Coles Supermarkets Australia Pty Ltd v 461 Hampton Street Investments Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

COMMERCIAL AND RETAIL LEASES LIST

S ECI 2023 04672

COLES SUPERMARKETS AUSTRALIA PTY LTD (ABN 45 004 189 708)	Plaintiff
v
461 HAMPTON STREET INVESTMENTS PTY LTD (ACN 644 677 976) (AS TRUSTEE FOR THE 461 HAMPTON STREET INVESTMENTS TRUST)	Defendant

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JUDGE:	Waller J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 May 2024
DATE OF RULING:	7 June 2024
CASE MAY BE CITED AS:	Coles Supermarkets Australia Pty Ltd v 461 Hampton Street Investments Pty Ltd
MEDIUM NEUTRAL CITATION:	[2024] VSC 306

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INJUNCTIONS — Application for interlocutory injunction — Where plaintiff seeks to restrain lease of property to third party — Principles relevant to granting interlocutory injunctions — Whether serious question to be tried (prima facie case) — Whether balance of convenience favours granting injunction — Injunction granted — StarTrack Express Pty Ltd v TMA Australia Pty Ltd [2023] FCAFC 200 — Parwan Investments Pty Ltd (recs appointed) v Hooper [2024] VSCA 86 — Huhtamaki Australia Ltd v Botha [2004] NSWSC 386.

INJUNCTIONS —Usual undertaking as to damages — Whether undertaking ought to extend only to any loss suffered by the defendant by reason of the injunction or to loss suffered by any person — Policy underlying undertaking supports wider application — Love v Thwaites (No 4) [2014] VSCA 56.

CONTRACTS — Contract formation — Whether concluded agreement made — Binding agreement to be later supplemented by refinement or agreement on other matters — Masters v Cameron (1954) 91 CLR 353 — Fourth category of Masters v Cameron — Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Heath KC with Mr K Hickie	Lander & Rogers
For the Defendant	Mr C Northrop	Nine Dots Legal

HIS HONOUR:

A. INTRODUCTION

This proceeding involves a dispute as to whether the parties reached a binding agreement pursuant to which the plaintiff would lease premises from the defendant for the purposes of operating a Coles retail store.

The plaintiff commenced this proceeding on 9 October 2023, seeking final relief in the form of declarations to the effect that:

(a) the purported agreement commenced on 17 December 2021;

(b) the purported agreement is and was at all times binding on the plaintiff and defendant; and

(c) the purported agreement incorporates by reference the terms and conditions recorded in the Coles ‘Standard Form Agreement for Lease’ dated August 2021, alternatively that agreement incorporates by reference the terms and conditions recorded in the Coles ‘Standard Form Agreement for Lease’ dated August 2017.

Between 28 September 2023 and 1 March 2024, the parties agreed to mutual undertakings in correspondence to the effect that:

(a) the defendant would not take any steps to lease, re-let, licence or otherwise deal with the premises in any way that is inconsistent with the plaintiff’s claim to the premises until such time as its claim is determined by the Court; and

(b) the plaintiff would abide by any order a Court may make as to damages as a result of the undertakings given by the defendant.

At a mediation of the proceeding, the parties agreed to extend their respective undertakings until 9 May 2024. However, following the conclusion of the mediation, and requests made by the plaintiff to the defendant to extend the undertaking to the determination of the proceeding or further order, the defendant informed the plaintiff that it would not agree to extend the undertaking beyond 9 May 2024 and it intended to advance leasing discussions with another tenant.

By its summons filed on 6 May 2024, the plaintiff sought urgent interlocutory relief pending the hearing and determination of the proceeding, or further order, restraining the defendant (by its directors, officers, employees and agents) from:

(a) leasing the premises, or offering to lease the premises, to any party other than the plaintiff;

(b) further or alternatively, leasing, selling, transferring, or otherwise dealing with the premises in any manner that is inconsistent with the purported agreement.

At a hearing on 8 May 2024, the defendant, by its counsel, undertook that it (itself, its servants and agents) will not enter into a lease or licence of part or all of the premises until the hearing and determination of this interlocutory application (or further order).

The parties returned to Court on 27 May 2024 at which time the application was heard.

In support of its summons, the plaintiff relied upon:

(a) Plaintiff’s Outline of Submissions filed 7 May 2024 (‘Plaintiff’s Submissions’);

(b) Plaintiff’s Supplementary Outline of Submissions filed 23 May 2024 (‘Plaintiff’s Supplementary Submissions’);

(c) Affidavit of Timothy Roberts sworn 7 May 2024 (‘First Roberts Affidavit’);

(d) Affidavit of Timothy Roberts sworn 23 May 2024 (‘Second Roberts Affidavit’); and

(e) Affidavit of Grant Levy sworn 24 May 2024 (‘Levy Affidavit’).

In opposition to the plaintiff’s summons, the defendant relied upon:

(a) Defendant’s Outline of Submissions filed 16 May 2024 (‘Defendant’s Submissions’);

(b) Affidavit of Ted Vlahos affirmed 16 May 2024 (‘First Vlahos Affidavit’); and

(c) Affidavit of Ted Vlahos affirmed 24 May 2024 (‘Second Vlahos Affidavit’).

B. FACTUAL BACKGROUND

The plaintiff is a retail provider of groceries, consumables and other goods through its supermarkets business. The plaintiff is a wholly owned subsidiary of Coles Group Limited (‘Coles GL’).[1]
[1]First Roberts Affidavit, [6].

The defendant is the registered proprietor of the property situated at 427-461 Hampton Street and 82 Holyrood Street, Hampton, Victoria (‘Hampton Property’).[2] The Hampton Property has been approved for a five storey mixed use development comprising no more than 62 dwellings, a supermarket and a restaurant.[3] The defendant is in the process of developing the Hampton Property accordingly.[4]
[2]Ibid [9].
[3]Ibid [25], TR1 338–52.
[4]First Vlahos Affidavit, [6].

The defendant has been the registered proprietor of the Hampton Property since 16 February 2023. Prior to that, Hampton Beach Pty Ltd (‘Hampton Beach’) was the registered proprietor of the Hampton Property between 4 October 2016 and 16 February 2023.[5]
[5]First Roberts Affidavit, [10].

When Hampton Beach was the registered proprietor of the Hampton Property, the plaintiff and Hampton Beach negotiated and agreed upon the terms of a lease of the Hampton Property. On 12 March 2019, Hampton Beach signed a letter of offer to lease premises at the Hampton Property.[6] At the time the letter of offer was sent to Hampton Beach, a planning permit (or development approval) had not been obtained from Bayside City Council.[7]
[6]Ibid [11].
[7]Ibid [12].

The plaintiff has been seeking to lease premises at the Hampton Property since late 2018 (when Hampton Beach was the registered proprietor of the land) for a Coles retail store.[8]
[8]Ibid [17].

Between March and December 2021, the plaintiff negotiated the commercial terms of a lease of premises at the Hampton Property with the defendant or its representatives.

December 2021 Offer Letter

On 17 December 2021, the plaintiff sent the defendant a letter of offer (‘December 2021 Offer Letter’), together with a ‘Premises Plan’ and ‘Licensed Area Plan’, pursuant to which the plaintiff offered to lease the premises on the ground floor at the Hampton Property (‘Premises’) from the defendant on the terms and conditions recorded therein.[9] The December 2021 Offer Letter was signed and sent to the defendant by Mr Hayden Keir, who was at that time employed in the position of Retail Leasing Manager of the plaintiff.[10]
[9]Ibid [34]–[37]. The Premises was more specifically described in the December 2021 Offer Letter as the area hatched on the attached Development Plan Hampton Street Drawing No. A0100 comprising the building and site being described as Lot 1 on Plan LP120558, located at 427-461 Hampton Street and 82 Holyrood Street, Hampton, with an expected lettable area of 1,979 square metres: at TR1 148.
[10]Ibid [35].

