Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited (No 2)
[2023] VSC 314
•8 June 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL AND RETAIL LEASES LIST
S ECI 2022 04440
BETWEEN:
| VINCENT COLD STORAGE PTY LTD (subject to deed of company arrangement) (ACN 604 324 469) | First Plaintiff |
| and | |
| VINCENT TRANSPORT SERVICES PTY LTD (in liquidation) (ACN 097 910 971) | Second Plaintiff |
| and | |
| CENTURIA PROPERTY FUNDS NO 2 LIMITED (ACN 133 363 185) (as custodian for the CENTURIA INDUSTRIAL REIT TRUST) | Defendant |
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JUDGE: | M Osborne J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 31 May 2023 |
DATE OF JUDGMENT: | 8 June 2023 |
CASE MAY BE CITED AS: | Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Limited (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 314 |
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INSOLVENCY – Deed of company arrangement – Recovery of premises by lessor – Whether Court should exercise discretion under s 444F of Corporations Act 2001 (Cth) to prevent possession of property by owner – Whether interests of owner are adequately protected – Whether possession by owner would have material adverse effect on deed of company arrangement – Strazdins v Birch Carroll & Coyle Limited (2009) 178 FCR 300 – Re Hi-Fi Sydney Pty Ltd (admin apptd) [2015] NSWSC 1312.
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APPEARANCES: | Counsel | Solicitors |
| For the First Plaintiff | Ms M Sullivan, solicitor | Harris Carlson |
| For the Deed Administrator | Mr P Fary SC | Macpherson Kelly |
| For the Defendant | Mr M Hoffman KC | Johnson Winter Slattery |
HIS HONOUR:
Introduction
The defendant, Centuria Property Funds No 2 Limited (‘Centuria’), is the owner of a warehouse and storage facility located at units 1 and 2, 102-128 Bridge Road, Keysborough, Victoria (‘Premises’).
The Premises were leased to the first plaintiff, Vincent Cold Storage Pty Ltd (subject to deed of company arrangement) (‘VCS’), and the second plaintiff, Vincent Transport Services Pty Ltd (in liquidation) (‘VTS’), pursuant to a lease for a term of five years which commenced on 1 December 2019 (‘Lease’).
The obligations of VCS and VTS as lessees (‘Lessees’) under the Lease were guaranteed by Andrew Vincent, a director of VCS and VTS.
On 27 October 2022, Centuria terminated the Lease and effected re-entry of the Premises by notice (‘Termination and Re-entry Notice’). The Termination and Re-entry Notice was based upon the Lessees’ failure to pay the rent and outgoings totalling $736,947.11 (inclusive of GST) for the period 1 June 2022 to 31 October 2022.
The Lessees sought to restrain the physical retaking of the Premises by Centuria and by summons dated 31 October 2022 sought injunctive relief restraining the retaking of possession, and in the alternative relief against forfeiture. When the summons was first returnable orders were made upon undertakings provided by the Lessees which included, among other things, that they would agree to pay half the rent due on a monthly basis on the first day of the month thereafter following ($66,771.90 inclusive of GST) and pay the outstanding outgoings in the sum of $136,827.70.
When the application came on for substantive hearing on 6 December 2022, the Lessees had not complied with the undertaking to pay the $61,771.90 (inclusive of GST) which had fallen due on 1 December 2022. In addition, the Lessees had been late in paying the outstanding outgoings.
The Lessees’ application for interlocutory injunctive relief was refused.[1] The Court found that they had not established a prima facie case with respect to the contention that the lessor had not lawfully re-entered the Premises. In the reasons for judgment the Court noted that the injunction would have also been refused on discretionary grounds
[1]Vincent Cold Storage Pty Ltd v Centuria Property Funds No 2 Ltd [2022] VSC 766.
During the course of the hearing on 6 December 2022, Centuria offered an undertaking to the effect that it would not seek to physically retake possession of the Premises until 31 January 2023. In offering that undertaking, counsel for Centuria stated that Centuria recognised that the Premises were being used for the storage of perishable goods owned by third parties and that it was not Centuria’s intention to throw the Lessees out on the street without allowing sufficient time to vacate the Premises in an orderly fashion and arrange the removal of the perishable goods.
The Lessees’ application for relief against forfeiture was not accompanied, as is common, by an undertaking that the outstanding arrears would be paid or that the Lessees would pay the monthly rental specified in the Lease as it fell due. Nevertheless, during the course of argument, the Lessees submitted that it was open to the Court to stipulate the conditions upon which relief against forfeiture would be granted and in the event that the Lessees did not comply with those conditions, the application for relief would necessarily be dismissed with a consequence that the forfeiture effected by the service of the termination and re-entry notice on 27 October 2022 would remain effective.
Having regard to the fact that Centuria did not intend to take possession in any event until 31 January 2023, and in light of that submission by the Lessees, the orders made on 13 December 2022 provided for the dismissal of the Lessees’ claim for injunctive relief but specified that the Lessees would be relieved from forfeiture of the Lease upon the condition that they pay the outstanding rental of $633,110.40 which represented the rent outstanding for the period up to and including 31 October 2022, the outgoings specified as being payable under the Lease outstanding for the months of November and December 2022 in the sum of $33,547.54, the sum of $370,631.37 (inclusive of GST) being the rent specified as being payable under the Lease for the months of November and December 2022 and January 2023; on or before 4pm on 30 January 2023.
The proceeding was otherwise listed for further hearing on 31 January 2023 at 2:15pm.
The Lessees failed to comply with the conditions specified in the order of 13 December 2022 by 4pm on 30 January 2023 or otherwise take any steps to vacate the Premises.
At 12:30pm on 31 January 2023, VCS appointed Stephen Robert Dixon as voluntary administrator who advised that the administrator intended to rely on the statutory restraints imposed on Centuria and its agents pursuant to, inter alia, ss 440B, 440F, 440G and 451E of the Corporations Act 2001 (Cth) (‘the Act’) in respect of any attempt to physically retake possession.
On 31 January 2023, orders were made adjourning the proceeding for further hearing to 7 February 2023.
At the further hearing on 7 February 2023, counsel for the administrator stated that the administrator did not seek any further stay or adjournment and that it was appropriate that orders be made, inter alia, dismissing the Lessees’ summons.
Accordingly, on 7 February 2023, orders were made that by reason of the plaintiffs’ failure to pay the amount set out in paragraph 2 of the orders made 13 December 2022, the claim for relief against forfeiture was dismissed.
