Cihan v Border Hotels No 2; Border Hotels No 2 v Cihan

[2015] NSWSC 297

Supreme Court

New South Wales

Medium Neutral Citation:	Cihan v Border Hotels No 2; Border Hotels No 2 v Cihan [2015] NSWSC 297
Hearing dates:	18 March 2015
Decision date:	18 March 2015
Jurisdiction:	Equity Division
Before:	McDougall J
Decision:	Discharge existing interlocutory injunction, grant interlocutory relief restraining removal of fixtures and fittings.
Catchwords:	PROCEDURE - interlocutory issues - injunctions - where the New South Wales Civil and Administrative Tribunal (NCAT) had made a ‘procedural direction’ restraining landlord under a retail lease from locking tenant out of premises - where that direction or injunction was conditioned on the tenant paying the landlord a weekly sum - where payments made neither in full nor on time – NCAT proceedings transferred to Supreme Court - application by landlord to set aside the directions of NCAT - whether discrepancies in evidence sufficient to account for shortfall in repayments by tenant - whether retail lease agreement as varied provided any reason to deviate from the directions of NCAT - whether tenant should be allowed equitable relief against the consequences of its own failure to do equity
Legislation Cited:	Civil and Administrative Tribunal Act 2013 (NSW) Conveyancing Act 1919 (NSW) Retail Leases Act 1994 (NSW)
Category:	Procedural and other rulings
Parties:	Mehmet Cihan as Trustee for Cihan Family Trust (Plaintiff/Defendant) Border Hotels No 2 Pty Ltd (Defendant/Plaintiff)
Representation:	Counsel: J Jobson (Plaintiff) A Ahmad (Defendant) Solicitors: Andresakis & Associates (Plaintiff) Dib Lawyers (Defendant)
File Number(s):	2015/29699 and 2015/38019

Judgment   (ex tempore – revised 18 March 2015)

1. HIS HONOUR: On about 21 October 2014, Mr Mehmet Cihan (as trustee, but nothing turns on that), agreed to sell to Border Hotels No. 2 Pty Ltd, a business known as Casa Asturiana Restaurant, conducted from premises at 77 Liverpool Street, Sydney. One of the terms of the contract for sale (which was in writing) was that Mr Cihan would grant Border Hotels a lease of the premises. Another was that Border Hotels would have possession from 21 November 2014 to enable it to trade as the owner of the business.

The disputes

2. That contract, and events subsequent to its making, have given rise to two sets of proceedings. One was commenced in the New South Wales Civil and Administrative Tribunal, and has been transferred to this Court. The other was commenced in this Court.

3. In the former proceedings, Border Hotels as plaintiff seeks orders restraining Mr Cihan from re-entering the premises and terminating its claimed equitable lease. In the other proceedings, Mr Cihan claims, in effect, that the contract and any equitable lease have come to an end, that he is entitled to possession, and that he should be paid damages.

4. I am dealing today with an application by Mr Cihan to discharge what was, in effect, an injunction granted by NCAT (as I shall call it, without intending to be disrespectful) on 31 December 2014. To understand how the problem arises, it is necessary to go a little further back in time.

Background

5. Mr John Palasty, who says that he is the manager, but not a director or shareholder, of Border Hotels, apparently negotiated the contract with Mr Cihan. Mr Palasty said that he did so on the basis of representations that Mr Cihan made as to turnover. In fact, according to Mr Palasty, the turnover shown on the books of the business was a little more than two-thirds of the represented amount. There were other complaints, including as to non-transfer of the liquor licence and removal of stock.

6. According to Mr Palasty, he then negotiated with Mr Cihan to vary the contract. The variation that he said he negotiated was that payment for the business would not be made immediately, but that Border Hotels would make weekly payments towards both the purchase price of the business and rent for the premises. According to Mr Palasty, he offered payment of $10,000 "every week until the purchase price of $550,000 is paid". Of the sum of $10,000 per week, $6500 was agreed to represent rental, and $3500 to represent instalment payments in reduction of the purchase price.

