT's consent was required.
There is a further aspect of the matter arising, that of contract.
According to Mr Folino-Gallo's submissions, a release having been effected, Mr Shelhot's interest in the joint tenancy vested in Mr Lockrey (just as it would have, by operation of the right of survivorship, had Mr Shelhot died).
But how could this affect HHT's contractual rights under the Lease against Mr Shelhot?
This point was made by Lord Hobhouse in Burton v Camden LBC as follows: -
"The contention of the respondent is that, by means of the deed of release which they executed, she and Miss Hannawin have successfully brought to an end all Miss Hannawin's rights and obligations under the lease, including, specifically, her obligation to continue to pay the contractual rent, and that they have achieved this without having obtained the concurrence of the landlord and without terminating the tenancy of the premises.
Lord Nicholls has already discussed the statutory difficulties involved in accepting this submission. There are also fundamental contractual objections to the submission. Miss Hannawin accepted a joint and several contractual obligation to pay the rent. She cannot escape from this obligation (or any of her other obligations under the contract) by an act to which the council, the landlord, is not a party and to which it has not assented."
The same applies in this case.
For all these reasons I reject Mr Folino-Gallo's submission that the Transfer was not a transfer or assignment.
Was HHT entitled to withhold consent to the assignment?
For the reasons set out above, it is my opinion that by the Transfer, Mr Lockrey and Mr Shelhot have purported to assign the lease from the two of them jointly, to Mr Lockrey alone. There is to be a change in the identity of the lessees. For the reasons explained by Lord Nicholls, this is an assignment of the lease.
By reason of clause 3.8(a) of the Lease, such assignment cannot take place without HHT's written consent.
By reason of s 39 of the Act, and clause 3.8(b) of the Lease, HHT can withhold its consent only on the grounds there set forth.
Before me, Mr Darams, who appeared for HHT, relied upon two grounds, namely: -
(1) that the proposed transferee of assignee (Mr Lockrey) has financial resources inferior to those of the "lessee" (Messrs Lockrey and Shelhot together) (s 39(1)(b) of the Act and clause 3.8(b)(ii) of the Lease); and
(2) the non-compliance by Mr Lockrey with HHT's request for information concerning his "financial standing" (s 39(1)(c) of the Act and clause 3.8(b)(iii) of the Lease).
I can dispose of the first of these grounds immediately.
There is no evidence that Mr Lockrey, alone, has financial resources that are "inferior" to those of he and Mr Shelhot together. I cannot draw that inference merely from the number of individuals involved.
Therefore, the question of whether HHT was entitled to withhold consent to the assignment depends upon whether Mr Lockrey has complied with his obligation under s 41(a) of the Act (and clause 3.8(c) of the Lease) to provide any information "reasonably required" by HTT concerning his "financial standing".
This is because, if Mr Lockrey has not complied with that obligation: -
(a) no deemed consent can have arisen under s 41(d) of the Act (or clause 3.8(d) of the Lease); and
(b) HHT had a basis to withhold consent under s 39(1)(c) of the Act (and clause 3.8(b)(iii) of the Lease).
On the other hand, if Mr Lockrey has complied with his obligation to provide information concerning his financial standing: -
(a) a deemed consent will have arisen if, on any one of the five occasions on which Mr Lockrey requested HHT's consent to the assignment, HHT did not, within 28 days of that request "make its mind up" (per Campbell J (as his Honour then was) in Indian Taj Pty Ltd (in liq) v Gilany [2004] NSWSC 1249 at [51]) and either consent, or not consent to the assignment; and
(b) HHT had no basis to withhold consent under s 39(1)(c) of the Act (or clause 3.8(b)(iii) of the Lease).
I should add that, as will emerge below, on 18 November 2011, when HHT finally declined to consent to the assignment, it did not, in terms, rely upon s 39(1)(c) of the Act (or clause 3.8(b)(iii) of the Lease).
However, in my opinion, on the proper construction of s 39(1)(c) of the Act and clause 3.8(b)(iii) of the Lease, it is not necessary, in order for there to be an effective withholding of consent, for HHT to correctly identify the basis upon which consent is withheld, provided that such a basis exists in fact. Mr Darams so submitted and Mr Folino-Gallo did not dispute the proposition.
In my opinion this follows from the wording of the Act and the Lease which provide that the lessor "is entitled" to or "can" withhold consent "if" any one of the grounds enumerated in s 39 of the Act or clause 3.8(b) of the Lease is made out. Neither the Act nor the Lease impose, as a condition of effective withholding of consent, that the particular ground be identified at the time.
This conclusion is consistent with the contractual principle that a party is entitled to terminate a contract if grounds exist in fact, notwithstanding the fact that the grounds relied upon at the time of termination are not made out (see Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359.)
Did HHT reasonably require information concerning Mr Lockrey's financial standing? Did Mr Lockrey comply with his obligation to provide that information?
In my opinion, the answers to these questions are "yes" and "no" respectively.
Mr Lockrey's first request for consent to the assignment of Mr Shelhot's interest in the Lease was by letter dated 22 July 2009.