At some time unknown to Centuria between 7 February 2023 and 2 March 2023, one of the Lessees, VTS, vacated the Premises.
On or around 2 March 2023, Centuria entered into a written licence agreement with VCS and Mr Dixon in respect of the Premises (‘Licence Agreement’).
The terms of the Licence Agreement were, inter alia, that:
(a) Centuria grants VCS a non-exclusive licence to occupy the Premises from 7 February 2023 to operate an office, refrigerated warehouse, cold storage and distribution centre (‘Licence’) (clause 2.1);
(b) the Licence ends on 21 March 2023 (‘Final Date’) (clause 2.2(a));
(c) in consideration of Centuria granting the Licence, VCS must pay Centuria:
(i) a licence fee of $153,987.67 (including GST); and
(ii) all outgoings for the Premises (as calculated under the Lease) from the commencement date until the final date (‘Outgoings’) (clause 3.1);
(d) VCS must not, among other things, transfer, assign or sublicence its contractual rights under the Licence to any other person (clause 4.1(d));
(e) by the Final Date, VCS must remove all of its loose items at the Premises, including but not limited to rubbish and any stock or inventory belonging to VCS or any customer of VCS[2] and return the Premises to Centuria in a clean and tidy state, free from any debris or rubbish (‘Return Obligation’) (clause 4.3); and
(f) Centuria, VCS and Mr Dixon must do or refrain from doing whatever is reasonably required to give effect to the Licence, both before and after the Licence Agreement is signed (clause 14).
[2]Underlining added.
Subsequently, Centuria, VCS and Mr Dixon acknowledged and agreed that the Licence Agreement contained an arithmetical error in the licence fee amount and the fee payable was properly $229,491.23 (excluding GST).
The Final Date was subsequently extended to the date of the end of the administration of VCS by agreement between Centuria, VCS and Mr Dixon.
In extending the Final Date, Centuria, VCS and Mr Dixon agreed that VCS would pay:
(a) a daily licence fee of $4,967.34 (including GST); and
(b) all outgoings,
and that the terms of the Licence were otherwise unchanged.
At the second meeting of VCS’s creditors on 5 April 2023, the administrator proposed a resolution that VCS enter into a deed of company arrangement (‘DOCA’).
The purposes of the DOCA include the following:
(a) to allow VCS to continue as a going concern;
(b) to facilitate the making of contributions under the DOCA (which are to be made from the profits from trading);
(c) to allow creditors to be paid a dividend under the terms of the DOCA which is premised upon the matters in (a) and (b).
The DOCA contemplated that VCS would vacate the Premises as soon as it is able to secure new premises for its business but that this may take some time.
The DOCA was approved by the requisite majority of creditors with Centuria voting against the DOCA. Creditors voting in favour of the DOCA comprised:
(a) the Australian Taxation Office (‘ATO’) whose amount admitted for voting purposes was $639,221;
(b) Lumi Finance Pty Ltd, amount admitted for voting purposes - $79,299;
(c) Andrew Vincent, amount admitted for voting purposes - $360,531,
(d) Christopher Vincent, amount admitted for voting purposes - $43,129; and
(e) Ashwoods Accountants & Advisory - $7920.
The results of the poll were value in favour - $1,130,100; value against - $1,001,260.
The DOCA contemplates that priority creditors would receive 100 cents in the dollar whilst unsecured creditors would receive 8 cents in the dollar. The priority creditor is the ATO as to $79,236. This component of the ATO debt relates to an outstanding superannuation guarantee charge liability.
According to the DOCA, VCS has no active employees as the company’s five employees were transferred to a related entity in January 2023 with the related entity assuming the entirety of VCS’s accrued employment entitlements.
By letters sent 17 April 2023 and 28 April 2023, Centuria’s solicitors wrote to the solicitors for the administrator informing the administrator that Centuria intended to retake possession of the Premises immediately on execution of the DOCA.
The DOCA was executed on 1 May 2023. As a result, the administration came to an end.
Thus, by reason of the provisions of the Licence Agreement (as extended) by that date VCS was required to, inter alia, remove all stock or inventory belonging to it or to any of its customers and return the Property to Centuria.
None of this took place. When Centuria’s representative sought to physically retake possession on 3 May 2023, access was denied by VCS and the attempt to take possession was unsuccessful.
Centuria’s application for possession
In the result, on 5 May 2023, Centuria filed a summons seeking orders for possession of the Premises.
At the time of its filing of the summons, VCS had failed to make payment of an amount of at least $151,182.46 which was outstanding under the Licence. This sum was paid on 11 May 2023, the day before a further hearing in the matter took place.
At the hearing, Mr Dixon stated that he may file an application pursuant to s 444F(4) of the Act restraining Centuria from taking possession of the Premises.
Since 2 May 2023, VCS has occupied the Premises as a trespasser and has made no payment in respect of its occupation of the Premises since that date .
As Centuria did not have any proceeding on foot in which it sought orders for possession, it filed a counterclaim in which it sought orders for possession pursuant to r 53 of the Supreme Court (General Civil Procedure Rules) 2015 (Vic) against VCS, the deed administrator and three owners of goods stored at the Premises, Australian Meat Group Pty Ltd (‘AMG’), Blackbird Logistics Pty Ltd (‘Blackbird’) and Chill (Vic) Pty Ltd (‘Chill’).[3] The goods owners were in effect joined for conformity and did not participate in the proceeding.
[3]Centuria informed AMG, Blackbird and Chill that it was not seeking costs of the counterclaim against them.
The deed administrator’s application
The deed administrator now seeks orders pursuant to s 444F(4) of the Act that subject to VCS’s compliance with certain terms set out in Annexure A to the proposed orders, Centuria not take possession or otherwise recover the Premises until the earlier of 28 August 2023 or 9am on the date after the deed administrator provides Centuria with written notice that the Property has been vacated by VCS. VCS was separately represented and made submissions in support of the application. The goods’ owners did not appear.
The application was opposed by Centuria.
The deed administrator’s application is brought pursuant to s 444F of the Act which provides:
Court may limit rights of secured creditor or owner or lessor
(1) This section applies where:
(a)at a meeting convened under section 439A, a company’s creditors have resolved that the company execute a deed of company arrangement; or
(b)a company has executed such a deed.
(2) …
(3) …
(4)The Court may order the owner or lessor of property, that is used or occupied by, or is in the possession of, the company not to take possession of the property, or otherwise recover it.
(4A)Subsection (4) does not apply in relation to PPSA retention of title property of the company.
