Bigdale Pty Ltd trading as Enigma at the Royal Motor Yacht Club v Royal Motor Yacht Club of NSW Port Hacking Branch

[2010] NSWSC 1196

CITATION:	Bigdale Pty Ltd trading as Enigma at the Royal Motor Yacht Club v Royal Motor Yacht Club of NSW Port Hacking Branch [2010] NSWSC 1196 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	6/09/10, 17/09/10
JUDGMENT OF:	Slattery J at 1
EX TEMPORE JUDGMENT DATE:	24 September 2010
DECISION:	See paragraphs 115 and 116 of judgment.
CATCHWORDS:	PROCEDURE - Injunctions - plaintiff operates restaurant inside defendants club premises - defendant issues notice to plaintiff to quit premises - plaintiff claims occupation of premises attracts Retail Leases Act 1994 - plaintiff obtains injunction restraining defendant acting on notice to quit premises - whether serious question to be tried - contest as to whether injunction should be dissolved - whether balance of convenience favours a grant of injunctive relief.
LEGISLATION CITED:	Bankruptcy Act 1959, 1966 (Cth) , s 58 Retail Leases Act 1994 (NSW) ss 3, 5, 6A, 16, 16(4), 68, 75, Schedule 1 Uniform Civil Procedure Rules (2005), r 6.24
CATEGORY:	Procedural and other rulings
CASES CITED:	Australian Broadcasting Corporation v Lenah Game Meats (2001) 208 CLR 199 Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 Beck v Woodhouse [1970] 1 AllER 769 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 Brunninghausen v Glavanics (1999) 46 NSWLR 538 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Constantinos Trembelas v Cyrus Community of New South Wales, (unreported), Supreme Court of New South Wales, 2 June 1998 CUB v Bond Brewing NSW (1987) 76 ALR 633 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Legg v Inner London Education Authority (1972) 3 All ER 177 Re Multi-Tech Services Pty Limited (In liq) (1982) 30 SASR 218 Sinclair Scott & Co v Naughton (1929) 43 CLR 310
PARTIES:	Plaintiff- Bigdale Pty Ltd t/as Enigma at the Royal Motor Yacht Club Defendant- Royal Motor Yacht Club of NSW Port Haching Branch
FILE NUMBER(S):	SC 2010/296655
COUNSEL:	Plainitff- J. Merkel Defendant-G.Sirtes SC
SOLICITORS:	Plaintiff-H. Stathis, H.C. Stathis & Co Defendant-L. Harris, Back Schawartz Vaughan Solicitors and Attorneys

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

SLATTERY J

FRIDAY, 24 SEPTEMBER 2010

2010/296655 BIGDALE PTY LTD T/AS ENIGMA AT THE ROYAL MOTOR YACHT CLUB & ANOR v ROYAL MOTOR YACHT CLUB OF NEW SOUTH WALES PORT HACKING BRANCH

EX TEMPORE JUDGMENT

1 HIS HONOUR: It is common commercial wisdom to settle upon the detail of a lease before the proposed tenant enters into occupation. This case is an illustration of what can go wrong when this wisdom is overlooked.

Background

2 The first plaintiff, Bigdale Pty Ltd is in occupation of and trades from the restaurant, kitchen and bistro area (“the bistro area”) at the defendant club, the Royal Motor Yacht Club of New South Wales Port Hacking Branch, Burraneer Bay. The terms of that occupation are disputed between the parties.

3 On 19 August 2010 the defendant club gave a form of notice by letter to Bigdale to quit the premises. Bigdale disputed the effectiveness of that notice and commenced these proceedings. The defendant gave a notice of termination of agreement on 10 September 2010. Bigdale also disputes the validity of that notice.

4 Bigdale now seeks interlocutory relief restraining the defendant from interfering with its occupation of the bistro area. The defendant resists the grant of that relief.

5 The principles that govern the grant of interlocutory relief of this kind are not in dispute. The plaintiff must establish that there is a serious question to be tried at final hearing on the claim it propounds and that the balance of convenience favours the grant of an injunction. McClelland J said in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at paragraph 535:

"…the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled…"

6 Unless the plaintiff demonstrates that there is a serious question to be tried, which if resolved in its favour would entitle it to final relief, then to achieve justice between the parties, an application for an interlocutory injunction should be refused. However the Court "does not undertake a preliminary trial, and give or withhold interlocutory relief upon a forecast as to the ultimate result of the case": Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 at 622 and see also Australian Broadcasting Corporation v Lenah Game Meats (2001) 208 CLR 199 per Gleeson CJ at [9]-[14].

7 Both the issues of serious question to be tried and balance of convenience have been put strongly in contest in this case. The defendant contends that the plaintiff has not made out a prima facie case and that the balance of convenience favours an injunction being declined.

8 The proceedings came before me in the course of the Equity duty list. I have been much assisted by the submissions of counsel on both sides. Ms Merkel appears as counsel for the plaintiff. In addition to her oral submissions she has filed detailed written submissions setting out the case that would be advanced at final hearing. Mr Sirtes, who appears for the defendant, has also advanced oral and detailed written submissions in reply.

9 The precise form of relief claimed has been complicated by a development after the matter was argued. The first plaintiff, Bigdale contends that it is the party with whom the defendant club made the relevant lease agreement. The defendant took issue in submissions with that contention, submitting that the early correspondence in December 2008 negotiating the occupation of the bistro area only refer to Mr Bill Psouridis and his brother, Mr Mark Psouridis not Bigdale, the company they jointly controlled.

10 In response to this submission Bigdale sought to amend its summons to join Mr Mark Psouridis as second plaintiff claiming relief on his behalf in the alternative.

11 This joinder has been resisted by the defendant. In this interlocutory hearing, where the defendant raises a contention that the plaintiff is the wrong party and the contention may be answered by joining another party as second plaintiff, the appropriate course here before dealing with interlocutory relief should be to allow the other party to be joined. I order that Mr Mark Psouridis be joined as the second plaintiff. I am not now deciding whether Bigdale or Mr Bill Psouridis or Mr Mark Psouridis were parties to lease arrangements with the defendant club.

