Nantong Construction (Australia) Pty Ltd (ACN 154 528 751) v M and S Sambor Pty Ltd (ACN 004 599 151)
[2019] VSC 774
•22 November 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
IN THE COMMERCIAL COURT
DUTY JUDGE LIST S ECI 2019 04826
| NANTONG CONSTRUCTION (AUSTRALIA) PTY LTD (ACN 154 582 751) | Plaintiff |
| v | |
| M & S SAMBOR PTY LTD (ACN 004 599 151) | Defendant |
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JUDGE: | Macaulay J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 November 2019 |
DATE OF RULING: | 22 November 2019 |
CASE MAY BE CITED AS: | Nantong Construction (Australia) Pty Ltd (ACN 154 528 751) v M & S Sambor Pty Ltd (ACN 004 599 151) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 774 |
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INJUNCTION - Urgent interlocutory injunction – Serious question to be tried – Balance of convenience – Damages as an adequate remedy.
LICENSE - License for agreement to use land – Revocation of license to access land –Circumstances in which common law regards a licence as irrevocable.
ESTOPPEL - Equitable estoppel – Circumstances when a licence becomes irrevocable – Considered Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr Mark McKillop | Minter Ellison |
| For the Defendant | Mr Marcus Clarke QC Mr Jeremy Whelen | MGA Lawyers |
HIS HONOUR:
Mr Sam Segman and Mr Perry Sambor have known one another as friends for over 35 years and have met regularly over a long time. They also appear to share business interests. This application signals a falling out in their relationship. Mr Segman is associated with two companies, Nantong Construction Australia Pty Ltd (‘Nantong’) and Conrock Australia Pty Ltd (‘Conrock’). Mr Sambor is associated with M & S Sambor Pty Ltd and Sambor Holdings. For convenience, I will not differentiate between those two companies and will refer to them collectively as ‘Sambor’.
For the past three or so years Nantong, which is a building company, has had access over land owned by Sambor, in order to conduct building works on adjoining land in which Sambor has no interest. The building works have involved the removal of existing structures and the construction of a six-storey building with two basement levels.
That access has been necessary, or at least desirable, because the building site is situated on a busy road with trams running along it, and the construction has involved the positioning of a crane beside the site and the delivery of materials via large trucks to the site, none of which could easily occur using the front streetscape for those purposes.
Accordingly, an oral access agreement, styled a licence, was allegedly struck between Nantong and Sambor through Mr Segman and Mr Sambor respectively. The licence was to allow Nantong to use Sambor’s land for the duration of construction for the purpose of constructing the building on the neighbouring site; in effect, to situate the crane, allow deliveries of materials and to accommodate a site management building. Nantong claims it provided valuable consideration to Sambor for granting it the licence.
Sambor has recently purported to revoke Nantong’s license. That provoked Nantong to apply for an urgent injunction, in effect, to allow it to continue to use the Sambor land. Nantong says that it expects to complete the works on the adjoining land by end of May 2020, which is in about six months’ time.
Sambor proceeding
Because it becomes relevant when considering issues relating to the balance of convenience, it is necessary to refer to another dispute.
Coincidentally, Sambor has for some time wanted to develop its own land and, for that purpose, it entered a written development agreement with Conrock. I mentioned that Mr Segman is associated with both Nantong and Conrock. Conrock is owned as to 75 per cent by Hadoya Pty Ltd and Nantong is owned as to 30 per cent by that same company, Hadoya. Hadoya is a company controlled by Mr Segman. Mr Segman is the director of Nantong but not of Conrock.
Under the Sambor/Conrock development agreement, Conrock was to undertake a development on Sambor’s land and for that purpose was given a right of access to that land. Sambor also charged its land in favour of Conrock to secure its obligations under the development agreement, and agreed that Conrock could lodge a caveat in respect of that charge. Recently, Conrock lodged such a caveat on Sambor’s land.
In addition to purporting to terminate Nantong’s license to access its land and carry out the building work on the adjoining property, Sambor has also purported to terminate its development agreement with Conrock. Although Nantong is not a party to the Sambor/Conrock development agreement, M & S Sambor and Sambor Holdings have brought a proceeding against both Conrock and Nantong. In substance, by that proceeding Sambor wishes to confirm the validity of its purported termination of the development agreement, have Conrock’s caveat removed and obtain orders preventing both Conrock and Nantong from accessing Sambor’s land.
