Tribalant Pty Ltd v Kirshu Pty Ltd
[2007] VSC 449
•12 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 8318 of 2007
| TRIBALANT PTY LTD | Plaintiff |
| v | |
| KIRSHU PTY LTD | Defendant |
---
JUDGE: | KAYE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 October 2007 | |
DATE OF JUDGMENT: | 12 October 2007 | |
CASE MAY BE CITED AS: | Tribalant Pty Ltd v Kirshu Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 449 | |
---
PRACTICE COURT – Application for interlocutory injunction to restrain lessor acting on notice under s 146(1) of Property Law Act 1958 (Vic) – Whether arguable that clauses in lease prohibiting alterations or repairs by lessee without lessor’s consent subject to implied qualification that lessor’s consent not be unreasonably withheld – Arguable case made out – Injunction granted.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R.L. Moore | Logie-Smith Lanyon |
| For the Defendant | Mr P. Best | Pryles & Co |
HIS HONOUR:
This is an application by the plaintiff for an interlocutory injunction to restrain the defendant from acting on two notices it served on the plaintiff under s.146(1) of the Property Law Act 1958.
The plaintiff conducts a computer software engineering business for the computer gaming industry. In that business it develops and builds computer games for such companies as Microsoft, Sony and Nintendo to operate on their computer platforms.
On 30 January 2004, the plaintiff entered into a lease with the then owner of premises at 680 Elizabeth Street, Melbourne, for the lease of level 2 of those premises, together with two car park spaces for a period of five years.
On 14 April 2004, the plaintiff entered into a further lease with the then owner of the premises for the lease of the upper mezzanine floor of level 2, 680 Elizabeth Street, Melbourne, also for a period of five years.
On 21 June 2007 the defendant purchased the premises. Since that date there have been a number of disputes and difficulties between the plaintiff and the defendant.
On 31 August and then on 6 September the plaintiff served two notices on the defendant under s.146 of the Property Law Act. Those notices alleged breaches by the plaintiff of clause 1(g) and clause 1(j) of the lease. Under clause 1 of the lease, the lessee plaintiff covenanted as follows:
“(g)Not without the approval in writing of the lessor or the agent to employ any person in the repair or maintenance of the premises or to effect any structural alterations, additions or repairs or to install or remove any fixtures and fittings on the premises.
(j)Not to make or permit any structural alterations, additions or repairs to the premises and not without the prior written consent of the lessor or the agent which consent may be given to conditions including without limitation the type of materials to be used to install any partitions, fixtures or fittings or to alter or remove any existing partitions, fixtures or fittings or to re-decorate the premises.”
The two notices specified a large number of matters which, it was contended, constituted the breach by the plaintiff of those two conditions. They included matters such as leaving rubbish in the common areas of the premises and using the mezzanine floor for a prohibited purpose, namely, as a residence.
There is conflicting evidence before me as to whether, in fact, those breaches have occurred and it is common ground in the application before me that there would be a serious issue to be tried in respect of matters such as those. The application before me focussed on two matters which, as a matter of fact, are not in dispute.
On 20 August 2007, the plaintiff installed two security cameras and associated cabling. One of the cameras was on the outside of the building overlooking the car park entrance and rear stair entrance, and one in the rear stair well.
Subsequently, on 31 August the plaintiff installed fibre optic cabling through the common areas of the premises to the leased premises. The plaintiff installed the security cameras without first seeking the approval of the defendant. After installing those cameras, it then sought the approval of the defendant, which was denied. The plaintiff did seek the consent of the defendant to install the fibre optic cabling and that permission was also denied.
On behalf of the defendant, it is submitted that in those circumstances there have been clear and unarguable breaches of clauses 1(g) and (j) of the lease and therefore that this application must fail.
On the other hand, on behalf of the plaintiff, Mr Moore submitted that there is a serious issue to be tried as to whether the installation of the security cameras and the installation of the fibre optic cabling did constitute a breach of those two conditions of the lease.
Mr Moore submitted that clauses 1(g) and (j) were each subject to an implied qualification that the lessor would not unreasonably withhold its approval to the works for which consent had been requested.
