Ashton v Australian Cruising Yacht Co Pty Ltd

[2005] WASC 192

ASHTON -v- AUSTRALIAN CRUISING YACHT CO PTY LTD [2005] WASC 192

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2005] WASC 192
Case No:	CIV:1699/2005	Heard:	3 AUGUST 2005
Coram:	HASLUCK J	Delivered:	26/08/05
No of pages:	34	Judgment Part:	1 of 1
Result:	Application dismissed
Category:	B
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Parties:	DAVID ASHTON AUSTRALIAN CRUISING YACHT CO PTY LTD (ACN 065 652 744)
Catchwords:	Real property Boat building site Grant of a licence to occupy a portion of the site Whether licence included condition forbidding revocation until boat completed Whether licence subject to implied term to similar effect Whether licence terminated by assignment of the licensor's leasehold estate Application to restrain revocation of licence by assignee application of rules concerning privity of contract and assignment Application for an interim injunction refused
Legislation:	Nil
Case References:	Alonso v Leichhardt Municipal Council (1975) 1 BPR 9368 American Cyanamid Co v Ethicon Ltd [1975] AC 396 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Bingham & Anor v 7-Eleven Stores Pty Ltd [2003] QCA 402 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Coleman v Foster [1856] 1 H&N 36 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Government Insurance Office (NSW) v K A Reed Services Pty Ltd [1988] VR 829 Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233 Howie v New South Wales Law Tennis Ground Ltd (1956) 95 CLR 132 Taylor v Johnson (1983) 151 CLR 422 Tito v Waddell (No 2) [1977] Ch 106 Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 Wood v Leadbetter [1845] 13 M&W 838 American Cyanamid Co v Ethicon Ltd [1975] AC 396 Hurst v Picture Theatres Ltd [1915] 1 KB 1 J C Williamson v Lukey (1931) 45 CLR 282 London & Blackwall Railway Co v Cross (1885) 31 Ch D 354 Minister of Health v Bellotti [1944] KB 298 Thomas v Sorrell 124 ER 1098 Voskuilen v Morisset Mega-Market Pty Ltd [2002] NSWSC 63

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : ASHTON -v- AUSTRALIAN CRUISING YACHT CO PTY LTD [2005] WASC 192 CORAM : HASLUCK J HEARD : 3 AUGUST 2005 DELIVERED : 26 AUGUST 2005 FILE NO/S : CIV 1699 of 2005 BETWEEN : DAVID ASHTON

Plaintiff

AND

AUSTRALIAN CRUISING YACHT CO PTY LTD (ACN 065 652 744)
Defendant

Catchwords:

Real property - Boat building site - Grant of a licence to occupy a portion of the site - Whether licence included condition forbidding revocation until boat completed - Whether licence subject to implied term to similar effect - Whether licence terminated by assignment of the licensor's leasehold estate - Application to restrain revocation of licence by assignee - application of rules concerning privity of contract and assignment - Application for an interim injunction refused

Legislation:

Nil

(Page 2)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff : Mr C P Stokes
Defendant : Mr A J Prentice

Solicitors:

Plaintiff : Chris Stokes & Associates
Defendant : Mossensons

Case(s) referred to in judgment(s):

Alonso v Leichhardt Municipal Council (1975) 1 BPR 9368
American Cyanamid Co v Ethicon Ltd [1975] AC 396
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Bingham & Anor v 7-Eleven Stores Pty Ltd [2003] QCA 402
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Coleman v Foster [1856] 1 H&N 36
Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Government Insurance Office (NSW) v K A Reed Services Pty Ltd [1988] VR 829
Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93
Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233
Howie v New South Wales Law Tennis Ground Ltd (1956) 95 CLR 132


(Page 3)

Taylor v Johnson (1983) 151 CLR 422
Tito v Waddell (No 2) [1977] Ch 106
Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173
Wood v Leadbetter [1845] 13 M&W 838

Case(s) also cited:

American Cyanamid Co v Ethicon Ltd [1975] AC 396
Hurst v Picture Theatres Ltd [1915] 1 KB 1
J C Williamson v Lukey (1931) 45 CLR 282
London & Blackwall Railway Co v Cross (1885) 31 Ch D 354
Minister of Health v Bellotti [1944] KB 298
Thomas v Sorrell 124 ER 1098
Voskuilen v Morisset Mega-Market Pty Ltd [2002] NSWSC 63


(Page 4)

1 HASLUCK J: The plaintiff, David Ashton, is an amateur boat builder. He has commenced legal proceedings in which he pleads that he was granted a licence to occupy a site at certain premises used for boat building for a term commencing in or about 1991 and concluding on completion of the construction by the plaintiff of his vessel. He has applied for an interim injunction restraining the defendant during the term of the licence from terminating the licence or interfering in any manner with the plaintiff's rights as licensee until the trial of the action or further order.

2 The plaintiff relies upon an affidavit sworn 15 June 2005 and a further affidavit sworn 27 July 2005. In opposing the application for an injunction the defendant relies upon the affidavit of Arno Dawson, who is the sole director of the defendant company, sworn 30 June 2005 and a further affidavit sworn 29 July 2005. I will draw upon the statement of claim and these affidavits in setting out the background to the dispute.

3 I digress briefly to note that the plaintiff's application for an interim injunction was heard in conjunction with a similar application made by another boat builder at the subject boat building premises, Mark Gorza. The issues thrown up by both applications were similar. I will use the Ashton application as a vehicle for general discussion about the issues. I will deal with the Gorza application separately in due course.

Background

4 The Maylands Boat Yard site was purchased by the then Metropolitan Region Planning Authority, now the Western Australian Planning Commission, in the late 1970s as part of its parks and recreation acquisition programme. It seems that an amateur boat building activity existed at the site when the property was purchased. The Planning Commission subsequently constructed a large shed on the site to provide an office, undercover boat building, chandlery shop and various areas for activities associated with boat building. The facility is said to be unique in Western Australia, being perhaps the only truly amateur boat building facility. I understand that as at the commencement of these legal proceedings there were approximately 90 to 100 owners/boat builders on the site.

5 In 1987, the boat building site was offered for lease to the private sector and Tranby Quay Pty Ltd was successful in obtaining a lease. The subject lease is exhibited to the first Ashton affidavit and is dated 1 July 1987. By the Planning Commission/Tranby lease the lessee was required to produce a development plan making provision for the installation of

(Page 5)

slipways, the construction of jetties to provide pen moorings for approximately 25 boats, the installation of a fuel dispensing jetty and other improvements.

6 Mr Ashton said in his first affidavit that in 1991 he bought a 47 foot steel yacht of 25 tonnes that had been sitting for sometime in the hardstand area of the Maylands Boat Yard. He took over the payment of the monthly rent for the hardstand site. In 1993 Harold Dodd, a director of Tranby and the manager of the Maylands Boat Yard, asked him to sign a standard form licence agreement but he (Ashton) was not agreeable to the clause allowing termination without reason. He was then told by Dodd that Tranby had never evicted anyone and as long as he paid his rent and behaved himself he could "stay as long as you want".

7 According to Mr Ashton, he understood from the Dodd conversation that he could stay until his boat construction was completed. The issue of a written agreement was not raised again and no written licence agreement was signed. Mr Ashton simply paid the monthly licence fee for the Ashton site and continued working on the refit of his yacht.

Assignments of the lease

8 On 30 October 1998 the lease of the Maylands Boat Yard and the related business was transferred by Tranby to Maylands Boat Yard Pty Ltd pursuant to a deed of assignment. Tranby as assignor assigned all the right, title and interest of the assignor in the leased premises to the assignee subject to the assignee paying the rent and performing the lessee's covenants. These covenants were said to be "all or any of the covenants and agreements contained or implied in the lease to be observed and performed by any person other than the landlord".

9 By cl 2 of the head lease the lessee covenanted to keep and maintain the demised premises in good and substantial repair, order and condition. By cl 2(l) the lessee was to actively and continuously use the demised premises for the purpose of building, repairing and maintaining amateur watercraft and to provide sites within the demised premises for the occupation by licensees building, repairing or maintaining amateur watercraft.