The December 2021 Offer Letter was subject to two conditions expressed as follows:

This offer is subject to the Lessee securing:
I.approval by the board (or sub-committee) of Coles Group Limited (as required) (“Board Approval”); and
II.if necessary or desirable, as determined by the Lessee, the Lessee receiving written advice from the Australian Competition and Consumer Commission (“ACCC”) to the effect that the ACCC has no objection to, or does not propose to take any action in respect to, the proposed leasehold interest (“ACCC Clearance”).

The Lessee may waive any of the above conditions by written notice to the Lessor.
If the Board Approval or ACCC Clearance is not obtained on terms and conditions acceptable to the Lessee, the Lessee may terminate this agreement arising from acceptance of this offer by the Lessor.[11]

[11]Plaintiff’s Submissions, [9]; First Roberts Affidavit, [34]–[37].

Paragraph 32 of the December 2021 Offer Letter stated:

It is the intention of the parties that upon the Lessor’s acceptance of this offer the parties will be legally bound and the terms and conditions of this letter will amount to an enforceable agreement between the parties subject only to the Board Approval and ACCC Clearance.[12]

[12]First Roberts Affidavit, TR1 158.

The December 2021 Offer Letter contemplated that an agreement for lease would be entered into between the parties which would incorporate the terms in the offer letter, and otherwise be on the terms of the ‘Standard Coles Lease’ and ‘Standard Coles Agreement for Lease’.[13]
[13]Plaintiff’s Submissions, [11]; First Roberts Affidavit, TR1 156–7.

The December 2021 Offer Letter, as sent to the defendant, did not include copies of the Standard Coles Agreement for Lease or the Standard Coles Lease.[14] Versions of those documents dated August 2017 (‘2017 Standard Coles AFL’ and ‘2017 Standard Coles Lease’, respectively) had been sent to the defendant on 5 March 2021 with an earlier letter of offer.[15] The Standard Coles Agreement for Lease and the Standard Coles Lease were updated in August 2021 (‘2021 Standard Coles AFL’ and ‘2021 Standard Coles Lease’, respectively).[16]
[14]First Vlahos Affidavit, [10].
[15]First Roberts Affidavit, [21].
[16]Ibid [29].

The December 2021 Offer Letter included terms in respect of the demised premises (including the expected floor area) (paragraph 1); the identification of the lessor and lessee (paragraphs 2 and 3); the term and options (paragraphs 4 and 5); the permitted use (paragraph 6); the rent and outgoings (including contractual mechanisms to adjust the agreed rent depending upon the actual size of the premises) (paragraph 7); GST (paragraph 8); licensed areas (paragraph 9); provisions in relation to development and other approvals (paragraph 12); lessee approvals (paragraph 13); lessor works (paragraph 14); environmental warranties (paragraph 15); signage (paragraph 16); amenities (paragraph 17); key dates for key events (paragraph 18); lessee works (paragraph 19); the fitout period (paragraph 20); liquor (paragraph 21); the premises opening date (paragraph 22); the lease commencement date (paragraph 23); restrictions concerning the alteration and subdivision of the premises (paragraph 24); restrictions against assignment of the lease and subletting the premises (paragraph 25); documentation (including the execution of an agreement for lease and lease) (paragraph 26); costs (paragraph 27); and restrictions on changing ownership (paragraph 28).[17]
[17]Plaintiff’s Supplementary Submissions, [14](b); First Roberts Affidavit, TR1 148–58.

On 17 December 2021, the sole director of the defendant, Mr Lube Kutlesoski, signed the December 2021 Offer Letter and returned a signed copy to the plaintiff.[18]
[18]First Roberts Affidavit, [39], TR1 160; Defence filed 17 January 2024, [25].

ACCC clearance

In or around January 2022, Mr Joel Burstyner (Managing Legal Counsel, Projects, Coles) determined that it was not necessary nor desirable for the plaintiff to obtain ACCC Clearance for the purposes of the leasehold interest the subject of the December 2021 Offer Letter, having regard to previous analysis that had been undertaken regarding the proposed lease of the Hampton Property in late 2018 and early 2019.[19]
[19]First Roberts Affidavit, [41]–[43].

Board approval

The plaintiff’s evidence was that the relevant committee to consider the approval of capital and project expenditure (including financial commitments under the proposed lease) for the establishment of a Coles retail store at the Hampton Property (‘Hampton Project’) was the Capital Approval Committee (‘CAC’) of Coles GL.[20] The CAC’s function is to consider and assess proposed projects and the amount of capital and project expenditure required for a particular project.[21] The CAC is constituted by the Managing Director and Chief Executive Officer (‘MD & CEO’) of Coles GL, and other senior members of management.[22]
[20]Ibid [46].
[21]Ibid [47].
[22]Ibid [46].

As at January 2022, the MD & CEO of Coles GL was, among other things, authorised to approve, in relation to a property project, capital and project expenditure (including for a lease) of up to $30 million.[23]
[23]Ibid [49].

The decision to approve the capital and project expenditure required for the Hampton Project needed to be made by the person who held the required level of delegation of authority under Coles GL’s Delegation of Authority Policy (‘DOA Policy’) in the CAC forum.[24]
[24]Ibid [47]–[48].

The DOA Policy permits temporary delegations of power.[25] On or about 14 January 2022, Mr Steven Cain (the then MD & CEO of Coles GL) delegated his approval power to the Ms Leah Weckert (the then CFO of Coles GL; now the MD & CEO of Coles GL) in connection with the business of the upcoming meeting of CAC on 18 January 2022.[26]
[25]Ibid [62].
[26]Ibid [64]–[66].

On 18 January 2022, the CAC met to consider the Hampton Project. The project was discussed and approval was sought for capital and project expenditure (including lease commitments) for less than $30 million.[27] Ms Weckert (holding temporary delegated approval power of the MD & CEO) participated in the meeting, considered the proposed project expenditure, and approved the proposed project expenditure on behalf of the MD & CEO at the CAC meeting.[28]
[27]Ibid [67].
[28]Ibid [68]–[69].

It was the plaintiff’s evidence that the approval of the capital and project expenditure for the Hampton Project at the CAC meeting equated to and comprised ‘Board Approval’ within the meaning of December 2021 Offer Letter, and no further internal approval of the agreement was required.[29] The Defendant did not accept that evidence and asserted that capital and project expenditure approval by the CAC was not enough to fulfil the ‘Board Approval’ condition, and that no relevant approval was ever given.[30] This is further discussed below.
[29]Ibid [51].
[30]Defendant’s Submissions, [34](c).

On 27 January 2022, the plaintiff informed the defendant that Coles GL had approved the proposal in the December 2021 Offer Letter.[31]
[31]First Roberts Affidavit, [72].

Conduct after the December 2021 Offer Letter

On or about 20 February 2022, the plaintiff provided the defendant with:

(a) a draft agreement for lease of the Premises based upon the 2021 Standard Coles AFL; and

(b) a draft lease of the Premises based upon the 2021 Standard Coles Lease.[32]

[32]Ibid [77].

On or about 28 February 2022, the plaintiff provided to the defendant the following standard form documents:

(a) the 2021 Standard Coles AFL; and

(b) the 2021 Standard Coles Lease.[33]

[33]Despite the plaintiff stating that these forms were current as at August 2021, they are labelled November 2021. The plaintiff has not explained the discrepancy: First Roberts Affidavit, [78].

Between February 2022 and August 2023, both parties negotiated a number of changes to the terms of the December 2021 Offer Letter, the 2021 Standard Coles AFL and the 2021 Standard Coles Lease.[34] The issues negotiated included:
[34]First Roberts Affidavit, [79]; First Vlahos Affidavit, [12].

(a) the ‘key dates’ listed in Item 1 of the Schedule to the 2021 Standard Coles AFL, including dates for substantial completion, practical completion and the commencement date of the Lease;

(b) the sunset dates, being the dates after which the plaintiff could terminate the Agreement for Lease if the defendant did not achieve certain construction milestones by those dates;

(c) the commencing base rent payable by the plaintiff under the Lease;

(d) the definition of gross sales, which impacts the amount of rent to be paid by the plaintiff based on turnover;

(e) the outgoings payable by the tenant under the Lease; and

(f) whether the plaintiff was leasing the whole of the Premises or entitled to surrender a significant portion if it failed to obtain a liquor licence (and therefore was unable to operate a Liquorland store.[35]

[35]First Vlahos Affidavit, [14].

