Kavia Holdings Pty. Limited and Anor. v Werncog Pty. Limited

[1999] NSWSC 932

CITATION:	Kavia Holdings Pty. Limited & Anor. v. Werncog Pty. Limited [1999] NSWSC 932
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	No. 2016 of 1998; No. 2585 of 1998
HEARING DATE(S):	10th September 1999
JUDGMENT DATE:	10 September 1999
PARTIES :	Kavia Holdings Pty. Limited - First Plaintiff Rocks Catering Pty. Limited - Second Plaintiff Werncog Pty. Limited - Defendant
JUDGMENT OF:	Hodgson CJinEq at 1

COUNSEL :	Mr. A. Sullivan QC with Mr. A. Leopold (Plaintiffs) Mr. D.R. Robinson with Mr. D. Kell (Defendant)
SOLICITORS:	Aubrey F. Crawley & Co., Sydney (Plaintiffs) Baker & McKenzie, Sydney (Defendants)
CATCHWORDS:	PRACTICE AND PROCEDURE - INTERLOCUTORY INJUNCTIONS - DUTY NOT TO MISLEAD COURT. At the hearing of a contested application by the lessee and/or occupant of two properties for an interlocutory injunction, the defendant deliberately misled the Court concerning a proper occupation fee for one property. On discovering this, the plaintiffs applied for a review of the conditions of the injunction imposed in relation to both properties. HELD that, had the original judge known that the defendant was deliberately misleading the Court concerning a proper occupation fee in respect of one property, this may have made a difference in the conditions imposed in respect of the other property; that those conditions should be reviewed; and upon review, that less onerous conditions should be imposed.
DECISION:	See page 8 of judgment

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

CORAM: HODGSON, CJ in Eq.

Friday 10th September 1999

NO. 2016 OF 1998
KAVIA HOLDINGS PTY. LIMITED & ANOR. V. WERNCOG PTY. LIMITED & ANOR.
NO. 2585 OF 1998
KAVIA HOLDINGS PTY. LIMITED & ANOR. V. WERNCOG PTY. LIMITED & ANOR.

JUDGMENT

1   On 27 July this year Young J decided an interlocutory application for injunction in these proceedings. He granted an injunction in favour of the lessee and/or occupant of certain premises at Darling Harbour on a condition that certain sums be paid to the defendant lessor. In relation to the premises known as Cohibar, the condition was that $12,245.00 per month be paid in respect of the period from 1 May 1999 to 31 October 1999, and thereafter, until further order, the sum of $15,000.00 per month. In respect of the premises known as Jordans, the condition was that a sum of $105,000.00 be paid on or before 30 September 1999, this being in respect of rent prior to 1 May 1999, and also the full rent under the lease of that premise in respect of the period from 1 May 1999 until further order, the amount of that rent being in the order of $54,000.00 per month.
2   It later appeared that Young J had been misled by the defendant in relation to an appropriate occupation fee for Cohibar. The plaintiffs then filed a Notice of Motion seeking an order that the conditions of the injunction be set aside and that, instead of those conditions, the plaintiffs pay $6,250 per month from 1 May 1999 in respect of Cohibar, and one half of the stated rent for Jordans as from 1 August 1999. That application came before Santow J on 18 August 1999, and it was stood over by him to be finally dealt with by me today.
3   In the course of so doing, Santow J delivered a judgment setting out the history of the matter and making a decision concerning costs, namely, that the defendant pay on an indemnity basis the plaintiffs' costs of and incidental to the hearing on 18 August, and the plaintiffs' costs of 27 July 1999.

ISSUES

4   Before me the parties have agreed that a figure of $11,875.00 per month will be the occupation fee for Cohibar until further order, or the final hearing of the case. It is common ground that that figure should apply at least as from 1 September 1999. The dispute on Cohibar before me concerns what occupation fee should be paid in respect of the period from 1 May to 31 August. The defendant contends that it should be the same figure of $11,875.00 per month; the plaintiffs contend that it should be no more than $6,250.00 per month.
5   The main dispute before me, however, has concerned whether there should be any revision of the conditions concerning the premises Jordans. In short, the defendant contends that the court was not misled in any way relevant to those premises. The plaintiffs contend that the circumstances justify a reconsideration of that aspect of the conditions as well. In short, the plaintiffs say that the defendant should not get any advantage from a hearing in which, on the plaintiffs' submission, the defendant deliberately misled the court; and further that there is now material, namely, evidence that the defendant deliberately misled the court, which makes it just that the matter be reconsidered and a different result arrived at.

