Randwick City Council v Burnett - [2005] NSWSC 508

No judgment structure available for this case.

CITATION:
Randwick City Council v Burnett & Anor [2005] NSWSC 508

HEARING DATE(S): 05/05/2005 - 24/05/2005

JUDGMENT DATE :

31 May 2005

JUDGMENT OF:
Cooper AJ at 1

DECISION:
1 Judgment in favour of the defendants on the plaintiff's action; 2 Judgment in favour of the cross defendants on the cross claimants' cross claim; 3 Submissions to costs invited

CATCHWORDS:
Liability of an entity to pay fees for use, occupation or rent of premises on Crown Land - Identity of entity responsible for fees - Cross claim for possession of goods left on subject premises - Conversion - Detinue - Tresspass to goods

LEGISLATION CITED:
Corporations Act 2001
Crown Lands Consolidaton Act 1913
Crown Lands Act 1989
Conveyancing Act 1919
Impounding Act 1993
Local Government Act 1993

CASES CITED:
Courtnay v Marine Food Products Ltd (1956) 73 WN 471
McDowelll v Ulster Bank (1899) 33 Irish Law Times Journal 233
Turner v York Motors Pty Ltd (1951) 85 CLR 55
Richard v Nolan 19 DLR (2d) 229
Willey v Synan (1936 -1937) 57 CLR 200

PARTIES:
Randwick City Council
John Robert Burnett & Anor

FILE NUMBER(S):
SC 20947 of 1997

COUNSEL:
Mr R Wilson (Plaintiff)
Mr M Stevens, Mr M E Luitingh (Defendants)

SOLICITORS:
Bowen & Gerathy (Sydney)
Lincoln Smith & Company (Sydney)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ACTING JUSTICE COOPER

31 May 2005
20947 of 1997

RANDWICK CITY COUNCIL v JOHN ROBERT BURNETT & ANOR

JUDGMENT
COOPER AJ:
The Nature Of These Proceedings

1 By its Statement of Claim the plaintiff claimed possession of land on which was constructed a building in which a gymnasium was operated, allegedly by the defendants.

2 In addition, the plaintiff claims from the defendants monies by way of rent or alternatively a form of occupation fee for the use of the premises by the defendants for the period during which it is alleged that they were in occupation.

3 On 30 July 1998 an agreement was reached between the parties details of which are fully set out in an Annexures P & Q to the affidavit of Ann Maree Bowen sworn on 5 November 2001.

4 Pursuant to that agreement judgment was entered for the plaintiff for possession and the plaintiff was given leave to issue a writ of possession in relation to the premises forthwith. It was agreed that the defendants were permitted to occupy the premises from the date of the agreement until midnight on 30 October 1998 provided that they paid to the plaintiff certain monies as consideration for such occupation. The defendants did pay those monies.

5 Clause 4 of the Terms of Agreement provided :-

“That the right of the defendants to be in occupation of the premises as provided for in paragraph 3 hereof shall terminate forthwith in the event that the defendants fail to make payment of any of the several sums of money as provided in paragraph 3 hereof on time or in the manner therein provided or:

At midnight on 30 October 1998:

6 Clause 5 of those Terms provided :-

1 The defendants’ right of occupation of the premises as provided for in paragraph 2 hereof is terminated pursuant to paragraph 4 hereof; or

2 The period 30 July 1998 to midnight on 30 October 1998 shall have expired by effluxion of time.

7 As mentioned earlier the payments required under the Terms of Agreement were in fact made.

8 The premises were not vacated prior to midnight on 30 October 1998.

9 On 27 November 1998, pursuant to the judgment, the Writ of Possession was executed and the occupiers were evicted and the plaintiff resumed possession.

10 A considerable amount of equipment and other items used in connection with the gymnasium business conducted on the premises remained thereon after the execution of the Writ of Possession.

11 For reasons and under circumstances which will be dealt with later, the plaintiff refused to allow the defendants to take possession of that equipment.

12 By its Amended Cross Claim, the defendants claim the return of the goods, or alternatively damages amounting to their value, on the grounds of detinue, conversion, trespass to goods and a breach of duty as bailee. In addition the defendants claim that in commencing and prosecuting these proceedings and by reason of the conduct generally in the course of them, the plaintiff has acted with contumelious disregard for the defendants and their rights and, consequently, also claims exemplary damages.

13 This case initially occupied eight days of hearing before Shaw J in July 2004 when it was adjourned by his Honour because the plaintiff was producing a large number of documents which had not been previously discovered. In a judgment dated 12 October 2004, His Honour granted leave to the plaintiff to file an Amended Defence to the defendants’ Amended Cross Claim based upon the Impounding Act 1993.

14 Upon the retirement of his Honour the case came on for hearing before me.

15 Very sensibly, the parties agreed that the transcript of the evidence before Shaw J together with all of the exhibits then tendered should be evidence before me. This has saved a considerable amount of time as well as costs but, nonetheless, the further hearing before me has still taken thirteen days.

16 The primary issues to be determined are:-

1. Has the plaintiff established on the probabilities that it is entitled to remuneration from the defendants in respect of rent or use and occupation for the period from 1 January 1996 up to the time the Agreement was made on 30 July 1998.

2. Have the defendants satisfied the Court on the probabilities that they were wrongfully deprived of the gymnasium’s equipment and other goods remaining within the premises at the time of execution of the Writ of Possession.

17 The essential facts in this case, although complex, are not in issue. The real issues are what inferences are to be drawn from those facts and what are the results in law of those facts.

Background Facts up to 31 December 1995.

18 It is now necessary to look at the background events upon which the current dispute is superimposed.

19 Since 1959 the plaintiff has been the Trustee of Crown Land known as “The Heffron Park Reserve Trust” which is dedicated as a Public Reserve. The park is located on land bounded by Fitzgerald Avenue, Robey Street, Jersey Road and Bunnerong Road, Maroubra. The reserve number is 81741.

20 A sporting complex of which the subject premises formed part was located within Heffron Park towards the corner of Fitzgerald Avenue and Bunnerong Road.

21 The subject premises were situated in a free-standing steel-framed building which over the years was used as a fitness centre and was located on part of the Reserve land.

22 By Deed dated 4 December 1979 the plaintiff granted a lease of the subject premises for a term of 20 years from 1 January 1980 to Maccabi Sports Centre Ltd.(Maccabi). The lease is expressed to be subject to the Crown Lands Consolidation Act 1913 including s 37SS of that Act.

23 Being Crown land, the lease required the approval of the Minister for Lands which was duly granted on 4 December 1979 as appears from the endorsement of the copy of the Deed (Annexure A to the affidavit of Mr Messiter of 24 October 2001).

24 At that stage the building was known as The Maccabi Sports Centre.

25 Clause 2(iii)g of the lease contained a covenant by the lessee not to sublet or assign the premises without the written consent of the lessor and the Minister for Lands.

26 The building was used by Maccabi as a sports centre. Initially it employed a manager to manage and supervise activities at the centre but it was later converted into a gymnasium.

27 During 1985 and 1986 representatives of Maccabi had discussions with various organisations with a view to subletting the gymnasium.

28 In June 1986 Maccabi Sports Centre Ltd. received a letter dated 16 June 1986 on the letterhead of Tarzan and Jane Super Gym of 441 Bunnerong Road Matraville signed by “Gwen A Burnett, Director” in the following terms:-

“Re: Lease of Maccabi Sports Centre.

Please accept this letter as a Letter of Intent to lease the property known as the Maccabi Sports Centre to be used by this company for sporting activities including gymnasium and aerobics.

1. Rent at $5000 per month

2. CPI increases each year or market value which ever is the lesser.

3. Rent to be paid three months in advance, monthly.

4. Use of the existing car-parking area.

5. One month’s free rent.

6. Period of lease to run for 3 years with an option to run for another 3 years.

7. The proportion of outgoings as charged by government authorities other than any outgoings charged as lease fees or rent.

8. Three months notice to quit may be given only by the tenant should no lease be agreed to.”

29 Following this, there were discussions between representatives of Maccabi and Mrs C Burnett (the female defendant) and Mr Robert Elliott on behalf of the proposed sub-lessee as a result of which Maccabi Sports Centre Ltd wrote to the Secretary, Tarzan and Jane Fitness Centre Pty Ltd, a letter saying that the Board of Maccabi Sports Centre Ltd had resolved to grant a sub-lease of its sports centre to their company subject to certain conditions stated therein.

30 A further copy of that letter was sent to the recipients and they were asked to return it signed by the duly authorised officers of the company under its common seal and the three guarantors.

31 The relevant parts of that letter of 18 July 1986 (Annexure E to the affidavit of Mr Frumar) are of significance and accordingly are set out hereunder:-

“We refer to our meeting with Mrs C Burnett and Mr Robert Ellliot on 16th instant and, following deliberations by the Board of our Company after your departure, the Board has resolved to grant a Sub-Lease of its Sports Centre to your Company, subject to the following conditions:

(a) the term of the Sub-Lease shall be three (3) years with an option of renewal for a further term of three (3) years;

(c) the first month of your Company’s occupation is to be free of any fee or charge;

(d) the grant of the Sub-Lease to your Company shall be conditional upon the consent of our joint landlords, Randwick Municipal Council and the Department of Lands;

(e) the contents of the Sub-Lease shall incorporate the conditions contained in this letter together with such terms as our solicitors shall consider to be appropriate noting that the document will be based upon earlier Sub-Leases which have been granted by our Company to previous sub-tenants;

(f) the Sports Centre is to be used by your Company as a multi-purpose sporting complex;

(g) excluded from the Sub-Lease shall be the two Maccabi Clubrooms which shall be made available to New South Wales Maccabi, its affiliates and members at any time and from time to time during your operating hours;

(h) your Company is to extend to New South Wales Maccabi, its affiliates and members a discount amounting to 25% of the prevailing tariff for any particular services provided by your Company to them or facilities made available to them at any time during the term of the Sub-Lease;

(i) personal guarantees are to be provided by John and Carmel Burnett and John Burnett’s mother;

(j) rent payable under the Sub-Lease is to be made monthly in advance by banker’s order to the credit of our Company’s account;

(k) the rent payable by your Company during the first year of the Sub-Lease commencing on and from 1st August or 1st September 1986, depending upon the date by which Health & Fun Fitness Centre vacate the Sports Centre, reviewable annually during both the initial term of the Sub-Lease and the option term by reference to the Consumer Price Index (All Groups) in respect of the City of Sydney;

(m) in addition to rent, your Company is to pay statutory outgoings attributable to the Sports Centre, if any or should the Sports Centre not be rated or taxed separately, your Company shall pay its proportion thereof determined on an annual basis;

(n) as an adjunct to the Sports Centre, your Company shall be entitled to the non-exclusive use of the car park area adjacent to the present entrance to the Sports Centre;

(o) at the expiration of the rent-free period, your Company is to pay our Company the sum of $5,000.00 representing the first month’s rent and thereafter the rent is to be paid monthly in advance on the same day of each and every consecutive month;

(p) a security deposit equivalent to three (3) months rent amounting to $15,000.00 is to be stipulated in the Sub-Lease and payment of that sum is to be made upon your Company’s acceptance of the conditions of this letter.