During that time, the defendant (by itself or its representative, Nash Management) engaged in design and construction works at the Premises, including:

(a) engaging Pro-Urban as the town planner to apply for development approval for the plaintiff’s signage and a liquor licence for the Premises;[36]
[36]First Roberts Affidavit, [84].

(b) engaging with the plaintiff’s design team to coordinate the design of the Premises, including, among other things, fire egress, floor finishes, mechanical services, lifts and the plaintiff’s preferred suppliers;[37]
[37]Ibid [85].

(c) consulting with the plaintiff over an environmental report and whether it was ‘satisfactory to close out the requirements of Clause 8.6(b) [of the 2021 Standard Coles AFL]’;[38]

(d) the preparation of a Control Plan, within the meaning of the 2021 Standard Coles AFL;[39] and

(e) commencement of electrical works in relation to the main switch board for the Premises.[40]

[38]Ibid [89].

[39]Ibid [93]–[94].

[40]Ibid [84]–[95].

Ultimately, final versions of the agreement for lease and lease were agreed in early August 2023.[41]
[41]Ibid [80].

On 7 August 2023, the defendant’s solicitors sent correspondence to the plaintiff’s solicitors stating that the defendant could arrange signing and exchange of the agreement for lease by counterparts, and that the defendant intended to sign electronically as contemplated by the December 2021 Offer Letter.[42]
[42]Ibid [81].

However, the defendant did not sign the agreement, and on 24 August 2023 informed the plaintiff (for the first time) that:

(a) it disputed that the December 2021 Offer Letter signed by it was intended to constitute a concluded agreement; and

(b) formal notification of approval by Coles GL and the ACCC was not provided and was not waived in writing.[43]

[43]Ibid [82], [100].

The defendant has since received interest in the Premises from other prospective tenants.[44]
[44]First Vlahos Affidavit, [24].

Caveat lodgement

On 6 May 2024, the plaintiff’s solicitors lodged a caveat with the Land Titles Office in respect of the Premises.[45] The caveat was registered on or about 21 May 2024.[46] It prevents the registration of instruments in respect of the Premises unless the plaintiff consents in writing.[47] The plaintiff’s stated purpose for the caveat is to ensure that any potential lessee of the Premises who undertook a title search of the Premises would become aware of the plaintiff’s claim of a leasehold interest in the Premises as detailed in this proceeding.[48]
[45]Levy Affidavit, [8].
[46]Ibid [11].
[47]Ibid GL1 7.
[48]Ibid [13].

C. RELEVANT PRINCIPLES
Interlocutory injunctions

The principles regarding interlocutory injunctive relief are well established and not in dispute. I recently stated those principles in Birchip Holdings Pty Ltd v Arrowsmith Rd Pty Ltd:

Whether to grant interlocutory injunctive relief is a matter of discretion. In the exercise of that discretion, the Court needs to be satisfied:
(a)first, that there is a serious question to be tried. This involves consideration as to whether the Plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the proceeding the Plaintiff will be held entitled to relief; and
(b)secondly, that the balance of convenience favours granting the injunction. This involves consideration as to whether the inconvenience or injury which the Plaintiff would likely suffer if an injunction were refused would outweigh or is outweighed by the inconvenience or injury which the relevant Defendants would likely suffer if an injunction were granted. As an additional (or integral) requirement, the Plaintiff must usually demonstrate that damages will not be an adequate remedy for the loss they will suffer if an interlocutory injunction is not granted.

In determining whether there is a serious question to be tried, the need to make out a ‘prima facie case’ does not require the Plaintiff to show that it is more probable than not that it will succeed at trial. It is sufficient that the Plaintiff shows a ‘sufficient likelihood of success’ to justify in the circumstances the preservation of the status quo pending the trial.
There is a relationship between the first and second enquiries. How strong the balance of probability needs to be depends upon the nature of the right that the Plaintiff asserts and the practical consequences likely to flow from the relief sought. The Court will be more inclined to grant an interlocutory injunction that will have serious practical effects for the Defendants where the Plaintiff has demonstrated strong prospects of success. The Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party which failed to establish its right at trial, or in failing to grant an injunction to a party who succeeded at trial.
Further, where relief at an interlocutory level would effectively entitle the Plaintiff to the final relief it seeks in the proceedings, a higher onus rests on the Plaintiff and the Plaintiff must show more than a serious issue to be tried. In such cases, the Court may embark on an assessment of the merits and strength of the Plaintiff’s case.[49]
[49][2023] VSC 681, [40]–[43] (citations omitted). See also Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ); Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618, 622–3 (Kitto, Taylor, Menzies and Owen JJ).

Contract formation

The High Court in Masters v Cameron described three types of cases where parties have negotiated terms of a contractual nature and also agree to the preparation of a formal contract to record the agreement:[50]
[50](1954) 91 CLR 353, 360 (Dixon CJ, McTiernan and Kitto JJ) (‘Masters v Cameron’).

(a) first, where the parties have reached finality and intend to be immediately bound to performance but, at the same time, intend to restate the terms in a more formal document;

(b) secondly, where the parties have reached complete agreement and intend no departure from or addition to the agreement, but have made performance conditional on execution of a more formal document; and

(c) thirdly, where the parties do not intend to make a concluded bargain unless and until they execute a formal contract.

A so-called fourth category is said to exist where the parties have agreed to be immediately bound but expect to make a further contract in substitution for the first contract, containing, by consent, additional terms.[51] In The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd, the Court of Appeal said:

This kind of case amounts to a variation upon the first of the categories set out in Masters v Cameron, the difference being that the parties contemplate agreeing upon future terms which will be added to the existing, binding, arrangement, rather than envisaging only the creation of a document to the same effect as the terms already agreed. This has been recognised as amounting to a ‘fourth category’. As with the first and second categories, a document falling within the fourth category is an immediately binding contract.[52]

[51]Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310, 317 (Knox CJ, Rich and Dixon JJ). See also Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386, [105], [116] (Sackville AJA, Hodgson and Campbell JJA agreeing) (‘Abadeen’); Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622, 628 (McLelland J); GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 365–6 (McHugh JA, Kirby P and Glass JA agreeing); Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248, [25]–[28] (Giles JA, McColl JA and Young CJ in Eq agreeing) (‘Tasman’); Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141, [103] (Osborn, Santamaria and Kaye JJA) (‘Nurisvan’).

[52]The Edge Development Group Pty Ltd v Jack Road Investments Pty Ltd [2019] VSCA 91, [22] (citations omitted) (Kaye, McLeish and Hargrave JJA) (‘Edge Development’).

While some have raised doubt concerning the so-called fourth category,[53] the categories identified in Masters v Cameron were not intended to be, nor are they, exhaustive or strict.[54] Categorisation may be a useful intellectual aid, but it is not determinative.[55] Whether parties have come to a binding agreement is a matter of their objectively ascertained intention to be bound,[56] which will always depend on the facts of the particular case.[57]
[53]See Tasman (n 51) [26] (Giles JA, McColl JA and Young CJ in Eq agreeing); Elisabeth Peden, JW Carter and GJ Tolhurst, ‘When Three Just Isn’t Enough: The Fourth Category of the “Subject to Contract” Cases’ (2004) 20(2) Journal of Contract Law 156; DW McLauchlan ‘In Defence of the Fourth Category of Preliminary Agreements: Or Are There Only Two’ (2005) 21(3) Journal of Contract Law 286.
[54]Nurisvan (n 51) [103] (Osborn, Santamaria and Kaye JJA); Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, 105–6 [25] (Gaudron, McHugh, Hayne and Callinan JJ) (‘Ermogenous’).
[55]Tasman (n 51) [26] (Giles JA, McColl JA and Young CJ in Eq agreeing).
[56]Abadeen (n 51) [113] (Sackville AJA, Hodgson and Campbell JJA agreeing); Tasman (n 51) [29] (Giles JA, McColl JA and Young CJ in Eq agreeing); Ermogenous (n 54) 105–6 [25] (Gaudron, McHugh, Hayne and Callinan JJ).
[57]Tasman (n 51) [29].

