Claremont 24-7 Pty Ltd v Invox Pty Ltd
[2015] WASC 55
•30 JANUARY 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: CLAREMONT 24-7 PTY LTD -v- INVOX PTY LTD [2015] WASC 55
CORAM: LE MIERE J
HEARD: 30 JANUARY 2015
DELIVERED : 30 JANUARY 2015
FILE NO/S: CIV 1108 of 2015
BETWEEN: CLAREMONT 24-7 PTY LTD
Plaintiff
AND
INVOX PTY LTD
Respondent
Catchwords:
Interim injunction - Agreement for lease of land - Intention to create legal relations - Objective assessment of agreement - Agreement to lease creating equitable interest - Equitable priorities - Invasion of possessory rights - Constructive notice of possessory rights
Legislation:
Nil
Result:
Injunction granted
Category: B
Representation:
Counsel:
Plaintiff: Mr C C K Ko
Respondent: Mr F Mallal
Solicitors:
Plaintiff: Trinix Lawyers
Respondent: Mallal & Co
Case(s) referred to in judgment(s):
Australian Broadcasting Corporation v O'Neill [2006] HCA 46
Masters v Cameron (1954) 91 CLR 353
Patrick Stevedores Operations (No 2) Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1
LE MIERE J:
(This is an edited version of my reasons for judgment delivered ex tempore on 30 January 2015.)
By chamber summons filed on 27 January 2015, the plaintiff applied for an interlocutory injunction restraining the defendants from entering into a lease or progressing or engaging in any negotiation or discussions with any party other than the plaintiff in relation to a lease of the property commonly known as ground floor, 301 Stirling Highway, Claremont, being more particularly described as lot 505 on diagram 72584 and being the whole of the land in certificate of title volume 1786 folio 367, which I will refer to as 'the Premises'.
The matter came on for hearing urgently the following day, 28 January. On that day the defendant applied for an adjournment of the matter to enable the defendant to put on evidence in opposition and I adjourned the matter to 30 January. I granted an interim injunction restraining the defendant until 31 January from entering into a lease or progressing with any party other than the plaintiff in relation to a lease of the Premises or giving possession of the Premises to any party other than the plaintiff.
I heard the matter urgently today, 30 January 2015, because the defendant has entered into an agreement to lease the Premises to KW Corporation Pty Ltd and, under that agreement to lease, KW Corporation is to take possession of the Premises on 1 February.
Parties contentions
The plaintiff says that on 5 December 2014 the defendant agreed to lease the Premises to the plaintiff and the plaintiff agreed to take a lease of the Premises from the defendant on the terms of a document entitled 'Updated Offer to Lease' dated 5 December 2014 and prepared and signed by Mr Patel on behalf of the plaintiff.
The defendant says that no binding agreement to lease was made on or about 5 December or at all. The defendant says that the intention of the parties was not to make a binding agreement unless and until they executed a formal contract.
Intention to create legal relators
In this case, as commonly happens, the parties finalised the details for an agreement but wished to record it in a formal or more formal document. In Masters v Cameron (1954) 91 CLR 353, the High Court pointed out that such cases may fall into one of three categories:
(1)the parties may intend to be bound immediately, though expressing a desire to draw up their agreement in a more formal document at a later stage; or
(2)they intend to be bound immediately but wish the operation of a particular clause or term to be delayed pending the drawing up of a more formal document; or
(3)they intend to postpone the creation of contractual relations until a formal contract is drawn up and executed.
A fourth category, by way of variation of category 1, has been added, namely, where the parties intend to be bound immediately by the terms which they have agreed upon whilst expecting to make a further contract in substitution for the first contract containing, by consent, additional terms. Whether the parties have reached final agreement or intend to postpone contractual relations or the operation of a particular term is a question of intention, objectively ascertained from the language the parties have used or inferred from their conduct.
If the parties' negotiations fall into either category 1 or 4, the parties are each bound and there is the contemplation of a further, more formal or more elaborate agreement. If the parties fail to reach agreement or fail to execute the contemplated agreement, then their relationship is governed by the original agreement. If the parties' negotiations fall into category 3 and the parties do not execute a formal contract, then there is no binding agreement between them. In this case, the plaintiff says that the case falls into category 1. The defendant says it falls into category 3.
Relevant evidence
The Updated Offer to Lease is dated 3 December 2014. It states:
We are pleased to lease the above premises in accordance with the following updated terms and conditions and subject to the terms of the lease to be drawn by lessor or appointed legal representative.
The parties had been negotiating for a long time and negotiations had been conducted by Mr Patel on behalf of the plaintiff and Mr Cheah a director of the defendant, and Mr Santa Maria of Alpha Property & Facilities Management Pty Ltd, an agent, on behalf of the defendant.
