Hoosh Inc (Haberfield out of School Hours) v State of New South Wales

[2016] NSWSC 953

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	HOOSH Inc (Haberfield out of School Hours) v State of New South Wales [2016] NSWSC 953
Hearing dates:	1 July 2016
Decision date:	08 July 2016
Jurisdiction:	Equity - Expedition List
Before:	Stevenson J
Decision:	Separate questions answered
Catchwords:	CONTRACTS – licence to use part of primary school premises for before and after school care – exercise of option – whether notice exercising option given to school principal – whether service on school principal was service on Minister for purpose of licence – nature of licensee’s entitlement assuming option was exercised
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Category:	Principal judgment
Parties:	HOOSH Inc (Haberfield out of School Hours) (Plaintiff) State of New South Wales (Defendant)
Representation:	Counsel: C A Evatt with I Kirgiz (Plaintiff) P M Knowles (Defendant)   Solicitors: Lincoln Smith & Company (Plaintiff) Hunt & Hunt (Defendant)
File Number(s):	SC 2016/154539

Judgment

1. By a Deed of Licence dated 11 March 2004, the Minister for Education and Training granted the plaintiff, HOOSH Inc (Haberfield out of School Hours) a licence for 10 years from 1 January 2004 to use a designated part of the Haberfield Public School site for the purposes of “organising and operating before and after school childcare and vacation care for children”. The annual licence fee was $1. Evidently, the reason the licence fee was this nominal figure was because HOOSH had funded the construction of the premises, located in the school grounds, from which HOOSH conducts the centre.

2. Clause 29 of the Licence was entitled “Option to Renew” and was in the following terms:

“If [HOOSH] desire to take a renewal licence of the Premises from the expiration of the term of this Licence then [HOOSH] shall give notice in writing of such desire to the [Minister], not less than three months and not more than six months prior to the expiration of the term of this Licence then PROVIDED THAT [HOOSH] shall not be in breach of any terms of this Licence at the time of exercising this option then the [Minister] may, in its absolute discretion, and at the expense and cost of [HOOSH] grant a Licence of the Premises to [HOOSH] for a further term specified in Item 8 of the Reference Schedule [of 10 years] from the expiration of the term of this Licence subject to the same terms and conditions of this Licence excepting this Clause 29. The Licence fee for the further term shall be the proper market Licence fee for the Premises which shall be determined by the State Valuation Office. The Licence fee so determined shall not in any circumstances be less than the Licence fee payable during the immediately preceding year of the term of this Licence. The cost of such valuation is to [be] shared equally by the [Minister] and [HOOSH].” [Emphasis in original]

3. On 3 June 2016 I made an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 28.2 that the following two questions be determined separately from, and apart from any other issues in the proceedings:

1. whether Ms Lucille Scaltrito, a director of HOOSH, handed a document (being a notice purporting to exercise the option in cl 29 of the Licence) to the principal of Haberfield Public School, Ms Karlynne Jacobsen; and

2. whether, if so, that constituted the exercise by HOOSH of the option contained in cl 29 of the Licence.

4. The second question gives rise to two further questions, namely:

1. whether service on Ms Jacobsen was service on the Minister in accordance with the Licence; and

2. whether, on its proper construction, cl 29 of the Licence creates an option which would entitle HOOSH to a further 10 year term upon service of an effective notice.

Decision

5. In my opinion, the answers to the separate questions at [3] are:

1. yes;

2. no.

6. The answers to the subsidiary questions at [4] are both “no”.

Did Ms Scaltrito give the Notice to Ms Jacobsen?

7. On 30 August 2013, Ms Scaltrito prepared and signed a document (“the Notice”), addressed to Ms Jacobsen, in these terms:

“RE: Extension of Licence for ten years and Hoosh building

…

Further to our discussions regarding the Licence renewal between the Department of Education and Hoosh Inc., we hereby apply to take up the option to extend the Licence for the next ten years as stated in the 2004 Licence. We would like the Department to note that the Hoosh building needs an extension to accommodate further demand in numbers.

These issues will need to be discussed at the next P&C meeting where I understand this letter will be tabled so the parents are confident of a continuing service of care.”

8. The “next P&C meeting” took place on 17 September 2013.

9. Ms Scaltrito said, in an affidavit, that she handed the Notice to Ms Jacobsen at that meeting and that Ms Jacobsen took the document and said “I will pass this on to the Asset Management Unit”.

