Hosking v Elizabeth City Centre No. Scgrg-00-868

[2000] SASC 346

GRAHAM AND DEBRA HOSKING v ELIZABETH CITY CENTRE PTY LTD

Civil (Ex Tempore)

1................ LANDER J........ This is an application by the plaintiffs for interlocutory orders in the following terms:

(1)That the defendant be restrained, whether by itself it is servants or agents, from entering into any agreement to lease or release in respect of the premises at Shop 5A Raleigh Walk Elizabeth City Centre; and,
(2)a mandatory injunction permitting the plaintiffs to enter and take possession of the premises referred to in paragraph (1).

I have set out the orders sought by the plaintiffs because the application, which I am presently considering, seeks orders of a different kind. However, it was clear during the application that the relief which was sought by the plaintiffs was not that referred to in the application, but rather the orders to which I have already referred.
This application comes before me in rather unusual circumstances.
On 13 September 2000 the plaintiffs issued proceedings against the defendant seeking relief against forfeiture of a Memorandum of Underlease between the defendant and the plaintiffs relating to the premises situated at Shop 5A Raleigh Walk, Elizabeth City Centre. They also sought injunctions to restrain the defendant from entering the premises or otherwise disposing of the business operated from the premises, and from disposing of, or assigning, or subletting, any interest in any lease in respect of the premises.
That summons was supported by an affidavit sworn by the male plaintiff and was later accompanied by an application seeking an urgent hearing of the relief sought in the original summons.
In their application dated 14 September 2000 the plaintiffs again sought relief against forfeiture of the Memorandum of Underlease between themselves and the defendant and various orders in the injunction. The matter came before a Master of this Court on 21 September 2000 in circumstances where the plaintiffs relied upon the affidavit of the male plaintiff of 12 September 2000 and a further affidavit of the male plaintiff of 20 September 2000. The defendant relied upon two affidavits of Carol Dawn Kirk who was the leasing executive of the defendant, the first sworn on 19 September 2000 and the second on 21 September 2000.
There was no transcript taken of the argument before the Master but I am told by Mr Kourakis QC, who appeared for the defendant, that the matter proceeded before the Master in a summary fashion. That is to say the Master considered the primary relief sought by the plaintiffs, namely relief against forfeiture, and considered, as a secondary aspect of the application, two applications put forward as in the nature of injunction.
The Master did not give any written reasons for dismissing the plaintiffs’ application. The note on the court file shows the following remarks:
“On the basis of the affidavit material submitted on behalf of the pltfs, and having heard the submissions of counsel on their behalf, I am not satisfied that there is a serious issue to be tried between the pltfs and the deft. Even if they (sic) were, in light of general background of the pltfs’ financial position and despite all their professed good intentions, I do not consider that the balance of convenience would with pltfs
Order:
1)     I dismiss the pltfs’ application.
2)     The pltfs to pay the deft’s costs.
3)     I certify fit for counsel.”
Mr Kourakis QC contended and Mr Robert Sallis, who appeared for the plaintiffs, accepted, that in fact the Master considered all of the relief sought in the plaintiffs’ summons, and by dismissing the plaintiffs’ application he not only dismissed the application for orders in the nature of injunction but also dismissed the plaintiffs’ claim for relief from forfeiture. That explains the sealed order which was obtained by Mr Dudek, the solicitor for the plaintiffs, which is in the following form:
“1) The plaintiffs’ application for relief against forfeiture be dismissed.
2). The plaintiffs pay the defendant’s costs of the application and this order.
Fit for counsel.”
It is unfortunate that the Master did not give reasons for dismissing the plaintiffs’ claim and it is unfortunate that the court file does not record that in fact the Master not only considered the question of an injunction but also considered the primary relief sought, namely relief from forfeiture. The Master’s short reasons rather suggest erroneously that he only considered the question of injunctions.
On 28 September 2000 the plaintiffs filed a Notice of Appeal and on 11 October 2000 filed an amended Notice of Appeal to the Full Court. I think the procedure adopted by the plaintiffs was correct. If it was the fact that the Master dealt with the plaintiffs’ application for relief from forfeiture, then the order made by the Master was a final order, and the appeal will be governed by r 106.05 of the Supreme Court Rules and the appeal would go to the Full Court.
