CMA Recycling Victoria Pty Limited v Doubt Free Investments Pty Ltd
[2011] TASSC 29
•17 June 2011
[2011] TASSC 29
COURT: SUPREME COURT OF TASMANIA
CITATION: CMA Recycling Victoria Pty Limited v Doubt Free Investments Pty Ltd [2011] TASSC 29
PARTIES: CMA RECYCLING VICTORIA PTY LIMITED
v
DOUBT FREE INVESTMENTS PTY LTD
FILE NO/S: 352/2011
DELIVERED ON: 17 June 2011
DELIVERED AT: Launceston
HEARING DATE: 20, 27 May, 2, 7 and 8 June 2011
JUDGMENT OF: Wood J
CATCHWORDS:
Equity – Equitable remedies – Injunctions – Interlocutory injunctions – Serious question to be tried – Other particular cases - Interim injunction to require landlord to yield up possession of leased premises.
Conveyancing and Law of Property Act, 1884 (Tas), s15.
Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57, applied.
Aust Dig Equity [1158]
REPRESENTATION:
Counsel:
Applicant: A J Abbott SC, R Newlinds SC and J Giles
Respondent: I R Jones SC
Solicitors:
Applicant: Simmons Wolfhagen
Respondent: Madgwicks
Judgment Number: [2011] TASSC 29
Number of paragraphs: 45
Serial No 352/2011
File No 29/2011
CMA RECYCLING VICTORIA PTY LIMITED
v DOUBT FREE INVESTMENTS PTY LTD
REASONS FOR JUDGMENT WOOD J
17 June 2011
CMA Recycling Victoria Pty Limited seeks the grant of an interlocutory injunction in relation to leased premises at Rocherlea in Tasmania. CMA Recycling operates a scrap metal recycling/waste handling depot from those premises. The registered proprietor of the land/premises and lessor, Doubt Free Investments Pty Ltd, took possession of the premises pursuant to a default notice under the Conveyancing and Law of Property Act 1884 (Tas) ("the CLP Act"), s15(1). A further notice, advising of the termination of the lease and re-entry of the premises by the landlord, dated 15 May, 2011, was attached to the front door of the business premises on 16 May, 2011 when personnel of CMA Recycling found themselves locked out of the premises.
The interlocutory application
The terms of the interlocutory injunction sought by CMA Recycling are set out as follows in an interlocutory application dated 18 May 2011:
"1 That until further order, the defendant yield up possession of the premises to the plaintiff, and
2 That until further order the defendant be restrained from proceeding under clause 18 of the lease or otherwise from taking possession of, interfering with, selling or attempting to sell, encumbering, or attempting to encumber, dealing or attempting to deal with, or in any way trespassing upon or converting any of the plaintiff's personality located in or upon the premises including the plaintiff's chattels and tenants fixtures and including without loss of generality all of the property listed under schedule 3 to the lease."
Counsel for CMA Recycling has indicated that an order in terms of paragraph 1 is sufficient and an order in terms of paragraph 2 is not required.
Since the interlocutory application was filed
On 20 May 2011, the interlocutory application was listed and the hearing commenced. An interim injunction was ordered by consent in terms enabling CMA Recycling to resume possession of the premises. The interim order due to expire on 24 May 2011 was extended by consent until 27 May 2011. The interlocutory application was relisted on that date for the hearing to continue. Any further interim injunction was opposed. A further interim order was made on 27 May, 2011 pending the resolution of the interlocutory application. That order was made on the basis of the limited evidence that was then before the Court, and noting that the hearing of the application was part-heard. The interim injunction expires today at 5pm or earlier order of the Court.
The pending proceedings
Injunctive relief is sought by CMA Recycling to preserve the status quo until pending proceedings are determined. CMA Recycling is the plaintiff in an action against Doubt Free Investments arising from the company's same conduct of taking possession of the premises on 16 May 2011, as a consequence of the default notice mentioned above. CMA Recycling claims against Doubt Free Investments that it had no lawful right to terminate the lease on 16 May 2011, and, by so doing, the defendant breached the lease. In the alternative, if the lease has been terminated, CMA Recycling claims that an order for relief against forfeiture should be made including declarations: that the lease is valid and subsisting; that as at 16 May 2011, the defendant had no right or entitlement to possession of the premises; and the defendant acted in breach of contract and interfered with the plaintiff's right to quiet enjoyment of the premises. An order is sought for breach of contract and aggravated and exemplary damages for trespass. The trial in relation to these proceedings is listed for 29 July 2011. The injunction is sought until judgment is delivered in those proceedings.
