Mendonca v Mason
[2013] VSC 516
•27 September 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
S CI 2013 4869
BETWEEN
| LAURIANO QUEROBINO MENDONCA | Plaintiff |
| v | |
| SUZANNE MASON | Defendant |
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JUDGE: | MACAULAY J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 September 2013 | |
DATE OF JUDGMENT: | 27 September 2013 | |
CASE MAY BE CITED AS: | Mendonca v Mason | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 516 | First Revision: 30 September 2013 |
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INJUNCTION – Application for injunction to prevent mortgagee in possession from excluding tenant under alleged lease from occupation of premises – Serious question to be tried – Strength of the probability of applicant’s ultimate success at trial relatively low – Damages an adequate remedy – Balance of convenience in favour of refusing injunction –Application refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | J Selimi | MLC Lawyers |
| For the Defendant | W Stark | Moores Legal |
HIS HONOUR:
Introduction
The question for determination is whether the defendant, Mason, should be restrained by interlocutory injunction pending trial from excluding the plaintiff, Mendonca, from occupation of premises at level 1, 375 Queen Street, Melbourne. In my view Mendonca’s application for an interlocutory injunction should be refused. My reasons follow.
Background
The premises are residential premises. Mendonca has been living there for over 20 years. He alleges that he was granted a lease by the registered proprietor of the freehold estate, Candolim Pty Ltd, for a term of 10 years commencing 8 June 1998. Three months before its expiry, on 8 June 2008, he claims to have renewed that lease, pursuant to an option to do so, for a further 10 year term. Hence, he claims to be entitled to occupation of the premises under a fixed lease term to 7 September 2018.
Mason is the mortgagee of the freehold of the whole of the premises at 375 Queen Street, both the ground floor and the first floor. She is the assignee of two mortgages. On 9 July 2009 Bendigo Bank assigned to her the first registered mortgage. On 19 April 2013 Mendonca’s sister, Elizabeth De Cruz and her husband assigned the second registered mortgage to Mason.
Before Mason took the assignment of the first (Bendigo Bank) mortgage, Candolim was placed in liquidation. Bendigo Bank, as first mortgagee, was already in possession of the premises before Mason took the assignment of its mortgage. Having taken the assignment and become registered first mortgagee, on 13 July 2009 Mason served notices on Candolim and its liquidator, and upon Mendonca as alleged tenant, requiring payment of all rents and other monies under any lease or tenancy between them to be paid to her. She also demanded written details of any such lease. None were provided by either party. Mendonca has since denied receiving the notice.
Four years later, on 26 June 2013, Mason served a notice on Mendonca alleging that since the notice of 13 July 2009 no rental had been paid to her. She again demanded that Mendonca provide written details within seven days of any lease or tenancy agreement he claimed to have entered into with Candolim. None was provided.
On 26 June 2013, having received neither rent nor details of any lease or tenancy agreement between Mendonca and Candolim, Mason sent Mendonca a further notice alleging that if there were any lease of the premises Mendonca had repudiated it and stating that she accepted that repudiation. She demanded that he vacate the premises not later than 15 days after service of the notice. On 15 July 2013 Mason took possession of the premises.
Mendonca immediately sought and obtained an interim injunction from the Victorian Civil and Administrative Tribunal. An order was made by Senior Member Vassie on 17 July 2013 restraining Mason from preventing Mendonca occupying the upstairs at 375 Queen Street, Melbourne and from excluding or attempting to exclude him from the premises. The order was conditioned upon Mendonca paying Mason $3,000 per month from the first day of each month commencing 1 August 2013. The further hearing of the matter was then set down for a two day contested hearing.
In compliance with the conditions of the injunction, Mendonca paid Mason two amounts of $3,000 for the months of August and September. The matter came on for hearing before Senior Member Vassie on Monday 16 September 2013. On that day Mason submitted that VCAT had no jurisdiction to determine the matter because Mendonca claimed to be entitled to occupancy under a fixed 10 year lease. VCAT has jurisdiction to determine tenancy disputes falling under the Residential Tenancies Act 1997. A dispute under a fixed lease term exceeding five years does not fall within VCAT’s jurisdiction.[1]
[1]Residential Tenancies Act 1997, s 6.
On 17 September 2013 Senior Member Vassie dismissed Mendonca’s proceeding at VCAT without determination on the merits after both parties agreed that VCAT had no jurisdiction. Hence, the matter came before this Court.[2]
[2]On the afternoon of 16 September, while the matter stood adjourned at VCAT, Mendonca obtained an interim injunction from this Court in much the same terms as the injunction granted by Senior Member Vassie. It was obtained as a precaution should VCAT rule (as it did the following day) that it had no jurisdiction.
