Purple Tangerine Pty Ltd v Australian Financial Loan Management Pty Ltd
[2013] VSC 411
•2 August 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
S CI 2013 03193
| PURPLE TANGERINE PTY LTD (ACN 142 555 048) | Plaintiff |
| v | |
| AUSTRALIAN FINANCIAL LOAN MANAGEMENT PTY LTD (ACN 069 311 486) | Defendant |
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JUDGE: | GARDE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 July 2013 | |
DATE OF RULING: | 2 August 2013 | |
CASE MAY BE CITED AS: | Purple Tangerine Pty Ltd v Australian Financial Loan Management Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 411 | |
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LANDLORD AND TENANT – Application for interlocutory injunction – Claim by tenant for substantial interference with quiet possession and derogation of grant against landlord – Serious issue to be tried – Balance of convenience – Lower risk of injustice – Interlocutory injunction granted – Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Hay | TressCox Lawyers |
| For the Defendant | Mr P Best | J.A. Fillmore & Co. |
HIS HONOUR:
This is the return of an application for an interlocutory injunction relating to premises at Level 13/50 Market Street, Melbourne. The defendant is the lessee of the whole Level 13 under a lease from Sawrac Pty Ltd, which is a related company and the owner of Level 13 in strata.
The plaintiff is the sub-lessee of an area no more than 25 per cent of the area of Level 13 situated in a corner of the floor. The entry vestibule, male and female toilets, the kitchen and emergency exit doors are not within the plaintiff’s sub-tenancy. The plaintiff has a licence to use the toilets and kitchen. The sub-lease is for three years and commenced on 22 August 2011. It does not contain any option for renewal and will expire on 21 August 2014, or in other words, in about 13 months time.
The defendant does not intend to renew the sub-lease when it expires. When the sub-lease was negotiated in 2011, Level 13 had no formal security other than a locked front door. It was necessary to use an electronic swipe card in order to enter the front door of the building from Market Street and to use the lifts after hours. The building swipe cards or fobs are issued by the manager of the owners corporation responsible for the building. The plaintiff has approximately 30 fobs from the owners corporation manager. The defendant has had a long email debate with the plaintiff concerning this issue.
Following an incident with an intruder on 12 October 2012, the defendant installed locks on the male and female toilets, and issued two keys to the plaintiff. The defendant also installed closed circuit television on Level 13 and a security system requiring the swiping of an electronic fob on entering the vestibule from the lift. This system is only operational after hours. An alarm system was installed so that any after-hours occupants of Level 13 and building security can be alerted to a security problem.
The plaintiff conducts the business of providing serviced offices. It has filed some eight affidavits as to the consequences of the security measures installed by the defendant on its use of the premises sub-leased by it. The serviced offices are or have been occupied by six different companies, including a wide variety of industries ranging from palliative care and support, software applications, automotive demand management for congestive electricity networks, and a dinner club.
The evidence is that about 24 people work in the sub-leased premises or serviced offices, or have until recently. 19 are male and five are female. The number of staff changes from time to time depending on the staffing requirements of the companies occupying the serviced offices. In addition, five of the plaintiff’s staff require access to the premises to provide services such as cleaning, mail deliveries and on occasions the supply of food. Access is required 24 hours a day.
According to the affidavits filed on behalf of the plaintiff, there have, unfortunately, been an ongoing series of problems associated with the new access and security arrangements. When the sub-lease was entered into, the plaintiff and users of its serviced offices could access Level 13 at all hours without restriction. There was no alarm on Level 13 and no requirement to have a fob. The building’s normal business hours were 7am to 7pm Monday to Friday. Subsequently they were changed to 6.15am to 6.40pm Monday to Thursday and 6.15am to 5.30pm on Friday. Outside of normal business hours, swipe cards issued by the building’s owners corporation are needed to use the lift to Level 13.
In October 2012, the defendant reduced the normal business hours for the lift to Level 13 to 8.15am to 5.30pm Monday to Friday. This increased the need for swipe cards to gain access to Level 13.
On 3 May 2013, the defendant installed a security system on Level 13 that requires any person leaving the lift after hours to deactivate an alarm with a fob. If the alarm is not deactivated by a person with a fob, then the alarm commences to ring. The alarm then rings for some minutes.
Initially, the defendant offered the plaintiff only seven fobs, one for the plaintiff and one for each of the six businesses that used the serviced offices. This is despite the fact, as I have said, that about 24 male and female staff were working at the plaintiff’s premises on Level 13 quite apart from five or so cleaning staff. The practical effect of this restriction is that a person without a fob cannot work after 5.30pm because if he or she wished to go to the toilet or catch the lift, the alarm would be activated. In addition, a person without a fob could not attend work before 8.15am or work at weekends because the alarm would be activated. There were ongoing problems with the alarm sounding when persons without a fob sought access to the lift or to go to the toilet in the same manner that they had done before the imposition of the access restrictions and alarms by the defendant. When the alarm was activated, upset was caused to the users of the serviced offices and disruption was occasioned to businesses.