Mr Moore submitted that in this case there is a serious issue to be tried as to whether, in respect to both of the two items, namely, the fibre optic cabling and the cameras, the defendant unreasonably withheld its consent and therefore there is a serious issue to be tried as to whether there has been a breach by the plaintiff of clauses 1(g) and (j) of the lease.
In support of his submissions, Mr Moore relied on the well known authorities relating to the implication of terms in contracts, namely BP Refinery Westernport Proprietary Limited v The Shire of Hastings[1], and the judgment of Mason J in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales[2].
[1](1976) 16 ALR 363, especially 376.
[2](1982) 149 CLR 337, especially 350-354.
In terms of the five criteria specified by the Privy Council in the BP Refinery case, Mr Moore submitted that the qualification which he contended would be implied into the two conditions in the lease satisfied, at least arguably, each of those criteria. He submitted that such a condition would be reasonable and equitable. It would be necessary to give business efficacy to the agreement. It was obvious, it was capable of clear expression and it did not contradict any express term of the contract.
He submitted that, in particular, the implication of such a qualification was necessary to give business efficacy to the agreement, for if such a qualification were not a part of clauses 1(g) and (j), the lessor could, at its capricious whim, refuse consent even for critical and minor alterations or repairs which were necessary to enable the plaintiff to carry out its business functions for which it had leased the premises.
In response, Mr Best, who appears for the defendant, submitted that the law would not imply into clauses 1(g) and (j) the qualification contended for on behalf of the plaintiff. He submitted that it was beyond argument that no such qualification would be implied into those two conditions, and therefore there is no serious issue to be tried.
In particular, Mr Best has submitted that it is a fundamental principle that the parties are bound by the express terms of the agreement. He referred me to a number of authorities in which Courts of higher authority have declined to import notions of reasonableness into conditions of contracts and leases in which the consent or approval of one party is required. He particularly referred me to Tedager v Harwood[3], Hang Wah Chong Investment Co Limited v Attorney-General of Hong Kong[4], and the judgment of Kitto J in Stocks and Holdings Constructions Proprietary Limited v Arrowsmith[5].
[3][1928] AC 72.
[4](1981) 1 WLR 141.
[5](1964) 112 CLR 646, 655.
Mr Best then drew my attention to clauses 1(n) and (t) of the lease. Clause (n) provides:
“That the lessee shall not without the prior written consent of the lessor which consent shall not be unreasonably withheld erect signage in relation to the premises.”
Clause 1(t) precludes the tenant from assigning the lease without the consent of the landlord and expressly provides that the consent of the landlord shall not be unreasonably withheld.
Mr Best submitted that, based on the inclusion into those two terms of the express qualifications to reasonableness, there is no place to import into clauses 1(g) and (j) a similar qualification. In doing so, he called in aid the well known canon of construction, expressio unius est exclusio alterius.
Mr Best submitted that the presence of the requirement for reasonableness in relation to the withholding of consent in clauses 1(n) and (t) had the consequence that the qualification sought to be implied into clauses (g) and (j) by the plaintiff would contradict the express terms of the agreement. He also submitted that the presence of the requirement for reasonableness in clauses 1(n) and (t) would mean that it was not obvious in the terms discussed in the authorities that a similar requirement should be imported into clauses (g) and (j).
In my view, and viewing this matter at this preliminary stage, the matters contended for by Mr Best are quite cogent. However, and notwithstanding those matters, I am unable to say that they render unarguable the contrary proposition advanced on behalf of the plaintiff by Mr Moore. In other words, notwithstanding the matters contended for by Mr Best, I am unable to conclude that no serious argument can be raised that there is to be imported into sub-clauses (g) and (j) the requirement that the withholding of any consent by the lessor be reasonable.
I reach that conclusion principally for the following reasons. Firstly, when one turns to the express terms of sub-clauses (g) and (j), without any qualification they would very much leave the tenant at the mercy of the landlord. Turning to sub-clause (g), that prohibits the lessee from conducting any repair or maintenance of the demise premises without the prior written approval of the lessor.
