HWE Cockatoo Pty Ltd v Dynasty Pty Ltd - [2002] WASC 187

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: HWE COCKATOO PTY LTD & ANOR -v- DYNASTY PTY LTD [2002] WASC 187

CORAM: McKECHNIE J

HEARD: 10 & 11 JULY 2002

DELIVERED : 11 JULY 2002

FILE NO/S: CIV 1920 of 2002

BETWEEN: HWE COCKATOO PTY LTD (ACN 009 639 285)
PORTMAN IRON ORE LTD (ACN 001 892 995)
Plaintiffs
AND
DYNASTY PTY LTD (ACN 009 614 279)
Defendant

Catchwords:

Interlocutory injunctions - Unconscionable conduct - No serious question to be tried - No new principles

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiffs: Mr P G McGowan
Defendant: Mr K E Yin

Solicitors:

Plaintiffs: Deacons
Defendant: Michael Whyte & Co

Case(s) referred to in judgment(s):

Austotel v Franklins Selfserve (1989) 16 NSWLR 582
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Case(s) also cited:

American Cyanamid Co v Ethicon Ltd [1975] AC 396
Beswicke v Alner [1926] VLR 72
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Castlemaine Tooheys Limited v State of South Australia (1986) 161 CLR 148
Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349
Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670
Parker v Camden London Borough Council [1986] Ch 162

