Supreme Court New South Wales Medium Neutral Citation: Burling Realty Commercial & Residential Sales Pty Limited ACN 134 887 291 v L J Hooker Limited ACN 003 890 453 [2012] NSWSC 551 Hearing dates: 14 to 16 May 2012 Decision date: 24 May 2012 Jurisdiction: Equity Division Before: Ball J Decision: (1)Declare that the defendant has given approval to the plaintiff pursuant to clause 3.3 of the residential franchise agreement made on 8 April 2009 between the plaintiff and the defendant (the Franchise Agreement) to operate the Business (as defined in the Franchise Agreement) from the premises known as 19 Broughton Street, Kirribilli, New South Wales. (2)Order that the defendant be restrained from terminating the Franchise Agreement in reliance on the notice of breach dated 19 January 2012. (3)Order that the defendant pay the plaintiff's costs of the proceedings. Catchwords: EQUITY - permanent injunction - order restraining termination of franchise agreement - no question of principle. Cases Cited: Jones v Dunkel (1959) 101 CLR 298 Manly Council v Byrne [2004] NSWCA 123 Category: Principal judgment Parties: Burling Realty Commercial & Residential Sales Pty Limited ACN 134 887 291 (Plaintiff) L J Hooker Limited ACN 003 890 453 (Defendant) Representation: JC Giles (Plaintiff) G Lucarelli (Defendant) Somerville Legal (Plaintiff) Thomson Lawyers (Defendant) File Number(s): 2012/51331 Judgment 1The plaintiff, Burling Realty, operates commercial and residential real estate agencies as a franchisee of the defendant, LJ Hooker. Prior to 22 October 2011, it operated both franchises from premises situated at Level 7, 221 Miller Street, North Sydney. However, on 15 August 2011, it exchanged contracts to buy the retail business carried on by Deborah Richardson Real Estate in Kirribilli, which included a lease of premises in Broughton Street, Kirribilli. Following the completion of that purchase on 21 October 2011, Burling Realty started operating its residential franchise from the Broughton Street premises. 2LJ Hooker says (and it is not disputed) that cl 3.3 of the residential franchise agreement required Burling Realty to obtain LJ Hooker's approval to the move to the Broughton Street premises. LJ Hooker further says that that approval was never sought nor given. On 19 January 2012, following complaints from the LJ Hooker Mosman franchisee and an unsuccessful mediation, LJ Hooker served a notice of breach requiring Burling Realty to cease operating its retail franchise from the Broughton Street premises by 29 February 2012. In response, Burling Realty commenced these proceedings seeking various interlocutory orders including an interlocutory order restraining LJ Hooker from terminating the residential franchise agreement. Those interlocutory orders were made by consent on 20 February 2012. The question now is whether those orders should continue on a final basis. The answer to that question turns solely on whether LJ Hooker gave its approval to Burling Realty moving its retail franchise to the Broughton Street premises. Background facts 3The directors of Burling Realty are Mr Burling and his wife, Ms Saul. Mr Burling has been working continuously as a real estate agent since 1967 and has been operating a real estate agency in North Sydney for approximately 36 years. Over that time, he has built up a successful business, particularly in the area of commercial real estate. 4In October 2008, Mr Burling had discussions with Mr David Hopkins, who was then and at all relevant times remained a franchise manager with LJ Hooker, concerning the possibility of Burling Realty becoming a franchisee of LJ Hooker. Following those discussions, Mr Hopkins wrote to Mr Burling on 27 October 2008 indicating that LJ Hooker was in a position to move forward with a commercial franchise agreement. In relation to the residential franchise, Mr Hopkins said: With regard to the residential franchise opportunities available we currently have franchise agreements in place for parts of the 2060 postcode which include McMahons Point, Waverton, and in 2061 which includes Kirribilli. 5Following that letter, Burling Realty made an application for both a commercial and a retail franchise. On or about 17 December 2008, Mr Hopkins informed Mr Burling that Burling Realty had been accepted as a commercial franchisee, but that its application for a residential franchise had been rejected. It seems clear that the residential franchise was rejected because of objections from the Mosman franchisee. 