10 I note in passing that the obligations imposed upon the assignee are in respect of covenants and agreements "contained or implied" in the lease. They do not extend to obligations previously undertaken by Tranby as assignor which stand outside the lease such as contractual licences granted to third party amateur boat builders to occupy defined areas

(Page 6)

within the yard. Later documents suggest that these licences were taken over by or "assigned" to Maylands Boat Yard Pty Ltd as the incoming business owner but the evidentiary materials before me do not include any deed or agreement to that effect.

11 Mr Ashton said in his first affidavit that shortly after taking over the business, Allan Dufty of Maylands Boat Yard Pty Ltd sent him a circular asking him to sign a standard form of licence agreement. Mr Ashton believed a number of boat owners received the same letter. This led to the Boat Owners Association being formed to negotiate security of tenure for the boat owners and fair and reasonable licence terms. No final agreement on written licence terms was agreed. By this time Mr Ashton had moved the hull of his yacht into its current water pen site. He continued to retain his water pen and to pay the monthly licence fee for the same.

12 By letter dated 8 December 2004 Maylands Boat Yard Pty Ltd by Allan Dufty gave notice that the business of the company would be sold on 31 December 2004 and that the lease with the Planning Commission would be re-assigned at the same time. The letter said that the new owner would be the defendant company, Australian Cruising Yacht Co Pty Ltd, managed by Arno Dawson.

13 The Dufty 8 December 2004 letter reads in part as follows:

"Arno Dawson is an experienced boat builder who has had a long association with this yard and is in a good position to offer advice to boat builders. Arno intends running the yard along similar lines to ourselves but in the new year you can expect a review of the monthly rates which would reflect CPI increases and the increases in insurance premiums."

14 I must pause here to look at certain documents bearing upon these matters which are exhibited to Mr Dawson's first affidavit.

15 Mr Dawson said that the boat yard business was sold to his company pursuant to a written agreement dated 31 December 2004. The assets, the subject of the 31 December sale agreement, comprised the goodwill of the boat yard, plant and chattels, stock in trade and "all licences/franchises connected with the premises or business". By cl 8 the purchaser contracted to perform the covenants to be observed by the lessee under the head lease. The sale documents made provision for a deed of assignment to the same effect but again, as in the earlier transaction, this concerned

(Page 7)

only obligations under the lease and does not bear upon third party licence agreements.

16 More importantly, by cl 10 of the 31 December sale agreement the vendor contracted to deliver to the defendant as purchaser "assignment of all existing licences pertaining to the use by third parties of mooring pens and other facilities provided by the business".

17 I digress briefly to note in passing (as appears from par 15 and Exhibit E to the Dawson affidavit) that the standard form written licence agreements that were delivered to the defendant are to the effect that the licence may be terminated by 7 days notice in writing on either side or within 24 hours in the event of breach (3.1 and 3.2); the rights rest in contract only and the licence shall not be construed as granting to the licensee an estate or interest in the area (5); the rights of the licensee are personal to it and may not be assigned without the consent of the licensor (6).

18 It emerges from earlier discussion that neither the plaintiff nor Mr Gorza signed licence agreements in the standard form. However, there is nothing in that standard form which might have led the incoming proprietor to believe or accept that an existing licensee had or claimed to have a right to remain until his boat was completed. Further, although the 31 December sale agreement makes provision for delivery or "assignment" of "all existing licences" to the defendant as purchaser, being a term which precluded the vendor from receiving any ongoing benefit by way of rental or otherwise under the licence agreements, there is no provision whereby the defendant expressly undertook to keep the licence agreements in force or to indemnify the vendor against any claims by the licensees.

19 Before leaving the 31 December agreement, I must touch on a matter mentioned by counsel for the plaintiff. He drew attention to the fact that, save for $100 and accruing interest, payment of the purchase price was deferred for 9 years. Further, by cl 4 provision was made for "reassignment" of the principal assets as a form of security.

20 Let me say briefly that, in my view, this provision does not bear upon the issue presently before me. The so-called reassignment is a security mechanism that only takes effect in the event of default. Further, it does not extend to the licence agreements. Accordingly, in the absence of any evidence concerning default, I can proceed from the premise that the defendant was the party in sole control of the boat yard after

(Page 8)

31 December 2004 and Maylands Boat Yard Pty Ltd had purported to vest the benefit of the licence agreements in the defendant company as part of the assets of the business.

Steps taken by the defendant company

21 By a letter dated "December 2004" Mr Dawson wrote to Mr Ashton advising that the defendant company would be taking over the lease and that he would be the new manager.

22 The Dawson December 2004 letter reads in part as follows:

"Tenants can be assured that changes will be minimum and a smooth transition in ownership is anticipated.

Existing tenant licence agreements will remain in force, however tenant licence agreements in the name of Australian Cruising Yacht Co Pty Ltd trading as The Boat Building Yard will be required to be signed in the new year."

23 The letter went on to say that current charges for the various areas would remain unchanged but a review of all charges would be undertaken. Any change in the rates would require the approval of the Planning Commission and would be accompanied by one month's notice. It was said that all payments from 1 January 2005 should be made out to The Boat Building Yard.

24 By letter dated 20 February 2005 Mr Dawson advised Mr and Mrs Ashton that "your licence agreement is hereby terminated effective on February 28th 2005". They were requested to remove their vessel from its current water pen location. Reference was made to outstanding rent in the sum of $187 for January 2005 and $187 for February 2005.

25 According to Mr Ashton, he had in fact paid the January rent on 27 January 2005. To ensure that there was no dispute in that regard, the Ashtons arranged to pay $561 being rent for January, February and March 2005. On 24 February 2005 Mr Dawson responded by enclosing a tax invoice for the January and February 2005 licence fees but returning a cheque for $187 in respect of the March licence fees.

26 Negotiations commenced with a view to arriving at a new form of licence agreement acceptable to both sides. The main difficulty, as Mr Ashton saw it, was that Mr Dawson continued to insist that the new licence agreement include a clause entitling the defendant to terminate the licence without cause. Mr Ashton objected to this as he needed a licence

(Page 9)

that enabled him to retain an area at the Maylands Boat Yard until he had completed the refit and construction of his boat.

Subsequent events

27 On 27 April 2005 the defendant's solicitors issued another notice of termination and notice to quit. The covering letter refers briefly to enclosing by way of service a notice of termination and notice to quit. The notice in question was structured in a formal way and contained a recital to this effect:

"A. By written licence agreement entered into between Tranby Quay Pty Ltd as licensor and David and Robyn Ashton as licensee the licensor agreed to licence the use of a boat pen at the Maylands Boat Yard ("the premises") for an indefinite term ("the licence").

B. The licence was assigned from Tranby Quay Pty Ltd to Maylands Boat Yard Pty Ltd.

C. The licence was assigned from Maylands Boat Yard Pty Ltd to the licensor.

D. The licence provides at clause 3.1 that 'either the licensor or the licensee may terminate this licence by giving to the other of them not less than 7 days notice in writing to that effect."

28 The 27 April notice required a delivery up but owing to what appears to be an inadvertent omission of certain words from the document it is not specified exactly what is to be delivered up. The reference to a "written licence agreement" and to the licence having been "assigned" suggests that the defendant and its solicitors were labouring under a mistaken belief that the plaintiff was a party to one of the standard form licence agreements that had been delivered or "assigned" to the defendant pursuant to cl 10 of the 31 December sale agreement. However, it was common ground at the hearing before me that at best the plaintiff and Mr Gorza were parties to verbal licence agreements. Thus, in practical terms, this and the related notices amounted simply to an attempt to terminate or revoke the subject licence by giving 7 days notice in writing.