(5)The Court may only make an order under subsection (4) if satisfied that:
(a)for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the purposes of the deed; and
(b)having regard to:
(i) the terms of the deed; and
(ii) the terms of the order; and
(iii) any other relevant matter;
the interests of the owner or lessor will be adequately protected.
(6) An order under this section may be made subject to conditions.
(7) An order under this section may only be made on the application of:
(a)if paragraph (1)(a) applies – the administrator of the company; or
(b)if paragraph (1)(b) applies – the deed’s administrator.
The deed administrator accepts that the grant of relief under s 444F(4) should be subject to conditions.[4]
[4]Corporations Act 2001 (Cth) s 444(6).
The proposed conditions are set out in Annexure A to the deed administrator’s proposed form of order and comprise:
A. Licence
1.The First Plaintiff shall pay the Defendant a licence fee for the period that it remains in occupation of the Property by virtue of Order 1 of these Orders.
2.The licence fee payable by the First Plaintiff to the Defendant shall be $37,346.89 per week (inclusive of GST and outgoings).
B. Payment
3. The First Plaintiff shall pay the Defendant:
(a)By 4:00pm 2 June 2023, the sum of $304,110.39 for the period of 2 May 28 June 2023;
(b)By 4:00pm 28 June 2023, the sum of $149,387.56 for the period of 29 June to 26 July 2023;
(c)By 4:00pm 26 July 2023, the sum of $149,387.56 for the period of 27 July to 23 August 2023;
(d)By 4:00pm 23 August 2023, the sum of $26,676.35 for the period of 24 August 2023 to 28 August 2023.
C. Termination:
4.The Defendant may terminate the licence agreement if the First Plaintiff:
(a) Enters liquidation; or
(b) If:
(i).the First Plaintiff fails to pay any invoice from the Defendant for the licence fee and default is not remedied by the First Plaintiff within 7 days after the Defendant gives notice in writing to the Defendant of the default; or
(ii).the First Plaintiff fails to comply with the requirements of paragraph E (Third Parties), F (Stock Limitation), or G (Inspection and reporting), and the default is not remedied by the First Plaintiff within 7 days after the Defendant gives notice in writing to the Defendant of the default.
5.The First Plaintiff may terminate the licence agreement any time during the term by giving not less than 14 days' notice in writing to the Defendant (Termination Notice)
6.If the First Plaintiff terminates the licence in accordance with paragraph 5 and vacates the premises prior to the termination date specified in any Termination Notice (Termination Date):
(a)the First Plaintiff shall not be required to pay the licence fee for any period after the Termination Date; and
(b)any pre-payment of the Licence Fee made by the First Plaintiff which relates to a period after the Termination Date shall be refunded to the First Plaintiff on a pro rata (daily) basis, within 7 days of the Termination Date, without deduction or offset.
D. Property at the End of the Term
7.At the end of the term or the sooner expiration of the licence, the First Plaintiff must remove all of the First Plaintiff's loose items at the premises, including but not limited to rubbish and any stock or inventory belonging to the First Plaintiff or any customer of the First Plaintiff, and return the premises to the Defendant in a clean and tidy state free from any debris or rubbish.
E. Third Parties
8.By 4:00pm 2 June 2023, the First Plaintiff shall provide any and all sub-tenants or licensees of the Property (the 'Third Parties') with a copy of these Orders and this Annexure.
9.By 4:00pm 6 June 2023, the First Plaintiff shall advise the Defendant in writing that the Third Parties have received a copy of these Orders.
10.By 4:00pm 28 August 2023, the First Plaintiff must cause and direct any and all Third Parties to remove their stock and property from the Property.
F. Stock Limitation
11.By 26 July 2023, the First Plaintiff is not to accept delivery of any new stock at the Property, save that, thereafter, delivery may be accepted of stock, where that stock is to be consolidated with stock already located at the premises and is to be removed within 24 hours.
G. Inspection and Reporting
12.The Defendant is entitled to attend and have unfettered access to the Property on 24 hours’ notice to the First Plaintiff or as otherwise agreed by the First Plaintiff and the Defendant.
13.Any representative, agent or person attending the Property on behalf of the Defendant is to be accompanied by a staff member or representative of the First Plaintiff to ensure the safety of any attendees of the Defendant.
14.By 4:00pm 7 June 2023 and every week thereafter until the licence is ended, the First Plaintiff shall provide the Defendant with written weekly reports on stock levels held at the Property.
The following features are of note. First, the period of the Licence ends on the earlier of 4pm on 28 August 2023 or 14 days following notice being given by VCS. The Licence can also be brought to an end by Centuria if VCS enters into liquidation or fails to pay any invoice rendered by Centuria and any default is not remedied by VCS within seven days after the notice of giving of default. The licence is also capable of termination by notice from Centuria in the event that VCS fails to comply with the requirements set out in paragraphs E, F and G.
Secondly, the licence fee is $37,346.89 per week which equates to $5,335.27 per day which exceeds the daily rate payable under the Licence Agreement which expired on 1 May 2023 of $4,826.58 and the amount payable for rent (but not outgoings) under the Lease (but not paid) of $4,967.34 per day. It is payable as to the period from 2 May 2023 to 28 June 2023 by 4pm on 2 June 2023; thereafter, payable essentially on a monthly basis in advance save for the payment due on 23 August 2023 which shall apply only for the period to 28 August 2023.
Thirdly, in the event that VCS terminates the Licence Agreement, it shall be entitled to a pro rata refund of any licence fee paid insofar as the licence fee is referable to a period after the date the termination takes effect.
Fourthly, VCS is required to remove all of its items at the Premises and leave the Premises in a clean and tidy state and remove all stock or inventory belonging to it or any of its customers (clause 7).
Fifthly, VCS is required to provide any and all subtenants or licensees of the Property (the third parties) with a copy of the orders and the Annexure and must cause or direct any and all third parties to remove their stock and property from the Property by 28 August 2023.
Sixthly, VCS is permitted to continue to accept delivery of new stock save that it shall not do so after 26 July 2023 except where the stock is received from and will be consolidated with stock already located at the Premises, in which case it is to be removed within 24 hours.
Seventhly, Centuria is entitled to attend and have unfettered access to the Property on 24 hours’ notice to VCS save that where it attends at the Property, it is to be accompanied by a staff member or representative of VCS.
Eighthly, VCS is required to provide Centuria with written weekly reports on stock levels held at the Property.
Section 444F of the Act
Section 444F empowers the Court to restrain an owner from taking possession of land occupied by the company subject to a deed of company arrangement notwithstanding that the occupier’s right to occupy the property has terminated.