By his proceeding issued in this Court, Mendonca asserts that:
(a)he is the lessee of the premises by written lease dated 8 September 1998, extended for a further 10 years by the written exercise of an option to renew on 8 June 2008;
(b)he paid rent in advance for the year 29 January 2009 to 28 January 2010 by cash in the sum of $6,240 to the director of Candolim (his mother, Deonisia Mendonca);
(c)for the period from February 2010 to April 2013, with the knowledge and consent of Mason as assignee of the first mortgage, he paid rent monthly to the second mortgagee (ie his sister, Elizabeth De Cruz);
(d)from 6 May 2013 he paid rent directly to Mason by depositing monies into her nominated bank account, that is $2,500 for each of May, June and July 2013, and the two amounts of $3,000 paid pursuant to the order of Senior Member Vassie;
(e)he was unlawfully and wrongfully evicted without notice on 15 July 2013; and
(f)he is entitled to possession of the premises.
Mason does not admit that the lease between Candolim and Mendonca is genuine. Further, she positively denies the authenticity of the purported exercise of the option to renew on 8 June 2008 alleging that it was created in June 2009 and back dated. She denies that monies were paid to De Cruz for rent as alleged by Mendonca. She also says that the monies paid to her since May 2013 were not paid to her on account of rent but on account of another debt owed to her by Mendonca.
Significantly, Mason submitted that after she served notice on 13 July 2009 requiring Mendonca to pay rent to her, any monies paid to Candolim or De Cruz on account of rent did not discharge Mendonca’s rental obligations to her.[3] Therefore, she submitted, he remained in default under the lease (if there was one) giving her an entitlement to terminate the lease by the acceptance of his repudiation of it.
[3]She relied on SEAA Enterprises Pty Ltd v Figgins Holdings Pty Ltd [1998] 2 VR 90 (‘SEAA Enterprises’).
The two fundamental issues to be resolved at trial are:
(a)As at 26 June 2013 was Mendonca entitled to occupation of the premises pursuant to any fixed term lease?
(b)If so, had Mendonca repudiated that lease so that, on 26 June 2013, Mason was entitled to accept that repudiation and thereby terminate the lease?
Resolution of those fundamental issues turns upon the answer to the following questions each of which is contentious:
(a)Did Candolim grant Mendonca a 10 year lease on 8 September 1998?
(b)Did Mendonca renew the lease by exercise of the option on 8 June 2008?
(c)Did Mason serve notice on Mendonca on 13 July 2009 requiring payment of rent to her as mortgagee in possession?
(d)Did Mendonca pay rent to De Cruz, either with Mason’s knowledge and consent or at all, for the period February 2010 to April 2013?
(e)Were the payments made to Mason from May 2013 onwards payments in discharge of Mendonca’s rental obligation?
Before considering those questions further, it is convenient to set out the relevant principles for determining an application for an interlocutory injunction.
Relevant legal principles
There is no dispute as to the general principles that should apply in deciding the matter at an interlocutory stage. A number of factors are considered and, although they may be stated separately, they are nonetheless interrelated.
The first is whether the plaintiff has made out a prima facie case. This consideration is explained in Australian Broadcasting Corporation v O’Neill[4] in which Gummow and Hayne JJ said:
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:
‘The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ...’.
By using the phrase ‘prima facie case’, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.[5]
[4](2006) 227 CLR 57.
[5]Ibid 81 [65].
The second consideration (often combined with the third) is whether or not damages would be an adequate remedy.
The third consideration is what is usually called the balance of convenience, but has been expressed by the Court of Appeal in Victoria in terms of where the lowest risk of injustice lies:
In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.[6]
[6]Bradto v State of Victoria [2006] 15 VR 65, [35].
Mendonca submitted that if there is a contested question of fact, it is not appropriate for a court to make any conclusive finding at the interlocutory injunction stage but it must assume the fact in the plaintiff’s favour. So expressed, the proposition is too wide. One of the authorities relied upon for the proposition was the decision of Croft J in BDO Group Investments (NSW-Vic) Pty Ltd v Ngo.[7] But his Honour was careful to qualify his statement about resolving conflicts in favour of the plaintiff with the words ‘insofar as it goes to establishing whether or not there is a serious question to be tried’.[8]
[7][2010] VSC 206.
