Rob Sinclair Equipment Rental P/L v Redline Transport Aust P/L - [2020] SADC 81

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ROB SINCLAIR EQUIPMENT RENTAL P/L v REDLINE TRANSPORT AUST P/L & ANOR
[2020] SADC 81
Reasons for Ruling of Her Honour Judge Schammer
29 June 2020
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - EX PARTE APPLICATIONS
The applicant, Rob Sinclair Equipment Rental Pty Ltd, provides equipment for hire, including trucks, prime movers and semi-trailers.
It entered into seven separate lease agreements with the first respondent, Redline Transport Australia Pty Ltd, for the supply of equipment to it on certain terms and conditions. Those conditions included the payment of rent and the holding and maintain of insurance with respect to the equipment leased. The second respondent was one of three guarantors of the first respondent’s obligations under the lease agreements.
The applicant claims that the first respondent is in breach of the lease agreements in that it has failed to pay rent, as at 8 May 2020, in the sum of $68,586.15 and that it holds no insurance cover with respect to the equipment.
By application dated 15 May 2020, the applicant, sought urgent orders, including, the delivery up to it, by the respondents, of equipment. The equipment includes:
a.   2013 WESTERN STAR 4800          VIN:5KKJBEDR1DPBX6011
b.   2008 KENWORTH T408              VIN:6F50000008A438119
c.   2012 MACK TRIDENT                 VIN:6FMM12H69CD803621
d.   2010 KENWORTH T908               VIN:6F5000000AA443926
e.   2013 KREUGER TRAILER             VIN:6FH7105AADM014775
f.    2004 HINO FM CURTAINSIDER      VIN:JHDFM1JTPXXX10058
The Application was heard on 28 May 2020, at which time the orders were made as sought, on the basis of the applicant giving an undertaking in the terms as required by r 111.1(4) of the Uniform Civil Rules 2020.
These are the reasons for my ruling.
Held:
The applicant’s claims for breach of contract and in detinue have a strong likelihood of success.
The balance of convenience favours the granting of the orders as sought.
The respondents are at liberty to apply to dissolve or vary these orders.
Australian Broadcasting Corporation v O’Neill [2006] HCA 46; Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; Adara Acquisitions Pty Ltd and Anor v Deal Corporation (Knox) Pty Ltd and Anor [2018] VSC 831, considered.

ROB SINCLAIR EQUIPMENT RENTAL P/L v REDLINE TRANSPORT AUST P/L & ANOR
[2020] SADC 81
Introduction

By interlocutory application dated 15 May 2020 (FDN 3), Rob Sinclair Equipment Rental Pty Ltd (the applicant), sought urgent orders, including, the delivery up to it, by Redline Transport Australia Pty Ltd and Tara Odele Byrne (the respondents), of specified equipment (Application).
The Application was supported by affidavits sworn by Robert Glen Sinclair on 15 May 2020 (first Sinclair affidavit) and on 26 May 2020 (second Sinclair affidavit) and affirmed by Kirsty Jane Bennett on 28 May 2020 (Bennett affidavit).
The Application was heard, in the absence of the respondents, on 28 May 2020. On that date, I made orders in the terms as sought by the applicant.
These are my reasons for ruling.
Rules
The Application was lodged prior to the inception of the Uniform Civil Rules 2020 (UCR) and was made pursuant to r 246 of the District Court Civil Rules 2006 (6 CR 246), having regard to the fact that the relief sought was injunctive. By the time the Application was heard, 6 DCR 246 had been revoked.
The relevant rules governing the Application are UCR 111.1 (Interim and interlocutory injunctions) and UCR 112.12(4).
UCR 111.1 states:
111.1—Interim and interlocutory injunctions
(1)The Court may grant an injunction before, at or after the hearing and determination of a proceeding.
(2)An application may in a case of urgency or risk be made without notice but in such a case the Court may, if it thinks fit, require the party applying for the injunction to give notice of the application to other parties.
(3)If an injunction is granted on an application made without notice, the Court will ordinarily only grant an interim injunction until notice is given and the Court subsequently hears and determines whether the interim injunction should be discharged or an interlocutory injunction should be granted.
(4)If ‘the usual undertaking as to damages’ is given to the Court in connection with an interlocutory order or undertaking by another person, it means an undertaking to the Court to—
(a) submit to such order (if any) as the Court considers just for the payment of compensation, to be assessed by the Court or as it may direct, to any person (whether or not a party) affected by the operation of the interlocutory order or undertaking by the other person or any continuation of it (with or without variation); and
(b) pay the compensation referred to in (a) to the person or persons referred to in the order.
