Tynec Pty Ltd v Geekie

[2005] NSWSC 938

CITATION:	Tynec Pty Ltd v Geekie [2005] NSWSC 938
HEARING DATE(S):	31 August 2005
JUDGMENT DATE :	16 September 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Judgment for plaintiff. Licence found to be irrevocable during period of lease. Defendant restrained from interfering with plaintiff's rights.

CATCHWORDS:	CONTRACT - agreement - terms and conditions - construction of licence agreement between tenants in common under lease - whether licence intended to be irrevocable for duration of lease period
CASES CITED:	Playgoer's Co-operative Theatres Ltd v The Workers Educational Association of NSW (1955) 72 WN(NSW) 374
PARTIES:	Tynec Pty Limited (Plaintiff) Andrew Geekie (Defendant)
FILE NUMBER(S):	SC 5165 of 2004
COUNSEL:	Mr A Fernon (Plaintiff) No appearance (Defendant)
SOLICITORS:	Jenkins & Associates (Plaintiff) Not represented (Defendant)

LOWER COURT JURISDICTION:

- 9 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

FRIDAY 16 SEPTEMBER 2005

5165/04 TYNEC PTY LIMITED V ANDREW GEEKIE

JUDGMENT

Issue

1 These proceedings concern a dispute between the plaintiff, Tynec Pty Ltd (“Tynec”) and the defendant, Mr Andrew Geekie (“Mr Geekie”) over first, the nature of a licence; and second, the purported termination of that licence by the defendant. The defendant did not appear at the hearing which proceeded in his absence.

Facts

2 Tynec and Mr Geekie are tenants in common under registered lease AA137119G. Tynec is the lessee as to three fifths, and Mr Geekie is the lessee as to two fifths of the premises known as Suite 1601, Level 16, Tower 2 Westfield Shoppingtown, Bondi Junction Plaza (the “premises”). The lessor, Perpetual Trustee Company Ltd, does not play a part in these proceedings.

3 The lease is for a term of 4 years, commencing on 1 October 2002 and expiring on 30 September 2006. The lease contains an option to renew for a further two years.

4 The sole director and shareholder of Tynec is Mr Antony Prochazka. Mr Prochazka, through Tynec, carries on business as a cosmetic surgeon. Mr Geekie and his wife, Janet Manley (“Ms Manley”), carry on the business of cosmetic tattooing and skin treatment.

5 The day-to-day business of the respective lessees was carried out in certain parts of the premises. This is clearly set out in the statement of claim, and it is convenient to reproduce the relevant paragraphs below:

8. From the commencement of the Lease, Geekie and Manley exclusively occupied and used for the purpose of their business, the corner office, the west-facing office and a small north facing office located on the Premises.

9. From the commencement of the Lease, Tynec, Geekie and Manley had shared usage of the reception area, the waiting area, the kitchenette and the corridors located on the Premises.

10. From the commencement of the Lease, Tynec exclusively occupied and used that part of the Premises not identified in paragraphs 8 and 9 above.

11. From the commencement of the Lease, Tynec paid 61% of all rent and outgoings incurred in connection with the Premises and Geekie paid the balance.

These paragraphs were admitted in the defence.

The Licence

6 The circumstances surrounding the creation of the licence the subject of this action were as follows: in September 2003, Mr Geekie and Ms Manley made a decision to move to Tasmania to be closer to family. They were expecting their first child. They left Sydney in late March 2004.

7 On 7 February 2004, Mr Geekie sent an email to Tynec outlining four different options regarding the continued operation of the lease. The email is set out below:

Dear Tony

While our discussion is fresh in my mind, let me summarise our options:

Option 1. You take over our [sic] all the space .

Summary .

Where is the space you need going to come from? The only other internal expansion you can do, without involving us, is the halving of your office, or sub-dividing the nurses station. Neither of these options has any potential to raise you any extra revenue.

Other expansions such as developing the hallways and the small waiting area will still require substantial design, building, plumbing, electrical, phones, decorating & furnishing. This will be 100% your expenditure, and it will also increase your percentage of the floor space. (Also assuming we have no objections to the plans.)

