Dirani v Tarabay & anor [2007] NSWADT 272

CITATION: Dirani v Tarabay & anor [2007] NSWADT 272

DIVISION: Retail Leases Division

APPLICANT Hussein Dirani

PARTIES: FIRST RESPONDENT Elie Tarabay

SECOND RESPONDENT Houda Tarabay

FILE NUMBER: 075024

HEARING DATES: On the papers

SUBMISSIONS CLOSED: 12 July 2007

DATE OF DECISION: 23 November 2007

BEFORE: Fox R - Judicial Member

CATCHWORDS: Claim for payment of money - Costs

MATTER FOR DECISION: Principal matter

LEGISLATION CITED : Retail Leases Act 1994

CASES CITED: Marquette v Doherty (2002) NSWSC5A Vincent v Premo Enterprises (Voucher Sales) Limited (1969) 2 All ER 941

B Lane, solicitor REPRESENTATION: G Penhall, solicitor

ORDERS: 1.Pursuant to section 72(i)(a) the Respondent pay to the Applicant unpaid rent in the sum of $11,048.40, and damages in the sum of $475.58, making a total of $11,523.98 together with interest at the prescribed rate calculated from 25 November 2006; 2. Any application for costs is to be made within 14 days. If an application is made, the Applicant for Costs is to file and serve submissions within 21 days of the date of this order, and the Respondent to that application is to file and serve a response within a further 28 days. Such costs application then to be decided on the papers. Otherwise, no order for costs.

