Prospective Life Pty Ltd v Rui Liang Xian trading as Lucky Styles

[2020] NSWDC 697

District Court

New South Wales

Medium Neutral Citation:

Prospective Life Pty Ltd v Rui Liang Xian trading as Lucky Styles [2020] NSWDC 697

Hearing dates:

12 October 2020 – 14 October 2020

Date of orders:

16 November 2020

Decision date:

16 November 2020

Jurisdiction:

Civil

Before:

R. J. Weber SC DCJ

Decision:

(1) Judgment and verdict for the defendant against the plaintiff;

(2) Judgment on costs is reserved.

Catchwords:

CONTRACTS — Whether there was breach of contract — Written terms — Oral terms — Implied terms — whether there were oral terms — whether there were terms implied by statute or other implied terms – Plaintiff agreed that the written agreement included everything she wished to be included – alleged oral terms necessarily superseded by express terms of the agreement – alleged implied terms not established – no breach by the defendant

CIVIL PROCEDURE – Breach of overriding purpose pursuant to section 56 of the Civil Procedure Act

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Retail Leases Act 1994 (NSW)

Cases Cited:

Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd [1979] HCA 51; (1979) 144 CLR 596

Category:

Principal judgment

Parties:

Prospective Life Pty Ltd (Plaintiff)
Rui Ling Xian (Defendant)

Representation:

Counsel:
Mr L T Fermanis (Plaintiff)
Dr E Peden SC, with Ms S Andrews (Defendant)

Solicitors:
Zhang Shijing Lawyers (Plaintiff)
Sunfield Chambers Solicitors and Associates (Defendant)

File Number(s):

2019/00316962

Publication restriction:

None

Judgment

Background

1. The defendant, Rui Liang Xian, operated a hair dressing salon on Burwood Road at Burwood. He traded under the name of “Lucky Styles”. He did so with his wife. They are ethnically Chinese, and the defendant speaks only very limited English.

2. The defendant and his wife are known as “Andy” and “Shirley”. The parties referred to the defendant and his wife as such throughout the proceedings, and I shall do the same, without intending any disrespect to them.

3. The plaintiff is a company whose directors include Shi Luo. Ms Luo is also ethnically Chinese, and is known as “Amy”. I shall also adopt the parties’ practice of referring to her in that manner, again without intending any disrespect to her.

4. On 27 September 2018, Amy attended on Andy’s hairdressing salon, and discussed the possibility of subletting part of the premises with a view to conducting a cosmetic services business there. Andy did not provide such services, he was solely a hairdresser. Eventually, the conversation shifted to the possibility of Amy purchasing his business.

5. Later on the same day, Amy again attended on the hairdressing salon. She agreed to buy Andy’s business for $130,000. She provided a deposit of $3000. At the resumed meeting they agreed on the terms of their sale agreement, which Amy wrote down (“the Agreement”). She did so in Chinese characters.

6. The next day Amy again attended on the hairdressing salon, and both Andy and Amy signed the Agreement.

The Agreement

7. The English translation of the Agreement is in the following terms:

The vendor agreed to sell the business, the equipment and current lease to the purchaser for $130,000.00. The purchaser must only do a similar type of business, or add additional items such as beauty therapy, manicures, etc.

The transaction date shall be 5 October 2018. After both parties of the contract have approved and signed the contract, the purchaser shall pay half of the transaction fee and the contract shall take effect immediately. After the remaining amount has been paid in full to the vendor, this business shall be transferred immediately to the purchaser.

The purchaser shall bear the responsibility for and pay promptly all the fees payable by the lessee in accordance with the current lease.

The vendor agreed to a minimum of a three-month support period. During the support period, the purchaser does not need to give any wages to the vendor. The two people on the vendor’s side shall operate the business as they normally do. The turnover produced shall be divided on a 50-50 ratio with the purchaser. The purchaser shall provide the consumables needed and pay the rent.

The turnover produced by the staff employed by purchaser will not be shared with the vendor.

The vendor made an undertaking that they will assist the purchaser to sign a new contract with the landlord prior to the expiry date of the lease they have signed with the landlord. The vendor must not renew the lease with the landlord.

The vendor guarantees that all the equipment has clear-cut right of ownership and that there is no mortgage on them.

There is a one-year period of non-competition within 5 kilometres.