McKECHNIE J: This is an application for an injunction to restrain the defendant from requiring the plaintiffs to vacate rented accommodation at Cockatoo Island. The accommodation is needed by the plaintiffs for their workforce which is generally engaged in mining on the island and specifically engaged at the moment in building a seawall.
The endorsed writ claims a declaration that the plaintiffs are entitled to sublease the premises by reason of an equitable estoppel against the defendant from denying the plaintiffs' right to occupation of the premises. The alternative claim under the Trade Practices Act turns on the same facts.
Each party has filed a number of affidavits and there are significant matters in dispute. However, for the purposes of determining this application, I shall proceed on a version of facts most favourable to the plaintiffs.
The argument yesterday chiefly centred on the question whether the plaintiffs have established a serious question to be tried, it being obvious that there are enormous consequences to the plaintiffs if an injunction is not granted. The defendant is unable to point to any corresponding prejudice.
I take into account the fact that the determination of the question of a serious issue to be tried and the balance of convenience are not separate but to an extent have to be considered together, and I do so. That said, I take it that, as I have indicated, there are enormous consequences to the plaintiffs.
The plaintiffs rely on the principles in Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, particularly, though not exclusively, on the judgment of the Chief Justice and Wilson J at 404. I accept these principles as set out in Walton Stores. Though expressed with a degree of difference between the judgments of the other members of the Court, I accept that they are nevertheless applicable.
Attention must therefore be turned to the facts of the particular case. The plaintiffs and the defendant have an oral lease for accommodation on Cockatoo Island which for some reason was never reduced to writing. The lease was to expire on 30 June 2002. In March 2001, the plaintiffs formulated a plan for future mining on Cockatoo Island involving the construction of an embankment, or seawall, to enable mining of the ore body then under the sea. Paragraph 13 of Mr Louw's affidavit of 3 July 2002 states:
"In March 2001 the Cockatoo Iron Ore JV formulated a plan for the future mining of the mining sub‑lease. The plan involved the construction of the Embankment and mining of the ore body then under the sea. Initially, the construction of the Embankment was to commence in the first quarter of 2002 with mining commencing by about July 2002 and the shipment of ore commencing in about August 2002. The construction of the Embankment was expected to extend the life of the mine for about 3 to 5 years, that is until between 2005 and 2007. As the then arrangements for the accommodation of the Cockatoo Iron Ore JV personnel were due to expire on 30 June 2002, it was necessary to make arrangements if possible with Dynasty for continued use of the Premises after 30 June 2002."
In December 2001, there were discussion between the parties for the possible sale of the resort to the plaintiffs. Those discussions came to nothing and so Mr Louw, the operations manager of the plaintiffs, met with Mr Thomas, who seems to be the driving force in the defendant, together with Mr Lunney, the defendant's accountant. That meeting took place on 23 January 2002 in Darwin. It is this meeting, coupled with, what is said to be, the defendant's inaction, once the construction of the embankment began, that is said to give rise to the estoppel.
While for the purposes of this application I have had regard to all of Mr Louw's affidavit and indeed have read all of the evidence which has been tendered on both sides, I focus particularly on pars 21 and 22:
"21.Mr Thomas stated that although the continued presence of miners on the Island impeded his ability to sell the Resort (and he mentioned an Indonesian business man who had spoken of an offer of $5M to buy a share and expenditure of a further $17M on developing the Resort) he concurred that he would rent the Premises for the period of the project. Other issues were then discussed including the price of beer, invoicing and use of the barge.
22.At the conclusion of the meeting, and based on the discussion with Mr Thomas, I assumed that there would be further negotiations between us to finalise a formal document which incorporated the agreement reached at the meeting and to resolve any outstanding issues. I also assumed that if the negotiations did not lead to a finalised agreement, Dynasty would not demand that the Cockatoo Iron Ore JV deliver up possession of the Premises until other accommodation arrangements could be made."
The first assumption in par 22 is that "there would be further negotiations between us to finalise a formal document which incorporated the agreement reached at the meeting and to resolve any outstanding issues". It seems clear from the correspondence between the parties that the plaintiffs' officers were well aware that the most basic matter, rent, had not been agreed between the parties, nor it appears had other matters.
On 15 February 2002, Mr Lunney wrote to the plaintiffs and said in part:
"…
Derek as per our discussion in Darwin on 23rd January 2002, I still have not seen your requirements on the Island for accommodation etc."
On 5 March 2002, Mr Hewitt on behalf of the plaintiffs emailed Mr Lunney as follows:
"As Wayne Thomas has returned, have we progressed with the outstanding fuel and accommodation issues. Once these are settled both parties are then able to progress the issue of future accommodation, etc."
A few days later on 8 March Mr Hewitt sent another email to Mr Lunney which included the following issues:
"•Need to settle the issue of the fuel rise and fall and the additional accommodation used.
•Need to discuss and come to an agreement over rents for at least a further three years. Possibly with different arrangements for maintenance of houses, kitchen/dining room and maybe even power.
•Need to discuss the future use, availability and rates for the Thomas Charters barge service.
Derek and I are happy to have a conference phone call with Wayne and yourself to thrash out these issues."
I also note in an affidavit of Grant Michael Jordan sworn 10 July 2002, which is to be filed by the defendant, an email of 10 April 2002, again it would appear from Mr Hewitt to Mr Lunney, which sets out a number of matters relating to airconditioners and then says:
