BLINOFF v SIMMONS [2007] NSWCA 233

New South Wales Court of Appeal

CITATION: BLINOFF v SIMMONS [2007] NSWCA 233

HEARING DATE(S): 23 August 2007 JUDGMENT OF: Tobias JA at 29; Basten JA at 1; Campbell JA at 30

EX TEMPORE JUDGMENT DATE: 23 August 2007

DECISION: Summons for leave to appeal dismissed with costs.

CATCHWORDS: CONTRACT – Sale of business – lessors' consent to transfer of lease – obligation of lessees as vendors of business – effect of Retail Leases Act 1994, ss 39 and 41

Retail Leases Act 1994 (NSW), ss 39, 41, Pt 5 LEGISLATION CITED: Supreme Court Rules 1970 (NSW), Part 51, r 4 Uniform Civil Procedure Rules (NSW), r 36.5

PARTIES: Steven Edward Blinoff - Claimant Harry Simmons and Debbie Simmons - Opponents

FILE NUMBER(S): CA 40090/07

COUNSEL: A. Reoch/B. Saunders - Claimant S. J. Stanton – Opponents

SOLICITORS: John Dowling, Campbelltown – Claimant Athena Touriki, Sydney – Opponents

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 4320/05

LOWER COURT JUDICIAL OFFICER: Naughton DCJ

LOWER COURT DATE OF DECISION: 13 November 2006

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40090/07 DC 4320/05

TOBIAS JA BASTEN JA CAMPBELL JA

23 August 2007 STEVEN EDWARD BLINOFF v HARRY SIMMONS & ANOR Judgment 1 BASTEN JA: In this matter there is an appeal from a judgment of Judge Naughton in the District Court in which his Honour handed down reasons on 13 November 2006. In fact the transcript indicates that he announced his decision, which was to dismiss the claim before him, on 3 November 2006. Pursuant to rule 36.4 of the Uniform Civil Procedure Rules (NSW), it seems likely that the material date in order to pursue these proceedings was 3 November 2006. 2 The summons was issued on 1 March 2007 and is therefore significantly out of time, no holding summons having been filed. The claimant needs an extension of time. Under Supreme Court Rules 1970 (NSW), Part 51 rule 4 he had twenty-eight days to file a summons and did not do so. No explanation has been given as to the delay but we have not heard the opponent in opposition. I will leave the matter of an extension of time and assume that an extension might be granted if the matter were otherwise worthy of a grant of leave. 3 The first basis upon which the case below was run was that there was a breach of an implied term of the contract of sale of the business. The parties to the contract were in dispute. It is clear that there were at least three groups or individuals concerned. On one side there was Mr Harry Simmons and Ms Debbie Simmons, who were the lessees of premises at which a takeaway food business operated in Harden Street, Canley Heights. The plaintiff in the proceedings in the District Court was Mr Steven Blinoff, who had sought to purchase the business from Mr and Mrs Simmons. It is clear that there was a contract of sale between those three persons, Mr Blinoff being the purchaser and Mr and Mrs Simmons being the vendors. It was also suggested that the lessors of the premises were party to the agreement. It is necessary then to consider the nature of the agreement. 4 What is known is that there was a sale and purchase for a sum of $60,000 which was described in an invoice given to Mr Blinoff as for the "sale of the shop, goodwill, fixtures and lease". The purchase price was noted in that invoice. 5 The agreement which gave rise to the payment was made, as his Honour found, on or about 1 April 2004, a meeting being held in the shop on that day. Present, and this was not in dispute, were Mr Blinoff and his de facto partner Ms Dodkins, Mr and Mrs Simmons together with Mr John Demarte who was one of the four lessors, being the one who was actively involved in managing the building in which the shop was located. Also present at the meeting was Mr Peter Fornasier of Fornasier Independent Real Estate; he was described as the lessor's letting agent. 6 The trial judge (Judgment, p 13) described the meeting as resulting in an agreement in the following terms. "At the meeting a tripartite agreement was made by which the defendants agreed to sell to the plaintiff the goodwill of the business and their interest in the fixtures and lease for $60,000 together with stock in trade at valuation. In addition it was agreed by the lessors, through Mr Demarte who had authority to bind them, that the whole of the defendant's interest in the leasehold of the premises would be assigned to the plaintiff. It was further agreed that the plaintiff and Ms Dodkins would take up possession of the premises under those agreements on 8 April 2004. Mr Demarte on behalf of the lessors gave them permission to carry out immediate renovations and repainting and to change the shopfront painted sign from Harden Street Fish Shop to Kimmies Hot Food". 7 I should note that Ms Dodkins' name was Kim and the new name of the shop apparently reflected the intention that she would manage the shop: Tcpt, 31/10/06, p 17. 8 In relation to the findings concerning the agreement, the claimant, who was the plaintiff below, makes three challenges to the approach adopted by the trial judge. First, it is said that it was not a tripartite agreement and that the lessors were not party to it. Secondly, it is said that no finding should be made that the lessors at that time consented to the assignment of the lease to Mr Blinoff and, thirdly, it is said that even if there were some form of consent, that could not avoid the entitlement of the lessors to insist on their rights under the Retail Leases Act 1994 (NSW) which it is agreed applied to these premises. 