In reply, HHT wrote on 12 August 2009: -
"The HHT considers that Section 41(a) of the Act has not been complied with as HHT has not been provided with reasonable information concerning Mr Lockrey's financial standing and, at this stage, is unwilling to consent to the proposed assignment until it is provided.
We therefore request the following information:
Verifiable information regarding Mr Lockrey's financial standing
A detailed proposal as to how Mr Lockrey proposes to clear his current indebtedness
A statement regarding Mr Lockrey's proposed strategies to avoid future indebtedness."
At the date this letter was sent, rental arrears under the Lease were $129,237.23.
In those circumstances, it was, in my opinion, reasonable for HHT to seek the information set out in its letter of 12 August 2009. Indeed the request for "information concerning Mr Lockrey's financial standing" adopted the language used in s 41(1) of the Act and clause 3.8(c) of the Lease.
Mr Lockrey did not, at any stage, provide HHT with such information.
It would have been easy for Mr Lockrey to do so. He could have provided HHT with his income tax returns and financial statements concerning the Café and such other businesses as he may have been conducting, assuming such documents existed.
Did HHT abandon its request for information concerning Mr Lockrey's financial standing?
Mr Folino-Gallo submitted that HHT's conduct after 12 August 2009 shows that it "abandoned" its request for information concerning Mr Lockrey's financial standing.
I do not agree.
There was correspondence between Mr Lockrey and HHT concerning the question of HHT's consent to the assignment of the Lease from 27 July 2009 to 18 November 2011. During that period, Mr Lockrey made the five separate requests for consent, to which I have referred.
To consider Mr Folino-Gallo's submissions that HHT "abandoned" its request for information concerning Mr Lockrey's financial standing, it is necessary to examine that correspondence.
Mr Lockrey, through his solicitor, did not reply to HHT's letter of 12 August 2009 until 15 April 2010; some eight months later.
In the meantime, on 15 December 2009 HHT wrote Mr Lockrey acknowledging that rental arrears had been made up but that money was still outstanding. HHT's letter continued: -
"You have mentioned to Larissa Anstee that you would like Ramy Shelhot's interest in the lease to be assigned to you. The HHT would require assurances that the debt levels previously incurred by you never happen again before granting consent. Currently, you and Ramy Shelhot are jointly and severally liable for any breaches of the lease, including failure to pay outstanding monies. If Ramy Shelhot's interest is assigned to you then the HHT will have lost the security of Ramy Shelhot being a party to the lease, if the debts of the MOS Café reach unmanageable proportions. Accordingly, the HHT insists on a period of three months from when all outstanding debts are paid in which the HHT can assess and be assured that your financial standing and acumen are reasonably satisfactory to enable you to run the MOS Café as a sole proprietor before considering giving consent."
On 15 April 2010 Mr Lockrey, through his solicitor, wrote to HHT: -
"It is our understanding that our client has currently paid all arrears of rent and has furthermore, consistently met the monthly rent payments required by you. In light of this we kindly request your consent to the assignment of the interest of Ramy Shelhot in the subject premises listed above to Paul Douglas Lockrey.
Would you kindly prepare the necessary assignment documentation for signing by our Client and Ramy Shelhot."
This letter represents Mr Lockrey's second request for consent to assignment.
On 7 May 2010 HHT replied, confirming that rent had been brought up to date and continuing: -
"However, as expressed in the HHT's letter to you of 12 August 2009 and the fourth paragraph of the HHT's letter to Mr Lockrey, the HHT still has concerns about the loss of security of Mr Shelhot's liability to pay any outstanding monies when his interest is assigned to Mr Lockrey if, for any reason, Mr Lockrey again falls behind in such payments. The initial MOS Café lease had three parties as the lessee, Paul Lockrey, Rami [sic] Shelhot and Natalia Maddelena Conti, all of whom were jointly and severally liable. The HHT therefore had a safety net as to the recovery of outstanding moneys. However, the HHT has lost that safety net with Mr Lockrey becoming the sole lessee.
To assuage these concerns, the HHT will give its consent to the assignment on the condition that Mr Lockrey provides to the HHT a Bank Guarantee in the amount of 3 month's annual base rent. Considering the HHT's patience and leniency in dealing with this matter, the HHT does not consider this unreasonable in the circumstances."
The reference in this letter to "the initial MOS Café lease" was a reference to an earlier lease of the premises.
Mr Folino-Gallo relies upon this letter as showing that HHT had abandoned its 12 August 2009 request for financial information concerning Mr Lockrey's financial standing.
I do not read the letter that way. It seems to me that HHT was simply offering Mr Lockrey an alternative to providing financial information, namely the provision of a bank guarantee in respect of three months rent. Mr Folino-Gallo submits that HHT was not entitled to impose such a condition. That may be right, but I do not think it relevant. HHT was simply proposing a way forward without making any suggestion of entitlement.