29 It seems that the defendant proposed to various licensees at the Maylands Boat Yard that a written licence agreement be signed. The relevant document is exhibited as DA 25 to the first Ashton affidavit. By

(Page 10)

cl 2 the licensee is to use the licensed area for amateur boat building, maintenance and repairs and for no other purpose. I understand that provision is made for termination of the licence without any reference to a condition of the kind contended for by the plaintiff in these proceedings concerning completion of the boat building project. However, as that part of cl 3 in the DA 25 proposed licence agreement has been struck out in a manner that obscures the wording I cannot be more explicit.

30 By letter dated 27 May 2005 the defendant's solicitors wrote to the plaintiff's solicitors to say that the issue of the further notice to quit dated 27 April 2005 did not constitute an admission that the original notice (that is, the 20 February notice) was invalid. It was said further that the requirement to pay rent was not dependent upon a tax invoice and that immediate payment was required of the outstanding rent.

31 The plaintiff then proceeded to pay the licence fee for May and June 2005 in the sum of $374 and received a receipt in respect of the relevant payments.

32 On Thursday, 2 June 2005 the Ashton's received by post a further letter from the defendant's solicitors enclosing a notice to quit and notice of abandonment dated 30 May 2005.

33 The defendant's 30 May notice contained a recital asserting that by a written licence agreement entered into by Tranby and the Ashtons the licensor agreed to licence the use of a boat pen at the Maylands Boat Yard for an indefinite term. It is said that the licence provided at cl 3.1 that either the licensor or licensee could terminate the licence by giving to the other not less than 7 days notice in writing to that effect. By cl 3.3 the licensee was required to deliver up possession upon termination of the licence and remove all property belonging to the licensee. It was said further that by cl 3.5, in the event of non-compliance, any property in the subject area was deemed to be abandoned. It was said further that as a consequence of the licensee's failure to comply with the notice of termination and notice to quit in writing dated 27 April 2005 the licensee was required to deliver up vacant possession of the subject area within 14 days.

34 At about that time various communications with the Department of Planning led the plaintiff and other members of the Boat Owners Association to believe that the Planning Commission was not minded to involve itself in the approval of a new form of licence and that issues relating to the licence and occupancy of areas of the Maylands Boat Yard

(Page 11)

lay solely between the licensor and the licensee. It was now clear to the plaintiff that it would be necessary to apply for a restraining order against the defendant prior to 16 June 2005.

35 It was against this background that the plaintiff's application for an interim injunction was brought before me on 16 June 2005. On that occasion certain programming orders were made. In addition, it was ordered that upon the undertaking of the defendant by counsel not to take any further step until further order pursuant to the notice to quit and of abandonment dated 30 May 2005, so that the plaintiff would be at liberty to maintain his boat in the prescribed area and to obtain access to the same in accordance with the subject licence, the matter was adjourned sine die.

Various considerations

36 It will now be useful to look at various considerations brought forward by the parties bearing upon the application for relief.

37 Mr Ashton said in his first affidavit that his boat is a 25 tonne yacht that still requires a second mast, running, rigging and various fit-out items. It needs to be moved shortly from its water pen onto a hardstand area to enable final construction to be completed. To move the boat it will be necessary to book a slipway, a heavy haulage contractor and a crane driver. Reference is made also to certain other steps that have to be taken and an estimation of costs in the sum of $2000 to $3000 in order to take such steps. Mr Ashton said that it will be necessary to find alternative premises for the boat where he can carry out repairs.

38 Mr Ashton went on to say in his first affidavit that currently, in its uncompleted state, he estimated the value of his yacht to be at between $100,000 to $120,000. Upon completion with the second mast, running, rigging and other items, he believed that the boat will be conservatively worth $200,000 in replacement costs.

39 Mr Dawson said in his affidavit sworn 30 June 2005 on behalf of the defendant that in July 1998 he entered into a written licence agreement with Tranby as the lessee of the Maylands Boat Yard at that time. The licence agreement provided him with the use of an undercover area in order to build a boat. Other people at the boat yard learnt of his skills with the result that, since 1998, he has assisted approximately 20 other licensees at the boat yard with the construction of their boats.

40 Mr Dawson referred in his affidavit to the chain of events mentioned earlier including the assignment of lease to his company which took effect

(Page 12)

on 1 January 2005. This was done with the approval of the Planning Commission as evidenced by its execution of the deed of assignment on 10 February 2005. He said that amongst the book and records that came to the defendant company were many licence agreements that had been executed by persons building boats at the Maylands Boat Yard.

41 At par 16 of his affidavit Mr Dawson referred to a true copy of a standard licence agreement which his predecessor, Maylands Boat Yard Pty Ltd, had licensees execute in respect of the boat yard. I note in passing that the so-called standard licence agreement makes provision for a description of the subject area and a commencement date. Clause 3.1 provides that either the licensor or the licensee may terminate this licence by giving to the other of them not less than 7 days notice in writing to that effect. The following clauses provide that if the licensor reasonably considers that the licensee has breached any of its terms then the licence shall terminate upon the expiration of not less than 24 hours notice in writing to that effect. Upon termination of the licence the licensee shall quietly deliver up to the licensor possession of the subject area.

42 Mr Dawson said that when he became the lessee pursuant to the assignment he arranged for the licence terms and conditions to be slightly varied. Exhibited to his affidavit is a true copy of the Dawson standard licence agreement which he is endeavouring to have persons at the Maylands Boat Yard sign.

43 Mr Dawson went on to say that at present there are approximately 100 boats being built at the boat yard. Most of these boats are being built on hardstands. There are approximately 24 water pens in total. There are only 2 deepwater pens, with one of these being occupied by the plaintiff. It has been occupied by the plaintiff since approximately 1993.

44 Mr Dawson said that he has secured approximately 30 signed licence agreements but has temporarily ceased to pursue such agreements pending the outcome of this hearing. Because of the shortage of water pens, he will only allow them to be used by licensees for 12 month periods. They will only be available to existing tenants unless no existing tenants have a demand for them. In his experience, boats can be built entirely on hardstand. However, towards the completion of a boat, it is desirable to work on it in a water pen where some aspect of the boat can be tested in a water environment. The difficulty with the plaintiff having remained in one of the two deep water pens for 12 years is that other licensees do not have the opportunity to finish off their boats in a water pen environment.

(Page 13)

He currently has two other licensees on a waiting list to use the deep water pen.

45 Mr Dawson said further in his affidavit that a historical company search of ASIC records indicates that Harold Dodd has never been a director of Tranby.

46 As to other parts of the first Ashton affidavit, Mr Dawson said that he had not seen the Ashton's work on their boat for some years. He said that he did not receive a cheque number 000126 on 27 January 2005 or at all. It was not necessary for the plaintiff to move his boat onto a hardstand area in order to complete construction. However, Mr Dawson did not have any objection to the plaintiff removing the boat from the water because other licensees required the deepwater pen.

47 Mr Dawson disputed that it will be necessary to lift the Ashton boat out of the water in order to move it. It could simply be towed to another location rather than lifted. In any event, if the boat was required to be lifted the cost involved would be less than the $2000 to $3000 suggested by the plaintiff. If the plaintiff was to move the boat to a hardstand, it would be incurring some of the costs of relocation in any event. Exhibited to Mr Dawson's affidavit is a valuation that assesses the value of the plaintiff's boat at $36,500.

48 It is said further by Mr Dawson that he was attempting to have all licensees sign the licence agreement so that there was uniformity in the terms and conditions observed by all licensees in the boat yard. The Planning Commission's intention was that the yard be used by amateur boat builders. The plaintiff's conduct in refusing to abide by the same rules as everybody else is throwing this intention into disarray. Other boat builders are being denied the opportunity to work on their boats in the deepwater pen. The 12 years in which the Ashtons have occupied the deepwater pen is an inordinate length of time. In Mr Dawson's experience as a boat building, 12 months is more than ample time to use the deepwater pen, and by rotating boat builders on this basis, more boat builders will have the opportunity to work on their boats. The plaintiff, contrary to the intention of the Planning Commission, is effectively utilising the deepwater pen as a marina.

