Arora Supermarkets Pty Limited v Franklins Pty Limited

[2015] NSWSC 1766

Supreme Court

New South Wales

Medium Neutral Citation:	Arora Supermarkets Pty Limited v Franklins Pty Limited [2015] NSWSC 1766
Hearing dates:	13 November 2015
Date of orders:	13 November 2015
Decision date:	27 November 2015
Jurisdiction:	Equity - Duty List
Before:	White J
Decision:	Plaintiff’s application for relief sought refused.
Catchwords:	LANDLORD AND TENANT – options to renew – plaintiff purportedly exercised option to renew a sublease with the defendant – sublease option was conditional upon the defendant’s exercising an option to renew the head lease with a third party – plaintiff sought orders to compel the defendant to exercise the head lease option – whether defendant was estopped from denying that it would exercise the head lease option, or whether it had engaged in misleading or deceptive conduct or unconscionable conduct – whether orders sought were interlocutory or final – held, dismissing the application, that: (1) the plaintiff must have known of the terms of the sublease, at least after it was varied following a prior exercise of the option to renew; (2) the defendant did not induce any expectation in the plaintiff, and did not know of any such expectation; and (3) the defendant did not engage in misleading or deceptive conduct, or in unconscionable conduct
Legislation Cited:	Australian Consumer Law
Cases Cited:	Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 Carr v Finance Corporation of Australia Limited (1981) 147 CLR 246 Attorney-General (NSW) v World Best Holdings Pty Ltd [2005] NSWCA 261; (2005) NSWLR 557 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533
Category:	Procedural and other rulings
Parties:	Arora Supermarkets Pty Limited ACN 144 813 990 (Plaintiff) Franklins Pty Limited ACN 096 722 904 (Defendant)
Representation:	Counsel: D R Pritchard SC with T Hollo (Plaintiff) D L Cook (Defendant)   Solicitors: Gavel & Page Lawyers (Plaintiff) William James Law (Defendant)
File Number(s):	2015/332942

Judgment

1. HIS HONOUR:   This matter was heard in the duty list on 13 November 2015. The matter was urgent. The plaintiff (Arora Supermarkets Pty Limited (“Arora” or “Arora Supermarkets”)) sought an order requiring the defendant (Franklins Pty Limited (“Franklins”)) to exercise an option of renewal of a head lease. Arora operates a supermarket at Telopea which it occupies under a sublease from Franklins. It claims to have exercised an option for renewal of the sublease. Under the terms of the sublease the exercise of the option will only be effective if Franklins exercises its option to renew the head lease for a corresponding five-year term. The time for exercising the option under the head lease expired on Saturday 14 November 2015. Arora commenced the proceeding on 12 November 2015. On 13 November I refused Arora’s application for the relief sought on that day. I was not able to give reasons for that decision because of the pressure of other business. These are my reasons for that refusal.

2. Arora’s sublease from Franklins is for a period of five years and terminates on 13 February 2016. Clause 5.2(b) of the sublease provides:

“If the Lessee wishes to have a further sublease of the Premises for the Further Term and if:

(i)    the Lessee gives to the Lessor notice to grant that Further Term at least 2 months before but not earlier than 6 months before the latest day by which the Lessor can renew the term of the Head Lease; and

(ii)   the Lessor exercises (at its sole discretion) the option to renew the term under the Head Lease for the period 15 February 2016 to 14 February 2021;

(iii)   the Head Lessor grants that renewed term to the Lessor; and

(iv)   there:

(A)   is no subsisting default by the Lessee at the date of service of its notice or at the date of commencement of the Further Term in the payment of any money due under this Sublease or in the compliance with any of the Lessee’s obligations under this Sublease; and

(B)   has not been 3 or more cumulative late payments by the Lessee of any money due under this Sublease,

the Lessor must grant to the Lessee a sublease for the Further Term at the rent and on the terms and conditions contained in this Sublease.”