It would seem to me that if, as contended for by the defendant, the landlord could capriciously and unreasonably withhold such consent, it would lead to an absurdity, and in particular, could very much cripple the capability of the plaintiff to derive any use out of the premises. In other words, given the breadth of sub-clause (g) and in the same way sub-clause (j), there is, in my view, a respectable argument that the implication contended for by the plaintiff is necessary to give business efficacy to the lease. Given that that is so, it is, in my view, at least arguable that the qualification contended for by the plaintiff is so obvious that it goes without saying, in other words, that it complies with the officious bystander test. Such a qualification would be reasonable and equitable and capable of clear expression.
There is, I think, some force in Mr Best’s submission that in view of the terms of sub-clauses (n) and (t), such a qualification might, on one view, contradict the express terms of the agreement. However, I do not consider that the contrary proposition is unarguable, and I do not contend that it is not serious, and I do not conclude it is not seriously arguable.
For those reasons, I consider that there is a serious issue to be tried as to whether there is to be implied into sub-clauses (g) and (j) a qualification that the approval of the lessor be not unreasonably withheld. I am fortified in that conclusion by the decision of McGarvie J in Australian Mutual Provident Society v 400 St Kilda Road Proprietary Limited[6], in which His Honour held that such a qualification was to be implied into a term of the lease which is not dissimilar to clauses 1(g) and (j).
[6][1990] VR 646, 665.
The next question, of course, is whether there is a serious issue to be tried, whether the consent of the landlord in this case is unreasonably withheld. Mr Best, as I understood him, did not contend that there was not a serious issue to be tried on that aspect of the case if, in fact, I were to accept there is a serious issue to be tried as to the implication of the term of reasonableness in relation to sub-clauses (g) and (j). In my view, he is correct in not attempting to venture what will, at this preliminary stage, have been impossible.
In relation to the cameras, the affidavit material of Mr Mosley, the principal of the plaintiff, sets out that the plaintiff does not have the code to the alarm system which is operable for the common areas. There is evidence, albeit disputed evidence, that there were, shortly before 20 August, attempts to break into the premises and that those attempts were brought to the attention of the defendant.
On 19 August, the premises lost power and as a result the alarm system attached to the premises became inoperable. The plaintiff has at the premises valuable equipment which, on my reckoning, according to the evidence, is worth approximately $800,000. It is presently in the course of carrying out an important contract to develop some software and it is understandable that it would require an appropriate alarm system to protect its premises.
In those circumstances it is, at least, arguable that the withholding of consent to install appropriate security measures in relation to the premises was unreasonable.
In relation to the installation of the fibre optic cabling, the photographs which have been produced to me show that the fibre optic cabling has little effect on the amenity of the common areas. It is, I think, relevant that the plaintiff had already, with the approval, apparently, of the previous lessor, installed a previous generation of cabling in the premises. It sought to install the fibre optic cabling to update its technology so that it would be able to complete in the time required the important contract which it is attempting to fulfil.
For those reasons there is a serious issue to be tried as to whether the withholding of the consent by the defendant was unreasonable.
On the balance of convenience, Mr Moore referred me to the affidavit of Mr Mosley. That affidavit satisfies me that there is evidence that the plaintiff has a substantial business, part of which is conducted at the demised premises. Accordingly, if the s.146 notices were to be enforced at this stage by the defendant, the business would sustain significant disruption that would not only affect its income but would deleteriously affect its reputation.
On the other hand, Mr Best did not submit that there was any irreparable harm which might be sustained by the defendant, other than that there was a poor relationship with the plaintiff and the defendant. There is, I think, force in Mr Best’s submission that the plaintiff did act in a high-handed way in installing the cameras and the cabling, and that thus the defendant, if enjoined, will be held out from exercising what may turn out to be its lawful rights.
In those circumstances, in my view, the balance of convenience clearly favours the grant of the injunction. In terms of the recent authority, the Court of Appeal in Tymbook Pty Ltd v State of Victoria[7], the lesser risk of injustice occurs if I were to grant an injunction than if I were not to do so.
[7][2006] VSCA 39.
I therefore, for those reasons, will grant the plaintiff the injunctions sought by them (subject to any discussion relating to the precise terms of them), subject to the plaintiff, through its counsel, giving two undertakings to me, namely, firstly, the usual undertaking as to damages; and secondly, an undertaking that the plaintiff will prosecute this proceeding with due expedition.
0
3
0