In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd,[58] Gleeson CJ explained the importance, in relation to a Masters v Cameron dispute, of understanding the commercial context of the dispute. His Honour said:

In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron ((1954) 91 CLR 353) dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and commonsense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.[59]

[58](1988) 18 NSWLR 540 (‘ABC v XIVth Commonwealth Games’).

[59]Ibid 548.

In Abadeen, Sackville AJA (Hodgson and Campbell JJA agreeing) said:

The fact that the parties to an agreement expressly contemplate that “the matter of their negotiation shall be dealt with by a formal contract” does not necessarily mean that they have not entered into a binding contract. Indeed, two of the three classes of case identified in Masters v Cameron result in a binding agreement notwithstanding that the parties contemplate that a formal contract will be executed later. Whether or not there is a fourth class of case, the parties may intend to be bound immediately by the terms they have agreed, while expecting to make a further contract in substitution for the first, containing additional terms. As was said by Giles JA in Tasman Capital Pty Ltd v Sinclair, at [29]:
Uncertainty and incompleteness in what has been agreed and the prospect of refinement and future agreement are material to whether the parties intended to make a concluded bargain, but once the intention be found the court will seek to uphold the bargain by resolving the uncertainty and fulfilling the incompleteness; although if that can not be done by accepted principles of construction and implication, the intention as found may fail.[60]

[60]Abadeen (n 51) [116], citing Tasman (n 51) [29].

Although post-contractual conduct is not admissible for the purpose of construing a contract, it is recognised that, where no formal contract exists, post-contractual conduct may be admissible on the issue of whether the parties intended a document to be a binding contract, but only in limited circumstances, such as where the conduct constitutes an admission against interest.[61]
[61]Nurisvan (n 51) [81]–[84] (Osborn, Santamaria and Kaye JJA); Molonglo Group (Aust) Pty Ltd v Cahill [2018] VSCA 147[2018] VSCA 147 [132] (Maxwell ACJ, Whelan and Kyrou JJA); Edge Development (n 52) [47] (Kaye, McLeish and Hargrave JJA);

D. SUBMISSIONS
Serious question to be tried

Both parties focused on three main issues going to whether the plaintiff had made out a prima facie case:[62]
[62]Plaintiff’s Supplementary Submissions, [4]; Defendant’s Submissions, [6].

(a) whether the defendant’s signing of December 2021 Offer Letter created an immediately binding and enforceable agreement to lease the Premises, subject to the satisfaction of the Board Approval and ACCC Clearance conditions;

(b) whether the plaintiff satisfied the Board Approval condition;[63] and

(c) whether the plaintiff’s purported representative signatory of the December 2021 Offer Letter, Mr Keir, had sufficient authority to bind the plaintiff.

[63]See above paragraph 17.

Signing of the December 2021 Offer Letter

The plaintiff submitted that the circumstances of this case fall within either the second or fourth categories of Masters v Cameron, asserting that there is a strong prima facie case that the objectively ascertainable common intention of the parties was that they agreed to be to be immediately bound by the terms contained in the December 2021 Offer Letter, once it was accepted by the defendant (subject to satisfaction of the Board Approval and ACCC Clearance conditions, which conferred a contractual right in favour of the plaintiff to terminate the agreement).[64]
[64]Plaintiff’s Supplementary Submissions, [8]–[9].

The plaintiff submitted that a close examination of the December 2021 Offer Letter itself suggests a common intention to be bound — the relatively comprehensive subject matter of the December 2021 Offer Letter, the express contemplation of the two standard form documents and the fact that Mr Kutlesoski freely and voluntarily signed the letter all suggest to an objective person reading the December 2021 Offer Letter that the parties intended to be immediately bound.[65]
[65]Ibid [14].

The plaintiff submitted that, notwithstanding the subsequent negotiations up to August 2023, all material and essential issues for an agreement for lease had been agreed at the time the December 2021 Offer Letter was signed. Those subsequent discussions, said the plaintiff, were to negotiate commercial changes or variations to the terms of the December 2021 Offer Letter and to proceed to formalise the agreement reached in the signed December 2021 Offer Letter based on the 2021 Standard Coles AFL, having regard to the mechanics and mechanisms in those documents.[66]
[66]Ibid [16].

The plaintiff submitted that, for the purposes of this application, a forensic analysis of the precise timing of the process of offer and acceptance of each discrete item for an agreement for lease is not appropriate. Rather, the Court is only required to be satisfied that the plaintiff has a prima facie case and there is a serious question to be tried that the defendant objectively intended to be immediately bound to an agreement to lease the premises to Coles SA at the time it signed the December 2021 Offer Letter, and that the agreement was sufficiently certain.[67]
[67]Plaintiff’s Supplementary Submissions, [17]–[18].

The defendant submitted that no binding agreement was made, owing in part to a lack of certainty. Rather, the defendant submitted that the December 2021 Offer Letter falls into the third Masters v Cameron category, whereby the letter was an informal document and the parties did not intend to make a concluded bargain unless and until they executed a formal contract.[68]
[68]Defendant’s Submissions, [34](d).

The defendant submitted that it was not clear at the time the plaintiff sent the December 2021 Offer Letter, nor is it clear now, whether the plaintiff wanted to incorporate the 2017 or 2021 Standard Coles AFL and/or Lease. The defendant pointed to the following issues:

(a) neither the Standard Coles AFL nor Lease were enclosed with the December 2021 Offer Letter sent to the defendant;

(b) paragraph 45(c) of the plaintiff’s Statement of Claim alleges that the December 2021 Agreement incorporated the 2017 versions or alternatively the 2021 versions, leaving it uncertain what terms the plaintiff believed to be incorporated at that time; and

(c) there are four versions of the documents in evidence.[69]

[69]Ibid [15]–[17].

The defendant submitted that many aspects of the December 2021 Offer Letter required additional matters to be agreed and incorporated into the formal agreement for lease and otherwise, pending that, remained uncertain. Those matters included the definition of ‘extended hours operating expenses’, specification of car parks, the definition of ‘the Centre’, the nature and scope of the construction of the premises, key dates, the sunset date, specification of certain documents (including the Development Plan and Carpark Control Zone Plan) and details in the schedules of the standard form Agreement for Lease and Lease.[70]
[70]Ibid [18]–[27].

Board Approval

The plaintiff submitted that it had led extensive evidence of the corporate structure and delegations of authority within the Coles Group, and the process of approving proposed capital and project expenditure for the development of a Coles retail store. As previously explained, this involved approval by the CAC of Coles GL for a certain level of capital expenditure. The plaintiff submitted that such evidence gave rise to a strong prima facie case and a serious question to be tried that the plaintiff satisfied the Board Approval condition stipulated in the December 2021 Offer Letter, which was a condition for its benefit, not the defendant’s.

The defendant submitted that the plaintiff sought to equate the CAC’s approval of expenditure to a certain level as equivalent to board approval of the offer within the meaning of the condition stipulated in the December 2021 Offer Letter. The defendant argued that was misguided, and that no evidence had been led that the board or a sub-committee of the board had ever approved the offer contained in the December 2021 Offer Letter.[71] At most, it demonstrated that the CAC had approved expenditure related to the December 2021 Offer Letter but more was needed — the board (or a sub-committee) had to approve the December 2021 Offer Letter itself, in full, and all the terms therein.[72] The defendant submitted that no evidence was led to suggest that the complete letter was put before the CAC and, further submitted that the CAC was a ‘non-board committee’.[73]
[71]Ibid [31].
[72]Transcript of Proceedings (27 May 2024) 67.19–67.26.
[73]Defendant’s Submissions, [32]; Transcript of Proceedings (27 May 2024) 68.20–68.26.