6On 17 December 2008, Mr Burling wrote to Mr Hopkins asking LJ Hooker to reconsider its position. What happened next is unclear. It appears that the issue was raised with the Mosman franchisee who proposed what was said to be a compromise which would have restricted Burling Realty's ability to market outside a defined area. Burling Realty maintain that that compromise was rejected in a letter sent to Mr Hopkins on 19 December 2008 in which Mr Burling said: We are still prepared to go ahead with our application for both franchises on the basis that the restricted limited area which is offered us is the north the area ends at Falcon Street, east to Merlin Street, south down Alfred Street and east across to Kurraba Road intersection of Clark Road North Sydney and then south taking in the old submarine base and Kirribilli. Mr Hopkins, however, says that he never received that letter; and there is no further correspondence in evidence or any evidence of other conversations concerning the matter. There is, however, an email dated 18 December 2008 from Mr Hopkins to other employees of LJ Hooker in which Mr Hopkins says: The conditions provided to this application have been accepted by the applicant and on that basis the application has now been approved. 7The residential franchise agreement was made on 8 April 2009, although it is expressed to commence on 1 February 2009. Under the terms of the agreement, LJ Hooker grants Burling Realty a franchise to operate an LJ Hooker retail business from the premises at 221 Miller Street for an initial term of 5 years, together with two options for renewal of 5 years each. Clause 1.1(b) of the franchise agreement provides: (b) The Franchisee acknowledges that: (i) this Agreement does not give the Franchisee any exclusive or specific right to any area or territory in which the Franchisee may operate; (ii) if at any time the Company gives maps or areas to the Franchisee for establishing focus areas of sales or for any other reason, those areas do not constitute an exclusive territory and the Franchisee must comply with rules about marketing that the Company sets. 8Clause 3.3 of the agreement relevantly provides: (a) The Franchisee must only operate the Business from the Premises or such other Premises approved by the Company after written application by the Franchisee. (b) If the Franchisee wishes to move from the Premises or if the Premises are destroyed or rendered inaccessible, the Franchisee must apply to the Company giving details of the alternative Premises it proposes to move the Business to. The Franchisee must not commence business from premises other than the Premises unless the Company has approved the new premises. The Company may withhold approval if it believes the proposed premises may not be optimal for use as a real estate office or may adversely impact on a nearby L.J. Hooker real estate office. ... The "Premises" are defined to be the premises at 221 Miller Street. 9During 2010, Mr Burling had a number of conversations with Mr Alan Lambert, the managing director of LJ Hooker, and Mr Hopkins, among others, about the need to relocate the residential franchise to a shopfront location because of the difficulty of operating a residential real estate business from the 7th floor of a commercial building. 10In or about April 2011, after looking for suitable premises for some time, Mr Burling became aware that the business conducted by Deborah Richardson Real Estate from offices in Broughton Street, Kirribilli was for sale. Included in that business was a substantial "rent roll" - that is, a business of collecting rents and managing residential real estate on behalf of landlords - together with the lease of the premises in Broughton Street. Mr Burling says that he spoke to Mr Hopkins at that time concerning the possibility of Burling Realty acquiring the business. Mr Hopkins, however, does not accept that the matter was raised with him before 25 July 2011. 11On 17 May 2011, Ms Saul sent to Mr Hopkins an email attaching a letter "together with paperwork which has been sent to the franchise department". The letter said: We have made some big changes to the office which will kick in on 1st August 2011 with the purchase of a rent roll and the acquisition of a shop front as suggested by Alan Lambert in our office last August. This will give us an immediate income stream of over $700,000 per annum from the rent roll and a strong presence in our designated area to take advantage of residential sales which to date we have been unable to do. Mr Hopkins says that he read the email on his Blackberry and that it was unlikely he would have opened the attachment. Instead, he says he forwarded the email to the appropriate people within LJ Hooker. 