3. Under clause 17.1 of the Head Lease, being the lease between Franklins as Lessee and Melani Brothers Pty Ltd (“Melani Bros.”) as Lessor, Franklins was entitled to renew the Head Lease if there was no existing unremedied breach of any term of the Head Lease, and if the option were exercised not less than three months before the expiration of the term of the Head Lease. The Head Lease terminates on 14 February 2016. Under the Head Lease Franklins is liable to pay a base rent and an additional rent of one per cent of the amount by which the Lessee’s Gross Sales exceed the base rent. There was no dispute that the percentage rent payable by Franklins on the “Lessee’s Gross Sales” included the sales made by its sublessee, Arora. The current base rent payable by Franklins is $139,949.16 plus GST per annum. Franklins is also liable to pay outgoings which are currently about $20,000 per annum.

4. Arora claims to have exercised the option under the sublease by posting a letter dated 28 August 2015 to Franklins giving notice of exercise of the option. There is a dispute as to whether the notice was posted. Franklins denies receipt. For the reasons which follow it is unnecessary to decide whether the notice of exercise of the option to renew the sublease was served within time.

5. Arora characterised its claim as one for mandatory interlocutory relief. The orders sought (described as interim relief) were:

“13   An order that by no later than 3pm on 13 November 2015 the defendant execute all such documents and do all such things as are necessary to carry to completion the exercise of the option for renewal of the registered Lease No. 0924368, as varied by Variation of Leases registered Numbers AB237765, AC955770, AG399082 and AH807354, granted to the defendant by Melani Bros Pty Limited on 13 July 2010 over Lots 1672 to 1681 (inclusive) Deposited Plan 36841 (Head Lease) contained in clause 17.1 of the Head Lese.

14.   An order that should the defendant fail to comply with order 13, a Registrar, in the name of the defendant, by no later than 5pm on 13 July 2010 [sic], execute all such documents and do all such things as are necessary to carry to completion the exercise of the option for renewal of the Head Lease contained in clause 17.1 of the Head Lease.”

6. The final relief sought in the summons included a declaration that Arora had by its letter dated 28 August 2015 validly exercised its option for renewal of the sublease, an order that Franklins execute all documents and do all things necessary to “carry to completion the option for renewal of the sublease”, an order that Franklins execute all such documents and do all such things as were necessary “to carry to completion the exercise of the option for renewal of [the Head Lease]”, an order that Franklins do all things required to create a renewed sublease and Head Lease in registrable form, and in the alternative damages under s 236 of the Australian Consumer Law.

7. No order was made for the separate determination of issues that would need to be decided at a final hearing. During the hearing I expressed doubt whether the relief sought by Arora was properly characterised as mandatory interlocutory relief. It is a hallmark of interlocutory orders that the court remains in control of the orders so that they can be varied or discharged where appropriate (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 178). By contrast an order whose legal, rather than practical, effect is finally to determine the rights of parties is a final order (Carr v Finance Corporation of Australia Limited (1981) 147 CLR 246 at 248, 255-256). If the order sought by Arora were granted it would finally determine (subject to appeal) Franklins’ obligation to renew the Head Lease. Once Franklins was required to exercise the option and did so, or a Registrar did so on its behalf, new legal relations would arise between Franklins and Melani Bros. that could not be altered by subsequent court order.

8. Franklins did not object to the matter proceeding as a contested hearing, whether properly characterised as interlocutory or final. This was notwithstanding that Franklins had only been served the previous night and had not had the opportunity to obtain evidence from a witness alleged to have made a representation to Arora’s managing director, Mr Ajay Arora, that was a critical part of Arora’s case. Mr Arora was not cross-examined. The application was heard during the duty list when time was limited. Although Mr Arora’s evidence was not challenged by cross-examination, it does not follow, particularly in the circumstances of this case, that his evidence is bound to be accepted.

