Rochford, Brian v Perpetual Trustees Australia Ltd
[1998] FCA 1714
•23 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 3168 of 1998
BETWEEN:
BRIAN ROCHFORD
First Applicant
MICHAEL JOHN MORRIS SMITH
Second Applicant
AND:
PERPETUAL TRUSTEES AUSTRALIA LIMITED
First Respondent
BRIDGEHEAD PTY LIMITED
Second Respondent
GANDEL ASSET MANAGEMENT PTY LIMITED
Third Respondent
JUDGE:
EMMETT J
DATE OF ORDER:
23 SEPTEMBER 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
Upon the second applicant personally giving the usual undertaking as to damages and undertaking to the Court that, if at a final hearing, relief as sought in the application is refused, he will forthwith deliver up possession of the premises subject of these proceedings to the respondents:
The Respondents forthwith deliver up possession of the premises to the First Applicant.
Until further order, the Respondents be restrained from interfering with the Applicants’ use, occupation or possession of the premises.
THE COURT DIRECTS THAT:
The Applicant file and serve any further affidavits on which it intends to rely in support of final relief no later than 5pm on 24 September 1998.
The applicants notify the respondents in writing no later than 5pm on 24 September 1998 of those parts of the affidavits read in support of the application for interlocutory relief which are intended to be relied upon in support of final relief.
The respondents serve any further affidavits on which they intend to rely in resisting final relief no later than 5pm on 25 September 1998.
The respondents notify the applicants in writing no later than 5pm on 25 September 1998 of those parts of the affidavit already read which are intended to be relied on the final hearing.
The applicants serve no later than 10 am on Tuesday, 29 September 1998 any affidavits on which they intend to rely in reply on the final hearing.
All parties notify the other parties, no later than 10am on 29 September 1998, of any documents which they intend to tender which are not annexure to affidavits.
THE COURT GRANTS:
The parties liberty to apply, including any application for subpoenas or notices to produce.
The respondents leave to file a cross-claim seeking leave under section 440C such cross-claim to be filed no later than 4 pm on Friday, 25 September 1998, and to be served no later than 5 pm on that day.
THE COURT ORDERS THAT:
Costs of today be reserved.
THE COURT GRANTS:
Leave to Brian Rochford Leasing Pty Limited to file an application in the form which I have initialled and dated with today's date such application to be returnable before me for hearing at 10.15 on Wednesday, 30 September.
THE COURT DIRECTS THAT:
The evidence in proceedings 3168 of 1998 is to be evidence in those new proceedings.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 3168 of 1998
BETWEEN:
BRIAN ROCHFORD
First Applicant
MICHAEL JOHN MORRIS SMITH
Second Applicant
AND:
PERPETUAL TRUSTEES AUSTRALIA LIMITED
First Respondent
BRIDGEHEAD PTY LIMITED
Second Respondent
GANDEL ASSET MANAGEMENT PTY LIMITED
Third Respondent
JUDGE:
EMMETT J
DATE OF ORDER:
23 SEPTEMBER 1998
WHERE MADE:
SYDNEY
EX TEMPORE REASONS FOR JUDGMENT
HIS HONOUR: The first applicant, Brian Rochford Ltd (“the Company”), is subject to administration under Part 5.3A of the Corporations Law. The second applicant, Michael John Morris Smith (“the Administrator”), is the administrator, having been appointed on 30 June 1998. The Company carries on the business of retail sale of swimwear and associated items. An associated company of the Company, Brian Rochford Leasing Pty Limited, is a party to a retail lease of 3 December 1991 from the second respondent, Bridgehead Pty Limited (“Bridgehead”). The lease relates to premises in the Chadstone Shopping Centre in Dandenong Road, Chadstone, Victoria. The shopping centre is now owned as to one half by Perpetual Trustees Australia Limited (“Perpetual”) as trustee of the Gandel Retail Trust, and as to the other undivided one half share by Bridgehead. Perpetual bought a half interest in the freehold in about April 1994.
