BMW Australia Ltd v Phileo Australia Ltd
[2000] VSC 308
•28 July 2000
| SUPREME COURT OF VICTORIA | |
| PRACTICE COURT | Not Restricted |
No. 6120 of 2000
| BMW AUSTRALIA LIMITED ACN 004 675 129 | Plaintiff |
| v | |
| PHILEO AUSTRALIA LIMITED ACN 007 608 755 | First Defendant |
| MULTIPLEX DEVELOPMENTS (VIC) PTY LTD | Second Defendant |
| MULTIPLEX DEVELOPMENTS No. 1 PTY LTD | Third Defendant |
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JUDGE: | Gillard J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 and 28 July 2000 | |
DATE OF JUDGMENT: | 28 July 2000 | |
CASE MAY BE CITED AS: | BMW Australia Ltd v Phileo Australia Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 308 | |
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Interlocutory injunction – weak plaintiff's case – balance of convenience – damages require remedy – injunction refused.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr R. Keen | Minter Ellison |
| For the First Defendant | Mr W.H. Houghton QC with Mr J.D. Elliott | Stamfords |
| For the Second and Third Defendants | Mr R. Strong | Mallesons Stephen Jaques |
HIS HONOUR:
This is an application by summons in a proceeding instituted by a writ by the plaintiff seeking an interlocutory injunction restraining the first defendant from completing the sale of property situated in South Melbourne to the third defendant.
The writ was issued on 24 July 2000 by BMW Australia Ltd against the defendant, Phileo Australia Ltd. The summons was issued the same day and was returnable before me yesterday. In the course of plaintiff's counsel, Mr Keen, explaining the issues, it became apparent that the interests of others could be affected if an injunction was granted. Accordingly, I indicated that the court would be most reluctant to proceed with the application in the absence of a party who may be affected by the outcome. The matter was stood down and solicitors for Multiplex Developments (Victoria) Pty Ltd were informed that the plaintiff was making the application.
Mr Robert Strong of counsel attended on behalf of Multiplex Developments yesterday afternoon and indicated that they wished time to consider their position and, accordingly, the matter was adjourned to today.
In the meantime, the solicitors acting for Multiplex Developments filed an affidavit. It is clear from that affidavit that Multiplex Developments (Victoria) Pty Ltd, as the purchaser of the land in question, has exercised the right it has under the contract of sale and nominated Multiplex Developments No. 1 Pty Ltd, as the purchaser.
On the application of the Plaintiff, the Court ordered that Multiplex Developments (Victoria) Pty Ltd and Multiplex Developments No.1 Pty Ltd be joined as second and third defendants respectively. The application was not approved.
This matter is urgent and I must confess I would have preferred more time to have considered the submissions and the material before making my decision, but as I say, it is urgent.
The plaintiff is the Australian company of the well-known German manufacturer of prestige cars. The first defendant at all times has been the registered proprietor of land situated at 209 Kings Way, Melbourne ("the property"). The second and third defendants are developer companies.
The basics facts which led to the present dispute can be briefly stated. As I said, the first defendant owns the property. In early 1999 it commenced discussions with the plaintiff with a proposition to construct a building on the site which would be satisfactory to BMW and the latter would lease part of that building from the first defendant. Plans were prepared and in about April 1999 the plaintiff stated that it wished to proceed and that it had the consent of its parent company. Thereafter, discussions continued and the parties negotiated an agreement for a lease. It was executed on 18 December 1999. Evidently, the parties in the course of these negotiations were represented by lawyers.
The agreement is long, detailed and has attached to it a form of proposed lease. Pursuant to the terms of the agreement, the first defendant is obliged to perform certain building works which are specified in the agreement. The plaintiff for its part agreed to take a lease for 15 years of the basement, ground floor and part of the first floor. Included on the ground floor is a display apron adjoining Kings Way. A photograph on the front of the agreement displays an attractive building and is in the form, as I have been told, of similar type buildings that BMW has in various parts of the world.
After the execution of the argument the first defendant decided it would not proceed with the construction. The suggestion is, it was not financially able to do so. It decided to sell the property, of course subject to the terms of the agreement to lease. Discussions took place with various developers, one of which was the second defendant. In the course of discussions, the plaintiff was involved and had discussions with representatives of the second defendant. The second defendant was granted an option to purchase, pursuant to which it entered into a contract on 30 June 2000. The contract is to be settled next Monday, 31 July.
