Benchmark Hawthorn Pty Ltd v City of Boroondara
[2002] VSC 581
•20 December 2002
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 4676 of 2001
| BENCHMARK-HAWTHORN PTY LTD (ACN 062 171 224) | Plaintiff |
| v | |
| CITY OF BOROONDARA | Defendant |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2, 3 and 4 December 2002 | |
DATE OF JUDGMENT: | 20 December 2002 | |
CASE MAY BE CITED AS: | Benchmark–Hawthorn Pty Ltd v City of Boroondara | |
MEDIUM NEUTRAL CITATION: | [2002] VSC 581 | |
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Land – licence – contractual licence – whether contract made – loss and damage.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Garry Fitzgerald | Corrs Chambers Westgarth |
| For the Defendant | Mr GD Bloch | Maddock Lonie & Chisholm |
HIS HONOUR:
The plaintiff, Benchmark–Hawthorn Pty Ltd (“Benchmark–Hawthorn”), sues the City of Boroondara seeking damages for wrongful repudiation of a carpark licence agreement. As pleaded, this agreement was made in 1989 or early 1990 between the City of Hawthorn (“Hawthorn”) as licensor and Allendale Private Hospital Pty Ltd (“Allendale”) as licensee. Its terms were that, in consideration of Allendale paying $20,000 towards the cost of sealing and constructing a carpark on part of the old railway reserve behind the Hawthorn Football Club in Hawthorn, Hawthorn would “make a permanent allocation to the hospital of one-third of the car parking spaces created on the land, being an allocation of 23 spaces”.
Much of the factual background was not controversial. It is not disputed that Hawthorn constructed the carpark in 1990 on part of the old ring railway reserve which it had leased from the Victorian Railways Commissioners, at a cost somewhat in excess of $60,000 and that Allendale, which conducted the Allendale Private Hospital at 23-27 Linda Crescent, Hawthorn, contributed $20,000 towards this cost. On or about 10 December 1996, Benchmark–Hawthorn, then called Benchmark–Chelsea Pty Ltd, entered into a series of agreements under which it purchased the business from Allendale and took a lease of the land from the registered proprietor, Allendale Investments Pty Ltd. None of these agreements in terms assigned to Benchmark‑Hawthorn any rights under the carpark licence agreement. At some stage thereafter, the name of the hospital was changed to Hawthorn Private Hospital. Boroondara succeeded to the rights of Hawthorn following the municipal restructuring of the 1990s. In March 2000, Boroondara denied the existence of the carpark licence agreement and indicated to Benchmark–Hawthorn that the allocation of the 23 carparking spaces would cease when it sold the hospital, as it then intended. Such an indication would amount to a repudiation of the carpark licence agreement, if such existed. Finally, the documents show that Benchmark–Hawthorn accepted this repudiation and sold the hospital in 2000 without the benefit of the carparking spaces. So much was not in issue.
What was in dispute were the following:
§ whether the carparking licence agreement was entered into;
§ whether, as a matter of law, the carparking licence agreement was capable of assignment to Benchmark–Hawthorn;
§ whether, as a matter of fact, the carparking licence agreement was assigned to Benchmark–Hawthorn in 1996;
§ whether Benchmark–Hawthorn suffered any and what loss and damage.
The Carpark Licence Agreement
In paragraph 6 of its statement of claim, the hospital alleges this agreement in the following terms:
“By an agreement made in about late 1989 or early 1990 between Allendale as licensee and the City of Hawthorn as licensor (‘the car park licence agreement’), the City of Hawthorn agreed that in consideration for Allendale paying $20,000 towards the cost of sealing and constructing a car park on the land, the total cost of which was approximately $60,000, the City of Hawthorn would make a permanent allocation to the hospital of one-third of the car parking spaces created on the land, being an allocation of 23 spaces.
PARTICULARS
The car park licence agreement was partly in writing, partly oral, and partly to be implied. Insofar as the same was in writing, it consisted of the following letters, copies of which are in the possession of the plaintiff’s solicitors, at whose offices the same may be inspected during normal office hours, by appointment:
(a)letters from the City of Hawthorn to Allendale dated 22 December 1989 and 16 February 1990; and
(b)a letter from Allendale to the City of Hawthorn dated 23 November 1990.
