Castle Mall Fine Foods Pty Ltd v Queensland Investment Corporation [2003] NSWADT 207

CITATION: Castle Mall Fine Foods Pty Ltd v Queensland Investment Corporation [2003] NSWADT 207 DIVISION: Retail Leases Division APPLICANT PARTIES: Castle Mall Fine Foods Pty Ltd RESPONDENT Queensland Investment Corporation FILE NUMBER: 035054 HEARING DATES: 07/07/2003 SUBMISSIONS CLOSED: 08/27/2003 DATE OF DECISION: 09/03/2003

BEFORE: O'Connor K - DCJ (President); Fairweather R - Member APPLICATION: Claim for assignment of rights under a lease/ declaration lessor not entitled to withhold consent to an assignment of rights - Costs - Unconscionability MATTER FOR DECISION: Principal matter Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Retail Leases Act 1994 Retail Tenancies Reform Act 1998 (Vic) CASES CITED: Le Coz v Innominata Pty Ltd [1999] VCAT 35 APPLICANT REPRESENTATION: M Dempsey, counsel RESPONDENT P Holmes, solicitor ORDERS: 1. Respondent to pay the applicant damages of $10,119 plus further amount calculated in accordance with para [85] of these reasons.; 2. Liberty to either party to relist on 7 days' notice if they cannot reach agreement in relation to the further amount.

REASONS FOR DECISION 1 The applicant ('the lessee') was at the times relevant to its application the lessee of a retail shop within the meaning of the Retail Leases Act 1994 ('RLA') at the Castle Mall shopping centre, located at Castle Hill in Sydney. The lease commenced on 1 November 1999. The permitted use of the premises was described in item 12 of the lease as 'coffee shop'. 2 The respondent is the successor in title to the original lessor having taken over the running of the shopping centre in October 2002 (and will for convenience be referred to in these reasons as 'the lessor'). 3 In February 2003 the applicant obtained a buyer for its business. In March 2003 the applicant's solicitor (Moore and Associates (Moore)) advised the respondent's solicitors (Allens Arthur Robinson (AAR)) of the proposed sale and asked for the lessor's consent to assignment of the lease. By May 2003 the consent had still not been furnished, and dispute had arisen over attempts by the lessor to vary the terms of the lease especially as to the scope of the permitted use. 4 The applicant filed an application for interim orders on 29 May 2003 and its principal application for relief under the RLA on 30 May 2003. The lessee was concerned that it would lose the sale. The case against the lessor was put on two bases: one that the lessor had failed to provide consent, and thereby breached s 39 of the RLA (a 'retail tenancy claim' under the RLA, see ss 70 and following); and the lessor's conduct was unconscionable within the meaning of s 62B (an 'unconscionable conduct claim'). The urgent orders sought were that the lessee's trading activities were consistent with the permitted use and that the lessor was not entitled to withhold consent to the assignment. 5 An urgent hearing was held on 4 June 2003. It transpired that the dispute involved issues as to whether the shop was trading outside the scope of the permitted use as prescribed by the lease. The Tribunal adjourned the hearing when the parties agreed to take the dispute to mediation before the Registrar, Retail Tenancy Disputes, the service created by the RLA. On 12 June 2003 the dispute was mediated, but not all aspects were resolved. To the extent that the dispute was unresolved it remained before the Tribunal. As a result of mediation, the lessor gave consent to the proposed assignment. The sale of the business proceeded, and occurred on 18 June 2003. 6 The lessee's application was preserved by a proviso to the mediation agreement: 'provided however that this release does not extend to or affect [the lessee's] rights to claim as costs, compensation or damages in the proceedings [being the present proceedings] or otherwise: (a) the costs of the proceedings; (b) any additional legal costs and legal expenses incurred by it on or incidental to the assignment as a result of the conduct of [the lessor] (by its servants, agents including solicitors) in relation to the assignment.' Hearing 7 The hearing of the application as amended by the above compromise proceeded on 7 July 2003. 8 Section 39(1) (Grounds on which consent to assignment can be withheld) provides: '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), (d) the circumstances set out in section 80E.' 9 It will be seen that the lessor must give consent unless one of the grounds set out in (a) to (d) is established. Section 41 sets out an orderly procedure for the giving of consents to assignment, providing: ' 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. The lessee may provide the lessor with a copy of a statement in writing that contains the information that is contained in or required to complete the form set out in Schedule 2A that has been provided to the proposed assignee. The statement may be provided if the assignment is in connection with the lease of a retail shop that will continue to be an ongoing business. The layout of the statement need not comply with that of the form set out in Schedule 2A. (b) Before requesting the consent of the lessor to a proposed assignment of the lease, the lessee must furnish the proposed assignee with a copy of any disclosure statement given to the lessee in respect of the lease, together with details of any changes that have occurred in respect of the information contained in that disclosure statement since it was given to the lessee (being changes of which the lessee is aware or could reasonably be expected to be aware). The lessee may provide the proposed assignee with a copy of a statement in writing that contains the information that is contained in or required to complete the form set out in Schedule 2A. The statement may be provided if the assignment is in connection with the lease of a retail shop that will continue to be an ongoing business. The layout of the statement need not comply with that of the form set out in Schedule 2A. (c) For the purpose of enabling the lessee to comply with paragraph (b), the lessee is entitled to request the lessor to provide the lessee with a copy of the disclosure statement concerned and, if the lessor is unable or unwilling to comply with such a request within 14 days after it is made, paragraph (b) does not apply to the lessee. (d) The lessor must deal expeditiously with a request for consent and is taken to have consented to the assignment if the lessee has complied with paragraphs (a) and (b) and the lessor has not within 42 days after the request was made given notice in writing to the lessee either consenting or withholding consent.' 