UCR 112.12(4) states:
(4)The Court may make orders about—
(a)     management of real or personal property the subject of a proceeding;
(b)     how real or personal property the subject of a proceeding is to be dealt with; or
(c)     payment of income derived from real or personal property the subject of a proceeding.
Background
Lease Agreements
The applicant provides equipment for hire, including trucks, prime movers and semi-trailers. The first respondent is a company which carries on a transport business based in Mackay, Queensland. The second respondent is a director of the first respondent.
By Summons and Statement of Claim dated 15 May 2020, the applicant pleads that it entered into nine lease agreements for the supply of equipment by it to the first respondent between 28 August 2018 and 3 July 2019, on certain terms and conditions.
The lease agreements are in identical terms, save for the date and the equipment specified therein. Importantly, the terms of each lease agreement include that the second respondent will guarantee all of the first respondent’s liabilities under the agreement. Brett Ian Nimmo and Redline Freight Holdings Pty Ltd are also named as guarantors.
Relevantly, clause 5 of each lease agreement states:
5Ownership of the Goods
(1)Lessor retains title to Goods
The lessor retains full title to the Goods notwithstanding:
(a)the delivery of the Goods to the lessee;
(b)the possession and use of the Goods by the lessee; and
(c)any temporary attachment of the Goods to any land or buildings to facilitate use of the Goods,
subject only to the rights of the lessee as a mere bailee of the Goods with a right only to use them in accordance with, and under, the Lease agreement.
(2)No option to purchase Goods
The lessee does not have any right, option, obligation or contingent obligation to purchase the Goods and acknowledges that no representation to that effect, express or implied, written or oral, has been made by or on behalf of the lessor to the lessee or any nominee of the lessee at any time.
Clause 7 outlines obligations on the lessee (first respondent) to pay rent and other payments.
Clause 11 outlines insurance obligations imposed on the first respondent. Clause 11(1) states:
(1)Extent of insurance
The lessee must effect and maintain at all times during the Term and any extension of the Lease agreement or holding over under the Lease agreement the following insurances:
(a)General insurance: insurance of the Goods for their full insurable value against:
(i)    damage or destruction caused by accident;
(ii)     any insurable risk commonly insured against in regard to equipment of a similar nature to the Goods; and
(iii)    such other insurable risks as the lessor may reasonably stipulate;
(b)Indemnified risks: insurance with respect to the lessee’s liability to the lessor pursuant to the indemnity provisions in cl 12(2);
(c)Third party risks: insurance against all third party risks including liability for damage or injury of any kind to any property or person and also against other risks to the full extent required by law by a policy inuring for the benefit of the lessor and the lessee;
(d)Public risk: public risk insurance relating to the Goods for an indemnity (including damage to property of any person) of not less than Twenty Million Dollars ($20,000,000.00) or such insurance is not covered in any insurance effected by the lessee under cl 11(1)(a), cl 11(1)(b) or cl 11(1)(c).
Clause 14 governs default and termination and states:
14    Default and termination
(1)     Events of default
Each of the following events is an Event of Default; namely:
(a)     If the lessee fails to pay Rent or other moneys payable under the Lease or under any other Lease incorporating this terms and conditions agreement or under this terms and conditions agreement on the due date for payment and such failure continues for more than one (1) Business Day;
(b)     if the lessee fails to perform or observe any of the covenants or provisions of the Lease or of any other Lease incorporating this terms and conditions agreement or of this terms and conditions agreement on the party of the lessee to be performed or observed (other than a failure of the type contemplated by cl 15(1)(a)) and (if capable of remedy) such default continues for more than ten (10) Business Days (or such longer period as the lessor in its absolute discretion permits) after notice from the lessor requiring the lessee to remedy the same;
(c)     …
In the event of default by the first respondent, clause 14(2) gives the applicant the right to either enforce performance or terminate the agreement. Clause 14(2)(b) states:
(2)Consequences of default
If an Event of Default occurs the lessor at its option may:
(a)…
(b)Termination: Terminate the Lease and the lessee’s right to possession of the Goods by notice in writing to the lessee. Upon service of such notice all rights of the lessee to or in the use of the Goods will terminate and the lessor may, directly or by its agent, take possession of the Goods. Any damages reasonably occasioned by the lessor taking possession are expressly waived by the lessee. The lessor will, upon taking possession of the Goods hold, possess and enjoy the Goods free from any right of the lessee or its successors or assigns to use the Goods for any purpose. Alternatively, the lessor may require the lessee at the lessee’s expense to dispose of some or all of the Goods and to account to the lessor for the proceeds of such disposal. In any event, the lessee will remain liable to the lessor as provided in cl 15(2) and cl 19.