In oral submissions, counsel for the defendant further argued that, under the terms of the December 2021 Offer Letter, no agreement came into being at all unless there was Board Approval.[74] By contrast, the plaintiff’s analysis of the December 2021 Offer Letter was that the agreement came into existence once the defendant signed the letter and then, if Board Approval was not obtained on terms and conditions acceptable to the plaintiff, the plaintiff may terminate the agreement (which the plaintiff had not done).[75]
[74]Transcript of Proceedings (27 May 2024) 60.3–60.6.
[75]Plaintiff’s Supplementary Submissions, [22]; Transcript of Proceedings (27 May 2024) 30.29–31.2.

Authority of Haydon Keir

The defendant submitted that the December 2021 Offer Letter cannot be binding unless Mr Keir had authority to enter into an enforceable agreement on behalf of the plaintiff. The defendant put this as a rebuttal to the proposition that paragraph 32 of the December 2021 Offer Letter[76] might otherwise make an incomplete agreement certain.[77]
[76]See above paragraph 17.
[77]Defendant’s Submissions, [29].

The plaintiff submitted that it had adduced evidence that persons employed in the position of Retail Leasing Manager, such as Mr Keir, among other things, negotiated proposed leasing agreements on behalf of the plaintiff, and were permitted to send offers to lease premises that had been negotiated with prospective lessors based on the plaintiff’s standard form letter of offer.[78]
[78]Plaintiff’s Supplementary Submissions, [24].

The defendant acknowledged that the plaintiff had led evidence to the effect that persons employed in the position of Retail Leasing Manager regularly did certain things. However, the defendant submitted that the plaintiff had led no evidence that such persons had authority legally to bind the plaintiff to leases of the kind alleged in this proceeding. If Mr Keir did not have authority to make a contractually binding offer on behalf of the plaintiff, there was no offer capable of founding a contract.[79]
[79]Defendant’s Submissions, [30].

Balance of convenience

The plaintiff’s evidence was that the Hampton Property has unique value in establishing a Coles retail store, and that there are few, if any, present alternative opportunities to establish a comparable Coles local retail store in the area.[80]
[80]First Roberts Affidavit, [111].

The plaintiff submitted that if its application was not granted, the defendant was likely to lease the Premises to someone else, which would destroy the proprietary leasehold interest that the plaintiff negotiated and agreed with the defendant.[81]
[81]Plaintiff’s Submissions, [52].

The plaintiff submitted that damages are not an adequate remedy because:

(a) the plaintiff seeks performance of an agreement for lease of land, which is a well-recognised example of a contract where damages will generally be inadequate;[82]
[82]Citing Parwan Investments Pty Ltd (recs appointed) v Hooper [2024] VSCA 86, [57] (McLeish, Walker and Macaulay JJA) (‘Parwan’); JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies (5^th ed, 2014) [20-035] (‘Meagher, Gummow and Lehane’s Equity’).

(b) the Premises comprise a unique opportunity for the plaintiff which it cannot replicate elsewhere;

(c) damages will not adequately compensate the plaintiff for the interference with the proprietary interest in the Premises (which is for an initial term of 10 years with 8 further terms of 5 years each thereafter — ie a total of 50 years if all options are exercised); and

(d) it will be extremely difficult to quantify the loss of profits that the plaintiff would expect to earn over the initial ten year term, or the entire fifty year period (being the initial term plus options).[83]

[83]Plaintiff’s Submissions, [54].

The defendant’s evidence was that:

(a) in order to develop the Hampton Property, the defendant obtained construction finance (i.e. a construction loan) secured against the Hampton Property;

(b) the construction loan is to be repaid or refinanced by no later than 15 January 2025;

(c) the defendant intends to refinance the existing construction loan on terms that permit the construction loan to be repaid and allow the defendant to retain ownership of the Premises and derive rental income from it;

(d) the defendant intends to seek the refinance from a major bank because the establishment fee and the interest rate will be significantly cheaper than obtaining the refinance from a non-bank or financial institution;

(e) if the plaintiff’s application is granted, a major bank will not agree to provide funding to refinance the construction loan and there are serious doubts about whether a non-bank or financial institution would do so;

(f) as part of refinancing the construction loan, the defendant intends to unlock the built-up equity in the Hampton Property by borrowing funds secured against the Premises, to enable the defendant to pay costs owed to third parties in connection with development of the Hampton Property and undertake new projects. If the plaintiff’s application is granted, such repayment of monies owed, and new project opportunities, cannot be explored;[84]

(g) the defendant has received interest in the Premises from other prospective tenants, but that interest is time-sensitive;[85]

(h) the defendant intends to seek to register a plan of subdivision once practical completion of the development of the Hampton Property is achieved. The caveat in respect of the Premises will prevent the registration of the plan of subdivision without the plaintiff’s consent, interfere with the defendant’s plans to refinance its existing construction loan, and prevent registration of a new mortgage without the plaintiff’s consent.[86]

[84]Defendant’s Submissions, [21]–[23].

[85]Ibid [24]–[25].

[86]Second Vlahos Affidavit, [9].

The plaintiff submitted that, in this case, the Court was required to balance the interests of the plaintiff, and the risk that it will lose its right and interest in the Premises in the event the injunction is not granted, against the interest of the defendant in being prevented from leasing the Premises to a third party which it contends will assist it to refinance a construction loan.

The plaintiff submitted that it has at all times been ready, willing and able to lease the Premises from the defendant, and that the defendant had created its own problem with refinancing the construction loan by refusing to proceed with its agreement to lease the Premises to the plaintiff. Furthermore, the plaintiff submitted that its undertaking as to damages in support of its application reduced the risk of injustice to the defendant.[87]
[87]Plaintiff’s Supplementary Submissions, [30].

The defendant submitted that the balance of convenience weighed in its favour. If an injunction was granted it would significantly interfere not only with the current project but with potential new projects as well. By comparison, the potential adverse consequences to the plaintiff were simply its inability to use these particular premises as a supermarket. There was no suggestion it would be unable to carry on business or that the refusal of an injunction would have more far-reaching consequences.[88]
[88]Defendant’s Submissions, [35]–[36].

E. CONSIDERATION
Serious question to be tried

I am satisfied that the plaintiff has established that there is a serious question to be tried as to:

(a) whether the defendant’s signing of the December 2021 Offer Letter created an immediately binding and enforceable agreement to lease the Premises, subject to the satisfaction of the Board Approval and ACCC Clearance conditions;

(b) whether the plaintiff had satisfied the Board Approval condition; and

(c) whether the plaintiff’s purported representative signatory of the December 2021 Offer Letter, Mr Keir, had sufficient authority to bind the plaintiff.

In respect of the first of the three issues, I place particular weight on paragraph 32 of the December 2021 Offer Letter which expressly stated that upon the defendant’s acceptance of the offer, the parties intended that they would be legally bound and that the terms and conditions of the offer letter would amount to an enforceable agreement between the parties subject only to the Board Approval and ACCC Clearance.

I am also satisfied that the December 2021 Offer Letter contained the necessary essential terms to constitute an enforceable agreement. For the purposes of this application I am satisfied that references in the December 2021 Offer Letter to the Standard Coles Agreement for Lease and the Standard Coles Lease are to versions of those documents that were current at that time.

As the December 2021 Offer Letter envisaged that a further agreement for lease and lease containing additional terms would be entered into, there is a prima facie case that it falls within the fourth category of Masters v Cameron type cases.

For the purposes of this application I do not need to determine whether an enforceable agreement arose immediately upon the defendant accepting the offer by signing it or only once the Board Approval and ACCC Clearance conditions had been satisfied.

Nonetheless, at this stage, I prefer the former construction.

It is consistent with the language on the first page of the December 2021 Offer Letter which states:

If the Board Approval or ACCC Clearance is not obtained on terms and conditions acceptable to the Lessee, the Lessee may terminate this agreement arising from acceptance of this offer by the Lessor.