12On 20 June 2011, Mr Burling says that he sent Mr Hopkins a letter which said: Further to our many telephone calls and conversations over the last two months we request permission to relocate the residential division of LJHooker North Sydney to the premises at 19 Broughton Street, Kirribilli while still operating the commercial division from 221 Miller Street, North Sydney. As also discussed with you the acquisition will be one of a going concern giving revenue from day one. In accordance with your request to support this application we have attached a copy of our business plan for the next three years. We cannot proceed with this acquisition further until we have the full go ahead and support of Head Office. Would you please provide us with the appropriate notification so that we can proceed forthwith. Attached to that letter is a business plan. Mr Hopkins maintains that he never received the letter or the business plan. The only copy of the letter in evidence is an unsigned version on blank paper, which Burling Realty maintains is its file copy. 13On 24 July 2011, Mr Graham McDougall, Ms Richardson's boyfriend, sent an email to Mr Burling and Ms Saul in which he said: Unless the heads of agreement is exchanged by close of business on Monday 25th July 2011 which will include a commitment to exchange the "contract of sale" by close of business Friday 29th July 2011 for the purchase of the rent roll in accordance with conditions outlined by our Solicitor Warwick La Hood, we will withdraw from discussions and commence negotiation with two other parties who have declared an interest in acquiring the rent roll. 14Ms Saul wrote on a printed copy of that email the following: 1) We cannot exchange until we have a letter of approval from H/office. 2) When we have the approval then we can exchange. 3) We need to call. speak to Deborah. Ms Saul said that Mr McDougall had no authority to send that email and that he was soon "put back in his box" by Ms Richardson. Nonetheless, the email provoked some concern on the part of Mr Burling and Ms Saul. Mr Burling rang Mr Hopkins to arrange to meet urgently. That meeting was arranged to take place at a lunch at the Royal Sydney Yacht Squadron on 27 July 2011. 15On 26 July 2011, Burling Realty and Endjade Pty Limited, the company through which the business of Deborah Richardson Real Estate was conducted, signed a non-binding heads of agreement for the sale of the business including the rent roll, lease of the property, good will and office equipment. Clauses 9 and 10 of the agreement (which were written in hand by Ms Richardson) provided: 9. A contract for the sale of business between Endjade Pty Limited and "the Buyer" must be exchanged within seven (7) days of the date hereof and a deposit of $100,000.00 to be paid which will be released to Endjade Pty Limited. 10. The settlement date shall be 60 days from the date of exchange of contract for the sale. 16Prior to the lunch on 27 July 2011, Mr Burling gave evidence that he prepared a letter to be delivered by hand to Mr Hopkins at the lunch which said: Further to our discussions regarding the acquisition of the Deborah Richardson Real Estate office at Kirribilli we require the approval to set up the new residential office at 19 Broughton Street, Kirribilli as previously requested. We will not be exchanging contracts for this purchase until we have the necessary go ahead from Head Office. We are already starting to get pressure from the Vendors to exchange contracts. Would you please deal with as a matter of urgency. Again, the only copy of this letter in evidence is an unsigned version on blank paper, which Mr Burling and Ms Saul say is the file copy. 17Mr Burling and Ms Saul met with Mr Hopkins at the Royal Sydney Yacht Squadron for lunch on 27 July 2011. Mr Hopkins was running late for the lunch. Mr Burling and Ms Saul say that they handed Mr Hopkins the letter that had been prepared. Mr Hopkins, on the other hand, denies that he ever received it. Both Mr Burling and Ms Saul say that they discussed the move to the office at Broughton Street at that lunch. According to Mr Burling, Mr Hopkins said that he had seen the premises from the outside and that it was a perfect LJ Hooker office. They discussed what needed to be done and Mr Hopkins said that he would arrange everything. Mr Hopkins, on the other hand, says that this was the first occasion on which Mr Burling mentioned that he intended to purchase the rent roll of Deborah Richardson's business. He says that there was a general discussion about the issues associated with purchasing a rent roll because Mr Burling had not purchased one before. There was also a discussion about the process of "on boarding staff" from Deborah Richardson's business to LJ Hooker. Mr Hopkins made no mention in his affidavit of a discussion concerning the acquisition of the lease. Initially, he adhered to that evidence in cross-examination. He maintained that there was no discussion of the acquisition of a business, but simply discussion of the acquisition of a rent roll. The cross-examination continued in these terms: Q. Did you saying anything about buying a business during the 27 July conversation? A. We talked about the purchase of a rent roll. Q. Did he talk about a shopfront? A. I