Taj Coffee Company Pty Ltd and Plaza Arcade

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: COMMERCIAL TENANCY (RETAIL SHOPS) AGREEMENTS ACT 1985 (WA)

CITATION: TAJ COFFEE COMPANY PTY LTD and PLAZA ARCADE [2009] WASAT 107

MEMBER: DR B DE VILLIERS (MEMBER)

HEARD: 22 MAY 2009

DELIVERED : 2 JUNE 2009

FILE NO/S: CC 475 of 2009

BETWEEN: TAJ COFFEE COMPANY PTY LTD
Applicant
AND
PLAZA ARCADE
Respondent

Catchwords:

Commercial tenancies - Refusal to consent to assignment of lease - Reasonable grounds - Experience in retail industry - Test for reasonability when assignment is refused - Test is that a reasonable person could come to the same decision on the same facts - Question is not what is the 'correct' decision, but whether the landlord was reasonable in its refusal - Information that must be taken into account when considering an application for assignment

Legislation:

Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA), s 10(1)
Strata Titles Act 1985 (WA), s 85

Result:

The application is dismissed

Category: B

Representation:

Counsel:

Applicant: Mr D McAskil
Respondent: Mr A Throssell

Solicitors:

Applicant: Retail Pace Pty Ltd
Respondent: Lease Equity Pty Ltd

Case(s) referred to in decision(s):

EDWF Holdings 1 Pty Ltd and EDWF Holdings 2 Pty Ltd [2008] WASC 275
Maber and The Owners Of Strata Plan 11391 [2007] WASAT 99 (S)
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
The Owners of Mandurah Terrace Apartments Strata Plan 17133 and Russell [2009] WASAT 1

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The application concerned a question whether the refusal of a landlord to consent to an assignment of a lease, was reasonable. If it was found that the refusal was unreasonable, the Tribunal could make an order that consent is deemed to have been given.
The tenancy, the subject of the proceedings, is a small coffee shop in one of the arcades of the central business district of Perth. The respondent refused to consent to the assignment of the lease to a buyer on grounds that the buyer had insufficient retail experience and in particular no experience in the running of a coffee shop.
The applicant contended that the respondent erred by not taking into account the commercial experience of its buyer. The buyer had experience in the information technology business and his wife was an accountant. They wanted to run the shop as owner-operators. The entry level of the tenancy was so low that the buyer would have no difficulty to master the challenge. The applicant had further agreed to train the buyer for a period of four weeks. The buyer had also indicated that he would retain essential staff to ensure the viability of the operation.
Section 10(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) does not require from the Tribunal to determine if the decision by the landlord was 'correct'. It requires that the Tribunal determines if the decision was 'reasonable'. The test for reasonability is if a reasonable person 'could' have come to the same decision as the landlord on the basis of the same facts. If a reasonable person could have come to the same decision, the application must be dismissed.
The landlord must therefore show that it had taken into account all the information before it, that there was logic to the decision, and that the refusal was not arbitrary.
The Tribunal considered all the information that was before the respondent and came to the conclusion that the refusal of the respondent to consent to the assignment was reasonable. The buyer did not provide sufficient information to allay the fears of the respondent that the business may fail due to the lack of experience of the buyer in the retail industry. The applicant also did not disclose to the respondent what 'system' he had in place to ensure the viability of the shop under the new ownership. The Tribunal was satisfied that the respondent had shown that it took into account the information before it, that it applied logic to the decision, that the decision was not irrational and that the reasonable person could have come to the same decision based on the same facts.
The application was dismissed.

Question to be determined

The applicant (Taj Coffee Company Pty Ltd) seeks a finding that the refusal of the respondent (Plaza Arcade) to consent to the assignment of a lease was unreasonable and a subsequent order that consent is deemed to have been granted for the assignment to occur.

