CITATION: Dinh v Nguyen & Ors [2003] NSWADT 264 DIVISION: Retail Leases Division APPLICANT PARTIES: Le Thy Dinh RESPONDENT Thi Giau Nguyen & Ors FILE NUMBER: 025144 HEARING DATES: 11/06/03 and 01/07/03 SUBMISSIONS CLOSED: 07/01/2003 DATE OF DECISION: 12/16/2003 BEFORE: Fox R - Judicial Member APPLICATION: Claim for assignment of rights under a lease/ declaration lessor not entitled to withhold consent to an assignment of rights - Claim for surrender of possession of premises MATTER FOR DECISION: Principal Matter LEGISLATION CITED : Retail Leases Act 1994 CASES CITED: APPLICANT REPRESENTATION: C Vacaro RESPONDENT In person ORDERS: 1 My previous orders in relation to possession, payment of rent ect, continue; 2 The parties have liberty to apply to the Registrar for a further short hearing date early in January, to make submissions in relation to:-; (a) the orders now to be made, and; (b) the matter of costs REASONS FOR DECISION 1 The Applicant brought these proceedings against the second named Respondents, the Lessors Chan and Lee to gain consent to the assignment of the Lease of a Parramatta restaurant. The Assignor Nguyen was the First Respondent, as Vendor pursuant to a Contract for Sale of Business dated 2 June 2002 but actually signed on 19 July 2002. The application against her was for a return of possession of the premises to the Applicant. The contract for the sale of the fixtures, fittings and goodwill was in standard form, drawn by Mr McCartin, accountant to and friend of the First Respondent and, it transpired later, joint mortgagee with some others of a Bill of Sale over the items sold. 2 On the first directions day the Lessor did not appear, and the issue for urgent resolution was the access to the premises, the First Respondent having locked the Applicant out, claiming that the time for completion as set by the Contract had passed, and no payment had been made. Because it seemed likely that the First Respondent had not yet taken all steps necessary to gain the consent to the assignment, I was satisfied that there was a Retail Tenancy Dispute and that I had jurisdiction to make the appropriate interim orders seeking to establish a status quo between the First Respondent Lessee/Assignor and the incoming Applicant Assignee. I directed that the Applicant have possession, rent to be paid in cash on the due date to the Lessor, if no payment, stay to lapse without further order. 3 Several further directions hearings took place, but eventually it became clear that the relevant proofs had been presented to the Lessor, and that the Lessor had consented to the assignment, although the relevant papers were (and still are) held by the Lessors' Solicitor. 4 By this time, on 22 May 2003, a further difficulty arose because the Applicant had again been locked out, this time by Mr McCartin, not as friend of the First Respondent, but as one of the three parties claiming a joint interest in the business by way of the Bill of Sale. That claim seemed entirely inappropriate because, on the one hand, there was no registrable charge of the Lease, and, on the other hand, it seemed to me already obvious that Mr McCartin had been quite heavily involved in the whole selling exercise. I again "unlocked" the premises, and my orders for possession and payment of rent etc continue to this day. McCartin and his associate Mortgagees were joined as parties. 5 These interim clashes raised the substantive issue between the parties:- "who is entitled to possession of the premises". This, as an issue, does fall within the definition of Retail Tenancy Dispute and so within the jurisdiction of this Tribunal, despite the fact that the issue was no longer between Lessee and Lessor, but was between Assignor and Assignee. 6 Evidence was taken on 11 June 2003 and 1 July 2003 to seek to establish what was the agreement in regard to possession of the premises and who (if anyone) was in breach. 7 I had affidavit and oral evidence from Ms Dinh the Applicant, but no other oral evidence on her side, and I heard oral evidence from Ms Nguyen as well as a substantial affidavit and oral evidence from Mr McCartin. Mr Nguyen and Ms Dinh both gave their evidence through an interpreter in Vietnamese, their first language. 8 The Applicant was represented by Mr Vacaro, and the Respondent who had at first instructed Mr Hall via Mr McCartin, appeared by herself, at the hearing assisted by her friend Mr McCartin, who also appeared as and for his fellow holders of the Bill of Sale. 9 The first issue to be resolved was that of the Contract for the Sale of Business. 10 The Applicant's evidence was of her being introduced by Mrs Cuc a broker of some sort. The Applicant had agreed to pay $90,000.00 for the goodwill fixtures and fittings, in accordance with the usual custom, subject to the consent of the Lessor to the assignment of the Lease. A payment of $40,000.00 was to be made and that, on the one hand, allowed the Applicant to take possession, and, on the other hand, left the First Respondent free to attend to other personal matters, as well as certain repairs and refurbishments of the premises. 11 The balance of $50,000.00 was to be paid on completion in December, and the Applicant was to pay 1% interest each month on the outstanding "vendor finance" sum of $50,000.00. 12 It is fair to say that eventually, the First Respondent denied most of the Applicant's claims about the agreement. One of the few things that was not in dispute in the two days of evidence was that interest of $500.00 per month has to be paid, by the Applicant to the First Respondent. 13 The Applicant's evidence went onto detail the payments in cash to the value of $10,000.00 as an initial deposit, and two subsequent payments each for $10,000.00, the final amount of cash was given to the Applicant on 2 June, after or during the full stock take. The financial accounting for the stock take became somewhat clouded by the fact that the transfer of the eftpos arrangements for the business caused some further delay before the matter could be completed. 