That language strongly suggests that the agreement arises immediately upon acceptance of the offer by the defendant. Similar wording appears in paragraphs 15 and 18 of the December 2021 Offer Letter.

That binding and enforceable agreement (as described in paragraph 32 of the December 2021 Offer Letter) may nonetheless be terminated at the plaintiff’s option if Board Approval or ACCC Clearance are not obtained on terms and conditions acceptable to the plaintiff.

The post-signature conduct of the parties does not alter my conclusion that there is a serious question to be tried in respect of this issue. Nothing in the plaintiff’s conduct during the period following execution of the December 2021 Offer Letter constitutes an admission that it did not regard the December 2021 Offer Letter as a binding and enforceable agreement.

In respect of the second of the three issues, I am satisfied that there is a serious question to be tried that the plaintiff satisfied the Board Approval condition.

The evidence of the plaintiff was that the CAC was the relevant committee of Coles GL at which the proposed lease of the Premises by the plaintiff was considered.

The minutes of the CAC meeting on 18 January 2022 clearly set out the essential details of the proposed lease of the Premises by the plaintiff and the fact that approval was obtained for the expenditure associated with the proposed lease.[89]
[89]First Roberts Affidavit, TR1 607–10.

As at January 2022, the MD & CEO of Coles GL held delegated authority of the Board of Coles GL to authorise and approve the expenditure associated with the proposed lease.

On 14 January 2022 the MD & CEO of Coles GL delegated his approval power to the CFO of Coles GL, Ms Leah Weckert.

Ms Weckert participated in the CAC meeting on 18 January 2022 which discussed and approved the expenditure associated with the proposed lease. Ms Weckert signed the minutes of that CAC meeting.[90]
[90]Ibid TR1 607.

The plaintiff’s evidence was that approval of the expenditure associated with the proposed lease at that CAC meeting constituted the Board Approval referred to in the December 2021 Offer Letter. While the defendant rejected that evidence, it did not ultimately present any compelling evidence to the contrary.

I am satisfied that this evidence establishes a prima facie case that the plaintiff satisfied the Board Approval condition stipulated in the December 2021 Offer Letter.

In respect of the third of the three issues, I am also satisfied that there is a serious question to be tried that Mr Keir had sufficient authority to bind the plaintiff when he signed the December 2021 Offer Letter.

The issue of Mr Kier’s authority was first raised by the defendant in its defence filed on 17 January 2024.[91] Although no reply has yet been filed, the plaintiff’s evidence on this application was that persons employed in the position of Retail Leasing Manager, such as Mr Keir, negotiated proposed leasing arrangements on behalf of the defendant and were authorised to send offers to lease premises that had been negotiated with proposed lessors based on the defendant’s standard form letter of offer.[92]
[91]Defence filed 17 January 2024, [23B].
[92]First Roberts Affidavit, [36].

It is somewhat unusual that the defendant is raising Mr Kier’s alleged lack of authority in order to avoid the consequences of signing the December 2021 Offer Letter. This is not a situation where a company itself is seeking to argue that the person who purported to sign on its behalf lacked the authority to do so. If Mr Kier in fact lacked the necessary authority then the plaintiff and Coles GL, by their subsequent actions, appear to have ratified his conduct.

Balance of convenience

In addressing the balance of convenience I take into account that I consider the plaintiff has established a strong prima facie case in respect of the three issues referred to in paragraph 68 above.

Having considered the evidence and the parties’ submissions I am satisfied that the balance of convenience weighs in favour of granting injunctive relief. Put another way, I consider that the inconvenience or injury which the plaintiff would likely suffer if an injunction were refused outweighs the inconvenience or injury which the defendant would likely suffer if an injunction were granted. As part of that balancing exercise I also accept that damages would not be an adequate remedy for the loss that the plaintiff will suffer if an interlocutory injunction is not granted.

The plaintiff’s evidence establishes that the Premises will provide the plaintiff with a unique opportunity to establish a Coles retail store in a particular geographical area which it cannot replicate elsewhere. The considerable amount of time invested by the plaintiff in identifying the Premises and in negotiating the terms of the agreement for lease demonstrates the value which the plaintiff places on this particular commercial opportunity.

If the Premises are leased to someone else, it will be very difficult for the plaintiff to quantify the lost profits that it would have earned over the term of the lease, including any term extended through the exercise of options to renew. Where it is difficult to calculate the quantum of any damages arising from the loss of a business, a remedy of damages will be regarded as inadequate and injunctive relief appropriate.[93] Damages are generally not an adequate remedy for failure by a vendor to complete a contract for the sale of land or a lessor to complete an agreement to lease land.[94]
[93]Huhtamaki Australia Ltd v Botha [2004] NSWSC 386, [17] (Hamilton J).
[94]Parwan (n 82) [57] (McLeish, Walker and Macaulay JJA); Meagher, Gummow and Lehane’s Equity (n 82) [20-035].

The inconvenience or injury which the defendant says it will suffer if an injunction is granted relates to its need to repay or refinance a construction loan secured against the Hampton Property.

The predicament facing the defendant is a consequence of it not executing the agreement for lease despite negotiating its terms for 18 months after it signed the December 2021 Offer Letter. To this extent the defendant may fairly be described as being the author of its own misfortune. The defendant has not explained why it decided not to execute the negotiated agreement for lease after stating, through its solicitor on 7 August 2023, that it intended to do so. Having signed the December 2021 Offer Letter and being aware of its terms (including in particular paragraph 32), the risk of the plaintiff seeking interlocutory injunctive relief to restrain the defendant from leasing the Premises to a third party ought to have been obvious to the defendant.[95]
[95]StarTrack Express Pty Ltd v TMA Australia Pty Ltd [2023] FCAFC 200, [80]–[81] (O’Callaghan, Stewart and Button JJ) (‘StarTrack’).

To the extent that the caveat lodged by the plaintiff may prevent the registration of the plan of subdivision and thereby interfere with the defendant’s plans to refinance its existing construction loan and prevent registration of a new mortgagee, Senior Counsel for the plaintiff stated that the plaintiff will act sensibly in response to any request to remove the caveat so as to enable the registration of the plan of subdivision or the registration of a new mortgagee.[96]
[96]Transcript of Proceedings (27 May 2024) 53.15–54.9.

No application has been made to remove the caveat. As I am satisfied that there is a serious question to be tried that the defendant’s execution of the December 2021 Offer Letter created an immediately binding and enforceable agreement to lease the Premises and that the balance of convenience favours the grant of an injunction, I would not order that the caveat be removed, even if such an application were made.

Accordingly, upon the plaintiff giving the usual undertaking as to damages I will grant an interlocutory injunction in the terms sought by the plaintiff.

The usual undertaking as to damages

So far as the usual undertaking as to damages is concerned, a question arose in the course of the hearing as to whether such an undertaking ought be expressed as extending only to any loss suffered by the defendant by reason of the injunction or to loss suffered by any person. The position in Victoria as to whether ‘the usual undertaking as to damages’ extends to persons other than the defendant has been described as ‘obscure’.[97] Unlike in New South Wales, where r 25.8 of the Uniform Civil Procedure Rules 2005 (NSW) defines the usual undertaking as to damages to include persons who are not parties to the suit,[98] Order 38 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), which concerns injunctions, includes no definition of the term.[99]
[97]Meagher, Gummow and Lehane’s Equity (n 82) [21-410].
[98]Rule 25.8 provides: ‘The “usual undertaking as to damages”, if given to the court in connection with any interlocutory order or undertaking, is an undertaking to the court to submit to such order (if any) as the court may consider to be just for the payment of compensation (to be assessed by the court or as it may direct) to any person (whether or not a party) affected by the operation of the interlocutory order or undertaking or of any interlocutory continuation (with or without variation) of the interlocutory order of undertaking.’ This has been the position in New South Wales since 1984: see Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1989) 89 ALR 366, 370–1 (Gummow J) (‘Smith Kline’).
[99]The phrase ‘usual undertaking as to damages’ appears in the Supreme Court (General Civil Procedure) Rules 2015 (Vic) only in r 37B.03(3) in respect of requirements for the grant of a search order.