Background

The application was lodged with the Tribunal on 3 April 2009. The decision to refuse the assignment of the lease was made on 2 April 2009.
The essence of the dispute centres on the refusal of the respondent to consent to an assignment of a coffee shop lease to a prospective buyer, Mr Indra Pratama.
The respondent contends that its refusal pursuant to s 10(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA) (Retail Shops Act) and the lease was reasonable and the Tribunal should not interfere with it.
The applicant contends that the refusal was unreasonable since the business experience of Mr Pratama was more than sufficient to enable him and his wife to successfully run a small coffee shop.
The first directions hearing took place on 16 April 2009. The Tribunal adjourned the matter for mediation and encouraged the parties to settle the dispute on terms that are commercially acceptable to them. The Tribunal also encouraged Mr Pratama to put as much information as possible to the respondent in an effort to convince the respondent that he (Mr Pratama) had sufficient training, resources and experience to successfully manage the coffee shop.
The mediation failed and the matter was listed for a second directions hearing 30 April 2009. At the directions hearing the Tribunal made detailed programming orders for the matter to be heard. The Tribunal again encouraged the parties to attempt a settlement on terms that are commercial acceptable to them.
A hearing took place on 22 May 2009. The decision was reserved.

Statutory and contractual arrangements

The Retail Shops Act provides as follows in s 10(1):
Notwithstanding any other written law, a retail shop shall be taken to grant to the tenant a right to assign a lease, subject only to a right of the land lord to withhold consent to an assignment on reasonable grounds.
The lease entered into by the parties provides as follows in para 15(1)(b)(ii) of the Retail Shops Act:
The Lessor must not unreasonably withhold its consent to a proposed assignment of the whole of the premises to a proposed assignee if:
……..
(ii)the Lessee proves to the Lessor that the proposed assignee is a respectable and financially responsible person or corporation with relevant experience and the ability to conduct successfully and profitably a business of the same type as the Lessee's Business;

Facts

The factual background giving rise to the application can be summarised as follows:
•The current lease commenced on 1 November 2005 and it is due to expire on 31 October 2011. The lease concerns Shop 13 Plaza Arcade in the central business district of Perth. The applicant has run a coffee shop on the premises for about 10 years. The size of the premises is approximately 23 square meters. It is agreed that the tenancy comes within the operation of the Retail Shops Act.
•The applicant trades in the retail of coffee, teas, other dry infusion products and cold drinks. The applicant also sells a small quantity of related coffee appliances such as coffee pots and grinders. It is primarily a take-away establishment, although a few limited seats are available. No food is served. Mr Pratama wishes to continue with the same business.
•The applicant has for some time been seeking a buyer for the shop. The Retail Shops Act and the Lease provide that the lease may be assigned, subject to the approval of the respondent, which approval may not be unreasonably withheld.
•The business broker used by the applicant found a prospective buyer and informed the respondent's agent on 25 February 2009 that the applicant had sold the business to Mr Pratama subject to the approval of assignment by the respondent.
•On 8 March 2009 the applicant submitted to Mr Pratt, the manager of the arcade, an application form for assignment of the lease. This was followed by a meeting between the Mr Pratama, the applicant, the business broker and Mr Pratt on 18 March 2009 to discuss the proposed acquisition and assignment. Several matters were discussed at this meeting, including the commercial experience of Mr Pratama to run the coffee shop.
•Mr Pratt made a recommendation to the respondent's agent Mr Kish and to the respondent for the application for assignment to be refused. The reasons for the proposed refusal were put to the respondent and it refused consent.
•On 2 April 2009 the respondent's agent wrote to the applicant to inform him that the respondent had refused to consent to the assignment of the lease on grounds that Mr Pratama does not have 'relevant experience' and has not previously 'conducted successfully and profitably a business of the same type as the Lessee's business.'
•The application was lodged with the Tribunal on 3 April 2009. On the same day Mr McAskil, acting for the applicant, sent an email to Mr Pratt, representative of the respondent, and informed him that the application had been lodged with the Tribunal. He expressed the 'hope (that) the Lessor will reconsider the consent issue ...'. He closed his email with the request: 'Can you please advise if the Lessor will reconsider the consent issue?' Mr Pratt replied by email on 6 April 2009 that the respondent's decision remained unaltered and that consent was refused.