The toilets on Level 13 were left unlocked when the plaintiff’s sub-lease commenced and was negotiated. In October 2012, the defendant locked the toilets providing the plaintiff with two keys for the male toilets and two keys for the female toilets.
On 27 February 2013, the locks on the female toilets were changed by the defendant. According to the plaintiff, the defendant refused to provide any keys at all. The result was that a woman who wished to use the toilet during working hours had to attend the defendant’s premises and request an escort to the toilet. The plaintiff says that the escort remained with the woman until she left the toilet. A woman could not access the female toilets at all on weekends or before 8.15am and after 5.30pm on weekdays.
The plaintiff says that the users of the serviced offices were furious about the lack of access to the female toilets. The plaintiff says that it received many complaints from the users of the serviced offices about access to the toilets. As for the male toilets, there was, according to the plaintiff, only one key for 19 men, and the one key was not sufficient.
The plaintiff issued these proceedings on 21 June 2013. By its statement of claim, it alleges that the defendant has derogated from its grant and breached the covenant of quiet enjoyment. It also alleges breach of an implied term of the sub-lease that it says requires the defendant to provide reasonable access to the toilets on Level 13.
In his submissions, Mr Hay of counsel, who appeared for the plaintiff, referred me to the decision of Aussie Traveller Pty Ltd v Marklea Pty Ltd,[1] where McPherson JA, with whom Thomas J agreed, referred to the landlord’s obligation to afford quiet possession as directed to acts of the lessor done on the leased premises, whereas the obligation not to derogate from the grant was directed to acts done off the premises. His Honour added that it was doubtful that the distinction has much practical significance.
[1][1998] 1 Qd R 1, 8.
The question in both types of cases is whether there is substantial interference with the lessee’s occupation.
In his submissions, Mr Best of counsel, who appeared for the defendant, referred to the Additional Provision 22F which required the landlord to provide the tenant with one swipe card to enable the tenant to gain access to the premises outside building opening hours. However, this provision relates to access to the building which is under the control of the owners corporation and is not directed to Level 13, which did not require swipe card access when the sub-lease was signed.
Defendant’s counsel referred to Clause 3.3.14 of the sub-lease, which requires the tenant to comply with the landlord’s directions for the use and return of keys and key cards, and to the landlord’s right in Clause 20.4.2 to exclude persons whose presence the landlord considers undesirable.
Defendant’s counsel also referred to the decision of Aussie Traveller Pty Ltd v Marklea Pty Ltd,[2] and to the decision of Spathis v Hanave Investment Co Pty Ltd,[3] and other cases, contending that in all cases the test was whether the lessee’s ordinary use of the premises had been substantially interfered with. Disturbance of enjoyment which is merely temporary and does not interfere with title or possession is not a breach of the covenant. Likewise, the law of nuisance requires the plaintiff to prove that there has been a substantial interference with the enjoyment of the property and that damage had been suffered as a consequence.
[2]Ibid.
[3][2002] NSWSC 304 (Campbell J).
I am of the view that there is a serious issue to be tried as to whether the defendant’s actions as described in the plaintiff’s affidavits constitute a substantial interference with the ordinary use of the plaintiff’s premises.
First, when the sub-lease commenced and was negotiated there were no additional security measures in place on Level 13. In the course of the sub-tenancy, restrictions have been imposed on access to Level 13, on the use of the toilets and by installation of the alarm system. It is clear that these measures operate to restrict access by staff and visitors to Level 13, particularly out of hours access, unless the person seeking access has a fob. As the number of fobs has been limited, the effect is to deprive staff of access to Level 13 without special arrangements. In addition, access to the toilets has been severely limited. The inability to gain access to toilets is embarrassing if not affronting to staff, whether the restriction occurs during ordinary office hours or out of hours. It is also a breach of occupational health and safety requirements.
I was informed at the hearing that as a consequence of what was done two of the sub-tenants of the plaintiff’s serviced offices on Level 13 have now vacated the premises.
For these reasons I am satisfied that there is a serious issue to be tried; that the defendant has substantially interfered with the plaintiff’s occupation and use of the plaintiff’s premises on Level 13.
As to the balance of convenience, the position of each party has altered since the summons dated 21 June 2013 was issued by the plaintiff seeking interlocutory injunctions. By letter dated 23 July 2013, the defendant made an open offer to replace the toilet blocks with the same electronic fob system as the lobby alarm. This is a helpful suggestion and will mean that anyone issued with an electronic fob for Level 13 will also have access to the toilets.
Secondly, the defendant offered to provide the plaintiff with 10 electronic fobs for after hours access to the lobby and toilets. Each person who wants to be authorised to use the fobs must provide the defendant in advance with name, organisation and a photograph, but not personal information.
At the commencement of the hearing plaintiff’s counsel relied on a proposed amended summons. On 30 July 2013, my Associate was provided with a proposed further amended summons dated 29 July 2013. The proposed further amended summons seeks provision of at least 18 swipe cards or fobs that provide access to Level 13. Until the fobs can be used to access the toilets at Level 13, the further amended summons seeks that the defendant must provide the plaintiff with four keys to the male toilet and two keys to the female toilet. Relief by deactivation of the alarm system on Level 13 is no longer sought by the plaintiff.