Pending trial, Sambor seeks interlocutory orders to remove the caveat and to prohibit both companies from using the land. When the two applications (Nantong’s and Sambor’s) came before me two days ago I ordered that Sambor’s application for interlocutory relief against Conrock be heard in December. Its interlocutory application against Nantong is the inverse of the application upon which I am presently ruling. Although some of the matters contended for by Sambor against Conrock intersect with the Nantong application, as will become apparent, they do not bear upon the proper exercise of my discretion in this matter.
Nantong’s application.
Nantong seeks an order that Sambor be restrained, until further ordered, from taking any steps to restrict Nantong from accessing Sambor’s land for the purpose of the completion of the construction of the development on the adjoining land.
Nantong contends that it has an arguable contractual entitlement, in the form of a licence granted for valuable consideration, to use the Sambor land to access the building site until it completes the construction of the development. Nantong argues there is a serious question to be tried whether Sambor was entitled to revoke the licence, and the legal consequences of Sambor’s purported revocation. It argues that the balance of convenience favours allowing it to remain in continued occupation of the land pending the trial of the proceeding. Further it contends damages would not be an adequate remedy should an injunction not be granted if, at trial, it is established that Sambor was not justified in terminating the licence. Finally, it says it has proffered an adequate undertaking as to damages by giving the usual undertaking itself and having it supported by an additional undertaking given by Big C & S Group Pty Ltd, the owner of the land upon which the building is being constructed.
Sambor challenges each element. Although there does not appear to be any significant challenge to the existence of an agreement by Sambor to license Nantong to use of the land, nevertheless Sambor claims the licence was only given until the end of 2017 and it takes issue with the proposition that any valuable consideration has been given. Beyond that, it strongly denies there is a serious question to be tried about Nantong having any continuing right to access the land now that Sambor has given a notice of revocation. Its primary argument rests upon a line of cases commencing with the High Court decision Cowell v Rosehill Racecourse Co Ltd (‘Cowell’).[1] Even if there is a serious question to be tried, Sambor contends that the balance of convenience favours the refusal of any injunction. It also argues that damages would be an adequate remedy (noting that its primary argument, resting on Cowell, is that damages should be Nantong’s only remedy). Finally, in view of Big C & S Group supporting Nantong’s undertaking as to damages Sambor did not appear to suggest that it remained inadequate.
[1](1937) 56 CLR 605 (‘Cowell’).
For reasons which I will briefly explain, the considerations of balance of convenience, adequacy of damages as a remedy and the adequacy of the undertaking as to damages, all favour the grant of the injunction. In my view the real gravamen of this application is whether there is a serious question to be tried, particularly in the light of Cowell. I will come to that matter last.
Balance of convenience
Nantong has been building the six-storey development since mid-2016 after it reached an agreement with Sambor for the use of Sambor’s land, an agreement that was allegedly struck between Mr Segman and Mr Sambor at a restaurant in June 2016. It is a substantial development, featuring over 100 residential apartments with some retail space. Having been underway for over three years and with a projected six months now until completion, this particular point in time represents a substantial way along the project timeline. Self-evidently, a lot of money has been invested in the development to date.
Although no specific details have been given on this topic, Mr Segman has deposed that the delay in implementation he expects would occur if Nantong had to seek alternative access to the site would trigger sunset clauses for a number of the contracts of sale that have been made with purchasers off the plan. That would cause immediate loss to Nantong and Big C & S Group and require further remarketing to resell the properties. Further, there are many trades and contractors working on the development and any significant delay in construction would probably see them drift off to other projects raising the prospect that, even if Nantong could arrange an alternative means of accessing the site, it would face further delay thereafter in re‑engaging trades to complete. In addition, the large crane presently on-site on Sambor’s land, used to hoist materials to the upper stories of the next-door building for construction and fit out, costs $10,000 per week for crane and crew. If construction is at a standstill, that cost would be ongoing and would represent a direct loss.
Further, there remains a risk that Nantong would not secure any alternative means of access or, if it did, the process of doing so could take nearly as long as the current estimate for finishing the work. As the alternative means of access is to use the streetscape, this would require obtaining permissions from a number of authorities including, the Council, Yarra Trams and possibly an electricity authority. Although some doubt was cast by Sambor on Nantong’s estimates, I am prepared to work on the basis that there is a genuine risk that the process could take around four months and that, ultimately, there is no guarantee of a successful outcome for Nantong.