10 No issue was taken as to non-compliance by the lessee with any requirements of the lessor as to the various matters of information provided for in s 41. 11 Section 62B sets out the criteria relevant to the establishment of unconscionable conduct: ' 62B. Unconscionable conduct in retail shop lease transactions (1) A lessor must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. (2) A lessee must not, in connection with a retail shop lease, engage in conduct that is, in all the circumstances, unconscionable. (3) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessor has contravened subsection (1) in connection with a retail shop lease, the Tribunal may have regard to: (a) the relative strengths of the bargaining positions of the lessor and the lessee, and (b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, and (c) whether the lessee was able to understand any documents relating to the lease, and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, and (e) the amount for which, and the circumstances under which, the lessee could have acquired an identical or equivalent lease from a person other than the lessor, and (f) the extent to which the lessor's conduct towards the lessee was consistent with the lessor's conduct in similar transactions between the lessor and other like lessees, and (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessee acted on the reasonable belief that the lessor would comply with that code, and (i) the extent to which the lessor unreasonably failed to disclose to the lessee: (i) any intended conduct of the lessor that might affect the interests of the lessee, and (ii) any risks to the lessee arising from the lessor's intended conduct (being risks that the lessor should have foreseen would not be apparent to the lessee), and (j) the extent to which the lessor was willing to negotiate the terms and conditions of any lease with the lessee, and (k) the extent to which the lessor and the lessee acted in good faith. (4) Without in any way limiting the matters to which the Tribunal may have regard for the purpose of determining whether a lessee has contravened subsection (2) in connection with a retail shop lease, the Tribunal may have regard to: (a) the relative strengths of the bargaining positions of the lessee and the lessor, and (b) whether, as a result of conduct engaged in by the lessee, the lessor was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessee, and (c) whether the lessor was able to understand any documents relating to the lease, and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessor or a person acting on behalf of the lessor by the lessee or a person acting on behalf of the lessee in relation to the lease, and (e) the amount for which, and the circumstances under which, the lessor could have granted an identical or equivalent lease to a person other than the lessee, and (f) the extent to which the lessee's conduct towards the lessor was consistent with the lessee's conduct in similar transactions between the lessee and other like lessors, and (g) the requirements of any applicable industry code, and (h) the requirements of any other industry code, if the lessor acted on the reasonable belief that the lessee would comply with that code, and (i) the extent to which the lessee unreasonably failed to disclose to the lessor: (i) any intended conduct of the lessee that might affect the interests of the lessor, and (ii) any risks to the lessor arising from the lessee's intended conduct (being risks that the lessee should have foreseen would not be apparent to the lessor), and (j) the extent to which the lessee was willing to negotiate the terms and conditions of any lease with the lessor, and (k) the extent to which the lessee and the lessor acted in good faith. (5) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person institutes legal proceedings in relation to that lease or refers to arbitration a dispute or claim in relation to that lease. (6) A person is not to be taken for the purposes of this section to engage in unconscionable conduct in connection with a retail shop lease by reason only that the first-mentioned person fails to renew the lease or issue a new lease. (7) For the purpose of determining whether a lessor has contravened subsection (1) or whether a lessee has contravened subsection (2): (a) the Tribunal must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention, and (b) the Tribunal may have regard to circumstances existing before the commencement of this section but not to conduct engaged in before that commencement. (8) A lessor or lessee, or former lessor or lessee, who suffers loss or damage by reason of unconscionable conduct of another person that is in contravention of this section may recover the amount of the loss or damage by lodging a claim against the other person under section 71A. (9) If the matter of such loss or damage arises in connection with a matter the subject of proceedings in the Tribunal, the Tribunal may proceed to decide it, and in so doing may award such sum as it thinks fit.' 12 The power to award costs is dealt by s 77A of the RLA which in turn adopts the provisions of s 88 of the Administrative Decisions Tribunal Act 1997 (the Tribunal Act) which provides, as relevant: ' 88. Costs (1) … the Tribunal may award costs in relation to proceedings before it, but only if it is satisfied that there are special circumstances warranting an award of costs.' 