Evidence and Contentions

The parties made detailed written submissions, called witnesses and presented oral closing submissions.
The Tribunal took all of this information and evidence into account in making its decision.
The Tribunal notes that although a witness statement was submitted for Mr Pratama, he did not attend the hearing to be examined nor did he apologise for his failure to attend. This is most unfortunate since it does not only show disrespect for the Tribunal and the process before it, it would have given the Tribunal an opportunity to hear from Mr Pratama, his version of the discussion that took place on 18 March 2009 as well as a more detailed explanation of his skills to manage the coffee shop.
The submissions of the parties can be summarised as follows:
Mr McAskil for the applicant contends in summary that -
•The refusal to consent to the assignment was unreasonable for reasons summarised below. The respondent did not properly weigh all the information and Mr Pratt and Mr Kish exaggerated the risk of the business failing under the care of Mr Pratama.
•Mr Netto, director of the applicant, has for some time been suffering health problems and he has put the shop on sale to spend more time with his family and to enter into another line of business that is more conducive to his health. It would be very difficult to find another buyer in the current economic climate.
•The shop has been on the market for more than 2 years and only two prospective buyers had been found. The first withdrew before a formal application for assignment was lodged. The second buyer, Mr Pratama's application, was refused.
•Mr Pratama indicated on his application form the following in regard to his experience and background in retailing (Question 12):
Currently operating in a different industry, however looking to obtaining adequate knowledge through handover period. Completed a coffee making course (Feb 2009)
•In reply to a question to list the shopping centres and retail outlets in which he had operated, Mr Pratama replied 'NA' - not applicable.
•Mr Pratama might not have retail experience, but he has experience in the Information and Technology industry and his wife is an accountant. In his IT business he had to deal with many queries, complaints and customer interaction. He also had to ensure personal attendance and service to his clients. This is not entirely dissimilar to the demands of the retail industry. Mr Pratama has also attended a TAFE barista course. There will also be a four week hand-over period during which Mr Netto will give basic training to Mr Pratama and his wife. Mr Pratama and his wife plan to operate the coffee shop as owner-operators and it should therefore not be a problem for them to succeed, especially if they retain some of the workers.
•The business broker described Mr Pratama as a very credible business person who should have no difficulty in running a small coffee shop. The shop is only at a very low first level entry into the retail market and there is no special complexity about running it.
•Mr Pratt, the agent for the respondent, should have taken into account the commercial experience of Mr Pratama and his wife. It was not reasonable to reject the application merely on the grounds of lack of retail experience. A person with the experience of Mr Pratama should have no problems to master the challenges that may be experienced.
•The existing pool of six staff will be retained to ensure there is sufficient back-up when necessary. The existing staff will also assist in training Mr Pratama and his wife. The fact that Mr Netto made such a success, albeit that he had no training or experience in retail, proves that Mr Pratama, who comes with a lot of experience and financial backing, should be given a chance.
•Mr Netto has a 'system' in place that will enable Mr Pratama and staff to maintain the smooth operation of the shop even if the owner is not in attendance.
•The right of a landlord to refuse an assignment on reasonable grounds must take into account the interests of both parties, the possible risks to them, the likelihood of failure, the scale of the business and all the commercial experience and financial backup of a prospective buyer. Mr Pratt and Mr Kish completely exaggerated the possible risk of failure of the coffee shop if Mr Pratama were to become the owner by estimating it to be 50/50. There is no evidence to support such a high risk given the business experience of Mr Pratama and his wife.
•It would be very difficult in the current economic climate to find another buyer.
Mr Thrussel for the applicant contends in summary that -
•The test for reasonability is whether a reasonable landlord 'could' have rejected the assignment on the available information at the time of the application. The Tribunal is not required to determine whether it was the correct decision but only whether there were reasonable grounds for it.
•There is no inconsistency between the provisions of the lease and the Retail Shops Act.
•There is no automatic right to assign a lease, hence the provisions of the Retail Shops Act to protect the interests of the landlord. It is a very high threshold and all the landlord need to demonstrate is that it had 'reason' to reject the proposed assignment. If the respondent can show that there was logic based on facts that supported the decision, it was reasonable.
•The respondent acted reasonably on grounds that it took into account all the information provided by Mr Pratama and concluded that his applicable experience in retailing was too limited for the lease to be assigned.
•The respondent accepts that Mr Pratama is financially sound, but that does not mean he can effectively run a coffee shop in a very busy CBD arcade and that he can cope with the demands of retailing such as long hours, working on one's feet day after day, and the constant demands of customers.
•If Mr Pramata failed, it would not only have a negative effect on the respondent, it would also impact negatively on other tenants in the arcade, especially those adjacent to the coffee shop.
•The 'system' referred to by Mr Netto is vague and ill-defined and at no stage was the respondent provided with detailed information as to what such a 'system' entailed, why it would work for Mr Pratama and how it would prevent Mr Pratama from failing.

