A landlord who terminated a long term contract for use of a Valley wedding venue by unilaterally deciding the arrangement financially “untenable” has avoided payment of repudiation damages on a count back of the licensee’ s billings towards a mandatory revenue target.
Nicolle Toohey was a successful event organiser who convinced the owners of Brunswick Street’s High Church – on her second attempt – to grant her the exclusive right to commercially exploit the event spaces at their eclectic venue.
The 5-year deal she struck with owners Andrew and Emma Golder in February 2015 allowed her use of the event space as a “consultant” and payment of 20% of booking fee revenue and the invoice value of the catering supplied to users, subject to a minimum turnover of $250k being achieved in the first 18 months.
They also granted her should they decide to sell, the first ‘option’ to buy the business at 1.5 times annual net earnings which was said to be 50% of market value.
Toohey opened a Facebook account for her venture and helped the Golders establish a website. The business model required all payments to be made to the landlord’s bank account and for Toohey’s company to invoice it for her 20% share.
She made about 54 separate bookings from March 2015 in advance of the August opening which led to about 50 payments being made into the landlord’s High Church account.
In September 2016 on the expiry of the 18-month revenue period, Toohey emailed the landlord to report – notwithstanding some “personal upheavals” which had confronted earlier in the year – total revenue of $332k.
The landlord acknowledged the achievement but noted in reply that unbudgeted costs – of a site manager, marketing and website issues – had drastically reduced its profit out of its 80% share of revenue and that it was disappointed that mid-week bookings had not materialised.
“The forward bookings for the first half of 2017 total less than $50,000 leaving us in the position where it is untenable to continue,” it notified when advising it had decided to go in a different direction by leasing out the building for an annual rent of $220k plus GST.
Alleging that this was a change of mind that ignored her contractual entitlements, Toohey filed a lawsuit against the Golders contending it had repudiated the 5-year contract and claiming $247k for loss of future revenue for the remainder of the term and further damages on the basis that she would have exercised her “option” to buy the business.
The landlord maintained that the termination of the contract was lawful and in exercise of its contractual right to terminate because the business had not achieved the stated revenue goal.
To substantiate that allegation – which had not been made at the time of purported termination – Andrew Golder engaged forensic accountant John Thynne from Vincents who analysed the revenue of the business and deduced that by August 2016 the total gross income was just $223k.
By the time the dispute came before Justice John Bond in the Supreme Court in February 2021, Toohey had recruited her own accounting expert – Elia Lytras – who concluded that the mandatory $250k target had been reached by April 2016.
Preferring Thynne’s analysis, Justice Bond concluded Ms Toohey had fallen $27k short of the revenue target over the 18 months.
Notwithstanding his strong reservations about the reliability of Mr Golder’s evidence – some of which was “implausible” and “false” – his termination of the licence “which would otherwise be regarded as repudiatory” was therefore justified.
That said, Ms Toohey had a moderate success in relation to her commission on forward bookings as at the date of termination. His Honour assessed such GST inclusive loss at $19k.
In a precautionary assessment of the event organiser’s loss, Justice Bond rejected the calculation of her financial loss for the remaining five years of the term and ruled that no loss of income could be claimed for any period thereafter as her right to acquire the business only arose if the owner had decided to sell.
The “option” – which Mr Golder had correctly described as a right of first refusal – could only be regarded conferring rights upon Ms Toohey in such circumstances and had no value otherwise.
Costs – which are likely to turn on the offers exchanged by the parties – are yet to be ruled upon.