History
A summary of the facts pertinent to this application for an interlocutory injunction is as follows.
The lease
CMA Recycling and Doubt Free Investments entered into the lease on 4 July 2007 regarding land being part of the property comprised in Certificate of Title volume 5029 folio 1, known as 256 George Town Road, Rocherlea as shown hatched on the Plan of Survey in Sch3 of the lease. The lease was subsequently varied, re-executed in registrable form, and registered on 23 February 2011. Various clauses of the lease are relevant to these proceedings:
"12.1 Acknowledgments
The parties acknowledge and agree that:
...
(c)the Tenant, must not use, permit or allow the Premises to be used in a manner contrary to any laws, regulations, bylaws, policies or directions issued by any Authority having jurisdiction or control over the Premises and/or the Permitted Use, relating to environment protection, the Premises and its surroundings; and
14.1 Maintenance and Repair
The Tenant must:
(a)keep the premises in good repair and condition (fair wear and tear excepted);
(b)keep the Tenant's Property and the Landlord's Property in good repair and condition and, where necessary, replace items of the Landlord's Property:
(c)promptly repair any damage to the Premises or the Landlord's Property caused or contributed to by the Tenant ...
17.1 Essential Terms
The following obligations of the Tenant are essential terms of this Lease:
(a) all obligations to pay money under this Lease; and
(b) the obligations under clauses 8.1, 9.1, 14.1 and 14.5.
This clause 17.1 does not prevent any other obligation of the Tenant under this Lease being an essential term.
17.2 Events of Default
An Event of default occurs if:
...
(c)the Tenant does not comply with any of its other obligations under this Lease, whether or not an essential term;
17.3 Landlord's Right to Terminate
If an Event of Default occurs, the Landlord may terminate this Lease by:
(a) re-entering the Premises without notice; or
(b) notice to the Tenant
except that when section 15(1) of the Conveyancing and Law of Property Act 1884 applies, the Landlord may only terminate this Lease if the Landlord has first given to the Tenant a notice which complies with that section and the Tenant has failed to comply with that notice within fourteen (14) days."
EPN and the Building Report
A notice under the Environmental Management and Pollution Control Act 1994 (Tas), addressed to CMA Corporation Limited, the holding company for CMA Recycling, and dated 4 April 2011, was issued by the Launceston City Council (an authority as defined in the lease and referred to as the Council for present purposes) in relation to the leased premises. The EPN was received on 8 April 2011. The notice identified that pollutants involving solid and liquid wastes were being emitted from the property onto adjoining land, and amounted to an environmental nuisance. The notice identified various measures that were required to be taken, all within 90 days, with some measures to be implemented immediately, some within 21 days, some within 30 days, 60 days and 90 days.
Doubt Free Investments obtained a building report prepared by Raymond Martin dated 24 April 2011 in relation to structural defects and damage to the premises. Damage related to concrete fence panels housing the stock, paving, kerbing, concrete sleepers and a picket fence. Mr Martin provided a preliminary estimate of the damage in the amount of $802,454,15.
Default Notice
Solicitors for Doubt Free Investments, Madgwicks, sent a letter to CMA Recycling dated 28 April 2011. A copy of the letter was sent by email to the solicitors for CMA Recycling, Minter Ellison, on that date. The letter was received by CMA Recycling on 29 April 2011. The letter was described as constituting a notice under s15(1) of the CLP Act. The notice enclosed a copy of the EPN and the building report, and identified the clauses of the lease that had been breached by reason of the matters set out in those documents. The clauses of the lease said to have been breached by the EPN include cl 12(c), and by the building report, include cl 14(1).