Both parties accepted that the relevant principles to be applied in relation to an application such as the present were summarised by Lander J in Strazdins v Birch Carroll & Coyle Ltd (‘Strazdins’)[5] as follows:
[5](2009) FCR 300, [130]-[133], [147].
(a) the Court is empowered to make an order preventing an owner or lessor of property that is used or is occupied or in the possession of the company from taking possession of the property or otherwise recovering it;
(b) an order restraining an owner or lessor from taking possession of the property or otherwise recovering the property may only be made if the Court is satisfied that, if the owner or lessor took possession or otherwise recovered the property, it would have a material adverse effect on achieving the purposes of the DOCA;
(c) the Court must also be satisfied that the owner or lessor’s interests would be adequately protected by the terms of the deed or the terms of the order or in some other way as required by s 444F(5);
(d) the third component is whether the orders should be made in the exercise of the Court’s discretion which discretion is unfettered but must be exercised judicially;
(e) the power is limited to preventing an owner or lessor from taking possession or recovering the property;
(f) the Court cannot otherwise interfere with any other rights that the owner or lessor might have in relation to the property;
(g) the Court cannot, if there has been a valid termination of a registered lease by the lessor, prevent the lessor seeking to set aside the registration of the lease. The Court can also not prevent the lessor from exercising any other rights the lessor might have under the lease;
(h) section 444F(4) does not allow the Court to make an order preventing the lessor from terminating the lease;
(i) the power to make an order under s 444F(4) is not dependent upon a valid lease being in place but is dependent upon the property being used or occupied by the company or by the company being in possession of the property;
(j) whether a lease has or has not been validly terminated prior to the company entering into the DOCA is immaterial to the exercise of the power except perhaps as to the exercise of the Court’s discretion;
(k) section 444F should be construed with the objects of Part 5.3A of the Act in mind, however, in determining whether to make an order the Court shall have regard to factors including the company’s financial position and the effect of the grant of an order on the owner of the property.[6]
[6]Re Cook, Natural Grocery Co Pty Ltd (admin apptd) (2020) 144 ACSR 71, [28]-[30].
The onus of establishing that the interests of the owner or lessor are ‘adequately protected’ falls on the deed administrator.[7]
[7]Mentha v Sydney Airports Corp (2002) 120 FCR 310, [53].
The reference to ‘interests’ refers to economic or commercial interest rather than legal interest. The reference to ‘adequately protected’ relates to the economic or commercial adequacy of the protection.[8] The word ‘adequately’ is to be distinguished from ‘perfectly’ or ‘completely’.[9]
[8]Munday Group Pty Ltd (in liq) v Tsourlinis Distributors Pty Ltd [2011] FCA 195, [57].
[9]Re Hi-Fi Sydney Pty Ltd (admin apptd) [2015] NSWSC 1312, 59.
Material adverse effect
The purpose of the DOCA includes allowing VCS to continue as a going concern and to facilitate the making of contributions under the DOCA which are to be made from trading.
Given that the evidence establishes that VCS does not have alternative premises available into which it could move its operations in the near term, clearly, the taking of possession of the Premises by Centuria will have a material adverse effect on achieving the purposes of the DOCA.
Indeed, the deed administrator deposes in his affidavit sworn 17 May 2023 that there is a shortage of alternative cold storage facilities available in Victoria. The deed administrator’s office was advised by the estate agents Knight Frank on or about 27 March 2023, that there is less than 1% warehouse space available across Victoria currently, and even less for cold storage facilities and further that the earliest available storage facility was between 12-18 months away and was currently under construction. Knight Frank otherwise advised that Knight Frank did not have any available properties that could be suitable for VCS’s business. The deed administrator otherwise deposes to discussions with CBRE estate agents to largely similar effect.
Christopher Vincent, general manager of VCS, in his affidavit of 17 May 2023 has deposed relevantly to advice by a third party (unnamed) that the third party could store approximately 6,000 pallets of VCS’s goods on a pallet rental basis payable month by month.[10] Mr Vincent has otherwise deposed to ‘recent discussions with real estate agents’ as a result of which he believes ‘that there are a number of properties which could be utilised by VCS as its base of operations on a longer interim basis and/or on a permanent basis that would be available now or soon (and that he has) also attended a number of premises inspections in the past week’.
[10]According to VCS, it is holding stock for approximately 30-33 customers of which stock held for three customers, AMG, Blackbird and Chill comprises around 55% of the stock.
No documents were produced in response to a notice to produce served by the solicitors for Centuria which sought documents recording or evidencing any discussions, advice or agreements between VCS and the third party referred to in Mr Vincent’s discussions relating to the facility capable of moving 6,000 pallets.
There is also a tension between the deed administrator’s evidence and that of Mr Vincent relating to the availability of alternate premises.
In any event, and having regard to the concession by Centuria to the effect that its taking of the Premises would likely have a material adverse effect on achieving the purpose of the DOCA because it self-evidently would make it less likely that VCS could continue as a going concern and thereby be in a position to make contributions under the DOCA, I accept that the deed administrator has established that for Centuria, as the owner, to take possession of the Property would have a material adverse effect on achieving the purposes of the DOCA.
Are Centuria’s interests adequately protected ?
The deed administrator contends that the interests of Centuria are adequately protected by the proposed further licence agreement and the accompanying conditions proposed, including:
(a) VCS’s offer to pay a licence fee calculated at a rate of $225 per square metre (inclusive of GST and outgoings) whilst it remains in possession of the Premises is in line with Centuria’s own market estimates of the rent that might be paid by an incoming tenant and represents a significant increase in both the amount paid under the Lease and the licence fee paid by the deed administrator;
(b) the conditions as to the removal of property belonging to third parties and the limitation on acceptance of further stock after 26 July 2023 are sufficient to adequately protect Centuria’s interests;
(c) VCS has agreed that Centuria can have access to the Property on 24 hours’ notice subject to any person attending the Premises being accompanied by a staff member or representative of VCS; and
(d) if there is a material breach of the conditions by VCS, Centuria can terminate the Licence or if problems arise can bring the matter back to Court pursuant to liberty to apply.
Centuria submits that the deed administrator has not discharged the onus of establishing that Centuria’s economic or commercial interests will be adequately protected by the relief sought and points to five key matters which should be considered cumulatively in evaluating whether the necessary onus has been discharged.
The five matters identified by Centuria are: (1) payment amount; (2) payment timing; (3) VCS’s financial position; (4) the availability of alternate premises; and (5) maintenance and inspection.