We enclose a photocopy of this letter for the purpose of enabling you to acknowledge your acceptance of its contents and we would appreciate your assistance in returning the same to us duly signed by the duly authorised officers of your Company under its Common Seal and the three guarantors by way of acceptance together with a cheque in favour of our Company in the sum of $15,000.00 in payment of the security deposit referred to above.”

32 The copy was returned signed by Mr John Burnett as manager of Tarzan and Jane Fitness Centre and Carmel Burnett.

33 Tarzan and Jane Fitness Centre Pty Ltd was incorporated on 6 February 1985. The subscribers and directors were Carmel Burnett and Gwen Alice Burnett. By 21 December 1987 Mr John Robert Burnett was the secretary of the company. That company was deregistered on 4 March 1994.

34 It is also to be noted that the Mr Robert Elliott referred to in the letter was the accountant of the company. Gwen Alice Burnett was the mother of John Burnett.

35 Mr John Burnett was an undischarged bankrupt from 5 December 1983 to 6 December 1986. Carmel Burnett was an undischarged bankrupt from 22 April 1985 to 6 December 1986. Upon becoming bankrupt, Carmel Burnett resigned as director and was replaced by Colin Murray. (p 438).

36 On 15 August 1986 either the defendants or a corporation with which they were associated (this is in issue) entered into occupation of the gymnasium.

37 On 26 September 1986 Maccabi Sports Centre Ltd wrote to Randwick Council a letter (Annexure H to the affidavit of Mr Frumar) the relevant parts of which are:-

(i) The period of the Sub-lease shall be three (3) years together with an option for renewal for a further term of three (3) years;

(ii) The grant of the Sub-lease is conditional upon the consent of both Randwick Municipal Council and the Department of Lands;

(iii) The Sports Centre is to be used as a multi-purpose sporting complex;

(iv) Personal guarantees of performance and observance of the terms and conditions of the Sub-lease are to be provided by the Directors of the Sub-lease Company;

Will you kindly put in train the necessary action for seeking the consent of both the Council and the Department of Lands to the proposed Sub-tenancy so that the appropriate documentation can be issued and signed as soon as possible so that commercial certainty and security of tenure can be assured to the Sub-lessee.

Finally, at the request of Tarzan and Jane Fittness (sic) Centre Pty Limited, we seek the Council’s consent to the installation of a sign at the street entrance to the Sports Centre of approximate dimensions of 2m x 1m so that the public may be informed of both the identity of the Sub-lessee and the nature of the activities which are being conducted at the Sports Centre.

38 By letter dated 5 September 1988 (Annexure L to the affidavit of Mr. Frumar) signed by the defendants as “owner/managers”, Maccabi Sports Centre Ltd was advised that Tarzan and Jane Fitness Centre would now be known as Pace Fitness Club.

39 On 24 October 1988 Maccabi responded (Annexure M to Mr Frumar’s affidavit) seeking the following:-

40 No written reply was received to this letter. However, there is no evidence that Maccabi Sports Centre Ltd followed up this request for information.

41 Thereafter there were discussions and letters between the defendants on behalf of Pace Fitness Club and signed by John Burnett as owner/manager relating to building work to be done on the premises.

42 By 1994 disputes had arisen between Maccabi Sports Centre Ltd and Randwick City Council which led to proceedings in the Land and Environment Court.

43 Those proceedings were settled by a Deed of Settlement dated 10 May 1994 between those parties Clause 10 of which provided that:-

1. Consent to a sub-lease of the subject building generally in the form or in the effect of the attached draft from Maccabi to Pace Fitness Centre or its nominee.”

44 On 26 July 1994 the solicitors for Maccabi Sports Centre Ltd wrote to Messrs Segal Litton & Chilton, the solicitors for the Pace Fitness Centre, enclosing a copy of the above Deed of Settlement and stating:-

“Kindly acknowledge receipt and note that we are now awaiting your client’s response to the various issues which were raised for discussion at last night’s meeting for the purpose of progressing negotiations to the point of preparation and execution of sub-lease documentation acceptable to both parties.

45 Thereafter there were a number of conferences between representatives of Maccabi Sports Centre Ltd of the one part and the defendants and/or their solicitor of the other part with a view to reaching agreement as to the final form of the sub-lease. In addition there was correspondence between the Maccabi Sports Centre Ltd or its solicitor and the solicitor for the defendants.

46 Towards the end of 1994 the name of the business conducted on the premises was changed to “Gold’s Gym”.

47 By letter dated 29 November 1994 (Annexure Y to the affidavit of Mr Frumar) the solicitors for Maccabi wrote to Segal, Litton and Chilton (Solicitors) with regard to the “Proposed Sub-Lease to Pace Fitness Centre (Gold’s Gym)” setting out matters which they believed had been resolved. The proposals include such matters as: the sub-lessee shall be the legal entity which conducts the business at the Maccabi Sports Centre know as Gold’s Gym; that Mr and Mrs Burnett were to be guarantors and that the initial annual rent shall be $100,000 of which Maccabi shall be responsible for the application of $5,000 towards the cost of repairs and maintenance to the improvements. It also set out the procedures for rent reviews and sought a response without delay.

48 It concludes:-

“However, should the terms and conditions of the Sub-Lease not have been settled by this date [January 1995] will you kindly inform your client that rent at the new rate of $8,333.33 shall apply from 1 January next and our client shall expect that all rent up to and including the month of January shall have been paid by your client to our client.”

49 In early 1995 Maccabi received a letter on the letterhead of Gold’s Gym (Annexure Z to Mr Frumar’s affidavit) in the following terms:-

50 A cheque for this sum was enclosed.

51 During the course of negotiations the defendants were raising, amongst other matters the poor state of repair of the premises. These complaints were made to Maccabi which passed them on to the Council which made some investigations of them.

52 On 15 November 1995 Maccabi Sports Centre Ltd wrote to Mr and Mrs Burnett a letter (Annexure AF to Mr Frumar’s affidavit) referring to previous meetings and correspondence and continuing:-

“As there has been no satisfactory reply from your Solicitors and we are concerned that you have been made fully aware and appreciate our stance, this letter is being forwarded to you for the purpose of insisting that you vacate the Sports Centre by no later than 10 December next, remove all your plant, gear and equipment and ensure that our Company’s plant and equipment which was installed at the date on which Pace Fitness Centre entered originally into occupation of the Sports Centre remains intact and that you leave the premises in a clean and tidy state and in good repair, subject, of course, to wear and tear.”

53 This led to a reply from Segal Litton and Chilton, Solicitors dated 8 December 1995 (Annexure AG to Mr Frumar’s affidavit) pointing out that:-

“Our clients have suggested that they would vacate because of their frustration as to water leakage. Subsequently Council indicated that it would take certain action to prevent such leakage. Since that time there have been various discussions as to the matter.”

54 The letter points out that their clients do not intend to vacate the premises. It also sets out certain terms as to which they understood the existing “tenancy” existed.

55 By letter dated 21 December 1995 (Annexure AN to the affidavit of Mr Frumar), Maccabi Sports Centre Ltd wrote to the Council pointing out the unsatisfactory state of affairs of the company’s lease and the informal sub-lease or licence granted by the company to “Pace Fitness Centre (now known as Gold’s Gym)” and made a formal approach to the Council for a surrender of its lease and a release and discharge from all outstanding obligations up to the date of such release and discharge, on the basis that the Council will endeavour to negotiate directly with Gold’s Gym satisfactory terms and conditions for the grant in its favour of a lease.

56 At a meeting on 16 January 1996 the Council resolved to accept a surrender of the lease from 31 December 1995 and to the mutual release and discharge of each other from all claims.

57 A Deed dated 2 September 1996 was executed by Randwick City Council and Maccabi Sports Centre Ltd giving effect to the surrender effective from 31 December 1995.

58 That Deed includes a clause:-

“On or prior to the date of surrender Maccabi shall deliver vacant possession of the leased land to Council subject to the occupation by the organisation which conducts thereon the business known as Pace Fitness Centre and/or Gold’s Gym.’

59 Up to this point of time it is clear that no concluded form of agreement, whether a sub-lease or sub-licence, was ever entered into between Maccabi Sports Centre Ltd the one part, and the defendants or a company operating the gymnasium the other part.

60 The defendants were notified of the surrender and demand was made by Maccabi upon the defendants and/or their company for payment of the arrears of rent up to 31 December 1995. Nothing was paid and this claim has never been pursued.

61 Thus, by 1 January 1996, Maccabi Sports Centre Ltd was out of the picture and the entity occupying the subject premises was in a direct relationship with Randwick City Council.

The Background Facts from 1 January 1996.

62 On 1 February 1996 the plaintiff wrote to Mr J Burnett as “General Manager Gold’s Gym”, a letter in the following terms:-

(a) That Council formally accept the offer from Maccabi Sports Centre Ltd to surrender their lease for use of Heffron Park as from 31st December 1995.

(b) That Council grants to Maccabi a release and discharge from all outstanding obligations up to 31st December 1995.

(c) That Pace Fitness Centre be offered a 3 year plus 3 year licence for use of the building provided that all out standings are paid directly to Council within 1 month.