12 This joinder requires a little explanation. Mr Bill Psouridis and Mr Mark Psouridis proposed together in December 2008 that they operate the Enigma restaurant at the defendant club. But Mr Bill Psouridis become bankrupt in January of this year. His estate is now vested under the Bankruptcy Act 1959 (Cth) in the Official Trustee in bankruptcy: Bankruptcy Act 1966, s 58. He cannot now commence any legal proceedings. Mark Psouridis is the only person proposed to be joined as the second plaintiff. The plaintiffs, allege that Bigdale is entitled to occupy the bistro area. In the alternative they allege that the second plaintiff is so entitled.

13 The Court has affidavit evidence about the December 2008 negotiations and the subsequent operation of the restaurant from Mr Stathis, the solicitor who negotiated the occupancy of the Bistro area for Bigdale and the Psouridis brothers.

14 The defendants have adduced evidence from Mr Lay, the current Commodore of the club, from Ms Jane Wood, the secretary/manager of the club and from a Mr Daniel Valenz, a restauranteur who, after discussion with the club, is proposing to take over the bistro area to operate a restaurant at the club if the plaintiffs’ occupation does not continue.

15 The events between December 2008 and the present time may be divided into three time periods. First, there was an initial period of negotiation and start up from December 2008 to January 2009 when the plaintiffs finalised the terms of their occupation and commenced operations. Secondly, from February 2009 until June 2010 the plaintiff conducted operations at the club premises, during which period the parties negotiated documents relating to occupation of the premises. Thirdly, between July 2010 and the present, in the termination phase, the idea of Bigdale being replaced surfaced and the current dispute arose.

The Course of the Dispute

16 The plaintiffs say that Bigdale or alternatively the Psouridis brothers have a lease or an exclusive licence of the bistro area of the defendant’s club premises, and that they are entitled to at least 3 months notice to quit. The plaintiffs further submit that their rights of occupation also attract operation of the Retail Leases Act 1994.

17 The defendant says that the plaintiffs’ right of occupation is merely a licence at will and that the Retail Leases Act 1994 (NSW) is not applicable. Questions of balance of convenience will be considered separately.

The Initial Period of Negotiations and Start Up

18 Until December 2008 Bigdale operated the “Enigma Restaurant” on the Grand Parade Brighton le Sands. Through their solicitor, Mr Harry Stathis the plaintiffs commenced negotiations with the defendant for the occupation of the Bistro area at the defendant club.

19 In mid-December 2008 Mr Stathis wrote to the defendant recording discussions between himself and the defendant’s executive committee. He recorded his proposing that the defendant allow the plaintiffs to "manage both the restaurant and the bistro and that [the defendant] would be seeking a fee of $6,500 per calendar month, this fee is to include all outgoings provided by the club to the caterers and is to include electricity, gas, water, waste removal, pest control, cleaning of floors, cleaning the grease trap, provision of Web internet facilities and all removal."

20 His letter recorded features of a proposed occupation agreement including: Bigdale’s proposed purchase of existing kitchen equipment; the caterer’s obligation to attend to ongoing repairs to equipment; the defendant’s fee of $1,000 per function catered for by Bigdale at the bistro area premises; and the inclusion of drinks waiting staff in that $1,000 fee.

21 Mr Stathis offered the following more specific proposal for the plaintiffs to occupy the bistro area:

"Our Clients have considered your offer and have instructed us to place the following proposal to you for consideration:

1. That a lease period be granted to our clients for a period of 3 years followed by 2 consecutive option periods of 3 years each.

2. So as to ensure the suitability of the operation between the Club and our clients, our clients would seek to have a mutual trial period for a period of 6 months, in order that both the Club and our clients assess the suitability of the venture, and with a provision that if at the end of the 6 month period either the Club or our clients are dissatisfied with the proposal, then either may rescind the agreement.

3. Our clients would seek confirmation from the Club that all holiday pay, long service leave entitlements and any other employee entitlement with respect to the employees engaged in the restaurant or bistro have been satisfied by the Club.

4. Our clients have a high degree of expertise and skill in the running of catering services and facilities of this nature. Whilst they recommend suggestions and positive input from the Club, they would seek an understanding that they be allowed to continue to operate the venue with minimum intervention by the Club."

22 The negotiations progressed. On 15 December 2008 Mr Ian Hillman, a committee member of the defendant, emailed Mr Stathis about what was described as "The RMYC Agreement ". On 17 December 2008 Mr Hillman sent an email to Mr Stathis outlining what was entitled the "Enigma Offer" and is reproduced below:

"The contents of the attached 'Running Sheet' is acceptable.

That for the 'precommitted' functions (approx 16) if the number of attendees is less than 100 persons the $1,000 RMYC is waived
That the RYMC will have the kitchen equipment inspected and will make the necessary repairs such as fridge seals, etc.

In exchange for Enigma having both kitchens professionally cleaned at no cost to the RMYC, the RYMC will waive the 'Caterers Fee' for the first month.

The 'Snack Bar' will trade a minimum of 6 days a week for both lunch and evening meals.

The 'Restaurant' will be open a minimum of four days a week for both lunch and evening meals.

Enigma will not require any of the current RMYC kitchen staff
Enigma will commence as the RMYC caterer on Monday 22 ^nd December 2008.

The 'Caterer's Fee' is $6,500 per month (excluding GST) as detailed in the attached 'Running Sheet' and will be subject to CPI increases on an annual basis.

The agreed Catering Licence Agreement shall contain a 3 year term with a three year option.

That after a period of one month the RMYC shall initiate a 'membership questionnaire' as feed back on the standard of catering.

That until such time as the formal 'Catering Licence Agreement' is finalised a 3 month 'no fault' escape option is available to both parties."

23 With his 17 December email Mr Hillman sent to Mr Stathis an "Interview running sheet". This document, summarised the main points agreed in the parties’ meetings up to that point. It is not reproduced here in full but relevantly provided that:

"1. The caterer shall be responsible for - dining room, snack bar and functions;

7. "All food service shall be by the caterer":
8. "All drinks service shall be by RMYC";
9. "The caterer shall pay a fee to RMYC for floor space at $1,000 per function";
10. The caterer is the organiser of functions and shall liaise with the RMYC for drinks service."