As to payment amount, Centuria submits that a payment which equates to $5,335.27 per day, being the equivalent of $225 per square metre per annum (including outgoings and GST) is not in fact adequate to protect Centuria’s economic or commercial interests and misapprehends the significance of the market evidence obtained by Centuria. Centuria points to the fact that its market estimates indicate that Centuria would immediately be able to achieve a rent of between $210-$250 per square metre per annum plus outgoings plus GST. It submits that the amount of $225 per square metre inclusive of outgoings and inclusive of GST is the equivalent of $171 per square metre per annum plus outgoings plus GST which is lower than the unsolicited offers that Centuria has received to date from third parties.
Secondly, as to the payment timing, Centuria complains of the fact that the proposed payments are for the most part payable monthly in advance (save that the payment of the first amount due 2 June 2023 will also include payment for the period where VCS has been occupying the Premises as a trespasser since the end of the Licence Agreement) and considers that this is problematic and gives rise to doubt as to whether VCS will adhere to the proposed payment regime. It points to:
(a) VCS’s history of failing to pay rent in respect of the Premises on time or at all, noting that:
(iii) VCS failed to pay rent due under the Lease on time to Centuria since September 2021 and at all since June 2022 (apart from that paid during the licence period by way of licence fee);
(iv) at the time VCS had an administrator appointed, it owed Centuria $1,037,289.31 under the Lease in respect of which unpaid rent and outgoings. Centuria will receive somewhere between 0.8 and 10 cents in the dollar through the DOCA;
(v) even during the licence period, there were multiple delays in VCS and Mr Dixon paying the outstanding amounts;
(b) VCS has not paid any moneys for its occupation of the Premises in the period from 2 May 2023 onwards and nor has it offered to do so otherwise than if its application for orders under s 444F(4) of the Act succeeds;
(c) there is no evidence to demonstrate VCS’s current financial position or its capacity to pay the proposed amounts going forward; and
(d) VCS has not given any assurance or provided any security to secure payment of such amounts.
Centuria submits that the only way in which its economic and commercial interests could be adequately protected is if the payment amount for the full occupation period is paid up front.
As to the financial position of VCS, Centuria submits that there is no evidence proffered to demonstrate VCS’s current financial position or its capacity to pay the proposed amounts through to 28 August 2023.
As to alternate premises, Centuria submits that in order for VCS to exit the Premises and thereby effectuate the DOCA, it must be capable of moving its operation or stock to an alternate cold storage facility by 28 August 2023. It submits that there is insufficient evidence for the Court to be satisfied that VCS will be able to move its operations or stock to alternate premises by that time and submits that it is inevitable that VCS will continue to occupy the Premises as a trespasser much as it is now. Notably, it points to the fact that there were approximately 9,000 pallets in the Premises in early March 2023 and there remain 9,000 pallets at the Premises on the date of the hearing of this application.
Relatedly, Centuria submits that VCS’s ability to locate and secure alternate cold storage premises is wholly uncertain and points to the tension, if not inconsistency, between the deed administrator’s evidence,[11] and Mr Vincent’s unparticularised and undocumented evidence to the contrary
[11]Referred to above at [56].
As to the question of maintenance and inspection, Centuria points to two broad matters. First, it points to its history of concerns communicated to VCS about its failure to adequately maintain the Premises during the period of the Lease and as to the condition of the Premises on 3 May 2023 where its representatives observed and took photographs establishing that freezer and chiller doors were left open venting air into ambient temperature transition zones; external doors in the transition zone had been left open for trucks; there was various damage to the Premises as well as rubbish and impeded egress areas; and the Premises were not secure and unsupervised. Relatedly, there has been a history of complaints to similar effect made by Centuria during the period of subsistence of the Lease.
Centuria also complains of VCS’s denial of access by Centuria to the Premises for the purpose of Centuria seeking to secure a new tenant and the imposition of conditions on Centuria’s access to the Premises notwithstanding VCS was a trespasser at the time of denial of access and the imposition of conditions on inspection not contained in either the Lease or the Licence Agreement.
Discretionary factors
The deed administrator otherwise relies upon the following which he submits favour the grant of the application on discretionary grounds:
(a) the grant of relief will promote the purposes of Part 5.3A of the Act;
(b) for Centuria to take possession of the Premises or otherwise recover them would have a material adverse effect on achieving the purposes of the DOCA;
(c) the interests of Centuria will be adequately protected by the conditions proposed;
(d) any willingness on the part of Centuria to entertain VCS’s continued occupation of the Premises is accompanied by required conditions that are objectively unreasonable, viz:
(vi) immediate payment of $193,666.68 (plus GST) for mesne profits for the period 1 May 2023 to 28 May 2023;
(vii) payment by 12 June 2023 of $581,000.04 (plus GST) for a non-exclusive Licence Agreement for the period 29 May 2023 to 20 August 2023; and
(viii) payment within five business days of Centuria issuing VCS any invoice for the payment of any third party outgoings incurred from 1 May 2023 to the end of the term;
(ix)VCS would vacate the Premises at the end of the term (20 August 2023) and would reinstate the Premises to the condition that they were in at the inception of the Lease (at an estimated cost of in the order of $250,000 plus GST);
(x) VCS would agree to weekly site inspections by Centuria, provide Centuria with weekly reports on stock levels to show reduction throughout the term and otherwise permit Centuria to inspect the Premises, show the Premises to prospective tenants on no less than 24 hours’ notice to VCS and otherwise to have unfettered right of access to the Premises during such inspection unaccompanied by any of VCS’s staff or representatives; and
(e) any precipitous action by Centuria will have a significant effect on third parties who store goods at the Premises and whose interests are better protected by there being an orderly process for dealing with those third parties with the process of liaising and arranging for the removal of their goods handled by VCS which has the expertise and relationship with those third parties.
In contrast, Centuria submits that even if the Court finds that Centuria’s interests are adequately protected, the Court should exercise its discretion to refuse an order under s 444F(4). Centuria points to the following matters:
(a) Centuria has lost more than $900,000 as a result of unpaid rent owing to it under the Lease,[12] and over $250,000 in legal fees;
[12]The difference between the rent owing and the amount likely to be realised under the DOCA.
(b) Centuria entered into the Licence Agreement in good faith to provide VCS with a short term exit strategy which would assist it in maintaining the viability of its business. This notwithstanding, neither the deed administrator nor VCS complied with the vacant possession obligation in the Licence and instead continued to occupy the Premises with the same stock levels that it had in early March 2023;
(c) the DOCA was entered into in circumstances where its effectiveness was premised on VCS finding alternate cold storage premises despite there being no alternate cold storage premises available in the market; and
(d) Centuria repeatedly informed the deed administrator and VCS of its intention to take possession of the Premises at the end of the Licence Agreement.