Accordingly I request that you advise me as to whether Council’s offer of a 3 year plus 3 year licence and for the payment of all outstandings on these premises directly to Council within 1 month. As stated in the resolution, funds from the rental will be used to undertake works to address problems relating to the roofing.

63 Segal, Litton and Chilton responded to this letter on 19 February 1996 (Exhibit 18) as follows:-

“Re: HURON HOLDINGS PTY. LIMITED T/AS GOLD’S GYM

We act on behalf of the above company and have been handed your letter dated 1st February 1996.

As you may be aware there are considerable monies owing by Maccabi Sports Centre to our client in respect of repairs effected by our client and which were refundable by Maccabi. There is also the bond previously paid by our client.

64 Thereafter there were meetings and correspondence between the representatives of the Council and Pace Fitness Centre/Gold’s Gym but no formal agreement was ever entered into.

65 The main sticking points appear to be questions of the state of repair of the building as well as the amount of occupation fee to be paid.

66 During the currency of these negotiations the plaintiff obtained reports concerning the state of repair of the building and also a valuation of the market rental.

67 On 15 May 1996 Segal, Litton and Chilton wrote to the plaintiff in furtherance of the negotiations and enclosed a cheque for rent in the sum of $2,083.34. See Exhibit 4 and Annexure M to the affidavit of Mr. Vescio. The relevant part of that letter states:-

“Secondly, our clients are agreeable to pay rental at the rate of $25,000. Our clients believe this is a fair and reasonable rental having to regard to all of the circumstances. Our clients will pay rental from 1 May and as a sign of good faith we enclose herewith cheque in the sum of $2,083.34 representing rental for the month of May 1996.”

68 On 9 September 1996 the plaintiff’s solicitors wrote to Segal, Litton and Chilton, solicitors a letter (Annexure R to the affidavit of Mr Vescio) which included the following:-

1 That your client only be permitted to remain in occupation as a monthly tenant subject to payment of arrears of occupation fee from January 1996 to date at $5,208.35 per month (credit being allowed for the payment already made). Such payment to be made not later than 1 October 1996 and thereafter monthly in advance.

69 On 2 October 1996 Segal, Litton and Chilton, solicitors replied (Annexure S to the affidavit of Mr Vescio) the relevant parts of which are as follows:-

”As we see the situation your client wishes our client to pay rental from the 1st January 1996 with no certainty as to any long term tenancy.

In view of the history of the matter this appears to be unreasonable.

Our client has been seeking to resolve the terms of the long-term lease.

We note that your client has not responded to the matters of concern as set out in our letter to your client Council dated 22nd March 1996.”

70 A draft form of Licence Agreement was sent by the plaintiff’s solicitors to the Segal, Litton and Chilton, solicitors.

71 On 17 October 1996 the plaintiff’s solicitors wrote to Segal, Litton and Chilton pointing out that no response had been received to the draft licence proposals put to them in conference on 8 October. The letter continues:-

“You are advised that unless a satisfactory response is received by close of business on Monday 21 October 1996 then without further notice steps will be taken to remove your client from the subject premises at Heffron Park.”

72 This led to a reply dated 21 October 1996 in which Segal, Litton and Chilton solicitors, said that they wished to make it very clear that their client wished to remain in possession and to enter into a long-term lease relationship with the Council. It then goes on to point out certain difficulties.

73 On 11 November 1996 the plaintiff’s solicitors wrote to Segal, Litton and Chilton enclosing a revised Agreement for Lease. See Annexure X to the affidavit of Mr Vescio.

74 Further correspondence ensued.

75 On 24 January 1997 Colin Biggers & Paisley, solicitors wrote to the plaintiff’s solicitors a letter headed “Henagrow Pty Ltd and Randwick City Council – Gym Heffron Park, Maroubra”. The letter advises that they have been instructed to act on behalf of the operator of the gym and understand that instructions have been withdrawn from the previous solicitors.

76 The letter states: “Our client rejects that there is any concluded agreement in relation to its occupation of the subject premises” and goes on to complain about the state of repair which, it is claimed, had prevented their client from being able to utilise the premises properly and adequately. It then makes a “without prejudice” offer in these terms:-

“Provided appropriate arrangements can be made and provided Council agrees to accept a minimal licence fee, to apply only from November 1996 to the date when our client vacates the subject premises, our client would be prepared to immediately commence inquiries in relation to alternate premises to which it could move. Immediately alternate premises have been located and are ready for occupation by our client, our client would vacate the subject building.”

77 Henagrow Pty Limited was a company of which the defendants had been the sole directors and shareholders since 1 May 1996.

78 In early July 1997, a Notice to Quit directed to “The occupant or occupants Gold’s Gym, Fitzgerald Avenue, Heffron Park Maroubra” was served on Henagrow Pty Ltd, Huron Holdings Pty Ltd, John Robert Burnett and Carmel Burnett. See Annexure AD to the affidavit of Mr Vescio. The Notice to Quit expired on 30 October 1997/

79 On 8 July 1997 the plaintiff’s solicitors wrote to the defendants’ former solicitors, Segal Litton & Chilton, enclosing a copy of the Notice to Quit and advising that unless outstanding rent in the sum of $122,549.97 was paid within 14 days proceedings would be instituted against the parties served with the Notice to Quit and, in the case of the two companies, the demand would be in the form of a Statutory Demand under s 459D of the Corporations Law.

80 On 8 September 1997 Colin Biggers & Paisley wrote to the plaintiff’s solicitors pointing out that their letter of 8 July was forwarded to the wrong solicitors and it took considerable time for the letter to reach their clients. It then goes on to say:-

“The relevant notice is not accepted by our client for the following reasons:

1 The period of time is unreasonable to enable our client to relocate its business.

2 The notice is addressed to parties none of whom are the operators or have ever been the occupiers and/or operators of the gymnasium which operates from the subject premises.

3 There is no lease with any of the parties referred to in the notice which gives the lessor the right to determine our clients’ occupancy on 3 months notice or otherwise.

81 The letter also denies liability for the payment of any back rent or occupation fee.

82 Between 1 January 1996 and 30 October 1997 (the date of the expiry of the Notice to Quit) the following payments were received by the plaintiff in respect of the occupation of the subject premises from Pace Fitness/Gold’s Gym:-

$2605.00

83 The current proceedings were commenced by a Statement of Claim filed on 28 November 1997.

84 The Statement of Claim was served on the defendants on or about 17 or 18 December 1997. No appearance or defence was filed.

85 On or about 28 April 1998 the plaintiff filed a Notice of Motion seeking, amongst other things, judgment for possession of the land and for the arrears of rent. That Motion was returnable on 4 May 1998.

86 As the Notice of Motion had not been served it was adjourned until 25 May 1998. By this stage it still had not been served and it was stood over until 11 June 1998.

87 On that day Mr Burnett appeared and orders were made for the filing of affidavits and the hearing was fixed for 30 July 1998.

88 On 30 July 1998 an agreement was reached, the terms of which have been set out earlier in this judgment and which required possession to be given of the premises by 30 October 1998.

89 The defendants wrote to the solicitors for the plaintiffs on 17 September and on 2nd, 22nd and 23rd October 1998, in effect, seeking an extension of the time to vacate.

90 On 28 October 1998 the plaintiff’s solicitors sent a lengthy letter in reply and concluded:-

“Council’s position will not change.

(a) No variation of the consent orders will be made without payment of outstanding occupation fees.

(b) Given past experiences, Council representatives will not meet and discuss the matter with you.

(c) We will not entertain further discussions with you. All communications are to be in writing.

91 On 30 October 1998 Mr Burnett wrote to the plaintiff’s solicitors saying that he wished to continue the occupation until 28 February 1999 on a month-to-month basis until new premises were completed and offered to pay $4,000 per month. A bank cheque in that amount for November occupation was enclosed. The letter also stated that because of the urgency of the situation, Mr Burnett had brought the issue to the attention of Mr Carr (the State Premier and also the local State Member of Parliament) and the matter was currently being investigated by the Minister. A copy of an acknowledgement of the letter from the Minister for Agriculture was enclosed.

92 By letter dated 2 November 1998 the plaintiff’s solicitors replied that there would be no agreement to vary the existing orders and returned the cheque tendered as payment for extended occupation.

93 The Writ of Possession was filed on 23 October 1998 and was signed by the Registrar on 3 November 1998. It was executed on 27 November 1998.

94 The gymnasium equipment as well as business records had not been removed from the subject premises prior to the execution of the Writ of Possession and they remained there in the circumstances which will be described in more detail later.

THE PLAINTIFF’S CLAIM

95 It is now convenient to consider the plaintiff’s claim

96 The plaintiff claims at the rate of $5,000 per month from 1 January 1996 to 30 October 1997, the latter date being the date of expiry of the Notice to Quit. It gives credit to the defendants for payments received and claims the balance namely $99,661,66.

97 In determining this claim there are two separate issues to be resolved.

98 The first is: was there an agreement or arrangement between the plaintiff of the one part and an entity of the other part which obligated that entity to make the claimed payments to the plaintiff?

99 The second is: if so, was that entity the defendants personally?

THE PLAINTIFF’S SUBMISSIONS

100 The plaintiff has made lengthy written and oral submissions which, for the purposes of my findings, I summarise briefly in the ensuing paragraphs.

101 The head lease from the Council to Maccabi Sports Centre Ltd was a valid lease executed by those parties and endorsed with the approval of the Minister for Lands as required by the Crown Lands Consolidation Act 1913.

102 The combined effect of the letters from Tarzan and Jane Super Gym of 16 June 1986, the letter of 18 July 1986 from Maccabi Sports Centre Ltd to Tarzan and Jane Fitness Centre Pty Ltd, the signatures on the copy of that letter, the entry into occupation of those premises by the entity and the payment and acceptance of rent pursuant thereto created the relationship of landlord and tenant as between Maccabi Sports Centre Ltd and that entity.

103 That sub-tenancy was in relation to premises which formed part only of the land comprised in the head lease between the Council and Maccabi.

104 That head lease provided that the lessee (Maccabi) was not to sub-let without the consent of the Council.

105 The correspondence set out earlier shows quite clearly that the Council was aware of the sub-letting and, by its actions, either consented outright to it or, at the very least, acquiesced in it.

