Mayne Group Limited v Barwon Health
[2003] VSC 193
•13 June 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2014 of 2002
F. 5523
| MAYNE GROUP LIMITED | Plaintiff |
| v | |
| BARWON HEALTH and MAYBURY CRAFT PTY LTD | Defendants |
AND BETWEEN
| BARWON HEALTH | Plaintiff by counterclaim |
| v | |
| MAYNE GROUP LIMITED and MAYBURY CRAFT PTY LTD | Defendants by counterclaim |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 and 5 June 2003 | |
DATE OF JUDGMENT: | 13 June 2003 | |
CASE MAY BE CITED AS: | Mayne Group Ltd v Barwon Health | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 193 | |
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Landlord and tenant – prohibition upon dealing with or disposing of tenant’s interest without consent of landlord – sub-lease – assignment of sub-lease – whether consent by tenant to assignment by sub-lessee is dealing with or disposition of the tenant’s interest.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P.E. Anastassiou SC with Ms Wendy Harris | Mallesons Stephen Jaques |
| For the Firstnamed Defendant | Mr P.N. Vickery QC | Harwood Andrews |
| For the Secondnamed Defendant | Mr J.P. Gorton | Blake Dawson Waldron |
HIS HONOUR:
As things turned out, this case turns upon the proper construction of cl. 13.1 of a head lease entered into on 15 August 1997 between the first Defendant, Barwon Health, then called the Geelong Hospital, as landlord, and the secondnamed defendant, Maybury Craft Pty Ltd, as tenant. The premises, the subject of the lease, are the land in Geelong upon which stands Baxter House Private Hospital.
The head lease is one of a suite of agreements entered into on this date to formalise an agreement made earlier, in March 1997, between Barwon Health and the plaintiff, Mayne Group Ltd, then called Mayne Nickless Ltd. Pursuant to this agreement, Mayne Health as the successful tenderer agreed to develop the site by constructing a private hospital and to take a lease of the hospital for 25 years with an option for a further 10 years.
In August 1997, the parties to the March agreement agreed to restructure their arrangements. In lieu of the existing agreement between Barwon Health and Mayne Group to develop and lease the land, there were to be two leases: a head lease dated 15 August 1997 between Barwon Health and a new tenant, Maybury Craft, for the same term of 25 years with a 10 year option; and a sub-lease dated 15 August 1997 between Maybury Craft and Mayne Group for 25 years less one day with an option of a further 10 years less one day. The development was to be carried out pursuant to a head construction contract entered into between Maybury Craft and Mayne Group. These arrangements were put in place by a tripartite agreement also dated 15 August 1997 entered into between Barwon Health, Maybury Craft and Mayne Group.
The head lease contained in cl. 13.1 a term whereby the consent of Barwon Health as landlord was required for Maybury Craft to deal with or dispose of its interest in the land. Its consent to the sub-lease made between Maybury Craft and Mayne Group is contained in the tripartite agreement.
The present litigation arises out of a decision of Mayne Group to sell the hospital to another company, Healthscope Ltd. This sale requires that Mayne Group assign its sub-leasehold to Healthscope. Mayne Group has sought and was refused the consent of Barwon Health to this assignment. Accordingly, it commenced this proceeding with a view to obtaining an order that Barwon Health was unreasonably withholding this consent. Barwon Health resisted this, contending that the head lease contained no provision requiring it not to withhold consent unreasonably and, to the extent that the sub-lease itself contained such a qualification, the sub-lease should be rectified to delete it. At an early stage in the litigation it also contended that its refusal to consent was not unreasonable. In fact, the sub-lease by cl. 15.1 prohibited the sub-tenant from assigning its term “without the prior written consent of the Landlord [Maybury Craft] and the Head Landlord [Barwon Health] (which in the case of the Head Landlord, must not be unreasonably withheld)”. Section 144 of the Property Law Act 1958 was excluded by cl. 15.5. Barwon Health, however, was not a party to the sub-lease.