24 There are two important things to observe about these documents. The 17 December 2008 email describes an agreed "catering licence agreement", which would contain a "three year term with a 3-year option". This part of the email contains language which might describe a lease. But aspects of the Interview running sheet speak of the caterer’s responsibility for organising functions and for liaison, bespeaking something more akin to a management agreement. Conflict between those two aspects of the initial email exchange encompasses the dispute that now exists between the parties. The plaintiffs claim a lease exists. The defendant says the plaintiffs have a licence terminable at will whilst they manage the restaurant.

25 The defendant expresses the belief in this email that the: "3 month no fault escape option", being the last bullet point in Mr Hillman's email of 17 December, was a trial period where either party could withdraw from the arrangement without further notice.

26 Mr Stathis responded the same day advising that the terms and conditions contained in the 17 December email and the running sheet are "Acceptable and accordingly my clients formally offer to cater upon the terms and conditions as contained in those documents." And he says that he looks forward to receiving communication from the board of the club.

27 That constitutes the complete correspondence between the parties preceding the plaintiff's occupation of the bistro area of the club.

The Plaintiff's Conduct of Operations at the Club

28 From the moment of the plaintiff’s occupation the parties attempted to finalise the written agreement that their informal emails had contemplated would be made. By the Sunday 1 February, Mr Stathis declared by email that the restaurant had opened and was about to be officially launched. Equipment was being organised and repairs to a number of items were being done.

29 A long period followed during which the catering licence agreement did not reach finality. Between February 2008 and 9 June 2010 the parties attempted to negotiate the catering licence agreement. Emerging differences between them made clear that they could not agree upon a form of such an agreement. Such differences had not been contemplated at the time of the 17 December email.

30 There are many examples of these differences. The plaintiffs sought further fees from the club for the club's utilisation of the dining room on special occasions, such as Anzac Day. There was disagreement about whether or not the plaintiffs could use the club on Friday nights for functions rather than those nights being used as a club "Members nights."

31 There was disagreement about the hours of operation. There were concerns expressed that the club was not properly supporting the plaintiffs because the bistro was not being patronised adequately by club members.

32 There were negotiations about reduction in the monthly licence fees. There were disagreements about the respective responsibilities for the maintenance and replacement of kitchen equipment listed on asset registers. These disagreements slowed down the finalisation of the catering licence agreement.

33 In mid August 2009 Ms Wood, the defendant’s secretary/manager forced the issue to a head. She said that she was instructing the club's solicitors to finalise the catering licence agreement. She claimed that the plaintiffs were already arrears in the payment of licence fees.

34 On 17 September 2009, nine months after the initial exchange of emails, Ms Wood sent Mr Stathis what she described as a "Proposed Agreement for final sign off", in the form of a "Catering licence agreement." This is an important moment in the communications between the parties. On 30 September 2009 Mr Stathis replied to Ms Wood putting Bigdale's position that, amendments were required to this proposed catering licence agreement. His six page response took issue with the detailed provisions of Ms Wood’s draft agreement on a range of subject matters. These covered use of the facilities for special occasions, communications issues, notice periods, hours of operation and hours of access.

35 The level of disagreement expressed in this reply did not auger well for finalising the catering licence agreement in the near term. That is exactly what happened. During the rest of the operating period the catering licence agreement could not be agreed. There were negotiations evident for a period. But a remarkable feature of the evidence is that within approximately a month of the draft catering licence agreement being provided in September 2008, there is little indication that the parties were seriously attempting to reach agreement as to its terms. The parties appear to have given up attempting to reach agreed terms. This may be because of other disagreements that emerged in their relationship, to which I will come in a moment.

36 The licencee was described in the draft agreement as Bigdale Pty Ltd trading as Enigma at the Royal Motor Yacht Club Port Hacking. At the time of this draft in September 2009 the parties appeared to understand that Bigdale was the entity proposing to conduct operations at the club premises.

37 An interesting provision of the September 2009 draft catering licence agreement, clause 12, throws light upon balance of convenience issues. It describes the activities under the licence as:

“To provide quality dining facilities for the club's restaurant bistro and function facilities including the preparation, presentation and service of meals to a standard acceptable to the club but excluding the sale of liquor and non-alcoholic drinks."

38 The licensed activities and the presentation and service of meals were to be at a standard acceptable to the defendant club. This was not clearly agreed back in December 2008. Non agreement on this subject lies behind the current disputes between the parties. What standards were to apply to the restaurant's operations has become a matter of present importance to the defendant. Presumably it had done so by September 2009 because this was one of the subjects of further negotiation.

39 By November 2009 the plaintiffs decided that they wished to restrict the range of food service they were offering. Mr Stathis emailed Ms Wood recording that there has been discussions between Mr Bill Psouridis and the club about the plaintiffs operating the bistro as a brasserie in future. He presented the defendant with an, "Upgraded menu to you for consideration". The plaintiffs did not advance a proposal to refurbish the bistro. Mr Stathis said, "Our clients accordingly do not wish to conduct general restaurant activities."

40 It was clear from this email that the plaintiffs preferred to conduct club functions, weddings, christenings, birthday celebrations and other special events, rather than a general food service to club members. Presumably these special events were more profitable for the plaintiff.

41 There is disagreement between the parties as to what difficulties arose in this period from February 2008 to June 2009. Mr Bill Psouridis and Ms Wood give different perspectives on it. None of the witnesses in this case has been cross-examined. The Court's review of this material is to better understand the nature of the issues for trial. Mr Bill Psouridis was of the view that the restaurant was operating well, that the business had been built up and that it was successful throughout 2009. He says that by early 2010 he had started to hear rumours that the club wished to change bistro operators. He says he approached Ms Wood about it.

42 Ms Wood's evidence refers to incidents that the restaurant was receiving complaints of poor food and service and that it had been the scene of loud arguments between members of Bigdale's staff. Her version is that: by March 2010 the plaintiffs were offering to leave the premises; and, the behaviour of some of the plaintiff's staff had by then become unacceptable to the club. I do not have to decide any of these questions. But these are the kinds of allegations being made.