I am also prepared to accept, for these purposes, that the combination of all of these factors expose Nantong to a serious risk of substantial financial loss if it is prevented from using Sambor’s land as its means of access to the site to complete the construction.
The rival prejudice said to be sustained by Sambor, should Nantong have continued access to the land, is not so readily apparent. In substance, it amounts to a hypothetical loss or a potential disadvantage, rather than anything tangible. Sambor wants to develop its own land and it has a contract with Conrock to do so. As mentioned, its dispute with Conrock is the subject of Sambor’s application which I have adjourned to a hearing in approximately three weeks’ time. Other than Sambor’s suspicion that Conrock has been ‘going slow’ with progressing Sambor’s development, in order to allow Nantong to finish the building next door, Nantong’s presence on Sambor’s land is not presently relevant to whether or not Sambor can progress its own development. If there is anything in Sambor suspicions, it has rights against Conrock which it has recently purported to exercise, that being the subject of the upcoming hearing.
Beyond allegedly impeding its own development plans, Sambor argues that Nantong’s use of its land is holding up its plans to sell the land. So far as the evidence reveals, there is no current purchaser for Sambor’s land and no marketing campaign. Sambor has held the site for decades. It claims that it only consented to Nantong being on its land until the end of 2017 yet it has not, until quite recently, done anything to complain about Nantong’s ongoing presence beyond that date. Insofar as it has made any preparation to sell the land, the only evidence in the material is that Mr Sambor had some discussions with Mr Segman and some Conrock people in or between March and July of this year about wanting to sell the land “to someone”. There is a dispute about whether Conrock was interested itself in buying the land or that it merely offered to (and did) assist Sambor in trying to find a buyer. But nothing came of it and there is no evidence of any other attempts to sell.
Sambor argues that there is no point in it even trying to sell its land to anyone outside the Segman-affiliated interests while Nantong is using the land for construction for, what it maintains, is a presently indefinite period of time. Nantong contends that if there is any impediment to Sambor selling the land it has more to do with Conrock’s caveat which has nothing to do with Nantong.
At present, I am not persuaded that there is any sale opportunity that Sambor is unable to pursue due to Nantong’s presence on the land, now or in the medium term through to the projected completion date in May 2020.
Apart from the claimed impediment to selling the land, Sambor points to its ongoing holding costs, including some water rates it is incurring because of Nantong’s occupation, as evidence of prejudice it is suffering. In the scheme of things, I regard those costs as being a relatively minor ingredient in the balancing exercise. They can be adequately catered for by Nantong’s undertaking to pay damages.
Damages an adequate remedy?
As to the adequacy of damages as Nantong’s remedy for any breach by Sambor, should it be found that Sambor breached a contract to provide Nantong access to the land through to the completion of the construction, I am of the view that consideration favours the grant of an injunction to Nantong.
Those damages are potentially very significant. Interference with Nantong’s construction on the site is immediate and tangible; it impacts not only Nantong but also the trades and contractors involved; it will likely impact purchasers of the apartments should there be any significant delay; and, potentially, it could threaten the viability of the project which seems to be about 90 per cent through to completion. Although, on the face of it, one might assume Sambor would be capable of meeting a significant award of damages, because it is the owner of the Sambor land and some mention has been made of a figure of $7 million as its potential sale price, there is no direct evidence of Sambor’s capacity to pay damages of the scale which might be involved if the project is put in jeopardy because of a wrongful denial of access to the Sambor land.
Adequacy of Nantong’s undertaking as to damages
On the subject of the undertaking to pay damages, I am satisfied that, with the supporting undertaking given by Big C & S Group, Nantong’s undertaking is adequate to support the grant of the injunction sought.
Is there a serious question to be tried?
Having considered these matters, it is necessary to turn attention to the argument as to whether there is any serious question to be tried concerning Nantong’s asserted entitlement to a substantive injunction against Sambor revoking the licence it allegedly granted in June 2016.
As I said earlier, there seems to be little dispute that Sambor gave Nantong some sort of licence or permission to use its land. The agreement is evidenced by a letter signed by Mr Sambor dated 15 October 2016, to be supplied to the Council in support of Nantong’s construction management plan, in which Mr Sambor wrote:
I Perry Sambor, owner of 1254-1258 Glenhuntly Road, Carnegie, confirm that Nantong Construction Australia Pty Ltd have been given authority to occupy my land during the construction of 1240-1248 Glenhuntly Road, Carnegie.