13 Mr Dempsey represented the lessee. He contended that the lessor had breached s 39(1) of the RLA by not giving the consent to assignment in a timely way, or had breached the clause in the lease dealing with consent to assignment; further that the lessor had breached the obligation not to engage in unconscionable conduct (s 62B); and, alternatively, if neither those heads of claim were made out, that there were 'special circumstances' warranting the making of an award of costs in favour of the lessee. 14 In each case the same amount of monetary compensation was sought, i.e. those legal costs incurred which were over and above those which would have been incurred had the consent been given in a timely way and in accordance with usual practice, i.e.: (i) Solicitors' costs exceeding those that which would have been incurred by the lessee had the consent to the assignment been given in an orderly way by the lessor. Those costs were stated to be $2022. (ii) The costs of the proceedings in the Tribunal (solicitor's costs in respect of the proceedings to 26 June, $2597; counsel's fees to 17 June, $5500 (of which $2000 was for attendance at mediation on 12 June) plus costs in connection with hearing on 7 July 2003 (not specified). 15 It will be seen that the total amount of compensation sought is potentially $10,119 plus the costs in connection with the period since 17 June 2003 in the case of counsel and costs since 26 June 1997 in the case of the solicitor. The total could end up in the range of $13,000-$15,000 – in the estimate of the Tribunal. 16 Mr Dempsey noted that the price negotiated for the sale of the business was a mere $40,000; and in that context having to spend $13,000-$15,000 in legal assistance to procure an assignment was highly disproportionate. Evidence in Support 17 The lessee filed documents detailing the history of the lease and the contact between the lessee and lessor over the assignment. There was no objection to the evidence being produced in this way from the lessor. There was a statement from a co-director of the lessee company, who was the person who ran the business, Mr Rick Forbes. There was no material going to the facts filed by the lessor, other than for some assertions contained in the filed Outline of Submissions. Mr Dempsey also handed up a chronology. 18 The Lease: The lease had commenced on 1 November 1999 and was for a five-year term. As previously noted, the permitted use was 'coffee shop'. The lessee acquired the shopping centre and took over its operation from 1 October 2002. The coffee shop's trading hours were 7 days a week, opening at 9.00 am except for Sunday 10.00 am) and closing around 4.00 pm or 5.00 pm depending on the day of the week, except for Thursday late night trading until 9.00 pm. The shop occupied a designated area; and was adjacent to a food court with other outlets not having a designated area. (There was some contest from Mr Moore, solicitor for the lessee, as to whether this was an entirely accurate depiction of the interrelationship of the food outlets in this area of the centre. It is not necessary to the decision to resolve this conflict.) 19 On 5 May 1999, Mr Forbes sent a fax to the leasing manager in which he stated that 'use will be as a coffee shop in traditional cast with eat in/take away but no limitations as to menu – just in character with coffee shop as given the last two tenants have been unsatisfactory financial performers'. He said further – 'We will need plenty of flexibility to find a successful formula'. The original lessor's letter of offer made 11 May 1999 made no specific reference to the content of the fax. 20 The lease dealt with consent to transfers of the lease at cl 15. Clause 15 is generally consistent with the provisions of the RLA except for cl 15.3. Under s 7 of the RLA a provision of a lease is void to the extent that it is inconsistent with a provision of the RLA. Clause 15.3 provides that the lessor may withhold approval of a transfer if the proposed new lessee proposes to change the Permitted Use. This does not reflect the language of s 39(1). Section 39(1) only permits consent to be withheld if 'the proposed assignee proposes to change the use to which the shop is put.' 21 Prospective Sale of Business: After the lessee obtained a buyer in February 2003 it notified the Centre Manager, Mr O'Toole. Mr Forbes provided the lessor with the completed forms, disclosures and other information to the lessor on about 23 February. He gave instructions to his solicitor, Moore, on 10 March 2003, and Moore wrote to the lessor's solicitors, AAR, on 11 March 2003, advising them of the deal and seeking consent to assignment of the lease. The letter sought advice as to the lessor's 'requirements in relation to any proposed assignment of the lease.' The Moore file note contains a file note stating the lessor's solicitor (Ms Delaney of AAR) had responded on 13 March 2003 and said that the 'Centre management is aware and that he checks out first references etc and then instructs.' 22 Conduct in Issue: The lessee contends that the circumstances that then unfolded demonstrate breach of s 39 and unconscionable conduct. 23 In late April or early May, there was a meeting between the shopping centre management, the lessee and the assignee, at which management obtained from the lessee a copy of the menu in use at the time. According to Mr Dempsey the lessor gave, through Mr O'Toole, an oral approval of the proposed assignees and that was followed on 10 May 2003 by the sending of a copy of the proposed Deed of Consent and Assignment of Lease (the Deed) to the assignees' solicitor. 24 Moore's file contains a note dated 16 May 2003 referring to Deed and the Brisbane office of AAR. The Tribunal understands from this that by this time carriage of the matter was now with the Brisbane office of AAR, the lessor being a major Queensland based investment corporation. 