The notice set out the landlord's requirements:
"3.1By this letter the Landlord gives you, as Tenant, notice that the Landlord requires that you –
a)Comply with the requirements of the EPN as you are required to do pursuant to Clause 13 of the Lease; and
b)Promptly repair the damage to the Premises identified in the Building Report as you are required to do under Clauses 14.1(c) and 14.3 of the Lease (collectively Rectification Works) –
both within a reasonable time after the date of this letter.
3.2The Landlord is unable to estimate a reasonable time for compliance at this time. In this regard the Landlord will treat the Notice as having been complied with if you –
a)within 16 days of the date of this letter provide to the Landlord a timetable (Timetable) for completion of the Rectification Works acceptable to the Landlord (acting reasonably); and
b)within 23 days of the date of this letter enter into a further variation of the lease to incorporate, as an essential term of the Lease, a clause by which you will covenant with the Landlord to complete the Rectification Works at your cost in accordance with the Timetable.
4Pursuant to Clause 17.1 of the lease your breach of Clause 14.1 of the lease constitutes a breach of an essential term of the Lease. Nothing in this Notice constitutes, or should be taken as constituting, a waiver of:-
a)the Landlord's right to treat the breach of clause 14.1 of the Lease as a repudiation of the Lease (which the Landlord may accept) and the landlord expressly reserves the right to do so; or
b)the Landlord's rights to damages pursuant to the Lease or at law."
Further, the notice stipulated the consequences of failing to comply with those requirements as follows:
"6If you fail to comply with the Landlord's requirements specified in paragraph 3.2 of this Notice; the landlord will, at its election, either forfeit the Lease or accept your repudiation of the Lease constituted by your breach of clause 14.1 thereof. In either case the Lease will then be at an end and the Landlord will require immediate vacant possession of the Premises."
16 May 2011: the "Notice to Tenant"
These requirements were not complied with by 16 May 2011. Doubt Free Investments was responsible for affixing a document with the heading "Notice to Tenant (Section 15 of the Conveyancing and Law of Property Act 1884)" to the front door of the business premises as mentioned. The document stated in part:
"TAKE NOTICE:-
Pursuant to notice dated 28 April 2011, issued by the Landlord to the Tenant, advising the Tenant of breaches of the lease agreement ('Lease') for occupation of 256 George Town Road Rocherlea in Tasmania ('Premises') and providing the Tenant with 16 days in which to produce a timetable to rectify the breaches identified therein.
AS A CONSEQUENCE of the failure to comply with the said notice to provide a timetable for rectification of breaches of essential terms of the Lease to the satisfaction of the Landlord within the sixteen day period, THE LANDLORD HEREBY GIVES NOTICE that such failure has been treated by the Landlord as repudiation of the obligations of the Tenant pursuant to the Lease AND THE LANDLORD accepts such repudiation and has terminated the Lease and has now re-entered into possession of the leased premises consequent upon termination of the Lease."
Chronology of some other relevant events
Having noted two key dates being 28 April 2011 when the default notice under the CLP Act was sent to solicitors for CMA Recycling, and 16 May 2011, when the notice treating the breaches as repudiation was affixed to the business premises, there are other relevant events before, in between and since. I note some of them:
· Since approximately 8 April 2011, CMA Recycling has taken steps to address the EPN, including reducing stock levels on the property, engaging environmental engineers to conduct soil testing, and engaging civil engineers to assess the panel walls and pavers.
· 21 April, Mr Luke Godden, State Manager for CMA Corporation Limited (with authority and responsibilities in relation to CMA Recycling as a subsidiary company), corresponded with the Council regarding steps to be taken to address the EPN.
· 27 April, the Council acknowledged that further time was required to comply with the EPN, and suggested Mr Godden provided a revised timeframe.
· 28 April default notice sent to Ms Donoghue of Minter Ellison by email and on 29 April received by Mr Godden.
· 2 May 2011, Mr Godden sent an email to the Council providing steps taken to comply with EPN and a revised timeframe.
· 2 May 2011, a revised EPN was issued by the Council.
· 2 May and 6 May, there were communications between the Council and Doubt Free Investments regarding permitting access to adjoining property owned by Doubt Free Investments in order to enable testing and clean-up.