43 In March of 2010 the parties corresponded about growing dissatisfaction in their commercial relationship. On 16 March 2010 Ms Wood sent an email to Mr Stathis acknowledging that Enigma had made minor attempts to improve trade levels but that the club regarded the current efforts to do so as unsuccessful. Ms Wood pointed out that the plaintiffs had been engaged to provide specific catering services for the club based on assurances as to their experience, skill and resources.

44 The correspondence recognised the plaintiffs’ concern that there was a perceived lack of patronage from club members but asked the plaintiff:

"That they address their negativity as displayed through loud and aggressive in-house arguments audible to both RMYC staff and patrons through comments criticising particular patrons made to other patrons and staff in the clubhouse and a lack of willingness to make the restaurant space more accessible to patrons of the club."

45 In subsequent months Ms Woods wrote about other incidents of a similar kind. I do not have to decide the merits of any of these allegations on a final basis. But at a distance the perception is certainly open from this correspondence that by the second quarter of this year the plaintiffs had decided that it was more profitable to run a business of catering for functions rather than the day to day provision of restaurant services to club members.

46 The matter came to a head in June and early July this year. The plaintiffs’ thought there were rumours circulating that they were soon to be replaced. Ms Wood was being asked by the defendant’s board by early July to consider replacing the plaintiffs. In May and June Mr Valenz, the defendant’s proposed new restaurateur, was in informal discussions about the possibility of taking over the restaurant.

The Termination Phase

47 The last phase of the parties dealings extends from 1 July this year up to the present time. There is general agreement about what happened during this last period. Mr Bill Psouridis says that by June he had been told by two of Enigma's patrons that a person called "Daniel" had met with Mr Bob Lay, the Commodore of the defendant, and that a tender was being submitted to provide food and restaurant services at the restaurant by Daniel in substitution for the plaintiffs. He says he approached Ms Wood about this but, according to him, she denied that there was any immediate proposal for the plaintiffs’ removal.

48 But he says, that on 7 July 2010 Ms Wood came into the restaurant and spoke to Mr Bill and Mr Mark Psouridis about tendering for an alternative restaurateur. Ms Wood does not dispute this conversation. Mr Bill Psouridis says that she said:

"The club is advertising for expressions of interest. They want to see what's out there. You have until 14 July to re-tender."

49 Mr Psouridis says that he asked why this was being proposed and that she said, "The board wants to see what else is out there". She foreshadowed that an advertisement would appear in the local paper the following day, which it did.

50 Despite gaining this information Mr Bill Psouridis says that he did not obtain legal advice as to the company's rights at this time, because he did not think that the advertisement for expressions of interest would affect the company's position. Whether that be right or not, the defendant called for tenders. A number of expressions of interest were lodged including that of Mr Valenz and his partner in “Thommo's Restaurant”, Mr Lance Thompson. The club interviewed a number of potential occupants of the Bistro premises. The plaintiffs participated in the re-tendering process and attended meetings with Ms Wood and board members of the defendant.

51 On 17 August the defendant’s board decided to accept Mr Valenz’s tender and to give notice for the plaintiffs’ removal from the premises. There was a disputed conversation the following day. Ms Wood's version is that the plaintiffs agreed in substance to leave the premises. The plaintiffs’ version is that they did not agree to leave but asserted the need to stay until the end of December. The plaintiffs’ say they were greeted with the response that they could only have until the end of August, a period not including the profitable functions likely to be generated by Fathers Day celebrations.

52 This contact resulted in correspondence between the parties on 19 August 2010. The defendant notified the plaintiffs formally that day by letter that the board had decided to proceed with another caterer and that the plaintiffs’ existing catering services would cease on 5 September 2010 and that the plaintiffs should be ready to vacate by 6 September 2010.

53 The correspondence subsequent to 19 August 2010 is of some importance. Mr Stathis asserted by letter on 27 August 2010 that the plaintiffs did not have information about re-tendering; but, noted that Bigdale was unsuccessful; and, took issue that the letter of 19 August was a valid termination of the existing agreements.

54 On 2 September 2010 Mr Stathis wrote foreshadowing that injunctive relief would be sought if undertakings not to remove the plaintiffs from the premises were not given. On 2 September 2010 Mr Stathis alleged that the agreement made in December 2008 was a retail lease falling within the Retail Leases Act 1994 (NSW). Issue was immediately taken with these allegations by the solicitors for the defendant.

55 The defendant’s evidence fills out the picture from the club’s perspective during that period. Ms Wood made a recommendation to the board in mid August this year that the club engage the services of Mr Valenz and Mr Thomson to replace the plaintiffs. She said in her internal report to the club:

"Finally Enigma are the only group that match the enthusiasm to be the club's caterers that Daniel and Lance do. They are willing to do everything and anything that the club wants now. Unfortunately, Mark shows a defensiveness that is simply his personality and Bill cannot do anything that I believe can cover or recover that. The lack of... with Enigma and the RMYC is irreparable".

56 Then she recommended that Mr Thomson and Mr Valenz become the new restaurateurs at the Bistro.

Serious Question to be Tried

57 The plaintiffs must first establish that there is serious question to be tried in the sense that if the evidence remains as it is there is a probability the plaintiffs will be held entitled to the final relief they seek: Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153 per Mason ACJ. The plaintiffs seek a declaration that the first plaintiff or in the alternative the second plaintiff is entitled to occupy the restaurant, bistro and kitchens and conduct business at the defendant’s premises pursuant to an agreement made on 22 December 2008.

58 The plaintiff has established a serious question to be tried. This has been contested but in my view it has been made out. The more difficult issue in this case is the question of the balance of convenience, to which I will come later. But in relation to the serious question to be tried Ms Merkel has argued that in December 2008 the parties: agreed to be bound by the consensus expressed in the email of 17 December 2008; and, a formal catering licence agreement was to be negotiated later in a more expansive form than the one page “Interview running sheet” agreement; but the parties agreed to be immediately bound by what they had exchanged up to that point. She puts this as what is sometimes described as a fourth category Masters v Cameron case by McClelland J in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628, and see also Sinclair Scott & Co v Naughton [1929] HCA 34; (1929) 43 CLR 310 and Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538 at 545. In my view it is arguable based on the materials exchanged in December 2008 that an agreement of the kind that Ms Merkel asserts was made.