Insofar as the same was oral, it consisted of conversations in about late 1989 or early 1990 between representatives of Allendale and the City of Hawthorn, to the effect alleged. Insofar as the same was to be implied, it arose by necessary implication from the correspondence and conversations referred to above, and in order to give business efficacy to the agreement. It was also to be implied from the fact that Allendale paid the sum of $20,000 to the City of Hawthorn by way of contribution to the cost of sealing and constructing the car park on the land, and the fact that the City of Hawthorn placed signs in the car park indicating that 23 spaces were reserved solely for the use of the hospital, and the fact that such signs were maintained by the City of Hawthorn and by the defendant continuously until about December 2000.”
The Allendale Hospital was in the 1980s situated at 23-27 Linda Crescent, a residential street in Hawthorn. Adjoining the hospital to the east was a private home known as 19 Linda Crescent and situate on the corner of that street and Hilda Crescent. Hilda Crescent runs generally in a north/south direction; its eastern side abutting the railway reserve. As with any hospital, the parking of cars for staff and visitors presented a perennial problem, especially in a case such as this, where there was opposition from neighbours to kerbside parking in Linda Crescent and surrounding streets. And so, the railway reserve presented a solution. It presented, too, a solution to a similar problem for the Hawthorn Football Club’s social club, which required parking for its patrons.
The railway reserve was held by Hawthorn under a lease dated 20 December 1961 for a term which, as at 1990, was due to expire in 2035. The surface of the reserve near the hospital was described rather unflatteringly as a quagmire in winter and a dustbowl in summer.
In the late 1980s the hospital carried out certain extensions and alterations including the shifting of its entrance onto 19 Linda Crescent, facing Hilda Crescent and the railway reserve.
Prior to 1989, Hawthorn had been for some time concerned about the condition of the reserve which was being used for parking cars by patrons of the Hawthorn Football Club and its social club, the hospital and students of the Swinburne Institute. Hawthorn, after discussions with the Hawthorn Football Club, decided to undertake the construction of a paved carpark on part of the railway reserve on the basis that the club bear a share of its cost, namely, two-thirds of the estimated $60,000 cost of construction. The club sought to involve the hospital on the basis that it would pay one-third of the cost, and by 22 December 1989 this agreement was in place.
The negotiations for this were conducted by Stuart Douglas Hall, a director of Benchmark–Hawthorn, and Kenneth John McNamara, the Hawthorn City Manager. Mr Hall said that, during a telephone conversation with Mr McNamara, he offered to pay a share of the cost of the construction “providing Allendale obtained permanent rights to and use of about a third of the carparks constructed”. Mr McNamara, he said, agreed with the proposal but said he would need to confirm that council agreed. It seems likely that the meeting took place on 5 February 1990 because Mr Hall wrote to Mr McNamara a letter of that date reaffirming a number of matters which were said to have been discussed on that day regarding the upgrading of the carparking area. Mr Hall wrote as follows:
“I feel that if the land in question was privately owned the Council would have required the owners to seal the car park long ago.
The hospital is keen to see the car park sealed to remove the ugly dustbowl/quagmire opposite its main entrance.
To ensure this happens the Hospital is prepared to contribute $20,000 in the form of a special rate levied over perhaps 3 instalments. In return the Hospital would expect to obtain some ongoing right to use some of the car parks created.
I will await your confirmation of the above in due course.”
The response of Hawthorn was sent by W.E. Kneale, its Manager Technical Services, by letter dated 16 February 1990 in the following terms:
“Thank you for your agreement to contribute the sum of $20,000 towards the cost of the proposed carpark.
Final plans are almost complete and work should commence very shortly.
Your offer to pay the contribution over a period of three years is quite satisfactory and the permanent allocation to the hospital of a number of car spaces is confirmed.
Actual number of spaces will be the subject of later discussion after we ascertain the final configuration.”
The work was subsequently put in hand and completed by the end of 1990. In November 1990 there was some dispute about the amount of the contribution of the hospital, with which I am not concerned. More significantly for my purposes, it seems that the number of car parking spaces to be allocated had not then been determined because, by letter dated 23 November 1990, the hospital wrote to Hawthorn proposing a meeting to settle this, among other matters.
