Lin Creations Pty Ltd v Springvale Property Holdings Pty Ltd
[2000] VSC 24
•27 January 2000
SUPREME COURT OF VICTORIA
PRACTICE COURT Do not Send for Reporting Not Restricted
No. 7969 of 1999
| LIN CREATIONS PTY. LTD. (ADMINISTRATOR APPOINTED) | Plaintiff |
| v. | |
| SPRINGVALE PROPERTY HOLDINGS PTY. LTD. | Defendant |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 21 JANUARY 2000 | |
DATE OF JUDGMENT: | 27 JANUARY 2000 | |
CASE MAY BE CITED AS: | LIN CREATIONS PTY. LTD. v. SPRINGVALE PROPERTY HOLDINGS PTY. LTD. | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 24 | |
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CATCHWORDS: Lessor and lessee – Dispute as to rent of premises – Injunction to restrain lessor retaking possession of premises – Serious issues to be tried – Balance of convenience in favour of lessee.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. D.J. Williams | Barry Fried |
| For the Defendant | Mr. S. Marantelli | Jonathan Wong |
HIS HONOUR:
On 23 November 1999 Robert William Morton was appointed administrator of the plaintiff Lin Creations Pty Ltd, pursuant to s.436C of The Corporations Law.
On 18 December 1999 an urgent ex parte application was made to me on behalf of the administrator of the plaintiff for an order requiring the defendant Springvale Property Holdings Pty Ltd to forthwith restore to the plaintiff possession of the shop known as Shop G33 Springvale Shopping Centre, 48-56 Buckingham Street, Springvale (the shop) and for an order to restrain the defendant from interfering with the plaintiff's possession of the shop until 4 p.m. On 20 December 1999 or further order.
Upon receiving an appropriate undertaking as to damages from the plaintiff and its administrator, I acceded to the application.
The defendant complied with my orders and the plaintiff regained possession of the shop.
On 20 December 1990 and by consent of the parties I continued the restraining order to 10 January 2000.
On 10 January 2000 I made an order that on or before 14 January the defendant make discovery of all documents recording or relating to any payments made since 1 March 1999 by the plaintiff or any other person to the defendant or its directors in respect of the shop. I then extended the injunction to 21 January and adjourned the further hearing of the matter to that same date.
I now have before me an application by the administrator of the plaintiff to continue the restraining order to the trial of the proceeding. The application is opposed by the defendant.
The defendant is and for a number of years has been the owner of the shop.
Prior to 17 July 1997 the shop was leased to a company called Son Brothers Pty Ltd. Son Brothers was controlled by Son Thanh Nguyen (Son). It would appear that Son Brothers never paid the defendant any rental in respect of the shop and in due course it ceased to occupy it. I do not know how that came about. Having regard to what occurred subsequently I assume that it was placed in liquidation.
On 17 July 1997 another company controlled by Son called Reclock Pty Ltd entered into possession of the shop. It too failed to pay any rent for the shop. On 4 February 1998 Reclock was placed in liquidation.
On the day that Reclock was wound up Son arranged for another of his companies called ML & C Pty Ltd to take a lease of the shop and to purchase the stock, plant and equipment at the shop. It too did never pay any rent for the shop to the defendant.
On 15 June 1999 ML & C received a notice to quit the shop and to deliver up possession of the shop on 1 August 1999. At that time Son controlled the plaintiff although he is not a director of it.
On 5 April 1999 he arranged for his fiancee Loan Thanh Tran (Loan Tran) to be appointed a director of the plaintiff.
Pausing at this point, the sooner the appropriate regulatory authority takes proceedings to ban Son from operating companies in the fashion he does the better. It would seem clear from the little I have outlined of his background thus far that he has little if any financial ability or scruple. His activities must have caused significant financial losses to his companies various creditors.
At all events, and obviously because he saw the writing on the wall so far as ML & C was concerned, as early as April 1999 Son began negotiating with the managing director of the defendant, Van Ho Nguyen (Van) to have the plaintiff take a lease of the shop.
It will perhaps surprise the reader of these reasons for judgment to learn that after some months of haggling the defendant agreed to grant to the plaintiff a five year lease of the shop commencing on 17 June 1999. The lease contains an option for a further term of five years.
In September 1999 a dispute arose between the plaintiff and the defendant concerning the rental of the shop. The defendant maintains that at that time the plaintiff was in arrears. That is disputed by the plaintiff.
On 8 September 1999 the defendant's solicitors served a notice of re-entry on the plaintiff.
On 23 November 1999 a creditor of the plaintiff who holds a charge over the plaintiff's property, including the plaintiff's interest in the shop, appointed Mr Morton administrator of the plaintiff. Mr Morton has permitted Son's fiancee to continue to operate the business being conducted at the shop whilst he investigates the affairs of the plaintiff.
At about midnight on 17 December 1999 security guards acting on behalf of the defendant entered the shop and took possession of it on behalf of the defendant. It was as a consequence of their actions in that regard that the urgent application was made to me on 18 December.