59 Bigdale's case is fielded by the defendants at several levels on the issue of serious question to be tried. It is necessary briefly to deal with the defendant’s responses to Bigdale's contentions. The defendant denies that Bigdale is the proper plaintiff, denies that any agreement was concluded and denies that the Retail Leases Act applies.

The Contracting Parties and Terms

60 The defendant first says that there was no agreement between Bigdale and the club but only an agreement between Mr Bill and Mr Mark Psouridis and the club. The high point of this submission is that there is no reference to Bigdale in the email of 17 December. But this is an interlocutory proceeding. All the evidence has not been adduced. Bigdale was the trading vehicle of the plaintiffs at their previous restaurant premises and would perhaps be expected to be their trading entity at the defendant's club premises. It is arguable that there was an indirect indication of Bigdale's proposed role at that time, sufficient for it to be inferred that the contract was being made on its behalf.

61 The argument that Bigdale was the contracting party is fortified by the fact that the draft catering licence agreement forwarded in September 2009 referred to Bigdale not to Messrs Psouridis as the contracting party. The defendants say that this was too late to affect who were the true contracting parties. In a sense this is correct. However Bigdale being adopted without protest by the defendant at that point, assists the inference that earlier, in December 2008 both parties thought it would be the lessee. That draft agreement was drafted by lawyers who would have probably been informed about Bigdale some time before the drafting. It is arguable that Bigdale was understood by both sides to be the true plaintiff, as Ms Merkel contends.

62 The amendment to the summons has been allowed and Mr Mark Psouridis has become the second plaintiff, so this issue may not matter much for interlocutory relief. On the question of a serious question to be tried, Mr Mark Psouridis is a party, subject to questions as to whether he is a proper party in his own name to bring a proceeding on behalf of a partnership dissolved because of his brother's bankruptcy. The Court may join a party if such a joinder is found to be proper or necessary: r 6.24 of the Uniform Civil Procedure Rules (2005). Mr Mark Psouridis may be able to argue that he can bring these proceedings on behalf of the partnership in his own name alone. The Official Trustee may join in on behalf of Mr Bill Psouridis’ estate. However I do not need to consider those questions. It is sufficient to note that it is arguable that Bigdale is the proper plaintiff.

63 The next point taken by the defendants is that there is no evidence of acceptance by the club of the offer being made by Mr Stathis in his facsimile of 17 December 2008. The plaintiff has two arguable answers to this. The first is that it is possible to construe the exchange of correspondence such that Mr Stathis' letter of 17 December as an acceptance of an offer by the defendant. But whether or not that is right, the defendant did allow the plaintiff to go into occupation. It could reasonably be argued that it did so on the terms represented in Mr Hillman's email of 17 December, confirmed by Mr Stathis' email the same day. No dispute seems to have been raised by the defendant about what terms were applicable before letting the plaintiffs into occupation.

64 It is arguable from the contents of the 17 December 2008 email, as Bigdale contends that there was an agreed catering licence agreement with a 3-year term and a 3-year option. The defendant says that at best there was a licence to conduct a business at the club's premises terminable at will or upon 3 months notice.

65 Both of those contentions are maintainable because of the informality of Mr Hillman’s email of 17 December 2008. An ambiguity at the heart of the email is the sentence, "The agreed catering licence agreement shall contain 3-year term with a 3-year option". This seems to contemplate that when the catering licence agreement is formulated the 3-year term with a 3-year option will arise. But the next bullet point introduces the statement, "That until a formal catering licence agreement is finalised a 3-month no fault escape option is available to both parties". This arguably indicates that the parties may exit their arrangements on 3 months notice, if they cannot agree upon a catering licence agreement. A question in the case is whether a 3-year term with a 3-year option is immediately conferred by this agreement or whether it only arises when the catering licence agreement is completed. That is a question for final hearing.

The Retail Leases Act 1994 (NSW)

66 The last issue relating to a serious question to be tried is whether or not the relationship between the parties attracts the Retail Leases Act. Bigdale says the Act applies, that as a result it is entitled to a 5 year term and that its potential remedies should be decided in the Administrative Decisions Tribunal. The defendant disputes this and points to the absence of the word "lease" in any of the parties' early dealings in December 2008. In my view, it is arguable that there is a serious question to be tried on whether or not this was a retail lease within the Retail Leases Act.

67 The Retail Leases Act provides a regime for the determination in the Administrative Decisions Tribunal of issues concerning retail leases in New South Wales. The jurisdiction is attracted in respect of retail tenancy claims and retail shop leases. Retail LeasesAct, s 3 defines a “retail shop” as premises that:

“(a) are used, or proposed to be used, wholly or predominantly for the carrying on of one or more of the businesses prescribed for the purposes of this paragraph (whether or not in a retail shopping centre), or

(b) are used, or proposed to be used, for the carrying on of any business (whether or not a business prescribed for the purposes of paragraph (a)) in a retail shopping centre.”

68 The Retail Leases Act, s 3 defines a "retail shop lease" or "lease" as:

"…any agreement under which a person grants or agrees to grant to another person for value a right of occupation of premises for the purpose of the use of the premises as a retail shop:
(a) whether or not the right is a right of exclusive occupation, and
(b) whether the agreement is express or implied, and
(c) whether the agreement is oral or in writing, or partly oral and partly in writing"

, s 5 excludes certain shops from the operation of the Act. These excluded shops include:

"(b) shops that are used wholly or predominantly for the carrying on of a business by the lessee on behalf of the lessor"

, s 6A outlines the application of the Act to short-term leases. Of particular relevance to the issues joined in these proceedings are the following parts of s 6A:

