Maharaja's Palace Pty Ltd v Raj and Jai Construction Pty Ltd

[2018] NSWCA 191

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Maharaja’s Palace Pty Ltd v Raj & Jai Construction Pty Ltd [2018] NSWCA 191

Hearing dates:

27 August 2018

Date of orders:

27 August 2018

Decision date:

29 August 2018

Before:

Leeming JA

Decision:

1. I note the usual undertaking as to damages proffered on behalf of the appellants.

 

2. I make order 2 in terms of the notice of motion filed 24 August 2018, namely:

 “An order that Order 2 made by Justice Kunc in the proceedings below on 24 August 2018 restraining the respondent, Raj & Jai Construction Pty Ltd, by itself, its servants and agents, from taking any steps to re-enter and take possession of the Shops 2, 3, 4, 5A, 5B, 6, 7, 8, 12 and 18 at 14-18 Douglas Road, Quakers Hill, New South Wales be continued until further order.”

Catchwords:

PRACTICE – interlocutory injunctive relief pending appeal – dispute between landlord and tenant whether partly performed oral agreement to lease – where appeal seriously arguable, although weak, but balance of convenience favoured continuation of injunctive relief

Legislation Cited:

None

Cases Cited:

Capilano Honey Ltd v Dowling (No 1) [2018] NSWCA 128
Fatimi Pty Ltd v Bryant [2002] NSWSC 750
Klewer v Official Trustee in Bankruptcy (No 2) [2010] NSWCA 258
Maharaja’s Palace Pty Ltd v Raj & Jai Construction Pty Ltd [2018] NSWSC 1269
Regent v Millett (1976) 133 CLR 679; [1976] HCA 40
Yeshiva Synagogue Inc v Karimbla Properties (No 10) Pty Ltd as Trustee of the Harry Triguboff Foundation [2017] NSWCA 331

Texts Cited:

None

Category:

Procedural and other rulings

Parties:

Maharaja’s Palace Pty Ltd (First appellant)
B&B Group Pty Ltd (Second appellant)
Satinder Pal Singh Benepal (Third appellant)
Raj & Jai Construction Pty Ltd (Respondent)

Representation:

Counsel:
S Wells and J Anderson (Appellants)
G Farland (Respondent)

  Solicitors:
Hedges Bhatty Solicitors (Appellants)
HWL Ebsworth Lawyers (Respondent)

File Number(s):

2018/260967

Publication restriction:

None

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Real Property List

Citation:

[2018] NSWSC 1269

Date of Decision:

16 August 2018

Before:

Darke J

File Number(s):

2018/201326

Judgment

1. HIS HONOUR: On 27 August 2018, after hearing the parties in full, I made orders in accordance with those sought in the appellants’ notice of motion. The practical effect of those orders was to restrain the respondent landlord from taking steps to re-enter and take possession until the hearing of the appeal, thereby maintaining the position which has obtained throughout the entirety of this litigation, save for a period of slightly more than a day last week, in circumstances explained below. Earlier that morning, the Registrar had set the appeal down for hearing on 1 November 2018. The number of matters in the list precluded me from giving full reasons at the time, although I indicated the most salient considerations, which are reproduced in paragraphs [15]–[20] below.

2. The respondent requested full reasons, as is its right. These are those reasons.

Background

3. The respondent owns land at Douglas Road, Quakers Hill, on which is erected a building containing a number of shops. For some years, the appellants have conducted a number of businesses on that land, including an Indian restaurant, known as Maharaja’s Haveli (which seats some 400 customers across five rooms in the downstairs section) and a function centre, known as the Oasis Function Centre (which is upstairs and seats some 250 customers). There is evidence that approximately $3 million has been expended over the last decade in fitting out the premises for those businesses.

4. This litigation arises because, despite the foregoing history, there is no written legal lease between the parties. The central issue in the litigation was whether a binding oral agreement for a lease of the premises, for a term of five years with two options of three years, was concluded in around mid-2014. The appellants rely upon a series of acts said to constitute part performance of that oral agreement, including the establishment of the second appellant, B & B Group Pty Ltd, as a special purpose vehicle between (so it is said) landlord and tenant, the transfer of the assets of the businesses to B & B Group, the payment of rent for slightly more than three years, the obtaining of development consent from the local council, and the exchange of draft written leases for the shops on the ground floor. The appellants accept that it is necessary for the acts on which they rely to be unequivocally and in their nature referrable to some contract of the general nature of the alleged agreement for lease: Regent v Millett (1976) 133 CLR 679 at 683; [1976] HCA 40, noting that the terms of the test to be applied are presently under consideration by the High Court: see Pipikos v Trayans [2018] HCATrans 47.

