Byblos Investments Pty Ltd v Racquet Club (Melbourne) Pty Ltd
[1998] VSC 166
•8 December 1998
SUPREME COURT OF VICTORIA
PRACTICE COURT
Not Restricted
No. 7470 of 1998
BYBLOS INVESTMENTS PTY. LTD. Plaintiff v. THE RACQUET CLUB (MELBOURNE) PTY. LTD. Defendant
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JUDGE: BEACH, J. WHERE HELD: MELBOURNE DATE OF HEARING: 24 NOVEMBER 1998 DATE OF JUDGMENT: 8 DECEMBER 1998 CASE MAY BE CITED AS: BYBLOS INVESTMENTS v. THE RACQUET CLUB MEDIA NEUTRAL CITATION: [1998] VSC 166
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CATCHWORDS:
APPLICATION FOR SUMMARY JUDGMENT - Breach of essential terms of lease - Clear issue to be tried - Interlocutory injunction - Balance of convenience.
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APPEARANCES: Counsel Solicitors For the Plaintiff Mr. G. Golvan Q.C. with Septimus Jones & Lee Dr. C.E. Croft For the Defendant Mr. G.D. Bloch Feingold Partners Pty. Ltd.
HIS HONOUR:
This is the return of a summons filed on behalf of the plaintiff whereby the plaintiff seeks summary judgment against the defendant for possession of the premises situate at 48 Queens Road, Melbourne (the premises) and an injunction restraining the defendant from entering on or remaining in possession of the premises. In the alternative the plaintiff seeks an injunction pending the hearing and determination of the proceeding restraining the defendant from using the premises for the purpose of any sexually explicit entertainment and restraining the defendant committing a nuisance on the premise.
The premises are a well known landmark in Queens Road, being formerly known as "Le Chateau Restaurant".
On 15 March 1993 the defendant entered into a lease of the premises from the plaintiff for an initial term of three years. According to the affidavit of the defendant's director Jim Klapanis sworn 20 November 1998 the defendant paid a sum of $350,000 to purchase the business then being conducted on the premises and a further sum of approximately $350,000 in fitting out the premises. Since that time the defendant has conducted what is described as a cabaret on the premises.
On or about 22 July 1998 the defendant entered into a further lease of the premises for a term of three years commencing on 1 February 1996. That lease will expire on 31 January 1999. The lease contains an option for a further three years.
Pursuant to the provisions of the lease the defendant is permitted to use the premises for the purpose of a restaurant, eating house, cabaret and reception rooms (Item 8 in the Schedule to the lease).
The following are the clauses in the lease relevant for present purposes:
"2. The Lessee hereby covenants with the Lessor -
(e)
Not to use or allow to be used the demised premises for any purposes whatsoever other than the purpose specified in item 8 of the Schedule without the written consent of the Lessor which consent is not to be unreasonably withheld and not to allow the demised premises to become vacant.
(h)
Not to permit or suffer anything on the demised premises which may be or become a nuisance or annoyance to the Lessor or any other person nor to use the demised premises for any illegal purpose.
(k)
Not to carry on or permit upon the demised premises or any part thereof any offensive noisy or dangerous trade business manufacture or occupation.
(bb)
To keep and renew all liquor licences held by the Lessee with respect to the premises ('the liquor licence') during the term of the Lease and any renewal thereof.
(dd)
The Lessee shall not commit, omit, or suffer to be done, committed or omitted any act matter payment or thing whatsoever whereby or by means whereof the liquor licence shall be allowed to expire or become void or shall be forfeited taken away or refused or whereby the Lessee or licensee for the time being shall be disqualified from receiving or having the liquor licence.
6. The Lessor and the Lessee mutually covenant and agree that each of Clauses 2(a), 2(b), 2(d), 2(e), 2(f), 2(h), 2(j), 2(k), 4(a), 4(b), 4(c), 4(d) and 4(e) hereof to be performed and observed or satisfied by the Lessee are and shall be essential terms of this Lease, and in the event that the Lessor determines this Lease pursuant to Clause 5(a) hereof as a consequence of or in reliance upon a breach by the Lessee of one or more of the covenants and agreements contained in this Lease referred to above whether alone or together with other covenants and agreements of this Lease, the Lessor shall be entitled to damages for loss of the benefits which performance of all the covenants conditions obligations and provisions of this Lease would, but for the determination have conferred upon the Lessor."