7. According to Mr Palasty, Mr Cihan agreed to those terms, and they “sealed” their agreement by handing over $10,000 in cash, in effect, as the first instalment.

8. Mr Palasty said that, thereafter, until 13 January, he made payments totalling $73,000 to Mr Cihan.

9. Notwithstanding those events, Mr Palasty said, on 28 December 2014, Mr Cihan demanded payment of all outstanding moneys and threatened that otherwise "I am coming down there with security guards to lock you out". There then were further discussions under which, Mr Palasty said, he insisted on the variation agreement being honoured and, ultimately, Mr Cihan agreed to back off for a while.

10. However, matters came to a head on 31 December 2014 when, according to Mr Palasty, Mr Cihan appeared at the premises with two security guards and demanded that Border Hotels hand over the premises.

11. The police were called. There was an uneasy stand-off. Border Hotels made an urgent application to NCAT.

The Tribunal’s orders

12. On 31 December 2014, NCAT made what it called "procedural directions", to the following effect:

“The respondent [Mr Cihan], is restrained from locking the applicant [Border Hotels] out of the premises and is to permit the applicant to operate the business until further order of the Tribunal, subject to the applicant paying the respondent the sum of $10,000 per week".

13. The Tribunal did not give reasons for making that order, (or, if it did, the Court was not taken to them). Presumably, the Tribunal reasoned that, as Border Hotels was seeking to protect its rights under the agreement as varied, considerations of equity required that a condition of the relief be imposed under which Border Hotels agreed to perform what it accepted were its ongoing obligations under that agreement as varied.

The application for discharge

14. As I have said, the NCAT proceedings were transferred to this Court, and Mr Cihan commenced his own proceedings in this Court.

15. Mr Cihan moves today for an order discharging the "procedural directions" made by the Tribunal on 31 December 2014. He seeks, further, an order restraining Border Hotels removing fixtures and fittings, or equipment, stock, or other items from the premises, an order that Border Hotels deliver up possession of the premises within 12 hours, and other, procedural, orders.

16. The basis on which the application for discharge of the Tribunal's orders was made is that Border Hotels has failed to comply with the Tribunal's condition, that until further order, it pay $10,000 per week. Evidence of non-payment

17. The affidavit evidence on each side was unsatisfactory. However, after a considerable amount of discussion (and analysis of underlying documents), it appears to be either common ground, or accepted for today's purposes, and in any event I find, that since 31 December 2014, up until the date of today:

1. Border Hotels should have paid a total of $110,000; but

2. it has, in fact, paid only amounts totalling $75,000.

18. It is also clear, on the evidence, that such payments as have been made, in purported compliance with the condition attached to the Tribunal's order, were not made regularly. It is not necessary to go to the detail. However, there was no reason (or excuse) for the significant irregularities in payment. Nor was there any reason (or excuse) for the shortfall in payments (subject to what I say later about a supposed payment of $10,500).

Any further relief to be on condition of payment?

19. I should note that in an affidavit sworn in opposition to the grant of relief, Mr Palasty proffered an undertaking ("offer" is probably a more accurate word) to pay to Mr Cihan, within 48 hours, any payment due that, it was determined, Border Hotels had not made.

20. When I indicated, in the course of argument, that if I were to consider discharging the Tribunal's order, I would only do so on condition that all arrears be paid forthwith, and that the weekly payments be maintained thereafter on a specified day of each week. Mr Ahmad of counsel for Border Hotels said that the arrears could not be paid in less than seven days.

21. I have no idea why Mr Palasty made the offer to which I have referred if he did not think that Border Hotels could meet it. It does not give me any great confidence in his evidence overall, except in so far as that is supported by the documents. However, since nothing turns on competing considerations of credibility, it is unnecessary to pursue that point.