49 Mr Dawson said also that if any injunction is granted it will further deny other boat builders the opportunity to utilize the deepwater pen which was never intended to be used solely by one person.

(Page 14)

The plaintiff's response

50 Mr Ashton responded to some of these assertions in his second affidavit. He referred to being told by Mr Dawson on various occasions that certain boats constructed by Mr Dawson at the Maylands Boat Yard were sold by him. The plaintiff believes this to be a breach of the lease provision concerning building of boats for sale. Mr Ashton said also that if dredging had been done by the lessee as required by the lease then the lessee would have all 24 water pens as deepwater pens.

51 Mr Ashton denied that his boat has occupied one of the deepwater pens since 1993. He said that the boat was put into the water on 7 June 1997 and was unable to be taken out of the water for a substantial period because the cradle required was condemned. He would be willing to remove his boat to a hardstand area under reasonable licence conditions if the defendant was agreeable.

52 As to the role of Harold Dodd, the plaintiff said that he (Dodd) acted at all times as the "patriarch" of the Dodd family company, Tranby Quay Pty Ltd. The plaintiff observed him on many occasions directing his sons as to what to do in relation to the maintenance and upkeep of the boat yard. He had been crippled following a car accident and was unable to sign documents. In the plaintiff's belief it was for this reason only that he was not a director of the company.

53 The plaintiff said further that there is no other amateur boat building yard in Perth or in Australia to his knowledge. The Maylands Boat Yard is the only one of its kind in Australia. He disputed the valuation referred to by Mr Dawson on the basis that the valuer knew nothing about the subject boat's construction, communication systems, desalination operations, sewerage treatment plant, sail wardrobe or other details. For that reason the valuation was of little worth.

54 Mr Ashton said that Mr Dawson was denying other amateur boat builders the use of the plaintiff's deepwater pen because of Mr Dawson's refusal to allow the plaintiff onto the hardstand under fair and reasonable licence conditions. Mr Ashton had not effectively utilized the deepwater pen as a marina in that the boat was not regularly sailed to and from that deepwater pen. It has been and remains in a state of construction.

55 The plaintiff said further that he and Mr Gorza, in their role as committee members of the Association, have written letters to the Department requesting that it enforce a number of lease obligations against the lessee so that the boat yard is properly maintained for the

(Page 15)

benefit of all amateur boat builders. All of the office bearers of the Association have received eviction notices. It is only as to the plaintiff and Mr Gorza that the defendant has proceeded to the issue of notices of abandonment. The other amateur boat builders are concerned to ensure that they do not receive similar notices. The plaintiff denied any suggestion that other amateur boat builders did not support the position being taken by Mr Gorza and himself regarding the termination provision in the proposed licence agreement, or the position that the Department ought to enforce the lease obligations against the lessee.

56 In his second affidavit sworn 29 July 2005 Mr Dawson joined issue as to a number of matters. He denied being involved in the sale of boats he had constructed. On one occasion he did sell one set of fibreglass hull and deck moulding. He said that he had been at the boat yard on many Sundays and had not observed any work being carried out on the plaintiff's yacht. He was aware that amateur boats are currently under construction at a number of sites around the metropolitan area including most yacht clubs, Hillarys Boat Harbour, Yanchep Marina, Cruising Yacht Club (WA) at Rockingham as well as any number of industrial/commercial sites and some residential backyards.

The plaintiff's case

57 It is apparent from the evidentiary materials that the plaintiff did not at any stage sign a licence agreement conferring upon him a licence to occupy a deepwater pen at the Maylands Boat Yard or any other portion of the premises. On the plaintiff's case, he was granted a licence to occupy a designated area by the original lessee (Tranby) initially as a consequence of arrangements made verbally between him and representatives of Tranby. More particularly, it is said that as a consequence of a conversation with Harold Dodd, who was speaking on behalf of Tranby, the verbal licence agreement included the express oral condition pleaded in par 4 of the statement of claim that the plaintiff had the right to a site and associated boat building facilities until completion of construction by the plaintiff of a vessel upon payment of a monthly licence fee. For ease of reference I will call this the alleged par 4 condition.

58 I pause here to say that by his statement of claim the plaintiff seeks a declaration that the licence "prohibits the defendant (as licensor taking the benefit and burden of the licence) from terminating the licence until completion by the plaintiff of his construction of his vessel". This amounts to an assertion in general terms that, when all the facts and

(Page 16)

matters pleaded in the claim are taken together, the defendant is bound to observe the alleged par 4 condition. The assumption seems to me that this follows from the assignment of the lease to the defendant but this is not pleaded with particularity. For present purposes, I will proceed upon the basis that the general assertion is broad enough to encompass the two pleas of the plaintiff mentioned below. However, I must keep steadily in mind that the plaintiff does not allege that there was any occasion on which Mr Dawson or any other person on behalf of the defendant agreed expressly to grant to the plaintiff a licence containing the alleged par 4 condition.

59 The plaintiff submitted that there were two lines of argument pursuant to which it could be said that a contractual licence including the alleged par 4 condition was binding upon the defendant as the party presently in possession of the Maylands Boat Yard as lessee.

60 First, the plaintiff submitted that as a consequence of the various instruments of assignment the defendant took possession of the leased premises subject to existing contractual obligations.

61 I pause here to observe that a plea to this effect gives rise to certain difficulties referable to the rules of law concerning privity of contract. As a general rule, only the parties to a contract are bound by its obligations. Moreover, as a general rule a contracting party cannot divest himself of the obligations (or burden) of a contract by assignment or otherwise. Likewise, the burden cannot be imposed upon another party (such as the defendant in the circumstances of the present case) unless that other party agrees to accept the burden, being an arrangement which is usually effected by novation.

62 These rules make it difficult for the plaintiff to assert that the defendant is bound to observe a licence agreement negotiated with the plaintiff by Harold Dodd (on behalf of Tranby) because the defendant was not a party to the relevant negotiations and did not agree to be bound by the same. The 31 December sale agreement refers to an assignment of 217 existing licence agreements. This allowed for the defendant to receive the benefit of those agreements but did not necessarily reflect an undertaking by the defendant to accept the burden of ensuring that the licensees were provided with areas on an ongoing basis. The standard licence agreement established that the rights of the licensee conferred no estate or interest in the area and could be terminated upon 7 days notice on either side. Prima facie, there is no rule of law that a person who takes the benefit of a transaction must also accept the burden of that transaction:

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Government Insurance Office (NSW) v K A Reed Services Pty Ltd [1988] VR 829. cfTito v Waddell (No 2) [1977] Ch 106.

63 I will return to these difficulties in due course. However, for the moment, it is sufficient to observe that in certain special circumstances concerning interests in land there are some exceptions to the rules I have just mentioned. For example, restrictive covenants and easements created by an owner of land can usually be enforced by a purchaser of the land against a successor in title to the original owner. Moreover, in some cases, where elements of unconscionable conduct are found to exist, a party who acquires an interest in land on the express undertaking that he will observe contractual obligations entered into by his predecessor with a third party might be obliged to honour the undertaking he has given pursuant to principles of constructive trust: Bahr v Nicolay (No 2) (1988) 164 CLR 604

64 However, a case of the latter kind usually turns upon a finding that the third party acquired an equitable estate in the subject land; that is, an order for specific performance would be made in respect of the third party's contractual rights. A situation of that kind is generally thought to be quite distinct from enforcement of contractual rights vested in a mere licensee because a contractual licence does not give rise to an estate in the land.

65 These various observations can be illustrated by Howie v New South Wales Law Tennis Ground Ltd (1956) 95 CLR 132. In that case a company which owned a lawn tennis ground contracted to provide persons designated special members with various entitlements including an allocation of reserved seats in the grandstand. When the company went into voluntary liquidation and proposed to transfer its assets to a law tennis association the plaintiffs sought declarations that on transfer to the association the rights of the special members would be binding on it.