understood there was a lease at the time that was attached to the purchase. Q. What did he say about a shopfront? A. He didn't say anything. Q. Did he say anything about a shopfront at any time on 27 July? A. We talked about the shop as well and he suggested we go and have a look. Q. At any time on 27 July what did he say to you about a shopfront? A. That was a minor part of the discussion but they said they could take me and show me at the end of the meeting. Q. What did he say at any time on that day about a shopfront? A. We really didn't talk about the shopfront. Q. Did he say any words to you about the shopfront? A. Only that he would show it to me later. Q. Did he say anything along the lines like, taking over this office will give me the shopfront Alan Lambert has wanted me to get? A. He talked about Alan Lambert, yes. Q. And did he say something to that effect? A. Yes. Q. Going back to the lunch, what else did you talk about? A. We talked - well, we went over the discussion of the purchase of the rent roll and then we talked about what we would do next with regards to on-boarding Deborah Richardson and we talked about meeting again and we went over my history with regard to rent rolls and we talked about meeting at Garry's office and I had a number of forms I could help them with. They talked about it being a big purchase. 18At the end of the lunch, Mr Burling, Ms Saul and Mr Hopkins agreed that they would visit the premises at Broughton Street. Mr Hopkins says that he did not know where it was and for that reason followed Mr Burling and Ms Saul. They walked around the premises for a short period of time and met a couple of staff members. Mr Hopkins says that Ms Richardson was not there. However, according to Mr Burling he introduced Mr Hopkins to Ms Richardson and that they had a conversation to the following effect: Hopkins: "Congratulations on the sale and welcome to the Hooker family" Richardson: "We should have exchanged contracts by now, but Garry is being held back because he is waiting on approval from your Head Office" Hopkins: "He has that now, so he can exchange right away" Mr Burling says that later that afternoon he telephoned Mr Hopkins and asked him for written confirmation that approval had been given. 19According to Mr Hopkins, either at the lunch or at Deborah Richardson's office Mr Burling said "taking over this office will give me the shopfront Alan Lambert has wanted me to get" and that he responded to the effect "Okay, but you will still have to send me a letter with all the details of the new office. I need a formal letter seeking approval of the office relocation". 20Mr Hopkins prepared a note of the lunch on his iPad while he was waiting in his car before driving to Deborah Richardson's office. That note is in the following terms: Nth Sydney o/v 27/7/12 Met with Garry Burling and Maryellen Saul. Discussed purchase of rent roll from Deb Richardson r/e in Milsons Point Paid $2mill @$3.65. 6 month retention x 26/7 settle 60 days. Meet new staff and Hookerise them. ***Set up a meeting for Tuesday fortnight to plan recruitment needs etc etc. Garry to send Dave a copy of his presentation pack. Also a photo of new shop Meet with console/rest to see system advantages. Viewed proposed premises and met staff briefly *** Dave to check with Fair trading [sic] on supervision guidelines. Mr Hopkins says he added the last two points to the note following the visit to Deborah Richardson's offices. He says that if he had been handed a letter at the lunch, he would have recorded that fact in his note. 21Mr Hopkins also says that some time on 27 July 2011 Mr Burling said to him words to the effect of: Can you send me a comfort letter that I can show Deborah and her staff to calm them down? I need a letter so I can assure Deborah's staff that they will be joining a well known and professional real estate brand. 22At 8.43 pm on 27 July 2011, Mr Hopkins sent Mr Burling and Ms Saul an email in which he relevantly said: I will send the email/letter as requested shortly from H/O as well as an outlook invite for a planning meeting next tuesday fortnight including an agenda outline. Could you please send me a digital photo of the new premises and I will organise for an external mock up to be done of the building. Any approximate measurements you may have for awnings/windows etc would be helpful. 23Mr Hopkins sent Mr Burling and Ms Saul a second email at 9.01 pm on 27 July 2011. That email said: Attached is a letter from LJ Hooker Corporate announcing our welcoming and involvement in your new business venture, I hope this meets with your intentions and approval. Please call me if not. The attached letter said: It was great to catch up with you today and discuss the commencement of the new LJ Hooker North Sydney residential office. LJ Hooker Corporate is excited with this new venture and we wish yourself, Maryellen [Ms Saul] and all the staff from both businesses all the best in what I am sure will be an exciting transition for everyone involved. As discussed, I will be working closely with you to ensure the changeover will be a seamless move and look forward to meeting with Deborah and her team and welcoming them into the "LJ Hooker" family. That letter was signed by Mr Hopkins. 