· 2 May, environmental engineer GHD, engaged on behalf of CMA Recycling, was not permitted access to adjoining land. Doubt Free Investments refused permission if CMA personnel were present at the time of inspection.
· On 12 May 2011, Ms Donoghue sent a letter to Madgwicks stating that CMA Recycling was working to assess all issues raised in the notice. A period of seven business days from 12 May was sought in order to respond to the notice. It is noteworthy that Ms Donoghue was on leave in the period after the notice was sent to her by email, and was unaware of the notice until 12 May 2011.
· 13 May 2011, letter sent by email from Mr Crawford, Madgwicks, declining request for an extension of time.
· 25 May 2011, Minter Ellison informed by email from the Council that the EPN was withdrawn.
Context
There is a substantial body of evidence contained in affidavits provided by both parties regarding a range of issues. For present purposes it is not necessary for me to traverse the detail of that evidence. There is evidence that is relevant as context to the present dispute, and some of it is worth noting here.
At and around the time of the default notice, CMA Recycling (and the parent company CMA Corporation Limited and related subsidiary companies) had a team of solicitors at Minter Ellison engaged in responding to a large volume of correspondence received from Madgwicks, solicitors for Doubt Free Investments. A significant amount of the correspondence concerns issues arising from a number of leases between CMA Recycling (and related companies) and Mr Rowe (sole director and secretary of Doubt Free Investments), and his companies. These leases concern a total of approximately eleven properties situated in Tasmania and interstate. Three successive rounds of default notices have been issued in relation to all leased properties in February, March and April 2011. By the time of the interlocutory application all default notices had been resolved. It is relevant that there had been a flood of correspondence in the period leading up to this default notice, and that previously, communications between the lawyers had been effective in resolving those other notices.
There was evidence that Mr Rowe had been employed as managing director of CMA Corporation Limited, until approximately May 2010, and is now operating his own business. The detail of that history is not material for present purposes. Mr Rowe is regarded by CMA Recycling as a competitor in the scrap metal recycling business.
The submissions on behalf of Doubt Free Investments were that CMA Recycling was a failing business and it had lost considerable custom in Tasmania in the previous 6 months. There was also evidence regarding the net loss of the holding company CMA Corporation Limited recorded in a half year report, 31 December, 2010 disclosing a net loss of $126 million. There was evidence that the company was required to raise capital of $25 million by 1 July 2011 and of a recapitalisation proposal which was expected to raise $30 million of new equity and refinance its existing debt facilities. It is not necessary to consider these matters in any detail. It is noted that counsel for CMA Recycling submitted that just because the holding company is in financial difficulty it does not follow that CMA Recycling is also in financial difficulty. The evidence does not indicate that the business operated by CMA Recycling is not viable but the evidence is such that it warrants consideration of a bond to support the undertaking as to damages. That is not opposed by CMA Recycling in the amount sought by Doubt Free Investments.
The test
The test for granting an interlocutory injunction is well-settled. The plaintiff must show that there is a serious question to be tried and that the balance of convenience favours the grant of an injunction: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at par[65], per Gummow and Hayne JJ, Gleeson CJ, and Crennan J agreeing at par[19]. See also judgment of Blow J in Byrne v Morton [2008] TASSC 83 at par[6]. In order to satisfy the test of a serious question to be tried, the plaintiff need only show that there is a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo (see Gummow and Hayne JJ in ABC v O'Neill at [65]).
A serious issue to be tried?
"Clean hands"
A submission has been made by counsel for Doubt Free Investments that as equitable relief is sought, the maxim of equity that "he who comes into equity must come with clean hands" applies. The maxim means that when a plaintiff whose conduct has been improper in a transaction seeks relief in equity that relief will be refused (Meagher RP, Heydon JD, Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed Butterworths, 2002) at [3-110].
Counsel for Doubt Free Investments points to the conduct of CMA Recycling of continuing to operate its business for a period of time in contravention of the EPN. The original EPN dated 4 April 2011 required, as immediate action:
"Immediate Action: Cease receiving and or storing additional material intended for recycling until clean-up/remediation of the sites and preventative actions have been taken to the satisfaction of Launceston City Council."
The evidence of Mr Luke Godden was relied upon and his concession that CMA Recycling continued receiving scrap from its suppliers for the currency of that EPN in contravention of it.