Further correspondence between Mr Lockrey and HHT
Mr Lockrey did not respond to HHT's letter until 12 August 2010; some three months later. He did not accept HHT's proposal. He made a third request for consent to the assignment and sought to negotiate HHT's proposal concerning a bank guarantee as follows: -
"As an alternative, our client would endeavour to pacify the HHT's concerns by providing a Bank Guarantee in the amount of 3 months annual base rent as requested subject to the HHT's consent to extend the current option period by 3 years. In light of our client's demonstrated compliance with his financial obligations to the HHT, we do not believe that this is an unreasonable request."
HHT replied on 27 September 2010 rejecting Mr Lockrey's proposal for a three year extension of the option in exchange for a bank guarantee and continuing: -
"As already stated in previous correspondence from the HHT, the HHT has a greater safety net in respect of the recovery of outstanding moneys with Mr Lockrey and Mr Shelhot as joint tenants. Despite the positive assurances given in your correspondence as to Mr Lockrey's financial status, the HHT is not convinced. The HHT has not received any information concerning the financial standing of Mr Lockrey that the HHT can definitively rely on and be confident with, especially as the MOS Café is only one Mr Lockrey's business ventures."
This letter made clear that HHT still required Mr Lockrey to provide it with information concerning his financial standing.
Mr Lockrey did not reply to HHT's letter of 27 September 2010 until 25 May 2011; some eight months later.
On that date Mr Lockrey, by his solicitor, made his fourth request for consent to the assignment.
In that letter, Mr Lockrey's solicitor addressed the question of the "Financial Standing of Mr Lockrey" as follows: -
"Mr Lockrey has been a Lessee of the premises known as part of the land comprised in Lot 101 Deposited Plan 834054 for some 15 years. During this time, Mr Lockrey has been party to 2 registered Leases and other collateral agreements in respect to leasing the subject premises which we can only surmise is as a result of the Lessor's knowledge of and assurance in Mr Lockrey's financial standing and his effective management of MOS Café.
While our client concedes that there have been periods where arrears of rent have accumulated, we have been advised that these periods were mostly prevalent when the Lease was controlled by Mr Ramy Shelhot and Mr Paul Lockrey and since obtaining sole control of the management of the Lease, our client has managed to clear the arrears of rent and maintained the monthly rental payments."
Thus, although Mr Lockrey, by his solicitor, made assertions as to his financial standing, he did not provide any "verifiable information" or indeed any information about that subject. He did no more than assert, in effect, that HHT already had knowledge of his financial standing.
HHT replied to that letter on 24 June 2011 stating, amongst other things: -
"HHT will provide consent to assign the interest of Ramy Shelhot in the MOS Café lease to Paul Douglas Lockrey. This consent is on the basis of:
1. Settlement of $4,606.87 (inc. GST) in outstanding rent (+30 days) promptly payable to HHT;
2. Settlement of HHT legal costs ($5,228.52 inc. GST) pursuant to Clause 9.5(a) of the lease to ascertain audited statements and response to pest treatment promptly payable to HHT. Copies of Tax Invoices from Eakin, McCaffrey and Cox in respect of the aforesaid legal costs paid by HHT are enclosed herewith; and
3. Mr Lockrey responsible for all HHT costs in relation to the assignment".
Mr Folino-Gallo submitted that, in this letter, HHT in fact provided consent to the assignment. I do not agree with that reading of the letter. In my opinion HHT was indicating that it would give consent if the matters referred to in the three numbered paragraphs were accepted by Mr Lockrey, and not otherwise.
It is true that HHT did not refer, in this letter, to its outstanding request for information concerning Mr Lockrey's financial standing.
However, again, I do not read the letter as evidencing abandonment by HHT of its requests for that information.
Rather, again, HHT was suggesting an alternative way of resolving the impasse that had developed between the parties.
Mr Lockrey, by his solicitor, sent a further letter on 12 October 2011, which represents Mr Lockrey's fifth, and final request for consent to the assignment.
HHT replied to that letter on 18 November 2011 concluding: -
"HHT will not consent to the assignment lease due to the outstanding rental arrears, outstanding payment of HHT legal fees and outstanding audited Annual Turnover Statement."
Conclusion
In my opinion this analysis of the correspondence shows that: -
(a) on 12 August 2009, HHT made a request under s 41(a) of the Act (and clause 3.8(c) of the Lease) for financial information concerning Mr Lockrey's financial standing;
(b) that request was reasonable;
(c) that request was not withdrawn or abandoned;
(d) that request was never complied with;
(e) accordingly, HHT is not deemed, by reason of s 41(d) of the Act (or clause 3.8(d) of the Lease) to have given its consent to any of the five requests made by Mr Lockrey to it for consent to the assignment, notwithstanding the fact that HHT did not respond to any of those requests, within 21 days "either consenting, or withholding consent"; and
(f) HHT was, on 18 November 2011, entitled to withhold its consent to the assignment by reason of Mr Lockrey's failure to comply to s 41 of the Act (and clause 3.8(c) of the Lease). The fact that HHT did not identify that matter, in its letter of 18 November 2011, as its basis for withholding consent is, for the reasons outlined above, irrelevant.
It follows that HHT has not unreasonably withheld its consent to the assignment.
The Amended Summons should be dismissed with costs.
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Decision last updated: 18 June 2012