9 So far as the factual question is concerned, there is ample evidence given by the plaintiff and his partner as to what was said at the meeting on or about 1 April. He gave evidence-in-chief as to those present and as to what was said in relation to the transfer of the lease. He was asked (Tcpt, 30/10/06, pp 15-16): "Q. Okay, and what did Harry, being Harry Simmons, say to you about the lease? A. He introduced me to the landlord stating that I'd be the new tenant. Q. And what was said about the lease? A. That it'd all be fine." 10 That evidence was repeated. He was then asked what Mr Demarte had said and he recounted the following exchange: "John, John Demarte and me were having conversations about, about the shop, the landlord and he said that he'd fix the lease when he got back from holidays." 11 Mr Blinoff asked if they could renovate the shop during the Easter weekend, which was 9-12 April in that year, and Mr Demarte agreed to that. There was also evidence that Mr Demarte had authorised his own painter to paint the new name on the shop. 12 There was evidence from Ms Dodkins to similar effect although in less detail, but confirming that Mr Demarte had said that he would "deal with the lease when he got back from his honeymoon" and that he would "fix it up when he got back": Tcpt, 1/11/06, p 21. 13 In cross-examination the plaintiff was shown a letter (from Ex G) addressed to Mr Fornasier from his (the plaintiff's) lawyers and was asked: "Q. It says there paragraph (1) 'in early April 2004 the lessor John Demarte was advised of our clients purchase of the business now trading as Kimmies Hot Food from Harry and Debbie Simmons. Mr Demarte responded with words to the effect that's great we'll organise the lease after my honeymoon'. Did Mr Demarte say that to you? A. Yes he did." 14 A letter in reply from the solicitors for the head lessors to the then solicitor for the plaintiff, dated 13 December 2004, was written after the dispute had arisen between the parties as to whether the plaintiff would be entitled to stay in the premises as lessee. The solicitors for the lessors took a different stance, noting under the heading "Lease Assignment": "Mr Demarte attended a meeting at the subject premises in about April 2004 without prior notice of the subject of the meeting and any statements attributed to him were of a general nature only." 15 However, on the basis of the plaintiff's own evidence and his own case, it was entirely appropriate for the trial judge to have made the factual finding that Mr Demarte, on behalf of the lessors, had consented to the transfer of the lease at the meeting which took place on or about 1 April 2004. Whether that resulted in a single tripartite agreement or merely an indication of consent to an agreement of sale and purchase is beside the point. If consent were given to the transfer of the lease then the plaintiff had an enforceable right as against the lessors to require their consent when the formal documentation was prepared as Mr Demarte had anticipated it would be. 16 The basis upon which, apart from a challenge to the factual finding, the plaintiff now seeks to avoid the consequences which flow from that finding, is to say that the Retail Leases Act confers on the lessor an entitlement to withhold consent notwithstanding what may have been said at the meeting because there is a procedure set out in s 41 of the Act as to how consent is to be requested pursuant to provisions which are taken, according to that section, to be incorporated into the lease. 17 To give support to that contention, reference was made to s 39 of the Act which sets out the grounds on which consent to assignment can be withheld. Subsection (1) states: "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): ... (c) if the lessee has not complied with s 41". 18 With respect, that argument does not address the circumstances of a case in which the lessor has granted consent. The fact that s 41 makes provision for certain procedural steps to be taken prior to obtaining consent to assignment does not preclude a lessor from giving consent to an assignment otherwise than in response to those procedural steps. Section 39 limits the circumstances in which the lessor is entitled to withhold consent to the grounds set out in sub-s (1). One of those grounds is that the lessee has not complied with s 41. That would entitle, but not require, the lessor to withhold consent. 19 In the present case the lessor had, on the view of the facts I have just enunciated, in fact given consent. There is nothing invalid about a consent so given. It is not precluded by the provisions of Part 5 of the Retail Leases Act and it must be understood to be effective according to its terms. Accordingly, in my view, the sections of Part 5 of the Act do not assist the claimant in the present case. 20 The next question is whether the contract included a term as to transfer of the lease which has been contravened by the defendants in the circumstances. There was no written agreement, the parties not being represented by lawyers. The only documentation in relation to the agreement was the invoice to which I have referred. Accordingly, although it was pleaded as possibly an express term, there was no evidence of any oral or written undertaking by the defendants. His Honour rightly treated the claim as based on an implied term. The implied term which was said to be part of the contract of sale was that, "the defendants would secure the assignment of the lease to the plaintiffs". 