The evidence presently before me indicates that, while Brian Rochford Leasing is the tenant of those premises, the business of the Company was carried on from those premises as well as other premises in Australia. The applicants contend that the premises have been used or occupied by or were in the possession of the Company within the meaning of section 440C of the Corporations Law. Section 440C provides as follows:
During the administration of a company, the owner or lessor of property that is used or occupied by, or is in the possession of, the company cannot take possession of the property or otherwise recover it except:
(a) with the administrator's written consent; or
(b) with the leave of the Court.
The Administrator has not given his consent and no leave of any court has been sought. Accordingly, if, as the applicants contend, the Company did use or occupy, or was in possession of, the premises, it is arguable that section 440C prohibited the respondents from taking possession of the property.
The evidence before me indicates that, on 22 September 1998, the lessors entered into possession of the premises, purporting to do so either pursuant to the expiration of a notice to quit or pursuant to the right of re-entry under the lease. There had been correspondence prior to 22 September 1998 in that regard. On 27 August 1997, the manager wrote to Brian Rochford Leasing informing Brian Rochford Leasing, in accordance with section 14(6) of the Retail Tenancies Act 1986 (Vic), that the lessor did not wish to renew the lease which was to expire on 31 October 1997. Brian Rochford Leasing was requested to make appropriate arrangements to make good the premises in accordance the obligations under the lease.
On 18 December 1997, the manager wrote again to Brian Rochford Leasing referring to the earlier letter and acknowledging that discussions had subsequently taken place between representatives of the landlord and tenant with a view to establishing whether or not the lessor would be prepared to reconsider the decision not to renew the lease. The letter said that the directors had given appropriate consideration to that prospect and that it had been decided that no further lease would be granted to Brian Rochford Leasing. The letter then said:
Accordingly, you may continue to occupy the premises under the provisions of Clause 11.11 of the Lease upon the clear understanding that the arrangement may be determined by either party by providing not less than one month's notice in writing to the other advising of that intention.
Clause 11.11 is a holding over clause in fairly standard form relevantly providing as follows:
If the Lessee continues in occupation of the demised premises after the expiration or sooner determination of the term hereby granted with the consent of the Lessor the tenancy shall under all the covenants and conditions mutatis mutandis as those herein contained so far as applicable continue as a monthly tenancy…
On 19 August 1998, the manager wrote again to Rochford Leasing relevantly saying as follows:
Pursuant to clause 11.11 of your executed Lease the Lessor hereby gives you one (1) months notice that your Lease and occupation of the premises is to terminate on 20 September 1998. Our construction department will contact you shortly regarding your make good requirements in accordance with Clause 5.7 of your Lease.
On 24 August 1998, the manager again wrote to Rochford Leasing relevantly saying:
As per our Lease Agreement with you, please be advised that this will serve as notice for vacation of your tenancy.
The store is to close and be vacated by the end of trade on 20 September…
The lessors contend that, apart from the operation of section 440C of the Corporations Law, they were entitled to retake possession since, following the expiration of the notice to quit, the tenant, Brian Rochford Leasing, was in effect a trespasser. The applicants, however, contend that notwithstanding a prohibition on subletting contained in clause 8 of the lease, the Company was in fact in occupation of, or at least used, the premises.
It is contended that that occupation was known to the lessors at least from a time after the appointment of the administrator. On 23 July 1998, the Administrator wrote to a number of landlords, including the lessors. The circular was headed, “Re: Brian Rochford Limited (Voluntary Administrator Appointed) (“BRL”)”. The circular went on to say relevantly as follows:
As you are aware, I was appointed Voluntary Administrator of BRL on 30 June 1998.
Since my appointment I have continued to trade the business and you have received my report to creditors dated 17 July 1998.
The Corporations Law provides for a moratorium from the company’s creditors taking any legal action during the course of the administration. Additionally, the Voluntary Administrator had 7 days to decide on a company’s leased property without incurring any liability. The cheque enclosed represents 24/31 of July’s rent, outgoings or other costs calculated from invoices forwarded to BRL. Any other amounts are “frozen” pursuant to the moratorium imposed by the Corporations Law.