Evidence heard

Several witnesses were called to give evidence during the hearing. A witness statement filed by each witness was accepted as point of departure, with further evidence, cross-examination and re-examination that followed. The Tribunal took active part in examining the witnesses.
The applicant called the following persons to give evidence: Mr Netto who is a director of the applicant and Mr Hunter who is a business broker appointed by Mr Netto to find a buyer. The applicant also filed a witness statement for Mr Pratama but as mentioned above, he failed to attend the hearing or to apologise for his absence. Mr McKaskil invited the Tribunal to attach such weight as it thinks fit to the statement of Mr Pratama.
The respondent called the following persons to give evidence: Mr Kish who manages the property interests of the respondent and Mr Pratt who is the managing agent of Plaza Arcade where the coffee shop is located.
The evidence of the respective witnesses can be summarised as follows:
•Mr Netto explained that his health makes it impossible for him to continue with the management of the shop. He uses assistants but that erodes the profitability of the shop. He has a pool of six part-time workers and has a 'system' in place to ensure the shop continues to operate even in his absence. Account must be taken that the shop is very small, it does not serve food and it operates with two persons on duty. Mr Netto would explain the 'system' to Mr Pratama after settlement of the assignment to ensure that the shop continues to operate profitably. Mr Netto has also agreed to a four week handover during which time he would train and assist Mr Pratama and his wife. Mr Netto has owned the shop for 10 years and it is a low entry retail tenancy. It does not require exceptional skill, save for a dedication to serve good coffee and common sense. The basic skills can be acquired in a short time. Mr Netto has been trying to sell the shop for some time but without success. He has shown that the shop can continue to offer good quality coffee even if he is not on duty. The staff are trained well and Mr Netto does not foresee any problems in the handover to Mr Pratama.
•Mr Hunter explained that he has more than 14 years experience as a business broker and has facilitated many sales of retail establishments. In his opinion Mr Pratama is an excellent candidate and a person of high integrity with good business acumen. It must be taken into account that this shop is at the very entry level of retail tenancy and the discretion to refuse an assignment must not be exercised as if a big tenancy such as 'Dome' is considered. Previous experience in the retail industry would weight much more with a larger establishment than with such a small shop. The period of hand-over ought to be more than enough to get Mr Pratama under way. Mr Pratama is an excellent communicator, very knowledgeable and has done his homework about this type of business. The essence in this trade is not as much the person but the equipment. The shop has excellent equipment and good people to work it. If Mr Netto succeeded, there is no reason why Mr Pratama would not. Mr Hunter attended the meeting of 18 March 2009 and can recall that Mr Pratama spoke about his IT experience.
•Mr Pratama said in his statement that he told Mr Pratt about his IT experience, his photography and graphic design business and that his wife was a practicing accountant. He further indicated that it would be an owner-operated venture which meant that they would not be so reliant on staff as Mr Netto. They will nevertheless, retain key part-time staff. Mr Pratama further explained the nature of his IT experience, the fact that he had some experience working at a coffee shop while he was a student, and his wife's family involvement in a coffee shop in Indonesia.
•Mr Kish says he has 10 years experience in retail property management and that his duties include, amongst others, to recommend to the respondent if approval should be given for a lease to be assigned. He is concerned at the lack of experience Mr Pratama has in retail and the risk it may pose to the respondent if the business failed. According to him, Mr Pratama was given more than enough opportunity to explain the full extent of his retail and other business experience. On the basis of the information provided, it was Mr Kish's opinion that an assignment would pose an unacceptable risk to the respondent. He disputes that he was told about the alleged injury suffered by Mr Netto but he contends that even if that were the case, the landlord need not take such information into consideration in the exercise of its discretion. The fact that Mr Pratama has not spent 'one day of his life in retail' is a serious concern to Mr Kish and he therefore recommended to the respondent that consent for the assignment be withheld.
•Mr Pratt explained that he has 15 years experience in managing retail shopping centres and arcades. He set out the process through which he received the application and the meeting that occurred on 18 March 2009. He was concerned at the time that the application form did not disclose sufficient information about Mr Pratama's retail experience. Therefore Mr Pratt had further discussions with him, Mr Netto and Mr Hunter. No further information that would satisfy him was provided. Mr Pratt accepts that Mr Pratama has general commercial experience and that he is financially sound, but that does not equate to retail experience, and in particular not coffee retail in an arcade. If Mr Pratama had 'some' experience in retail he may have changed his mind, but as the information stood at the time of application and even at the time of the hearing, he has grave concerns for the viability of the shop if the assignment were to be approved. He accepts the general financial security of Mr Pratama but says the landlord's interests go much wider than payment of rent. It also includes the viability of an operation, the ability of the tenant to market and develop new products, the cost to recovery of debt, advertising for a new tenant and impacts on other tenants if a tenancy failed.