10. The Asset Management Unit is a unit within the Department of Education.

11. Ms Scaltrito was cross-examined about this evidence, but was unshaken. She said “this letter was definitely given to the principal, and in a very large envelope”.

12. Ms Jacobsen, in her affidavit, said:

“I have no recollection of Ms Scaltrito handing me [the Notice] at the meeting on 17 September 2013 or at any other time. I deny that it happened or that she said to me words to the effect ‘here is our licence renewal’. I had not seen the letter…until after these proceedings commenced.”

13. In cross-examination Ms Jacobsen gave this evidence:

“A.   … And at that meeting Ms Scaltrito said to you words to the effect, well HOOSH is exercising its option to renew the lease or is renewing the lease. Here is a letter to that effect. Do you remember her saying that?

A.    No.

Q.    And she gave you an envelope, a large envelope, is that right?

A.    No.

Q.    You can’t remember or are you just saying no?

A.    I am saying no. I can’t recall that.

Q.    Can I suggest you are mistaken about that and she did?

A.    No.

HIS HONOUR

Q.    Can I just understand what your state of memory is. You said you can’t recall--

A.    No, I can’t recall.

Q.    Can I just finish the question? So are you saying that you can positively recall that she did not hand you an envelope with such document at that meeting?

A.    I am saying no, I didn’t get a letter at that meeting.”

14. Ms Jacobsen said that she has undertaken a search of her records and files and has not found any copy of the Notice or any document referring to the Notice. A search conducted of the Department’s document management system has also found no record of the Notice.

15. The secretary of HOOSH, Ms Melissa Kemp, was present at the 17 September 2013 meeting. Ms Kemp gave this evidence:

“On 17 September 2013 I witnessed Lucille Scaltrito hand the Principal a letter at the beginning of the meeting. The Principal placed it in her lap, on top of a folder, and did not open it. When it came time to HOOSH’s place on the Agenda, Lucille spoke to the fact that she had given the Principal the letter and commented that it was regarding the renewal of the licence and HOOSH building extension.

The Principal acknowledged the request to exercise the option and said that the ‘asset management team would be speaking with HOOSH about the new lease’, ‘This isn’t a matter for the general meeting and we will organise a meeting between Lucille and Vera and Asset Management in my office’.” [Emphasis in original]

16. Ms Kemp was cross-examined about this evidence but was very clear that her recollection was accurate.

17. Ms Kemp was taken to the minutes of the P&C meeting for 17 September 2013. Those minutes contain no reference to Ms Scaltrito handing the Notice to Ms Jacobsen. The last entry in the minutes (immediately before a note that the meeting closed at 9.25pm) states:

“Hoosh reported that it would be seeking approval to extend its veranda to provide more covered play area.”

18. In cross-examination Ms Kemp said that Ms Scaltrito handed the Notice “to the Principal” “at the beginning of the meeting” and that, very near the end of the meeting:

“[W]hoever was chairing the meeting, got to the point in the agenda where they said to Ms Scaltrito – Lucille - you are on the agenda. What is so important tonight? Like what did you want to bring up - and I can see Lucille right now in my mind at the back of the room stand up and say it’s, I just want to let the meeting know that I have handed a letter to the principal and it involves our licence renewal and about our extension because it's all got to happen very shortly. We are running out of time.”

19. Ms Natasha Pollock swore an affidavit stating that between 2007 and 2014, she had children attending Haberfield Public School. She said:

“In 2013 I attended six P&C meetings. At all these meetings the HOOSH Director Lucille Scaltrito raised issues HOOSH was having with the school and Department or shared information on HOOSH with the P&C membership. I recall at one meeting Lucille Scaltrito handing a whole [sic: white] DL sized envelope over to the Principal Ms Karlynne Jacobsen. Ms Jacobsen placed the envelope in her lap. She did not open the envelope and said she would look at it later as it was not a P&C matter.”

20. Mr Knowles, who appeared for the Minister, did not cross-examine Ms Pollock. Mr Knowles informed me that this was because of an arrangement he had with Mr Evatt, who appeared with Mr Kirgiz for HOOSH, that neither would take any “Brown v Dunne points”. Such arrangements can often promote efficiency in the conduct of litigation, but do not obviate the need to challenge the evidence of a witness if a submission is to be made that such evidence not be accepted.