On 27 August 1998, the manager sent a facsimile communication to the Administrator saying as follows:
We have been advised that the [Brian Rochford Store at the Chadstone Shopping Centre] is to be vacated by 20/9/98. Following herewith is a reconciliation of the account showing a closing balance of $9937.38 – for which we would appreciate you PROMPT payment.
Please note that these charges are based on the presumption that the store has been vacated and “made good” by midnight on 20/9/98.
On 1 September 1998, the manager also wrote to the company referring to the premises and saying as follows:
Unfortunately as I have already mentioned in previous telephone conversations with yourself, Brian Rochford and Roland Hopmans we are unable to accede to your request that you remain in this tenancy. In the future we will endeavour to locate a tenancy suitable for a Brian Rochford Concept and as and when the opportunity presents itself we will be happy to discuss this with you.
In the meantime we thank you for being an excellent tenant within the centre and we trust that in the future you will once more be a tenant at Chadstone Shopping Centre.
The report of the Administrator, which was sent to the lessors and the manager, includes the lessors as creditors of the Company. From material of that nature, the Company and the Administrator contend that an inference can be drawn that the occupation of the premises, if there was occupation of the premises by the Company, was with the non-urgent acquiescence of the lessors. The lessors, on the other hand, contend that, having regard to the provisions of the covenant against assignment, which was guaranteed by the Company, the Company was not in possession of the premises, nor did it use or occupy the premises with the consent or acquiescence of the lessors.
The lessors contend that, accordingly, section 440C has no application. That contention is based on a proposition that the use, occupation or possession by a company that is contemplated by section 440C, is a use, occupation or possession at least with the consent or acquiescence of the owner or lessor of the property. That is a question which will require some consideration. However, I am satisfied from the material before me, that there is at least a serious question to be tried as to whether or not the conduct of the lessors in re-taking possession of the premises was a contravention of section 440C.
There was some suggestion by counsel for the respondents that there has been a new lease granted in respect of the premises. However, there is no evidence of that matter before me. It is a question, of course, which would very much go to the balance of convenience if interlocutory relief were to be granted and to be in place for some time.
However, I have indicated to the parties that I am able to give them a hearing date within seven days, that is on 30 September 1998, for the purposes of determining the matter on a final basis. In those circumstances, it seems to me that even if a lease has been granted in the absence of any indication that there is any entitlement of the proposed tenant to take possession immediately, the balance of convenience would be in favour of the applicants.
I have evidence before me that the applicants regard the premises as a significant trading place for the business of the Company. The evidence indicates there have been substantial sales in the last 12 months, in excess of $700,000, and that there are some thousands of items of stock still in the premises in question. I consider that the evidence before me, together with inferences which I can draw, would indicate that interruption of the business by closing the store at this time of the year, at the beginning of the summer season, would be significantly detrimental to the Company and to the administration by the Administrator. On the other hand, I do not consider that there is any evidence of any detriment that would be of significance to the lessors if the lessors were required to deliver up possession to the Administrator until such time as I can resolve the matter.
In the circumstances, I consider that it is appropriate to grant interlocutory relief as sought by the applicants on terms, however, that the Administrator personally give the usual undertaking as to damages and also give an undertaking to the Court that, if I determine that the applicants are not entitled to any final relief, then the Administrator will forthwith deliver up possession of the premises to the lessors.
Counsel for the applicants has indicated those undertakings are given to the Court. On that basis, I will make orders in accordance with prayers (2) and (3) of the interlocutory relief sought in the application.
I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett
Associate:
Dated: 23 September 1998
Counsel for the Applicant: BA Coles QC Solicitor for the Applicant: Kemp Strang Counsel for the Respondent: JV Nicholas Solicitor for the Respondent: Arnold Bloch Leibler Date of Hearing: 23 September 1998 Date of Judgment: 23 September 1998
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