Counsel for CMA Recycling submitted that the maxim does not operate in these proceedings to shut out interlocutory relief. In relation to the default notice, it was submitted that CMA Recycling seek to vindicate a legal right to possession of the property, and that equity is not invoked in that aspect of the case. It was said that the injunction is sought in the auxiliary jurisdiction of equity as an injunction to protect a legal right. It was submitted that the same argument applies to the application for relief against forfeiture. In these proceedings the Court is concerned with an application to hold the status quo up to the time when an application in equity will be made. In such proceedings, maxims of equity have a role to play in the exercise of discretion, but are not determinative. It was submitted there was a line of authority to support this proposition, but cases were not cited, and counsel contended that, regardless, CMA Recycling had behaved in good conscience by genuine endeavours to rectify the situation.
It is not necessary to consider the extent to which the maxim applies to these proceedings. Assuming it does apply in a full sense, the conduct of CMA Recycling in relation to the EPN, viewed overall, does not preclude it from obtaining relief in these proceedings. On the evidence before me the company showed candour in its dealings with the Council about the EPN and a co-operative working relationship was established with the Council. The facts indicate a level of conscientiousness by CMA Recycling in addressing the various requirements of the EPN. By 27 April, the Council accepted that the EPN may be revised, and in fact, invited a revised timeframe from Mr Godden. The revised timeframe was accepted, and the requirement to cease receiving additional material was amended.
The specific wrongful behaviour referred to has not continued beyond the date of the revised EPN. The conduct of CMA Recycling since the EPN was revised has demonstrated ongoing and substantive steps have been taken to address the measures required by the notice. It seems that various factors have hampered some of the remedial steps that CMA Recycling would have otherwise implemented, including the conduct of Doubt Free Investments in blocking access to the adjoining property, and the undertaking given by CMA Recycling to this Court at the behest of Doubt Free Investments not to carry out any structural works. It must be borne in mind that "unclean hands" is not an absolute defence. A party who offends the principle may "wash her/his hands" of the impropriety: Karl Suleman Enterprises Pty Ltd (in liq) v Babanour [2004] NSWCA 214 at par[54].
As a separate submission it was argued that relief should be refused because Mr Godden was not frank in his evidence in these proceedings, and has not behaved in "good conscience". I do not accept that submission.
The validity of the default notice
CMA Recycling contends that the default notice is invalid as it does not comply with the CLP Act, s15(1), and that there is a serious issue in this respect. The CLP Act, s15(1), provides:
"A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease, shall not be enforceable, by action or otherwise, unless and until the lessor serves on the lessee a notice specifying the particular breach complained of and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and in any case requiring the lessee to make compensation in money for the breach, and the lessee fails, within a reasonable time thereafter, to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money, to the satisfaction of the lessor, for the breach."
I am satisfied that there are serious questions as to whether the default notice complies with s15(1) of the Act.
The CLP Act, s15(1), requires that default notices issued under this provision must specify the particular breach of the covenant or condition in the lease, and require the lessee to remedy the breach being the breach of the lease. The failure to remedy that breach, if it is capable of remedy, within a reasonable time gives rise to an entitlement to enforce a right of re-entry or forfeiture. The notice issued by Doubt Free Investments affixed to the premises on 16 May 2011, purported to terminate the lease on the basis of the failure by CMA Recycling to provide a timetable for rectification. Importantly, the plaintiff was not required to provide a timetable under the lease (see events of default in cl 17.3 of the lease which refers to obligations under this lease). Section 15(1) speaks of a "right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant or condition in the lease". The failure to provide the timetable is the basis for pressing a right of re-entry and it is identified as such in the notice setting out the reason for re-entry. The failure to provide a timetable is not a breach of the lease, cannot be an event of default, and arguably did not give rise to a right to terminate the lease.
Two of the demands in the default notice are to comply with the EPN and promptly repair the damage in accordance with obligations under the lease within a reasonable time after the date of the letter. Those demands are not the subject of criticism. It is accepted by CMA Recycling that the matters raised in the EPN and the building report do amount to breaches of the lease. The demands are responsive to the breaches and identified in the default notice as "requirements". It is noted that the terms of s15(1) refer to "requiring" the lessee to remedy the breach.