The $25,640.44 deposit for renting the shop shall be paid in advance by the purchaser to the vendor. When the lease expires or prior to the expiry date of the lease, when a contract is signed between the purchaser and the landlord for the transfer of the lease or when there is a new contract, the vendor shall refund this deposit to the purchaser. This shall take effect after the signatures are affixed.

This contract has legal validity.

Events Following the Execution of the Agreement

8. Ultimately, following the execution of the Agreement, the full purchase price was paid, and on 5 October 2018 Amy took possession of the shop. Andy’s hairdressing business for a time was continued to be run by him at the shop, on the basis of the profit share arrangement contemplated in the Agreement.

9. From 5 October 2018, Amy paid the rent and outgoings to the landlord in the amounts which Andy had informed her were the amounts payable pursuant to the lease.

10. Amy then proceeded to undertake renovations to the salon, so as to make it more suitable to her cosmetic services business. This was undertaken at a cost in excess of $50,000. This sum was claimed by way of damages in the proceedings although, as Mr Fermanis of counsel who appeared for the plaintiff correctly accepted, there could be no such head of damage available for breach of the Agreement in relation to renovation costs, as the Agreement said nothing about renovating the premises.

The Assignment of the Lease

11. Andy’s uncontradicted evidence was that he made many attempts to enlist Amy’s cooperation in effecting an assignment of the lease to her. 19 February 2019 marked the commencement of Andy’s efforts in this regard. In his evidence Andy explained that the process of achieving an assignment of the lease was not commenced immediately on settlement of the transaction as the real estate agent, who acted on behalf of the landlord, had advised Andy that before any transfer of the lease could be expected to be effected, it would be useful if Amy was in occupation of the premises, and demonstrating her capacity to pay the rent and outgoings.

12. This advice was conveyed by Andy to Amy, who accepted it.

13. In February 2019, the real estate agent requested that Andy have Amy provide copies of her bank statements to him, on behalf of the landlord, so as to provide comfort to the landlord as to her capacity to service the lessee’s obligations under the lease. She refused to do so as she had no money in the bank. Thereafter, Andy continued to press Amy to commence dealing with the real estate agent in order to finalise the transfer of the lease.

14. In June 2019, Andy’s solicitors provided the lease to Amy’s solicitors. They also confirmed the fact that Andy had exercised the option to renew contained in it, the effect of which was to extend the lease until 14 December 2020.

15. On 10 July 2019, Amy’s solicitors wrote to the real estate agent attaching a letter to the landlord together with Amy’s passport bio page. The email was headed: “Request to Transfer the Lease”.

16. On 16 August 2019, the real estate agent advised Amy’s solicitors that the landlord agreed to the transfer of the lease to her.

17. Various communications were then made by or on behalf of Andy imploring Amy to finalise the lease transfer to her as soon as possible.

18. In these circumstances, it must have come as a considerable surprise therefore, when, on 30 August 2019, Amy’s solicitors wrote to Andy’s solicitors purporting to rescind the Agreement on the basis of Andy’s purported failure to:

1. Provide a formal contract for the sale of the business; and

2. Secure the transfer of the lease.

19. I say that this must have caused some surprise as there was no contractual obligation to provide a formal sale of business agreement, and the landlord had already agreed to a transfer of the lease. The only impediment to finalising the lease agreement was Amy’s inertia.

20. The letter purported to rescind the Agreement and sought repayment of the purchase price of $130,000, and in the absence of which, it threatened proceedings would commence.

21. Unsurprisingly, Andy did not comply with this demand, and on 10 October 2019, these proceedings were commenced.

22. In the meantime, on 2 September 2019, Amy vacated the shop, having had uninterrupted occupancy of it from 5 October 2018. The reason for this was clear. The evidence demonstrated that, without any fear of contradiction, Amy’s business had failed.

The Pleadings

23. The Statement of Claim pleaded that the Agreement between the parties was partly written, partly oral, and partly implied.

The oral terms case

24. In cross-examination, Amy agreed that she had included everything which she wished to be included in the Agreement (Tp 24.23-25). This had important consequences for the proceedings, as the pleaded case involved an assertion that there were, in addition to the written terms of the Agreement, certain oral terms.

25. Mr Fermanis conceded in his submissions that the effect of his client’s concessions was that the oral terms case must fail. Notwithstanding this, he informed the Court that he did not have instructions to abandon it. This was a most unsatisfactory situation and a patent breach by his client of its obligations under s 56 of the Civil Procedure Act 2005 (NSW) (“CPA”). I should add that Mr Fermanis acted with complete propriety and in total conformity with his obligations under the same provision. He was in a difficult position.