106 The relationship between Maccabi and that entity was either a common law sub-tenancy at will or a tenancy at will arising from s. 127 of the Conveyancing Act 1919.

107 In the case of Courtnay v Marine Food Products Pty Ltd (1956) 73 WN 471, Hardie J quoted with approval the definition of a tenancy at will in these terms:-

“A tenancy at will exists whenever, by virtue of an express or an implied agreement between the land owner and another person, the other is then in exclusive possession of the land otherwise than as a servant or agent of the owner for an estate which is not of freehold or for a term.”

108 He also quoted with approval the following passage:-

“Whenever a person is let into possession, either under an instrument of mere general letting, or pending negotiations for a lease, or for an agreement for a lease, or for an assignment of a lease, or under a contract of purchase which afterwards falls through (and this even though a portion of the purchase money or interest thereon have been paid), the occupation without more impliedly creates a tenancy at will.”

109 Hardie J went on to point out that these pronouncements had received approval in the High Court in Turner v York Motors Pty Ltd (1951) 85 CLR 55 per Dixon J at 65 and per Williams J at 80 and 81.

110 The submissions continues that, pursuant to s. 122 of the Conveyancing Act 1919, upon the surrender of the lease by Maccabi Sports Centre Ltd, the plaintiff became the landlord at will of the entity under the same terms and conditions as had previously existed between Maccabi and that entity.

111 Although the provisions of the Crown Lands Consolidation Act 1913 by sections 37KK and 37 MM required the consent of the Minister to any sub-tenancy, this did not operate to prevent the tenancy at will referred to earlier coming into effect.

THE DEFENDANTS’ SUBMISSIONS

112 These are likewise lengthy and complex. Putting them at their simplest they are summarised in the ensuing paragraphs.

113 The arrangements between Maccabi Sports Centre Ltd and the entity was not capable of creating an interest in the land amounting to a lease so as to enable the application of s. 122 of the Conveyancing Act 1919.

114 The correspondence referred to earlier between Maccabi and the entity indicates that no firm agreement was ever entered into for a sub-lease and therefore, Maccabi could not obtain an order for specific performance to compel the entity to execute a formal lease and so there was no equitable interest in the land on the part of that entity.

115 The defendants also submitted that the plaintiff had no power to grant a lease to the entity.

116 On behalf of the defendants it is pointed out that rental at the rate of $25,000 per annum offered by the defendants in their letter 15 May 1996 (Exhibit 4 and Annexure M to the affidavit of Mr. Vescio) was never agreed to by the Council. Indeed Council pointed out that it was bound to accept only market rent.

117 Consequently the defendants submit that there was no agreement between the parties rendering the defendants or other entity liable for payment of a consideration for remaining in occupation of the premises pending a final agreement being reached.

118 This submission is rejected. The letter indicates that the entity on whose behalf that letter is written, namely Huron Holdings Pty Ltd trading as Pace Fitness Club, acknowledges that it is occupying the premises and using them pending the entering into of a formal agreement, under an arrangement whereby it is obliged to pay a fee. Whilst the amount of that fee is not agreed upon, the fact that there is an obligation to pay it is. In these circumstances one would infer that the amount of the fee has to be a reasonable fee. On behalf of the plaintiffs it is submitted that the fee agreed upon in August 1986 is, at the very least, a reasonable fee.

119 On behalf of the defendant it is submitted that after 1 July 1993 the new Local Government Act 1993 came into force. Under the provisions of that Act a Plan of Management has to be established followed by publication of its terms. No such plan of Management had been established. Consequently, there can be no agreement involving an obligation to pay a fee for use of the land regardless of whether it creates an estate in the land.

120 In addition there was no power in the Council by virtue of the Local Government Act 1993 to enter into any arrangement for the use of the premises for a commercial purpose because the land is Public Land within the meaning of the Local Government Act. The use by the entity to operate a commercial gymnasium was a commercial purpose,

121 The answer to this submission is that the definition of Public Land is included in the Dictionary to the Act and expressly excludes “land to which the Crown Lands Act 1989 applies”. The subject land is clearly Crown land to which that Act applies. Accordingly the regime stipulated under the Local Government Act does not apply.

122 In view of my findings it is not necessary to go into the details of the arguments supporting these submissions.

IS AN ENTITY LIABLE TO THE PLAINTIFF FOR FEES FOR USE AND/OR OCCUPATION AND/OR RENT?

123 The totality of the correspondence referred to earlier and in particular the letter signed by Gwen A Burnett, Director, to Maccabi dated 16 June 1986, the letter from Maccabi to the Secretary Tarzan and Jane Fitness Pty Ltd dated 18 July 1986, the return of a signed copy of that letter, the letter of 26 September 1986 from Maccabi to the plaintiff make it quite clear that at the time the entity entered into possession of the subject premises it was the common intention that a formal sub-lease approved by the Council and the Minister would be entered into. However, pending the negotiations leading to such a formal lease and its due execution and approval, the entity would be allowed into occupation on the conditions set out in the letter from Maccabi to the entity of 18 July 1986.

124 Amongst those conditions it was that in paragraph (l) which provided that if the sub-lease documentation was not executed by both parties either was at liberty to terminate the arrangement set out in that letter upon giving the other not less than three months prior written notice of its intention to do so.

125 It was pursuant to that arrangement in that letter that the entity entered into occupation and did make some payments pursuant thereto.

126 Even if this arrangement did not constitute a tenancy at will it nonetheless was an agreement between the parties, namely Maccabi and the entity, that pending negotiations and execution of a formal sub-lease the entity would make payments to Maccabi.

127 As pointed out earlier, the Deed pursuant to which Maccabi Sports Centre Ltd surrendered the residue of its lease contained a clause which provided that Maccabi shall deliver vacant possession of the leased land to Council “subject to the occupation by the organisation which conducts the business known as Pace Fitness Centre and/or Gold’s Gym”.

128 From this clause as well as from its letter of 1 February 1996 to the entity, it is clear that the plaintiff took over the premises with knowledge and upon the understanding that the entity was in occupation of the subject premises pending the execution of a formal licence for use of the building for a term of three years plus a further three years. This letter plus the letters from Segal Litton & Chilton of 19 February 1996 (Exhibit 18) and further correspondence including the letter of 15 May 1996 (Exhibit 4) enclosing a cheque for rent, plus the continued occupation of the entity in the premises with the consent and approval of the plaintiff establishes to my satisfaction on the probabilities that there was an agreement between the plaintiff and that entity, that pending execution of a formal lease, the entity could remain in occupation in return for the payment of a monthly fee. That monthly fee was the amount that had hitherto been agreed upon at $5,000 per month.

129 Accordingly I am satisfied that an entity is liable to the plaintiff for the payment of money in respect of the occupation by that entity of the subject premises.

THE IDENTITY OF THAT ENTITY

130 On behalf of the plaintiffs it is submitted that on looking at the evidence as a whole it can be seen that it was the defendants personally who were the parties to the arrangements with each of Maccabi Sports Centre Ltd and the plaintiff.

131 The submission continues that at the time they signed and returned to Maccabi Sports Centre Ltd its letter of 18 July 1986 they were not then directors of Tarzan and Jane Fitness Centre Pty Ltd. They were at that time undischarged bankrupts. Accordingly they had no power to bind that corporate entity and their signatures constitute a personal obligation under those arrangements.

132 This submission would have some force to it but for the fact that it was preceded by a letter dated 16 June 1986, the terms of which are set out earlier, and which is signed by Gwen A Burnett as a “Director” of that company. This lady was at that time a director of Tarzan and Jane Fitness Centre Pty. Ltd. This letter opens the negotiations and introduces that corporate entity to Maccabi Sports Centre Ltd as the one entering into the arrangements. The signatures on the copy letter of 18 July 1986 returned to Maccabi are signed as managers. Although not directors of that company, they were in fact managing the business of that company and one of them was a guarantor. What they did in that letter was a continuation of what had been authorised in the earlier letter of 16 June 1986.

133 Further correspondence set out earlier makes it abundantly clear that the entity with which Maccabi Sports Centre Ltd was contracting was in fact Tarzan and Jane Fitness Centre Pty Ltd.

134 It should be noted here that Tarzan and Jane Fitness Centre Pty Ltd was deregistered on 4 March 1994.

135 This does not mean that the defendants would become personally liable to Maccabi Sports Centre Ltd merely by virtue of their signatures on the copy letter of 18 July 1986. The liability of Tarzan and Jane Fitness Centre Pty Ltd continued up to 31 December 1995. If Maccabi had wished to sue that company after its deregistration it could have applied for re-registration for that purpose. If no amount due could have been recovered from that company then it could have claimed against the defendants not by reason of any personal liability but by reason of their personal guarantee for the debts of Tarzan and Jane Fitness Centre Pty Ltd contained in paragraph (I) of the letter of 18 July 1986.

136 Up to 31 December 1995 no corporate entity other than Tarzan and Jane Fitness Centre Pty Ltd was advised to Maccabi Sports Centre Ltd although different business names such as Pace Fitness Centre and Gold’s Gym were advised.

137 The identity of the entity changed after 1 January 1996.

138 The Deed of Settlement between Maccabi Sports Centre Ltd and the plaintiff of 16 May 1995 envisaged that the plaintiff would consent to a sub-lease of the subject premises from Maccabi to “Pace Fitness Centre or its nominee”.

139 The Deed of Surrender dated 2 September 1996 contained a clause that the surrender of the land by Maccabi was “subject to the occupation by the organisation which conducts thereon the business known as Pace Fitness Centre and/or Gold’s Gym”.

140 It was following the effective date of surrender (31 December 1995) that the plaintiff wrote to Mr Burnett as General Manager Gold’s Gym its letter of 1 February 1996 offering to “Pace Fitness Centre” a licence for the use of the building.

141 The entity to which that offer was made was “Pace Fitness Centre”.

142 The corporate entity which operated under the name of Pace Fitness Centre was made known to the plaintiff in the letter from Segal Litton & Chilton to it of 15 February 1996 as “Huron Holdings Pty Ltd trading as Gold’s Gym”.

