Kokos International Pty Ltd v Libra Motors Pty Ltd
[2002] WASC 317
KOKOS INTERNATIONAL PTY LTD -v- LIBRA MOTORS PTY LTD & ANOR [2002] WASC 317
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASC 317 | |
| Case No: | CIV:2477/2002 | 17 DECEMBER 2002 | |
| Coram: | EM HEENAN J | 17/12/02 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Interlocutory injunction granted | ||
| B | |||
| PDF Version |
| Parties: | KOKOS INTERNATIONAL PTY LTD (ACN 009 404 611) LIBRA MOTORS PTY LTD (ACN 609 278 344) WELLMAN ENTERPRISES PTY LTD (ACN 054 589) |
Catchwords: | Interlocutory injunction Lessor and lessee Dispute over existence of lease of premises and option to extend Plaintiff in possession and paying rent claiming right to extend term Serious question to be tried, balance of convenience favours continuation of possession on terms |
Legislation: | Trade Practices Act, s 51A, s 52, s 87 |
Case References: | Nil Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 Patrick Stevedores Operation No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Port Kennedy Resorts Pty Ltd v Huat [2000] WASCA 328 Riches v Hogben [1985] 2 Qd R 292 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
LIBRA MOTORS PTY LTD (ACN 609 278 344)
WELLMAN ENTERPRISES PTY LTD (ACN 054 589)
Defendants
Catchwords:
Interlocutory injunction - Lessor and lessee - Dispute over existence of lease of premises and option to extend - Plaintiff in possession and paying rent claiming right to extend term - Serious question to be tried, balance of convenience favours continuation of possession on terms
Legislation:
Trade Practices Act, s 51A, s 52, s 87
(Page 2)
Result:
Interlocutory injunction granted
Category: B
Representation:
Counsel:
Plaintiff : Mr R H B Pringle QC
Defendants : Mr A S Stavrianou
Solicitors:
Plaintiff : Galic & Co
Defendants : Chalmers & Partners
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281
Patrick Stevedores Operation No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1
Port Kennedy Resorts Pty Ltd v Huat [2000] WASCA 328
Riches v Hogben [1985] 2 Qd R 292
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
(Page 3)
1 EM HEENAN J: Before the Court is an application for an interlocutory injunction by the plaintiff in these proceedings. This has been heard this morning as a special appointment with full argument. The application is made in the course of proceedings concerning a dispute over the rights to possession of some commercial premises in Murray Street, Northbridge, presently operated as a backpackers' hostel by the plaintiff, Kokos International Pty Ltd.
2 The pleadings in the action and the accompanying affidavits reveal that the dispute between the plaintiff, as the present occupant of the premises, and the defendant, as the proprietor, concerns representations alleged by the plaintiff to have been made by the defendant in 1999 when the plaintiff purchased the business of the former lessee and began negotiations to go into possession and take an assignment of the then existing lease.
3 The history reveals that the premises were the subject of an undated lease between the Hospital Benefit Fund of WA Inc as lessor and Mr Eugene Lee as lessee which appears to have been stamped on 10 February 1994. That lease was subsequently renewed and extended by a renewal of lease, again undated but stamped 30 September 1998. When the present plaintiff negotiated with Mr Lee for the purchase of the business operated from these premises there was about two to two and a half years of the unexpired term of the extended lease then to run. According to the plaintiff it desired the security of a longer term if it was to outlay the funds necessary to purchase the business and take over possession of the premises and hence, again according to the plaintiff, there were discussions and negotiations between a representative of the plaintiff and representatives of the defendant landlords.
4 On the affidavit material there is some controversy over exactly what was said and, perhaps more importantly, what was intended by these negotiations, but it is reasonably clear on the evidence that there was a meeting on 17 June 1999 at which Mr Yung Chan Yu, who is referred to in the papers as Mr Yung, negotiated with Mr Lee for the purchase of the business and in the course of these negotiations had discussions with a Mr Baruffi who it is alleged was the agent of the defendant landlords.
5 It is alleged by the plaintiff, in par 4 of the statement of claim and supported by Mr Yung's affidavit, that in the course of these negotiations (a) Mr Yung informed Messrs Lee and Baruffi several times that the plaintiff would require a further five years' occupation of the premises from expiry of the lease and otherwise the plaintiff would not agree to
(Page 4)
- purchase the business and (b) that Mr Baruffi proposed that the lease be varied by extending it on the same terms for a further five years. On 18 June 1999, the day after this meeting, a fax was sent by Mr Baruffi, the defendants' agent, to Mr Yung which reads as follows:
"Dear Yung,
Further to our meeting yesterday we wish to advise as follows:
(i) the lessor is prepared to grant a 5-year extension to the existing lease;
(ii) the newsagent is prepared to sell his business and will be advising me of his price;
(iii) outgoings and rental for 1998-99 is attached.