Consideration

The Tribunal will deal with the statutory framework of the Retail Shops Act and thereafter apply the evidence before it to such framework.

What is meant by 'withhold consent on reasonable grounds'?

The Retail Shops Act does not define what is meant by 'reasonable grounds'. It is therefore left to the Tribunal to determine, on the basis of general principles as expressed by the courts and the facts of each case, whether a refusal by a landlord to consent to an assignment falls within the ambit of 'reasonable'.
The test of what constitutes 'reasonableness' is not merely whether the Tribunal may have come to a different conclusion to that of the landlord. The test is therefore not what the 'best and preferable decision' is as in the case of administrative review, but whether a refusal from the perspective of the landlord was reasonable. The Tribunal must therefore be satisfied that the refusal from the landlord was 'unreasonable' before it may make an order that consent for assignment is given. The test of reasonableness is a much more stringent test than whether the decision was 'correct'.
In the matter of Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 the court found that the role of the Tribunal is not to review the process in order to decide if the decision of the landlord was 'correct', but rather to consider the entire process and decide whether, on the basis of the facts as they objectively exist, if the withholding of consent was unreasonable.
The Tribunal must, as a general principle, be cautious and slow to intervene in the way in which a landlord considers an application for assignment. The landlord has the right to make a commercial decision and to consider the risks if an assignment were to occur, but at the same time, Parliament has built a safeguard for tenants, to ensure that a landlord acts 'reasonably' in its consideration of an application to assign a lease. A landlord therefore does not have an uncontrolled veto over a proposed assignment.
During the second reading speech of the Retail Shops Act, the Minister responsible for the amendments explained what were intended in regard to the words 'unreasonable grounds' (with emphasis):
She said that factors such as the financial record of the proposed assignee would be taken into account and its 'ability'. (Henderson, 4 July 1990 at page 3308). She went on to explain that: 'These are factors that are generally taken into account. The landlord will obtain information about the credit rating of the proposed assignee and look at his previous business background. These are the kind of things which I expect the landlord would consider.'
The Retail Shops Act does not limit the exercise of the landlord's discretion to experience in the 'same' industry or the 'same type of business'. Although the lease in these proceedings made specific mention of the 'same industry', there is no statutory requirement for the experience to necessarily be within the same industry. If Parliament had intended to be so specific in defining what information should be taken into account, it would have said so. The preferred construction of the Retail Shops Act is that all relevant information must be taken into account, including the financial status of the proposed assignee and its experience in retail industry and other commercial areas.
The Tribunal therefore does not agree with Mr Pratt's evidence in which he explained that he would as a matter of course exclude from consideration all information that is not directly derived from retail tenancy. There is nothing in the Retail Shops Act that supports such a very strict and conservative approach. Mr Pratt, in effect, said he would close his eyes to experience and information that may have been gained in other commercial sectors than retail tenancy. While the Tribunal can understand that experience in retail tenancy may be preferable and that more weight may be attached to it, the Retail Shops Act does not relieve the landlord from also taking into account other relevant information about the business experience of a proposed assignee.
The Macquarie Concise Dictionary (Revised Third Edition, Macquarie University, 2004) defines 'unreasonable' as 'not agreeable to or willing to listen to reason' and 'not based on or in accordance with reason or sound judgement'. The mere fact that this Tribunal may disagree with a refusal to give consent of a landlord, or that the Tribunal may have come to another conclusion on the same facts, does not, in itself, mean the decision was not reasonable. If the decision is based on sound judgment, if there is logic to it, if it was not irrational, if opportunity was given for all facts to be heard, and if the landlord can show that it took proper account of all the facts; the Tribunal should generally be hesitant to impose its views on a landlord.