I am satisfied that the balance of convenience favours the issue of at least 18 swipe cards or fobs to Level 13 as sought by the plaintiff. It is common practice in many office buildings for permanent and part-time staff to be issued with an individual swipe card or fob to facilitate access during ordinary working hours or out of hours. It is highly desirable, if not essential, for staff to be able to get ready access to the toilet where that access is restricted by the need to have a swipe card or fob. It is also highly desirable for more swipe cards to be issued to avoid the risk of activating the alarm system, for example, when Level 13 is in use out of hours.
I accept the evidence of the plaintiff that as many as 24 people have worked within the defendant’s premises on Level 13 at any one time, added to which there is the need for cleaning and servicing staff to have out of hours access.
I conclude that the plaintiff’s application to be issued with at least 18 swipe cards or fobs is realistic and convenient, and that the 10 swipe cards or fobs now offered by the defendant is unreasonable for up to 24 people and cleaning and servicing staff. In the meantime it is appropriate for four keys to be provide to the male toilets and for two keys to the female toilets to be available until the toilet locks are changed over to the new system.
Given that the balance of convenience favours the plaintiff, I now turn to the issue whether the grant of an injunction carries the lower risk of injustice if it should turn out that the injunction should not have been granted, as to which see Bradto Pty Ltd v The State of Victoria.[4]
[4](2006) 15 VR 65, 71-3 [29]-[35] (Maxwell P and Charles JA).
I am satisfied that the issue of additional swipe cards or fobs, whilst beneficial to the use of the plaintiff’s premises on Level 13, will not in any significant or discernable way make any difference to the defendant. Whilst there will be a very modest additional cost associated with the issue of additional swipe cards or fobs, there will be no other impact on the defendant. If a swipe card or fob is lost or stolen, it can readily be cancelled by the defendant. It is also reasonable that the defendant be able to make a charge of say $50 for the replacement of a lost swipe card or fob. This will provide an encouragement to swipe card holders not to lose their cards, which is a concern of the defendant.
Attached to the defendant’s solicitors letter of 23 July 2013, being Exhibit AC12 to the affidavit of Alicia Carter, sworn 26 July 2013, are the terms and conditions for the issue of security fobs for Level 13/50 Market Street, Melbourne.
Counsel for the plaintiff indicated in argument that Conditions 1 to 5 as set out in the proposed terms and conditions were acceptable to his client. For the reasons indicated during argument, I will not accept Condition 6. However, as I have also indicated, the defendant is at liberty to impose a reasonable fee of say $50 in the event that it is requested to replace a swipe card or fob.
On the giving by the plaintiff of the usual undertaking, orders will be made:
(1)That the plaintiff have leave to amend its summons dated 21 June 2013 in the form of the further amended summons dated 29 July 2013.
(2)Interlocutory orders will be made as set out in [1] and [2] of the plaintiff’s further amended summons, and I will now hear the parties as to any matter which they wish to raise, including the adequacy of a $50 charge for replacement swipe cards for fobs and any application as to costs.
(Discussion ensued)
The normal order on an application for interlocutory injunction where the interlocutory injunction is granted is that costs of the application for an interlocutory injunction be reserved. In the argument concerning costs before me, Mr Hay has highlighted the significance of the Calderbank offer contained in the letter of 5 July 2013 from his instructing solicitors TressCox.
He said that a total of 18 security fobs were sought. He added that his client offered to maintain a register of the persons to whom security fobs had been provided. He highlights that the number of keys to be provided in relation to the male toilets was four and the number of keys to be provided to the female toilets was two, which is the result that will ensue. He also stated that his client offered to pay $50 for each replacement key.
On the other hand, Mr Best points out that there are significant differences between the circumstances described in the letter of 5 July 2013, and those that will obtain as a consequence of the order that I will make. He points out that it was a matter of significance to his client that the register be under the control of his client, and that in paragraph 12 of the Calderbank offer, the offer was put on the basis that the defendant would deactivate the alarm in the northern fire exit corridor on Level 13.
Mr Best also submits with some justification that there have been a number of changes in the application for an interlocutory injunction that has been brought to the court. As a consequence, the nature of the application has altered, and with that the nature of the affidavit material and submissions that the defendant required to meet the claims also altered.
Taking these submissions into account I have come to the conclusion that the appropriate course is to order that costs of the application be reserved. The trial judge will be in a position to determine the best way in which costs should be ordered having regard to the evidence then before the court and having regard to the outcome of the claims for substantial interference in the plaintiff’s use and occupation of its premises.
I intend in “Other Matters” to note the arrangements that have now been resolved for applications for replacement fobs. This is appropriate to give added certainty to the relationship. I will record under “Other Matters” the terms and conditions on which replacement fobs will be issued.
(Discussion ensued).
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