MISLEADING THE COURT

6   One matter which I should first consider is how to characterize the misleading of the court at the hearing before Young J. It is apparent that the court was misled by the tendering of the front pages of certain leases, of premises said to be comparable to Cohibar, showing a particular rent, without also tendering other provisions of those leases which indicated that substantial incentives or rent holidays were given in relation to those leases. That matter, it appears, was exacerbated by evidence led by the defendant to the effect that the rent stated in those leases was being paid, when in fact in respect of some, or all, of the leases there were rent holidays or concessions still operative. The misleading of the court by that evidence, as Santow J pointed out, could be innocent, careless, or deliberate.
7   Before Santow J, no attempt was made to explain how the misleading of the court came about, and Santow J offered the defendant an opportunity to put on that material. Santow J noted:

The defendant declined to take up that opportunity, rather it sought that the matter wait for determination of what has been described as a "final" interlocutory hearing by Hodgson CJ in Eq on 10 September 1999.

8   Before me also no attempt has been made by the defendant to explain how the court came to be misled. Quite plainly, the defendant has had an ample opportunity to offer such an explanation and has chosen not to do so. It seems to me that if the misleading of the court was innocent, or even careless, one would have expected an explanation and an apology to be offered. In circumstance where this has not happened, and apparently has not happened by a deliberate choice, I think I should infer that the misleading of the court was deliberate. In many cases such a finding would be the equivalent of a finding of fraud. However, this is not a case where fraud has been specifically charged, and certainly not specifically charged against any person. In those circumstances, I would not find fraud against any person. However, I think it is appropriate to make a finding that the defendant deliberately misled the court in the hearing before Young J. In making that finding I would emphasise, as did Santow J, that there is no finding adverse to the legal advisers of the defendant.
9   The effect of the misleading of the court, as it now appears, was merely to support a finding that $15,000.00 per month was an appropriate occupation fee for Cohibar, whereas the parties have now agreed that, at least as from the present, an appropriate fee would be just under $12,000.00. On one view of the matter, therefore, the misleading of the court was not in relation to a matter having very significant financial consequences.

SUBMISSIONS

10   As I have already said, it is common ground that the circumstances justify varying the condition in relation to Cohibar. The substantial question is whether they justify varying the conditions in relation to Jordans.
11   Mr Sullivan, QC, for the plaintiffs has provided written submissions which I will leave with the papers. In substance he submits that the defendant should get no advantage whatsoever from a hearing at which the defendant misled the court. Furthermore, he submits the Court was misled indirectly in relation to matters affecting Jordans, in that it treated the case as being one between two parties acting bona fide, whereas in truth one was deliberately seeking to mislead the court. He submitted that this was relevant to the court's approach to the discretionary adjustment of matters to occur up to the final hearing of the case. 12   Mr Sullivan submitted that the restriction on applications to vary interlocutory orders, being based inter alia on the public policy of finality of litigation, was displaced by the public policy supporting the right of a party to a fair hearing. He submitted that it was impossible to say whether or not Young J would have resolved the matter in the same way had he been aware of the deliberate attempt to mislead him. Looking at the matter having regard to that circumstance, there was a compelling case in favour of the plaintiffs that it should not be required to pay any rent in respect of Jordans prior to 1 May this year, and that thereafter it should have to pay no more than about three quarters of the rent.
13   Mr Robinson for the defendant submitted that Young J's decision was based on matters of principle decided by him which were entirely independent of the value for occupation purposes of Cohibar. Young J found that there was no agreement between the parties as to non-payment of rent, but an arguable case for an estoppel, and that it was appropriate that the current rent be paid for Jordans plus some of the back rent. In imposing the conditions which he imposed in relation to Jordans, there was an exercise of discretion which has not miscarried and which is unassailable.
14   Mr Robinson referred me to a number of cases dealing with the limited circumstances in which interlocutory orders may be varied, including Adam P Brown Male Fashions Pty Limited v Philip Morris Inc (1981) 148 CLR 170, Woods v Sheriff of Queensland (1895) QLJ 163 and Brimaud v Honeysett Instant Print, McLelland CJ in Eq, 19 September 1988.
15   In any event, Mr Robinson submitted, there was no probability that, even if Young J had been aware of the misleading of the court, he would have come to any different view concerning Jordans. All the material he relied on was material submitted by the plaintiffs. There was no material relied on by the defendant dependent upon the credibility of the defendant's principals or employees. A closer examination of the material confirmed that Young J was correct in holding there was no concluded agreement, but that there was a question to be tried concerning estoppel. In imposing the conditions, Young J had struck a reasonable balance. 16   Mr Robinson pointed out that this was not a case in which any application was made to set aside the whole of Justice Young's decision. It was not an application based on fraud, but only an application to vary and, in accordance with the principles concerning variation of interlocutory orders, it would be appropriate to vary only so much of the order as was really affected by the misleading of the court. Mr Robinson submitted that it was not appropriate to treat this as an occasion for punishment of the defendant, in that any appropriate punishment had occurred through the imposition of costs orders by Santow J. Now the court should do no more than seek to achieve the just result on the material now before the court.