Yours faithfully,
Kevin Baruffi and Associates."
7 By a document entitled "Application to assign commercial premises," which is an annexure to Mr Yung's affidavit of 4 November 2002, the plaintiff sought an assignment of the existing lease which was due to expire on 14 November 2002 in terms which provided for an option of five years in the context, the plaintiff contends, that that was understood and intended to represent the stipulation made at the meeting on 17 June that a further five year term should be granted.
8 Little attention seems to have been given at this point to the method by which the extra five year term would actually be conferred, whether it was to be an extension of the existing lease, whether there was to be a new lease for a term of almost seven years, or whether there was to be some other modification of the existing contractual agreements, but at least in the plaintiff's view the essential point was that the term was to be extended for five years subject to the same conditions of the then current
(Page 5)
- lease. I shall have to return to the issues which arise from that contention in a moment.
9 What eventually happened was that in early September 1999 there was correspondence between Mr Yung and Mr Baruffi concerning the lease. There is a letter written by Mr Baruffi dated 2 September 1999, also annexed to the affidavit of Mr Yung of 4 November, providing for a new form of lease to be prepared and while that letter speaks for itself it is significant to note that as a short-term measure it proposed that the existing lease would simply be assigned and a new lease for a longer term would follow. There was some telephone discussion with Mr Baruffi of 15 September 1999 which confirmed those arrangements. This correspondence envisaged something more, it seems, than a mere extension for five years, for it alludes to "Further option periods available on the above premises." That reference should be taken to be to a proposal that there would be an extension for five years plus an option for a further five years plus a further option for a further five years, a total potential tenancy of 15 years after the expiration of the then current lease as assigned.
10 Consistently with those arrangements the then current lease was assigned, by a deed of assignment between the plaintiff and the vacating tenants referred to as covenantors, and the defendants as lessors. That deed, which observed the lax tradition of being undated but which was stamped on some date which is not possible to tell from this copy is at page 149 of the affidavit of Mr Yung. Nothing in that assignment conferred upon the plaintiff, as the new lessee, any right to a term continuing beyond the date of expiration of November 2002.
11 The defendant asserts that this is significant because it implies that the plaintiff was aware and accepted that there was no right to possession beyond that termination date at least at that point and that any expectation as to a longer right of possession was an expectancies only which depended upon the results of further negotiations which had, by then, been foreshadowed.
12 In the months which followed a draft lease for the longer term, including two options of five years, was proffered by the defendants and submitted to the plaintiff and the plaintiff's advisers for consideration. That was submitted under cover of a letter from the defendants' agent of 9 August 1999 - the draft lease can be found at pages 86 - 143 of the annexures to the affidavit of Mr Yung.
(Page 6)
13 As well as propounding the longer five year term plus the two additional options, this draft contained a rent review clause which provided for greater rent increases at the review periods than were provided for under the lease as assigned. Apparently because of those provisions, but perhaps for other reasons as well, there was never any agreement between the parties upon the contents of the draft lease. Then, as the expiration of the lease as assigned in November 2002 began to approach, the plaintiff on 15 August 2002 purported to claim an entitlement to another five year term plus a five year option.
14 That was done by the letter at page 160 of the affidavit which I have already mentioned. Again, the defendants' place some significance on that letter as indicating that the plaintiff acknowledged that there was not then any legal entitlement to another five year term plus a five year option.
15 The 14th November 2002 came, but there was no new lease or extension providing an extended term. The landlord defendants now contend that the lease as assigned having expired the plaintiff is obliged to give up possession and advance a counterclaim for possession of the premises. There is a collateral dispute between the parties pending in the Local Court concerning the amounts payable under the assigned lease for variable outgoings giving rise to a claim for a refund by the plaintiff as lessee and a claim for additional moneys due to the defendants as lessors. It is unnecessary to do anything more than notice the existence of that dispute but that does not appear to me to touch upon entitlements to possession after 14 November this year.
16 The position of the plaintiff essentially is that by the discussions which took place in June 1999, confirmed to an extent by the letter from the settlement agents of 27 July 1999 (page 83 of the documents), there was a representation that the then existing lease would be extended by a further five years on the same terms and conditions and that on the faith of that representations the plaintiff completed the purchase from the then lessee and went into possession. On one view there may be sufficient in the papers to constitute an enforceable agreement for lease subject to an adequate memorandum in writing as required under the Property Law Act containing all the material provisions of the agreement signed by the party to be charged; namely, by the owner lessors against the possibility that there may be some deficiency in the written memoranda. The plaintiff also contends that there is a proprietary claim based on estoppel generated by the expectancy that a longer term would be granted and relied upon by the plaintiff when going into possession. As a second or third alternative
(Page 7)
- and a third cause of action the plaintiff contends that the representations which I have already described are actionable under s 51A and s 52 of the Trade Practices Act and can entitle the plaintiff to relief under s 87 to make good the representation.