143 This was reinforced by the cheque (Exhibit 4) sent by that firm of solicitors to the plaintiff under cover of the letter of 15 May 1996 which, on its face, indicates that it was drawn by “Huron Holdings Pty Ltd ACN 056751400 trading as Pace Fitness Club”.

144 At all times in 1996 and 1997 the defendants were the sole directors and shareholders of that company.

145 The plaintiff accepted that cheque and negotiated with that firm of solicitors in the knowledge that it was acting on behalf of Huron Holdings Pty Ltd trading as Pace Fitness Centre and/or Gold’s Gym.

146 As set out earlier, on 24 January 1997 Colin Biggers & Paisley, solicitors wrote to the plaintiff’s solicitors advising that they were acting on behalf of the operators of the gymnasium and heads that letter “Henagrow Pty Ltd and Randwick City Council – Heffron Park, Maroubra”.

147 The defendants were the sole directors and shareholders of Henagrow Pty Ltd from 1 May 1996.

148 All of this evidence satisfies me that on the probabilities the entity which entered into the arrangements with the plaintiff for occupation of the subject premises pending the execution of a formal licence was Huron Holdings Pty Ltd or possibly Henagrow Pty Ltd. In short, the plaintiff has failed to satisfy me on the probabilities that the arrangements or agreement for payment of any fees for that occupation was made with the defendants personally.

149 It therefore follows that on the plaintiff’s action there will be judgment in favour of the defendants.

THE CROSS CLAIM

Demands for the Return of the Goods

150 The evidence of the Cross Claimants (I shall refer to them as the defendants) is that from the time they were served with the Statement of Claim until about mid-1999 they did not have any solicitors acting for them because they had little or no income or assets of any substance apart from their shareholdings in the companies. They lived in rented premises. They could not afford to have legal representation on a full-time basis and so Mr. Burnett did what he could to recover the gymnasium equipment left in the subject premises at the time of the execution of the writ of possession on 27 November 1998.

151 He was then at his home in Queensland with his wife and children and unsuccessfully tried to contact someone at Randwick Council who would speak to him.

152 On 1 December 1998 he attended the Supreme Court at about 4.30 pm intending to make application to the Court on an urgent basis for an order that he be permitted to re-enter possession of the premises. He saw a duty judge who indicated that he was not prepared to make any orders in the absence of the plaintiff or its legal representatives and adjourned the Motion to 3 December 1998.

153 On the adjourned date he again attended Court. The plaintiff was represented by counsel and solicitors and, by consent, orders were made concerning the filing of affidavits.

154 Mr Burnett’s evidence is that he said to Ms Bowen, the solicitor for the plaintiff, that he wanted to get back into the property to remove the equipment and also he had a lot of personal things there that he wanted to recover. She replied that Council would not let him in to remove anything unless and until he could prove who owned it.

155 Portions of this conversation are denied by Ms Bowen but I am satisfied that she did tell him that the Council would not let him into possession or back into the premises and that he and his wife could not recover the goods unless and until they could prove their ownership of them.

156 Annexure J to the affidavit of Mr Messiter of 24 November 2003 is an affidavit sworn by Carmel Burnett on 17 May 1999 containing one paragraph which reads:-

“At no time between 1.1.96 and 30.7.98 did I ever personally occupy the gymnasium at Heffron Park.”

157 Annexure K to the same affidavit is an affidavit sworn by John Burnett on 18 May 1999 in identical terms.

158 On 14 May 1999 Tesoriero Pegler solicitors sent a facsimile to the solicitors for the cross defendant (I shall refer to it as the plaintiff) saying:-

“On or about November 1998 when your client retook premises our clients left certain goods and chattels on the premises and would like to get those back. Please advise by return suitable arrangements for the collection of those goods and chattels.”

159 The heading just says “Re Randwick City Council” and does not mention the names of the clients.

160 The plaintiff’s solicitors replied on 18 May 1999, the relevant parts of which are:-

“As Mr Burnett has been advised on more than one occasion in the past, the onus is on him or his wife to prove ownership of goods currently in the possession of Council before Council will entertain any proposal to have goods collected, released or otherwise dealt with.”

161 On 1 June 1999 the plaintiff’s solicitors wrote to Tesoriero Pegler a letter the relevant parts of which are:-

“To date the defendants have declined to provide any details of proof of ownership of the gymnasium equipment. Council maintains its position as first conveyed to Mr Burnett at the end of last year.

162 On 4 June 1999 the defendants’ solicitors wrote to the plaintiff’s solicitors noting that their clients had been in possession of the gym pursuant to the Short Minutes of Order and Terms of Agreement dated 30 July 1998 and held possession of the goods from that date to 27 November 1998. The letter noted that no other party had made any claim to the goods since 30 July 1998. The letter enclosed a passage from the 13th edition of Bullen & Leek pointing out that Council was not entitled to demand proof of ownership.

163 The letter continues:-

“Our clients’ possession of the goods from 30 July 1998 to 27 November 1998, the absence of any other claim from 30 July 1998 to date and the long gone lapse of reasonable time since 27 November 1998 in which the Council has had the opportunity to make enquiries as to our clients’ rights means that Council’s refusal to hand over the goods is wrongful.”

164 The letter adds that the defendants were claiming substantial damages including exemplary damages.

165 The answer from the plaintiff’s solicitors of 17 June 1999, although lengthy, in fairness to both parties, should be set out in full. It reads:-

“With reference to your letter dated 4 June 1999 we advise that the Plaintiff makes no claim with respect to the goods that you refer to and remains willing to return them to whomsoever is entitled to them, either as owner or as being the person or entity with the immediate right to possession thereof. As you are aware the goods were left upon the premises when the Plaintiff obtained possession of those premises and by reason of such dispossession the Plaintiff was placed in de facto possession of those goods against the Plaintiff’s will. Your clients could have removed those goods without hindrance as the period of possession of the premises, pursuant to the consent orders between the parties, neared expiry. However this did not occur.

Your clients’ claim to the goods is based upon them having de facto possession of these premises, and hence the goods, during the period covered by the consent orders. However, the goods were on the premises well before the consent orders were entered into and therefore belong to some other entity, the Plaintiff being unaware as to what arrangements, if any, were entered into between this entity and your clients as to ownership or the right to possession of the goods. Enquiries conducted suggest that a corporate entity by the name of Northbow Pty Limited could be either the owner or the person entitled to immediate possession of those goods. We understand that your client is associated with this entity.

Your clients have consistently denied being in possession of the premises during any period prior to that covered by the consent orders and have filed affidavit evidence to this effect. On the assumption that this assertion is correct, the mere fact that your clients were, as against the Plaintiff, entitled to occupy the premises during the period covered by the consent orders, does not carry with it proof that your clients were during the period of occupation in actual possession of the goods. This will obviously depend upon what arrangements, if any, your clients came to with the entity that was in prior possession. Without any such nexus with the goods it is not open to your clients to claim that they are now entitled to immediate possession of them merely upon the basis that your clients, as against the plaintiff, were to occupy the premises during the period of the consent orders. This is particularly so given that your clients did not remove the goods at the expiry of that period.

The plaintiff is of the view that your clients are in possession of information that would clearly establish who is the owner of the subject goods and who has the right to immediate possession thereof. Your clients have been associated with the running of the gymnasium business at the premises ever since they obtained the licence from Maccabi in 1986. After Maccabi surrendered the head lease on 01.01.96 your clients conducted negotiations with the plaintiff with respect to a fresh lease of these premises. In addition your clients arranged for the partial payment of rentals during 1996.

Our concerns are twofold. Firstly, it is quite possible that one of the corporate entities that your client is associated with is either the owner or the person who is entitled to possession of the goods. If this be so, the plaintiff will need to ensure that it returns the goods to that entity. Secondly, it is equally possible that the goods are leased from a credit provider with whom the plaintiff ought to conduct enquiries as to entitlements under any such lease.

Accordingly, it is reasonable for the plaintiff to request the defendants to provide sufficient information so that it may determine who, or what entity, is entitled to possession of the goods that you now claim. If the plaintiff does not make reasonable enquiries in this regard it will expose itself to a claim in conversion by the true owner of those goods.

166 The response from the defendants’ solicitors states that the above letter no way answers their claim and alleges that the Council is not entitled to demand proof of ownership and, given the lapse of time, is legally obliged to hand over the goods to the defendants who were last in possession of them and who have claimed them.

167 On 6 August 1999 solicitors then acting for the defendants filed an affidavit sworn by Mr Burnett on 21 July 1999. In paragraph 1 of that affidavit he says:-

(a) we need several of the goods from there before we can open at Southpoint; and

168 In paragraph 3 he says:-

“Most of the items in the gymnasium are owned by Pace Fitness Corporation Pty Ltd which is a non-trading family trust. If required I can produce receipts and confirmation from suppliers as proof of ownership for many of the items. However as several of the goods are very old or as some receipts were left on the premises, I do not have records for everything.”

169 An order was made that the defendants file and serve Defence and Cross Claim within thirty days. This was not done. The defendant says that he cannot recall why this was not done but he does recall conversations with his solicitors in which they asked him for an inventory of the goods in the gym so that they could be specified in the proposed Cross Claim and also asked him for receipts and invoices to support the claim. He says he was unable to provide them as they were not then in his possession and most of them were in the gymnasium building.

170 A meeting took place between the solicitor for the plaintiff and its General Manager and Mr Burnett at which various propositions to settle the matter were discussed.

171 In the current proceedings an order was made on 1 May 2000 that the defendants file and serve an Amended Defence and Cross Claim by 9 June 2000. That order was not complied with.

172 On 14 June 2000 the defendants were directed to file and serve verified Defence and Cross Claim by 21 June 2000. That was not complied with.

173 On 5 December 2001 further leave was granted to the defendants to file a Cross Claim by 31 January 2002. This was not complied with.

174 On 6 March 2002 the defendants were given leave to file and serve a Cross Claim by 5 April 2002.

175 On 22 May 2002 Mr Burnett on behalf of himself and Carmel Burnett filed a Cross Claim claiming damages:-

“For items under our care and control which the plaintiff has converted; any other losses or damages that have occurred or do occur as a result of the plaintiff’s conversion of the items; damages for defamation and interests and costs.”