You originally approached us to join you as a cost sharing exercise, so you could get the Suite you wanted without having to pay all the costs. Taking over our space gives you access to a $50 000 fit-out for free. In essence it gives you free: plumbing, phone system, treatment beds, office desks, chairs, décor, not to mention our initial 40-50% contribution to the architect, decorator, and legals, as well as $8000 worth of bond.

Finally, this option effectively gives you total control over the entire space. You determine who comes and goes. It is also gives you the capacity to earn extra revenue from the rooms.

Yes we want a room for a week each month for free; and put simply this is our trade-off for the free access to the $50 000 fit-out. Yes, this may be a couple of months off from your ideal timing, but we did start discussing this late last year, and if you let the chance go it may not come again for the duration of the current lease and even the option periods.

The advantages for you are:

1. You access $50 000 development for free.
2. You can re-develop the space as you see fit (i.e. divide the floor plan without reference or veto by us)
3. Determine the signage as you see fit (so long as we have a "by line" somewhere).
4. Use of all the front desks as you see fit (which would save on rebuilding your front desk).
5. Use of all existing furniture & fittings.
6. If you become a stockist of our product, we would hand over our clients that buy direct from there.
7. We would hand over Robert Smith (for you to encourage him to use the rooms more often and the day surgery. Now that you have it being used by other people, he may be keener to use it).
8. You maintain full control of the Suite.

Disadvantages

1. Use of Janet's room one week in four (pre-determined dates).
2. Use of the front desk for this same period.
3. You have to pay an extra $850 per week.

Option 2: You only take our spare room and my office .

Summary .

As stated today in our discussion, this will mean we will still have to go to external sources to cover the rent. This means leasing those rooms to you will be based on "market rates", and the only reason to discount them to you is an assumption that administratively it will be easier to deal with you than someone else. (This will remain an "assumption").

My "discounted" rate would be $350 & $250 (excl. GST) per week respectively. My "market" rate would be $400 & $300 respectively (or $150 per day individually).

Advantages:

1. Only use minimum rooms.

Disadvantage s:

1. No guarantee we won't take the highest offer.
2. Paying close to 80% of the total costs anyway.

Option 3: You rent the rooms on a sessional basis .

Summary .

This will cost you $150 per day per room (excl. GST)

Advantages :

You only use the room [sic] when you need them.



Disadvantages:
1. Room allocation will be on a first come basis.
2. No certainty or stability for room usage.
3. No room for expansion.
4. Expensive for usage above 3 days.

Option 4: You don't rent any of the rooms .

Summary .

The rooms will them [sic] be rented out to whoever wants to pay me the money, whether they be medical, allied health, or cosmic healing.

While it will be a part of their "contract" that they (and their patients/clients) must be "compatible" with the practice; but no more so than Lawrence's, Tom's, or Robert Boyle's patients and staff, must be "compatible" with the practice at present.

Advantages :

1. This will cost you absolutely nothing.

Disadvantages :
1. You will have very limited scope to expand internally.
2. You will have no control over the type of tenant (within reason of course).

Conclusion

It is obvious which option we prefer, and we will need an answer next week so we can start advertising. But over to you.
Andrew & Janet

8 Tynec accepted option 1 on or about 8 February 2004. In addition to the terms outlined under option 1, Tynec claims it was agreed that the licence would commence from 1 April 2004. I find this established. Tynec has paid all outgoings since then. The real issue in this case is whether the licence is irrevocable during the term of the lease. It was not argued it was irrevocable during any new term arising from exercise of the option.

9 From 1 April 2004, the north office was used exclusively by Tynec’s practice manager as an administration office. Computers, files and furniture were moved into that room. The west room was licensed to various medical practitioners to use on a sessional basis. The west room was also occasionally used by Mr Prochazka to see patients and to conduct staff meetings. Janet Manley Aesthetics operated from the corner room for one week out of every four.

10 Relations between the two parties disintegrated in early August 2004. At this time, Mr Geekie informed Mr Prochazka of his intention to transfer his portion of the lease to Dr Robert Boyle. On or about 12 August 2004, Mr Geekie entered into an arrangement with Dr Boyle – with whom Tynec was also in negotiation – for him to use the corner office, reception area and waiting room. On Friday 20 August, Mr Prochazka had the external locks to the premises, and the security codes, changed. By letter dated 14 September 2004 to Mr Prochazka, Mr Geekie purported to terminate the licence. Tynec claims that the purported termination was invalid and that Mr Geekie’s arrangement with Dr Boyle constitutes a breach of the licence terms.