As I have stated, the third defendant has been nominated as the purchaser. There is evidence that the second and third defendants do not propose to erect a building in appearance like the photograph on the front of the agreement. Instead, it appears that it will erect a larger, squarer building, but having said that, it recognises that it is obliged to comply with the terms of the agreement to lease and hence will provide, in accordance with the terms of that lease, areas to the plaintiff.
I interpolate to note that the agreement to lease does set out diagrams of the floor plans and areas of each of the three floors concerned. I should also point out that evidence is before me that, from an economic point of view, the building proposed as set out in the front of the agreement to lease would not be a good financial proposition and the one that has been put forward by Multiplex is a building that will return a greater financial result. In other words Multiplex is of the opinion that their design is a better use of the site.
It is clear that any sale is subject to the agreement to lease and, upon assignment, the plaintiff will have rights against the first and the third defendants enforceable in law.
When one analyses what the complaint is, the gravamen of the complaint by the plaintiff is that it will not get the building it wanted, but one of a different design and, I suspect more importantly, appearance. However, on any view, it will get all areas as prescribed by the agreement to lease and it will get its signage rights. The proposed design will provide the plaintiff with the same display areas as the original design.
The plaintiff seeks to stop the sale because it alleges that the first defendant is in breach of a collateral agreement to the agreement to lease. It should be noted that the plaintiff now wishes to purchase the property and has made an offer to the first defendant to purchase the property for the same price. One observes that this may have had something to do with the decision to bring this particular application.
At this point it is necessary to briefly state the principles which guide a court on an application for an interlocutory injunction. The court does have an inherent power to grant an injunction. Jurisdiction is now the subject of statute. Section 37(1) of the Supreme CourtAct 1986 provides - "The court may by order, whether interlocutory or final, grant an injunction or appoint a receiver if it is just and convenient to do so."
It is clear from sub-s.(2) that the order may be made subject to terms and conditions. It is observed that the jurisdiction is indeed a wide one. It requires the court to be satisfied of two matters, namely, that it is just, and convenient, to grant an order.
An interlocutory injunction is merely provisional in its nature and does not conclude or determine any rights. Its object is to preserve the position which is in dispute in statuo quo until the hearing and determination of the dispute or further order. The court does not in general seek to anticipate the determination of a right; it merely gives its opinion as to whether there is a serious question to be to determined and if a case has been made out for the preservation of the right which has been breached or threatened.
The court considers four general issues.
First, it is necessary for the party claiming the injunction to establish that it has a right which is recognized as legal or equitable and there is an infringement or a threatened infringement of that right by some unlawful act.
The second matter that has to be considered is the question whether there is a serious or substantial question to be decided or, depending on the nature of the relief sought, the plaintiff has a prima facie case. The two extremes are exemplified by the leading authorities of the American Cyanamide Co v. Ethicon Ltd case, (1975) AC 396 and Beauchamp Group Ltd v. Bristol Laboratories Pty Ltd (1968) 118 CLR 618. The established view today is that the applicant has to prove that there is a serious question to be decided. See Castlemaine Tooheys Ltd v. South Australia (1986) 161 CLR 148 at 153 per Mason, CJ.
The third matter that has to be addressed is the balance of convenience which means that the plaintiff must establish that if the injunction were refused it would suffer a greater injury than the defendant would suffer if the injunction was granted.
The final matter concerns the discretionary factors that may be applicable to a particular case. For example, delay causing prejudice or failure by a plaintiff to disclose all relevant matters and questions of that type.
In the majority of cases where a plaintiff seeks to preserve the status quo or alternatively to restore the state quo to the position it was prior to the dispute arising, the serious question to be decided test is the applicable one. In this regard the question of the balance of convenience assumes considerable importance and if the court was of the view that the serious question to be decided consideration showed a weak plaintiff's case, the strength of its case on the balance of convenience may tilt the balance in favour of granting the relief. The converse also applies. I refer to what Sir George Lush said in Slater Walker Superannuation Pty Ltd, v. Great Boulder Goldmines Ltd (1979) VR 107 at 110, quoted with approval by the Full Court in Magna Alloys and Research Pty Ltd v. Coffee (1981) VR 23 at 28.
Most applications, and this is no exception, are heard on affidavit material untested in any way. The court is not in a position to resolve disputed questions of fact and often time constraints make it difficult for the court to resolve complex and difficult questions of law.