This approach is consistent with efforts of the Tribunal to give effect to the word 'unreasonable' in the context of other legislation, such as the Strata Titles Act 1985 (WA). In two decisions giving rise to a question whether a strata company had acted unreasonably to allow alterations of common property pursuant to s 85 of the said Act, the Tribunal laid down the following general criteria (with emphasis):
Therefore, as long as the reasons for refusal by the respondent are cogent when judged in this context, this Tribunal should be slow to find there has been an unreasonable refusal.' Maber and The Owners Of Strata Plan 11391 [2007] WASAT 99 (S), at [26] .
The task was for the State Administrative Tribunal to assess whether there was good sense or logic to support the dissenting view.' [4] The Owners of Mandurah Terrace Apartments Strata Plan 17133 and Russell [2009] WASAT 1
The Tribunal must apply a more stringent test that merely whether the decision to refuse consent was 'correct', namely, that it must be satisfied that the refusal was 'unreasonable'.
In the recent decision of EDWF Holdings 1 Pty Ltd and EDWF Holdings 2 Pty Ltd [2008] WASC 275 (EDWF Holdings) the principles that ought to guide the Tribunal were clearly set and summarised out by Martin CJ. The principles derive from the High Court decision in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 which was described by Martin CJ as the 'leading High Court authority on the subject': [191]
In summarised form the principles (see [191], [192] and [197]) are as follows:
1.The assignor carries the burden of proving that consent was unreasonably withheld.
2.In the context of a covenant relating to the consent of one party to an assignment of the interest of another, the word 'unreasonably' can be equated to 'arbitrarily', in the sense that consent was withheld 'without reasonable cause.
3.The question of whether consent was unreasonably withheld is to be assessed subjectively, in the sense that the focus of inquiry is upon the Retail Shops Actual reasons of the party refusing consent at the time of refusal, although (somewhat inconsistently) at trial that party may rely upon a ground not taken at the time of refusal.
4.A party refusing consent is not bound to give reasons, although failure to do so leads more readily to the inference that the refusal was unreasonable.
5.A refusal motivated by the purpose of depriving the other party of a benefit to which that party was entitled under the contract is unreasonable.
6.A doubt based on reasonable grounds as to the assignor's (sic - assignee's) willingness or ability to perform its obligations under the contract is a reasonable basis for refusing consent.
Two further criteria were also identified namely:
7.The assessment will be subjective, in the sense that it will turn upon the information available to the landlord at the time consent was refused, but objective, in the sense that the court will apply the standards of the reasonable man to the assessment of the conduct of the landlord. Accordingly, if insufficient information is provided to the party whose consent is sought, the refusal of consent will be reasonable, although the maintenance of that refusal may become unreasonable if adequate information is later supplied: [192]
8.The refusal of consent to an assignment to a creditworthy tenant carrying on a lawful and permitted use can be reasonable if based upon considerations relevant to the relationship between landlord and tenant (such as, in this case, the tenancy mix in the shopping centre):[197]
The Chief Justice then set out the following process that should guide the Tribunal in determining the question before it (with emphasis):
First, the court should identify the reasons why the party refused consent at the time consent was refused. If, having identified those reasons, the court finds that they were objectively reasonable (in the sense that a reasonable person could refuse consent for those reasons) that they were relevant to the relationship between the parties to the agreement, and that it has not been established that the factual premises upon which the refusal was based were erroneous, that will be the end of the inquiry - the other party will have failed to discharge the onus of proof that consent was unreasonably withheld. However, if the court does not conclude that there were relevant reasons which provided a reasonable basis for the decision to refuse consent at the time the decision was made, or that the reasons depended upon a factual premise that was false, it will be open to the party who refused consent to sustain that conclusion by reference to other reasons, supported by objective facts which exist at the time of the hearing.: [204]
The answer to the question posed by the Tribunal is therefore that 'reasonable grounds' under the CTRSA means that the Tribunal must be satisfied that objectively a reasonable person 'could' refuse an assignment of a lease on the basis of the same facts at those presented to the landlord.