14 According to the Applicant the initial four payments of $10,000.00 each left a further $50,000.00 to be paid at completion, early in December when the works had been done by the First Respondent whilst the Applicant ran the restaurant. 15 I stress that it was always the Applicant's evidence that she had agreed to make the initial cash payments so that the First Respondent, as Vendor had some funds available with which she could pay tradesmen in relation to the upgrading works 16 Mrs Dinh was cross-examined at length by Mr McCartin, partly as friend of Mrs Nguyen and partly as involved mortgagee. 17 Mrs Dinh did not call her husband despite her evidence that he was with her at most of the discussions, and certainly, recently, when the First Respondent had at various times found it necessary and convenient to lock the Applicant out. Mrs Dinh did suggest that her husband was not as involved in the purchase of the business, but he was often present, and he does hold the liquor license and to that extent is quite involved with the restaurant. 18 The broker Ms Cuc was summoned to appear, but did not answer the call. 19 There was no other evidence for the Applicant. 20 The First Respondent Mrs Nguyen was called. Her evidence was that she sold the restaurant goodwill and fixtures and fittings for $50,000.00, none of which had been paid, but that that the Applicant was up to date with the $500.00 per month "interest" and that nothing was agreed about any repairs or upgrading of the premises. 21 There is in evidence an original receipt signed by Mrs Nguyen, proposed by Mrs Dinh to be proof of the payment of the first $10,000.00 instalments. Mrs Nguyen said that this was a deposit for a car which the Applicant had agreed to buy from the First Respondent, and not any deposit in relation to whatever might have been agreed for the sale. 22 Mrs Nguyen said that the $10,000.00 in question, which had been paid in cash, was brought by her to the restaurant at the time of the general stock taking which took place on June 2 when the Applicant took possession of the premises and the business. The evidence was that the liquor stock had valued at just under (or perhaps a dollar or two over) $3,000.00. At this stage Mrs Nguyen gave Mrs Dinh (because she was longer proceeding with the car purchase), from which Mrs Dinh paid for the liquor stock, and Mrs Nguyen allowed Mrs Dinh to retain the remaining $7,000.00 so she could use it as capital for the business. 23 The further evidence was that Mrs Nguyen had told Mrs Dinh about the Bill of Sale, the inference, apparently being that if Mrs Dinh did not pay the $500.00 interest per month, she would lose title to the business. These monthly monies were not going to Mrs Nguyen, but instead they were being paid to Mr McCartin in a kind of trust arrangement. 24 It appeared that the only paper security which Mrs Nguyen took for the giving of possession, was the signing of two separate forms 6 as issued by the Department of Fair Trading, one of which transferred the business name of the restaurant to Mr Dinh, and another form operated to transfer the business name back to Mrs Nguyen. The practical security was that Mrs Nguyen would work in the restaurant on a daily basis, but this employment did not eventuate. Again, I was given no credible evidence in this regard other than the bald statement and, on the same basis as I reject Mrs Dinh's suggestions about an agreement for refurbishment, I reject Mrs Nguyen's evidence about an agreement that she would work in the business. 25 I was given no explanation of the late proffer and signing of the Contract for Sale of Business on 18 or 19 July, almost 6 weeks after the Applicant had taken possession and almost 6 weeks after the whole deal been done. According to Mrs Nguyen, the original agreement was made for a 2 October completion deadline and that was in the document as proposed to the Applicant on 18 or 19 July. Further, according to Mrs Nguyen, when (on July 18 or 19) she approached the Applicant and her husband for the signature of this agreement, Mr Dinh became quite distraught, because he would not be able to make the payment by 2 October and sought a 2 month extension for the completion date, taking it to 2 December. This was agreed and Mrs McCartin and Mrs Nguyen left the premises to go and alter the document (apparently at his office) and that is when the special condition to the contract, which entitled the Vendor to terminate and take possession if there was default, became operative on 2 December, instead of 2 October. 26 Mr McCartin's evidence by way of substantial affidavit was of assistance, although it did not allow me to form any further conclusions about the initial negotiations between Mrs Dinh and Mrs Nguyen. Negotiations were generally carried out in Vietnamese, a language which he does not speak. 27 I heard a great deal of evidence about the stock taking process on 2 June, and subsequent difficulties with cash flow and book keeping complication flowing from the fact that the eftpos terminal arrangements take some weeks to transfer from the outgoing trader to the incoming trader. I am, however, satisfied that, in the end, the books generally were balanced to within $100.00 or two, and that there is no point in making a finding about that. 28 I am not satisfied that Ms Dinh or Mrs Nguyen were always telling me the truth. However I must say that, generally, Ms Dinh's evidence seemed to me to come closer to the truth then that of Ms Nguyen, and, in case of conflict, I would have to prefer Ms Dinh's. That said, I also have to indicate that I would not wish to accept Mrs Dinh's evidence without some external confirmation. 