The timetable in par3.2(a) of the default notice and variation of the lease in 3.2(b) are not described as requirements in par3.2 of the default notice, although par6 does refer to the "Landlord's requirements specified in paragraph 3.2 …". The default notice, par3.2, provides that both of these events would give rise to treatment by the landlord that the notice has been complied with. So, compliance with the timetable will operate as compliance with the notice. In effect, par3.2 grants a concession and the landlord will "treat the timetable and the variation of the lease as compliance". Arguably, this would leave the requirement with regard to repairs and compliance with the EPN outstanding if this concession in the notice is not taken up. There is a tension in the terms of the default notice between the terms of par3.2 and the terms of par6, the latter providing that the "requirements" in par3.2 will result in the landlord forfeiting the lease or accepting the repudiation of the lease. An issue in these proceedings may be whether the reference in the default notice to a timetable is properly to be construed as a "requirement" within the meaning of the CLP Act, s15(1).
It is arguable that, properly construed, the only valid requirements in the default notice are the requirements to repair and comply with the EPN. It is arguable that a reasonable time to remedy those breaches had not expired by 16 May when Doubt Free Investments purported to terminate the lease. As at that date, the EPN timetable was extant and the landlord had expressed the view, in the default notice, that as at 28 April 2011, a reasonable time could not be estimated. In this context, it is noted that the reference in cl 17.3 of the lease to a period of 14 days does not alter the situation, as the CLP Act, s15(8), prevents the parties from contracting out of the requirement for reasonable notice.
Relief against forfeiture
It is submitted for CMA Recycling that "if the lease has been terminated CMA Recycling has a prima facie entitlement to relief against forfeiture. The defendant's right to terminate the lease is granted to secure performance of the lease ... The defendant's right to terminate has achieved its purpose, namely to secure performance of the lease. The defendant carries a heavy onus to resist relief against forfeiture". Reference was made to Young, Croft and Smith "On Equity" at 5.990. Further I note that the authors at 5.990 state that "While a less benign view is taken of defaults other than non-payment of rent, a default which has been remedied and which is unlikely to recur will usually mean that the tenant will be given relief: see generally, Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of New South Wales Ltd (1970) 2 BPR 9562 (NSWSC); Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685; and Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2006] NSWSC 1203."
In this regard I refer to matters already mentioned such as the steps taken by CMA Recycling to remedy the defaults and that rent payments are up to date. It is not necessary to consider this argument in any further detail; a serious issue to be tried has already been shown and it is sufficient to note that this issue also warrants consideration at trial.
Breach of contract
It was submitted for Doubt Free Investments that there was not a serious issue to be tried as the CLP Act did not apply to grant relief. Written submissions filed and a folder of authorities provided during the course of the hearing regarding the validity of the notice were not relied upon. Instead, oral submissions were made regarding breach of contract. In essence, the following propositions were advanced:
·Clause 14.1(a) and (c) had been breached.
·By virtue of cl 17.1, the obligations in cl 14 were an essential term of the lease and by reason of cl 17.2 of the lease a failure to comply with those obligations is an event in default which provides a right to terminate the lease under cl 17.3.
·The breaches of cl 14 amounted to a breach of a fundamental term. The breaches also amount to repudiation by the tenant although repudiation is not relied upon.
·On 16 May 2011, Doubt Free Investments exercised its contractual right to terminate the lease for breach of an essential term.
·Section 15(1) does not apply to grant relief if the lease is terminated as a matter of contract law for breach of a fundamental term or repudiation.
In support of these propositions, two decisions of the Victorian Court of Appeal were relied upon: Natwest Markets Australia Pty Ltd v Tenth Vandy Pty Ltd (2008) 21 VR 68, and Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319. It was further submitted that there was no entitlement for relief for forfeiture, and the application should be dismissed.
It was submitted for CMA Recycling that:
·The Victorian cases were distinguishable as they were concerned with non-payment of rent and the equivalent statutory provision in Victoria, like the CLP Act, s15(7), did not apply to non-payment of rent cases.