25 Moore's file shows that it received a copy of the Deed from the assignees' solicitor on 19 May 2003. The Deed sought to vary the permitted use, prescribe food items to be sold, insert a new Demolition Clause and insert a new Personal Information clause. The lessee was concerned that these changes might derail the sale. 26 By letter dated 20 May 2003 Moore noted that he had had to obtain the Deed from the assignees' solicitor. The reply first referred to some minor drafting issues and matters to do with financial arrangements and guarantors, and then at point 7 asked for the proposed new Demolition Clause to be reviewed, and at point 8 referred to the proposed deletion of Item 12 of the Lease, permitted use, and the proposed insertion of the words 'The retail sale of only those items listed in Annexure 1'. 27 The annexure contains a prescriptive list of food items under the following headings: Main Meals; Toasty Melts; Freshly Cut Sandwiches; Extras; Something Light; Beverages (coffee and various other fruit, soft drink and milk items); Blackboard Menus; Beverages. Mr Dempsey noted at hearing that under Main Meals some meals were permitted and some excluded, for example beef lasagne was allowed, but not vegetarian lasagne. 28 Moore requested that there be inserted at the top of Annexure 1, the words 'Eat in or Take Away'. 29 The lessor then decided to desist from the prescription of any menu, and reinstated the terms of the original lease in that respect. By letter dated 23 May 2003, AAR said: 'We note from your telephone call of 21 May 2003 that your client was concerned that QIC [the lessor] was seeking to vary the terms of the existing lease. QIC was not in fact seeking to vary the existing terms and agrees to the assignment of the lease to Mr Nakad on the basis that there is no change to the permitted use of 'coffee shop'. Accordingly fresh assignment documents without the addition of the menu will be forwarded to the assignee's solicitor for signing. We have also advised the assignee's solicitors of our client's instructions.' 30 Moore by letter dated 24 May 2003 replied: 'We are instructed to advise you that today, during a telephone conversation between Mr Forbes of our client company and Mr Ross O'Toole of the lessor, it was stated that the lessor would not allow take-away to be served from the leased premises. Further, Mr O'Toole today informed the purchaser's representative of this position.' 31 There was no direct evidence from either Mr Forbes or Mr O'Toole placed before the Tribunal, other than a statement of Mr Forbes dated 10 June 2003 referred to below. There was no dispute by the solicitor for the lessor that the issue that lay at the heart of the dispute was the matter reflected in the above hearsay account, i.e. that the lessor was seeking to intervene in relation to take away sales from the business. 32 Moore went on to state: 'The purchaser's solicitor has today advised the writer that his client will not proceed with the purchase of the business unless your client agrees to point No 8 of our letter [all items to be sold by take-away]. The purchaser's insistence on this has only arisen as a result of representations made to him by Mr John Marcou on behalf of the landlord that the assignment of lease will incorporate a restraint preventing the selling of take-away items from the shop's menu. This has been an established part of the business carried out continuously since the commencement of the lease with the knowledge of the landlords.' 33 Again there was no direct evidence placed before the Tribunal on these matters. Again there was no dispute by the solicitor for the lessor that the matter of being able to continue the existing practices of the business including take-away was material to the proposed assignee. 34 AAR then replied by letter dated 26 May 2003: 'Our client has already consented to the assignment of the lease without any variation to the permitted use of 'coffee shop'. If your client insists on the addition of the words 'eat in or take away' then that is a separate request by your client to vary the permitted use under the lease. QIC has no obligation to agree to the requested change in permitted use by your client and does not agree to the requested variation to the lease. If your client's proposed purchaser wishes to continue with the sale on the basis that he is purchasing your client's lease without variation to the permitted use then QIC as landlord has no objection, as we have already indicated. In addition, our client reserves its right to recover the additional legal fees it has incurred due to your client's requests.' 35 A fresh Deed was provided which made no reference to any change in permitted use or to the prescribed menu, and only included by way of proposed change the Demolition Clause and the Personal Information Clause. 36 Moore replied by letter dated 28 May 2003, reiterated that the basis on which the business had been conducted, noted that there was no response to the statement that the business had always been conducted so as to include take away, noted that there had been no response to this statement, and continued: 'Accordingly, we seek an undertaking from your client that it accepts that the permitted use includes the sale of take away food and beverages sold at the coffee shop and that it will not, during the Lease or any renewal thereof, take any steps to attempt to restrict the established use of the premises for take away activity. Please provide that undertaking by 2.00 pm 28 May 2003. In the absence of any satisfactory response, our client may take such action as it is advised including injunctive relief and costs.' 37 AAR indicated that there was insufficient time to get instructions, and later the same day Moore wrote: 'Our client has informed us that the approved assignee will not proceed with the purchase unless the undertaking is provided or the matter is otherwise clarified satisfactorily as soon as possible.' 