When the case came on before me for trial, the parties had very dramatically shifted their positions. Barwon Health now accepts that Healthscope is an appropriate sub-tenant. It contends, however, that the qualification imposed by cl. 15.1 of the sub-lease upon its right to withhold consent to the assignment does not bind it since it is not a party to the sub-lease. In the alternative, it still seeks rectification of the sub-lease. Mayne Group, for its part, now contends that, since Barwon Health is not a party to the sub-lease, it cannot obtain rectification. More fundamentally, it argues that the head lease does not by cl. 13.1, or at all, prevent an assignment of the sub-lease with or without the consent of Barwon Health so that its original claim is not pursued. Counsel for Barwon Health were then driven to contend that the head lease did by cl. 13.1 prevent the assignment of the sub-lease without its consent. It was accepted by all parties before me that this question alone would be determinative of the litigation. Either cl. 13.1 of the head lease did not prohibit the assignment without the consent of Barwon Health in which case Barwon Health’s consent was unnecessary; or it did so, in which case Barwon Health was entitled to withhold its consent for any or no reason. The parties then agreed to a statement of agreed facts to raise this question.
Clauses 13.1 and 13.4 are in the following terms:
“13.1 No disposal of Tenant’s interest
The Tenant must not without the prior written consent of the Landlord:
13.1.1assign, transfer, sub-let, grant any licence, mortgage, charge or part with or share the possession of or otherwise deal with or dispose of the Tenant’s estate or interest in the Premises or any part of the Premises; and
13.1.2declare itself trustee of the Premises or any part of the Premises or of any legal or equitable estate or interest in the Premises.
…
13.4 S. 144 excluded
Section 144 of the Property Law Act 1958 does not apply to this Lease.”
In argument, the question was further crystallised to this: would the tenant, Maybury Craft, as sub-lessor, by giving its consent pursuant to cl. 15.1 of the sub-lease to the assignment by Mayne Group as sub-tenant, itself be “dealing with the Tenant’s estate or interest in the Premises or any part of the Premises”.
When the question is so formulated, the answer must inevitably be in the negative. The estate or interest of Maybury Craft in the premises is a reversionary one represented by the portion of its term which has not been disposed of by the sub-lease to Mayne Group. This interest is entirely unaffected by the proposed assignment. In any event it cannot be said that the mere giving of consent to an assignment by another is a dealing or a disposition of anything at all.
It was put on behalf of Barwon Health that the granting of a lease by Barwon Health to Maybury Craft created both a contract and an interest in the land, neither of which previously existed. This brought into existence two separate legal relationships between Barwon Health and Maybury Craft: privity of contract and privity of estate. This is correct. Moreover, the grant of the sub-lease brought into existence a new privity of contract and privity of estate between Maybury Craft and Mayne Group. Where the Mayne Group assigns its interest, a new privity of estate is brought into existence between Maybury Craft and Healthscope in lieu of that between Maybury Craft and Mayne Group[1]. So much is not in controversy.
[1]Haidar v Blendale [1993] 2 VR 524 at 526-7, per Gobbo J.
The next step in the argument of Barwon Health is that, by consenting to the assignment, Maybury Craft is party to a transaction which creates a new interest in the land and a new privity of estate between it and Healthscope. Its consent, therefore, is a dealing in or disposition of an estate or interest in the premises. The difficulty which such an analysis does not and cannot overcome is that cl. 13.1, when it operates, prevents Maybury Craft, not from dealing with or disposing of any interest or estate in the land, but only with its own interest or estate. As I have mentioned, its own interest or estate is unaffected by the proposed assignment.
I conclude therefore that Maybury Craft is not by cl. 13.1 of the head lease prevented from consenting to the proposed assignment without the prior written consent of Barwon Health. I will hear counsel further as to the orders which should be made to give effect to this conclusion and as to costs.
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