[8]Ibid [11].
Accepting that a genuine conflict on the evidence about a fact important to the claim often denotes a ‘serious question’ for trial, the mere existence of that conflict does not foreclose the court’s consideration of the strength of the plaintiff’s claim. In ABC v O’Neill, Gummow and Hayne JJ (Gleeson CJ and Crennan J agreeing) rejected the idea that so long as the court is satisfied that there is a question for determination that is not frivolous and vexatious there will necessarily be a serious question to be tried sufficient to satisfy the first of the usual elements.[9] Instead, their Honours described the ‘governing consideration’ as ‘the strength of the probability of ultimate success [which] depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought’.[10]
[9](2006) 227 CLR 57, 83 [70].
[10](2006) 227 CLR 57, 68 [19], 84 [71].
Therefore, it is not necessarily sufficient, in order to shift the focus solely to the balance of convenience (including the adequacy of damages), for a plaintiff to simply identify a contested fact upon which his or her entitlement to relief depends. In assessing the seriousness of the question to be tried, the court will also consider the strength of the probability of success. The degree to which the court may wish to consider that relative strength will vary from case to case.[11]
[11]Brayson Motors Pty Ltd v Commissioner of Taxation for the Cwth (1983) 57 ALJR 288, 292 (Brennan J); Kolback Securties v Epoch Mining NL (1987) 8 NSWLR 533, 536 (McLelland J).
Serious question to be tried
There is a dispute between the parties on each of the five questions referred to at [14] above. Although it may be said that there is a serious question to be tried on each of these issues – and therefore in respect of the cause of action pleaded by the plaintiff – the totality of the evidence advanced by the parties demonstrates, in my view, that the strength of Mendonca’s prospects of ultimate success is relatively low. That is not to say that I make any final conclusions on any of the facts. But the following list of issues shows that Mendonca’s claim may face considerable hurdles.
On the first question of whether Candolim granted Mendonca a 10 year lease on 8 September 1998:
•When requested to do so by Mason as the mortgagee in possession, Mendonca did not (perhaps, could not) produce the lease or a copy of it between 2009 and July 2013;
•The liquidator apparently did not produce the lease or a copy of it when requested to do so (suggesting it may not have existed within Candolim’s records);
•No original of the lease has been produced;
•No evidence has been adduced by Mendonca’s mother either to confirm the lease or say where it is;[12]
•Mason has sworn that Mendonca ‘boasted’ to her that he had outwitted the liquidator of Candolim, when it tried to gain possession of the premises, by having his mother ‘sign and predate a lease document’;[13] and
•There is other evidence that Mendonca may have created a false document in connection with the lease – see the evidence below regarding the exercise of the option.
[12]Mrs Mendonca would now be 93 years of age but there is no evidence that she was incapable of swearing an affidavit for filing in this proceeding. On Mendonca’s case, his mother executed various lease documents within the past 4 or 5 years.
[13]Although, the reference to ‘a lease document’ may be a reference to the written option exercise discussed in [25] below.
In relation to the second issue, the exercise of the option to renew:
•No copy of it was produced between 2009 and July 2013;
•No copy was produced to Mason by the liquidator, when asked for any lease documents, again suggesting it may not have existed within Candolim’s records;
•No original of the handwritten document was produced and Mendonca informed the court that it could not presently be located;
•Again, no evidence was adduced from Deonisia Mendonca on the subject; and
•Mason’s solicitor, Andrew Fraser, swore that on 13 July 2009 Mendonca telephoned him and said ‘that the residential lease to him [ie Mendonca] had expired and that the last date for renewal was 8 June 2008 and that he was proposing to show that lease to the liquidator’. Fraser further swore that Mendonca ‘requested…advice as to whether he should produce a letter of renewal which he would backdate to 8 June 2008’. Fraser swore that he informed Mendonca that he (Fraser) could not be involved in advising him on such a matter because he was acting for Mason and not for him.[14]
[14]Fraser’s evidence was corroborated by a contemporaneous file note of the conversation.
On the fourth question of whether or not any rent was paid to De Cruz in the period February 2010 to April 2013:
•No records or receipts are produced in respect of such payments;
•Mendonca did not adduce any evidence from his sister, Elizabeth De Cruz, to confirm the payments;
•To the contrary, Mason swears that De Cruz informed her that no such rental payments were made by Mendonca;
•The reason given by Mason for the assignment to her of De Cruz’s mortgage was that Mendonca was not making payments to De Cruz under the mortgage;
•No explanation was given why payments of rent would be made to the second mortgagee (De Cruz) rather than the first mortgagee (Mason) when such an explanation might be expected (particularly if it is accepted that a notice was given by Mason in July 2009 for rent to be paid to her); and
•Mason swears she did not know of or consent to such an arrangement.