38 Again there is no direct evidence; again there was no dispute that the proposed assignees were considering withdrawing at this point. 39 A reply was requested by 6.00 pm that day. AAR objected to the imposition of 'unilateral deadlines'. 40 The lessee commenced proceedings in the Tribunal the next day by filing the application for urgent interim relief, and then the principal application on 30 May 2003. 41 The next item of importance is a formal memorandum from AAR addressed to Moore dated 30 May 2003 (the day the lessee commenced action in the Tribunal). It sets out a list of hot and cold food items and drinks that the lessor was prepared to permit to be sold from the shop. The key exclusion is that the tenant was not to be permitted to serve 'sandwiches, hamburgers or toasted sandwiches as takeaways.' Moreover, the offer requested that the tenant 'not openly advertise or openly promote the sale of takeaways by way of signage or otherwise.' 42 AAR provided Moore on 4 June 2003 with the latest version of the Deed with no amendments in relation to permitted use and amendments only as to the Demolition Clause; and the Personal Information Clause. 43 Mr Forbes responding to direction given by me on 4 June 2003 set out in a letter dated 10 June 2003 his account of the current scope of activities of the shop. 44 According to Mr Forbes, from the outset of his occupancy he sought to serve a very diverse menu and choice of offerings because, he said, of 'the financial failure of previous operators'. He said that he and his partner understood coffee shop to be an apt description for the kind of business commonly conducted by coffee shops in similar shopping centres in the area. He described this as: a shop serving 'light meals, sandwiches, soups, steak sandwiches and hamburgers, a variety of coffees and drinks both prepared on the premises and pre-prepared and prepackaged by manufacturers, ice creams, milkshakes, salads and fruit salads, cakes and biscuits and such foods typically available from your general suburban coffee shop on either an eat in or take away basis.' 45 He said: '[W]e also sought to ensure that by using the generic term coffee shop we would not be precluded from updating our menu to keep pace with the changing fashions in coffee shops rather than be restricted by a prescriptive list which could conceivably restrict us from responding to changing market tastes for the duration of the lease and any subsequent extension thereof. We believe that the definition of the use in the lease only would restrain us from selling foods or products or methods of product delivery that were inconsistent with the diversity of offering from suburban coffee shops.' 46 He continued: 'We had specifically sought in negotiations to avoid the use being designated as a café or a coffee lounge which could have been more restrictive to the scope of our business. We attach a copy of our current menu and the blackboard menus displayed on our premises. We believe these foods together with the refrigerated prepackaged soft drinks, fruit juices, milk drinks, iced confections and fresh fruit sold from our shop are consistent with the operation of similar shops throughout Sydney and our area and in continuance with the original intention expressed in our lease. We do not accept that the usage term would operate to exclude us from offerings consistent with those made in any other coffee shop in the food industry. The exclusions, which after three and a half years of operation the landlord now seeks to impose, are inconsistent with the continuous and consistent offerings of our business operation in the centre from commencement of business and both during ownership of the landlord and its predecessors in title.' 47 The Tribunal will not set out the entirety of the attached menus, but in terms of the position as put by the lessor to the lessee as at 30 May 2003 the items that were in contention were, at least, the following: the lessee's sale as takeaways of sandwiches, steak sandwiches and hamburgers; and possibly also Turkish breads and foccaccias and chicken schnitzel. It is clear from a note added by Mr Forbes to this information ('We have always offered any item in our menu available as take away or eat in.') that he saw it as impractical to limit service of contentious items to the restaurant area (there were 23 tables and 46 places provided for under the lease). 48 The assignees' solicitor wrote on 11 June 2003 indicating that the assignees were only prepared to proceed with the sale on the basis that current items sold by the lessee can continue to be sold, and that there be no restriction in relation to what can be sold by take-away. 49 As noted earlier the mediation held 12 June 2003 resulted in the existing use issues being resolved thus enabling the sale to proceed. 50 On 18 June 2003 Mr O'Toole furnished the following statement to the proposed assignees: '(i) the nature and extent of the business which has been conducted by [the lessee] as lessee under the lease from 1 November 1999 to date has been conducted within the permitted use of 'coffee shop' in accordance with the lease, (ii) to the extent that [the lessee] has sold items on a take-away basis to date (which parties acknowledge has represented approximately 25% of [the lessee's] revenue from the shop) such sales have been conducted within the permitted use of 'coffee shop' in accordance with the lease; and (iii) the permitted use of 'coffee shop' includes the sale of food and beverages by way of catering service.' Lessor's Reply 51 Mr Holmes for the lessor gave oral and written submissions. He did not introduce any additional evidence. His submissions assert: 'As to the relative strengths of the claims made by the parties, the lessor did have a tenable basis in fact and law on which to defend the proceedings. The fact that the parties have come to a commercial resolution of the dispute through mediation does not derogate from that fact. No evidentiary weight should be given to the statement made under the Settlement Agreement by the Lessor (the Statement) [this is a reference to the statement dated 18 June 2003 by Mr O'Toole] in relation to the permitted use of the Lessee's premises in determining whether, at law, the permitted use of 'coffee shop' includes the sale of take-away items. The Statement was made in the context of a commercial resolution of the matter pursuant to a mediation and as one part of an overall settlement.' 