"… This must be resolved in the short term and probably before any new rental agreement is made. I have been instructed that Dynasty did not live up to their obligations then work performed by HWE will be balanced against future rent payments."
These emails illustrate graphically that in reality all had not been agreed. All that had been agreed at the meeting of 23 January 2002 was that the parties would conduct detailed discussions. It was not until 16 May 2002 that the plaintiffs forwarded to the defendant a proposed draft lease. By this time the work on the embankment had begun, a fact known of course to the defendant. The delay in preparing the draft lease is odd. Mr Louw explains this in a later affidavit filed on 10 July 2002 as follows in par 5:
"At the conclusion of the meeting with Mr Thomas, I probably said that I would firm up on the discussions within the next few days. My letter of 16 May 2002 was later than I had expected to take to write to Mr Thomas, but was my follow-up to the meeting."
The letter concerned which appears at p 122 of Mr Louw's earlier affidavit says:
"Henry Walker Eltin (HWE) has reviewed the Rental Agreement for Cockatoo Island and re‑drafted it to reflect the discussions in Darwin. …" -
and there was, it would appear, a schedule of possible rentals.
"We will make contact towards the end of May 2002 to finalise the Agreement."
There is no explanation why it took so long to produce the draft. The expression "firm up on the discussions" is curious. Does this mean that Mr Louw was firming up the detail of the discussion with a view to putting it to Mr Thomas as a basis for negotiation? I am inclined to think it does. I gain support for that view because the sublease which was attached had, as is usual, a schedule. In item 10 of the schedule entitled "Rent" there is no figure, only a question mark against the amount.
The draft sublease also includes a requirement for consent by the Minister for the sublease, indicating an awareness on the part of Mr Louw that before the written agreement could be finalised, which of course is what he was expecting by par 22, there would have to be further steps taken.
In my view, the evidence of the plaintiffs does not permit a conclusion that there was any concluded agreement reached between the parties on 23 January 2002. Necessarily, substantial negotiations had to proceed before there was any real prospect of an agreement. The fact that negotiations had to proceed involves the possibility that agreement may not in the end be reached, despite an initial willingness as expressed in the meeting of 23 January 2002 to negotiate. There is no evidence of any unconscionable conduct by the defendant arising from the discussions of 23 January 2002.
I turn to consider the second assumption in par 22 of Mr Louw's affidavit. There is no evidence that Mr Thomas or any other employee of the defendant encouraged or knew about this assumption. The plan for the embankment was in train. The defendant knew that the plaintiff would require accommodation. That is why it was prepared to consider negotiations about accommodation, but there is no evidence that the defendant did anything to foster a belief that the lease would be extended long enough to allow the plaintiffs to relocate if there was no finalised agreement.
The plaintiffs expected a written agreement would evolve and until 16 May 2002 there was nothing to which the defendant could respond. Any delay in producing the draft lease is not attributable to the defendant. The second assumption has no basis in law or fact. It was not brought about by anything the defendant did. In these circumstances knowledge that the plaintiffs would require accommodation does not, in my view, equate with unconscionable conduct by inaction.
The plaintiffs knew at all times the need to conclude an agreement prior to 30 June 2002. The defendant did not impede this and until 16 May 2002 was not called on to do much. The relationship was not completely harmonious, a fact which the plaintiffs' officers well knew, making any assumption in the circumstances dangerous.
I am very conscious of the issue at this stage of whether the plaintiffs have established a serious issue to be tried and I say again a serious issue has to include the consequences. The issue is not whether the plaintiffs would ultimately succeed. Nevertheless, the remarks of Kirby P in Austotel v Franklins Selfserve (1989) 16 NSWLR 582 at 587 are relevant. His Honour said:
"Doubtless, there will be cases where expedients must be adopted by a court in order to give effect to its conclusion that equity requires relief, but it strikes me as astonishing, in a multi‑million dollar transaction designed to last for many years which substantial and well‑advised parties have held back from completing, that a court should step in and determine so crucial and disputable an element in the parties' commercial relationship as the rental to be paid and then to require the parties (one of whom is resisting) to proceed with the lease with all the opportunities for friction and variation in the ongoing relationship which a lease entails."
As is clear from the relief sought, and indeed the terms of the application before me the question of rent has not been agreed. What lease then is the defendant estopped from denying, I ask rhetorically. The one whose terms are yet to be agreed, I respond; to demonstrate, with respect, the hopelessness of the plaintiffs' position, despite the forceful arguments which Mr McGowan, with his customary ability, has advanced on the plaintiffs' behalf. I note as well the comments of Kirby P shortly before the passage I have read at 586:
"The wellsprings of the conduct of commercial people are self‑evidently important for the efficient operation of the economy. Their actions typically depend on self-interest and profit‑making not conscience or fairness. In particular circumstances protection from unconscionable conduct will be entirely appropriate. But courts should, in my view, be wary lest they distort the relationships of substantial, well‑advised corporations in commercial transactions by subjecting them to the overly tender consciences of judges. …"
My conclusion is that, even on a view of facts most favourable to the plaintiffs, there is nevertheless no evidence before me sufficient to found the cause of action which the plaintiffs seeks to pursue and in consequence this application for an injunction must be dismissed.