29 It is for this reason that I accept that there was an agreement for an initial $40,000.00 of which was to be paid and was paid in cash before the take over. It is clear from Mrs Dinh's evidence that she received appropriate funds from friends and acquaintances, and I am also satisfied that, in relation to the first payment of $10,000.00 she did receive a receipt from Mrs Nguyen. That is sufficient confirmation of the whole very irregular arrangement. 30 Mrs Nguyen's explanation of the receipt, being for the sale of the car, is an obvious fabrication, and I reject it. 31 The status of the Sale of Business Contract signed on 18 or 19 July, long after the deal had been struck can only be viewed as some kind of ex post facto acknowledgement of it. The whole matter was greatly confused by both Applicant and First Respondent failing to take appropriate legal advice early in the piece. The Respondent's action to lock the Applicant out, claiming forfeiture, when there had been no consent to the assignment of Lease was, to say the least, ill-considered. The state of the evidence does not allow me to make a final observation as to who was the more at fault, it seemed to me to be very clear that the First Respondent had done as little to advance that cause as had the Applicant. 32 It seems to me to follow, as a matter of law that, the First Respondent having failed to establish full compliance with its obligation, she was not entitled to call for completion, and whatever time/essential qualities that particular term of the Contract may have had, it failed. It seems also to me to follow that, to this day, the Contract just "ambles" on, and the Applicant's liability for the vendor finance payment of $500.00 per month, continues. 33 I do not accept the Applicant's proposition that the sum of $40,000.00 was paid to allow Mrs Nguyen to arrange for repairs and refurbishment to the premises because, there is absolutely no independent support for that other than an aging quotation for the installation of a cool room, and because I did not ever, from the evidence, gain any indication of regular demand for the work to be done (which would always have to be carefully scheduled to avoid interruption to the running of the restaurant), or anything else of that kind. 34 There was a substantial body of evidence from both Mrs Nguyen and Mr McCartin to seek to establish that the Applicant was told, on the one hand, of the previous difficulty of obtaining consent from the Lessor on assignment to Mrs Nguyen at the time of her purchase some years before, and, on the other hand, of the existence of the Bill of Sale. Whilst I understand the relevance of anticipated difficulty with the Lessor, I cannot understand what was thought to be the relevance of the existence of the Bill of Sale. Mrs Nguyen, as the Vendor, has a primary obligation to make title. Whatever rights (if any) the Bill of Sale may have given Mr McCartin and his associates to govern the disposal of the goodwill, or otherwise direct it, seem to me to have been abandoned by Mr McCartin's involvement in the whole transaction. This involvement almost amounted to active encouragement. At best, the Bill of Sale gave McCartin and his associates a claim on the proceeds of the sale, in exchange for the usual discharge. 35 It follows from all of the aforegoing that the Applicant, on her own case, is still obliged to pay to the Respondent the sum of $50,000.00 and remains liable in the sum of $500.00 per month. 36 The state of the evidence does not allow me to conclude the development of the assignment of the Lease – it seems to be clear that the Lessor has agreed and that the papers in that regard are held by the Lessor's Solicitor. It is also clear that the Lessor is currently holding 2 separate bonds in the sum of approximately $6,200.00 each. 37 It is not clear whether the Lease has yet been registered, so I can make no directions about the registration of the Assignment. In any event, in accordance with the usual commercial practice, these are matters usually resolved at the settlement of the sale, the assignment documentation being tendered in exchange for the completion payment. 38 I indicated at the hearing of this matter that, in the end, I might not make specific orders either generally or in relation to the matter of costs, without hearing further from the parties, and in view of my findings generally, that appears to have been the appropriate course. 39 Regrettably, delays in obtaining transcript of the second day's hearing and subsequent personal commitments have delayed the delivery of these reasons until the commencement of the Christmas season and, in order to give them some time to consider, unless the parties request differently, I would propose to relist the matter for hearing in the second week of January. This will allow that the parties, perhaps by consent, to propose orders to allow the sale aspects to be resolved. 40 The parties are also welcome to make submissions to me on the matter of costs, although I must say that having now fully considered and reconsidered both my notes and the transcript, my preliminary view is that there are no special circumstances in relation to the hearing of the dispute generally, but that the complete lack of entitlement of either the First Respondent or McCartin as mortgagee to reclaim possession of the premises does amount to special circumstances, and renders the First Respondent and Mr McCartin each liable to a costs order in relation to those two directions hearings. However, I again indicate that I do not regard this aspect of the matter to be closed, and the parties are welcome to make further submissions. 41 To make it clear, my previous orders in relation to possession, payment of rent etc, continue. The parties have liberty to apply to the Registrar for a further short hearing date early in January, to make submissions in relation to the orders now to be made, and in relation to the matter of costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.