A review of Supreme Court of Victoria practice notes demonstrates an intention that the undertaking can and should extend to persons other than the defendant. Practice Note No 4 of 2004 provides that the giving of ‘the usual undertaking as to damages’ means an undertaking:

to abide by any order which this Court might make as to damages, in case this Court shall be of opinion that the defendant [or as the case may be] shall have sustained any, by reason of this order, which the plaintiff [or as the case may be] ought to pay.[100]

[100](2004) 8 VR 480, [3.11(g)].

From at least November 2011 to February 2024, the relevant practice notes defined ‘the usual undertaking as to damages’ in these (or materially the same) words:

… to abide by any order the Court may make as to damages, in case the Court shall hereafter be of the opinion that any person shall have sustained any loss, by reason of this order, which the party giving the undertaking ought to pay.[101]

[101]Commercial Court Practice Note 10 of 2011, [9.25]; Practice Note SC CC 1, [11.20] (First Revision 30 January 2017); Practice Note SC CC 1, [11.20] (reissued 21 December 2017) (emphasis added).

On 26 February 2024, a substantial revision of Practice Note SC CC 1 came into effect which makes no reference to ‘the usual undertaking’.

However, practice notes do not have the force of law, and ‘ought not to be elevated to a status that they do not have’.[102] The practice notes referred to in paragraph 100 above, applicable between November 2011 and February 2024, contain references, ‘in relation to the form of the usual undertaking as to damages’, to paragraph [38.01.320] of Civil Procedure Victoria and to the decision of Love v Thwaites (No 4).[103]
[102]LexisNexis Australia, Civil Procedure Victoria (online at 4 June 2024) [1555] (‘Civil Procedure Victoria’); Baulderstone Hornibrook Pty Ltd v HBO & DC Pty Ltd [2001] NSWSC 821.
[103][2014] VSCA 56.

The relevant paragraph of Civil Procedure Victoria records that the giving of ‘the usual undertaking as to damages’ means an undertaking in the following terms:

… to abide by any order the court may make as to damages in case the court shall hereafter be of opinion that the defendant shall have sustained any, by reason of this order, which the plaintiff ought to pay.[104]

[104]Civil Procedure Victoria (n 102) [83.01.320] (emphasis added), citing Nicholson v Roff (1884) 6 ALT 97; Cooper v Smyth (1883) 4 LR (NSW) Eq 39; Parker v Mallon (1907) 24 WN (NSW) 206; Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 627; Australian Marketing Development Pty Ltd v Australian Interstate Marketing Pty Ltd [1972] VR 219 at 229; Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249, 251; Ansett Transport Industries (Operations) Pty Ltd v Halton (1979) 25 ALR 639 at 642; Smith Kline (n 98) 370; Hession v Rowson (VSC, Batt J, No 7357/95, 21 September 1995, unreported).

Similarly, in 2014 in Love v Thwaites (No 4), the Court of Appeal noted ‘the usual undertaking’ was an undertaking in the above terms, that is, directed to loss suffered by the defendant.[105]
[105][2014] VSCA 56, [1] (Warren CJ and Beach JA), [55] (Tate JA).

Thus, the position in Victoria is somewhat curious in that, for a substantial period of time, the practice envisaged by the practice notes has been that ‘the usual undertaking’ should extend to ‘any person’, yet during that time, the Court of Appeal (including Warren CJ who approved the relevant practice notes) described an undertaking in terms limited to the defendant as constituting ‘the usual undertaking’. It should be noted, however, that while Love v Thwaites (No 4) was decided in 2014, the relevant undertaking in that case was given in 2003.[106] It could be that their Honours’ comments in respect of the form of ‘the usual undertaking’ should be construed as meaning ‘the usual undertaking at the time it was given’. I note, however, that Tate JA adopted the present tense in her Honour’s reasons, stating ‘the usual undertaking is …’.[107]
[106]Ibid [1].
[107]Ibid [55] (emphasis added).

In two decisions of Ierodiaconou AsJ delivered in 2020, ‘the usual undertaking’ provided by the plaintiff was defined by reference to Practice Note SC CC 1, and expressly extended to ‘any person’.[108] In one of those decisions, Ierodiaconou AsJ cited the Court of Appeal decision in Love v Thwaites (No 4), suggesting her Honour did not see that decision as an impediment to adopting the extended definition of ‘the usual undertaking’.[109]
[108]See Australian Cardiology Services Pty Ltd v Rudd [2020] VSC 645, [80]; Tucker v State of Victoria (Undertaking as to Damages) [2020] VSC 121, [37].
[109]Tucker v State of Victoria (Undertaking as to Damages) [2020] VSC 121, [18], overturned on appeal in Tucker v Victoria [2021] VSCA 120, but on other grounds. The Court of Appeal (Kyrou, McLeish and Sifris JJA) took no issue with the form of the undertaking, noting ‘[T]he purpose of enforcing an undertaking as to damages is to compensate the party who has suffered loss by reason of the interlocutory order of the Court (or here, the giving of an undertaking in place of such an order)…’ at [442].

By contrast, in the Federal Court jurisdiction[110] there appears to be a longstanding and consistent adoption of the meaning of ‘the usual undertaking as to damages’, as that term has been variously defined in relevant practice notes, as extending to ‘any party [to the proceeding]’[111] and ‘any person, (whether or not that person is a party)’.[112]
[110]Where the Federal Court Rules 2011 (Cth) are silent as to the meaning of the ‘usual undertaking’.
[111]See, eg, Smith Kline (n 98) 370–1 (Gummow J), considering Practice Note No 3 of the Federal Court of Australia issued 15 February 1978.
[112]See, eg, most recently, StarTrack (n 95), where it was recorded under ‘Order’ that the appellant gave the usual undertaking as to damages in the form set out in the Usual Undertaking as to Damages Practice Note (GPN-UNDR) (25 October 2016).

Policy behind the undertaking

In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd,[113] Gibbs J identified the purpose of an undertaking as to damages:

The object of requiring a plaintiff who seeks an interlocutory injunction to enter into an undertaking of this kind is to attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it. The insistence upon the giving of an undertaking is a very important, if not an essential, means of preventing injustice from being done by the court when it makes an order at an interlocutory stage, before the rights of the parties have been finally determined. The court has a discretion not to enforce such an undertaking but … it would seem just, speaking generally, that a plaintiff who has failed on the merits should recompense the defendant for the damage that he has suffered as the result of the making of the interlocutory order.[114]

[113](1981) 146 CLR 249 (‘Air Express’).

[114]Ibid 311–12.

In National Australia Bank Ltd v Bond Brewing Holdings Ltd (No 2),[115] Brooking J described the notion of ‘the usual undertaking as to damages’, emphasising its equitable origin:

When a court of equity is asked to grant an interim or interlocutory injunction it will consider whether it should take steps, as it ordinarily will, to protect the party enjoined against the danger of injury resulting from the injunction. It has been doing this for the past 200 years.
…
It is because damage flowing from the act of the court is not — unless one of the recognised causes of actions exists — compensable in damages that equity requires its undertaking or bond or other appropriate safeguard. Time and time again we are told that this is equity’s way of avoiding injustice. It is never said that equity insists on an undertaking or bond merely in order to prevent arguments and provide a summary remedy. Implicit in the judgments is the idea that without the undertaking there will be no remedy, so that injustice will result …
Equity has its own means — an anticipatory one — of avoiding injustice, by refusing to grant an injunction or appoint a receiver by interim or interlocutory order except on terms.[116]

[115][1991] 1 VR 386.

[116]Ibid 599–602 (citations omitted).

