Xilei Pty Ltd v Harina Company Limited and Lend Lease Real Estate Investments Limited Gebara [2016] NSWCATCD 33

Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Xilei Pty Ltd v Harina Company Limited and Lend Lease Real Estate Investments Limited Gebara [2016] NSWCATCD 33 Hearing dates: 29 January 2016 Decision date: 11 March 2016 Jurisdiction: Consumer and Commercial Division Before: D Bluth, Senior Member Decision: 1. The Application for Original Decision is dismissed as the applicant has no standing to bring a retail tenancy claim against the respondents. Catchwords: Whether a license pursuant to a franchise agreement is a lease between the franchisee and the lessor, s3 of Retail Leases Act, 1994 Legislation Cited: Retail Leases Act, 1994 Cases Cited: Australia Credit & Finance Pty Ltd ATF Sumo Salad, MLC Centre Trust v GPT RE Limited and QRC Limited [2011] NSW ADT 234 Ireland v Subway Systems Australia Pty Ltd and Anor (Retail Tenancies) (2012) [VCAT] 1061 Category: Principal judgment Parties: Xilei Pty Ltd (applicant) Harina Company Limited (first respondent) Lend Lease Real Estate Investments Limited (second respondent) Representation: Counsel: Mr G Carolen (respondents) Solicitors: Self (applicant) Ashurst (respondent) File Number(s): COM 15/51103 Publication restriction: Unrestricted

reasons for decision 1. 1 Xilei Pty Ltd (the applicant) lodged an Application for Original Decision on 4 September 2015 under file number COM15/51103. At the relevant time of this dispute, the applicant was a franchisee of a Michel's Patisserie shop situated at [**********]Sydney (the shop). 2. Harina Co Limited and Lend Lease Real Estate Investments Limited (the respondents) are the owners of the Wintergarden Building. The respondents leased the shop to Jonamill Pty Limited (Jonamill), the franchisor for the Michel's Patisserie chain of shops, pursuant to a lease dated 19 May 2008, registered number AE540046 (Lease). 3. The term of the Lease was for seven years expiring 27 April 2015 and there was no option for a further term. Jonamill held a previous lease over the shop from 28 April 2003 to 27 April 2008. 4. Clause 41 of the Lease allowed the respondents to terminate the Lease if demolition of the shop was to take place. 5. Pursuant to clause 63.2 of the Lease, Jonamill was entitled to seek the consent of the respondents to enter into a licence agreement with a franchisee for the shop. 6. In or around 2008, Jonamill sought consent from the respondents to grant a licence of the shop to the applicant pursuant to clause 63.2 of the Lease. Consent was provided to the licence on or about 1 September 2008. 7. On or around 2 September 2008, Jonamill entered into a franchise agreement with the applicant (Franchise Agreement). 8. The Franchise Agreement contained the following terms whereby the applicant was entitled to occupy the shop (referred to as the 'location'). 10.4 If the franchisor takes a lease in its own name or in the name of its nominee then: 10.4.1 The franchisor will provide to the franchisee a copy of the lease at or prior to the commencement of this agreement. 10.4.2 The franchisor shall use its reasonable endeavours to obtain for the franchisee the right to occupy and use the location for the establishment and conduct of the franchise business on the terms of this agreement or any alternative license agreement put forward by the franchisee or its nominee (as the case may be). The franchisee and guarantor shall do all things reasonable and necessary (including but not limited to entering into any deed of consent or guarantee which may be required by the lessor of the location (to secure the lessor's of the franchisee's occupation of the location as aforesaid. 10.4.3 The franchisee will observe and perform all of the terms and conditions of the lease as if it were the lessee named in the lease and the franchisee's guarantors will observe and perform all of the obligations of the guarantors named in the lease as if they were the guarantors named in the lease. 10.4.4 [Not applicable] 10.4.5 [Not applicable] 10.4.6 The franchisor grants to the franchisee, or shall procure its nominee to grant the franchisee a, non-exclusive, bare personal licence to occupy the location to conduct the franchised business in accordance with this agreement during the term terminable on the expiration of this agreement or on any event entitling the franchisor or the franchisee to terminate this agreement or any event entitling the landlord or the tenant to terminate the lease. 10.4.7 The franchisor will not assign, surrender or otherwise deal with the lease in a manner which would affect the franchisees' right to occupy the location provided the franchisee is not in breach of this agreement (or any license agreement referred to in clause 10.4.2). 10.4.8 The licence granted or to be granted under clause 10.4.6 does not grant the franchisee possession of the location to the franchisor's or its nominee's exclusion nor does it give the franchisee any property rights in or over the location. The franchisee acknowledges that its right to occupy the location under the licence granted herein (or any licence agreement as aforesaid) shall rest in contract only. 10.4.9 The franchisor may retain keys to the location and have unlimited access to the location for the purpose of this agreement. 10.4.10 The franchisee does not have any right to seek an order for possession of the location or commence proceedings for trespass or nuisance - such rights rest solely with the franchisor or its nominee. 1. Clause 10.5 of the Franchise Agreement contained provisions for the relocation of the franchise business in the event that the lease of the shop expired or was terminated for any reason other than default on the part of the franchisee. 2. There was no requirement in the Franchise Agreement for the applicant to upgrade or refurbish the shop including any fit out. This is because when the applicant entered into the Franchise Agreement it was an existing business with an existing fit out. 3. The respondents proposed a demolition and rebuilding of Level 3 of the Wintergarden Building. Consequently, the Lease was terminated by the agent for the respondents by service of a notice on Jonamill on 23 September 2013 pursuant to clause 41 of the Lease. The notice required Jonamill to provide vacant possession of the Shop by 28 March 2014. 4. Jonamill served a notice on the applicant on 16 October 2013 to terminate the licence for the shop at the end of March 2014. The applicant vacated the shop on or about March 2014 in compliance with the notice from Jonamill. 5. The applicant is seeking from the respondents damages and loss of profits as a result of termination of the Lease.