"(1) Generally, Act not to apply to short-term leases. Subject to subsection (2), this Act does not apply to a lease of a retail shop for a term of less than 6 months without any right for the lessee to extend the lease (whether by means of an option to extend or renew the lease or otherwise).
(2) Exception for successive, extended or renewed leases for more than one year. If the lessee has been in possession or entitled to be in possession of the retail shop without interruption for more than one year (whether by means of a series of 2 or more leases or by means of an extended or renewed lease or leases, or by any combination of those means), this Act applies to:
(a) the lease on and from the day on which the lessee has been in possession or entitled to be in possession of the shop for more than one year, and
(b) any succeeding lease or leases of the shop to the lessee, where possession or entitlement to possession is not interrupted.
(4) Operation of provisions for minimum 5 year term. Section 16 (1) and (2) do not apply to the lease referred to in subsection (2) (a) unless the lessee notifies the lessor in writing during the term of the lease that the lessee elects to have the benefit of section 16. However, in that case, any period for which the lessee has already been in possession or entitled to possession of the retail shop without interruption is taken to be included in the term of the lease."

s 16 provides that a minimum term for a lease to which the Act applies is 5 years:

"(1) The term for which a retail shop lease is entered into, together with any further term or terms provided for by any agreement or option for the acquisition by the lessee of a further term as an extension or renewal of the lease, must not be less than 5 years. An agreement or option is not taken into account if it was entered into or conferred after the lease was entered into.

(2) If a lease is entered into in contravention of this section, the validity of the lease is not thereby affected but the term of the lease is extended by such period as may be necessary to prevent the lease contravening this section.

Note: For example, if a lease is entered into for a term of 3 years, its term is extended by 2 years to 5 years. If a lease is entered into for a term of 2 years with an option for a further 1 year after that initial 2 years, the term of the lease is extended to 4 years (with the option for a further 1 year after that initial 4 years)."

, s 68 mandates that disputes must be submitted to mediation before proceedings can be taken:

"(1) A retail tenancy dispute or other dispute or matter referred to in section 65 (1) (a1) may not be the subject of proceedings before any court unless and until the Registrar has certified in writing that mediation under this Part has failed to resolve the dispute or matter or the court is otherwise satisfied that mediation under this Part is unlikely to resolve the dispute or matter."

, s 75 allows the court to transfer matters involving a retail tenancy dispute to the Administrative Decisions Tribunal on the application of a party to the proceedings. It does not prevent the Court from granting urgent relief of an interlocutory nature where it is in the interests of justice to do so:

"(1) If civil proceedings pending in a court involve a retail tenancy dispute, the court must on the application of any party to the proceedings transfer the proceedings (or so much of the proceedings as involve such a dispute) to the Tribunal to be dealt with as a claim under this Division, but only if the court is satisfied that:
(a) the dispute is such as may effectively be dealt with as a claim under this Division and that it is appropriate that the dispute be dealt with by the Tribunal, and
(b) the interests of justice do not require that the matter be dealt with by the court.
…
(4) This section does not prevent a court from granting urgent relief of an interlocutory nature where it is in the interests of justice to do so."

74 Finally, Retail Leases Act, Schedule 1 provides a list of retail shop businesses. The list includes restaurants.

75 Retail Leases Act s 75 is important to the Court’s present exercise of jurisdiction. If the plaintiff can establish this is a “retail tenancy dispute”, this is pending “civil proceedings”. The section does not prevent "A court from granting urgent relief of an interlocutory nature where it is in the interests of justice to do so". Despite the Tribunal’s jurisdiction the Court may give the urgent interlocutory relief now in question. But the Court may, upon the application of one of the parties, later transfer the dispute to the Tribunal if the Court is satisfied that question may effectively be dealt with as a claim by the Tribunal, and the interests of justice, do not require the matter to be dealt with by the Court.

76 The defendant argues against the application of the Retail Leases Act. The defendant first says the relationship was at best a non-exclusive licence or right of occupation. But that is not an answer on its own to the plaintiffs’ contention that the Retail Leases Act applies. The definition of “retail shop lease” in the Act applies to a "right of occupation" whether or not that right "is a right of exclusive occupation". The Retail Leases Act can apply to non-exclusive occupation rights under licences.

77 The defendant next submits that Windeyer J’s decision in Constantinos Trembelas v Cyrus Community of New South Wales, (unreported), Supreme Court of New South Wales, 2 June 1998, in which a club’s caterer was held not to have rights under the Retail Leases Act, applies directly here. In Constantinos Trembelas his Honour found that the licensee of a bistro kitchen in a community club premises did not have a right of occupation within the Retail Leases Act because the right was not a licence to carry on a “business” but rather to operate only part of a business, which does not fall within the Act. His Honour found that the other part of the business, namely, the provision of drinks waiters and cleaning, was conducted by the defendant club in that case. That division of responsibility in Constantinos Trembelas is remarkably similar to that in the present case. Here plaintiffs supplied only some of the restaurant services to customers. The defendant provided drinks waiters. The total package including drinks service was in effect a joint enterprise. This will at final hearing provide an argument for the defendant that the Retail Leases Act does not apply. There is a serious question to be tried on that issue.

78 Lastly the defendant says that if there was a retail lease within the Retail Leases Act it did not have a 5-year term. This argument depends upon the proper construction of the email of 17 December 2008. If emphasis is given to the last bullet point of the email and there is found merely to be a licence at will, with a 3-month no fault escape option, then the defendant may argue that this is actually a Retail Leases Act, s 6A “short term lease” of less than 6 months. The 3-year term does not apply immediately on 17 December but only applies after the catering licence agreement is finalised. Before the catering licence agreement is perfected the parties were able to keep their options open. The defendant argues that as a “short term lease”, the Retail Leases Act does not apply, because the plaintiffs never gave a Retail Leases Act, s 16(4) notice. It is undisputed that no notice was given under Retail Lease Act s 16(4). But a construction that the 17 December email does create a right of occupation for more than six months is also open. These are all matters for final hearing.

79 In my view, there is a serious question to be tried upon the plaintiffs’ contentions that they have the rights of occupation claimed in their prayers for final relief. There is a suggestion by the defendant that the plaintiff's case is a weak one. In my view, the plaintiff's case is arguable. It is not one I would assess on these issues as either strong or weak. It is not obviously weak, although there are some hurdles for it to overcome.