17 I accept that there are arguable claims on all three of the causes of action alleged.
18 The defendants' position however is not to be neglected. There is affidavit evidence from Mr Baruffi, the defendants' representative at the discussions in June 1999, that the agreement to grant a five year extension had from the very beginning been subject to approval by the landlord and was only ever likely to be on the basis that a new lease would be required, the new lease containing terms which, from the lessor's viewpoint would be an improvement on the terms of the existing lease. The defendants submit that subsequent intimations of a readiness to grant a five year extension always proceeded on the footing that there would be a new lease and that the new lease when eventually proffered did contain additional terms, notably the revised mechanism for calculating rent and rent reviews so leading to higher rentals.
19 On one view of the correspondence it can be seen that there seems to have been a shift of attention from in mid June and July 1999 to September 1999 and beyond from a consideration of a mere five year extension to the existing term to a consideration of a new lease with not just a five year extension but also with two further options to extend, each of five years, making a total of 15 years as already noted. Against that possibility it is not surprising that some higher rental or some mechanism for higher rental would be demanded for the increasing security of a 15-year potential right of possession.
20 It appears to me that there is a real issue in this case on the papers and on the rival evidence of the parties over whether there was to be a five year extension to the existing lease on existing terms as claimed by the plaintiff or a five year extension only on the basis that there would be a new lease with different terms, a potential which led to the changed rent review mechanism and the two additional five year options.
21 I note that in the affidavit of Mr Baruffi for the defendants sworn 11 November Mr Baruffi puts the defendants' version of these negotiations as being conditional on a new lease with the implication that there would be more moneys payable. The plaintiff on the other hand acknowledges that for a potential 15-year term a greater remuneration
(Page 8)
- would not only be one that was to be expected but would be reasonable in the circumstances, but then says that this does not detract from the plain representation made in June that there would be a five year extension on the same terms. There is some potential corroboration of the plaintiff's claim in that regard by par 10 of Mr Baruffi's affidavit of 11 November although that may well be equivocal.
22 I am left therefore with the situation where there are rival versions of the events and negotiations on the critical issue of whether there was to be a five year extension on the same terms or whether the five year extension was only ever available at a higher price. I do not see how that issue can be resolved at this stage of the proceedings but I accept that it constitutes a serious question to be tried and it is sufficient in my opinion to warrant protective measures being taken if that outcome is favoured by the balance of convenience. It is to that second test for the entitlement to an interlocutory injunction to which I now turn.
23 The situation is that the plaintiff continues in possession of the disputed premises. The defendants have brought this counterclaim for vacant possession, mesne profits and interest. There have been some submissions made on behalf of the defendants querying the financial status of the plaintiff and the sufficiency of the undertaking as to damages which has been offered but there is no suggestion that the plaintiff is not ready, willing and able to continue to make the payments under the lease as assigned nor in any real sense that the plaintiff would be unable to meet a liability for mesne profits if it turns out that it was not entitled to possession at any date after 14 November 2002 and that the market rental of the premises is greater than the rental payable. The defendants press me with the submission that it desires to have the premises vacated so as to be able to utilise them for other purposes but no particular alternative is mentioned.
24 It seems to me that to force the plaintiff out of possession at this stage in circumstances where it might turn out that the plaintiff is entitled to possession for another four and a half years or more is likely to be more prejudicial to the plaintiff than to the defendants particularly where this is a dispute which should be capable of resolution by trial within some six to nine months, and where there are already other proceedings between these parties pending concerning their mutual financial obligations.
25 I am satisfied that the balance of convenience favours the grant of an interlocutory injunction in this case but I consider that it should be conditioned on the basis that the plaintiff prosecutes this action to trial
(Page 9)
- diligently and applies for the action to be entered into the expedited list. I consider that the defendants, and for that matter the plaintiff, should have liberty to apply generally to discharge or vary the terms of the injunction and that the defendants should be at liberty to apply for further or additional undertakings or security for undertakings as to damages. I consider that a term of the injunction to which the plaintiff must submit would be that the acceptance by the defendants of any payments made by the plaintiff from now on should not be regarded as an affirmation or admission of any right of occupancy, if the ultimate decision of the Court is that the right to possession under the lease terminated on 14 November 2002.
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