5. The respondent landlord issued notices to quit on 24 May 2018. The litigation was commenced by summons filed on 29 June 2018 (some two months ago), and has proceeded to date with extreme expedition. The appellants sought and obtained interlocutory relief leaving them in possession, in substantially the same terms as were sought in the motion filed in this court, which extended until the trial. The trial was heard on a final basis on 6 and 7 August 2018 before the primary judge sitting in the Real Property List in the Equity Division. His Honour delivered judgment on 16 August 2018 dismissing the Statement of Claim: Maharaja’s Palace Pty Ltd v Raj & Jai Construction Pty Ltd [2018] NSWSC 1269.

6. The primary judge, who saw the principals of the landlord (Mr Bhart Bjushan) and the tenant (Mr Satinder Benepal) being cross-examined, found neither to be an impressive witness: at [47], although his Honour expressed a more favourable view as to the evidence of Mr Goyal, who was involved in the negotiations on behalf of the landlord: at [48] and [53]–[54]. His Honour’s reservations about Mr Benepal’s uncorroborated evidence undoubtedly contributed to his failure to be satisfied that there was a conversation giving rise to a binding oral agreement as alleged. However, the primary judge also gave significant regard upon the contemporaneous documents and the inferences to be drawn from them, including the terms of the instructions for the preparation of leases, the omission of shop 18 (which is occupied by the upstairs function centre) from the draft lease, and the failure, on the part of the appellants, to protest promptly about this.

7. The interlocutory injunctive relief detained prior to trial had been expressed to apply “until further order”. Accordingly, that regime came to an end upon the making of final orders on 16 August 2018: see Fatimi Pty Ltd v Bryant [2002] NSWSC 750 at [226]–[229]; Klewer v Official Trustee in Bankruptcy (No 2) [2010] NSWCA 258 at [6]. It seems that no application was made by the unsuccessful plaintiffs to continue the regime to enable them to review the reasons for judgment and consider whether they wished to appeal. A week later, on the morning of 23 August 2018, they became aware the respondent had re-entered and taken possession of the premises, changing the locks, installing barricades and stationing security guards. That led to an urgent application on Friday 24 August 2018, following which the Duty Judge granted a mandatory injunction involving the return of the appellants into possession, as well as an interim negative injunction preventing the respondent from retaking possession of the premises. The latter order expired at 5pm on Monday 27 August 2018. Neither the reasons nor the transcripts of that application were available the following Monday.

8. I respectfully echo the concerns expressed in Capilano Honey Ltd v Dowling (No 1) [2018] NSWCA 128 at [10] to the effect that while there is much to be said for requiring the expeditious pursuit of proceedings, including an appeal, by the moving party, the very limited injunctive relief – amounting to one working day – within which a further application was required to be made in the Court of Appeal would seem to presuppose a degree of urgency that may not have been warranted in the facts of this case.

9. The applicable principles governing the grant of interlocutory injunctive relief pending appeal were summarised by Basten JA in Yeshiva Synagogue Inc v Karimbla Properties (No 10) Pty Ltd as Trustee of the Harry Triguboff Foundation [2017] NSWCA 331 at [15]–[17]:

“The established basis upon which this Court may intervene to grant such relief pending an appeal is, in broad terms, to prevent the subject matter of the appeal being destroyed or substantially impaired in such a way as to render a successful appeal nugatory. A common example may be found in cases where an appellant resists payment of a sum in accordance with the judgment under appeal on the basis that the money will probably be irrecoverable notwithstanding success on the appeal.

More broadly, the Court is exercising a discretionary power and will need to weigh the hardship and inconvenience likely to be caused to each party by granting or not granting the order sought. The relevant circumstances are likely to include the period for which the relief will need to operate, the promptness with which the applicant for relief has come to the Court and the strength of the proposed appeal.

So far as the last matter is concerned, the inquiry is usually constrained to a determination whether the appeal is reasonably arguable. With respect to the prospects of success on an appeal, the Court stated in Alexander v Cambridge Credit Corporation Ltd (Receivers appointed):

‘... although courts approaching applications for a stay will not generally speculate about the appellant’s prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interests of the parties, from making some preliminary assessment about whether the appellant has an arguable case.’” (Footnotes omitted)

Those principles were not in dispute.

10. The appellants submitted that the appeal was reasonably arguable, and that the balance of convenience favoured continuing the interlocutory regime for the relatively short period of time before the appeal was heard. They emphasised the continuing payment of rent, the money that had been spent on the premises, and the disruption to the approximately 40 staff who were employed, the hundreds of bookings that had already been taken over the next two months, and the 1,500 members who, in return for having paid an annual membership fee, were entitled to benefits at the premises.