9. There was no adequate explanation as to why the application was made so late. This could have been a discretionary consideration against granting the relief sought if the grounds for granting the relief sought were otherwise established. For the reasons which follow those grounds are not established.

10. Mr Arora deposed that in early July 2010, Arora and Franklins commenced discussions with a view to Arora’s purchasing a Franklins branded supermarket at Telopea. Mr Arora dealt with a Mr Roni Perlov, the finance director of Franklins. He deposed that during the course of the discussions he and Mr Perlov discussed the possibility of Arora’s taking over the Head Lease of the premises which Franklins had obtained by assignment from a previous lessee called Foodworks. He deposed that a conversation to the following effect took place:

“Me:   I would like a lease in the company’s name.

Perlov:   Because you are a much smaller player than Foodworks and Franklins is a large organisation, the Lessor will not assign the lease to you. What we will do is sublease the property to you and exercise the options on our lease as and when it falls due. This is a common practice.

Me:   That’s fine, if this is the only option to buy the business.

Perlov:   This process is like a conduit where we won’t be charging any further administration or other fees. Its purpose is to complete the commercial transaction.”

11. Arora submits that notwithstanding the terms of clause 5.2(b)(ii) of the sublease, Franklins was bound to act as if it were merely a conduit between Arora and the head lessor, and was required to exercise its option on the Head Lease if Arora exercised its option to renew the sublease.

12. On 9 July 2010 the directors of Arora signed a Heads of Agreement with Franklins which provided that Arora would manage the Telopea store for up to 60 days and prior to the end of that period would enter into a franchise agreement for the Telopea store substantially in the same form as an existing franchise agreement for another store at Quakers Hill, and at the same time would enter into other agreements including a sublease. The principal commercial terms were summarised. These included that the sublease would have a term of five years and that there would be options for three further five-year terms.

13. On 20 October 2010 the parties entered into a franchise agreement in respect of the Telopea store for a period of five years from 14 February 2016 with provision for three further terms, each of five years at the option of Arora as franchisee. The franchise agreement was for the provision to Arora of a licence to use what was called a comprehensive retail franchise system to enable the franchisee to operate as a discount supermarket retailer. It was common ground that the franchise agreement was superseded by new agreements made in 2012 when the shares in Franklins were acquired by Metcash Limited or a subsidiary and new agreements were made between Arora and subsidiaries of Metcash.

14. At the time of entering into the franchise agreement, Arora paid Franklins $1.3 million. It entered into a 10-year loan with Westpac to fund the acquisition and provide working capital to operate the Telopea supermarket. On 20 October 2010 it entered into a sublease with Franklins that was to expire on 13 February 2011, subject to the options for renewal for two five-year periods commencing 13 February 2011 and 13 February 2016. The option for renewal was substantially in the terms of the later sublease set out at para [2] above. It included the term in substance that Franklins was only required to grant a sublease for a further term if, at its sole discretion, it exercised the corresponding option to renew the term under the Head Lease.

15. Arora was represented by a lawyer in the negotiations for its agreements with Franklins. Mr Arora deposed that at the time of entering into the sublease in October 2010 nobody, including Franklins, drew his attention to clause 5.2(b)(ii), being the term that provided that the option to renew the sublease was dependent upon Franklins, at its sole discretion, exercising the corresponding option to renew the term under the Head Lease. Mr Arora deposed that had he known about the existence of that term he would not have executed the sublease and would have attempted to negotiate the removal of the term so that if Arora exercised its option under the sublease, assuming it was not in breach, Franklins would be required to exercise its option under the Head Lease.

16. There was no evidence that Franklins was aware that Mr Arora, who was agreed to be the mind of Arora, was unaware of this term of the sublease.