24Mr Hopkins said in cross-examination that, if permission had been granted, a letter would have come from "corporate services" and that he did not work for corporate services, although the letter was signed by him as "NSW Network Performance Manager LJ Hooker Corporate". It is not clear whether Mr Hopkins intended to draw a distinction between "corporate services" and "corporate". In the emails Mr Hopkins sent that day he described himself as "NSW Network Performance Manager LJ Hooker International Operations". 25Also at 9.01 pm on 27 July 2011, Mr Hopkins sent an agenda for a meeting on 9 August 2011 to Mr Burling and Ms Saul. Included on that agenda were the following items: ... Business Plan and review ... The roll out plan - Timeline from office set-up to opening day. (Implement office start-up worksheet) PR and opening day requirements/invitations ... 26There was a delay in signing the agreement for the acquisition of the Deborah Richardson Real Estate business. It appears that the main cause of that delay was that Burling Realty was waiting for financing. Ms Saul, who was principally responsible for that aspect of the transaction, gave evidence that she was not prepared to progress the financing until she had received approval to the office from LJ Hooker because she did not want to incur valuation fees unnecessarily. 27Contracts were eventually exchanged on 15 August 2011. The total purchase price payable by Burling Realty was approximately $2,000,000. 28In the meantime, there was extensive correspondence between Burling Realty and LJ Hooker concerning the launch of the new office. Some of that correspondence was either addressed to Mr Hopkins or copied to him. It is not necessary to refer to that correspondence in detail. It is clear from it that Burling Realty was progressing the move to the new premises. Of some significance is an email Mr Hopkins sent to Mr Burling on 24 August 2011, which was in these terms: Please see attached the Photo imagery for new premises. I am not liking the design for the upstairs window but I am sure we can come up with something different, your thoughts? I met with John Darrow (Head of Marketing) this afternoon to confirm the new look shop time-frame and he indicated that it will not be this side of xmas and to proceed with the current branding. 29On the evening of 22 August 2011, there was a function at a private room at the Royal Sydney Yacht Squadron which was attended by Burling Realty staff and the staff of Deborah Richardson Real Estate. Mr Hopkins and his wife, who also worked for LJ Hooker, attended that function. According to both Mr Burling and Ms Saul, Mr Burling announced that Burling Realty had purchased Deborah Richardson Real Estate and that it would be turning it into an LJ Hooker residential office. Mr and Mr Hopkins both denied that he said words to that effect. 30On 21 October 2011, Mr William Russell, the head of network development of LJ Hooker, received an irate telephone call from one of the principal's of the Mosman LJ Hooker office complaining about the Broughton Street office. Following that telephone call, Mr Russell rang Mr Burling and said that he was the only person who could approve a change in premises and that the residential office needed to be located in North Sydney, not where it was at present. 31On 22 October 2011, Mr Burling sent a letter to Mr Russell which had been largely drafted by Ms Saul. The letter refers to the fact that Burling Realty sought assistance from LJ Hooker on the relocation and the involvement that LJ Hooker had in advising Burling Realty on the relocation. It also refers to the fact that Mr Hopkins inspected the new premises. In addition, it seeks to explain why it was in LJ Hooker's interests for Burling Realty to move its retail franchise to the new premises. The letter concludes: You may be assured that having been in the business of Real Estate for over forty years and having sat on the Committee of the Real Estate Institute of NSW in my view we have done nothing wrong and have been transparent and complied with all of Head Office rules and requests. The letter makes no mention of the letters and emails of 20 June 2011 and 27 July 2011. Did LJ Hooker give its approval to Burling Realty to operate the retail franchise from Broughton Street? 