Similarly, in European Bank Ltd v Evans,[117] the High Court noted that the requirement of the undertaking had been explained as a ‘response to the anxiety entertained by the court that otherwise its interlocutory order might lead to damage for which there could be no redress except by an order for costs’.[118] The Court continued:

A party seeking an equitable remedy is required to “do equity” and this is the origin of the requirement that the party giving an undertaking as to damages submit to such order for payment and compensation as the court may consider to be just …[119]

[117](2010) 240 CLR 432.

[118]Ibid [15] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ), citing Russell v Farley (1881) 105 US 433, 438.

[119]Ibid [15], [17] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ).

In at least two other Australian jurisdictions — New South Wales and the Federal Court — this stated policy has not been considered inconsistent with extending the undertaking to persons other than the defendant.[120] Rather, the extension of the undertaking serves only to reflect the reality that persons other than the defendant may suffer harm or damage as a result of the making of the interlocutory order, for which damage a court of equity may consider it is just for the applicant to provide compensation.[121]
[120]See, eg, in the Federal Court: Smith Kline (n 98) 369-371 (Gummow J); Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556, [119]–[122], [130] (Jagot J). See, eg, in New South Wales: Lan v Kaymet Corp Pty Ltd [2017] NSWCA 52, [33]–[35] (Sackville AJA, McColl and Leeming JJA agreeing); Evans & Associates v European Bank Ltd (2009) 255 ALR 171, [31]–[37] (Campbell JA).
[121]See Evans & Associates v European Bank Ltd (2009) 255 ALR 171, [31]–[37] (Campbell JA). See also Meagher, Gummow and Lehane’s Equity (n 82) [21-410] where the authors state ‘The undertaking may also extend to third parties unconnected with the dispute, to permit them to recover expense incurred by reason of the order’, citing at fn 671: Searose Ltd v Seatrain(UK) Ltd [1981] 1 All ER 806; Z Ltd v A-Z and AA-LL [1982] QB 558, 577, 588; Smithkline Beecham Plc v Apotex Europe Ltd [2007] Ch 71; [2006] 4 All ER 1078, [28].

For example, in Smith Kline, Gummow J identified the limitations of the ‘usual undertaking’, as then adopted in Victoria:

However, this form of undertaking left unclear the position of a defendant who was not enjoined, but who nevertheless sustained damage by reason of the injunction against one or more of the fellow defendants. It also did not deal with the situation where there were cross-applications for injunctive relief, and it was the application by the defendant as cross-claimant which was successful, so that it was he who was required to give the undertaking. Hence, the attraction of drafting a usual undertaking as to damages in terms of payment to “any party adversely affected by the interlocutory injunction” as is the position with the present Practice Note in this court.[122]

[122]Smith Kline (n 98) 370.

Holding that in the case before him, the term ‘any party’ in the practice note and the given undertaking meant ‘any party to proceeding’, rather than ‘any person’ as was expressly provided for in the relevant New South Wales Supreme Court rule at the time,[123] his Honour continued:

I should add that nothing that has been said here is intended to qualify the power of the court in an appropriate case to require an undertaking as to damages, the beneficiaries of which are not only parties to the proceedings but also other persons whose interests are or may be adversely affected by the grant of interlocutory relief. With the expansion in modern times in the scope of interlocutory injunctive orders, no doubt the number of cases in which such an expanded form of undertaking is appropriate also will increase: see generally Jackson v Sterling Industries Ltd (1987) 162 CLR 612.[124]

[123]Ibid 369; New South Wales Supreme Court Rules 1970 (NSW) Pt 28 r 7(2).

[124]Ibid 371.

The previous Supreme Court of Victoria practice notes from 2011 to 2024 adopted the wording ‘any person’ — plain words that would bring a non-party, third person within the operation of the usual undertaking.[125] Defining ‘the usual undertaking’ in this way suggests an acceptance of the view that the policy behind the undertaking does not prevent its extension to persons other than the defendant.
[125]See Smith Kline (n 98) 371 (Gummow J).

In Evans & Associates v European Bank Ltd,[126] Campbell JA of the New South Wales Court of Appeal, in considering when and why undertakings as to damages were given,[127] focused on the inability of the court, at the time of granting an interlocutory injunction, to predict with any accuracy ‘the way events unfold [which] might affect not only parties to the litigation, but also other third parties’.[128] While the exercise of deciding where the balance of conveniences lies involved some prediction of the effect of granting the injunction, it ‘remains the case that when an interlocutory injunction is granted, the court knows that it cannot predict all the consequences of the injunction being granted’.[129] His Honour explained:

… In all cases where an undertaking as to damages is given, however, there is a situation where: (a) a plaintiff claims some underlying right in litigation; (b) the court makes an interlocutory order or accepts an interlocutory undertaking that seeks to protect that underlying right during the period before the court decides whether the plaintiff actually has the underlying right; (c) making the interlocutory order or accepting the interlocutory undertaking has the potential to damage the rights of people affected by it, in circumstances where the court frequently does not know with any precision who will be affected by the order or undertaking given, or in what ways they will be affected.
…
The undertaking as to damages is an attempt to lessen the extent to which the making of an interlocutory order or accepting of an interlocutory undertaking might be productive of harm, if it eventuates that the plaintiff does not have the underlying right that the plaintiff claims in that litigation.[130]

[126](2009) 255 ALR 171, overturned in European Bank Ltd v Evans (2010) 240 CLR 432, but on grounds related to the measure of compensation and whether the loss could have been foreseen.

[127]Ibid 178–81 [27]–[35].

[128]Ibid 179 [31].

[129]Ibid 179 [32].

[130]Ibid 179–80 [33], 180–1 [35].

His Honour continued under the heading ‘Construction of the undertaking’:

The terms of the undertaking as to damages under Pt 28 r 4 of the Supreme Court Rules recognise that not only any parties to the litigation who are restrained, but also parties to the litigation who are not themselves restrained, and even people who are not the parties to the litigation, might be harmed by the granting of an interlocutory order that sought to protect a right that a plaintiff claimed, but that the plaintiff failed to make good at a trial … Hence the undertaking is to make a payment to “any person, whether or not a party, affected by the operation of the interlocutory order or undertaking”. The class of potential payees under such an undertaking is thus very wide — it is anyone in the world, provided only that they have been affected by the operation of the interlocutory order or undertaking.
But the terms of the undertaking leave it to the court to decide whether any payment at all should be made under the undertaking, and if so precisely to which of the potential payees any payment should be made, and what the amount is of any such payment. The only limits that arise expressly from the language of the undertaking on the court’s decision in those respects are that the order that the court makes is one that the court considers “just”, and that the payment is to be a payment of “compensation”... However, the court is subject to some bounds of principle in making a decision whether and if so how to enforce the undertaking as to damages. The fact that the power to decide whether, to whom, and in what amount any payment should be made is conferred on a court, and the express requirement that the order made be one that the court “considers to be just” requires the power to be exercised in a judicial manner, and in accordance with the purpose for which the power is conferred, and in accordance with the guidance provided by previous decisions about what is just compensation in particular cases.[131]

[131]Ibid 181 [36]–[37].

Having regard to the policy underlying the requirement that a plaintiff give an undertaking as to damages and the express terms of the practice notes in place between at least November 2011 and February 2024, I consider it appropriate that the plaintiff should, as a condition of the Court granting an interlocutory injunction, give an undertaking to abide by any order the Court may make as to damages, in case the Court shall hereafter be of the opinion that the defendant or any person shall have sustained any loss, by reason of this order, which the plaintiff ought to pay.

F. ORDERS

Upon the plaintiff giving an undertaking in the terms set out in paragraph 117 above, I will order that, until the hearing and determination of the proceeding, or further order, the defendant (by its directors, officers, employees and agents) be restrained from:

(a) leasing the Premises, or offering to lease the Premises, to any party other than the plaintiff;

(b) further or alternatively, leasing, selling, transferring, or otherwise dealing with the Premises in any manner that is inconsistent with the terms of the December 2021 Offer Letter.

Subject to hearing from the parties I am inclined to order that the parties’ costs of the plaintiff’s summons be costs in the proceeding which is the usual order made where an interlocutory injunction is granted.

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[2024] VSC 306

7 June 2024