66 The High Court held that the rights of the special members was based upon a contract with the company. If for any reason the company ceased to carry on its business the rights would cease. The burden of the agreement could not be laid on the assignee association which had notice of the rights of the special members. The doctrine concerning restrictive covenants is limited to negative covenants and to covenants made for the benefit of the land of the covenantee.

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Features of the present case

67 The plaintiff submitted that there were certain features of the present case which enabled the plaintiff to surmount the difficulties I have just described and to enforce the alleged par 4 condition as against the defendant. Even so, I am conscious that the plaintiff's line of argument depends substantially upon the alleged conversation between the plaintiff and Harold Dodd on behalf of Tranby and the creation of a verbal licence agreement that included the alleged par 4 condition. As to that, I am conscious also that there is little in the surrounding documentation to confirm the making of the alleged par 4 condition or the giving of any undertaking to comply with the same by Tranby's successors in title as lessee of the Maylands Boat Yard.

68 The plaintiff pointed to a letter dated 16 November 2000 to the Ashtons from the Manager of Maylands Boat Yard Pty Ltd, Mr Dufty, in which this was said (in the course of canvassing a proposal for the plaintiff to leave the water pen):

"We feel that you have had a fairly long period in your water pen and we need to hold you to an approximate departure date. Because no lease expiry date has ever been set we will not make this date precise while you are making reasonable progress towards departure."

69 These comments were said to constitute an acknowledgement that a verbal licence agreement existed and that it was subject to the alleged par 4 condition. As to this and other documents, the plaintiff sought to persuade me that if a licence was granted without an expiry date being fixed (or, putting it another way, that the licence was for an indefinite term), this was tantamount to an undertaking not to revoke the licence until the purpose for which the licence was granted was fulfilled, namely, completion of the boat.

70 Counsel for the plaintiff gave some emphasis also to the history of the site which was set aside for the use of amateur boat builders. For example, as I noted earlier, by cl 2(l) of the head lease the lessee is obliged to provide sites within the demised premises for the occupation by licensees building, repairing or maintaining amateur water craft.

71 Further, on the plaintiff's case, the recitals to the defendant's notices to quit seemed to assume that the defendant saw itself as being bound to observe licence agreements negotiated by or on behalf of Tranby and that,

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as appears from par A of the recital to the 27 April notice, the plaintiff's licence was for an indefinite term.

72 As to this latter point, I feel obliged to note in passing that par D of the subject recital goes on to assert that the purported licence allowed for termination on either side by giving 7 days notice in writing. Thus, as a matter of first impression, the reference to an indefinite term does not, when considered in context, suggest that the licensor had entered into an undertaking not to revoke the licence until construction of the plaintiff's boat was completed.

73 The plaintiff contended that matters of the kind I have just mentioned were sufficient to overcome any difficulties arising out of the rules concerning privity of contract and assignment mentioned earlier. In effect, the plaintiff said that by taking over the boat yard business the defendant agreed to take over and keep in force all existing licences on whatever terms had been agreed with former owners. This meant, in the case of the plaintiff and Mr Gorza, that the defendant was bound to let them stay in their existing areas until their boats were complete, because their verbal licence agreements (unlike the standard form written agreement) included the alleged par 4 condition. I will return to this aspect of the matter in due course. For ease of reference, I will call this first contention the "plaintiff's assignment of licence plea".

74 Second, the plaintiff submitted that, irrespective of any difficulties associated with the privity issue, the evidentiary materials permitted the Court to infer that upon the taking over the boat yard the defendant, by its own conduct, granted a fresh contractual licence to the plaintiff upon terms and conditions that corresponded to the pre-existing licence agreement and thereby included the alleged par 4 condition.

75 In other words, on the plaintiff's case, it was known to Tranby's successors in title, including the defendant company (via Mr Dawson) that the plaintiff occupied his water pen pursuant to a verbal licence agreement which included the alleged par 4 condition. Accordingly, when the defendant company took over as lessee of the boat yard and allowed the plaintiff to remain at the site upon payment of monthly rent in the same way as before, these events could be said to give rise to a fresh verbal licence agreement which was subject to the same terms and conditions as before including the par 4 condition.

76 For ease of reference I will call this second contention the "plaintiff's fresh licence plea".

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77 As to both the plaintiff's assignment of licence plea and fresh licence plea, the plaintiff relies particularly on the Dufty letter dated 8 December 2004 from Maylands Boat Yard Pty Ltd to the Ashtons (being DA7 at page 59 to the Ashton affidavit). The letter refers to the defendant taking over the business and goes on to say that "Arno intends running the yard along similar lines to ourselves…". The plaintiff relies also on the letter dated "December 2004" from Mr Dawson to the Ashtons (being DA8 at page 60 to the Ashton affidavit) in which it is said that the defendant will be taking over the government owned lease and "existing tenant licence agreements will remain in force, however tenant licence agreements in the name of Australian Cruising Yacht Co Pty Ltd trading as The Boat Building Yard will be required to be signed in the new year." Further, as I have indicated, the plaintiff relies upon the recitals to the notices to quit which seem to assume that a pre-existing licence agreement had run on as before.

78 I note in passing that there appears to be no suggestion in the evidentiary materials that there was any discussion between Mr Dawson and the Ashtons at any stage in which express mention was made of the alleged par 4 condition or in which any undertaking was given by Mr Dawson on behalf of the defendant that the plaintiff could continue to use his water pen until his boat was completed. The plaintiff's case depends upon findings being made that the verbal licence agreement entered into with Tranby included the alleged par 4 condition and that subsequent events resulted in the defendant company being bound by this condition. There is evidence before the Court that Mr Dawson was aware that licence agreements in the standard written form had been entered into with various amateur boat builders with provision for termination on 7 days notice. There is no evidence before me that he was aware of or had undertaken to be bound by a verbal licence agreement allowing the plaintiff to occupy the subject water pen until his boat was completed pursuant to the alleged par 4 condition.

79 This brings me to another constituent of the plaintiff's case which is reflected in par 5 of the statement of claim. The plaintiff pleads further, or alternatively, that it was an implied term of the licence that Tranby would not terminate the plaintiff's licence without reasonable cause. The term is said to be implied by reason of the plaintiff's refusal to sign a proposed written licence agreement which entitled Tranby to terminate the licence for no reason, the plaintiff's conversation with Harold Dodd, the plaintiff's construction of a boat at the premises and the need for his use of the hardstand area and the repair facilities.

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The plaintiff's submissions

80 The stance of the plaintiff is that a full review of the evidentiary issues should await the trial of the action. In the meantime, it could be said that sufficient evidence had been placed before the Court to raise a serious issue to be tried that, initially, the plaintiff entered into a verbal licence agreement with Tranby containing the alleged par 4 condition. Further, pursuant to either of the plaintiff's assignment of licence plea or his fresh licence plea, the defendant is bound by a verbal contractual licence containing the alleged par 4 condition.

81 The plaintiff went on to submit that equity will intervene in a proper case to restrain wrongful revocation of contractual licence in circumstances where damages are an inadequate remedy. This was a case where the contractual licence in question contained a negative stipulation (that is, the alleged par 4 condition) and was the sort of case in which equitable relief by way of an interim injunction was often provided. The balance of convenience favoured the grant of an injunction to maintain the status quo pending trial in that otherwise the plaintiff would lose the opportunity to complete the construction of his boat at the only amateur boat building facilities in Western Australia.

82 The plaintiff said further that he would be put to substantial cost if required to move his boat to alternative premises; the defendant company would continue to receive licence fees while the matter proceeded to trial; the circumstances were open to an interpretation that the defendant wished to evict the plaintiff and Mr Gorza for reasons unrelated to the reasons reflected in the defendant's affidavit.

83 Thus, in summary, the plaintiff contends that he is entitled to relief because the defendant is in breach of a licence agreement containing the par 4 condition or, alternatively, is in breach of a licence agreement containing the par 5 implied term. These terms are said to be binding upon the defendant pursuant to the plaintiff's assignment of licence plea or the plaintiff's fresh licence plea.