52 Later the submissions assert: 'The Lessor was entitled to, and did, preserve its rights in circumstances where it had a bona fide difference of opinion from the Lessee as to the permitted use of the Lessee's premises. The Lessor maintains that it is the Lessee that sought an amendment to the lease by its insistence on the addition of the words 'on an eat in or take away basis' to the permitted use in the assigned lease. The Lessor was not obliged to agree to the assignment of a lease that included that amendment. Nevertheless, at all times (before and after the commencement of the proceedings) the Lessee was willing to negotiate and mediate with the Lessor in good faith for a mutually satisfactory resolution of the dispute. The Lessor offered a number of alternative formulations of the permitted use, including limited Take Away Sales, which the Lessor rejected. By contrast, the Lessee declined to negotiate or mediate until the Tribunal formally referred the parties to mediation. The Lessor participated promptly and in good faith in the mediation which resulted in the settlement of the substantive appeals. … If any party was unreasonable, it was the Lessee in failing to accept any proposals and compromises proferred by the Lessor.' 53 In respect of the Tribunal's costs discretion, the lessor contended that there were no 'special circumstances' here of the kind recognised in past cases by the Tribunal as warranting an exceptional order for costs. This was particularly so given that the mediation had resolved the primary issue in dispute (the permitted use issue) and accordingly there was no adjudication on that matter to which an order for costs could properly attach. 54 Mr Holmes claimed that his client had offered three alternative ways to resolve the dispute, referring to the various draft Deeds that his client had placed before the lessee, and that this showed that it had sought to act conscientiously and in good faith. Mr Holmes submitted that the mediation had settled the substantive dispute between the parties in that the issue of the permitted use was resolved. 55 Mr Holmes submitted that it was not open to the lessee to rely on the lessor's non-response to the statement made by Mr Forbes by fax in May 1999 as to his intentions as it had not been listed by him as a pre-lease representation on which he relied in the disclosure statement. 56 There was an issue raised by Mr Holmes as to when time commenced for the purposes of the 42 day period. Mr Holmes referred to the file note of 13 March 2003 indicating that Ms Delaney was waiting on instructions from management re the proposed assignees. Mr Holmes said that the proposed assignees' financial statements were only presented to his client on 14 April 2003 and this is when time commenced to run. 57 Mr Holmes' objection would have been a good objection had Mr Forbes been attempting to widen the scope of a permitted use by reliance on silence in the early days of operation of the lease. But the present issues have arisen over three years down the track, and there is no dispute that Mr Forbes had been running a wide business of the kind foreshadowed in the fax for some time. It is those circumstances that are material to the present case. 58 When Lessor's Time Commenced for Dealing with Notice of Proposed Assignment. On the basis of the material before me, I am satisfied that the letter from Moore to AAR on 11 March 2003 constituted a notice sufficient to trigger the time period. This matter has to be viewed in a practical commercial way. Section 41 does not start after the assessments are made by the lessor of the financial capability and suitableness of the prospective assignee. I accept Mr Holmes point that s 41 does not address a situation where non-responsiveness by the proposed assignee impedes the lessor's ability to dispose quickly of the lessee's application for consent to the assignment. This difficulty is noted at [47-720] of Lang's Commercial Leasing in Australia (CCH) (Lang). 59 If Mr Holmes' submissions as to when time starts to run for the purpose of s 41 were correct, the possibilities open to a lessor to delay completion through delay in the assessment process would be compounded. If there is delay on the part of the assignee in furnishing financial material that is unreasonable then the lessor would, I consider, be entitled to withhold consent. 60 Reasonableness or Otherwise of Lessor's Conduct. Mr Holmes noted that the law does not preclude the lessor and assignee from mutually varying the lease. The Tribunal agrees. But in this case the evidence is that the lessor was wishing to cut back the scope of the use to which the premises were being put by the lessee and there is no evidence that the assignee was prepared to accept any reduction in the scope of existing use. 61 The Tribunal accepts Mr Holmes' submission that it will sometimes be the case in shopping centres that a level of prescription will occur in relation to items that can be sold, and lines which may be seen as artificial will sometimes have to be drawn, in order to preserve the mix and to do equity as between traders. But this, on the evidence before us, is not a case of that kind. Here there was an attempt to cut back the menu. Mr Holmes referred to the fact that at one stage of the interchange between the parties the lessor had offered to assign the lease without change. Mr Holmes said that this showed that his client had moved to act lawfully, once it had been criticised over trying to vary the lease, and accordingly the lessee was not entitled to any remedy. 