In relation to the fifth question of whether rent was paid to Mason for the period of May 2013 onwards:
•Mason disputes that the money was paid to her as rent but says that it was paid to her in respect of a separate advance that had been made by her to Mendonca;
•The evidence indicates that a very substantial amount of money had been lent by Mason to Mendonca over a long period of time which, at least, gives some credibility to the proposition that the payments might well have been made to her in respect of a different debt;
•The three payments of $2,500 per month (for May, June and July) do not correlate with the amount due under the alleged fixed term lease (ie $120 per week); and
•Mendonca did not produce any accompanying record or explanation of the payments consistent with them being rental payments.
That leaves for consideration the third question, concerning the service of the notice of 13 July 2009. The answer to that factual question may determine whether, even if there was a lease and monies were paid by Mendonca to Candolim in January 2009 or to De Cruz between February 2010 and April 2013, such payments were in law a good discharge for rent.
Mason submitted that, if it is accepted that she did give Mendonca the notice in July 2009, she had an irresistible argument against Mendonca for the proposition that he was in default under the lease and had repudiated it at the date she elected to terminate the lease in June 2013. Her argument, so it was contended, held good even if one were to accept (for the purposes of argument) that Mendonca had a lease, that it was renewed, and that he had paid rent for a year in advance to Candolim in January 2009 and then monthly from February 2010 to April 2013 to De Cruz.
Relying upon SEAA Enterprises, she argued that after she gave notice to Mendonca on 9 July 2009 that Candolim was in default under its mortgage and that rent must be paid to her as registered first mortgagee, rent accruing and payable under the lease for the balance of the 2009 year had to be paid to her. Candolim could not give a good discharge for the receipt of rent from Mendonca as against Mason from 9 July 2009 onwards. Moreover, this proposition remained good even if Mendonca paid Candolim in advance for rent for the 2009 year under an agreement made before the assignment to her of the mortgage. That is because the rent only became due and payable at the intervals specified in the lease (monthly) so that the earlier lump sum advance of monies to Candolim could only be allocated to, and be a discharge of, the rent obligation accruing month by month in the period preceding the notice, and not thereafter.[15]
[15][1998] 2 VR 90, 102-103.
Mason argued that the position was even stronger in relation to any arrangement made by Mendonca after the date she took the assignment of the mortgage and gave the notice for payment to her of rent. Upon the principle that once a mortgagor of land is in default and the mortgagee has given notice requiring rent to be paid to that mortgagee, rent paid to the mortgagor (or some other person) does not discharge the tenant’s liability to pay rent under the lease, Mason argued that payments allegedly made to De Cruz in 2010, 2011, 2012 and 2013 did not discharge Mendonca’s rent obligations under the lease. Thus he was and remained in default under the lease at June 2013.
The principles upon which Mason relied were not seriously disputed. Nor was it disputed that Candolim was and remained in default under the first mortgage in July 2009; it was, after all, in liquidation before that date. Mendonca’s only arguments against Mason’s propositions were that he did not receive the notice of 13 July 2009, and that Mason knew about and consented to the rent being paid to De Cruz between 2010 and 2013.
Mason’s solicitor swore that he sent the notice, and it was addressed to Mendonca at 375 Queen St, Melbourne. That address was also the address for service of notices under the lease. Mendonca does not dispute that he has received other documents that have been mailed to that address.
On the second point, Mason denied that she knew of or gave consent to rent being paid to De Cruz. Mendonca’s evidence on this issue consisted of an omnibus verification of the assertions made in his statement of claim, which includes the assertion of such knowledge and consent.
Whilst these matters might be said to be disputed matters of fact, I consider that the strength of Mendonca’s argument upon each of them is relatively low. If he fails upon those factual proofs, then it appears to me that Mason does have a powerful argument that any lease that may have existed as at June 2013 was terminated at that time.
Are damages an adequate remedy?
If I declined to order an interlocutory injunction, yet Mendonca ultimately succeeded at trial, in my view damages would be an adequate remedy. In fact, it was not specifically put to me that damages would not be an adequate remedy.