Was consent unreasonably withheld?

The Tribunal will now apply the test as per the EDWF Holdings matter to the matter under consideration.
If the Tribunal finds that consent was not unreasonably withheld, or put otherwise, that a reasonable person could refuse consent for those reasons and based on those facts, the application must be dismissed.
The Tribunal has considered the reasons put forward by the witnesses on behalf of the respondent and concludes that the reasons are indeed cogent, logical, and not arbitrary. The Tribunal is satisfied that a reasonable person could on the basis of the same facts refuse consent for the assignment to occur.
This conclusion of the Tribunal is based on the following analysis of the evidence:
•Mr Pramata indicated on the application form for assignment that he had no retail experience. Although mentioned his other business experience, he failed to expand on it; and although there was no question on the form to explain other commercial experience, the onus was on Mr Pratama to provide the respondent with sufficient information for consent to be given. It is not expected of the landlord to embark on a fishing expedition to find information in favour of the assignment. Mr Pratama could have attached documents to substantiate his commercial background but he failed to do so. He was therefore satisfied for the decision to be made on the basis of the limited information he provided. The Tribunal accepts the concerns expressed by Mr Pratt and Mr Kish at the lack of information and lack of demonstrated experience on the part of Mr Pratama. Mr Pratama may, as is said by Mr Hunter, be an excellent business person, but that does not automatically address the concerns held by the respondent. The evidence of Mr Hunter about the ability of Mr Pratama to run the coffee shop, was not supported by documentary or oral evidence by Mr Pratama.
•Although Mr Pramata mentioned he had experience in the IT business, he failed to provide any detail to substantiate the exact nature and extent of his business/es. Most importantly, he failed to provide detailed information as to why his experience would be applicable to the management of a coffee shop. Information that could have assisted his application would have been financial statements, detailed explanation of the nature of his business, references from clients, marketing experience, development of new products and so forth. His statement as having had an IT business that is of relevance to the retail industry, remains nothing but a general claim in the absence of verifiable evidence.
•Mr Pratama failed to provide additional information at the meeting of 18 March 2009 to address the concerns of Mr Pratt that his lack of retail experience would be detrimental to the application. There was no obligation on Mr Pratt to assist Mr Pratama to complete the questionnaire. The very first test for Mr Pratama is to be able to provide the necessary information to the respondent to enable an approval of the assignment. If Mr Pratama had not understood the obligation on him to provide information, it adds to the concerns expressed by the respondent at his suitability to run the shop.
•Mr Pratama failed to provide information about his wife's experiences as an accountant. References to her training, the type of business that she audited, her experience in retail and experience with client service may all have contributed to another outcome.
•Mr Pratama did not explain why the alleged involvement of his wife's family in a coffee shop in Indonesia had any relevance to these proceedings. It appears like a throw away line in his statement and underscores the absence of other reliable commercial and retail experience.
•Mr Pratama further failed to give any detailed information about his photographic and graphic design businesses. The fact that he failed to make available more information even after his application had been refused, adds to the concerns expressed by the respondent that he would not be suited for the management of the coffee shop.
•Mr Netto failed to explain to the respondent the nature and working of his 'system' and why it would deliver the results as he suggested it would. Mr Netto said he could not explain the 'system' to Mr Pratama prior to settlement since Mr Pratama may open a coffee shop in competition with him. The Tribunal does not accept his explanation that it was a 'trade secret'. First, the respondent has a direct interest to ensure the continued viability of the shop, and it was reasonable to expect from Mr Netto an explanation of what arrangement would be put in place to ensure the success of Mr Pratama. Secondly, it is unlikely that the 'system' to keep such a small shop operating was so unique that it would qualify as a trade secret. Thirdly, if there were real concerns about the 'secret' then staff could also open a shop in competition with Mr Netto. The respondent cannot be faulted for its scepticism of the alleged 'system' and the benefits it might offer.
•Mr Pratama's failure to attend the hearing and to give oral evidence was a reflection of the relaxed way in which he approached the application. The Tribunal would expect a person who is keen to acquire a shop to put forward all the relevant information he could in order to facilitate a positive decision by the landlord. It seems as if Mr Pratama had opted for a minimalist approach where he only gave the bare essentials with some generalisations. Unless of course, he had no other information to give.
•The Tribunal does not accept the contention of Mr McAskil that the email he sent on 4 April 2009 constituted a new application for assignment. It is clear from the wording of the email that the sole purpose of it was to inform the respondent of the legal proceedings before the Tribunal and to invite a settlement. There was nothing to suggest additional information had been provided or that a fresh application had been made.

Conclusion

The Tribunal is therefore satisfied that the refusal of the respondent to consent to the proposed assignment was reasonable. This does not mean that Mr Pratama is prevented from putting another application to the respondent in which it addresses the issues identified in these proceedings. But on the basis of the information available to the respondent prior to it making its decision, the Tribunal is satisfied that it acted reasonably.
The application must therefore be dismissed.

Order

The application is dismissed.

I certify that this and the preceding [48] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
DR B DE VILLIERS, MEMBER

[2009] WASAT 107

2 JUNE 2009

Key Legal Topics

Areas of Law

Commercial Law

Legal Concepts

Contract Formation

Reasonable Grounds

Assignment of Lease

Commercial Tenancies