62 This submission ignores, we consider, the commercial circumstances as they had developed to that time. As a result of the interventions that the lessor had made in terms of the menu, and by virtue of its statements seeking to restrict takeaway and the variety of food items offered for sale, it had raised doubts in the mind of the lessee and the proposed assignees as to what was permitted and as to what might happen in future. It was therefore not surprising that the lessee now sought to obtain clarity as to what was demanded. 63 Mr Forbes' statement, the only evidence on this matter before the Tribunal, is that the coffee shop had since 1999 been running, in effect, as a general sandwich and food outlet serving popular morning and lunch time items including baked meals, with a take away element. The take away element accounted for about 25% of the business's turnover. It may well have impacted on nearby outlets in the food court, but there was no evidence that there had been any concern expressed by the original lessor or, until the assignment was proposed, the present lessor. 64 As we have already stated, the 'use to which the shop is put' refers in our view to what is actually occurring at the time the assignment is proposed in the conduct of a business as distinct from what might have been said to be the scope of the permitted use in the original lease. If a lessor does not act within a reasonable time after becoming aware of an extension in the scope of a permitted use, the lessor is, as we see it, fixed with the consequences, which include the possibility that the lessee may assign the lease on that basis for, at least, the remainder of its term. 65 As to the overall reasonableness of the lessor's conduct, it is not desirable for a lessor to use the context of a possible sale of the business and assignment of the lease as the forum within which to agitate the desirability of clawing back trading activities that it may see as going beyond the original permitted use, and see as interfering with the mix that it is trying to achieve in the centre. Any reservations or concerns as to the way a business has developed should in the first instance be raised with the current lessee on a confidential basis. It is obvious that prospective purchasers will have dealt with a lessee on the assumption that what is happening at the shop is permitted, and they will normally have made their own enquiries of centre management in that regard to satisfy themselves that there is nothing in the way of lessor's objections that the lessee has not disclosed. 66 In this instance the evidence (sparse as it is) is clear that from day one Mr Forbes ran the business with what might be called a generous view of the ambit of the expression 'coffee shop'. There is no evidence that he was ever challenged by management over the next three or so years in that regard. 67 Finding on Consent to Assignment. The lessor did not deal with the request for assignment promptly. It was nearly two months after Moore's letter that the lessor made it clear (through the communication with the proposed assignees' solicitor enclosing the draft Deed) that restrictions were to be proposed on the way in which the business was presently being run. We agree with Mr Dempsey that this concern should have first been made known to the lessee, and he should have been given an opportunity to address it ahead of it being canvassed with the prospective assignees. They could well have walked away from the sale at that point. While the consent remained outstanding the lessee remained at risk of losing the sale. 68 We are satisfied that the lessor was in the circumstances not entitled to withhold consent. 69 There is a breach of s 39(1). 70 As to the lessor's submissions as to the statement of Mr O'Toole, we do not rely on it in reaching this conclusion. The uncontradicted statement of Mr Forbes dated 10 June 2003 is sufficient. 71 Unconscionable Conduct. In light of this finding, it is not necessary to go on to consider the unconscionable conduct claim, though as indicated the narrative of the events in this case raises troubling issues in that regard. We simply note that the following circumstances may raise issues in terms of the factors set out in s 62B(3): (a) the relative strengths of the bargaining positions of the lessor and the lessee, - a small business versus one of the country's largest investment funds whose legal affairs are managed by a major law firm (b) whether, as a result of conduct engaged in by the lessor, the lessee was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the lessor, - a real issue as to what were the legitimate interests of the lessor on this occasion given the terms of ss 39 and 41 of the RLA - seeking to vary the terms of the lessee's lease within the five year term, by way of direct negotiation with the prospective assignee and seeking to make those terms a condition of the assignment (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the lessee or a person acting on behalf of the lessee by the lessor or a person acting on behalf of the lessor in relation to the lease, - the issue of the attempt to vary the menu as against existing practice which had not been the subject of any prior confidential warning to the lessee - the issue of the expression of that concern directly to the prospective purchaser - the attempt to vary material terms of the lease which went beyond any reasonable approach to clarifying the terms of the permitted use so as to avoid contention in future (i) the extent to which the lessor unreasonably failed to disclose to the lessee: (i) any intended conduct of the lessor that might affect the interests of the lessee, - generally, the way in which the lessor dealt with the prospective assignee thereby arguably raising risks in relation to the sale (k) the extent to which the lessor and the lessee acted in good faith. - this issue is also raised. 