176 The plaintiff moved to strike out this Notice of Motion. It was clearly defective in form and was filed without leave. On 3 July 2002 Bell J struck out the Cross Claim and gave leave to file an Amended Cross Claim within 14 days.

177 From about April to October 2000 Corrs Chambers Westgarth acted for the defendants but they ceased because the defendants were unable to continue to pay them.

178 Thereafter the defendants were unrepresented by solicitors until their present solicitors agreed to act for them in July 2002.

179 The defence and Cross Claim were filed on 17 July 2002.

What happened to the Equipment

180 From approximately 27 November 1998 until December 2002 the plaintiff engaged Nycon to patrol the subject premises daily from 7.00 pm to 7.00 am. In addition the plaintiff’s officers checked the premises to ensure that they were secure and Council staff changed the locks and repaired damage to the premises when the need arose.

181 The premises are in an isolated area and difficult to keep secure as the location and the isolation attracts vandals.

182 The premises were broken into on a number of occasions on some of which items were taken. On other occasions the premises were vandalised. During 2002 a number of fires occurred within the premises.

183 Ms Walshaw is employed by the plaintiff and assumed responsibility for the management of the property section, of which the subject premises formed part, in September 2002. She was concerned at the costs of employing security for the building and a fire which occurred in it in November 2002.

184 In that month she inspected the premises and the equipment and recommended that the building be cleared and steps be taken to demolish it because the roof was in a dilapidated state and posed a health and safety risk to the community.

185 As the Christmas school holiday period was approaching she felt that there may be an increased likelihood of illegal entry and recommended that the equipment within the building be removed to a more structurally sound and secure building.

186 She arranged for people to conduct an audit of the equipment in the building. They were asked to identify any equipment damaged beyond possible repair. Each individual item was listed and reasons noted for the decision. Annexed to her affidavit of 24 November 2003 is a list of the items which were removed for disposal and a further list of the items which were removed for storage.

187 Those listed for disposal were in fact disposed of and the other items were removed to Danzas Intercontinental Store at Matraville for storage at a cost of $3,300 per month.

188 The equipment remained in storage until about February 2004 when it was disposed of at Pickles Auctions in March and April of that year.

189 Pursuant to an order of this Court the plaintiff was permitted to view the equipment which was then stored at the premises of Danzas International on 27 March 2003 in the company of his solicitor.

190 The circumstances under which the equipment came to be so auctioned indicate conduct on the part of Council’s officers which causes concern.

191 Mr Geoffrey Dunford is employed by the plaintiff as Performance Improvement Officer and took over Council’s property portfolio in late 2002. He was investigating expenditure on security in relation to the premises known as Gold’s Gym.

192 In his affidavit he says that he examined Council’s files in relation to these premises and produced a report. In that report dated 27 June 2003 addressed to Ms Walshaw he states:-

The last lessee of Gold’s Gym

has not made any claims as to ownership

It is now obvious that Randwick Council has not been able to identify the owner of the equipment

that after reasonable inquiry I believe has been abandoned

193 In view of the allegations contained in the instant Cross Claim filed on 17 July 2002, the passages underlined by me were clearly false. Senior officers of the Council, including Ms Walshaw and Mr Dunford, as well as its solicitors, were well aware that that, far from being abandoned, the entitlement to the equipment was the subject of the claim made by the Burnetts in proceedings then pending before this Court. Furthermore, they were then well aware that the goods had not been collected by the Burnetts because the Council refused to allow them to collect them. The issue of whether this refusal was justified or not was a matter then pending before this Court.

194 The report goes on to say that he has asked the rangers to inspect the abandoned articles that are being stored off-site and to initiate appropriate action as the empowered authorised persons, under the Impounding Act 1993.

195 If, as Mr Dunford swore, he had examined Council’s files in relation to the premises, he must have come across many pieces of correspondence and memoranda making it perfectly clear that the defendants had then in existence a claim for these goods pending before this Court. It beggars all understanding as to how he could, therefore say that the last lessee had not made any claims as to ownership and that he had a belief that the goods had been abandoned.

196 This report was sent to Ms Walshaw who endorsed her written approval to the action recommended in it.

197 The objects of the Impounding Act 1993 are to empower authorised persons to impound and deal with articles that have been abandoned or left unattended.

198 Under the Act a particular person has to be appointed as the impounding officer.

199 Section 15 of the Act provides:-

“An impounding officer may impound an article found in the officer’s area of operation if the officer believes on reasonable grounds that the article has been abandoned or left unattended.”

200 Section 20(1) obligates an impounding authority to make all reasonable inquiries in an effort to find out the name and address of the owner of an impounded item.

201 Sub-section 5 of section 20 provides that notices under that section must be in writing addressed to the person to be given the notice and must clearly indicate that the item has been impounded and will be sold or otherwise disposed of if not claimed within not less than 28 days in the case of an article.

202 Section 24 authorises an impounding authority to offer the articles for sale.

203 Janine Davidson was the officer of the plaintiff Council holding the authority granted pursuant to the Impounding Act. She went with Mr Dunford to the Danzas store where the equipment was pointed out to her. She says in her affidavit of 21 July 2004 that her belief at that time was that this gymnasium equipment had been left at the premises of Gold’s Gym after the occupant had left. She intended to issue written enquiries to find out the name of the owner.

204 During July 2003 she sent by post notices advising that after the expiration of 7 days (not 28 as prescribed under the Act) from the date of the notice the Council intended to exercise its powers under the Impounding Act to dispose of the abandoned articles details of which were set out in a summary enclosed. The notices were sent to Northbow Pty Ltd, Huron Holdings Pty Ltd, Henagrow Holdings Pty Ltd, Pace Fitness Corporation Pty Ltd, Paristen Pty Ltd and Mr & Mrs Burnett,

205 On 24 September 2003 she sent a letter to the defendants enclosing letters forwarded to Pace Fitness Corporation Pty. Ltd and Northbow Pty Ltd. The letter pointed out that both companies had been deregistered on 18 February 2002 and notice had also been sent to the Australian Securities & Investment Commission. The letter said that, to the extent that the Burnetts may claim ownership of the articles, notice was given that after the expiration of 7 days (not 28 days as prescribed by the Act) the Council intended to exercise its powers under the Impounding Act to dispose of the abandoned articles in accordance with the relevant provisions of the Act. The description of the articles was set out in a summary enclosed.

206 The oral evidence of Ms Davidson is that, in about mid-October 2003, she was advised that a Mr Burnett had rung her. She later received a telephone call from a man who said his name was Burnett. She knew he was a recipient of one of the letters. She knew that he would have been ringing her in connection with the notice that had been sent to him. She knew that she had to make the decision on reasonable grounds whether the goods were abandoned or left unattended. She knew that Mr Burnett was a person who could give her information on that issue. Nonetheless she refused to speak to him and told him that he had to speak Mr Geoff Dunford.

207 I am satisfied that she was deliberately turning a blind eye to facts which may frustrate the preconceived desire to apply the provisions of the Impounding Act and to deprive herself of obtaining information relevant to the duty cast upon her under s 15 of that Act to form a belief on reasonable grounds that the article has been abandoned or left unattended.

208 Her evidence was that she was totally unaware that the defendants had made a Cross Claim which was then pending in this Court for the return of the goods. She had the good grace to concede that if she had known this she would not have had a belief on reasonable grounds that the goods were abandoned or left unattended.

209 In paragraph 18 of her affidavit of 21 July 2004 Ms Davidson swears that, in November 2003, she had a conversation with Mr. Dunford:-

“I said: Have you heard anything more about the Gold’s Gym equipment?

He said: No.

I said: It appears to me that the goods have been left unattended, perhaps abandoned.

210 In paragraph 16 of his affidavit of 20 July 2004 Mr Dunford swore his version of this conversation thus:-

“I said: ‘Do you have any feedback for the letters….?

She said: ‘I got a message to ring Burnett….’

I said: ‘Are these articles abandoned?’

She said: ‘Yes, I cannot identify who the owner is.’

211 Mr. Dunford according to his evidence, knew that Mr Burnett had rung in response to the letters. He knew that Mr Burnett was claiming the return of the equipment or damages for their conversion in proceedings then pending in this Court, yet he did not ask Ms Davidson to make contact with Mr Burnett. And Ms Davidson, knowing that she is the person who is vested with the powers under the Impounding Act, put herself in the position where she overlooked the probability of identifying a claimant to the equipment.

212 But there is more. By letter dated 15 August 2003 the Australian Securities and Investment Commission sent to the defendants’ then solicitors (Lincoln Smith & Co) a copy of the Notice under the Impounding Act sent to it in relation to Northbow Pty. Ltd. and Pace Fitness Corporation Pty. Ltd.

213 That firm wrote on 20 August 2003 to the plaintiff’s solicitors (Annexure U to the affidavit of John Burnett sworn 18 April 2005) pointing out that the notices sent to the defendants were sent to the wrong address and that they never received them. It also draws attention to the fact that in the notices the goods are said to be located at “Gold’s Gym – Heffron Park, Maroubra.”

214 By this stage the goods had, to the knowledge of the defendants been moved to the Danzas store. The letter then seeks details as to where the goods, the subject of the notice, are located.

215 On 22 September 2003, the plaintiff’s solicitors replied (Annexure V to the same affidavit) that the articles had been removed from Heffron Park and were currently being stored at the location at which their client previously inspected them and concludes:-

“If your clients have any enquiries with respect tro the Notice they are free to contact the Council at the address referred to in the Notice.”

216 It is following this, that Mr Burnett made the phone calls.

217 The equipment was sent to Pickles Auctions and sold in March and April 2004.

Are the Cross Claimants entitled to Immediate Possession of the Equipment?

218 The facts clearly establish that prior to the execution of the Writ of Possession on 27 November 1998 a gymnasium business known as Pace Fitness Club was carried on at the subject premises.

219 On 30 July 1998 an agreement was reached between the defendants and the plaintiff, details of which are set out earlier in this judgment, under which the defendants were given the right to occupy the subject premises up to midnight on 30 October 1998. Judgment was entered in accordance with this agreement.

