Harlan Personalised Transport Services Pty Ltd v Asian; Pacific Property Investment Pty Ltd and Ors
[2009] VCC 92
•24 February 2009
| IN THE COUNTY COURT OF VICTORIA | (Un) Revised |
(Not) Restricted
AT MELBOURNE
CIVIL DIVISION
Case No. CI-07-02419
| HARLAN PERSONALISED TRANSPORT | Plaintiff |
| SERVICES PTY LTD | |
| v | |
| ASIAN PACIFIC PROPERTY INVESTMENT | Defendants |
| PTY LTD & ORS |
---
| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 23 & 24 February 2009 |
| DATE OF JUDGMENT: | 24 February 2009 |
| CASE MAY BE CITED AS: | Harlan Personalised Transport Services Pty Ltd v Asian Pacific Property Investment Pty Ltd & Ors |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 0092 |
REASONS FOR JUDGMENT
---
Catchwords: Contract of employment – fiduciary obligations by employees – conduct inducing breach of contract – operator of accommodation facility substantially in arrears of rental – lease validly terminated and new lease granted to former employees of the facility operator.
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms S Keating | Michael T Helman |
| For the Defendants | Mr P L Ehrlich (for first | Daniel Faigen (Corporate |
| defendant) | Counsel) | |
| Mr M D Dean (for second | Balbata & Associates | |
| defendant) |
DRAFT
HIS HONOUR:
1 The Melbourne Lodge in Bell Street, Preston, is a 50 bed facility offering crisis accommodation for homeless persons. The accommodation is a property owned by the first defendant. The plaintiff leased the property in October 2005. The term of the lease was three years with an option of a further three years. Initially, the plaintiff’s intention was to provide accommodation for students. This was a use ancillary to the primary business of the plaintiff which was in the passenger transportation field for which it employed a fleet of buses.
2 From about December 2005 the plaintiff employed the second defendant, Mr F…………….as the manager of the Melbourne Lodge and the focus switched to the provision of crisis accommodation.
3 The third defendant, Ms An………………., later worked at the Melbourne Lodge. The residents at the facility were usually the clients of government or private welfare agencies who accepted responsibility for the cost of the accommodation.
4 Although the Melbourne Lodge was well-patronised, payments often were delayed. The plaintiff was unable to meet the rental payments to the first defendant on time. The first defendant reduced the rent to assist the plaintiff.
The arrears continued and on 17 May 2007 the first defendant terminated the lease. Although there had previously been some dispute as to the arrears owing at that time, at trial it was established that the amount was $45,974. There was no dispute that in the circumstances the lease was validly terminated by the first defendant.
5 After the lease was terminated the premises were let on 17 May 2007 to the fourth defendant, a company apparently incorporated by the second and third
DRAFT
defendants to take over the lease and to ensure the continuity of
accommodation for the residents of the Melbourne Lodge.
6 The plaintiff’s claim arises from the circumstances leading up to the termination of the lease and the granting of a new lease to the fourth defendant.
7 The plaintiff alleges that there was a breach of the fiduciary obligations owed by the second and third defendants as employees of the plaintiff, that the first defendant had induced the breach of contract and the fourth defendant had
obtained the benefit of it. In the circumstances the plaintiff claims substantial damages from each of the defendants calculated on the basis that the plaintiff would have continued to operate the business at the premises for the balance of the term of the lease and for the option period and would have achieved a
substantial occupancy rate.
