Lopez Nominees Pty Ltd v Holding Nominees Pty Ltd
[1999] VSC 43
•2 March 1999
SUPREME COURT OF VICTORIA
PRACTICE COURT Do not Send for Reporting Not Restricted
No. 4278 of 1999
| LOPEZ NOMINEES PTY. LTD. | Plaintiff |
| v. | |
| HOLDING NOMINEES PTY. LTD. | Defendant |
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JUDGE: | BEACH, J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 25 FEBRUARY 1999 | |
DATE OF JUDGMENT: | 2 MARCH 1999 | |
CASE MAY BE CITED AS: | LOPEZ NOMINEES PTY. LTD. v. HOLDING NOMINEES PTY. LTD. | |
MEDIA NEUTRAL CITATION: | [1999] VSC 43 | |
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CATCHWORDS: Application for interlocutory injunction - Serious issues to be fixed - Balance of convenience favouring defendant - Application refused.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr. S.R. Horgan | Swersky & Velos |
| For the Defendant | Mr. P.N. Wickrama | Andrew T. Fraser & Associates |
HIS HONOUR:
In 1996 Francis Aloysuis Dwyer and his wife Margaret Victoria Dwyer were the owners of premises at 34 Scott Street, Essendon. The premises were used as a nursing home (the nursing home).
In early 1996 the Dwyers sold their nursing home business to the defendant Holding Nominees Pty. Ltd. for $512,000.
By a lease dated 31 May 1996 they leased the nursing home to the defendant for a term of five years.
Pursuant to the terms of the lease the defendant:
(1)was responsible for keeping the nursing home in repair and in good tenantable order and condition (clause 2(d)).
(2) was not to allow the nursing home to become vacant (clause 2(h)).
(3)was required to comply with all notices etc. given by statutory or public authorities and relating to the nursing home (clause 2(o)).
(4)was to comply with the requirements of the National Health Act 1993 and any amendment or re-enactment of the Act and with any regulations by-laws or orders relating to nursing homes or the holders of nursing home registrations for the time being in force in Victoria (clause 5(a)).
(5)was to ensure the renewal of the nursing home registration granted in respect of the nursing home (clause 5(c)).
(6)would at all times carry on in the nursing home the trade or business of a holder of a nursing home registration (clause 5(e)).
(7)would not do anything to jeopardise the nursing home's registration (clause 5(h)); and
(8)would deliver up to the lessor the nursing home registration within 21 days prior to the expiration of the lease (clause 5(i)).
For their part the plaintiff warranted that at the commencement of the lease the premises were suitable for use as a nursing home which the lessors had been conducting on the premises (clause 3(b)).
Prior to the sale of the business to the defendant the Dwyers had had allocated to them 32 bed places by the relevant Commonwealth authority. The allocation of the bed places meant that the Dwyers could provide Commonwealth subsidised care at the nursing home for 32 persons. The bed places were transferred to the defendant at the time of the sale of the business.
By a contract note dated 25 March 1998 the plaintiff Lopez Nominees Pty. Ltd. purchased the freehold of the nursing home from the Dwyers.
In July 1998 the Commonwealth Department of Health and Family Services (the Department) wrote to approved providers of nursing home services concerning aged care reforms and their impact on leased premises. The circular letter reads:
"To the Approved Provider
operating in leased premises
Aged Care Reforms and their Impact on Leased Premises
One of the primary reasons behind the reforms introduced by the Government from 1 October 1997 is to address the poor quality of many residential care services, particularly nursing homes. The previous legislative and policy framework for aged care was seen as not providing adequate incentive for investment. Significant changes have therefore been made to ensure that the quality of accommodation improves over time.
Each service must meet accreditation requirements, including a specified level of building quality, if they are to continue to be eligible for Commonwealth subsidy after 1 January 2001. Continuous improvement is a key feature of the accreditation requirements.
It is apparent that many services that do not meet certification requirements are in leased premises. To ensure that landlords understand the importance of building quality and the need for improvements the attached letter has been sent to them.
It is critical that you as the approved provider with the responsibility of quality of care and meeting accreditation requirements discuss and plan with your landlord any current and future needs for building improvement.
If your buildings do not yet meet certification requirements it may be appropriate for both you and your landlord to attend information seminars to be offered by Bovis Australia, business consultants appointed by the Technical Reference Group on Restructuring, so that together you can ensure the provision of appropriate aged care into the future.
It has been made clear in the letter to the landlords that an allocation of places is to an approved provider, and that applications of transfers to a new location in order to provide better quality accommodation are likely to be approved, subject to normal planning requirements.