Against this background, counsel for Benchmark–Hawthorn urged me to find that a binding contractual licence had been granted by Hawthorn to Allendale. I regret that I am unable to do so. It is apparent that no concluded agreement was ever reached with respect to the carparking spaces in early 1990. Some months later, the parties had yet to determine their number and perhaps their location. It may be correct, as counsel for Benchmark–Hawthorn contended, that the negotiating parties had in mind that Hawthorn held the railway reserve under a long lease, but there is no evidence that Mr Hall knew any details of this or that it was even mentioned in their discussions. Well after the time of the alleged agreement, nothing had been settled as to the term or, indeed, the terms of the licence, other than it was not to be for a short term and that the hospital was to be allocated a number of spaces.
Mr McNamara said that the agreement by Allendale to pay the $20,000 was reached in order that it should have a more attractive area at its front entrance. He said that the promise to pay was not made in consideration for the exclusive use of the carparking spaces which, he said, council would reserve for hospital staff and visitors in any event. I bear in mind, however, that my task is to determine the existence of the contract on an objective basis from the intention of the parties as this is manifested by their words and deeds. I accept, too, that in 2002, some 13 years after these events, the written record is more reliable than the recollection of the witnesses, each of whom has long ceased to have any interest in the transaction.
It is clear that the hospital staff and visitors were, in 1989, using the railway reserve for parking and that this was an acceptable course for Hawthorn, for it kept their cars away from the residential streets. It seems, too, that the hospital needed this parking because it had only 30 spaces on its own land and its planning permit required it to have some 80 spaces for its 60 beds. The two difficulties attending the existing practice of the hospital of using the railway reserve as a parking area were, first, the unsatisfactory surface of the reserve and, second, that the hospital staff and visitors had to compete for space with the Swinburne students. The first difficulty was overcome by the construction of the carpark; the second by the council’s imposition of a limitation upon the public use of a portion of the railway reserve near the hospital which was marked out with 23 carparking spaces. This limitation was achieved by prohibiting parking in this portion between 7.00 am and 8.00 pm on weekdays otherwise than by a permit, which the hospital might issue. At other times, unrestricted parking at those spaces was available to the public. To my mind this is not properly described as an allocation of those spaces to the hospital. Nor can such an arrangement be meaningfully characterised as the grant of a licence over the land comprising the carpark spaces, for the hospital was given no right to occupy the land; the right which it received from Hawthorn was that to issue permits to park on the council land. In any event, the right which the hospital received was in no way permanent, in the sense of indeterminate or in the sense of a period equivalent to the term of the lease under which the council had held the reserve. Nothing was said to show that Hawthorn granted to the hospital any right at all for a fixed term or indefinitely.
The claim of the plaintiff must therefore fail at this point. Nevertheless, in deference to the submissions of council and in case this matter should go further, I will venture briefly my views upon the remaining questions.
Assignability
I start from the proposition that a contractual licence, accepting for present purposes that this existed, will be capable of assignment only if there can be implied in it a term to that effect. The agreement is not recorded in any formal document; it is essentially one reached between two business people in the course of conversations. Nothing was said between them about assignability. Nevertheless, given that the benefit of the agreement accrued, not to Allendale personally, but rather to the hospital as a continuing business or institution, I am satisfied that it should be taken that the parties agreed that the benefit of the licence agreement should pass to a successor in title of the hospital business.
Assignment
As I have mentioned, the transfer of the rights to the parking spaces is not specifically mentioned in the documentation recording the sale of the hospital business to Benchmark–Hawthorn. Clause 2.2 of the Sale of Assets Agreement defines the subject matter of the sale in very broad terms:
“all the assets of the Vendor used or owned in connection with the Business as at the Acquisition Date…”
It was conceded by counsel on behalf of the Boroondara, and properly so, that these words would suffice to carry rights in a contractual licence of the kind here contended for. I would therefore have found that those rights passed to Benchmark–Hawthorn upon the sale to it by Allendale in December 1996.
Loss and Damage
It was never seriously contested that, assuming the existence of a licence agreement of the kind contended for, Boroondara repudiated it in March 2000: its fax of 29 March 2000 makes this plain. Likewise, it is clear that Benchmark–Hawthorn accepted this repudiation, thereby determining the licence agreement.
Benchmark–Hawthorn put its claim for consequent loss and damage in any one of three ways:
(a)the market value of 23 carparking spaces until 31 March 2035, the date of expiry of the council lease over the railway reserve;
(b)the amount of the diminution of the sale price of the hospital in 2000;
(c)the value of its lost opportunity to sell the hospital with the carparking spaces.