32The answer to this question depends on whether, on its proper construction, the letter Mr Hopkins sent on 9.01 pm can be interpreted as an approval of the new premises. Originally, LJ Hooker also contended that, even if the letter could be construed as an approval of the new premises, Mr Hopkins did not have authority to give that approval. However, during the course of final submissions, Mr Lucarelli, who appeared for LJ Hooker, rightly in my opinion, accepted that LJ Hooker could not succeed on that point. 33Burling Realty's case is simple. It says that it requested approval in its letter dated 20 June 2011. LJ Hooker delayed in giving a response. When the matter became urgent, Mr Burling arranged for him and Ms Saul to meet with Mr Hopkins, who was the person at LJ Hooker responsible for their franchise, on 27 July 2011 to obtain a prompt response, which Mr Hopkins gave later that day after viewing the premises. Once that approval was given, LJ Hooker gave Burling Realty extensive assistance in preparing the new premises to open as an LJ Hooker office. It was only after an objection from the Mosman franchisee that LJ Hooker sought to change its position. 34In its defence, LJ Hooker sought to resist this case by saying that Burling Realty, knowing that the Mosman franchisee would object to the new office and that consequently approval for it would be refused, engaged in what was an elaborate plan to surreptitiously "annex" the Kirribilli area as part of Burling Realty's franchise business and to that end it misled Mr Hopkins concerning its true intentions. In final submissions, Mr Lucarelli did not press that case. Instead, he submitted that Burling Realty had not asked for approval before 27 July 2011, that Mr Burling and Ms Saul essentially panicked when they received Mr McDougall's email dated 24 July 2011, that they asked Mr Hopkins what they should do at the lunch on 27 July 2011 and were told that they needed to make a written request for approval and that they never submitted that request. 35I do not accept Mr Lucarelli's interpretation of the facts. In explaining why, it is helpful to examine events in chronological order. However, in doing so, it needs to be borne in mind that Mr Lucarelli relied on later events in support of the conclusion that Mr Hopkins account of earlier events is more likely. For the reasons I give, I do not accept that later events support LJ Hooker's case. What I say about earlier events must be understood in that light. 36On the case as Mr Lucarelli put it in final submissions, what happened in 2008 in relation to the initial rejection of the retail franchise is not of great importance. It is clear, however, that Mr Burling and Ms Saul were aware of the obligation to obtain approval to the new office from LJ Hooker. In my opinion, it is likely that they appreciated that that was not a foregone conclusion because of what happened in 2008. That explains why they were unwilling to enter into an agreement with Ms Richardson until they had obtained approval from LJ Hooker. In my view, the contemporaneous note Ms Saul made on the email from Mr McDougall dated 24 July 2011 to the effect that Burling Realty could not exchange "until we have a letter of approval from H/office" is clear evidence that Burling Realty was conscious of its contractual obligations and was aware that approval could not be guaranteed. Although Mr Lucarelli challenged the proposition that the note was a contemporaneous one, in my opinion, there is no merit in that submission having regard to the third point concerning the need to speak to Ms Richardson. 37In my opinion, Mr Burling did send Mr Hopkins the letter dated 20 June 2011 seeking approval. Mr Lucarelli conceded that that letter and the business plan were prepared at about that time. However, he submitted that those documents were only prepared as drafts and that they were not sent because it was premature, since no purchase agreement had been signed and finance had not been arranged. I do not accept that submission. Both Mr Burling and Ms Saul were experienced in business. Both of them understood that it was necessary to obtain approval. It was obviously important to obtain that approval before Burling Realty committed itself to the payment of what was a very substantial sum of money. The letter refers to "our many telephone calls and conversations over the last two months" and says that "in accordance with your request" a business plan was attached "to support this application". If the letter was prepared on or about 20 June 2011 as Mr Lucarelli concedes it was, it provides clear evidence that Mr Burling had had discussions before 20 June 2011 with Mr Hopkins about Burling Realty's plans and the need for approval. In particular, it is difficult to see how Mr Burling would have become aware of the need to prepare a business plan except as a result of discussions with Mr Hopkins. 