21. Ms Pollock’s evidence was not challenged. It would be most unfair to her, and thus to HOOSH, were I to reject her evidence in the absence of such challenge unless I was satisfied that her evidence was so glaringly improbable as to warrant its rejection. I do not find Ms Pollock’s account improbable. Indeed, it is very similar to that of Ms Kemp, namely that Ms Jacobsen placed the envelope in her lap and did not open it. There is no suggestion that Ms Pollock and Ms Kemp knew what evidence the other was to give. Although Ms Pollock was not able to recall the date on which she said she saw Ms Scaltrito hand an envelope to Ms Jacobsen, it must have been at the meeting of 17 September 2013.

22. Ms Vera Paterson was the chairperson of HOOSH in 2013. She was not able to attend the 17 September 2013 P&C meeting but stated that, the following day, 18 September 2013:

“I made a phone call to Lucille [Scaltrito] after receiving her message where I was debriefed about the P&C meeting, Lucille [Scaltrito] also informed me that Karlynne [Jacobsen] had been given the letter and informed Lucille [Scaltrito] ‘that a meeting would need to be organised soon with Asset Management’.”

23. There is thus a conflict between the evidence given by Ms Scaltrito, Ms Kemp and Ms Pollock on the one hand and that given by Ms Jacobsen on the other.

24. It is curious that no record of the Notice can be found in the records of the school or the Department.

25. It is also true, as Mr Knowles pointed out, that there is no reference in the correspondence between the parties since September 2013 to any purported exercise by HOOSH of the option nor to any suggestion that the rent review process referred to in cl 29 be engaged.

26. The documentary and oral evidence before me suggests that, following termination of the Licence on 31 December 2013, the Department stated that, from its point of view, any further licence would have to be on different terms to those contained in the Licence and that negotiations took place about what those terms might be. Those negotiations took place between July 2014 and immediately before the commencement of these proceedings (on 19 May 2016). It was only when those negotiations broke down, and the Department, through its solicitor, stated that it would proceed with a tender process for the provision of out of school care for pupils of Haberfield Public School that HOOSH made the assertion that it had exercised the option under cl 29 of the Licence.

27. I accept that these are factors to be taken into account in assessing the evidence given by Ms Scaltrito, Ms Kemp, Ms Pollock and Ms Paterson.

28. There is also a tension, as Mr Knowles pointed out, between Ms Scaltrito’s recollection that she gave Ms Jacobsen the Notice in a “large” envelope (see [11] above) and Ms Pollock’s statement that the envelope was “DL sized” (see [19] above). However, this was not explored in cross-examination as Mr Knowles asked no questions of Ms Pollock.

29. Having seen the manner in which Ms Scaltrito, Ms Kemp and Ms Paterson gave evidence, and bearing in mind Ms Pollock’s unchallenged evidence, I am satisfied that their recollection as to what happened in September 2013 is accurate and is to be preferred to that of Ms Jacobsen.

30. Each of Ms Scaltrito and Ms Kemp impressed me as calm, confident witnesses who had a clear recollection of what had occurred at the 17 September 2013 meeting. And as I have said, Ms Pollock’s evidence was remarkably congruent with that of Ms Kemp.

31. The impression I had from Ms Jacobsen’s evidence is that because she did not recall receiving the Notice from Ms Scaltrito, and because she could not find any trace of it in the school records, she had concluded that Ms Scaltrito had not handed the Notice to her.

32. Overall, I think it probable that the recollection of Ms Scaltrito (corroborated to some extent by her conversation with Ms Paterson) and that of Ms Kemp and Ms Pollock is correct and that Ms Scaltrito did hand the Notice to Ms Jacobsen.

Did service of the Notice constitute the exercise by HOOSH of the option in cl 29?

33. Clause 25 of the Licence provided that “any notice given by a party under this Licence shall” be delivered or sent to:

“Properties Directorate

Locked Bag 3004

Blacktown NSW 2148”.

34. The Properties Directorate of the Department has been renamed Asset Management Directorate and is no longer located at that locked bag address.

35. Mr Nikola Stevanovic, a Senior Group Leader in the Department, gave evidence that he had located no document from the Department notifying HOOSH of the change of name of the “Properties Directorate” to “Asset Management Directorate” or of the change of address for that directorate but that:

“I expect that arrangements would have been put in place to forward any correspondence to a new postal address.”

36. The question of possible renewal of the Licence arose at a meeting of the Haberfield Public School P&C Association of 16 July 2013. The minutes of that meeting record that Ms Jacobsen stated:

“Asset Management team will be speaking with Hoosh about the new lease [sic]. Communication will be conducted with the Department directly”.