The question of the right of the hospital to continuing enjoyment of the carparking spaces on the railway reserve came to light when Benchmark–Hawthorn was gathering the vendor’s statement for inclusion in the contract of sale by tender of the business. The marketing material previously distributed to potential purchasers included a planning map which showed the 23 carparking spaces in question. Then came the fax from Boroondara of 29 March 2000 in which it denied the rights of Benchmark–Hawthorn and warned that the carparking spaces “signed as a permit zone for Allendale Private Hospital will cease to be effective” when the ownership of the hospital land is transferred to another entity. Why Boroondara took this position was never made clear. The consequence of the removal of the permit zone which it foreshadowed would be likely to provoke resentment from the hospital which risked committing a breach of its planning permit, and resistance from the adjoining residential ratepayers. In any event, the prospective purchasers were advised of the fact by the selling agents. Notwithstanding that a number of would-be purchasers had shown interest, only one tender was received when tenders closed on 12 April 2000. None of the other prospective purchasers gave evidence so it is difficult to conclude that the non-availability of the carparking was a factor which affected their decision not to lodge a tender.
The successful tenderer, Swinburne Institute of Integrated Medical Research Ltd, on 12 April executed a conditional contract to purchase the business including bed licences and chattels from Benchmark–Hawthorn and the real estate from Allendale Investments. The total price was $5.65M.
This contract was subject to the approval of the Swinburne Board. This was in due course forthcoming but fresh unconditional contracts were entered into on 15 May 2000 following some adjustments for the value of certain chattels which were omitted. The price as finally agreed was described as follows in the agreements:
Real Estate $4,600,000.00 Bed Licences $400,000.00 Hospital Equipment $305,100.00 $5,305,100.00
The first basis of the damages calculation was the value in May 2000 of 23 carparking spaces in Hawthorn. Darrell William Johnson, a qualified valuer, expressed an opinion that the cost of purchasing 23 carparking spaces in Hawthorn as at December 2000 was $165,000, and I accept his evidence as to this.
The immediate difficulty with this opinion, however, is that the supposed rights of Benchmark–Hawthorn with respect to the carparking spaces are not those of a purchaser, nor even the exclusive rights of a lessee of the spaces to 2035; his valuation presupposes some such entitlement. The entitlement of Benchmark–Hawthorn is somewhat less secure and less comprehensive. This would have the effect of reducing the value of that right. On the other hand, the owner of the hospital is in a very weak bargaining position in any attempt to acquire such a right since it needs spaces close to the hospital, spaces which are unavailable if the council were not ready to provide them. In the end, I am not able to find what, if anything, is the value of the licence interest which Benchmark–Hawthorn asserts.
The second basis was the diminution of the sale price to Swinburne. Again, the evidence in support of the plaintiff’s contention was, at best, scanty. Stewart George Lopez, a sales manager of Wilson Pride, the selling agents, said that, in his opinion, the “eventual selling price of Hawthorn Private Hospital was substantially less than what could have been achieved had the right to use the car parks been included with the hospital site”. The price paid by Swinburne is known. It is known, too, that a number of interested purchasers did not lodge a tender, but none was called to explain why. Ashley John Wain, a project manager employed by Drapac Property, a consultant assisting Swinburne in the purchase, said that it was advised that it was by no means certain that Swinburne needed the 23 carparks in order to operate the hospital lawfully. It may be that it would have expected that Boroondara would make some arrangement for parking should this be necessary in order to protect the amenity of the residential neighbourhood. In any event there is no evidence as to the amount by which the price was diminished, if at all, by reason of the council’s repudiation of the carparking permit arrangement.
Finally, there is the claim for damages for lost opportunity. There was no evidence of this or of its value.
I conclude that Benchmark–Hawthorn has not shown that it has suffered any substantial damage by reason of the withdrawal by Boroondara of the existing permit parking arrangement. It follows that the claim of Benchmark–Hawthorn must fail. There will be judgment accordingly.
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CERTIFICATE
I certify that this and the 9 preceding pages are a true copy of the reasons for judgment of Byrne J of the Supreme Court of Victoria delivered on 20 December 2002.
DATED this 20th day of December 2002.
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Liza Powderly
Associate to Justice Byrne
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