17. The initial term of the sublease was only for the period from 20 October 2010 to 13 February 2011. The current sublease, which is undated, was apparently executed in about February 2011 and is expressed to commence from 15 February 2011 and to terminate on 13 February 2016. It is a short document. Its front page is in the usual form of a dealing to be registered under the Real Property Act. It incorporates terms set out in an annexure. The annexure consists of four pages, two of which are a schedule setting out the names of the parties, the term, and a summary of other details including options for renewal. The substantive text of the annexure is confined to one and a quarter pages and only two clauses. Clause 1 provides in substance that the parties agree that the terms of the “Prior Lease” apply to the lease as if they were fully set out in the annexure. Clause 2 provides for the variations to the terms of the Prior Lease. Paras (a) and (f) of clause 2 provide for variations of definitions. Paragraphs (g) and (h) at the top of page 2 of the document provide for amendments to two clauses of the Prior Lease. Paragraph (g) provides:

“(g)   Clause 5.2(b)(ii) of the Prior Lease is amended to read:

‘(ii)    the Lessor exercises (at its sole discretion) the option to renew the term under the Head Lease for the period 15 February 2016 to 14 February 2021;’”

18. I find it hard to accept that anyone reading this document would not be aware that it was a term of the sublease that the lessor had what was called a “sole discretion” to decide whether to exercise the option to renew under the Head Lease. Mr Arora signed the sublease for Arora Supermarkets. He said:

“At no time during the negotiations did my lawyer or anyone from Franklins inform me of the variation in clause 2(g) of the Current Sublease. Had they done so my response would have been to attempt to negotiate a more favourable outcome for Arora.”

19. Mr Arora did not attempt to explain how he did not see clause 2(g) when he signed the sublease. In fact he did not depose that he was unaware of the terms of clause 2(g), but only that he was not informed of the terms of that clause by his lawyer or anyone from Franklins. This is in contrast to his evidence about his state of mind when he signed the first sublease where he denied knowing about the existence of the term in clause 5.2(b)(ii). He did not deny that he knew of the existence of the variation in clause 2(g) in the current sublease.

20. Following Metcash’s acquisition of Franklins, Arora entered into two agreements with subsidiaries of Metcash called an Alliance Agreement and a Relationship Agreement pursuant to which the Telopea supermarket was rebranded as an IGA supermarket and Arora made an agreement for the purchase of products from Metcash Trading Limited and IGA Distribution Pty Ltd, both subsidiaries of Metcash. The Relationship Deed set out the terms upon which Metcash (meaning both of those subsidiaries) agreed to supply products to Arora.

21. Other companies associated with Mr and Mrs Arora operated IGA supermarkets either as owner or as manager for the Metcash group. Arora International Markets Pty Limited owned or operated supermarket stores at 13 locations throughout Sydney. Arora Markets Pty Ltd owned or operated stores at six supermarkets in or around Sydney. Disputes arose between companies in the Arora group and companies in the Metcash group that resulted in the institution of legal proceedings. These were settled by a Deed of Settlement and Release made on 6 March 2015. The Deed recited that the Arora Entities and the Guarantors (Mr and Mrs Arora) had commenced proceedings against the Metcash Entities in relation to various matters relating to the Supply Agreements between the Metcash Entities and the Arora Entities and that the Metcash Entities had asserted that Arora International Markets, Arora Markets and Arora Supermarkets were in default under those agreements. Receivers and administrators had been appointed over Arora International Markets in December 2014. The Deed provided that Arora Markets would surrender subleases for three stores. The Deed contained provisions apparently designed to deter any action to prevent the receivers or administrators from disposing of stores owned or operated by Arora International Markets. In relation to the Telopea store, clause 6(b) of the Deed provided that Arora Supermarkets agreed to exchange a contract with a purchaser for the sale of that store by 6 July 2015 with settlement to occur by 3 August 2015. Clause 7 provided that:

“7.   Telopea lease

(a)   The Metcash Entities consent to Arora Supermarkets approaching the head-landlord of the Telopea premises to negotiate two further 5 year options, provided that any variation of lease or sublease with respect to Telopea will otherwise need to be on terms to the Metcash Entities’ satisfaction;

(b)   If Arora Supermarkets is successful in negotiating two further 5 year options with respect to the head-lease for Telopea, the Metcash Entities agree to vary the Telopea Sublease to reflect the two further 5 year options and otherwise on terms to the Metcash Entities’ satisfaction.