By clause 14(3), any breach by either party of the obligations imposed by certain clauses in the agreement, including clauses 7 and 11(1), are agreed and declared to be ‘fundamental’ breaches, such that any failure to comply with such conditions will constitute a repudiation of the agreement.
Clause 16 relates to the return of the hired equipment – upon the expiry or termination of the lease agreement. It states:
(1)Redelivery of Goods by the lessee
Upon the expiry of the Term or early termination of the Lease (other than a termination pursuant to cl 11(3)), the lessee must immediately deliver the Goods, at the lessee’s expense appropriately protected and in the condition required by cl 10(1), to the Return Address.
(2)Repossession of Goods by lessor
If the Goods are not returned to the lessor as and when required by cl 17(1), the lessor may retake possession of the Goods. For that purpose the lessor and its employees and agents may, without notice, liability or legal process, enter upon or into the Location and may break open any gate, door or fastening and detach or dismantle the Goods from any part of the Location to which the Goods have been affixed.
The ‘return address’ for the purposes of clause 16 is 391 Martins Road, Greenfields, South Australia.
Alleged breach of lease by first respondent
The applicant pleads that in breach of the lease agreements, the first respondent has failed to pay rental amounts due and owing to it pursuant to clause 7, and has failed to properly insure the equipment as required by clause 11(1).[1]
[1] Statement of Claim at [21].
In March 2020, Robert Sinclair, a director of the applicant, received notification that insurance cover over the equipment being the subject of the lease agreements had not been renewed. Mr Sinclair endeavoured to obtain further information from Mr Nimmo as to the status of the insurance cover, but was unsuccessful in doing so.[2]
[2] First Sinclair affidavit at [7].
As a result, on 24 April 2020, the applicant, via its solicitors, served a Default Notice on the first respondent. At that time, the first respondent was also, allegedly, in default of its rental payments. The Default Notice outlined the first respondent’s alleged breach of the lease agreements and requested the provision of evidence of insurance with respect to the equipment and the making of payments as due.[3]
[3] Exhibit “RGS2’ to the first Sinclair affidavit.
On 28 April 2020, Mr Sinclair sent an email to Mr Nimmo, expressing his disappointment at the possibility the first respondent had been operating the equipment without insurance and stating that ‘[i]f no insurance is produced the assets will be repossessed.’[4] In the absence of receiving any confirmation of insurance, on 4 May 2020, Mr Sinclair sent a further email to Mr Nimmo, advising that arrangements would be made by the applicant to collect the equipment being the subject of the lease agreements on 8 May 2020.[5]
[4] Exhibit “RGS3” to the first Sinclair affidavit.
[5] Exhibit “RGS3” to the first Sinclair affidavit.
The applicant made arrangements for its agent, Robert Stack and Associates Pty Ltd, to attempt to collect the equipment from the first respondent’s premises in Mackay. The agent reported to Mr Sinclair of their attempts to recover the equipment by email on 8 May 2020. Although some of the equipment was able to be retrieved and possessed, other equipment could not be located or retrieved. The agent also ascertained that one item of equipment, a Hino Truck, had been involved in an accident and was overturned on a local highway. Other equipment was also ascertained to be damaged.[6]
[6] Exhibits “RGS4” and “RGS5” to the first Sinclair affidavit.
The agent advised Mr Sinclair that he had been told by Mr Nimmo that all further communications as between the applicant and the first respondent should be directed to their solicitors.
On 7 May 2020, the applicant received an email from the first respondent’s insurance broker, confirming that the first respondent’s insurance policy over the applicant’s equipment was cancelled effective from 26 November 2019 due to non-payment of the premium.[7]
[7] Exhibit “RGS9” to the second Sinclair affidavit.