38The conclusion that Mr Hopkins had been made aware of Burling Realty's plans is supported by Ms Saul's email dated 17 May 2011 in which she refers to "the acquisition of a shopfront as suggested by Alan Lambert". Both Mr Burling and Ms Saul say that the letter dated 20 June was sent; and, in my opinion, it would have been natural for them to send it at that time. 39Mr Lucarelli relies on the fact that the letter dated 20 June 2011 was not on letterhead or signed and that a copy of it had not been discovered by LJ Hooker as well as Mr Hopkins' denial that he received the letter in support of the submission that the letter was not sent. Mr Lucarelli also relies on the fact that subsequent correspondence does not refer to the letter. I will deal with this last submission later. However, I accept Ms Saul's evidence that normally Burling Realty's file copies of letters were unsigned and on blank paper. Moreover, in my opinion, Mr Hopkins was not a credible witness. He denied that he was aware at all that Burling Realty proposed to acquire the Deborah Richardson Real Estate business before 25 July 2007. Yet, for the reasons I have given, that denial is inconsistent with the email dated 17 May 2011, which was clearly sent to him, and the statements made in the letter of 20 June 2011. Mr Hopkins said that he did not read the attachment to the email dated 17 May 2011. But even if he did not read it on his Blackberry, the likelihood is that he would have read it when he got back to the office. More importantly, as I have said, Mr Burling could not have said what he said in the letter dated 20 June 2011 if he had not spoken to Mr Hopkins and been told that he needed to prepare a business plan in support of the application for approval. 40The conclusion that Mr Hopkins was not a credible witness is supported by what happened on 27 July 2011. Mr Hopkins says that he was not handed the letter dated that day at the lunch. The only explanation Mr Lucarelli could give for that letter was that it had been prepared after the event as an attempt by Burling Realty to manufacture evidence to assist its case that it had sought approval. According to Mr Lucarelli, a telling feature about the letter is that it did not refer to the letter dated 20 June 2011. But why that should be a telling feature is not clear. The letter says that Burling Realty required approval "as previously requested". In my opinion, those words are a reference back to the letter dated 20 June 2011. According to Mr Lucarelli, another telling feature about the letter is that Mr Hopkins' contemporaneous note does not refer to the fact that he was handed the letter. However, the note is brief and it is not obvious why Mr Hopkins would refer to the letter in his note if he had the letter itself. More significantly, Mr Hopkins evidence of what occurred at the lunch is implausible and evasive. At first, he sought to say that all that was discussed was the acquisition of the rent roll. Ultimately, however, he was forced to concede that Mr Burling had said something to the effect that Burling Realty would be taking over the office to give it a shopfront. 41In addition, in my view, it is inherently plausible that the main purpose of the meeting was to discuss the need for approval. Burling Realty was being put under some pressure to sign a binding agreement. Understandably, it was not prepared to do so until it knew whether it would get approval. It was natural in those circumstances for Mr Burling to organise an urgent meeting with Mr Hopkins to find out whether there was a difficulty in obtaining that approval. In addition, the only purpose of going to Broughton Street after the lunch was to enable Mr Hopkins to see the premises for himself. 42Mr Lucarelli submits that it is critical to Burling Realty's case that the court accept that Mr Hopkins met Ms Richardson there and that Ms Richardson said to Mr Hopkins that exchange was being held back by the absence of approval and that Mr Hopkins' replied "He has it now", since it is that response which Mr Burling later asks Mr Hopkins to confirm in writing. According to Mr Lucarelli, I should accept Mr Hopkins' evidence that Ms Richardson was not in the office when he was there. Mr Lucarelli submits, relying on Jones v Dunkel (1959) 101 CLR 298, that I should more readily reach that conclusion because Burling Realty did not call Ms Richardson to say that she had a conversation with Mr Hopkins in the terms alleged by Mr Burling. 