Issues

11 There can be no doubt that a licence was created between the two parties. The defendant, in his letter purporting to terminate the licence, admitted of its existence. The only issue in these proceedings concerns the nature of the licence, that is, whether or not, on the proper construction of the email dated 7 February 2004, the licence was irrevocable.

12 It is clear from the email dated 7 February 2004 that Mr Geekie was aware of Tynec’s intention to develop its business. Mention is made of discussions that had taken place between the two parties in the previous year regarding internal expansion by the plaintiff. The options described in the email make reference to the ability of the plaintiff to raise extra revenue. It is also clear that Mr Geekie, in outlining option 1 contemplated that Tynec could develop the premises – including hallways and the small waiting area and would be gaining an increase in the percentage of floor space. Item 2, under the heading entitled “The advantages for you are”, states: “You can re-develop the space as you see fit (ie, divide the floor plan without reference or veto by us)”. Reference was also made to the “benefit” the plaintiff would receive of a $50,000 fit-out. The nature of this fit-out was not explained during the hearing.

13 It seems clear that Mr Geekie – intending to leave Sydney and take up residence in Tasmania – viewed the offer he was making as permanent, at least for the duration of the lease. At the time of these events, the lease had at least two more years to run. This did not include the period available if the option to renew were exercised. The advantages described in the email contemplate long-term change. Redevelopment and division of floor space is not a minor activity. It could not be thought reasonable to grant Tynec “total control over the entire space”, including the power to “determine who comes and goes” and yet make such control subject to any inclination of Mr Geekie to return and reclaim that office space. As a matter of construction of the express terms I consider the licence irrevocable.

14 If I am correct about this, that is the end of the matter. If I am not correct then, in my view, the plaintiff’s claim must succeed in any event. If a term is necessary – that is, if the enjoyment of rights conferred by the contract would be rendered nugatory or worthless without that term – the term may be implied at common law, provided the implication is not unjust or unreasonable.

15 Commercial documents are construed using a commonsense approach. It is expected such a contract would operate in a reasonable way. If the licence contained no term of irrevocability, presumably Mr Geekie would be entitled to terminate the licence at will and require access to the rooms previously used – as indeed he has attempted to do. Those rooms may be the subject of arrangements with third parties, thereby exposing Tynec to possible damages claims. Further, Tynec, having made cosmetic changes to the premises, would be required to reinstate the premises to their prior condition upon Mr Geekie’s return – as was demanded by Mr Geekie in his letter of 14 September 2004. Without the protection of an irrevocable licence, the benefits to Tynec are meaningless and a commercial nonsense.

16 I conclude the licence was irrevocable. In those conditions in accordance with Playgoer’s Co-operative Theatres Ltd v The Workers Educational Association of NSW (1955) 72 WN(NSW) 374 an injunction should be ordered restraining the defendant from interfering with it.

17 Orders

1. Declare that the plaintiff and the defendant entered into a licence commencing 1 April 2004 (the “Licence”) pursuant to which the plaintiff was granted an exclusive licence by the defendant to occupy and use that part of the premises known as Suite 1601, Level 16, Tower 2, Westfield Bondi Junction Plaza (the “Premises”) previously used by the defendant for the term of the plaintiff’s and defendant’s lease of those Premises, subject only to:

(a) the plaintiff paying all rent and outgoings in respect of the Premises; and
(b) the defendant having exclusive access to one room and shared access to the front desk in the Premises for one week in every four, rent free.


2. Declare that the defendant’s purported termination of the Licence on 14 September 2004 is void and of no effect.

3. Declare that, subject to the plaintiff complying with the terms of the Licence, the defendant has no right to terminate the Licence.

4. Order that the defendant, by himself, his servants and agents be restrained during the period of the Licence from:

(a) entering the Premises, except for the purpose of utilising one room and the front desk one week every month in accordance with the Licence;
(b) making any alterations to or changing any locks in the Premises;
(c) interfering with the plaintiff’s use and occupation of the whole of the Premises, subject only to the defendant’s use of one room and front desk in accordance with the Licence.

5. Order the defendant pay the plaintiff’s costs.

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