Power of the Court

22. It appeared to be common ground, by the conclusion of submissions, that one of the effects of the removal of the Tribunal proceedings into this Court was that they should be taken to have been commenced in this Court, and that it would follow that this Court has power to set aside, or discharge an order made by the Tribunal, in exactly the same way as, on proper cause being shown, it could set aside, or discharge an order made in this Court originally. Certainly, that seems to me to be the effect of cl 6(1)(b) of Pt 5 of Sch 4 to the Civil and Administrative Tribunal Act 2013 (NSW). Schedule 4 is given effect through ss 16 and 17 of that Act.

No need for writing

23. At one stage, a question was raised as to whether Border Hotels had any enforceable rights at all, given that it was asserting an oral variation to a written contract for sale, which included a written agreement for grant of a lease. Mr Jobson of counsel, for Mr Cihan, submitted that any variation must needs be by deed. He submitted that an oral variation was ineffective. I do not agree.

24. In so far as the agreement is one for sale of a business, it is not an agreement for the sale or disposition of an interest in land. Thus, it may be varied by another agreement (assuming good consideration), and there is no particular requirement for that varying agreement to be in writing, let alone by deed.

25. In so far as the agreement is one for the grant of a lease then the general position, taking into account the provisions of s 54A of the Conveyancing Act 1919 (NSW), would be that the variation, to be enforceable, should be in writing. However, it seems to me, that position is varied by relevant provisions of the Retail Leases Act 1994 (NSW). By s 7, that Act operates despite the provisions of a lease to the extent that the two are inconsistent. By s 8, a retail lease is considered to have been entered into when a person enters into possession of a retail shop as lessee or begins to pay rent.

26. There is no doubt that this is a retail shop lease. By the definition of that expression in s 3, it includes an agreement which is oral, or in writing, or partly oral and partly in writing.

27. Thus, it does not seem to me that Border Hotels' claim must necessarily fail because the alleged agreement and variation on which it relies was not made in writing.

28. That, however, is very much a side issue.

The defendant’s submissions

29. Mr Ahmad submitted that it would not be in accordance with the dictates of conscience to discharge the order made by the Tribunal, in circumstances where the effect of doing so would be to deprive his client of the enjoyment of the bargain that, it says, it has made and varied. He did not submit that there was some good (or any) reason for the non-compliance.

Decision

30. It may be accepted that if the order is discharged, the likelihood is that (barring any further intervention by the Court) Mr Cihan will retake possession. However, that would not bring an end to Border Hotels’ legal rights. The relevant consequence would be that Border Hotels would be left to its right in damages. If Border Hotels is correct in saying that the agreement was made and varied, and that it performed the agreement as varied, then by hypothesis it will have a substantial claim for damages against Mr Cihan. What it will not have is the enjoyment of the primary benefits for which it contracted under the agreement. It will be left to its secondary rights in damages.

31. When Border Hotels sought an order restraining Mr Cihan from retaking possession, it did so in an attempt to protect its rights under the agreement as (it says) it was varied. Thus, basic considerations of equity required that, as a condition of obtaining such relief, it undertake to perform what it says was the agreement that had been made and varied. That, no doubt (as I have said), is why NCAT imposed the condition that it did on the order that it made.

32. In effect, Border Hotels is now being put in the position of seeking further equitable relief against the consequences of its own, effectively admitted and proven, failure to do equity by performing the condition that NCAT imposed. I cannot see why it should have a further opportunity to obtain equitable relief.

33. Had the original application been made in this Court, then the Court certainly would have insisted on Border Hotels’ doing equity as a condition of obtaining equitable relief. That would have required that it continue to make the weekly payments that, on its own evidence, fell due under the agreement as varied. For my part, had I been the judge to whom the application was brought, I would have qualified the order further by providing that it would lapse automatically if any of those payments were not made, but since the Tribunal did not impose that condition, it is unnecessary to take this aspect further.

34. Mr Ahmad pointed to correspondence in which solicitors acting for Border Hotels, on being served with the notice of motion and affidavit in support, wrote some eight days ago, asking Mr Cihan to "specify the amount you require to be paid to rectify the alleged default". Mr Ahmad submitted that I should take that into account as a reason for declining to discharge the order. I do not agree.