It was not suggested that the premises are of unique or special value to Mendonca. It was only said that he has been a resident there for more than 20 years. So it may be assumed that he regards the premises as his home. But many people change homes after such a duration and he offered no particular evidence about the value of the premises to him.
It was asserted by Mendonca in an affidavit that if an injunction were not granted he would be ‘left homeless’. It is not clear why that should be so. Mendonca has not deposed to his financial circumstances. The evidence is that he is currently paying Mason $3,000 per month in compliance with the conditions of the interim injunction already granted. Moreover, through his counsel he has offered an undertaking to the court, in support of the interlocutory injunction he seeks, to continue paying $3,000 a month.
If Mendonca is able to pay $3,000 a month there is no reason to believe that he could not obtain suitable, alternative residential premises within the city area. It was certainly not suggested that that amount of money would not provide suitable alternative accommodation. When his counsel was asked about the apparent inconsistency between Mendonca offering to pay Mason $3,000 per month but then implying that he could not pay for alternative accommodation if an injunction was not granted, no satisfactory explanation was offered.
I am not persuaded that Mendonca could not pay for alternative premises or that he would be homeless if he could not stay at 375 Queen St. Should he ultimately be successful, presumably he will be entitled to damages measured by the difference between the cost of alternative accommodation and the amount that he was liable to pay under the lease (a modest $120 per week).
It was not contended that Mason would be unable to meet such damages were they to be awarded. As mortgagee in possession of the premises at 375 Queen Street, Mason appears to have a substantial asset and a capacity to pay any damages which might be awarded in Mendonca’s favour. As well, there seems a real likelihood that Mason is entitled to payment of a significant amount of money from Mendonca for loans made either to him or to Candolim so that the satisfaction of a damages award could be achieved by set-off. Mendonca denies that loans were made to him. Even if that is so, it appears that he has guaranteed to Mason the repayment of Candolim’s debts.
Balance of convenience
In my opinion the balance of convenience favours refusing the injunction. As I have already discussed, a refusal to grant the interlocutory injunction will not cause Mendonca irreparable harm, and no such harm is suggested. For reasons I have discussed, there is no reason to believe he could not obtain suitable alternative premises in which to live. Were he to succeed, again for reasons I have discussed damages would be an adequate remedy and there is no reason to believe he could not recover them from Mason.
On the other hand, with Mendonca occupying the premises Mason can neither sell the building for optimum return nor obtain a commercial rent from the premises. Mason is 69 years of age, a teacher, and the money she is presently paying in interest on loans she has borrowed to advance monies to Candolim and/or Mendonca is in the order of $6,000 per month. That sum of money exceeds her monthly salary. The evidence reveals that she suffers an illness which is being exacerbated by the stress the debt is causing her. She has an urgent need to ameliorate her significant financial outlays.
Mendonca has not offered any security for the undertaking he has proffered to pay damages to Mason in the event that he fails at trial. In my view this is a very significant factor weighing against the grant of the injunction.[16] Every month that goes by Mason would have to meet from her own resources the difference between the $3,000 Mendonca has proffered and the $6,000 in interest which she is having to pay. As I have already noted, Mendonca has not disclosed his financial position. He has not said where the $3,000 per month he has offered will come from nor where he has obtained the money to pay those amounts to date. Apparently, he was recently relieved of having to pay the filing fee at VCAT because of claimed impecuniosity. I have no confidence that if Mendonca were ordered to pay damages pursuant to the undertaking he must give as the price of any interlocutory injunction that Mason would ever recover those damages.
[16]Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Ltd (1991) 1 Qd R 301, 311.
Mendonca also offered, as a further condition of any injunction I might grant, an undertaking that he would agree to the discharge of the injunction as soon as he failed to pay the $3,000 per month. While that might operate, in practical terms, as some sort of ‘security’ for the undertaking to pay the $3,000 per month, it does not address the question of security for the undertaking to pay additional damages Mason might sustain as a consequence of him having wrongfully deprived Mason of possession of the premises should his claim fail.
Conclusion
In conclusion, although there is a serious question to be tried, in the sense of a question that is not frivolous or vexatious, in my view Mendonca would enjoy relatively low prospects of success at trial. Damages would be an adequate remedy should he ultimately be found to have been entitled to possession of the premises but be denied occupation of them pending trial, or permanently. Thirdly, in my view the lowest risk of injustice lies in not granting the interlocutory injunction sought.
In combination, these considerations lead me to refuse Mendonca’s application for an interlocutory injunction.
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