21 His Honour suggested that that term was not one which it would be reasonable and equitable as between the parties to imply. He said all that the defendants could do was to use their best endeavours to procure the assignment but the implied term alleged by the plaintiff made the matter one of absolute obligation as against the defendants. It was not the defendants who had power to grant the plaintiff a lease, but rather it was the lessors. The plaintiff's remedy lay against the lessors rather than against the defendant/lessees in the circumstances of this case. His Honour further noted that the lessors were not joined as parties to the proceedings. 22 With respect, that analysis must be correct. If the alternative approach had been pursued, namely that the defendants would use their best endeavours to procure the assignment, it may be that no case could have been made out because nobody ever asked Mr and Mrs Simmons to do anything to achieve that end. That was no doubt because the plaintiff, having moved into possession of the premises and having taken steps to renovate and repaint with the consent of the lessor, assumed for several months that the lessors had indeed consented and the only question outstanding was the formality of the lessor providing the necessary documentation to allow the assignment or transfer of the lease to be registered. 23 Indeed, on 23 February 2005, when it became clear that the lessors were not prepared to treat the lease as having been assigned to the plaintiff, the solicitors for the vendors wrote to the solicitors for the plaintiff noting that in the circumstances it might be necessary for him to take action, in which the vendors offered to join, to force the lessors to grant the transfer in a registrable form. 24 The letter addressed to the then solicitors for the plaintiff concluded: "As Mr Jeweller pointed out to you, it could be appropriate now to prepare a Transfer of Lease for approval and execution of our clients, and then registration by you of the Transfer at the Land & Property Information Centre. Finally, we would have thought all the acts of part performance on the part of the Landlord with regard to accepting your client as an Assignee of the Lease, would support any application by your client, and maybe a joint application of your client and ours at the Retail Leases Tribunal for an Order that the Landlord consent to the Assignment of the Lease". 25 Whether or not that was the reason, it is clear that no case was pursued on the basis that the defendants had failed to take steps to use their best endeavours in accordance with a term to that effect, which might well have been implied. However, his Honour's refusal to imply a term which provided that the defendants would guarantee the assignment and registration of transfer of the lease was not in error and as no alternative was pursued there was no breach of contract on the part of the defendants. 26 Finally it was said the contract was frustrated by the failure of the lessors to consent to the assignment of the lease. This argument depended upon the lessors not being party to the contract for the sale of the business, including the transfer of the lease, and no doubt was posited upon the proposition that there was no consent to the transfer of the lease by the lessors. If there had been consent, then the steps open to the plaintiff to enforce the transfer as against the lessors were those outlined, with some minor inaccuracies, by the solicitors for the vendors in their letter to which I have just referred. 27 The fact that consent was given at the meeting on 1 April 2004 renders it impossible to maintain a claim based upon frustration. It is not the case that the contract became frustrated or incapable of being performed by the plaintiff in circumstances where the transfer did not take place. There may have been no default on the part of the defendants, but on the factual finding I have indicated which was made by his Honour, and which is not in doubt, there was an ability on the part of the plaintiff to insist that the transfer be prepared, consented to and registered. As his Honour noted, there were other difficulties with the case in frustration. It is not necessary to address them for the present purposes. 28 For these reasons in my view the application for an extension of time and for leave to appeal do not have tangible prospects of success. If leave were to be granted the appeal would be refused. Given that full argument has been heard, I would assume that an extension of time is available to the claimant but I would refuse leave to appeal. The parties may be heard in relation to costs. 29 TOBIAS JA: I agree. 30 CAMPBELL JA: I agree. 31 BASTEN JA: The orders of the court will be that the summons for leave to appeal is dismissed with costs. **********