It is argued on behalf of the defendant that having regard to the history of the matter no further injunctive relief should be granted to the plaintiff, all the more so since the defendant has now entered into an agreement to re-let the shop to a company called Delta Grand Pty Ltd.
The following matters are relied upon by the administrator in support of his application:
1. It is strongly arguable that in the circumstances of this case the defendant demanded key money from the plaintiff as a condition of granting to the plaintiff the lease in question.
That contention is based upon the affidavit of Son sworn 6 January 2000, the relevant paragraphs of which read:
"10(b) Prior to signing the lease, Mr Chuong made various amendments in his own handwriting to the amounts payable in respect of each of the years rent due under the lease. The rental payable under the lease was going to be for $118,000.00 per annum and that rent was to be increased by a fixed sum of 3% per annum to cover CPI increases. However, at the time the lease was to be signed, a sum of $159,500.00 was still outstanding in respect of rent which was owing by ML & C and Reclock. Mr Chuong made amendments to the lease so that the amount of outstanding rent due by those companies was included in the rental calculations for the lease which was to be signed that day;
(c) In the first year the sum of $57,500.00 of outstanding rent was to be included in the rental payment and in the subsequent years the amount of $25,500.00 per year was to be included in each of the rental payments. That is why, when looking at the first schedule, the rent for the first year of $175,500.00 goes down in the second year to $147,040.00."
By virtue of the provisions of s.11 of the Retail Tenancies Reform Act 1998 any provision in a retail premises lease to the extent that it requires the payment of any key money is void.
"Key money" is defined in the Act as meaning:
"(a) money that a tenant is to pay; or
(b)any benefit that a tenant is to confer - by way of a premium or something of a like nature in consideration of the granting of or agreeing to grant a lease or the renewal of a lease or the consenting to an assignment of a lease or to the sub-leasing of the premises to which a lease relates."
It is argued that if that is in fact the situation then the plaintiff has paid significantly more in rent to date than it was required to and the rent therefore is not in arrears.
2. The accounting records of the defendant are so inadequate, incomplete and contradictory that it has not been possible for Mr Morton to calculate how much rent the plaintiff has in fact paid to date in respect of the shop. Again, in the event the defendant did not demand and receive key money, it may well be that upon a proper examination of all available financial information the plaintiff is not behind with its rent.
In my opinion the matters I have adverted to do raise serious issues requiring the court's determination. Where then does the balance of convenience lie?
The plaintiff's administrator has given an undertaking on his own behalf and on behalf of the plaintiff that hereafter, whilst he remains administrator, the rental in respect of the shop will be paid as and when it falls due. He has also given the usual undertaking as to damages, again on his own behalf and on behalf of the plaintiff. The defendant is protected therefore so far as the payment of future rental is concerned.
In her affidavit sworn 26 November 1999 in a proceeding Loan Tran brought to have the administrator's appointment set aside, Loan Tran has sworn that in September 1999 she began to negotiate a sale of the business being conducted at the shop for $550,000. If the plaintiff is evicted from the shop it will suffer significant financial loss, as of course would its creditors. Those too are factors which in my opinion it is appropriate to have regard to.
As to the proposed lease of the shop to Delta Grand Pty Ltd, it is pointed out by counsel for the administrator that the terms of the agreement for lease are such that the defendant can lose nothing if the relief sought by the administrator is granted. In that regard counsel for the administrator points to the following matters:
1. Clause 2.1 of the agreement for lease gives the defendant the right to unilaterally rescind the agreement. The clause reads:
"2.1 The Lessor may in its absolute discretion rescind this Agreement by notice in writing to the Lessee at any time on or before the Commencement Date."
2. The commencement date of the proposed lease is defined in the following way:
"Commencement date means the latest date of the following dates:
(a) 15 January 2000;
(b)the date on which the Administrator gives his written consent to release possession of the premises; and
(c)the date on which the Court orders delivery of possession of the premises by the Administrator."
Counsel also draws attention to recital G in the agreement for lease which reads:
"G.The Lessor is presently instituting proceeding to seek the leave of the Court pursuant to Section 440C of The Corporations Law in order to obtain possession of the premises."
In counsel's submission that statement is clearly false. No such proceeding has ever been instituted by the defendant.
Having considered the various matters to which I have referred, it is my opinion that the balance of convenience is such in this case as to justify granting the administrator the relief he seeks on behalf of the plaintiff. If a satisfactory outcome of the dispute has not been achieved by the parties by the termination of the administration the defendant may apply to the court pursuant to the leave reserved to vary the orders I make in the proceeding.
I order that the injunction ordered by paragraph 2 of my order of 18 December 1999 and extended it first by paragraph 2 of my order of 20 December, then paragraph 2 of my order of 10 January and the order I made on 21 January be extended to the trial of the proceeding or further order.
I reserve to the parties liberty to apply.
I reserve the costs of the application.
I direct that within 72 hours this order be prepared by the solicitors for the plaintiff and be brought to me for authentication.
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