37. Ms Kemp said, of this incident:

“What I recall is that [Ms Jacobsen] said that Hoosh will have to deal with asset management and that she will be organising them and she knew they were coming out to the school but she would organise with them to [meet with] Hoosh.”

38. There is thus no contest that, at this meeting, Ms Jacobsen made clear that HOOSH would have to deal directly with the Department (and not with her) about any renewal of the Licence.

39. As I have mentioned, Ms Scaltrito’s evidence was that at the 17 September 2013 meeting, after she handed the Notice to Ms Jacobsen, Ms Jacobsen said “I will pass this on to the Asset Management unit”.

40. I accept Ms Scaltrito’s evidence that this is what Ms Jacobsen said on that occasion. However, Ms Jacobsen’s unchallenged evidence was that, consistently with what she said at the 16 July 2013 P&C meeting, no one from the Department had ever said to her that she “should or could take responsibility for sending and receiving communications in relation to the Licence”.

41. Mr Evatt drew Ms Jacobsen’s attention to a document published by the Department on 31 August 2009 entitled “Community Use of School Facilities” which stated that part of the “responsibilities and delegations” of school principals was to:

“[R]eceive applications for community use and evaluate each application in accordance with the implementation procedures, consideration of the needs of the local community and child protection requirements. When needed, consult with the local Asset Management Unit.”

42. However, I do not read that document as conferring on a principal such as Ms Jacobsen authority to receive notices under a document such as the Licence.

43. Ms Jacobsen agreed that she had been asked by Asset Management to inform HOOSH that it would need to communicate with Asset Management about renewal of the Licence and was asked by Asset Management to gather information from HOOSH (which she described as “certain logistical things”). For that purpose, Ms Jacobsen met with Ms Scaltrito and Ms Paterson on 7 November 2013 and, on 19 November 2013, forwarded a departmental pro forma document (engrossed on Haberfield Public School letterhead) seeking information about “HOOSH Lease Renewal”. Ms Jacobsen passed the completed form on to Asset Management on or about 20 December 2013.

44. There is, however, no suggestion that the Department held Ms Jacobsen out as a person able to accept service of documents on its behalf. The Department told Ms Jacobsen that she should tell HOOSH that HOOSH would need to deal with Asset Management. That is what Ms Jacobsen said at the 16 July 2013 meeting. There is no suggestion the Department said something different to HOOSH.

45. Although I accept that on 17 September 2013, Ms Jacobsen told Ms Scaltrito that she would pass on the Notice to Asset Management, and although she evidently did not do so, I cannot see how it follows that the handing of the Notice to Ms Jacobsen somehow amounted to service on the Department, and thus on the Minister as required by cl 29 of the Licence.

46. In these circumstances, although it might be understandable that HOOSH representatives understood that delivery of the Notice to Ms Jacobsen on 17 September 2013 was, in effect, delivery to Asset Management, and thus the Department, that does not appear to me to be the correct legal position.

47. And no case of breach of warranty of authority is brought against Ms Jacobsen.

What would have been the effect of proper service of a notice under cl 29?

48. In any event, I see a more fundamental problem facing HOOSH, and that arises from the wording of cl 29 itself.

49. Although cl 29 is headed “Option to Renew” it is not, in substance, any such thing.

50. Clause 29 provides that if HOOSH gave timely notice:

“…then the [Minister] may, in its absolute discretion, and at the expense and cost of [HOOSH] grant a Licence of the Premises to [HOOSH] for a further term [of 10 years]”.

51. It appears to me that these words were intractable. They do not confer on HOOSH an option of the kind commonly found in a lease or a licence. They do not confer a right on HOOSH to obtain a renewed licence. All they do is confer on HOOSH an option to give the Minister a notice so as to enliven the Minister’s “absolute discretion” to decide whether a further licence should be given.

52. The course of dealings between the Department and HOOSH after 31 December 2013 makes clear that the Minister had exercised his discretion not to grant HOOSH a licence of the kind referred to at cl 29 (namely one for 10 years and on the same terms and conditions as the Licence, apart from cl 29 itself), but only to grant HOOSH a licence in, or to the effect of, the terms proffered by it in the course of those negotiations.

53. Had HOOSH served the Notice in the manner required by the Licence it would have exercised the “option” available to it under cl 29. But the exercise of that option would not have given it any right to any further licence.

The next steps

54. I will now hear the parties as to what further steps are necessary to finalise the proceedings.

**********

Amendments

11 July 2016 - Typographical errors in [7] and [8] corrected.

Decision last updated: 11 July 2016