DECISION

17   Both sides accepted the principle that the defendant should not profit from misleading the court. However, as I indicated, the defendant's contention was that the only possible profit was a very small amount in respect to the Cohibar rent. As I have also noted, Mr Sullivan submitted that the profit was more extensive than that.
18   In a sense, it might be said that the court was also misled because in deciding the case, it did so in ignorance of the fact that one party was deliberately seeking to mislead it.
19   However, it seems to me that in the circumstances of this case it is a little artificial to treat that circumstance as a further misleading of the court from which the defendant should not profit.
20   It is also common ground that the circumstances are sufficient to justify reconsidering the interlocutory injunction to some extent. In my opinion, in this reconsideration, the court is not strictly limited to reconsidering the matter in respect of which the court was directly misled. The court now knows that in the hearing before Young J there was a deliberate attempt to mislead the court, and I think it is fair to say that, had Young J known of that, it could have affected the whole of his approach to the matter. Accordingly, I do not accept that the court is limited to reconsidering the conditions in relation to Cohibar. The real question is whether I should reconsider, and perhaps vary, the conditions in relation to Jordans, because of the possibility that Young J might have decided the case differently if he had known that one party was deliberately trying to mislead him, as I now know.
21   This is not a case where it is sought to set aside the whole judgment, and there is no specific allegation of fraud. I think, in those circumstances, I must still give weight to the original decision. I accept the submission that I am not now seeking to punish the defendant, although I am seeking to prevent an advantage being obtained by the defendant by its misleading of the court, and I am attempting to do what is fair between the parties in the light of all the circumstances now known.
22   On the whole, I think it would be unfair to the plaintiffs to proceed on the basis that it would have made no difference to Young J's decision if he had known the truth about the conduct of the case before him. It is impossible to know one way or the other, but it seems to me that this impossibility should not redound to the benefit of the defendant.
23   I am dealing with a situation which is only to apply for a few months, and which can be adjusted after the final hearing, so that it does not in any way finally deal with the rights of the parties. In those circumstances, I think it is reasonable to take a broad brush approach. Taking that approach, I think it would be appropriate to remove the requirement for payment of back rent of $100,000.00. It seems to me that that was substantially foregone by the defendant, albeit not in a way that necessarily made it irrecoverable, but, in my opinion, in a way which, in all the circumstances of the case, including the defendant's deliberate attempt to mislead the court, make it inappropriate to require payment of that amount as a price of interlocutory relief.
24   In relation to rent from 1 May onwards, in my opinion, the appropriate condition is to require the payment of full rent from the present, but leaving standing the payment which occurred for the month of August.
25   In relation to Cohibar, the only question is the rent between May and August inclusive, and in my opinion that should be paid at the rate of $6,250.00. Although there is some force in Mr Robinson's submission that the agreement of the parties implies that a fair figure is $11,875.00, the agreement explicitly only applies from September into the future, and I am not able to know all the considerations that went into both parties agreeing to that figure. It seems to me that if I were to allow that figure for an earlier period, that may be giving the defendant some advantage from its misleading of the court. So for that reason, I would make it the lower figure which was offered by the plaintiffs.
26   As regard costs, I am treating this as an ordinary contested interlocutory application for injunction. The plaintiffs have been substantially successful, and I think it appropriate that the costs of this application be the plaintiffs' costs in the proceedings.
27   Mr Sullivan has applied for an order that the costs the subject of Justice Santow's order be payable forthwith. I am not minded to make such an order.
28   I will direct that Short Minutes be brought in.
29   The exhibits may be returned.

Last Modified: 09/14/1999