The Balance of Convenience

80 The more difficult question is consideration of the balance of convenience. The defendant points to alleged delay on the plaintiff's part, to the difficulties in continuing a commercial relationship between the parties upon the grant of injunctive relief and to alleged problems with the value of the plaintiff's undertaking as to damages.

Further Background

81 I will briefly deal with the supplementary facts that relate to this issue. The evidence from Mr Psouridis is that a further 3 months trading until December 2010 leading up to the Christmas period would be immensely valuable for the plaintiffs. Based on a computer printout summarising monthly gross takings for the bistro and restaurant, he says that the takings from the period 1 January 2009 to 31 December 2009 were $882,981 and that the gross takings for the period 1 January 2010 to 8 August 2010 were $500,516. He estimates that if Enigma continued to trade until 31 December 2010 the gross takings would be in excess of $1,000,000 for that period. There is no evidence before me of tax returns or other financial statements incorporating those figures. Assertions about these figures have not been tested. The defendant has made requests for information about the figures. Whether these projections are sound or not, the potential value of the right to trade in this kind of retail business in the pre-Christmas period cannot be doubted.

82 Mr Psaouridis says that Bigdale has functions booked, including for weddings, up to April next year and that it currently does not have any other premises to which it can relocate. It employs 6 people full time and 3 casual staff.

83 On the other hand, the defendant says that it has already made detailed arrangements for Mr Valenz and Mr Thomson to take over the club’s Bistro area after informed them on 17 August 2010 that they were the successful applicants. Their evidence is that they: purchased crockery, stock, coffee machines and internal signage; undertook printing; spoke to persons who might be book functions at the club; purchased uniforms; entered into arrangements for the employment of head chef, kitchen staff and waiting staff, and are anxious to start operation.

84 Ms Wood’s evidence is that the club’s functions customers had initially appeared upset when they found out in August about the proposed change of caterers. Particular anxiety arose from patrons associated with weddings booked for September and November. The September wedding has now taken place and was catered for under an interim arrangement agreed between the parties. But there are other functions looming.

85 There are four questions relevant to the balance of convenience: the question of the strength of the plaintiffs' case; the question of delay; the question of a continuing commercial relationship; and, the question of the undertaking as to damages.

Strength of the Plaintiff’s Case

86 Sometimes it can be said that the strength of the plaintiffs' case, is sufficient to overcome other balancing factors that may weigh against the granting of an injunction. In this case the strength of the plaintiffs' case does not incline the exercise of the Court's discretion, either for or against the grant of an interlocutory injunction. As the diligent efforts of counsel on both sides have shown, there are many bases upon which the plaintiffs might succeed, but many bases upon which the plaintiffs also might fail. This is partly caused by the inadequacy of the contract with which the parties have contented themselves for the last 21 months.

Alleged Delay

87 The defendant says that there has been considerable delay in the plaintiffs' approach to the Court for injunctive relief. The cases often warn that delay is a basis for refusing a plaintiff interlocutory injunctive relief: Legg v Inner London Education Authority (1972) 3 All ER 177, per Megarry J and CUB v Bond Brewing NSW (1987) 76 ALR 633.

88 It is uncontested Ms Wood told the Psaroudis brothers on 7 July 2010 that the club was advertising for expressions of interest and she gave them until 14 July to re-tender to operate the bistro. That is almost three months ago. Since then a great deal has happened.

89 The plaintiffs’ delay from the end of the first week of July 2010 until the commencement of proceedings in September is a significant factor in the exercise of the Court's discretion. The delay created expectations and commitments in third parties and generated the potential for liability on the part of the defendant to those third parties.

90 In July – August 2010 the defendant undertook the re-tender process in which the plaintiffs participated. It is difficult to accept that the plaintiffs did not appreciate when the club embarked upon this process and invited them to participate in it, that there was a high risk that their occupation of the Bistro would come to an end.

91 The plaintiffs explained their inaction. Mr Bill Psaroudis says that he did not believe that the advertisement for expressions of interest would affect the company's position, partly because Ms Wood has said the board just wants to see “what else is out there”.

92 Whilst it is true that the defendant's intentions were mediated somewhat in their effect through Ms Wood’s words, the events between March and June 2010 must have conveyed to the plaintiffs that serious consideration was being given to an alternative bistro operator. If the decision were to be made to favour a new operator, the plaintiffs must have appreciated that this would probably have adverse consequence for their continued occupation. It was imperative in these circumstances for Bigdale to take steps in the short term, to vindicate its rights, so that their exercise did not become complicated with the expectations of new operators.

93 The plaintiff needed to act urgently. The fact that these proceedings were only commenced in early September has meant that two kinds of potential prejudice have arisen for the club. One relates to the tendering process itself. The other relates to the nature of the right of occupation between the parties.

94 As to the first of those, the club has expended money, has committed management time to planning for a replacement operator, has conducted the tendering process, has created expectations within its own membership of change through the tendering process, has engaged in conversations with Mr Valenz's company, Tommo's, and has induced Tommo’s to commit resources to prepare to take over the bistro operations.

95 Whether or not there is a binding contract already made between the defendant and Mr Valenz's organisation, there is evidence that the club may have impliedly made representations to him and his company about the re-tender process, about its genuineness and about the timing of his commencing operations if his tender were successful. He appears to have participated in the re-tendering process in good faith and without receiving any indication that it might be brought to an end by the plaintiffs.

96 If the Court were to grant an injunction, the position of both the club and Mr Valenz, Mr Thompson and their company would be adversely affected. Some of their preparatory expenditure would be likely to be wasted. They may not readily be able to withdraw their involvement with the club. There is potential for disputation about the recovery of their expenditure.

97 This situation has arisen largely because the plaintiffs did not act earlier to bring these proceedings. The plaintiffs can be excused for not acting within the first few days or perhaps even the first week of being told of the re-tender process on 7 July. But some kind of approach to the Court by about the third week of July was appropriate.

98 The plaintiffs' participation in the tendering process during late July and August is difficult to characterise as other than that the plaintiffs committing to a genuine re-tender in which they accepted the risk of an adverse outcome. Other persons would be entitled to conduct themselves on that basis.