220 The terms of that agreement, however, related solely to the occupation of the premises and in no way covered the equipment and goods within the premises.

221 By the time of the execution of the Writ of Possession on 27 November 1988, the equipment and goods had not been removed from those premises.

222 According to the evidence of Mr Burnett a demand for the return of the equipment and goods was made by him as early as 1 December 1998. His evidence is that it was refused unless he produced to the plaintiff evidence of the defendants’ ownership of the goods.

223 It is common ground that on 14 May 1999 the defendants’ solicitors sent a letter (set out earlier) to the plaintiff’s solicitors requesting the return of those goods and equipment.

224 The reply of the plaintiff’s solicitors was that the onus was upon the defendants to prove ownership of goods currently in the possession of the Council before the Council would entertain any proposal to have goods collected, released or otherwise dealt with. Details of the relevant correspondence have already been set out in full.

225 Paragraph 1 of the Amended Cross Claim states:-

Crown Lands Act

226 Thus in this paragraph the defendants are alleging not that they in their own right operated the gymnasium, but that they did so for and on behalf of Northbow Pty Ltd.

227 Paragraph 3 of the Amended Cross Claim alleges that at the time the plaintiff entered into possession of the gymnasium and at all material times prior thereto, the defendants were the owners of and or alternatively, had in their actual possession within the gymnasium the subject equipment.

228 In effect, the defendants allege that it was they personally who exercised control and dominion over the subject equipment and goods. Accordingly at the time of the demands, whether in December 1998 or May of 1999, they were the persons who had the immediate right to possession.

229 On the other hand, the plaintiff submits that whatever dealings were performed with the equipment and goods by the defendants was performed by them in their capacity as servants and/or agents and/or directors of corporations and that the immediate right to possession was vested, not in the defendants, but in the corporations on behalf of which they acted.

230 The Appeal Division of the New Brunswick Supreme Court of Canada in the case of Richard v Nolan 19 DLR (2d) 229 considered this very question.

231 At p 232 McNair C.J.N.B. at p 232 quoted with approval from Clerk and Lindsell On Torts 11th Edition p 454 the following passage:-

“A mere servant who has custody or charge of goods on behalf of his master has not a possession in the sense now under consideration. The master has not only the right of possession, but constructively the possession itself.”

232 In that case the chattel was a motorcar. His Lordship distinguished the situation where the car had been lent to the plaintiff to use on his own business. In that case he would have the immediate right to possession. In that situation he would, as bailee, be entitled, by virtue of his possession, to sue for any injury to the car caused by the wrongful act of another.

233 A further possible situation considered was where the plaintiff’s case is that he was operating the car in the business of the owner as her servant. In those circumstances the apparent de facto possession of the plaintiff would in fact be the possession of the owner.

234 In the case of Willey v Synan (1936–1937) 57 CLR 200 the High Court considered a case where the plaintiff who was the boatswain of a ship claimed to have been the finder of coins on that vessel.

235 The issue was whether because he was a servant on the ship the right to immediate possession of the coins vested in him in his own right or vested in his employer. At p 216 Dixon J (as he then was) points out:-

“To avoid the nonsuit, therefore, it was necessary for the appellant to adduce evidence of such a right to possession of the goods as would entitle him to recover from a person seizing them without statutory or other lawful authority.”

236 Dixon J quotes with approval from McDowell v Ulster Bank (1899) 33 Irish Law Times Journal 233. This was a case where a porter of a bank sweeping up the banking chambers after the hours of business, found a roll of notes near the tables where customers wrote out cheques. He handed the notes to the manager, but afterwards, on the true owners failing to appear, he sought to recover the money from the bank. In that case, Palles CB said:-

“I decide the case on the ground of the relation of master and servant and that it was by reason of the existence of that relationship and in the performance of the duties of that service that the plaintiff acquired possession of the property. I can see that it is the duty of the porter of the bank, who acts as caretaker, to pick up matters of this description, and to hand them over to the bank. I hold that the possession of the servant of the bank was the possession of the bank itself, and that therefore, the element is wanting which would give the title to the servant as against the master.”

237 At p 218 Palles CB points out that it is necessary to examine, in the cases of master and servant, the scope of the servant’s duties in order to determine whether the right to possession is in the master or the servant.

238 More relevant to the present case is whether the use of the gymnasium equipment and goods within the subject premises by the defendants was in their own right or in right of the corporations of which they were at the relevant times sole directors and shareholders and by which they were employed as managers and were paid a fortnightly wage.

239 It is now necessary to consider the evidence relating to this issue.

240 As at 27 November 1998 and through 1999, 2000 and 2001 the defendants were the directors and sole shareholders in the following companies:-

241 A business names search for Pace Fitness Centre shows that the proprietor of that name was John Robert Burnett from an unknown date and in particular from 9 October 1990 to 28 June 1997.

242 From 28 June 1997 the proprietors of that business name were Northbow Pty Ltd and Paristen Pty Ltd.

243 The defendants moved from Maroubra to the Gold Coast area of Queensland in about January 1996.

244 Exhibit 39 comprises documents produced under subpoena by the National Australia Bank. Those documents include bank statements for Northbow Pty Ltd trading as Pace Fitness Club (Maroubra) from January to June 1997; of Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise from January from June 1997 and of Paristen Pty Ltd trading as Pace Fitness Club at Bondi Junction for the same period.

245 Exhibit 39 includes a letter dated 3 September 1997 from John Burnett to the Bank seeking finance for the purchase of a house at 40 Cottlew Street East, Southport, Queensland.

246 The application is supported by details of the income and expenditure for the months of January to June 1997 of Northbow Pty Ltd trading as Pace Fitness Club, Maroubra. Included within the expenditure is an item “licensing fees – Pace Corporation $12,000” and a further entry of “licensing fees – for Bondi, March, April, May and June $8,000”.

247 There are similar details of income and expenditure for the same period in respect of Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise and of Paristen Pty Ltd trading as Pace Fitness Club, Bondi Junction.

248 The letter also includes what is described as “Pace Fitness Club’s Overview” which continues as follows:-

“Pace Fitness Corporation Pty Ltd/Burnett Family Trust. This is a non-trading company. It is simply purchasing the family home.

The Trust grants the three clubs a licence to use the Pace name and in return each club pays a monthly fee of $2,000. This is how the Trust has been able to meet interest repayments on the current vendor finance and would also cover any future housing loan and other associated expenses.”

249 It describes Northbow Pty Ltd, trading as Pace Fitness Club, Maroubra, as having a quite stable income as the club is now well established.

250 Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise, is described as a club which had opened recently and had high advertising costs for the first half of the year.

251 In respect of Paristen Pty Ltd trading as Pace Fitness Club, Bondi Junction, the documents says:-

“The Bondi Junction club has experienced some difficult times recently. As a result of our previous landlord being in financial difficulties with the Bank, he sold an option to buy our premises to a party associated with our opposition. Consequently, we did not renew our lease option and were forced to find alternative premises”.

252 It then goes on to point out that alternative premises were found at Eastgate Shopping Centre but there was a three-month relocation period during which Bondi members were allowed to use the Maroubra facilities.

253 Exhibit 40 comprises bank statements produced by the National Australia Bank for the personal account of the defendants. It shows salary being paid into the account on a regular fortnightly basis in the amounts of $359.00 and $588.00.

254 The salaries were paid into the Maroubra Junction branch of the NAB until 24 October 1996. From 7 November 1996 they were paid into the Surfers Paradise branch of NAB at the same rate until 2 July 1998. These latter payments are described as having been made by Paristen Pty Ltd.

255 From then until 6 December 1998 the wages appear to have increased to $510.00 and $825.00 per fortnight and paid by Paristen Pty Ltd.

256 From 17 December 1996 until 22 April 1996 the fortnightly payment into the account of the defendants reverted to $358.76 and $587.10 per fortnight and are described as having been paid by Paristen Pty Ltd.

257 Exhibit 42 comprises bank statements from the Maroubra Branch of the National Australia Bank of “Northbow Pty Ltd – Pace Fitness Club” from 2 August 1996 to 18 December 1998. These statements show what are described as “cash and/or cheques”. On the probabilities I am satisfied that they are receipts from the business being conducted on those premises and note that the last credit occurred on 7 December 1998.

258 Exhibit 73 comprises documents relating to the ownership of the equipment in the gymnasium and refers to goods purchased by Pace Fitness Corporation Pty Ltd and Pace Fitness. There is also a letter from the valuer of some of the goods, Grey Eisdell Timms Pty Ltd to the effect that the goods were represented as belonging to Pace Fitness Corporation Pty Ltd.

259 The plaintiff and his wife moved from Sydney to Queensland in about January 1996. Thereafter operations co-ordinators were employed to run the day-to-day affairs of the gymnasiums at Maroubra and Bondi Junction. John Burnett frequently came to Sydney to supervise and was in almost daily contact by telephone. Mrs Burnett came to Sydney less frequently.

260 Mr Burnett swears in his affidavit of 18 April 2005 that, during 1994, Huron Holdings Pty Ltd entered into a licence agreement with a US corporation for the use of the name Gold’s Gym. Late in 1994 the name on the Maroubra premises was changed to Gold’s Gym. Thereafter until about July 1996, all expenses relating to the running of the gymnasium were paid by Huron Holdings Pty Ltd.

261 Annexure E to his affidavit is a letter from the Australian Taxation Office addressed to Huron Holdings Pty Ltd trading as Gold’s Gym dated 20 December 1995 regarding group tax instalment deductions.

262 On 28 June 1997 the ownership of the name Pace Fitness Centre was transferred to Northbow Pty Ltd and Paristen Pty Ltd, companies of which the defendants were the sole shareholders and directors.

263 In paragraph 28 of this affidavit Mr Burnett says:-

“During the whole of the time I managed the gym, my wife and I were paid a wage or salary by the company that operated the gym at the relevant times. All expenses relating to the operation of the gym were paid from time to time by the company that was the operator of it.”