The plaintiff alleges that since approximately May of this year, the defendant has used the premises for purposes other than those specified in Item 8 of the Schedule to the lease without the written consent of the plaintiff in that it has allowed the premises to be used for the purpose of sexually explicit entertainment or spectacles and in association with a brothel called Cromwell Heights; further, that in breach of clause 2(h) of the lease the defendant has permitted the generation of grossly loud or excessive noise on the premises and the emission of such noise from the premises to the nuisance and annoyance of the plaintiff, persons generally and in particular the guests and staff at the Parkroyal Hotel which is adjacent to the premises.
On or about 26 August 1998 the Liquor Licensing Bureau made an application to the Liquor Licensing Commission pursuant to the provisions of s.101 of the Liquor Control Act 1987 for the cancellation or suspension of the liquor licence and extended hours permit granted in respect of the premises by reason (inter alia) of the noise which has emanated from the premises or the vicinity of the premises between the end of March 1997 and August 1998.
By notice in writing dated 15 September 1998 the plaintiff gave notice to the defendant pursuant to the provisions of s.146 of the Property Law Act 1958 that it had breached and continued to breach clauses 2(e), 2(h) and 2(k) of the lease and required that such breach or breaches be remedied insofar as the same were capable of remedy.
Pausing at this point - there cannot be the slightest doubt but that prior to service of the s.146 notice, the premises were being used by the defendant for the purpose of sexually explicit entertainment or spectacles. Indeed a more appropriate word to use in respect of the entertainment or spectacles would be pornographic. Nor in my opinion can there be any doubt but that over the months leading up to the service of the notice, noise emanated from the premises or was created outside the premises by patrons of the cabaret who had been at the premises. The evidence in relation to such matters is overwhelming.
However, since 26 September 1998, and without prejudice to its claim that the lease does entitle it to provide sexually explicit entertainment or spectacles at the premises, the defendant has ceased to allow such entertainment to be provided at the premises and has sworn that it intends to await the Court's determination as to whether such entertainment is permissible under the lease before it again allows such entertainment to be provided.
The defendant's case in respect of the noise complained of by the Parkroyal Hotel is that such noise does not emanate from the premises to any significant extent, but emanates from other sources in the area namely the Chevron Hotel and the Dome Club. In that respect it points out that no action for nuisance has ever been taken against the defendant by the Parkroyal Hotel.
The defendant says further that by reason of the plaintiff's threats to determine its lease made prior to the service of the s.146 notice in August 1998, it built at a cost exceeding $12,000, an acoustic wall on the premises facing the Parkroyal Hotel, and acoustically insulated the windows and doors facing the hotel. The defendant also installed a "limiter" in the premises which sets the maximum volume to which the sound system can be amplified and cannot be over-ridden by a disc jockey.
The case for the plaintiff insofar as its application for summary judgment is concerned is that as clauses 2(e), (h) and (k) of the lease are essential terms of the lease, breach by the defendant of any of those terms constitutes a repudiation of the lease which may or may not be accepted by the plaintiff; that in this case by giving the s.146 notice the plaintiff accepted the repudiation and the lease has now been determined. Accordingly, there is no basis upon which the defendant is entitled to remain in possession of the premises. A further argument advanced on behalf of the plaintiff is that even if those clauses of the lease were not essential terms of the lease the breaches of them are so serious and gross that they amount to a repudiation of the lease as a matter of general law, which repudiation has been accepted by the plaintiff.