On 8 May 2020, the applicant, via its solicitors, served a further Default Notice on the first respondent outlining the continued breach of the obligation to effect insurance and that as at that date the first respondent was said to be in arrears of payments due and owing under the agreements in the sum of $68,586.15 (exclusive of default costs). The Notice sought payment of a sum of $283,335.50 being a sum calculated by reference to the payments in arrears, the value of the equipment as per clause 15 of the agreements and repossession costs, less the value of secured equipment.[8]
[8] Exhibit “RGS6” to the first Sinclair affidavit.
On that same date, the applicant also caused a Default Notice to be forwarded to the second respondent requiring her as guarantor to pay losses estimated by it in the sum of $283,335.50, arising from the first respondent’s alleged breach of the lease agreements.[9]
[9] Statement of Claim at [25].
By letter dated 12 May 2020 sent by its solicitors, to solicitors representing the first respondent, the applicant terminated the lease agreements.[10]
[10] Exhibit “RGS7” to the second Sinclair affidavit.
The Application
The Application was filed on 15 May 2020 and was given an urgent hearing date on 21 May 2020.
On 19 May 2020, the applicant’s solicitor provided the respondents with notice of the hearing date and the relevant documents via the email address [email protected], being the email address specified in the lease agreements.[11] Mr Nimmo replied that same day, simply stating ‘[t]his is not Tara Byrne’s Email. I have deleted it’.[12] Shortly thereafter Mr Nimmo sent a further email advising that he had ‘become a bankrupt’.[13]
[11] Exhibit “RGS1” to the first Sinclair affidavit at p 50.
[12] Exhibit “KJB2” to the Bennett affidavit.
[13] Exhibit “KJB2” to the Bennett affidavit.
The Application and first Sinclair affidavit was served on the first respondent’s registered office, in Maroochydore, on 20 May 2020.[14]
[14] Exhibit “KJB3” to the Bennett affidavit.
As service of the Application was made on the first respondent only the day before the hearing, the Application was relisted for hearing on 28 May 2020.
On 22 May 2020, the applicant’s solicitor provided the respondents with notice of the new hearing date via the email address [email protected].[15]
[15] Exhibit “KJB2” to the Bennett affidavit.
In his second affidavit, Mr Sinclair deposed to his knowledge as to the whereabouts of each item of equipment being the subject of the lease agreements. Of those 17 items, eight are now in the applicant’s possession. Of the remaining nine, the whereabouts of six are unknown, and two are damaged trucks. Only two of those nine items, all being heavy vehicles, are registered.[16] The second affidavit also attached a copy of the record of direct debts paid by the first respondent to the applicant with respect to the lease agreements.[17]
[16] Second Sinclair affidavit at [5]-[7].
[17] Exhibit “RGS8” to the second Sinclair affidavit.
The Application proceeded to hearing on 28 May 2020 in the absence of the respondents. I was satisfied that the respondents had sufficient notice of the fact and purpose of that hearing. I was satisfied from the affidavit material that the correspondence sent to the email address [email protected] was in fact being received by Mr Nimmo, for and on behalf of the respondents. I was satisfied, given the affidavit evidence, of the necessity to deal with the application urgently and without further delay, having regard to the fact that numerous items of expensive equipment remained in the first respondent’s possession (or alternatively the whereabouts of that equipment were unknown) and that the equipment was uninsured. I was further satisfied that at least some of the heavy vehicles were continuing to be used by the first respondent in the absence of insurance, including compulsory third party insurance.
The Application was made on the basis that in having terminated the lease in the circumstances as outlined, clause 16 entitled the applicant to take possession of the equipment. As the first respondent was based in Queensland, and the Application proceeded at a time of interstate/border closures due to Covid-19, for practical purposes, the applicant sought orders enabling its agents to attend at the first respondent’s premises in order to recover the equipment. As the whereabouts of some of the equipment was unknown, a further order was sought requiring the second respondent to disclose the whereabouts of that equipment. The Application was accompanied by an appropriate undertaking as to damages by the applicant (within the meaning of UCR 111.1(4)).
Legal Principles

As outlined by the High Court in Australian Broadcasting Corporation v O’Neill,[18] the relevant principles that apply with respect to the granting of interlocutory injunctions are those set forth by the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd.[19]
[18] [2006] HCA 46 at [65]-[72].
[19] (1968) 118 CLR 618.
The court is to address two main inquiries, namely whether the applicant has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action it will be held entitled to relief, and, second, whether the inconvenience or injury which the applicant will likely suffer if an injunction is refused outweighs or is outweighed by the injury which the respondents will suffer if an injunction is granted.