(c)   If a future purchaser of the Telopea Store from Arora Supermarkets exercises the next 5 year option under the Telopea Sublease, the Metcash Entities agree to exercise the corresponding 5 year option under the Telopea head-lease.”

22. Contrary to the submissions made for Arora, clause 7 does not implicitly acknowledge any right by Arora to compel Franklins to exercise the option under the Head Lease if it exercised the option under the sublease. To the contrary, Franklins agreed to exercise the option of renewal under the Head Lease only where Arora complied with its obligation under clause 6 to sell the Telopea store and the purchaser wished to exercise the option. Clause 7 enabled Arora to offer a potential purchaser of the store security up to February 2021 and Franklins gave its consent to Arora’s seeking to negotiate further options with the head lessor which could have provided further security of tenure to a potential purchaser.

23. Arora did not exchange contracts with a purchaser to sell the Telopea store.

24. Mr Arora deposes that he was the managing director of Arora Supermarkets. He is no longer a director. He says he is the general manager, having resigned as a director on 17 November 2014. His wife is the sole director. He is also a former director of Arora Markets which was placed in liquidation on 14 October 2015. It appears from the company search that he ceased to be a director of that company on 17 November 2014. Clearly there are issues regarding the solvency of companies in the Arora group, including the plaintiff.

22. Mr Sam Hindmarsh, the acting General Manager of Property of Metcash Trading Limited, deposes that Arora Supermarkets’ monthly turnover for the Telopea store significantly declined in 2015. Monthly turnover in September 2014 was approximately $428,000 compared to approximately $249,000 in September 2015. There is a similar variance for the months of October 2014 and October 2015. Stock levels are very low. Reports by Metcash staff on their inspection of the Telopea store reveal significant customer dissatisfaction with the low level of stock. Photographs taken on those inspections show many empty shelves.

23. Mr Gupta of Arora gave evidence that the reason for low stock levels was that Metcash had cancelled credit facilities to Arora and had required it to pay for stock in advance of delivery. He said that this disrupted its arrangements with its suppliers. He admitted that the reason Metcash had taken that step was because Arora had not paid the debts it owed to Metcash when they fell due.

24. If Franklins were entitled to exercise a discretion not to renew the Head Lease following exercise of an option to renew the sublease, there would be no grounds on which to impugn the exercise of that discretion. Franklins’ refusal to exercise the option of the Head Lease was reasonable and was made in good faith. If the option were exercised Franklins would be liable to the head lessor for the rent and outgoings. There are serious reasons to doubt Arora’s ability to meet its obligations under the sublease. If Arora defaults under the sublease Franklins will remain liable to the head lessor and may well be unable to find a tenant for the balance of the term of the Head Lease. Presumably Arora was unable to find a purchaser given that it had agreed with Franklins to sell the store, but did not do so. As Mr Cook for Franklins submitted, Franklins regards the Head Lease not as an asset, but as a liability.

25. What then are the grounds on which Franklins is to be precluded from exercising the discretion provided for in clause 5.2(b)(ii) of the sublease? Three grounds were advanced by Arora. First, it submitted that Franklins was estopped from relying upon the discretion provided for in clause 5.2(b)(ii) of the sublease. Secondly, it submitted that Franklins has engaged in misleading and deceptive conduct in contravention of s 18 of the Australian Consumer Law and that a mandatory injunction should be granted to compel it to exercise the option under the Head Lease. Thirdly, the same relief was claimed on the basis of unconscionable conduct engaged in in contravention of s 20 of the Australian Consumer Law.