72 Nor is it necessary to consider whether to exercise the costs discretion in favour of the lessee. Compensation 73 The lessor breached an obligation imposed by the RLA, and accordingly the Tribunal may make an order of the kind sought. Section 72(1)(a) provides: ' 72. Powers of Tribunal relating to retail tenancy claims (1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate: (a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person.' 74 The Tribunal also has power to award interest on the whole or part of the claim at a specified rate not exceeding the District Court rate: s 72A. There is cap on monetary (in amount or in kind) of $300,000: s 73. There is no application for interest in this case, and the amount sought is well under the limit. 75 We agree with the lessee's primary submission that this is a case where the lessee should never have found it necessary to engage legal assistance beyond that appropriate to conclude a contract for the sale of the business and for obtaining the lessor's endorsement of any documents relating to the assignment of the lease. As the lessee asserts, this should have been a simple transaction. 76 The lessee's solicitors acted appropriately on or about 24 May 2003 in pressing his interests vigorously and in the days to 28 May 2003, the period after the lessor's position was made crystal clear. The non-co-operative responses of the lessor as conveyed through its solicitors were inappropriate. 77 Here a lessee of some years standing wished to depart the shopping centre and had found a replacement. There had never been any action taken suggesting that the business was operating in a manner that was unacceptable to the lessor. The matter was raised for the first time in the most sensitive of contexts – a prospective sale that was yet to be completed – and, on the (limited) evidence before the Tribunal, the objection was made known first to the prospective purchaser and not discussed first in confidence with the current lessee and prospective seller. 78 Laws similar to the RLA have been enacted around Australia. The Victorian Civil and Administrative Tribunal has noted in a case arising under the Victorian Retail Tenancies Reform Act 1998 that the issue of the lessor's entitlement or otherwise to withhold consent must be considered 'in the context of a statute which has an evident purpose of protecting and fostering small business and encouraging innovation by the establishment of new small businesses': Le Coz v Innominata Pty Ltd [1999] VCAT 35 at [18]. 79 The lessee proceeded to seek relief in the nature of injunctive relief in the Tribunal without first going, as the RLA ordinarily contemplates, to the Registrar, Retail Tenancy Disputes, for mediation. The RLA allows for such a possibility. The obligation to go first to mediation contains this exception: 'This section does not apply to proceedings before a court [the Tribunal being a court for this purpose] for an order in the nature of an injunction': s 68(3). The present are the kind of circumstances in which a commercial lessee has historically directly approached the courts to obtain a declaration or injunctive relief: see Lang at [12-220]. The Tribunal's power to make orders of this kind is found in ss 72(1)(f)(ii) and (iii) and 72(4). 80 The uncertainties and difficulties that face ordinary commercial tenants who are met by a withholding of consent are recounted in Lang; and in Croft, Retail Tenancies (3rd ed, 2000, Leo Cussen Institute, Victoria) at 126-128. The RLA represents a stricter pro-lessee position than has been reflected historically in commercial leasing practice. 81 A dispute over consent to assignment is not to be addressed by the 'reasonableness' or otherwise of the lessor's conduct in withholding the consent, as might have been allowed at common law. The RLA in s 39(1) simply permits withholding of consent in four defined circumstances. None of them turn on generalised notions of 'reasonableness'. 82 There should in our view never have been a need for the lessee to consider litigation in the Tribunal as a way of resolving this matter. It was reasonable to engage counsel. These considerations all favour compensation equivalent to an indemnity costs order. 83 Quantum. We are satisfied that the lessor should meet all his legal costs other than those attributable to the costs he would have incurred had the sale of the business and the assignment of the lease proceeded in the orderly way contemplated by the RLA. There should be no adjustment to remove the costs incurred in relation to the mediation. 84 Here a business sale involving the relatively small sum of $40,000 (which amount included equipment and stock) was held up, and placed at risk. The lessee could have expected to incur costs on his solicitor's side of about $1500 and in relation to the costs charged by the lessor for consent to assignment of about $750. Instead the lessee has ended up spending about $15,000 or so extra in getting this matter resolved. 85 The quantum is assessed as follows: Solicitor's costs above and beyond those which ordinarily would have been incurred in connection with such a matter, the extra amount being $2022; solicitor's costs in respect of the proceedings to 26 June, $2597; counsel's fees to 17 June, $5500 (of which $2000 was for attendance at mediation on 12 June); plus the following further amount, further solicitor's costs in connection with the hearing of 7 July 2003 and this determination; and further counsel's fees in the same respect; together with provision for GST to the extent not covered in the amounts mentioned. The parties are to settle the further amounts. If they cannot agree as to the further amounts, either party has liberty to relist on 14 days' notice. Order