Further, in his own evidence, Mr Sambor stated that, based on his discussions with Mr Segman in 2015 and 2016, he believed that Nantong would require the use of the Sambor land to develop the adjacent land, and that “access to Sambor Land would be granted until completion of the development of the Adjacent land".[2]
[2]Affidavit of Mr Henry Sambor affirmed 28 October 2019, paragraphs 36 a and b.
Nevertheless, Sambor’s arguments against the proposition that there is now a serious question to be tried concerning Nantong’s entitlement to the ultimate relief it seeks is threefold-
(a) first, that it was only limited in duration until December 2017;
(b) second, that it was not supported by any valuable consideration; and
(c) thirdly, and most significantly, because of the principles in Cowell, Nantong can never obtain injunctive relief even if Sambor wrongly terminated the licence because its remedies are confined by law to damages only.
Addressing first the duration of the access agreement, the rival contentions are that the licence was granted until the completion of the development, on the one hand, or it was only granted until December 2017, on the other. This is clearly a factual dispute which can only be resolved at the trial of the proceeding. There is some evidence going each way.
Mr Sambor’s position, that it was only granted until December 2017, is not supported by the terms of his letter dated 15 October 2016 and is somewhat at odds with his apparent failure to make any complaint about Nantong’s ongoing use of the land throughout 2018 in the first half of 2019. Nowhere in his affidavit material does he state that the licence agreement was explicitly limited in duration until the end of 2017; rather, he states his belief that he granted access to Nantong until the completion of the development on the adjacent land, with an accompanying belief that that development would be completed by the end of 2017. There is, however, evidence showing that, at an early stage, December 2017 was the expected completion date. Ultimately, that may be enough to support Sambor’s argument as to the true terms of the license agreement, but that is a matter for trial. That alone does not deny that there is a serious question to be tried.
I do not pause long to discuss the question of valuable consideration. In my view, it is at least arguable that the nature of the consideration described by Mr Segman[3] qualifies as valuable consideration sufficient to support the promise made by Sambor.
[3]Affidavit of Mr Sam Segman sworn 22 October 2019, paragraph 17.
That then brings me to the consideration of Cowell.
The dispute in Cowell arose in the context of a forced eviction of a man, Mr Cowell, from the Rosehill Racecourse in the early 1930s. The matter made its way to the High Court on a demurrer, that is, it was decided on a point of pleading. Mr Cowell sought damages for assault. The racecourse said that its assault was justified because it validly revoked Mr Cowell’s licence to be on the race track due to his misbehaviour and, following that revocation, Mr Cowell then became a trespasser. Mr Cowell replied that, for the consideration of his entrance fee to the race track, Rosehill promised him a right of access to view races and impliedly promised not to revoke it until the conclusion of the race meeting. Rosehill demurred to that plea saying, in effect, that whether or not its revocation was in breach of the licence, it was only a “bare licence” to access the land, not coupled with any proprietary interest, and thus was revocable at common law, with Mr Cowell’s remedy being limited only to damages. Moreover, or in explanation of that conclusion, it claimed that equity would not preclude Rosehill from relying upon its revocation and effectively revoking the licence.
It was that demurrer that was the point in the High Court and, by majority, the High Court upheld it.[4] The principle focus of the judgments was the correctness of a line of English decisions concerning licences to enter land to enjoy entertainment events — sometimes called ticket cases. But there was also discussion of the application of the principle to building contracts in which a builder is given a right of access to land in order to carry out building works for the licensor on its land.
[4]Cowell (Latham CJ, Dixon J and Stark J, Evatt J dissenting).
Sambor relies on this principle as a complete answer to Nantong’s case. That is, it argues that, at the highest, Sambor has granted Nantong a bare licence to access its land, not coupled with any proprietary interest in the land, has given notice of revocation of that licence and that, even if that notice breaches a term of the licence, the revocation is effective and Nantong’s only remedy is for damages. In aid of that argument, Sambor argues that, consistently with Cowell, equity will not preclude it from relying upon its revocation.
Nantong makes a series of arguments in response:
(a) first, that it does not merely have a bare licence — rather, it has a licence which itself has been granted for valuable consideration;
(b) second, unlike the ticket cases or the case of a builder who has access for the purpose of building for the licensor, Nantong’s licence is the entire substance of the agreement — it is not a mere licence given as a collateral right to enable the enjoyment of the substantive contract;
(c) thirdly, and in any event, Nantong relies upon an equitable estoppel that arises from the alleged unconscientious departure by Sambor from an assumption it has induced Nantong to hold, which departure would cause detriment to Nantong ;[5] and
(d) fourthly, if all else fails, it says that the Cowell principle is qualified in that it permits the licensee a reasonable time to vacate the premises and, in the circumstances of this case, four months is that reasonable time because that is the minimum time in which Nantong is able to secure alternative means of access to the adjacent building site.