8 The evidence relied upon by the plaintiff to establish the alleged breaches was primarily the evidence of Mr Harrison Jorre, the managing director of the plaintiff, and certain email communications as follows:
(a)
on 5 December 2006, Mr Troy Cuthbertson, the general manager of a related business of the first defendant, wrote to Mr Jorre congratulating him upon the first anniversary of what was described as “the great facility and service that you provide to women in the local area that are in need”. The email continued:
“Having said all that we would like to highlight the fact that
come the 10th of December the outstanding money owed
will reach four months. Attached is a copy of the last
invoice issued. As discussed we will be expecting
outstanding payment by the 15th December.”;
(b)
on 27 March 2007, Mr Cuthbertson wrote to Mr Jorre advising that the “current outstanding debt” was $34,974.49 and continued:
DRAFT
“You will also notice that I have extended the discounted monthly amount of $8,937.51 to assist you further for the next six months. ………..to be the payment of $14,766.59 on the 15th of any month from 1st April 2007 – 15th
September 2007 will leave Rydges on Bell, Preston no alternative other than to exercise paragraph 8.1 of the contract – ‘default of payment by tenant’ and give 30 days
notice of termination of lease contract.”;
(c) on 17 April 2007, Mr Cuthbertson wrote to Mr Jorre as follows: “Please find attached notice to vacate premises and
termination of lease. It is unfortunate from our end to
have to do this because of the facility in service that is
made available to people in need. However, your
unwillingness to abide by the lease agreement leaves us
with no option other than terminate. A hard copy of the
letter will also be sent to your offence. A final balance
including the monthly lease for the final 30 days is
included for final payment. Failure to settle in full by the
17th May will result in legal action.”;
(d) On 17 April 2007, Mr Jorre responded to Mr Cuthbertson as follows: “I acknowledge receipt of your email and have noted its
contents. I understand Mr John F……………, who is one
of my employees, that you have invited him for a meeting
at 2pm on the 18th of April 2007. I will be sending my
representative to accompany John F…………….to attend
that meeting with you. Unfortunately I have not been
informed of the matters to be discussed at that meeting.”
9 Mr Jorre gave evidence of the following matters:
(a)
after 27 March 2007, he had tried to telephone Mr Cuthbertson on a number of occasions but there was no response;
(b)
Mr F……………informed him just before the letter of 17 April 2007 that Joy Cuthbertson had told him that the plaintiff was in arrears of rental and the first defendant did not want the plaintiff at the premises. Mr F…………..said that he and Mr Jorre should talk because he had been made an offer by the first defendant to take over and run the place or to
DRAFT
take over the lease. Mr Jorre said he told Mr F………….to “relax” and
“take it easy”;
(c)
after the email from Mr Cuthbertson on 17 April 2007, Mr Jorre said Mr F………….told him that there would be a meeting but Mr Cuthbertson did not want Mr Jorre there. Mr Jorre said he sent a friend to represent him at the meeting;
(d)
the meeting took place on 18 April 2007. After the meeting Mr F…………and Mr Jorre’s representative met with Mr Jorre and Ms A……………at the Melbourne Lodge. Mr Jorre said he could not recall what was said and specifically could not recall if he was told that if the plaintiff did not pay the outstanding rent the first defendant would get a new tenant;
(e)
on 17 May 2007, Mr F……………came to Mr Jorre’s home. He told Mr Jorre that he was going to continue the business that Mr Jorre had started. Mr Jorre responded that he would “fucking sue you for taking my business”;
(f)
after that date Mr Jorre said that he did not continue to employ Mr F……………or Ms A…………….;
(g)
on 19 May 2007, Mr F…………..sent an email to Mr Jorre in the following terms:
“Sadly this is the final financial statement for Melbourne
Lodge. As you know both Fi and I signed a lease with
Rydges at 12 noon last Thursday so that we could
continue what you initiated. We could not just stand by
and do nothing and then be forced into vacating the
building at 12 noon at that day as you directed to do some
weeks ago because of rental arrears. As from midday on
17 May 2007 therefore we begin officially trading as ‘The
Lodge on Bell’. We commend you Harrison for your
initiative in establishing Melbourne Lodge. It took courage
to do what you did. We’d like to take this opportunity to
DRAFT
say ‘thanks’ to you and Graeme for all your support over
the past 17 months. Thanks also to Maria for all her
magnificent work with the accounts.”
10 In the amended Statement of Claim it is alleged that the actions of Mr F…………..and Ms A……………..constituted breaches of their contracts of employment and their duties pursuant to ss.182 and 183 of the Corporations Act 2001 and that the first defendant had induced the breaches of contract and duties of confidentiality.
