Activity 8.1 Problem Solving Exercise Read the following: · Property Law Act 1974 (Old), s 121 · Daventry Holdings Pty Ltd v Bacalakis Hotels Pty Ltd [1986] 1 Qd R 406 . JA McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121 Now advise Rob on the following: Debase Productions is a theatre group who leases a studio in Brisbane in a building owned by Metro Arts. Debase is in financial trouble and falls behind in their rent. A clause in the lease states: The Lessee must not assign this lease without consent from the lessor. Debase Productions approaches Metro Arts to request assignment of the lease to Flipside Circus. Rob, the head of Metro Arts is uneasy about this assignment for the following reasons: . He has heard that Flipside Circus is poorly run, and he fears that their business will fail. . He is scared of clowns. · If he must accept Flipside Circus as lessees, he would prefer to sign a fresh lease that contained stronger guarantees of payment of rent. . He is worried that if he accepts the assignment, he won't be able to recover the outstanding rent from Debase Productions. Answer . The assignment covenant is affected by s121 PLA, which says that Rob cannot unreasonably withhold consent. Whether or not refusal is unreasonable is a question of fact. . If a reasonable person, in the lessor's position, might regard the assignment as negatively affecting his or her property interests, the landlord can refuse without breaching s121: Pimms v Tallow Chandlers. The refusal must not be some collateral purpose wholly inconsistent with the lease: Boss v Hamilton Island; JA McBeath Nominees v Jenkins.
. The financial viability of the proposed assignee is a legitimate consideration, so Rob's concerns about the failure of the business is relevant. However, at this point, he has just 'heard' this. It would arguably not be reasonable to refuse based on what may be rumour. Rob is entitled to seek information on the financial status of Flipside: Daventry Holdings v Bacalakis. . Seeking a better deal with the new tenants would not be a reasonable reason: JA McBeath Nominees v Jenkins. . The reasons have to relate to Flipside Circus' fitness as the lessee, so Rob's fear of clowns would not constitute a reasonable reason. . Therefore, Rob should be advised to request information on Flipside Circus' financial strength, and provided his concerns are legitimate, make sure he communicates that reason when he refuses to consent to the assignment. . Rob should also be advised that even after an assignment, Metro Arts and Debase Productions are still in privity of contract, so Debase can be sued for outstanding rent after the assignment: Auriol v Mills. Question 1 We continue with the facts introduced in Topic 7: Nature and Creation of Leases. The story so far: · CP Developers Pty Ltd (CP) own a multi-storey building 'Cityscape' in the middle of the CBD, which has