That is not to say the court should not where possible make an attempt to form some view of the strength of the applicant's case. That of course is not an invitation to the court to speculate. But in some cases it is possible to make some assessment of the strength or otherwise of the case.
In Series Five Software Ltd v. Clarke (1961) All ER 853, Laddie, J. held that a court was not precluded from considering the strength of either party's case on application for interlocutory relief, but should not attempt to resolve difficult issues of fact or law and express a view as to the strength of the respective cases unless it was apparent from the affidavit evidence and exhibits that one party's case was much stronger than the other. It is a trite observation that each case must depend upon its own circumstances. Nevertheless, I agree with the general approach stated by Laddie, J. bearing in mind that the material may be inadequate, incomplete and has not been tested, but nevertheless sometimes the court can express a view and this may give some assistance to the parties to resolve their dispute earlier rather than later and also establishing matters relevant to the overall determination. However, a court should be very wary of doing this unless it is able to form a firm opinion based on the evidence which the court is prepared to rely upon.
I now turn to the facts in the present matter and the first question is the right. The plaintiff says that it has the collateral agreement with the first defendant. Mr Houghton QC, who appears with Mr James Elliott for the first defendant, submits that the evidence does not establish this agreement or indeed, at worst, raise a serious doubt that there ever was such an agreement.
The first matter to consider is what is stated in the writ. It is a general endorsement, and in paragraph 3 it provides –
"By an agreement made in or about mid-1999 between the plaintiff and the defendant, the defendant agreed inter alia to construct a motor vehicle showroom facility …"
et cetera.
The first observation I make is to note the generality of the allegation. The fact is that it is asserted it was some time in or about mid-1999. One immediately has in mind what was said at the beginning of the 20th century, that one has to be extremely wary about collateral agreements and they should be viewed with suspicion. In Heylbut, Symons & Co v Buckleton (1913) A.C.30 Lord Moulton at p.44 observed that collateral contracts must be rare and then stated –
"Such collateral contracts, the sole effect of which is to vary or add to the terms of the principal contract, are therefore viewed with suspicion by the law."
The law has moved on since 1913 but His Lordship's observations are apposite to the proposed application. One immediately starts with the thought in the present case that there is a general allegation that the agreement was made in or about mid-1999 and this raises some doubts about its existence.
The second matter I wish to refer to is the affidavit of Alan Stuart Battye, which is sworn 24 July 2000. In paragraphs from 17 through to 25 he gives evidence as to this alleged agreement. The only direct assertion is that made in paragraph 24 where he says:
"These discussions took place on the clear understanding that BMW Australia was going to lease the facility as part of the development as presented by Phileo at a meeting on 6 April 1999."
The next paragraph refers to the execution of the agreement to lease.
Again, one looks at those paragraphs and one immediately senses that Mr Battye is not prepared to give direct evident as to any discussions which might lead to the conclusion that the parties had actually agreed to this alleged agreement.
The next matter that one must address is the agreement to lease, itself. It was clearly negotiated over a period of time and it is a very detailed agreement. It sets out in some detail what was expected of a landlord with respect to the works to be constructed by it and there are references to plans and to what the works were to be. They are described in some detail. One might think that that is not surprising when parties sit down to work out their respective obligations. One might immediately think, looking at this agreement, that it was the true repository of their agreement. Indeed, appendix 1 sets out in some detail what was to be done in relation to works, and it is noted that there is a reference to architectural drawings as submitted on 21 April 1999. Those drawings were not produced to the court but are referred to in the affidavit material as setting out the proposed works which the plaintiff contends for. One might think that if there was a prior agreement in relation to what was to be involved in the works that the parties would turn their attention to having that agreement completely incorporated in some way in the final agreement. The fact is the agreement to lease was indeed detailed. One might think in those circumstances that it was intended by the parties to be their entire agreement. That latter observation is supported by the fact that clause 1.5 of the agreement says precisely that. It provides that, "This agreement and the lease contains the whole of the agreement between the landlord and tenant in relation to the premises" .
In addition, there is a letter which was written by BMW on 2 May to Mr Sung, of the first defendant. Part of it is as follows:
"As you are aware, we have met with the representative, Multiplex, and have no objection to that company taking over the project as has been indicated to us.
However, we wish to advise you that BMW has no intention of renegotiating the project or altering the obligations of either party under the agreement to lease later than 15 December 1999."