Before evaluating the respective contentions, it is useful to examine the decision of Lander J in Strazdins and of Brereton J in Re Hi-Fi Sydney Pty Ltd (admin apptd) (‘Re Hi-Fi’).[13] In both those cases, the Court granted s 444F(4) relief.
Strazdins and Re Hi-Fi
[13][2015] NSWSC 1312 (‘Re Hi-Fi’).
Strazdins involved an application by a deed administrator for an order pursuant to s 444F(4) of the Act that the owner of property not take possession of certain premises, and in the alternative that the company the subject of the DOCA be granted relief from forfeiture with respect to all or any breaches of the lease both pursuant to statute and in the alternative in equity. The company the subject of the DOCA occupied premises where it operated two licensed venues. The lease provided that an event of default arose if an insolvency event occurred. On 24 April 2008, the company entered into voluntary administration which constituted an insolvency event, and thus constituted an event of default under the lease. At that time, the company was in arrears in respect of payment of rent in the amount of $40,421.[14]
[14]The base rent was $143,600 per annum.
On 12 June 2008, the lessor’s solicitors wrote to the company giving notice of intention to terminate the lease effective from the date of service of the notice on the ground that an insolvency event had occurred because the company had been placed into administration.
Notwithstanding the company default and the purported termination of the lease, the owner of the property was not entitled, because of s 440C of the Act,[15] to take possession of the property. Section 440D also prevented the owner of the property from applying to the Court for an order for possession of the property save with the administrators’ written consent or of the leave of the Court.
[15]Section 440C of the Act prevents an owner from taking possession without the occupier’s consent or lease of the Court during the period of administration.
The administrators sought and obtained leave to extend the period within which they were obliged to convene a meeting of creditors pursuant to s 439A(5) of the Act and an order was made extending the period to 15 July 2008.
On 25 June 2008, the solicitors for the owner wrote to the administrators advising that the owner was prepared to offer a new lease to the company for a term of two years with 31 year options, the exercise of which options was subject to a redevelopment clause.
During the course of the administration of the company, a proposal was made for the company to enter into a DOCA which had been advanced by a separate company, NT Pubco Pty Ltd (‘NT Pubco’). NT Pubco was an experienced operator of licensed premises. On 18 August 2008, the owner called on the bank guarantee which had been provided in accordance with the terms of the lease. This enabled all arrears of rent and outgoings owing when the company entered into administration to be paid. Further, since that time the company had met all its obligations in respect of rent and outgoings. A resolution of creditors passed at the second meeting of creditors resolved that the company execute a DOCA in terms of the proposal put by NT Pubco. The terms of the DOCA included a provision requiring the administrators to pay all arrears and outgoings with respect to the lease out of the deed fund, although in fact, having regard to the bank guarantee being called upon, there were no arrears and outgoings outstanding. In any event, as noted above the administrators continued to meet their obligation.
The proceeding came on for trial on 6 February 2009 during the course of which, among other things, the owner made an open offer to lease the premises to the company for a term of five years although the owner later withdrew that offer following the failure of negotiations.
The day before trial, because of suggestions that the earlier notice of termination might not be valid, the owner served a second notice of termination relying on the insolvency event constituted by the appointment of voluntary administrators and a further insolvency event constituted by the execution of the DOCA on 22 September 2008.
His Honour first held that an order could be made under s 444F notwithstanding that the lease had been terminated. His Honour also accepted that the owner taking possession would have a material adverse effect on the purpose of the DOCA because it is a condition precedent to the DOCA coming into existence that an order be made under s 444F. If no order was made, the company would go into liquidation.
The critical question which remained was whether the owner’s interests could be adequately protected. The deed administrator and the company submitted this was so because all arrears of rent and outgoings had been paid, the person who would become the company’s sole director under the terms of the DOCA was experienced in its business, NT Pubco was a financially viable company experienced in the conduct of the business and the company would in any event provide a bank guarantee as the lease required.
In determining that the owner’s interests were adequately protected, his Honour first identified those interests, concluding that the relevant interests were those which the lessor had under the lease prior to its purported termination. In so concluding, his Honour had regard to the fact that the owner’s contention that the interests were of a wider nature sought to take advantage of the company entering into administration so as to provide it with further commercial interests which it did not enjoy immediately before that time.
His Honour concluded that those interests which arose as a result of the company entering into administration, were not the interests that were the subject of the adequate protection analysis which s 444F seeks to address. Rather, his Honour considered that the interests that the company had were the interests of lessor under the lease as if it had not been terminated and that such interests could be adequately protected by the imposition of a condition that the company comply with all the terms and conditions of the lease as if the lease had not been terminated provided the Court could be satisfied that it was likely that the company was in a position to comply with those conditions.
His Honour accepted that the practical effect of an order pursuant to s 444F of the Act in those circumstances was the same as relieving the company from the forfeiture of the lease.
On that basis, his Honour granted the relief sought.
In Re Hi-Fi, Brereton J considered an application for relief against forfeiture and an alternative application for orders pursuant to s 444F of the Act in respect of breaches of a sublease and purported re-entry resulting from the appointment of an administrator and a disputed breach of the covenant against assignment without the lessor’s consent.
Notably, at the time of the hearing of the application, all arrears had been paid, during the administration the rent had been paid punctually and a person of substance had proffered undertakings to replace and/or replenish the security deposit and bank guarantee. Further, his Honour noted that the lessor had suffered no damage from the breach of lease, and further that as a result of the DOCA the company would no longer be insolvent and that its operating results since the change in management along with the undertakings offered a real prospect that it would no longer be a troublesome tenant.
His Honour granted relief under s 444F. His Honour agreed with the approach of Lander J in Strazdins to the effect that the interests the subject of the assessment as to adequate protection are those of the owner qua lessor under the lease. His Honour identified those interests as receiving the rent and ensuring compliance with the terms of the lease as distinct from exploiting a default under the lease to negotiate shorter terms at higher rents with more attractive potential tenants.
An examination of the facts in those cases reveals stark differences to the facts of the present. Critically, in both Strazdins and Re Hi-Fi, at the time of the application for relief under the Act, the company was no longer in default of the provisions of the lease; the conditions which attended the grant of relief were that the Lessee comply with the lease and an undertaking was provided so as to ensure compliance.