84 As to the two latter pleas, as I have indicated, the plaintiff placed reliance upon certain letters and upon the recitals to the notices issued by the defendant. According to the plaintiff, the recitals showed that a licence agreement had been entered into between Tranby and the Ashtons for the use of a boat pen and that the licence in question had in due course been assigned to the defendant company. However (I remind myself) there is nothing in the recitals to suggest that a licence agreement, if any, was subject to the alleged par 4 condition. On the contrary, in each case

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the recital asserts that the parties to the licence could terminate the same by giving 7 days notice.

The defendant's submissions

85 The defendants submitted that there was no pleaded allegation in the statement of claim that the defendant had itself ever granted a licence to the plaintiff in the terms set out in the statement of claim. This meant that the plaintiff was relying essentially upon an assertion that a verbal licence containing the alleged par 4 condition was negotiated with Tranby and that the defendant was bound by the same as a consequence of the agreements for sale of the business made later and the various assignments.

86 The defendant sought to refute such an assertion by referring to the conventional view that a contractual licence confers no proprietary interest on the licensee. Any rights conferred by the licensee are conferred as against the person granting the licence (in this case Tranby) and do not run with the land so as to be binding upon a successor in title such as the defendant. In the absence of any contractual privity between the plaintiff and the defendant, the plaintiff's claim could not succeed.

87 The defendant submitted further that it follows from the fact that a licence conveys no interest in the land that an assignment of his leasehold estate by a licensor (such as Tranby) to a third party (such as Maylands Boat Yard Pty Ltd) will effectively terminate the licence. Counsel for the defendant referred to Coleman v Foster [1856] 1 H&N 36 where it was said by Pollock CB at 38 that "if a man gives a licence and then parts with the property over which the privilege is to be exercised, the licence is gone. A licence is a thing so evanescent that it cannot be transferred".

88 The defendant submitted that this principle was directly applicable to the circumstances of the present case. In other words, even if the plaintiff was granted a licence by the original lessee, the lessee in question (Tranby) divested itself of its leasehold estate in the land and the licence was thereby terminated. Any promise given by the original lessee does not confer rights on the licensee as against the assignee of the lease interest being, in this case, the defendant company.

89 The defendant recognised that licences coupled with a grant are irrevocable: Wood v Leadbetter [1845] 13 M&W 838 at 845. However, this was not such a case. For a licence to be coupled with a grant there must have been conferred something in the nature of a right to take natural produce or profits from the land over which the licensor has control.

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Further, and in any event, the plaintiff's case was not advanced upon that basis.

90 The defendant referred to Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 in which the High Court held that a licence to enter a race course to view the races, although given for value, did not create a proprietary interest in the land, but created a contractual right only, and was revocable at common law. Equity did not preclude the defendant from effectively revoking the licence or relying upon its revocation. In other words, the transaction of buying a ticket for an entertainment did not create anything more than a contractual right in the buyer against the seller; that is, a right to have the contract performed. For the breach of such a right there is a remedy in damages but the remedies applicable to the protection of proprietary rights are not legally (or equitably) appropriate in such a case.

91 The defendant, in its written submissions, recognised that, notwithstanding the absence of a proprietary interest in the subject land, in some circumstances equity would intervene to restrain the wrongful termination of a licence where this amounted to the breach of a negative stipulation in a contract: Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233. However, on the defendant's case, it was questionable as to whether this could be regarded as good law, having regard to the decision of the High Court in Cowell's case (supra). Further, there was insufficient evidence before the Court to establish that the defendant was a party to or bound by a contractual licence containing the alleged par 4 condition or the alleged par 5 implied term.

92 Put shortly, the defendant submitted that a licence confers no proprietary rights on the licensee, merely contractual rights against the licensor (in this case Tranby, not the defendant). There was no serious issue to be tried because the original licence, whatever the terms of that might have been, was terminated by Tranby's assignment of its leasehold interest. The defendant was not bound by the original licence and was entitled to revoke the plaintiff's licence (if any) even if that was wrongful or in breach of contract. A breach of contract might entitle the plaintiff to claim damages, but it did not provide a basis for the plaintiff to apply for injunctive relief.

93 The defendant submitted further that even if there was a serious issue to be tried (which was disputed) the plaintiff had not established that

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damages would be an inadequate remedy, especially given the modest quantum of the damages.

94 Further, the balance of convenience favoured dismissal of the application. If the application for an injunction was unsuccessful, then only the plaintiff would be affected and he could simply move his boat to another location to complete construction. On the other hand, if an injunction was granted, it would prevent any other member of the public who wished to construct a boat from using the deepwater pen facilities at the Maylands Boat Yard, despite the plaintiff having had the advantage of the boat yard facilities for more than 14 years. The proper running of the yard required that there be provision for rotation of the various pens and areas.

95 Before resolving the matters in issue it will be useful to look further at some of the legal principles and decided cases bearing upon the present application.

Legal principles

96 An applicant for interlocutory injunctive relief must satisfy the Court that there is a serious question to be tried. If there is a serious question to be tried, the Court must consider whether the balance of convenience is for or against the grant of relief, but the two necessary conditions are not independent of each other.

97 Having satisfied itself that the plaintiff would not be adequately compensated by an award of damages, the Court should consider whether the defendant would be adequately compensated by damages recoverable under the plaintiff's undertaking as to damages. When there is no doubt as to the adequacy of the respective remedies and damages, the question of the balance of convenience arises. Where other factors are evenly balanced, the appropriate course is to preserve the status quo: American Cyanamid Co v Ethicon Ltd [1975] AC 396; Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148.

98 The ruling of the High Court in Cowell v Rosehill Racecourse (supra) is important. It shows that a contractual licence to enter land does not give rise to a proprietary interest in the land and can be revoked. However, in reviewing the law concerning licences, the decision of Helsham J in Graham H Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93 is a useful point of reference also. In that case Helsham J held that upon the true construction of the subject contract, a term had to be implied in it that the builder had a licence to go onto the

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land in question and to carry out the building works, which licence was not to be revoked whilst the contract was still on foot and there was work to be done by the builder under it.

99 The defendant owner had the power to revoke the licence at will, leaving the plaintiff to his remedy at law unless the contract was of such a kind and the circumstances such that equity would interfere. However, on the facts of the case, it was held that the plaintiff had not made out its case for relief by way of an injunction.

100 Observations made by Helsham J in the course of his judgment were to this effect. It follows from the decision in Cowell v Rosehill Racecourse (supra) that a contractual licence coupled with an agreement not to revoke it is revocable at law. However, equity will, in certain circumstances, restrain a defendant from revoking such a licence, if the licensor is threatening to do so, if the defendant has purported wrongly to revoke it. Traditionally, equity has not, except in certain circumstances, seen fit to grant its remedy of specific performance to compel performance of building contracts. The only remedy of the building contractor for an infringement of the right is by way of damages.

101 As to the proposition that equity will, by its special remedy of injunction, prevent the breach of a negative stipulation in a contract, even though the contract is not one that would attract the other special equitable remedy of specify performance, the general approach of equity is reflected by what was said by Lord Uthwatt in Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 at 202. The settled practice of the courts of equity is to do what they can by injunction to preserve the sanctity of a bargain. A licensee who has refused to accept the wrongful repudiation of the bargain which is involved in an authorised revocation of the licence is as much entitled to the protection of an injunction as a licensee who has not received any notice of revocation.

102 Helsham J affirmed that the Court retains a wide discretion and will exercise its powers to grant an injunction in circumstances where it is just and equitable that a defendant should be restrained from acting in defiance of a negative stipulation in a contract. Relevant matters would include whether damages are an adequate remedy and whether irreparable harm will be suffered by the plaintiff if the remedy is refused.