It, therefore, follows in my opinion that the plaintiffs were right to appeal to the Full Court rather than to a single Judge, which would have been appropriate if the Master had only considered the question of an interlocutory injunction, which would have been of course an interlocutory order.
In their Notice of Appeal the plaintiffs complain about the Master’s finding that there was no serious issued to be tried and that the balance of convenience would not be with the appellants.
They also complained about matters not raised in the summons. The plaintiffs complain that the defendant had unlawfully re-entered the premises because there was no evidence that the plaintiffs had repudiated the Memorandum of Underlease. They also complain in their Notice of Appeal that the re-entry was unlawful because the notice of re-entry was invalid and of no legal effect whatsoever.
Of course those matters are matters not raised in the plaintiffs’ proceedings and whether the Full Court would deal with those matters is a matter yet to be determined. The only proceedings that the plaintiffs brought against the defendant were for relief from forfeiture. The application for relief from forfeiture acknowledges, by the very application itself, that there has been a forfeiture from which there should be relief. In those circumstances it seems to me that the plaintiffs are not entitled to rely upon unlawful conduct on the part of the defendant in their appeal to the Full Court. In any event, that will be a matter for the Full Court in due course if the matter goes to the Full Court.
The purpose of this application, so I am told by the plaintiffs, is to preserve the subject matter of litigation, namely the lease, by preventing the defendant from entering into any other lease arrangements with any other party in relation to the subject premises and by permitting the plaintiffs to re-enter the premises and to continue the conduct of their business.
The plaintiffs previously conducted the business of Elizabeth Florists from these premises. The plaintiffs assert that if an interlocutory injunction is not granted to protect them in relation to these premises their appeal to the Full Court will be rendered nugatory. They further assert that if they are not permitted to recommence their business immediately it is likely that they will become insolvent.
For the purpose of determining whether the plaintiffs should have relief, so as to preserve the subject matter of the appeal, it is necessary to determine whether there is a serious question to be tried, whether damages will be an adequate remedy and where the balance of convenience lies.
The serious question to be tried inquiry really requires me to make a similar inquiry to that made by the Master to determine whether there is any real likelihood that the plaintiffs will succeed on appeal in relation to that aspect. So, also, does the nature of the application require me to consider, like the Master was obliged, the question of damages and the balance of convenience.
The plaintiffs bought this business earlier this year paying the sum of $60,000 which sum included goodwill and which sum also included plant and equipment, together with stock at valuation. They traded between February and June 2000 and have provided to the court trading figures for the period to 30 May 2000. The trading figures suggest that the plaintiffs’ business was trading at a profit. That seems to be at variance with the plaintiffs’ own evidence which is to the effect that the plaintiffs were in fact trading at a loss. Whether they were trading at a profit or loss does not need to be resolved on an interlocutory application. What is clear is that they failed to pay the rent due to the defendant to June 2000 and the defendant gave notice to the plaintiffs in respect of three months rent then outstanding. In response to that notice the rent then outstanding was paid. However, after paying rent to June, the plaintiffs fell into arrears yet again and notice was given by the defendant on 2 August 2000. There was partial payment of the rent due after that time but on 28 August 2000 the defendant re-entered the premises and has since taken possession of the premises.
The plaintiffs’ claim is, of course, for relief from forfeiture. Ordinarily the plaintiffs would be entitled to relief from forfeiture if they could show that they were in a position to pay the outstanding rent and if they could demonstrate to the court that it was likely they would be able to continue to pay rent into the future.
When the matter came before Judge Bowen Pain the defendant proved that there was a sum of $12,275 then outstanding together with costs which had been occasioned to the defendant in defending the claim for relief. I am satisfied that at no stage during the hearing before Judge Bowen Pain was an offer made by the plaintiffs to pay the amount then outstanding. I am also satisfied on the evidence that was before Judge Bowen Pain that the plaintiffs did not satisfy the second aspect usually required to be satisfied to obtain relief from forfeiture, namely there was a likelihood they would be able to continue to pay rent into the future.