11
the plaintiff’s allegations. For the first defendant they are contained in the
Defence Counsel produced comprehensive written submissions in relation to Defendant’s Closing Notes, both dated 23 February 2009, and submissions of the second, third and fourth defendants. I substantially accept the submissions contained in those documents as to why the plaintiff’s claim must fail. 12 In summary, I am satisfied that:
(a)
there was no evidence that either Mr F………….or Ms A………..were in possession of information or documents described as “confidential information” in the Statement of Claim which would justify that description;
(b)
there was no evidence that any confidential information of the plaintiff was used improperly by the second and third defendants to “contact or solicit the customs of the plaintiff” as alleged in the amended Statement of Claim;
(c)
there was no evidence that the first defendant was in any way involved in such a solicitation.
DRAFT
13 The evidence simply discloses that the plaintiff could not pay the rent of the leased premises despite being given every opportunity to do so. At any time up to 17 April 2007, and probably beyond that date, the plaintiff could have remedied the default and enable or permit it to continue in possession. The first defendant had an obligation to mitigate its losses. Only about half the term of the lease had passed. The second and third defendants appear to have felt some obligation to the residents of the Melbourne Lodge and entered into an arrangement with the first defendant to lease the premises through the fourth defendant even when the plaintiff’s lease was determined.
14 The lease was determined on 17 May 2007. A new lease was entered into on that date with the fourth defendant and there was continuity for the residents of the facilities. These facts do not establish the breaches alleged by the plaintiff. Even if such breaches were established, the plaintiff has not established that it suffered loss.
15 The plaintiff’s expert, a chartered accountant Mr Brian Jones, readily conceded that the business of the Melbourne Lodge required the plaintiff’s continued occupation of the premises in Bell Street, Preston and if the lease with the first defendant had been properly terminated then the plaintiff would have suffered no loss.
16 Mr Jones’ evidence relied upon his report dated 27 November 2008. The report is most unsatisfactory and I substantially accept the criticisms of the report contained in the submission of Defence Counsel previously referred to and the further written submission of Mr Ehrlich entitled “The First Defendant’s Objections to the Admissibility of the Report of A Head for Business Pty Ltd”.
17 The report’s conclusions rest upon assumptions which Mr Jones did not properly investigate. He conceded that he had asked for more current financial records than those of the calendar year 2006 and information about
DRAFT
the occupancy rates achieved by the fourth defendant after May 2007. He
was told that this information was unavailable.
18 Rather than commenting on these omissions as he was required to do under the expert witness code, Mr Jones prepared a report based on dubious assumptions about likely occupancy rates. The assumption that “the facility would have reached its capacity of 100% utilisation” was entirely inappropriate and the conclusions reached of likely financial losses based on that assumption were unsustainable.
19 The first defendant’s counterclaim claims the unpaid rent as at 17 May 2007 and as damages its entitlements under the lease for the balance of the term less the rental received from the fourth defendant. This counterclaim has
been made out.
20 The second defendant’s counterclaim is for three weeks annual leave entitlements owing as at the date of termination of his employment on 17 May 2007. His fortnightly gross pay was $2,115. The second defendant is entitled to judgment on his counterclaim for $3,172.
21 The third defendant’s counterclaim for unpaid wages was abandoned.
22 The notice of contribution by the second to fourth defendants against the first defendant has no operation because the plaintiff’s claim against all defendants will be dismissed.
23 The orders of the court are as follows:
(i) the plaintiff’s claim against each defendant is dismissed; (ii)
judgment on the first defendant’s counterclaim against the plaintiff for a sum which I will determine after hearing further submissions;
DRAFT
(iii) judgment on the second defendant’s counterclaim against the plaintiff for $3,172 or whatever alternative figure I determine after hearing further submissions;
(iv) the third defendant’s counterclaim is dismissed;
(v) the second to fourth defendant’s notice of contribution against the first defendant is dismissed;
(vi) the plaintiff must pay the defendant’s costs of the proceeding to be taxed on Scale D, including –
(a) any reserved costs; (b)
the first defendant’s costs of its counterclaim and the second to fourth defendant’s notice of contribution;
(c) the second defendant’s costs of his counterclaim but excluding the third defendant’s costs of her counterclaim.
24
0
0
0