[5]Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394.
Collectively, the parties have each referred to a significant body of authority in favour of their particular positions. I have considered the various cases referred to, and others. In my view, this is not a point of principle on which I should attempt to reach any conclusive view in the context of an urgent interlocutory injunction application. It suffices to say that I consider that the point made by Sambor is not so certain that it can be said that Nantong is unable to succeed in its final relief. In other words, it is not so certain as to deny there is a serious question to be tried.
I will merely make a few observations to explain that view:
(a) It is not clear to me that the ratio decidendi of Cowell travels beyond the context of cases of a narrow type — perhaps confined only to licences granted for the purpose of enjoying entertainment.[6]
[6]See Cowell Latham CJ 619, Dixon J 633, 639.
(b) Some textbook writers[7] suggest that the majority view in Cowell has not been followed in England, has been distinguished in many subsequent cases in Australia, and may have been doubted in dicta in the High Court case of Forbes v NSW Trotting Club.[8]
[7]See A Moore, S Grattan, L Griggs Australian Real Property Law, (Thomson Reuters, 6th ed, 2016) [ 1.25], p 29; B Edgeworth, C Rossiter, M Stone, P O’Conner Australian Property Law (LexisNexis, 9th ed, 2013), [1.20], p 14.
[8](1979) 143 CLR 242, 271 Gibbs J, 274 Murphy J.
(c) There are a number of single judge decisions in which the court felt able to apply equitable principles to relieve from an unconscionable revocation of a licence.[9]
(d) There seems to me to be a logical difference to the application of the Cowell principle to the case of a licence that has been gratuitously given as a necessary means of enjoying some other contractual benefit (such as for entertainment or to carry out a building contract), on the one hand, and its application to a licence which is the sole substance of the transaction as it is in the present case.[10]
(e) The true point of distinction in the application of the principle may be the amenability of the particular contract to the equitable remedy of specific performance .[11] Evatt J’s objection that the principle relied upon by the majority in Cowell placed too much insistence on discovering a proprietary interest as a condition for equity’s interference[12] has possibly been justified by subsequent developments in jurisprudence. In any event, the usual reasons why equity will not intervene in the performance of personal contracts (such as contracts of service) have less force in their application to a bespoke right of access over land for a substantial commercial undertaking, and it is not self-evident these days that a court would refrain from ordering specific performance of this contract if the circumstances justified it.[13]
[9]See, for example, Heidke v Sydney City Council (1952) 52 SR (NSW) 143; Chaka Holdings Pty L TD v Sunsim Pty LTD (1987) 10 BPR 18,171 see Young J at pages 22 and 23; McKeand v Thomas [2006] NSWSC 1028; Porter v Hannah Builders Pty Ltd [1969] VR 673.
[10]See and compare, Humphries v Southern Cross Ski Club [2012] VSC 232 [58]-[60].
[11]See Cowell Latham CJ 619, Dixon J 633.
[12]Cowell, Evatt J 652.
[13]Cf. Heidke v Sydney City Council (1952) 52 SR (NSW) 143.
For these reasons I am satisfied that there is a serious question to be tried as to whether Nantong is entitled at trial to the relief it seeks. Having regard to the contentions for and against that proposition, the balance of convenience and my view on the adequacy of damages as a remedy, upon the giving of the undertakings as to damages that have been proffered I will grant Nantong the order it seeks, namely-
The defendant be restrained until further order from taking any steps whatsoever to restrict the plaintiff from accessing the land at 1254-1258 Glenhuntly Road, Carnegie for the purpose of the completion of the construction of the development at 1240-1248 Glenhuntly Road, Carnegie.
I make this final observation. My assessment of what is just has been influenced by the estimate given by Nantong about the timing of the completion of the development, that is by the end of May 2020. I have had regard to the likely difficulty and time involved in Nantong securing an alternative means of accessing the site for its crane and deliveries. Were it to be shown that Nantong’s likely completion time was to extend significantly beyond the end of May 2020, that may justify the court reassessing the balance of convenience and the justness of continuing the interlocutory injunction. Much would depend, of course, on a host of other considerations at the relevant time.
Costs will be reserved.
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