264 In paragraph 30 of his affidavit he says:-

“Whilst I worked in and managed the business in conjunction with my wife during the whole of the time the gymnasium was conducted from the subject premises I did so for and on behalf of one or more of the companies to which I have referred in this affidavit and never on my account. During the whole of that time, I did not personally employ any of the persons who worked in the business nor did I personally assume or regard myself as being responsible for the debts of the business, including rent or occupation fees.”

265 Mr. Burnett swore that the documents relating to the running of the business from 1986 onwards including those relating to the acquisition of assets had been left in the subject premises to which he was denied access. It is common ground that the plaintiff changed the locks on the premises and would not allow him access thereto.

266 In paragraph 43 of his affidavit he refers to a number of documents, Annexure M, which were produced by the plaintiff on discovery and which had been in filing cabinets in the storeroom of the subject premises at the time of the execution of the Writ of Possession.

267 Annexure H to the affidavit of Mr Burnett is a membership agreement between a member of the Pace Fitness Club dated 17 December 1997. At the top left-hand corner of the document are the words “Pace Fitness Club” and at the bottom left-hand corner are the words “Northbow Pty Ltd ACN 072207151”.

268 Annexure I to that affidavit is a letter from Centrelink addressed to Northbow Pty Ltd trading as Pace Fitness Club requiring the company to deduct from payments it makes to an employee the total sum of $293.89 owed by that person to the Commonwealth.

269 Part of Annexure M to the affidavit of Mr Burnett is a letter dated 15 July 1996 from Pace Fitness Club to a bank signed by James Khoo, Financial Controller advising that Pace Fitness Club – Bondi will now be operating under the name of Paristen Pty Ltd and that Pace Fitness Club – Maroubra under the name of Northbow Pty Ltd. As a result each company will require new merchant summary cards as soon as possible.

270 The same Annexure also includes a number of documents evidencing purchase of and repairs to equipment addressed to Pace Fitness Club or to Pace Fitness Centre or to Gold’s Gym.

271 Annexure N is an inventory and appraisal by Grey Eisdell Timms Pty Ltd of gymnasium equipment at the premises at Maroubra and also at the premises at Bondi Junction dated 20 February 1996. At that stage the value of the goods at Gold’s Gym on the basis of a going concern was $168,800 and had an auction value of $97,550. The value of the equipment at Bondi Junction on a going concern value was $250,500 and its auction value was $146,425.

272 The evidence of Mr Burnett was that because of the relocation of the Bondi Junction gym to smaller premises some third to a half of the equipment formerly at Bondi Junction was removed to Maroubra.

273 The evidence of Mr Burnett, p 304, is that in 1997 he changed the ownership of the Pace business name to ownership by Northbow Pty Ltd and Paristen Pty Ltd because there were two gymnasiums using the name of Pace Fitness Club - one at Bondi Junction which was operated by Paristen Pty Ltd and the other at Maroubra which was operated by Northbow Pty Ltd.

274 His evidence was that from 1996 until 1998 the customers’ fees at the Maroubra gym were paid into the bank account of Northbow Pty Ltd. (p 307).

275 At p 318 he said that the day-to-day expenses of the Maroubra gym were all paid out of the Northbow Pty Ltd. cheque account. He added:-

“Yes, the only thing that was paid by anybody else was in 1998 my wife and I were given occupation of the premises for a three month period. We had to pay some occupation fees. $2000, $3000, $4,000 for those three months we paid those. Even in that time Northbow paid all the wages, and cleaning, buying any of the stock and all the money was banked into that account as it had been in 1997. All the money went into Northbow’s account and it paid all the running day-to-day expenses.”

276 When asked why the name of the Maroubra business which changed from Gold’s Gym back to Pace Fitness Club he responded (p 434):-

“Well there were two reasons, the first reason was that there was a problem with getting the name registered Gold’s Gym. While it was an international licence, we couldn’t actually register the name in Australia or New South Wales. Someone else had it registered so there wasn’t much benefit when I couldn’t register the name. Another reason was the clubs were called Gold’s at Maroubra and at Bondi, Pace. We had a lot of advertising in newspapers and colour brochures, so we would have to do two lots. So it was becoming very expensive and we thought it wasn’t working very well, so it would be more cost effective to change it back to Pace so that you would do one lot of brochures, you know, printing and letterhead. If we could put both names on it, it would probably more cost effective.”

277 There was produced an account from Carney, solicitors which indicated that before August 1996 that firm did work in connection with the agreements for sale and purchase of the business Pace Fitness Centre and the company structure connected therewith.

278 At p 471 Mrs Burnett described the division of managerial functions between herself and her husband before they moved from Maroubra to Queensland in about January 1996 thus:-

“We had our own job descriptions, and looking at the – John was in charge of advertising, marketing. He would have possibly have more contact with the accountant than I would. My job then was looking after staff training, systems within the various departments, that is the gym, the reception, aerobics and also conducting workshops for the staff, typing up staff manuals. That was mainly it.”

279 Both Mr. And Mrs Burnett gave evidence that most of the subject equipment was owned by Pace Fitness Corporation Pty. Ltd. although some belonged to Northbow Pty. Ltd.

Findings on the Cross Claim

280 A thorough examination of all of the evidence tendered in this case satisfies me quite comfortably of the following:-

1 At the material times most of the goods and equipment were owned by Pace Fitness Corporation Pty Ltd of which the defendants were sole directors and shareholders.

2 Some of the goods were owned by Northbow Pty Ltd of which the defendants were sole directors and shareholders and employed as managers at a fortnightly wage.

3 Northbow Pty Ltd was granted the right to use the subject goods pursuant to a licence arrangement between it and Pace Fitness Corporation Pty Ltd.

4 The use and control of the equipment by the defendants was by virtue, either of their employment by Northbow Pty Ltd or by the exercise of their rights as directors of that company, or both.

Corporations Act 200

281 This is supported by the evidence of Mr. Burnett in paragraph 30 of his affidavit:-

“Whilst I worked in and managed the business in conjunction with my wife during the whole of the time the gymnasium was conducted from the subject premises I did so for and on behalf of one or more of the companies to which I have referred in this affidavit and never on my account. During the whole of that time, I did not personally employ any of the persons who worked in the business nor did I personally assume or regard myself as being responsible for the debts of the business, including rent or occupation fees.”

282 In exercising control over that equipment and those goods the defendants were answerable to the respective corporations of which they were directors and which they were employed.

283 The capacity and right of the defendants to make decisions regarding the equipment, its purchase, its disposal and its use was not a right vested in them personally. It was a right which accrued to them by virtue of their position as directors of the company and/or their employment as managers.

284 It is trite to say that a corporation has neither body to kick nor soul to damn and consequently must act through human agents. The defendants were but the human agents of the corporations.

285 On a number of occasions in the past, the defendants have described themselves as the owners of the Pace Fitness business. Mr Burnett explained this by saying that they owned all the shares in the company which owned the business and therefore they owned the business. He appreciates now that this is not correct in law.

286 In exercising their powers as directors of the respective companies the defendants owed a duty of care to the company. Thus, under s 180 of the Corporations Act 2001 a director of a corporation who makes a business judgment must make it in good faith for a proper purpose.

287 Under s 181 of that Act a director or other officer of a corporation must exercise their powers and discharge their duties in good faith in the best interest of the corporation and for a proper purpose.

288 Under s 182 of the Act, a director, secretary, other officer or employee of a corporation must not improperly use their position to gain an advantage for themselves or for someone else or cause detriment to the corporation.

289 The defendants were under these duties to the respective corporations in respect of all of their acts in controlling the equipment and goods used in the course of the gymnasium business. In making a claim for the subject equipment and goods in their own right instead of in the right of the corporation they are not acting in good faith in the best interests of the corporation.

290 Under these circumstances the defendants have failed to satisfy the Court on the balance of probabilities that at the time the plaintiff entered into possession of the gymnasium and at all material times prior thereto and at all material times thereafter they (the defendants) were, in their personal right, entitled to possession of the subject equipment and goods.

291 Accordingly, the Cross Claim fails and there will be judgment for the plaintiff upon the Cross Claim.

292 Both parties made lengthy and detailed submissions on other aspects of the Cross Claim. However, in view of my findings on the preliminary matter, it is not necessary to rule on them.

ORDERS

1) Judgment in favour of the defendants on the plaintiff’s action.

2) Judgment in favour of the plaintiff on the defendants’ Cross Claim

3) I invite submissions as to costs.

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Citations

Randwick City Council v Burnett [2005] NSWSC 508

Most Recent Citation

Burnett v Randwick City Council [2006] NSWCA 196

Cases Citing This Decision

1

Burnett v Randwick City Council [2006] NSWCA 196

Cases Cited

1

Statutory Material Cited

6

Turner v York Motors Pty Ltd [1951] HCA 52

CITATION:	Randwick City Council v Burnett & Anor [2005] NSWSC 508
HEARING DATE(S):	05/05/2005 - 24/05/2005
JUDGMENT DATE :	31 May 2005
JUDGMENT OF:	Cooper AJ at 1
DECISION:	1 Judgment in favour of the defendants on the plaintiff's action; 2 Judgment in favour of the cross defendants on the cross claimants' cross claim; 3 Submissions to costs invited

CATCHWORDS:	Liability of an entity to pay fees for use, occupation or rent of premises on Crown Land - Identity of entity responsible for fees - Cross claim for possession of goods left on subject premises - Conversion - Detinue - Tresspass to goods
LEGISLATION CITED:	Corporations Act 2001 Crown Lands Consolidaton Act 1913 Crown Lands Act 1989 Conveyancing Act 1919 Impounding Act 1993 Local Government Act 1993
CASES CITED:	Courtnay v Marine Food Products Ltd (1956) 73 WN 471 McDowelll v Ulster Bank (1899) 33 Irish Law Times Journal 233 Turner v York Motors Pty Ltd (1951) 85 CLR 55 Richard v Nolan 19 DLR (2d) 229 Willey v Synan (1936 -1937) 57 CLR 200
PARTIES:	Randwick City Council John Robert Burnett & Anor
FILE NUMBER(S):	SC 20947 of 1997
COUNSEL:	Mr R Wilson (Plaintiff) Mr M Stevens, Mr M E Luitingh (Defendants)
SOLICITORS:	Bowen & Gerathy (Sydney) Lincoln Smith & Company (Sydney)