This case is very different; there is a subsisting default under the terminated lease of a most significant kind. Essentially, the company has paid no rent for its occupancy of the Premises since June 2022. During that period, it has continued to run its business from the Premises without the burden of paying anything to the owner for its occupancy of same, save for the period in which the administrator and the company were parties to the Licence Agreement.
Secondly, the Lease was terminated well before and independently of the events in respect of which protection is accorded under Part 5.3A of the Act. Here, the Lease had been terminated on 27 October 2022. An administrator was not appointed until 31 January 2023 with the DOCA executed on 1 May 2023..
Thirdly, the conditions proposed by the deed administrator and the company accompanying the relief sought under the Act are not those which facilitate compliance with the Lease. On the contrary, the deed administrator and the company eschew amongst other provisions, the make good clause and contemplate only a short term licence terminable by VCS on 14 days’ notice but with an end date of 28 August 2023.
The relevant circumstances bear only little resemblance to those present in Strazdins or Re Hi-Fi.
Analysis
I am not satisfied that Centuria’s interests will be adequately protected if the orders sought are made. Further and in any event, I would not in the circumstances exercise my discretion in favour of the grant of relief under s 444F(4) otherwise than on terms notified as acceptable to Centuria.
Although there is some overlap between the matters relevant to the conclusion that Centuria’s interests are not adequately protected and the discretionary matters, I will deal firstly with the matters which are pertinent to my conclusion that the deed administrator has not satisfied the burden of establishing that Centuria’s interests will be adequately protected.
For the purposes of this analysis, I will assess the question of adequate protection on the same basis as their Honours did in Strazdins and Re Hi-Fi, namely that the adequacy analysis is to be undertaken by reference to the interests that Centuria had under the Lease immediately before its termination.
First, in contrast to Strazdins and Re Hi-Fi, that which is proposed by VCS as a condition of the grant of relief under s 444F(4) is vastly different to that required to be observed by it under the now terminated Lease. Centuria had the benefit of a lease for a fixed term of five years; the rent struck and payable under the Lease (albeit not paid) reflected the fact that the bargain was designed to provide it with the security of regular returns over that period. The proposed term of the licence is much shorter. In that context, the fact that the amount of the licence fee the subject of the proposed conditions is said to be equivalent to the amount that an incoming tenant might pay is an inapt comparison. Here, the payment is being provided by a short term occupier; not an occupier whose covenant to pay rent appears in a long term lease. In any event, the comparison is not of an equivalent amount, as the proffered amount is inclusive of GST and outgoings whereas the alleged market estimates are exclusive of outgoings and exclusive of GST. Even as to its quantum, the licence fee proposed is inadequate to protect Centuria’s interests. Nor are the terms otherwise in any way comparable; a condition requiring the Premises to be restored to their state at the commencement of the Lease which formed part of the Lease does not appear in any comparable sense in the proposed conditions, to cite one example.
Secondly, having regard to both the proposed terms and VCS’s unsatisfactory payment history, there is no certainty that the amounts stipulated in the conditions will be paid. There is no evidence adduced on the application which enables me to conclude that the payments set out in proposed condition 3 will be paid. There is no evidence as to VCS’s current financial position and the cashflow analysis undertaken for the purposes of the DOCA did not have regard to the terms now proffered. Notably, there is no assurance, undertaking or security provided with respect to the payment of the amounts. Further, any amount paid is required to be repaid by Centuria if VCS terminates the Licence either by notice or upon it entering into liquidation. Moreover, the proposed conditions contemplate that even in the event of non-payment, VCS will still be accorded a further seven day indulgence before Centuria is permitted to terminate the Licence. These conditions do not adequately protect Centuria.
Thirdly, I am not at all satisfied that VCS will vacate the Premises on 28 August 2023 or ensure that all third parties remove their stock and property from the Premises at that time. The generality of Mr Vincent’s evidence and its inconsistency with that of the administrator as to available alternate premises is such that, for that reason alone, it must be accorded no weight.
Further, having regard to the financial travails of VCS and VTS and the difficulties which have attended to the occupancy of these Premises, there is cause to be concerned about VCS’s attractiveness as a tenant for any new premises. Nor am I satisfied that VCS has any capacity, even if it was willing, which I doubt, to cause or direct third parties to remove their stock and property from the Property. The terms on which the goods are stored are not in evidence.
VCS was aware on 13 December 2022 that its application for injunctive relief restraining Centuria from taking possession had been dismissed and that its application for relief against forfeiture required it to remedy the outstanding arrears, comply with the Lease for the period from November 2022 to the end of January 2023 onwards by making substantial payments to Centuria by 30 January 2023 or else the forfeiture of the Lease affected by the notice served 27 October 2022 would take effect. Not only did it not pay any sum whatsoever to Centuria during the period prior to 31 January 2023, it made no attempt at all to either wind down its business, move to alternate premises, or apparently communicate with the third parties that its occupancy rights at the Premises would cease on 31 January 2023, and that the third parties needed to make alternate arrangements for their product. Remarkably, even after the expiry of the Licence Agreement, on 15 May 2023, VCS (now a trespasser) sent notices to all of its customers that it would be increasing rates effective immediately. VCS by its manager, Mr Vincent, notwithstanding the execution of the DOCA, was purporting to increase the rates payable for storage by its customers in circumstances where it had no right to occupy the Premises at all and where there was an extant proceeding on foot by Centuria to recover possession of the Premises which were being occupied without Centuria's consent or without any lawful entitlement.
Having regard to VCS’s conduct to this point and the significant difficulty it faces in either obtaining alternative premises, there is a very real chance, in my view, that Centuria will find itself in a similar position on 28 August 2023, if not before, where VCS simply fails to comply with the conditions which attach to the orders as sought by the deed administrator.
It is not a sufficient answer that in such circumstances it is open to Centuria to terminate the Licence and come back to Court. Centuria is the owner of the Property having validly terminated the Lease on 27 October 2022 and having received only the most minimal payment in the period since. Absent an arrangement adequate to protect Centuria’s interests, it should be able to deal with its property as it sees fit.