43In my opinion, there are a number of difficulties with that submission. First, I do not accept that it was more natural for Burling Realty to call Ms Richardson. In my opinion, she was available to be called by either party. Although there is evidence that Mr Burling and Ms Saul continue to have some contact with Ms Richardson, that evidence did not go so far as to suggest that, as a result of some friendship or other circumstance, it was more natural for Burling Realty to call her: see Manly Council v Byrne [2004] NSWCA 123 at [71]-[72] per Campbell J. Second, having regard to the fact that Ms Richardson has no involvement in the current dispute, the only inference that could be drawn from the failure to call her is that she has no recollection of the conversation in question. Third, for the reasons I have already given, I do not regard Mr Hopkins as a credible witness. I prefer Mr Burling's evidence when he says that he requested Mr Hopkins to confirm the approval in writing. 44 Mr Burling's evidence is also supported by what happened that evening. In the email dated 8.43 pm, Mr Hopkins says that he "will send the email/letter as requested shortly from H/O" and he signs the requested letter as "NSW Network Performance Manager LJ Hooker Corporate". The reference to "H/O" is presumably a reference to "Head Office". The reference to "LJ Hooker Corporate" is likely to be a reference to LJ Hooker Corporate Services, the division that Mr Hopkins says was responsible for giving approvals, although he said that he was not employed by that division. If the only purpose of the letter was to give comfort to the staff of Deborah Richardson Real Estate, there would have been no reason for Mr Hopkins to refer to "H/O" or to sign the letter as he did. 45The letter enclosed with the email sent on at 9.01 pm is not clearly expressed as an approval to the new office. It refers to the "new LJ Hooker North Sydney residential office". However, in the context that reference must be read as a reference to the Broughton Street office. The letter does not use the word "approval" or one of its grammatical variants. But, as I have said, I accept Mr Burling's evidence that he asked Mr Hopkins to confirm the approval in writing. The letter says that LJ Hooker Corporate is "excited with this new venture" and wishes Burling Realty "all the best" with it. Mr Hopkins goes on to say that he will be working closely "to ensure the changeover will be a seamless move". In the context, in my opinion, that must amount to an approval to the new premises. 46The conclusion of the previous paragraph is supported by what happened subsequently. As I have said, Mr Hopkins was clearly aware that work was being done to prepare the premises to be opened as an LJ Hooker office. Mr Hopkins was actively involved in the work himself as his email dated 24 August 2011 illustrates. In my opinion, if he was really still waiting for a formal application for approval, he would have said something about that knowing that Burling Realty was pressing ahead on the assumption that approval had been given. However, he said nothing. 47Mr Lucarelli places some weight on the agenda for the meeting that was to occur on 9 August 2011 which states that one of the items was "Business Plan and review". He submitted that that was evidence that Mr Hopkins was still waiting for a business plan, which is consistent with Mr Hopkins' evidence that he never received the letter dated 20 June 2011. However, in my opinion, that item is equally consistent with the fact that Mr Hopkins had received the business plan and proposed that it be discussed at the meeting. 48Mr Lucarelli also placed some weight on the fact that the letter sent to Mr Russell on 22 October 2011 made no reference to the letters dated 20 June 2011 or 27 July 2011. But the whole letter is directed at convincing Mr Russell that it was in LJ Hooker's interest that Burling Realty move its retail franchise to the new premises. It is not a letter directed at explaining why Burling Realty had a legal right to open the new office. It was not drafted by a lawyer. In any event, the last paragraph does assert that Burling Realty had complied with all its obligations. Having regard to those matters, little in my opinion can be read into the fact that the letter does not specifically refer to the 20 June and 27 July letters. 49For those reasons, in my opinion, LJ Hooker gave its approval to the premises at Broughton Street on 27 July 2011. Orders 50The court makes the following declarations and orders: (1)The court declares that the defendant has given approval to the plaintiff pursuant to clause 3.3 of the residential franchise agreement made on 8 April 2009 between the plaintiff and the defendant (the Franchise Agreement) to operate the Business (as defined in the Franchise Agreement) from the premises known as 19 Broughton Street, Kirribilli, New South Wales. (2)The court orders that the defendant be restrained from terminating the Franchise Agreement in reliance on the notice of breach dated 19 January 2012. (3)The court orders that the defendant pay the plaintiff's costs of the proceedings. ********** 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. Decision last updated: 24 May 2012