The defendant makes the following points in reply to those contentions:
(1)
It has not committed any breach of the lease so far as the use of the premises is concerned. A "cabaret" by definition is a form of musical, variety, or other entertainment at a restaurant, nightclub etc. (see The Macquarie Dictionary, second edition at p.272). The performances on the premises complained about by the plaintiff are entertainment and are therefore a permitted use of the premises. Further, that even though advertising material may suggest that the premises have an association with Cromwell Heights, that advertising material was not authorised by the defendant and there is no substance to the suggestion.
(2)
The liquor licence issued by the Liquor Licensing Commission in respect of the premises authorises the defendant to use the premises for providing sexually explicit entertainment and that such a licence be issued to the defendant was consented to by the plaintiff.
(3)
The noise emanating from the premises is not excessive. The liquor licence in respect of the premises provides that the noise emitted from the premises shall not exceed the permissible noise levels for entertainment noise as specified in the State Environmental Protection Policy (Control of Music Noise from Public Premises) No. 2. When the Parkroyal Hotel first complained about the noise level in mid-1997 (the defendant having by then carried on the same business without complaint for the previous two and a half years) the defendant commissioned acoustic engineers to conduct tests on a typical evening and to report upon whether undue noise was emanating from the premises. The report of the engineers dated 12 June 1997 concluded that the noise level measurements were within the State Environment Policy No. 2 guidelines. There has been no increase in the noise level since that time and in fact by reason of the installation of the acoustic wall and "limiter" the noise level has been reduced.
(4)
By serving the s.146 notice on the defendant calling upon the defendant to remedy the breaches insofar as the same were capable of remedy the plaintiff did not accept any repudiation of the lease by the defendant in the event the defendant had in fact repudiated the lease, and having thereafter allowed the defendant to act to its detriment by expending the moneys it did in installing the acoustic wall and "limiter" the plaintiff is estopped from contending that the service of the s.146 notice had the effect of terminating the lease. As to the argument that the breach of the lease as to the use of the premises could not be remedied because of the stigma now attaching to the premises, the premises are of such a nature and in such a location that any effect on their reputation by reason of the fact that sexually explicit entertainment is provided at the premises would be minimal.
It is clear from a long line of authority touching upon the matter that an application for summary judgment should be brought in only the clearest of cases.
In Webster v. Lampard (1993) 67 A.L.J.R. 886, and in following the decision of Dixon, J. as he then was in Dey v. Victorian Railways Commissioners (1949) 78 C.L.R. 62 at p.91, Mason, C.J., Deane and Dawson, JJ. said at p.888:
"The power to order summary judgment must be exercised with 'exceptional caution' and ' should never be exercised unless it is clear that there is no real question to be tried'."
In my opinion there are real questions to be tried in this proceeding concerning the alleged breaches by the defendant of the clauses in question of the lease - that much is clear from the nature of the arguments advanced on behalf of the defendant in opposition to the plaintiff's application. It follows therefore that the application for summary judgment must be dismissed. I turn then to the plaintiff's application for interlocutory relief.
Again, on any view of the matter there are serious issues to be determined in the proceeding. Where then does the balance of convenience lie? In my opinion it lies in favour of the defendant. I say that for the following reasons:
(1)
On 28 November 1997 the plaintiff entered into a contract to sell the premises to Australand Holdings Limited subject to the lease. Settlement of that contract was to occur on 30 November 1998. It is the intention of Australand to develop the site as a high rise apartment block. In that situation I consider the plaintiff will suffer little or no financial detriment if the defendant remains in occupation of the premises. Nor would it be of any consequence to the plaintiff or for that matter Australand if the Liquor Control Commission cancelled the liquor licence in respect of the premises.
(2)
The defendant by its director has sworn that no further entertainment of an explicit sexual nature will be provided at the premises pending the hearing and determination of the proceeding.
(3)
If the defendant is restrained from remaining in possession of the premises it will suffer significant loss of income and the potential loss of its original capital investment in the premises together with the moneys it expended in installing the acoustic wall and "limiter".
(4) The plaintiff and/or Australand will continue to receive the rental in respect of
the premises.
The plaintiff's summons filed in the Court on 6 November 1998 will be dismissed with costs to be taxed and paid by the plaintiff.
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