The observation that Mr Houghton makes of this letter is that there is no reference in this letter to any other previous agreement and that the plaintiff seems to be prepared to accept that its rights are to be found in the agreement to lease. Again, that raises doubts about whether the parties actually agreed to a collateral agreement.
As I say, the agreement to lease is extremely detailed. It does contain plans and diagrams. It also refers to other architectural drawings. When one considers all this evidence, and in particular the vagueness of the allegations in the writ as to when this contract came into being, the affidavit material in relation to it, that a detailed agreement for a lease was executed, dealing with the works and the fact that there is an express term in that agreement that it is to be the entire agreement, it all leads to the conclusion that there are grave doubts that the parties did enter into any such agreement collateral to the agreement to lease. The alleged collateral agreement does seek to control the agreement to lease and add terms to it, some of which may be at variance with the express terms. Lord Moulton's words are not to be ignored.
Turning to the serious question to be decided, not only does the plaintiff have to establish that there is a serious question to be decided as to this alleged collateral agreement, but it also has to prove that the agreement contained a term as alleged. In the submissions put by counsel on behalf of the plaintiff, it is asserted that the alleged agreement contained the following implied term:
"Phileo will not sell, lease, transfer or otherwise dispose of or deal with its interest in the site other than to a purchaser who enters into an agreement with BMW in the same terms, with such variations as are necessitated by the alteration in the parties, as this agreement."
As follows from the well-known cases concerning the implications of terms in contracts, I am by no means persuaded, given the circumstances of this alleged agreement, that it would contain an implied term in that form. Mr Keen submitted that the term follows on from implied terms which are usually in all contracts, namely terms to the effect that each party will do all things necessary to enable the other party to have the benefit of the contract and will not do anything in any way to make it impossible for performance to be carried out. I accept that those terms are usually implied in contracts, but in my view it is a big step to go on to say that it was an implied term of this alleged collateral contract that Phileo was not able to sell the property in the future. Indeed, as Mr Houghton QC pointed out, there are a number of provisions in the lease, itself, which contemplates that the parties expected that the landlord may on-sell, so, having observed that, in my view again, there are some doubts that the plaintiff could prove an implied term to that effect.
In conclusion, whilst it is arguable that there is a serious question to be decided, in the scale of things there are serious doubts about the plaintiff's chances of proving the agreement and the term, and those factors must be steadily borne in mind when considering the balance of convenience.
If the injunction is not granted, BMW has its rights against Multiplex. The agreement is detailed and provides the plaintiff with rights it can enforce. On any view, it will get its facilities and display areas, matters which one might think are of concern. It will have the location; it will have the display areas; it will have its office areas; it will have its basement. What it may not get, and I emphasise "may", is a building the appearance of which is not to its liking. One might think that when one analyses the matter before me this day that this is the real concern. But having said that, it may walk away from the agreement if it is entitled to do so, and by that I mean, of course, if it has a right to rescind the agreement for the lease on the basis that Multiplex do not honour its obligations. But having done that, it my find other premises. It has the options and it can pursue a course which will no doubt be to its benefit and in the end this may result in very little loss to it.
On the other hand, if the injunction is granted the first defendant may go into liquidation; it may not be able to sell to another; it will be exposed to a claim for damages; the mortgagees may move in, and all told it could be a disaster for the first defendant.
In my opinion, the balance of convenience does favour the first defendant and this is especially so in the light of what I described as arguably a weak plaintiff's case.
In addition, I am satisfied that damages would be an adequate remedy for the plaintiff. The plaintiff is in a position to pull out and go elsewhere if in fact Multiplex failed to honour its obligations. Whilst the site is a good one, no doubt there are other sites in the area. This is not the head office in Victoria. The site is to be used as a second-hand car outlet. The fact is that the plaintiff can make its decisions hereafter it may rescind and go to another site.
There are many options open to the plaintiff, but given any of those options, in my view, damages would be an adequate remedy for the plaintiff. In my opinion, because of the balance of convenience favouring the first defendant and that damages would be an adequate remedy, the plaintiff fails in its application.
(Discussion ensued re costs.)
I order
1.that the plaintiff's summons filed 24 July 2000 is dismissed;
2.that the plaintiff pay the defendants' costs of its summons.
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CERTIFICATE
I certify that this and the 10 preceding pages are a true copy of the reasons for judgment of Gillard J of the Supreme Court of Victoria delivered on 28 July 2000.
DATED: this twenty eighth day of July 2000.
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Associate
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