It follows that I cannot say the Master was wrong to dismiss the plaintiffs’ claim for relief from forfeiture. Once that application was dismissed it had to follow that the plaintiffs’ claim for interlocutory injunctions had to be dismissed.
However the plaintiffs contended that the Master should have granted the injunctions in any event.
In those circumstances I am not satisfied that Judge Bowen Pain erred in finding that the plaintiffs have not made out a serious question to be tried.
In any event, now that the matter is before me, I know that in addition to the amount of rent outstanding there is a sum of $8,500 owing to trade creditors. The plaintiffs are due to repay to their banker, the Commonwealth Bank, the sum of $30,000 on 30 November 2000 and I know from the affidavit of the male plaintiff that there is a real risk that he and his wife will become insolvent very shortly.
I put to Mr Sallis that in those circumstance his client could not expect to obtain relief from forfeiture unless his clients were in a position to advise the court that they would pay the rent outstanding at least until 21 September 2000, when Judge Bowen Pain heard this matter, and could convince me that there was a real prospect they would be able to pay their rent into the future. He sought an adjournment of the application in order to obtain evidence from a Ms Jemima Sims, who he said was presently considering purchasing part of the business from the plaintiffs.
In support of that application for an adjournment he called oral evidence from Ms Catherine Greven, Ms Sims’ accountant, and indeed also the plaintiffs’ accountant. She gave evidence Ms Sims was presently overseas, would be returning sometime later this week, and would be in a position early next week to consider whether she would be prepared to purchase any part of this business. Ms Greven indicated that she had done some work in valuing this business and had reached the conclusion that the business had traded at a substantial loss to 30 June 2000. She was also aware that Ms Sims had already injected some $14,500 into the business which she believed Ms Sims would want credit for if she was to purchase any part of this business.
On the application for adjournment I asked Mr Sallis whether his clients could even pay the amount of rent that would be lost to the landlord if I granted an adjournment for two weeks. No offer was made in respect of that rent which would have been in the order of $2,000 over the next two weeks. That is not to criticise the plaintiffs, who I think are genuine people trying desperately to conduct this business. It just, however, points out the improbability that the plaintiffs will ever be in a position to recommence business in these premises.
I refused the application for an adjournment because I believed that there was little prospect any evidence could be given by Ms Sims which would assist the plaintiffs on this application. I refused it also because the plaintiffs were not in a position to assure me that they could pay the rent to 21 September 2000, the rent for the period between now and the appeal, and that they had sufficient moneys for working capital to restart the business and conduct the business to that point of time.
I am not satisfied that the Master was wrong in dismissing the claim for relief from forfeiture. That being so I cannot say he was wrong to dismiss the application for interlocutory injunctions. But in any event I am not satisfied that the Master erred in respect of his finding there was no serious question to be tried. I am also not satisfied that he erred in finding that the balance of convenience was with the defendant.
The plaintiffs, at the very least, would need, for the purpose of obtaining the interlocutory relief sought on this application to me, to pay to the defendant the amount of rent outstanding as at 21 September 2000, the amount of rent between now and the hearing by the Full Court and satisfy the court that the plaintiffs could recommence their business within the premises and conduct their business until the hearing by the Full Court.
No such offer has been made and no such assurances given.
I am satisfied that the plaintiffs could not do any of that out of their own resources and I am not satisfied that they could do that out of any other resources offered by any other party, including Ms Sims.
In my opinion, the Master also did not err in finding that the balance of convenience lay with the defendant. For those reasons, I am not satisfied that it would be appropriate to grant the relief to which I have referred and I dismiss the application.
There will be the following orders:
The plaintiffs’ application for interlocutory injunction restraining the defendant from entering into any agreement to lease or any lease with any party apart from the plaintiffs and for a mandatory injunction that the plaintiffs be entitled to enter the premises at 50A Raleigh Walk, Elizabeth City Centre is dismissed.

2...... The plaintiffs to pay the defendant’s costs of an incidental to the application.

The matter is certified for counsel.

[2000] SASC 346

17 October 2000