103 The principles outlined by Helsham J were applied in Alonso v Leichhardt Municipal Council (1975) 1 BPR 9368. In that case a town hall had been booked for a public meeting for which extensive notice had

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been given and it was thought that untold hardship would be caused if the meeting could not be held. Helsham J in that case was of the view that the plaintiff association, as the hirer of the hall, had a licence not coupled with an interest in the land. However, such a licence could be the subject of an injunction to restrain its wrongful revocation in a proper case. In the circumstances of the case damages were not an adequate remedy and there was no reason why, in the exercise of discretion, the Court should not grant an injunction.

104 A similar line of reasoning was approved in Bingham & Anor v 7-Eleven Stores Pty Ltd [2003] QCA 402. Williams JA made these observations at pars 6 to 11:

"[6] In my view Holmes J was correct in concluding that this was a claim seeking to enforce in equity a negative contractual stipulation. The High Court in J C Williamson Limited v Lukey and Mulholland (1931) 45 CLR 282 at 292 and Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 at 628 clearly recognised that a court of equity had jurisdiction to restrain the violation of stipulations in contracts, particularly negative stipulations. The real question in this case was whether or not a negative stipulation was involved. Yeldham J had to consider a fairly similar factual situation in Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Pty Ltd [1983] 1 NSWLR 513. That case involved a distributorship agreement. The relevant clause provided that the distributor could terminate the agreement "with cause, by giving the Dealer written notice thereof, stating the Distributor's grounds for such termination. The grounds for such termination shall include but not be limited to ...". In the proceedings the dealer sought to restrain the distributor from acting on a notice given pursuant to that provision. At 515 Yeldham J said:

'What is sought by the plaintiff in the present case is an injunction to restrain the defendant from terminating the dealer agreement in breach of the contract between the parties in purported reliance upon a notice which I have held it could not validly give. The injunction is to restrain what is in substance the breach of a negative stipulation, namely that the defendant would not terminate the

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contract without cause except in the circumstances provided for in cl 10 of the main dealer agreement.'

[7] That statement is particularly apposite here. The respondents were in substance seeking to restrain breach of a negative stipulation, namely that the appellant would not terminate the franchise agreements otherwise than on the proven occurrence of one of the events specified in Article 25.

[8] In my view that is the correct categorisation of what the respondents were asking for and obtained. If further authority is required it is to be found in my view in cases such as Axxess Australia Pty Ltd v Primus Telecommunications (Aust) Pty Ltd [2000] VSC 64, Thomas Borthwick & Sons (Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538, and State Transport Authority v Apex Quarries Ltd [1988] VR 187.

[9] Counsel for the appellant relied on the reasoning in Ahmet v Pacific Seven Pty Ltd (unreported, Supreme Court of Victoria, 998 of 1987, 30 April 1987). Whilst there were some similarities to the present case, Hampel J did not consider whether the applicant was seeking to enforce a negative stipulation in the franchise agreement. Counsel also relied on the decision of Southwell J in Dataforce Pty Ltd v Brambles Holdings Ltd [1988] VR 771. Again that case can be distinguished, if only because the performance of that agreement had not commenced prior to proceedings being brought.

[10] The appellant also contended on appeal that the interlocutory injunction ought not to have been granted because it involved supervision by the court of a relationship which had broken down. The fact that the granting of an injunction may involve a degree of supervision of conduct by the court is no longer as strong a factor against granting the injunction as it previously was. Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 46-7 made it clear that 'constant supervision by the court' by itself is no longer an effective or useful criterion for

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refusing a decree of specific performance. The judgment went on to say: 'The courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations. The reservation of liberty to apply to the Federal Court in respect of certain of the orders to be made is in no way out of ordinary in the exercise of equitable jurisdiction'.

[11] Given the fact that the franchises in question had many years to run, and given the nature of the investment of the respondents in those businesses, I am not persuaded that the learned judge at first instance was wrong in concluding that the balance of convenience was in favour of granting the injunctions and in specifically concluding that damages were not an adequate remedy."

Findings

105 I am conscious that, generally speaking, a contractual licence to enter or occupy land is revocable and can be terminated by the licensor: Cowell v Rosehill Racecourse (supra). However, it emerges from the decided cases, that in certain circumstances, where revocation by the licensor could be characterised as the breach of a negative stipulation, an injunction can be obtained to restrain the revocation until the events allowed for by the stipulation have been completed.

106 If Tranby had stayed on as lessee, and had sought to revoke the plaintiff's licence owing to a disagreement between the parties about reorganisation of the boat yard and/or increased rentals, the plaintiff could have approached the Court for relief on the grounds that the licence agreement between the parties was subject to the alleged par 4 condition; that such a condition amounted to a negative stipulation forbidding eviction until the boat was completed; that a negative stipulation is enforceable by injunctive relief subject to the balance of convenience. Indeed, in essence, this is how the plaintiff's case is pleaded.

107 For the moment, let me put the privity issue to one side and look simply at the threshold question of whether there is enough evidence to support a plea that the plaintiff entered into a verbal licence agreement with Tranby containing the alleged par 4 condition or, in the alternative, the alleged par 5 implied term. In doing so, I am conscious that the plaintiff needs to establish only that there is a serious issue to be tried.

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108 I noted in earlier discussion that the plaintiff cannot point to any contemporary document in which mention is made of the alleged par 4 condition. At best, there are a few, rather scant references to a licence agreement being made for a indefinite term. The plaintiff's case depends essentially upon the conversation described in par 8 of Mr Ashton's first affidavit. This reads as follows:

"In 1993 Harold Dodd, the director of Tranby Quay Pty Ltd and the manager for Maylands Boat Yard approached and asked me to sign a standard form licence agreement for my hard stand site. I took it away to read. Some time later I raised it with him. I said I didn't agree with the clause allowing him to terminate without reason. [H]e said: 'We've never evicted anybody and as long as you pay your rent and behave yourself you can stay as long as you want.' I understand that allowed me to stay until my boat construction was completed. He didn't raise the issue of the written agreement again."

109 It was common ground at the hearing before me that Mr Dodd is now deceased and will not be available to give evidence at the trial of the action. The defendant's evidence on affidavit seemed to establish that Mr Dodd was not a director of Tranby at the relevant time. This was not refuted by the plaintiff. I foresee evidentiary difficulties for the plaintiff in making out its case at trial in these circumstances. However, for present purposes, I am inclined to proceed upon the basis that the plaintiff can bring forward sufficient evidence at trial to establish that the late Harold Dodd had actual or ostensible authority to speak as an agent of the company in regard to the granting of a licence and that hearsay assertions made by him will be admissible as admissions against the defendant's interest.

110 It follows that, as to this aspect of the matter I will accept that there is a serious issue to be tried as to whether the late Harold Dodd made a statement of the kind attributed to him by Mr Ashton.

111 The next question is whether the Harold Dodd statement, considered in its context, can be said to have given rise to a verbal licence agreement containing the alleged par 4 condition; that is, the plaintiff had the right to remain on the site until completion of his vessel.

112 It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. An intention to contract is essential. In Taylor v Johnson (1983) 151 CLR

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422 at 428 a majority of the High Court indicated, consistently with what has been described as the "objective theory" of contractual assent, that the law is concerned, not with the real or subjective intentions of the parties, but with the outward manifestation of those intentions.

113 Cheshire & Fifoot: "Law of Contract" (8th Aust ed) indicates at par 5.1 that an objective test must be applied in determining whether the parties have manifested an intention to create legal relations. The same text recognises at par 28.6 and in following passages that the objective theory has been subjected to criticism. However, essentially, the function of a judge is not to seek to satisfy some elusive mental element but to ensure, as far as practical experience permits, that the reasonable expectations of honest parties are not disappointed. This is the objective test of agreement. Intention is to be determined as a matter of inference from conduct. The parties are to be judged not by what was in their minds but by what they had said or written or done.

114 In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Gaudron, McHugh, Hayne and Callahan JJ indicated at par 24 and par 25 that the word "intention" describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happen. It is not a search for the uncommunicated subjective motives or intentions of the parties.

115 In Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 79 ALJR 206 the High Court said at par 34 that the legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual belief and intention. This accords with the general test of objectivity.