REASONS FOR DECISION 1 The Applicant is the Lessor of lock up shop premises at Bexley previously leased by the Respondents, from which the Respondents conducted a mixed business. The Lease of the premises was registered on title (number 8574656) and was for a period of 1 May 2002 to 30 April 2005. There was an option for a further three years. The Respondents, with the Applicant's consent, sold the goodwill of the business and assigned the Lease to Sam and George Ghoussain. The Assignees took possession in July of 2003. A deed of Consent to Assignment was executed by the Respondents and the Ghoussains, but that was not made available to the Applicant until later on in the year, and is dated 10 November 2003. 2 There was an issue about the exercise of the option, and there were some negotiations between the Respondents and the Applicant (apparently as well as the Ghoussains) but no agreement was reached, and no rent was paid for occupation after 30 April 2005 despite the fact that the Ghoussains continued to trade from the premises. 3 The Ghoussains vacated on 12 September 2005. 4 The Applicant issued proceedings out of the Local Court Burwood against the Respondents, as assignor of the Lease, for rent from 1 May 2005 to 12 September in the sum of $11,048.40, and for some repairs to the premises amounting to $405.63. On the Respondents' motion pursuant to section 75 of the Retail Leases Act 1994, those proceedings were transferred to this Tribunal. 5 Mr Lane, Solicitor appears for the Applicant and Mr Penhall, Solicitor appears for the Respondents. 6 The parties have agreed, in view of the amount at issue, that the matter be decided on the papers, being the Applicant's Affidavit which annexed the Lease, the Deed of Assignment and some subsequent correspondence between the parties, and the written submissions and replies from each of the parties. 7 The Deed of Assignment was in usual terms in that it sought to preserve (or perhaps restate) the continuing liability of the assignor "4. The Assignor covenants with and guarantees to the Landlord that nothing contained in the this Deed will by implication or otherwise release the Assignor from payment of the rent reserved by and the performance and observance of the covenants and conditions contained in the Lease and on the Assignor's part to be performed and observed or otherwise prejudice or affect the rights, powers and remedies of the Landlord against the Assignor in respect of such rent covenants and conditions. 5. The Assignor indemnifies the Landlord from and against all damages and all costs losses and expenses which the Landlord may suffer or incur consequent upon or arising directly or indirectly out of any breach or non-observance by the Assignee of any of the covenants terms provisions or conditions in the Lease contained or implied and on the part of the Assignor to be performed and observed and the Assignor agrees that this indemnity will continue and the Assignor will remain liable to the Landlord under this indemnity notwithstanding that as a consequence of such breach or non-observance the Landlord has exercised any of its rights hereunder or under the Lease and notwithstanding that the covenant guarantee and indemnity herein given may for any reason whatsoever be unenforceable either in whole or in part." 8 As I have observed earlier, the Deed of Assignment was not submitted to the Lessor until some four months after the Ghoussains' entry into possession as Assignees and in fact, although it was received by the Applicant, the Applicant never signed a counterpart, or submitted it to either the Ghoussains or the Respondents. 9 The Affidavit does make it clear that the parties did seek to comply with the preliminaries for gaining consent to assignment pursuant to section 41 of the Retail Leases Act 1994 in that references etcetera were proffered, but there was never submission of the disclosure statement envisaged by section 41(a) and (b). Both parties concede that the requirements of section 41(a) were not complied with, and that there was never either a consent, or a deemed consent. It follows that the Respondents does not have the benefit of section 41A which would, in conjunction with section 7 of the Retail Leases Act 1994, completely negate, or severely curtail, the effect of the Deed of Assignment. 10 It is clearly established law that an Assignor remains liable under the assigned Lease. See Halsbury Laws of Australia 254-1580 "The contract between Lessor and Lessee is not affected by assignment. So Lessor can sue Lessee notwithstanding that there are new contract rights between Lessor and Assignee. This allows the Lessor to bring an action against the Lessee to recover rent which should have been paid by the Assignee, even where since the date of the assignment the amount of the rent has been increased, provided that the increase was envisaged in the contract between the Lessor and the Lessee". 11 On the same basis, the liability of the Lessee (Assignor) continues during any holding over of the assigned term (see Lang's Commercial Leases in Australia 13, 504). Those observations are directly in point in this matter. Mr Lane drew my attention to Marquette v Doherty (2002) NSWSC5A. That matter just accepts the basic assumption that the guarantor's liability for compliance with the Lease continues into the holding over period. 12 It seems to me to follow that the Deed before me simply restates the law which applies in circumstances where s41A has not been enlivened. The result is that the Respondents are liable to the Applicant even without the "assistance" of the Deed. Be that as it may, the Deed, if it was effective, certainly purports to render the Respondents are liable (perhaps "all over again"). In that regard a major issue before me was the fact that the counterpart of the Deed had not been signed by the Applicant, and returned to the Respondents and the Assignee. 13 Mr Lane raised observations by Lord Denning MR in a matter of Vincent v Premo Enterprises (Voucher Sales) Limited (1969) 2 All ER 941, at 944: "A Deed is binding on the maker of it, even though the parts have not been exchanged, as long as it has been signed, sealed and delivered. 'Delivery' in this connection does not mean 'handed over' to the other side. It means delivered in the old legal sense, namely, an act done so as to evince an intention to be bound." On that test, certainly, both the Assignee and the Assignor on the facts before me have delivered the Deed, and so would be bound by it. 14 Mr Penhall argues that, construing the words of the Deed, it could not come into effect until the Landlord had also signed this counterpart. He bases that on the words of clause 2 of the Deed which states the Lessor's consent to the assignment. So, if the Lessor did not sign the document, no consent came into operation. However it seems to me that this argument fails because the Deed itself recites the fact of the assignment dating back to 1 July, and recites the Lessor has "agreed to consent to the Assignor assigning to the Assignee". In these circumstances it seems to me that there exists an agreement for assignment which has been part performed, and the parties are bound by that, and cannot now be heard to not acknowledge it. 15 It seems to me that Mr Penhall went on to argue that if the Deed had been delivered, it had been delivered in escrow, but there is nothing in the correspondence before me to establish that. I am satisfied that the Deed was unconditionally delivered by both the Respondents and the Ghoussains. 16 There was also an argument arising out of the fact that the Deed called for the consent of the St George Bank as Mortgagee of the premises, however the evidence establishes that, by the time the assignment in fact took place (months before the delivery of the Deed) the loan had been paid out, and the Bank, in fact, had no further interest in the property, and its consent was irrelevant. 17 There was also an argument arising out of the fact that the transfer of the Lease had not been registered, but again there was no evidence before me that either the Respondents or the Ghoussains had sought that. In any event, as Mr Lane rightly pointed out, that registration is something which can be carried out entirely without the intervention of the Lessor, the transfer of the Lease is registered on the Lease, and the production of the Title Deed by the Lessor is not essential for that transaction. The Assignee cannot plead its own failure in aid. 18 There will be an order pursuant to section 72(i)(a) the Respondents pay to the Applicant unpaid rent in the sum of $11,048.40, and damages in the sum of $475.58, making a total of $11,523.98 together with interest at the prescribed rate calculated from 25 November 2006. 19 The facts of this matter, and its conduct seem to me to be such that there are no special circumstances to entitle either party to an order for costs, however give them the usual leave.