Mr Patel emailed the Updated Offer to Lease to Mr Cheah on 5 December 2014 after a telephone conversation. Mr Patel says that, during that telephone conversation, he said to Mr Cheah that he would make the final changes to the offer to lease and would send across the completed offer to lease for the defendant to sign. Mr Cheah said words to the effect that the offer to lease needed to be in the Alpha format. Mr Patel expressed concern and said words to the effect that the plaintiff needed confirmation that the Premises is 100% secured prior to the council meeting on 9 December 2014. Mr Cheah responded with words to the effect that the Premises were secured by the plaintiff. Mr Patel then informed Mr Cheah to advise Mr Santa Maria of that.
After the telephone conversation, Mr Patel emailed the Updated Offer to Lease to Mr Cheah at 3.11 pm. At 4.44 pm Mr Cheah emailed Mr Santa Maria enclosing the Updated Offer to Lease and stating:
Enclosed terms in the offer by SNAP is acceptable to both parties.
Mr Cheah asked Mr Santa Maria to 'capture these terms inside Alpha Property's standard format offer that was used previously and expeditiously provide offer and new disclosure statement to Amar Patel for his perusal and execution'. The email was copied to Mr Patel.
On 9 December, Mr Santa Maria emailed to Mr Patel an offer to lease in the standard Alpha format and said that he would need the return of the disclosure statement signed and dated seven days from the date of the offer, 'which also needs to be returned for owner's acceptance'.
In its written submissions, the defendant says that it is apparent from the facts referred to in the affidavit of Mr Cheah sworn 29 January 2015 that the intention of the parties was not to make a concluded bargain at all unless and until they executed a formal contract and, hence, there was no binding agreement made on 5 December. The affidavit sworn 29 January 2015 by Mr Cheah contains few, if any, facts to support that contention. It consists, principally, of argument. In [3(a)], Mr Cheah says that the required documentation formalities to be adopted on 5 December 2014 was on the same footing as that adopted and implemented by the plaintiff and defendant on 24 April 2013. That is, in essence, an argument or conclusion. Mr Cheah does not set out, specifically, the facts from which that conclusion is to be drawn or from which it is to be inferred.
Mr Cheah goes on to refer to paragraphs of Mr Patel's affidavit and to annexed documents which led to the execution of the offer to lease document on 24 April 2013. However, there is no specific evidence that the parties reached an express agreement or that it was ever expressly stated that there was to be no formal binding agreement until an offer to lease in the Alpha format or some other formal document was executed by both parties.
Prima facie case
It is not appropriate on the hearing of an interlocutory injunction that I conduct anything in the nature of a preliminary trial of the issue between the parties ‑ whether or not there was a concluded agreement made on 5 December. I find that there is a prima facie case that the parties made an agreement to lease. As I have said, whether or not, as a matter of fact and law, such an agreement was made is a matter to be determined at trial.
An agreement to lease gives rise to an equitable interest and a right to specific performance of the agreement; hence, there is a prima facie case that the plaintiff has an equitable interest in the Premises arising from the agreement to lease of 5 December 2014.
In determining whether or not the court should grant an interlocutory injunction, the court must have regard to the strength of the plaintiff's prima facie case and matters which go to the balance of convenience. The governing consideration is the requisite strength of the probability of ultimate success, which depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought: see Australian Broadcasting Corporation v O'Neill [2006] HCA 46.
An important feature of this case is that, on or about 31 December 2014, the defendant made an agreement to lease the premises with a third party, KW Corporation. That agreement also gives rise to an equitable interest. The question of equitable priorities arises whenever, as here, a person, the plaintiff, wishes to assert an equitable interest against the interest of a second person, in this case, KW Corporation. The result will depend on a number of factors.
Where both interests are equitable, the result is usually governed by the principle that the person who was first in time takes precedence. In this case, the plaintiff was first in time. The principal matter advanced against the plaintiff having priority is that, between the defendant's agent sending the plaintiff the offer to lease document on 9 December 2014 and KW Corporation and the defendant executing their agreement to lease on or about 31 December 2014, the plaintiff delayed and failed to execute the formal offer to lease. That is a matter which will have to be explored at trial. However, the evidence is not sufficient to establish that KW Corporation has an interest which takes precedence to that of the plaintiff for the purposes of this interlocutory hearing.
Damages inadequate remedy
An injunction is not granted to restrain actionable wrongs for which damages would be the proper remedy. However, damages will rarely be an adequate remedy for the invasion of proprietary or possessory rights. In this case, the plaintiff has made out a prima facie case that it has an equitable interest in the Premises.