Nor do I consider that Centuria’s interests are adequately protected by the proposed inspection regime. Centuria is understandably keen to put the Premises in an appropriate condition and secure a replacement tenant. On the conditions proposed by the deed administrator, it must make an appointment with VCS and ensure that any inspection is accompanied by a staff member of VCS. In circumstances where the commercial relationship between VCS and Centuria has completely broken down and is attended by evident angst, such a regime is likely to be problematic, if not unworkable. Further, there are subsisting complaints by Centuria as to the manner in which VCS has maintained the Premises both during the subsistence of the Lease and following its determination whilst VCS has remained in occupation. Whilst those matters are disputed by VCS, I am not satisfied that the deed administrator has established that the condition of the premises will not deteriorate further during the period of further occupancy. Even if Centuria’s interests are limited to ensuring that the condition of the Premises remains no worse than it is at the present date (which I doubt), they are not adequately protected by allowing VCS to remain at the Premises. There is no incentive for VCS to properly maintain the Premises; if anything the worse the condition of the Premises, the less attractive the property might be to a replacement tenant. Further, given the history of VCS’s failure to perform its obligations, there can be no confidence that VCS will adhere to the terms in any event.
The above analysis, consistently with the approach in Strazdins and Re Hi-Fi, has proceeded on the basis that the question as to the adequacy of the protection of Centuria’s interest is to be carried out by reference to its legitimate interest under the now terminated lease. In Strazdins and Re Hi-Fi, the lease termination came about near simultaneously with the administration of the company. That is not the case here. Since 27 October 2022, VCS has occupied the Premises as a trespasser, save for the period to 1 May 2023 when its occupancy was pursuant to the Licence Agreement.
In that context, there is good reason to consider that the question of the adequacy of protection of Centuria’s interest should now be carried out by reference to the interests of an owner of premises unencumbered or unaffected by the lease which had been terminated as a result of a default on the part of the lessee months earlier.
If the necessary analysis is carried it on that basis, then it is difficult to conceive of conditions which could adequately protect the interests of the owner absent the owner’s acquiescence. Centuria has an entirely legitimate interest in securing vacant possession of the Premises for the purposes of enabling it to obtain a new tenant for the Premises and performing any necessary works to those Premises that may assist in securing a new tenant. That legitimate interest is not adequately addressed by a continued denial of access against its wishes. I do not accept the submission that the proposed occupancy adequately compensates Centuria because it simply delays the point at which the new tenant is obtained or the necessary works are undertaken. The risk cannot be discounted that Centuria’s interests may be detrimentally affected by a further delay in it obtaining vacant possession whether by the loss of a potential tenant who may commit to alternative premises in the meantime, a further deterioration in the quality of the Premises or increased rectification costs which have to be borne by Centuria regardless of how that arises. In any event, the deed administrator has not discharged its onus of establishing that any such detriment is adequately addressed. Nor do I accept that the fact that Centuria has previously offered to accept VCS’s continued occupancy of the Premises on certain terms is relevant. It remains open for any owner of premises to offer occupancy on terms it deems acceptable. If the proposed occupier does not accept those terms, then there is no impediment to the owner of the premises pressing its entitlement to vacant possession.
Regardless of the prism through which Centuria’s interests are to be assessed, they are not adequately protected by the terms proposed by the deed administrator.
Centuria’s interests are not adequately protected by the imposition of a most uncertain arrangement which require it to continue to suffer the presence of a defaulting and insolvent occupier who appears to have a quite unrealistic understanding of the circumstances which attend its occupancy of the Premises.
Moreover, even if I were to consider that Centuria’s interests could be adequately protected, I would have declined to grant relief on discretionary grounds. First, and unlike Strazdins and Re Hi-Fi, in this case, the Lease had been brought to an end months before the company and its administrator (thereafter the deed administrator) sought to rely upon the protective provisions contained in Part 5.3C of the Act. Further, and unlike the earlier cases, the application is advanced so as to secure the benefit of occupancy for a company indebted to Centuria with respect to unpaid rental in an amount in excess of $1 million in respect of which around $900,000 will remain unpaid even if the DOCA is implemented. Even during the period of the Licence Agreement, the deed administrator failed to ensure that payment was made in a timely fashion.
Secondly, and notwithstanding the pragmatic approach taken by Centuria which granted VCS considerable indulgence and allowed it sufficient time to either vacate the Premises or take steps to inform its customers that its occupancy rights would cease on 31 January 2023, the company made no attempts whatsoever to do so. Instead, VCS carried on its business as if nothing had changed, refusing or unwilling to make any payment in consideration of its occupancy rights. Centuria’s co-operative approach has been taken advantage of and abused.
Thirdly, and notwithstanding the further concession granted by Centuria by way of the negotiation and entering into of the Licence Agreement with VCS on 14 March 2023, VCS breached that agreement by failing to comply with the obligation in clause 4.3 to ensure the removal of third party goods by the exit date. Again, it would appear that VCS took no steps whatsoever during that period and nor did it return the Property to Centuria at all, much less in a clean and tidy state free from any defects or rubbish. There is no evidence as to what steps the administrator did or did not do during that period in order to ensure compliance by VCS with clause 4.3.
Further, the DOCA was entered into on the basis that VCS could continue to operate notwithstanding that its ability to continue to operate was dependent upon either it securing a right of occupancy at the Premises which was not a realistic prospect (to put it mildly), or securing alternative premises, notwithstanding that the investigations carried out by the deed administrator were far from supportive of any such prospect.
In effect, VCS has taken advantage of the indulgence provided by Centuria both during the course of the Lease and following its termination and has taken no steps during that period to either find alternative premises, communicate with third parties to arrange for the removal of the goods or secure alternative premises. VCS then entered into a DOCA which, among other things, was predicated upon it being able to continue to operate so that it could facilitate a rather desultory return to creditors (three of the five of whom are related parties to the directors) and then rely upon the facts which underpin the achievability of the DOCA to secure a right of occupancy on wholly favourable terms for it against the wishes of an understandably aggrieved property owner.
Nor do I accept that the interests of the third party owners of goods are better protected by VCS remaining in occupancy. In contrast, I consider that their interests will be better protected by Centuria. Upon becoming aware of the fact that third party goods remained stored at the premises on 3 May 2023, notwithstanding that Centuria had allowed VCS to remain at the Premises until 1 May 2023, Centuria made prompt contact with those owners of goods of which it was aware,[16] and has made or is making orderly arrangements for the removal of their goods. I have no reason to doubt that Centuria will observe such statutory or other obligations that it may owe to the third parties.
[16]AMG, Blackbird and Chill.
For the above reasons, the application by the deed administrators for orders under s 444F(4) of the Act is dismissed.
The possession action
As the property is now occupied by a trespasser, there is no answer to Centuria’s counterclaim for possession and orders will be made accordingly. In accordance with the position taken by Centuria at the hearing of the application, there will be a stay on execution of the order for possession of 28 days.
Conclusion
I will hear the parties as to the precise form of order and as to costs.
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