35. To my mind, it must have been clear to Mr Palasty, and more generally to Border Hotels and those advising it, that on the plain wording of the Tribunal's order, Border Hotels was required to pay $10,000 per week from 31 December 2014 until further order. It must have been plain to Border Hotels (as its own banking records, which were put in evidence, proved) that it had not done so.

36. Apart from one disputed payment of $10,500 (which Border Hotels asserted had been paid under the agreement as varied and now accepts has not been shown to be so made), it must have been clear that there was a shortfall. Even if there were some genuine reason for thinking that the $10,500 in question had been paid pursuant to the agreement as varied (and none was shown), the total paid would amount to $85,500: I repeat, against a total due to date of $110,000.

37. Mr Palasty surely did not need the assistance of Mr Cihan to work that out. He surely did not need to be told what, if anything, was required to rectify the default, in so far as it was capable of remedy.

38. Mr Ahmad pointed to evidence given by Mr Palasty, which suggested that Border Hotels had overpaid under the agreement as varied, but before the Tribunal's orders were made.

39. On Mr Palasty's evidence, from 1 December 2014 (being either the date the variation agreement was said to have been made, or the following day) to 13 January 2015, Border Hotels paid a total of $73,000, compared to the, presumably, $60,000 that would have been owing. He referred to seven payments in all. Two of those payments were said to have been made after 30 December 2014. Once allowance is made for that fact, it would appear that five weekly payments were made during December totalling $53,000, so that the amount of the overpayment was at most $13,000. Again, that is not sufficient to offset the proven shortfall (nor would it be sufficient to do so, even if the $10,500, to which I have referred earlier, should be taken into account).

40. Alternatively, if the proper reading of the evidence is that there were five weekly payments due in December, and thus an overpayment of $3000 only, then that position is so, in effect, a fortiori.

41. I add that where the evidence for Border Hotels leaves the situation, or the factual picture, entirely unclear, I am not sure that the Court should draw inferences in its favour from unsatisfactory evidence, when it was in the power of Border Hotels to clarify the matter.

42. Even if it were appropriate to take into account alleged overpayments made before NCAT made its orders, they do not seem to me to be of such magnitude as to offset the now, as I have said, agreed and proven shortfall.

43. Thus, I do not regard the asserted overpayments as offering any discretionary reason to withhold the relief that Mr Cihan seeks.

44. As I have said, I do accept that the effect of discharging the orders is likely to be that Mr Cihan will exercise whatever right he may have to retake possession, and Border Hotels will lose the primary benefit for which it bargained. However, that is simply a consequence of its own inattention to its obligations, both under the agreement that it says it made and varied, and under the relief that it sought and obtained from a Tribunal of competent jurisdiction.

45. Accordingly, on balance, I conclude that Mr Cihan has made good his claim to have the existing interlocutory order discharged.

Further relief

46. As to the further relief sought, I can see no reason for suggesting that Border Hotels should be allowed to remove from the premises fixtures and fittings or equipment that are the property of Mr Cihan. Fixtures are his property at law regardless, and fittings are (or were) his property to the extent that they were acknowledged in the contract for sale as being fittings that would pass with the contract.

47. The position as to stock is different. There is no evidence that Mr Cihan left any stock in the premises (indeed, Mr Palasty complains that he did not), and thus no evidence that such stock as may be on the premises is the property of anyone other than Border Hotels.

48. Mr Palasty says that Border Hotels had brought further items of fittings or equipment onto the premises. If and to the extent that it has, the order that I propose to make will not prevent it from removing them.

49. I do not propose to make any order directing Border Hotels to hand over possession of the premises within some fixed time. That is in effect an order by way of final relief and I am not in a position to come to a view that, as a matter of law, on a final hearing, that would be proved as Mr Cihan’s right.

50. However, I am prepared to grant relief to the extent that I have indicated. Insofar as Mr Cihan seeks an interlocutory injunction, it must be on terms that he proffers the usual undertaking as to damages.

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Decision last updated: 24 March 2015