The applicant referred to the decision of Digby J in the Supreme Court of Victoria in Adara Acquisitions Pty Ltd and Anor v Deal Corporation (Knox) Pty Ltd and Anor.[20]
[20] [2018] VSC 831.
In that matter, Adara asserted to be the owner of certain furniture and fittings (property) and sought urgent orders for the delivery up of that property and/or to facilitate it to take possession of the property. In considering the application, Digby J outlined the relevant considerations for the court when dealing with an application of this type, seeking injunctive relief, being functionally mandatory. As such, not only must be a serious issue to be tried, but the applicant must establish that its claim has a sufficiently strong likelihood of success.
Consideration/Findings
I am mindful that the Application proceeded on what was, in effect, an ex-parte basis. Nevertheless, the evidence as to the first respondent’s purported failure to hold and maintain insurance over the equipment as required by clause 11(1) was unequivocal. As per clause 14(3) of the lease agreements, a breach of clause 11(1) by the first respondent is a fundamental breach of the agreement. Further, pursuant to clause 14(2), in the event of the first respondent’s default, the applicant has the right to terminate the agreements and to take possession of the equipment.
For the applicant to succeed in its claim in detinue, it must establish:
That it made a demand for possession of the equipment at a time when it had a right to immediate possession of that equipment; and
The first respondent wrongfully refused to comply with that demand.
Having regard to the material before me, I am satisfied that the applicant’s claims, both in breach of contract and detinue, have a strong likelihood of success.
As to the balance of convenience, I am satisfied from the evidence that the first respondent is continuing to use the equipment, despite the fact that it is in default of its insurance obligations. The equipment comprises nine heavy vehicles. If such vehicles are damaged and destroyed, the cost of repair (or replacement) will be significant. Further, the fact that seven of the nine vehicles are not registered carries with it additional risks. I am satisfied that granting the application in the terms as sought carries with it a lower risk of injustice, than that which will be suffered if it is ultimately determined the applicant had no entitlement to possession of the equipment.
I am satisfied that the balance of convenience favours the granting of the orders as sought, and that the making of the orders is in the interests of justice.
To preserve the respondents’ position, the respondents are at liberty to apply to dissolve or vary the orders.
Orders
Upon the plaintiff, by its counsel, undertaking to:
(a)submit to such order (if any) as the court may consider to be just for the payment of compensation, to be assessed by the court or as it may direct, to any person (whether or not a party) affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) of the order or undertaking; and
(b)pay the compensation referred to in (a) to the person or persons referred to in the order.
The Judge did this day make the following orders:
1Within seven days of service of this order on the first defendant, it deliver up to the plaintiff the following equipment:
a.      2013 WESTERN STAR 4800             VIN:5KKJBEDR1DPBX6011
b.     2008 KENWORTH T408                   VIN:6F50000008A438119
c.      2012 MACK TRIDENT  VIN:6FMM12H69CD803621
d.     2010 KENWORTH T908                   VIN:6F5000000AA443926
e.      2013 KREUGER TRAILER                VIN:6FH7105AADM014775
f.      2004 HINO FM CURTAINSIDER      VIN:JHDFM1JTPXXX10058
(collectively referred to as the Equipment).
2In order to facilitate the delivery up of the Equipment:
a.the plaintiff by itself, its servants or agents shall be permitted to enter the premises of the first defendant located at 41 Mercy Drive, Mackay in the State of Queensland (Premises) for the purpose of taking possession of the Equipment; and
b.the first defendant by itself, its servants or agents shall not obstruct, hinder or delay the plaintiff by itself, its servants or agents from entering the Premises and taking possession of the Equipment.
3Within seven days of service of this order upon the second defendant, she, as an officer of the first defendant, file and serve an affidavit disclosing the current location of the items of Equipment (except insofar as that Equipment has already been delivered up to the plaintiff in accordance with orders 1 and 2).
4Other than to comply with order 1, the first and second defendants and their officers, servants and agents, be restrained from disposing of or otherwise dealing with the Equipment.
5The defendants be at liberty to apply upon 48 hours’ notice in writing to the plaintiff to dissolve or vary this injunction.
6This order be forthwith served on the first defendant at its registered office address and personally on the second defendant in her capacity as an officer of the first defendant.
7Costs reserved.
8Liberty to apply.