11. The respondents submitted that the appeal was hopeless. In support of that proposition, they relied on three things. The first was the fact that the notice of appeal sought declaratory relief in relation to the notices to quit, which had not been sought at trial. Accepting for present purposes that the appellants face a difficulty in obtaining declaratory relief on appeal which was not sought at trial, it does not follow that the balance of the appeal is foredoomed to fail.

12. The second was that insofar as the appeal turned upon the rejection of the testimonial evidence of Mr Benepal, the Court of Appeal would not interfere with the credit-based assessment of his evidence made by the primary judge and in particular (this was the third point) on certain equivocal evidence he gave as to the agreed rent.

13. On the balance of convenience, there was some evidence that the respondent was seeking to sell the whole property subject to lease, although it had not as yet executed an agency agreement. It was submitted that as a matter of commercial reality, it would not be possible to sell the property if the injunction issued.

Consideration

14. The following six paragraphs reproduce the brief reasons expressed by me at the conclusion of the hearing.

15. I accept that the respondent is entitled, prima facie, to enjoy the fruits of its victory after a final hearing. I do not accept that this is an appeal that is hopeless, although I do find that it is an appeal that has significant difficulties given the nature of the challenge which turns, in part, upon the fact finding made by the primary judge who had the benefit of seeing the relevant witnesses, and expressed views about the reliability of their testimonial evidence. But it is a large thing to contend, as the respondent does, that the appeal is hopeless.

16. The principal basis on which the appeal is said to be hopeless is the variation in evidence by Mr Benepal in relation to the rent in that he conceded during cross-examination that it might be somewhat more than $198,000 per annum, including GST. The primary judge recorded this at [58]. Contrary to the respondent’s submission, I do not regard that as fatal to the prospects of an appeal which, on its face, appears to have been drafted with care, and at least one potential answer to the evidence relates to a separate lot, namely lot 17, which was a temple or prayer room upstairs, as to which there was a conversation involving the possible expansion of the function centre.

17. Further, I proceed on the basis that notwithstanding the retaking of possession following the expiration of the interlocutory relief granted by the primary judge, which in turn was reversed on further application by the former tenant last Friday afternoon when the Duty Judge granted relief which expires at 5pm today, I should proceed as if the former tenant had applied for post-judgment relief from the primary judge, and therefore as if there had been continuity of tenure. I think that is the right approach to take in the circumstances. In any event, the respondent is content with that course.

18. In those circumstances I am faced with what I regard as a less than strong appeal in terms of prospects of success. Indeed, it is one that is on the weaker side, as best I can see, but one that is properly arguable and accordingly the exercise of my discretion is informed principally by the balance of convenience. On that front, and I will not do justice to all of the factors here and now in light of the state of the list, but the most salient considerations are (a) long-term insecure possession, coupled with payment of rent, over some three years, (b) short-term continuing possession after notices to quit had been served and proceedings had been commenced, this occupying from March/April of this year up till the present, (c) a final hearing of the appeal being set down on 1 November which is nine weeks away from today, and (d) some expectation of orders being made relatively quickly after that.

19. The further occupation that is sought by the appellants may well be less than three months. The appellants proffer the usual undertaking as to damages, which is some protection against any potential purchaser falling away, and militates against the prejudice, which I regard as real, to the landlord in not being able to sell its property subject to short-term leases. By that I mean that a sale would be very difficult with this litigation on foot. But that prejudice is substantially outweighed by the disruption to the appellants’ business, and the moderately numerous employees of that business, and the very numerous patrons of that business, in the event that injunctive relief does not issue.

20. Weighing up all of those factors I think this is a case where interlocutory relief should issue.

21. Although I did not mention it in the brief reasons given at the conclusion of the hearing, I would add that there appears to have been a conflation of two separate things in the respondent’s submissions as to prejudice. It may be that the commercial reality is such that the property in unsellable while the litigation remains on foot, and I would accept that existence of the litigation would prima facie affect the price which a willing but not anxious purchaser would pay. But that is not the relevant prejudice for the purposes of this application. The issue for present purposes is more precise. Whatever the outcome of the notice of motion, the litigation will remain unresolved. The relevant prejudice, therefore, is the prejudice suffered by the respondent in being unable to retake possession until the appeal is heard and determined. It is not established that that narrower prejudice has any impact upon the respondent’s ability to sell the property. That reasoning serves to reinforce the conclusion I reached resulting in the orders I made at the conclusion of the hearing.

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Decision last updated: 29 August 2018