The letter also makes clear that transfers to another provider, either the landlord or a third party, are unlikely to be approved where the premises do not meet certification requirements.
It is in the interests of both the landlord and the lessee to enter discussions as to how best to ensure buildings meet the required standard, which is to rise over time. Accommodation payments from residents, where buildings meet certification standard, are for the purpose of improved accommodation and part of the discussions can be around how best to share costs and benefits appropriately.
Where discussions with the landlord fail to resolve any requirement for capital improvements it may be appropriate to seek professional advice on the range of options that you may have. Your industry association will be able to recommend legal and other advisers with appropriate experience should you require it.
The lease agreement you have with your landlord is a private arrangement between the two parties and the Commonwealth does not have a role in intervening in contractual arrangements which have been freely entered into by the parties.
The role of the Commonwealth is to improve the quality of care for older people.
It is in the interests of both landlords and lessees to negotiate towards a sustainable place in the aged care sector of the future. A copy of this letter has also been provided to your landlord.
Yours sincerely,
Andrew Stuart
Assistant Secretary
Residential Program Management Branch2 July 1998."
It is clear on any view of the matter that at that time the nursing home did not meet accreditation requirements. However, there is a significant dispute between the parties as to the cost involved in bringing the nursing home up to standard. For the plaintiff it is said that the cost of bringing it up to standard is of the order of $15,000; further that it is not necessary that the work required be done immediately. If the parties provide the Department with their proposals to upgrade the nursing home and assure the Department that those proposals will be implemented, the Department will grant the appropriate accreditation.
For the defendant it is said that the cost of bringing the nursing home up to a standard where it will receive accreditation will be of the order of $750,000; further that it is essential that that work be done now if the nursing home is to operate satisfactorily.
It is not possible of course for me to determine that issue at this stage of the proceeding. That must await trial.
At all events by notice of 2 February 1999 the defendant gave to the plaintiff notice of determination of the lease of the nursing home on the ground that the nursing home premises are unsuitable for the conduct of a nursing home business. At about the same time the last of the patients accommodated at the nursing home vacated the premises, the defendant removed the 32 beds from the premises and then took steps to sell the 32 bed places to another nursing home provider.
On 4 February 1999 the plaintiff made an urgent ex parte application to me to restrain the defendant selling the bed places. That day I made (inter alia) the following order in the matter:
"Until 4.00 p.m. 11 February 1999 or further order of the Court, the first defendant, its directors, agent or employees be restrained howsoever from dealing with, transferring, selling, perfecting any sale, offering for sale or dealing with in any whatsoever the nursing home registrations or bed places or allocated places in respect of aged care held pursuant to the Aged Care Act 1997 and conducted by the first defendant as part of the business of the Alimar Private Nursing Home situated at 34-36 Scott Street, Essendon in the State of Victoria."
The order was subsequently extended by consent of the parties to Thursday last.
On Thursday I heard an application by the plaintiff for an interlocutory injunction extending the order to the trial of the proceeding.
On any view of the matter there are serious issues to be tried in the proceeding not the least of which relate to the present condition of the nursing home and the question of whose responsibility it is to bring it up to a standard where it will receive Commonwealth accreditation. If no more than $15,000 is involved in achieving the appropriate standard it could well be argued that the responsibility is the defendant's. If the appropriate standard can only be achieved by the expenditure of a sum of the order of $750,000 it is arguable that that responsibility rests with the plaintiff. As I observed a moment ago - those matters must await the trial of the proceeding.
In whose favour then is the balance of convenience. I have found this a very difficult matter to determine. On the one hand it can be said that the defendant should be held to the term of its lease and be not permitted to dispose of the bed places because without them the premises cannot be conducted as a nursing home. On the other hand it can be said that the premises have ceased to be used as a nursing home, the patients have left and been placed elsewhere, and the beds have been removed from the premises. In that situation there is little to be gained in restraining the defendant from disposing of its bed places. If the plaintiff is ultimately successful in its action it should be adequately compensated by an appropriate award of damages.
In the final analysis I am not satisfied that it is appropriate to continue the injunction. It is clear to my mind that the premises are unlikely to be used as a nursing home whilst they remain in their present condition. In that situation there seems little point in restraining the defendant disposing of the bed places. If the plaintiff is ultimately successful in the proceeding it should not be a difficult task to calculate the loss it has suffered as a consequence of the defendant's action.
The application for interlocutory relief is refused. I order that the plaintiff pay the defendant's costs of the application.
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