116 It follows from those cases that it is not enough for the plaintiff to describe his personal response to what was put to him by Harold Dodd or to rely upon his subjective belief that he was being allowed to stay until his boat was completed. The crucial question is whether, in the context of a discussion about a standard form licence agreement, Harold Dodd's statement, viewed objectively, can be regarded as the voluntary assumption of a liability on behalf of the party he represented (Tranby), namely, that the plaintiff was entitled to remain on the site until his boat was completed.

117 In evaluating what was said, I cannot overlook the fact that, even on the plaintiff's account, there was no explicit reference on either side to

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completion of the boat. Harold Dodd's assertion is open to the interpretation that although Tranby was not presently minded to bring the licence agreement to an end without any reason, it might be obliged to act if compelled to do so by a good reason; for example, non-payment of rent, or bad behaviour, or some other compelling reason such as pressure from the Planning Commission or a need to re-organise the boat yard. To my mind, in the absence of any explicit reference to the plaintiff being allowed to complete his boat, the words relied on are not sufficient to create the promissory obligation contended for. On the evidence before me, I am not satisfied that the plaintiff has demonstrated that there is a serious issue to be tried that the verbal licence agreement which was said to have been made initially between the plaintiff and Tranby contained the alleged par 4 condition.

118 I must now turn to the alleged par 5 implied term; that is, the plaintiff's alternative plea to the effect that it was an implied term of the licence that Tranby would not terminate the plaintiff's licence without reasonable cause.

119 The general rule is that courts may, if it is necessary to give business efficacy to a business contract, imply such a term as the parties would have done themselves had they thought about the matter. For a term to be implied, various conditions (which may overlap) must be satisfied. First, it must be reasonable and equitable; second, it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; third, it must be so obvious that it goes without saying; fourth, it must be capable of clear expression; fifth, it must not contradict any expressed term of the contract: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 16 ALR 363 at 365; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 340 and 404.

120 It is true that in the present case the head lease made provision for the lessee to run the boat yard as a facility for amateur boat builders. Thus, it might be said, as a matter of first impression, that the alleged par 5 implied term should be found to exist because this would operate for the benefit of a boat builder such as the plaintiff. However, upon reflection, it becomes apparent that in order to discharge its responsibility under the head lease to provide sites within the demised premises for amateur boat building activities fair and balanced arrangements would have to be worked out by a lessee such as Tranby as between various amateur boat builders operating in a constricted space. A condition forbidding revocation until completion does not immediately strike one as

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obvious or efficacious. The parties are more likely to agree (as evidenced by the standard lease) that termination could not be effected without reasonable notice.

121 It follows that I am not satisfied that there is a serious issue to be tried as to the presence of an implied term of the kind contended for by the plaintiff.

122 These findings are not all that stand in the way of the plaintiff's application for injunctive relief. I must now return to the privity issue.

123 Let me suppose for a moment, notwithstanding the conclusions I have arrived at, that I was persuaded to the plaintiff's viewpoint concerning the effect of the Harold Dodd statement; that I was prepared to accept (as a serious issue to be tried) that the verbal licence granted by Tranby included the alleged par 4 condition. This still leaves the further question as to how such a condition can be thought to be binding upon the defendant, being a party that did not (on the evidence before me) enter into any negotiations with the plaintiff concerning completion of his boat but simply acquired the boat yard business pursuant to the 31 December sale agreement and allowed the plaintiff to remain upon the site after the assignment of the lease to the defendant.

124 It is apparent from the way in which the statement of claim is pleaded that the plaintiff relies principally upon what I have called the plaintiff's assignment of lease plea; that is, the notion that if Tranby was bound by a verbal licence agreement containing the alleged par 4 condition, then the defendant, as its successor in title, will be bound also. However, it follows from earlier discussion that such a view is contrary to the general rules concerning privity of contract and the assignment of the burden of a contract. Nor can it be said that particular facts and matters have been pleaded which would bring this case within any of the exceptions. There is no act or event pleaded or set out in the materials before me which suggest that the defendant contracted with the plaintiff or undertook to any other party to assume the burden of complying with the alleged par 4 condition. When Tranby disposed of its interest in the boat yard, the licence with the plaintiff (which created no interest in the land) came to an end. If the licence included the alleged par 4 condition the plaintiff may have been left with a claim against Tranby for breach of contract, but the doctrine of privity and related rules prevent the plaintiff enforcing the alleged par 4 condition against the defendant pursuant to the plaintiff's assignment of licence plea. The defendant agreed to perform the lessee's covenants under the lease but there is nothing in the language

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of the assignment to suggest that the defendant agreed to keep in force licence agreements entered into previously with third party boat builders such as the plaintiff and Mr Gorza. The 31 December sale agreement made provision for the assignment of "all existing licences" so that the defendant was entitled to the benefit of the same but, for the reasons I have given previously in relation to the privity issue, this did not mean, in the absence of any novation agreement, that the burden of the agreement in the form of the alleged par 4 condition was thereby imposed upon the defendant. A conclusion to the contrary would come close to a finding that the plaintiff's contractual licence gave rise to an enforceable proprietary interest in the land.

125 I pause here to observe that the conclusion I have just expressed is not affected by the letters and documents relied upon by the plaintiffs which seem to assume that existing licence agreements will "remain in force". First, the assumption that a person is bound by an agreement does not make it binding (in the absence of an estoppel plea). Second, as I have noted, the relevant documents make no mention of the alleged par 4 condition. Third, the relevant documents and events are open to the interpretation that the defendant, not because it is bound by anything in the assignment, but simply of its own volition, was prepared to allow the existing licensees to remain on the site until new licence agreements could be negotiated. This brings me to the plaintiff's fresh licence plea.

126 To my mind, there can be little doubt that the plaintiff and the defendant are parties to a contractual licence agreement of sorts in that, after the assignment of the lease to the defendant, the defendant allowed the plaintiff to remain on the site and accepted rental payments from the plaintiff. There is probably sufficient in the situation for this to be regarded as the entry into of a contractual licence between the parties. However, there does not appear to be sufficient in the evidence to suggest that any such informal licence agreement was subject to the alleged par 4 condition because there is no document or series of events which suggest that the parties have applied their minds to such a matter. Moreover, as I noted in earlier discussion, the recitals do not add up to an acknowledgement by the defendant that any licence granted to the plaintiff includes the alleged par 4 condition.

127 Put shortly, then, even if it be held (contrary to my earlier conclusion) that Tranby granted a licence to the plaintiff that included the alleged par 4 condition, or the alleged par 5 implied term, the defendant has not demonstrated (as a serious issue to be tried) that the relevant obligations were assigned to or vested in the defendant in a manner that is

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binding upon the defendant company. The plaintiff may presently be occupying its pen pursuant to an informal contractual licence arising from the payment of rent and the decision of the defendant to allow things to run on for the time being. However, it follows from the reasoning of the High Court in Cowell v Rosehill Racecourse (supra) that in the absence of any special condition established by the evidence the licensor is at liberty to revoke the licence. This it has purported to do by serving the notices to quit. The recitals may contain errors but these do not interfere with the legal effect of the document.

128 Finally, even if I were satisfied that the plaintiff had demonstrated that there is a serious issue to be tried, I am of the view, as I weigh up the various considerations mentioned earlier, that the balance of convenience weighs against the grant of an injunction.

129 To my mind, if the plaintiff makes out its case that the defendant is bound by the alleged par 4 condition, or the par 5 implied term, and that the defendant is in breach of its obligations, damages will be a sufficient remedy. The consequence of an injunction being granted is that a portion of the boat yard will be tied up for a considerable period of time as the plaintiff pursues his claim to trial, and this seems to run counter to the communal requirements of the site. The evidence does not suggest that the plaintiff will suffer irreparable harm. The cost of relocating the boat can be recovered as damages if the plaintiff is able to make out its claim.

Summary

130 The plaintiff's application for an injunction is refused. I will hear from the parties as to whether any further orders are required including orders for costs.