99 The defendant points to another aspect of delay. If the 17 December e-mail really created only a short-term lease, in order to attract the Retail Leases Act the plaintiff would have needed to give notice under Retail Leases Act, s 6A(4). Had the plaintiffs done so in July 2010, the notice would have been an indication to the defendant of the plaintiffs' claim that the Retail Leases Act applied. That may have deterred the defendant in the meantime from expending the money and incurring the other obligations that it has.

100 The plaintiffs’ delay is largely unexplained. The defendant says that the Court should interpret this lack of action as an admission against interest by the plaintiffs. But I do not think that one can construe mere inaction in these circumstances as an admission against interest.

101 In my view the plaintiffs' inaction for this period of close to three months is a factor weighing against a grant of equitable relief to them.

Hardship and a Continuing Relationship

102 The other factor which precludes the grant of interlocutory equitable relief is the kind of relationship which the Court would, by granting that relief, be forcing upon the defendant. On this issue the lack of certainty in the contract between the parties made on 17 December 2008 is significant.

103 The attempt the club made to put greater definition in the relationship between the parties in the Draft Catering Licensing Agreement, had it been agreed, may well have overcome a lot of the uncertainty. But negotiations stopped. The parties seem content with that situation. If the Court were to grant an injunction the e-mail of 17 December their relationship up to the final hearing. This document leaves broad room for disagreements about the quality and standards of the plaintiffs’ operations in the Bistro area.

104 The prime areas of dispute relate so far to the standard of food being served by the plaintiffs, the standard of behaviour of the Psouridis brothers within club premises, the fees for catering for functions and the trading hours.

105 In recent times the continuing threat on the plaintiffs' side has been of leaving the premises, and on the defendant's side of evicting the plaintiff. The relationship between them has broken down so badly that communication is now extremely difficult. The Court can infer that granting an injunction up to hearing would be likely to compel the parties into a painful and chaotic future together.

106 One struggles to find in the email exchange of 17 December 2008 anything about standards of behaviour by the plaintiffs’ staff, a standard of food to be served, the allocation of responsibility between club and the plaintiffs about catering functions, or about the precise operating days and hours of the bistro. The Interview running sheet says that "The caterers shall be responsible for" the dining room snack bar and functions. There is ample room for debate within the word "responsible" as to what standard of organisation and behaviour is expected at those functions.

107 The statement that food service is to be provided for functions by the caterer and drinks services by the club, hardly assists in defining their relative responsibility so as to reduce disputes in the future. There is evidence of disputes about hours and standards of behaviour. Many aspects of the efficient organising of functions will require continuing liaison between the parties, including the organisation of drink services. The loss of confidence that has already occurred between them makes such liaison almost impossible.

108 The Court should be ready to grant an injunction even if it involves a degree of supervision of the execution of a contract. But here, in my view, by granting an injunction up to hearing, the Court would force the parties into the considerable mutual hardship of an impossible relationship and, for a potentially lengthy period of time. In my view this mutual hardship outweighs the hardship that the plaintiffs would suffer by the Court not granting an injunction at this time: Beck v Woodhouse [1970] 1 AllER 769.

The Undertaking as to Damages

109 Finally, there is the question of the quality of the plaintiffs’ undertaking as to damages. The defendant says with some force that even if an injunction is to be granted up to hearing that because of Mr Bill Psaroudis' bankruptcy, that the defendant would actually only be dealing with the other brother. Only Mr Mark Psaroudis will guarantee Bigdale’s obligations in the future. Only Mr Mark Psaroudis would be operating the restaurant. There would not be a partnership between the brothers. The defendant says this is very different from the agreement made in December 2008.

110 It is to be inferred from the e-mails of December 2008 that the expert personal qualities of both Mr Mark and Mr Bill Psaroudis in running the Bistro area were a significant factor in the making of this contract. A disadvantage of granting an injunction up to hearing is that the defendant would be forced into a relationship quite different to the one for which it had originally contracted. There is no compelling case in justice for the Court to constrain the defendant in that changed relationship.

111 I am of the view that injunctive relief up to hearing should not be granted.

Short Term Orders

112 That leaves the question of what should now be done in the short term. Some relief is appropriate merely to ensure that the parties smoothly disengage from one another with the least prejudice to each other and to third parties, such as Mr Valenz, and the bridal parties and other guests of the club who wish to use the services of the restaurant in the near future.

113 Some reaction time will be required to today’s decision. Enough time needs to be given to allow the plaintiffs to wind down and exit the premises. But not so long should be given that hardship is created for the defendant or for an incoming restaurateur.

114 Subject to hearing submissions this afternoon from both sides, I have in mind to allow a further period of between 14 and 28 days for the plaintiffs to leave the premises. I have not formed any concluded view about what the period should be. It is likely to cause hardship to the plaintiffs’ staff to have the plaintiffs’ current occupation of the restaurant end at midnight tonight. I will hear from the parties on this issue after they have an opportunity to take instructions. I direct the parties to bring in short minutes of order to give effect to these reasons.

Conclusions and Orders

115 Accordingly, I decline to grant interlocutory relief up to the trial. But I invite the parties to put submissions to me about for what short period hereafter the current relief should subsists to allow the parties to disengage.

A short time later

116 The Court has now heard further argument about when the present injunctive relief should be dissolved in light of Bigdale’s forthcoming functions and the defendants desire to commence its new season with its new caterer. I make the following orders:-

1. I order Mr Mark Psaouridis to be joined as a second plaintiff to these proceedings.

2. On the plaintiffs through its Counsel giving the usual undertaking as to damages I order the defendant by its servants and agents not to do any act which interferes with the occupation of the property defined in the Summons by the plaintiffs, their servants and agents for the purposes of the business of the bistro and restaurant located at the Royal Motor Yacht Club (Port Hacking) until midnight on the evening of 6 October 2010.

3. I reserve the question of costs and direct the parties to exchange and provide to my Associate by 5pm on Friday, 8 October 2010 written submissions on the issue of costs.

4. I stand the matter over for further mention before me at 9.30am on Wednesday, 13 October 2010.

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25/10/2010 - Cover sheet- typographical error of judgment date. - Paragraph(s) judgment date.