26. The plaintiff’s case insofar as it is based on alleged oral terms must fail.

The express terms case

27. The breaches of the express terms are said to involve a failure to provide the lease document to Amy to facilitate the transfer of the lease to her, together with a failure to provide a lease transfer form. These alleged failures were pleaded to have occurred on and from 7 February 2019. The pleadings also alleged a failure on Andy’s part to prepare a formal contract for sale, together with his failure to provide the lessor’s consent to the transfer of the lease.

28. The allegations of breach of the terms of the Agreement cannot survive contact with the facts.

29. The agreement did not provide an obligation on Andy to provide a formal sale of business agreement. On the contrary, clause 10 indicates that the Agreement was to have immediate legal effect. Further, as to the lease transfer, as I have earlier indicated, the lease was in fact provided to Amy’s solicitors, and the landlord in fact consented to its transfer.

30. In this regard it is also well to note that the obligations of Andy in relation to the lease transfer were merely to “assist the purchaser to sign a new contract with the landlord prior to the expiry date of the lease they have signed with the landlord.” As such, this obligation to assist, even if assistance had not in fact been provided to the date of Amy’s purported rescission, was an obligation to do so prior to the expiry date of the lease, that is to say, prior to 14 December 2020.

The implied terms case

31. The statement of claim also pleaded the existence of implied terms, these were:

1. An implied term of good faith;

2. That the defendant would provide a formal sale of business contract and a copy of the current lease, and arrange for a transfer of the lease within a reasonable time, being prior to 5 October 2018; and

3. That the defendant would comply with section 41 of the Retail Leases Act 1994 (NSW).

32. These alleged implied terms are also misconceived, and as such I shall deal with them only in a summary fashion.

33. As to the good faith term, Mr Fermanis in his submissions made clear that what was really asserted was a contractual duty to cooperate in the task of effecting the transfer of the lease of the type contemplated by the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 [at 607] per Mason J. As Dr Peden SC, who appeared with Ms Andrews for the defendant, correctly submitted, there was no need, nor indeed room for such an implied term, as the Agreement provided an express obligation to assist.

34. Moreover, even if such an implied term existed, it would not have been breached as Andy did provide assistance to facilitate the transfer of the lease, which resulted in the lessor’s consent to the transfer.

35. The second implied term cannot survive contact with the express terms of the contract, with which it is inconsistent. There was no duty to provide a formal contract for sale, indeed the Agreement made it perfectly clear that it constituted the bargain between the parties, and that it was a contract which “has legal validity”. Similarly, there can be no implied obligations on Andy to provide the lease or to arrange a transfer of it within a reasonable time prior to 5 October 2018, as was pleaded. Such an obligation would be inconsistent with clause 6 of the Agreement.

36. As to the alleged implied term to comply with section 41 of the Retail Leases Act 1994 (NSW) (“the Act”) by providing an updated lessor’s disclosure statement, such an implied term has not and cannot be established.

37. As Dr Peden SC correctly submitted, there is nothing to justify the conclusion that the legislature contemplated that section 41 was to be incorporated as an implied term in every retail tenancy. On the contrary, a breach of section 41 is to be dealt with within the four corners of the Act, and not as a contractual breach.

38. On the factual level, even if the implied term existed, Andy provided to Amy a landlord’s disclosure statement together with updated information as to the rent and outgoings which were then paid by Amy.

39. There was no breach of any implied term by the defendant.

40. It follows that the plaintiff has not established any breach of the Agreement by the defendant, and as such the proceedings must fail.

41. As a consequence of my finding it is obviously unnecessary for me to deal with damages related issues. That said, I should mention the claim made by the plaintiff for the repayment of the bond in the sum of $25,640.44 (see clause 9 of the Agreement). This claim is premature as, pursuant to that clause, this amount will be refunded “when the lease expires or prior to the expiry date of the lease, or when there is a new contract”. These events have not occurred. Senior Counsel for the defendant advised the Court that this sum will be paid as and when it falls due.

Conclusion and Orders

42. The Court makes the following orders:

1. Judgment and verdict for the defendant against the plaintiff;

2. Judgment on costs is reserved.

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Decision last updated: 08 December 2020