Estoppel

29. Arora submitted that it had assumed or expected that Franklins would exercise the option to renew the Head Lease if it exercised the option to renew the sublease. It submitted that that assumption or expectation was induced by its dealings with Mr Perlov and by the renewal of the sublease in February 2011. It submitted that there was no suggestion that Franklins’ position had changed until a letter was sent on 30 October 2015 from Franklins declining to exercise the option to renew the Head Lease.

30. I accept that when the initial sublease was entered into in October 2010 Arora, through Mr Arora, expected that when the sublease was renewed Franklins would also renew the Head Lease. But I do not accept that at that time he gave any thought to whether that would necessarily be so, irrespective of performance by Arora of its obligations under the sublease, and irrespective of the performance by the related entities of Arora of their obligations in respect of other stores.

31. I do not accept that Mr Arora had made the same assumption or had the same expectation when he signed the current sublease in February 2011. He did not depose to having had that expectation or having adopted that assumption. As noted above, he did not depose that he was unaware of the terms of clause 5.2(b)(ii) of the current sublease and did not say that he had not read the sublease. I do not accept that when Arora entered into the current sublease it, through Mr Arora, assumed that Franklins did not have a discretion to decline to exercise its option of renewal of the Head Lease. I think Mr Arora knew that Franklins had reserved that discretion to itself. He probably assumed that Franklins would not exercise the discretion to refuse to exercise the renewal of the Head Lease if Arora exercised the option of renewal of the sublease if the commercial relationship between the parties continued to be satisfactory. That would have been a reasonable assumption to make. But it would not have been reasonable for Arora, through Mr Arora, to assume that Franklins would exercise the option to renew the Head Lease, even if the commercial relationship between the parties was no longer satisfactory. That would flatly contradict the discretion reserved to Franklins.

32. Franklins did nothing to induce Mr Arora to expect that the option to exercise the Head Lease would be exercised if Arora exercised the option to renew the sublease, irrespective of whether a continued good commercial relationship continued to subsist between the parties. The statement made by Mr Perlov as deposed to by Mr Arora set out at para [10] above was made in the course of negotiations before any documentation was prepared. It is unnecessary to decide whether Mr Perlov did say the words attributed to him. Assuming that he did, nonetheless, the statement was made before any documents were prepared and was no more than a discussion as to the framework in which more detailed terms would be settled. It could not reasonably have been understood as a guarantee by Franklins that irrespective of the circumstances, Franklins would exercise the option of renewal of the Head Lease if Arora exercised the option to renew the sublease.

33. There was no claim to rectify the sublease. Nor, on the evidence, could there have been such a claim.

34. There is no basis to conclude that Franklins knew that Arora entered into the current sublease in the expectation or on the assumption that if it exercised the option to renew the sublease, Franklins either was bound to or would exercise the option to renew the Head Lease without having a discretion not to do so.

35. There may well have been an implied term that the discretion would be exercised reasonably and in good faith. Understandably, counsel for Arora did not rely upon any such implied term. If there were such an implied term, Franklins was not in breach of it.

36. For these reasons I rejected the argument based on estoppel.

Misleading and deceptive conduct and unconscionable conduct

37. For the same reasons the alternative claims based on alleged misleading and deceptive conduct or unconscionable conduct are rejected. Arora submitted that Franklins’ conduct throughout July 2010 and thereafter, including renewing the sublease in February 2011, conveyed a representation to Arora that it would exercise its corresponding option under the Head Lease if and when Arora exercised its option to renew the sublease. Arora submitted that such a representation was as to a future state of affairs because the time for performance and the consequences of performance lay in the future and the representation was to be taken not to have been made on reasonable grounds, unless evidence were adduced to the contrary (Australian Consumer Law, s 4(2)).