Furthermore, the matters set out in Mr Patel's affidavit of 29 January 2015 demonstrate that damages would not be an adequate remedy for the plaintiff in this case. Mr Patel is the proprietor and operator of 11 SNAP fitness gyms around Australia. He secured the exclusive rights for the territory in Claremont. It was important to secure suitable premises. When considering the suitability of premises Mr Patel placed the greatest weight on the location of the premises and finding premises on the main road of the territory. The location of premises on the main road is the critical factor of success and typically required by the franchisor of SNAP Fitness to obtain site approval. Mr Patel says of all the councils that he has had to deal with securing the premises of the 11 other SNAP fitness gyms, their town planning schemes allow for gyms on main roads and so the only process with council he has had to go through in the past is development approval which on average takes between one to three months. The Town of Claremont town planning scheme does not allow for a gym on Stirling Highway. The only way to operate a gym on Stirling Highway was to apply for a scheme amendment. This scheme amendment is only applicable for the specific premises applied for. The location of the Premises made it extremely desirable premises as it was located on a central main road which would ensure the gym would be easy to locate and it would be seen by passing public who could then become potential members. That is why Mr Patel, on behalf of the plaintiff, went through the long, costly and arduous process of over two years to obtain scheme amendment and development approval from the Western Australian Planning Commission and Town of Claremont. If the plaintiff has to locate to other premises, Mr Patel will need to apply for another scheme amendment specific to that other premises from the Town of Claremont and then apply for development approval and go through the council approval process, which took two years, again.
Balance of convenience
A court must consider the impact of the injunction on the rights of third parties. The weight of this will depend on all the circumstances: see Patrick Stevedores Operations (No 2) Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 at [42]. In my view, the following matters are important in determining how the court should exercise its discretion whether or not to grant an injunction which will have the effect of preventing KW Corporation from taking a formal lease of the premises or from taking possession of the premises in accordance with its agreement to lease.
First, on 19 January 2015, Mr Lapelerie, a representative of KW Corporation, told Mr Patel that he, Mr Lapelerie, was aware of the plaintiff's interest in the Premises and that it had been working on the approval for a long time as he had been in direct contact with the council to check as to the status of the plaintiff's application and he knew the plaintiff had been granted approval by the council in early December, but he was under the impression the owners were struggling with the conditions required to accommodate the change of zoning. Whilst it is not completely clear, it appears from that evidence that KW Corporation knew of the plaintiff's interest in the Premises and their efforts to obtain a change of zoning before KW entered into its agreement to lease.
Prima facie, there is evidence that KW Corporation had constructive notice of the plaintiff's claimed interest. In the plaintiff's written submissions, the plaintiff says, and I accept, that constructive notice consists of that knowledge that would have come to a person's attention had he or she made the inquiries a reasonably prudent person would have made in the circumstances. The plaintiff submits, and I accept, that KW Corporation had constructive notice in circumstances where it was aware that the plaintiff had been working with the council over a long period of time for approval, that KW Corporation had been talking to council to check the status of the plaintiff's application and KW Corporation was aware approval was granted in early December. Further inquiries would have revealed the plaintiff had a claimed interest in the Premises.
The second matter is that KW Corporation has not entered into possession of the premises or, indeed, taken a formal lease. KW Corporation has not commenced to fit out the premises. Indeed, it is less than one month since KW Corporation executed the offer to lease and KW Corporation learned no later than 19 days after it had executed the offer to lease that the plaintiff claimed to have a prior and superior interest in the Premises to KW Corporation and intended to pursue that interest.
KW Corporation is not a party to this action but, at my direction, the plaintiff gave notice to KW Corporation on 28 January, which notice consisted of the writ, the plaintiff's chamber summons and the order which I made on 28 January, which included that the matter be adjourned for further hearing to today. KW Corporation has not appeared before the court today or taken any steps to put any material before the court or to inform or request either of the parties to put any material before the court concerning any prejudice to it. There is, accordingly, no specific evidence of any prejudice to KW Corporation.
In the circumstances, having regard to the matters set out in Mr Patel's affidavits of 27 January 2015 and 29 January 2015, it may be inferred that KW Corporation may more readily be compensated in damages than the plaintiff if the plaintiff is subsequently found to have the interest it claims and the injunction was not granted.
Injunction granted
For those reasons, I will grant the injunction sought by the plaintiff. This is to be on the basis that there is to be an expedited trial. The matter should be resolved expeditiously so that the interests of the plaintiff, the defendant and KW Corporation may be resolved as soon as possible. Accordingly, after determining the form of the words of the injunction, I will hear the parties in relation to directions for proceeding with the trial of the action.
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