·If repudiation is under consideration, then the intention of the lessee must be assessed with regard to his conduct, and it was evident here that there was not a manifest unwillingness or inability to render substantial performance of the contract.
·If this case involves breach of a fundamental term, then the CLP Act, s15, applies. In support of this proposition there was reliance upon Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268.
The hearing of this application is not the time to resolve complex questions of law of the kind raised in this context or to resolve competing appellate authority. I expect more thorough attention will be given to these questions by counsel at trial. The submissions I have heard, by their very nature, demonstrate the arguable and serious nature of the issues raised, and that there is not a clear-cut answer to the claims made by CMA Recycling. It suffices to note that the decision of the New South Wales Court of Appeal, relied upon by the Doubt Free Investments, does support the position of CMA Recycling that the CLP Act, s15, does apply: Macquarie International Health Clinic Pty Ltd (supra), per Hodgson JA, at pars[296] and [301], with whom Allsop P and Macfarlan JA agreed.
I conclude that there is a serious issue to be tried.
Balance of convenience
Submissions for CMA Recycling point to the evidence that the company is operating a business from the leased premises, and it can be inferred that it will suffer considerable harm if the lease is terminated. It is also submitted that as the business is a scrap metal yard, it can be inferred that it is not a simple matter to move the business and set up a scrap metal yard on some other site, and that planning permission and compliance with environmental regulations is required. It is submitted that moving the existing business will result in a real disadvantage in the operations of the business, and a real disadvantage in competing with Mr Rowe's business. It is submitted that damages is an inadequate remedy because it would be very difficult to quantify loss. It was also pointed out that while CMA Recycling is in possession of the premises, the damage identified in the EPN and the building report is being rectified to the advantage of Doubt Free Investments.
It is also submitted that there is no evidence of loss to Doubt Free Investments from the injunction being continued because it will continue to receive rent, at a market rate and it has not proved that there is an alternative use for the site.
The points raised on behalf of Doubt Free Investments regarding the balance of convenience are as follows:
·That as the applicant's case was a hopeless one, the balance of convenience moves in favour of the defendants: Glenwood Management Group Pty Ltd v Mayo (1991) 2 VR 49 at 54.
·In view of the financial situation of CMA Recycling, the application should be dismissed unless a bond is provided to support the undertaking as to damages.
·Although CMA Recycling is operating a business from the leased premises, there is evidence that it has lost 37 per cent of its business in the last six months.
·There is no evidentiary basis for the contention that the business cannot be moved to another site and no evidence regarding issues with compliance with environmental regulations.
By the time of this decision, a bond has been provided in the sum sought on behalf of the respondent in the sum of $76,725. It remains for me to consider whether a bond is required. I am satisfied that it is required and appropriate in the circumstances. The provision of a bond adequately addresses the concerns raised about the present financial circumstances of CMA Recycling and potential developments in that regard.
The evidence from Mr Godden was to the effect that the business was not now operating at a loss and that he was not aware of a site that he could move the business to. The rent is paid up a month in advance. Having regard to the photographs of the premises and the scrap metal annexed to the building report, it is evident that relocation of the business, if there were to be a site available, would be expensive, difficult and detrimental to the business of CMA Recycling. It is reasonable to infer from the available evidence that the operations of the business that CMA Recycling conducts at the site are connected to that location. As a further consideration it is noted that the matter is set down for an early trial in late-July and that the interlocutory injunction would only apply until judgment or further order. I add that in my assessment, the applicant's case is not a hopeless one for the reasons I have given.
The balance of convenience weighs in favour of granting the interlocutory injunction to preserve the status quo.
Conclusion
CMA Recycling has shown that there is a serious question to be tried and the balance of convenience favours the grant of the application.
Outcome
For the reasons set out above I am satisfied that it is appropriate to make the following orders:
1Until further order, the Defendant yield up possession of the premises comprising the Plaintiff's scrap metal yard located at 256 Georgetown Road, Rocherlea.
2Paragraph 2 of the interlocutory application dated 18 May, 2011 is dismissed.
I will hear from counsel as to the precise terms of the order regarding the bond and also as to whether both of the undertakings CMA Recycling is prepared to give are still sought by Doubt Free Investments.
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