38. But in the context in which the statements attributed to Mr Perlov were made, they did not convey that irrespective of the commercial relationships between the parties, Franklins would exercise the option to renew the Head Lease if Arora exercised the option to renew the sublease. The parties knew that in exercising the Head Lease, Franklins would be assuming a substantial personal liability to the head lessor. The statements Mr Arora deposed to Mr Perlov’s having made would have conveyed that Franklins would exercise the option to renew the Head Lease if Arora exercised the option to renew the sublease and the relationship between Franklins and Arora at the time when renewal arose was the relationship the parties contemplated. It was not an unconditional assurance and could not reasonably have been so understood.

39. In any event, Franklins made its position perfectly clear by the terms of the sublease it proffered in October 2010. Those terms were accepted. They were repeated when the sublease was renewed in February 2011 and again they were accepted. There was no misleading or deceptive conduct.

40. No submissions were developed either orally or in writing that Franklins engaged in unconscionable conduct. Unconscionable conduct connotes a serious level of commercial immorality (Attorney-General (NSW) v World Best Holdings Pty Ltd [2005] NSWCA 261; (2005) NSWLR 557 at [121] per Spigelman CJ). Franklins did not engage in any such immoral or unconscionable conduct.

41. Counsel for Arora stressed that Arora had paid $1.3 million to acquire the franchise for the Telopea store in the expectation that it would have the right to renew the sublease for the store for five years with an option for three additional five-year terms. That is a good reason why it might be implied that Franklins was required to act in good faith and reasonably in exercising its discretion to renew the Head Lease if Arora exercised its option to renew the sublease. But it is not a reason to preclude Franklins from relying upon the terms of the sublease that it negotiated with Arora and with which Arora agreed, that it should have a discretion whether or not to renew the Head Lease if the option to renew the sublease were exercised. Franklins could face significant liabilities to the owners of the land if it were required to exercise its option to renew the Head Lease if Arora defaulted in its obligations under the sublease. There is no reason that it should be compelled to assume those liabilities merely because Arora paid $1.3 million to obtain the franchise of the store. The money was paid in the expectation of a successful operation of the store and of a good continued commercial relationship between the parties. If that expectation had been satisfied there would be no reason to doubt that Franklins would have exercised the option to renew the Head Lease. That is not what happened.

42. For these reasons I rejected Arora’s claim for the relief in paragraphs 13 and 14 of the summons. In case I am wrong in dealing with the case on a final basis, I should say that I would reach the same conclusion if I treated the plaintiff’s claim as one for a mandatory interlocutory injunction. I do not consider the plaintiff’s claim for final relief to be seriously arguable, but even if it is seriously arguable, the strength of that claim is material considering the balance of convenience (Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533).

43. The balance of convenience is against the grant of mandatory interlocutory relief. If the mandatory relief sought were granted Franklins would be exposed to a liability to the owner of the land for the rent and outgoings under the lease. There is serious doubt that Arora would be able to continue to comply with its obligations under the sublease. No security is proffered for its undertaking as to damages and there was no evidence of its ability to satisfy an undertaking as to damages.

44. There is also force in Franklins’ submission that an injunction should also be refused on the ground that damages would be an adequate remedy. Mr Arora gave evidence that he had attempted to negotiate directly with Melani Bros. for a new lease, but that such a lease was only available at a greatly increased rent. If the lease were available at such a rent, Arora’s damages, being the difference between the moneys payable under a renewed sublease and the moneys payable under a new Head Lease, should be readily capable of quantification.

45. Because I have concluded that the hearing on 13 November 2015 was a final hearing, it appears to me that the consequence is not only that the relief sought in paragraphs 13 and 14 of the summons quoted at [5] above should have been refused, but the summons itself should now be dismissed. Prima facie, at least, on the findings I have made, Arora is not entitled to the declaration or other orders it seeks and is not entitled to damages. However, this was not raised in submissions and I will hear from the parties as to what further orders should be made. I will also hear the parties on costs.

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Decision last updated: 27 November 2015