West Asset Holdings Pty Limited v Sara Investments (NSW) Pty Ltd

[2023] NSWSC 136

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

West Asset Holdings Pty Limited & Anor v Sara Investments (NSW) Pty Ltd & Anor [2023] NSWSC 136

Hearing dates:

9, 10, 13, 16, 17, 20 & 22 February 2023

Date of orders:

24 February 2023

Decision date:

24 February 2023

Jurisdiction:

Equity - Duty List

Before:

Slattery J

Decision:

Court expert appointed under UCPR, r 31.46 to undertake a quick assessment of stock, plant and equipment at the Lidcombe premises before the Court expert’s appointment as a receiver or alternative remedies are pursued.

Catchwords:

EQUITY – equitable remedies – receivers – appointment of a receiver –commercial landlord enters leased premises and seeks the appointment of a receiver over the former tenants perishable goods – tenant seeks removal of the goods to another location to continue its business – dispute about the value of the goods, the feasibility of removal and the appointment of a receiver – Court considers having preliminary appointment of the proposed receiver as a Court expert under UCPR, r 31.46 to ascertain the value of the goods so that the Court can consider whether the potential alternatives to a receivership are realistic.

Legislation Cited:

Supreme Court Act 1970, s 67

Uniform Civil Procedure Rules2005, r 31.46

Cases Cited:

Sara Investments (NSW) Pty Limited v West Asset Holdings Pty Ltd [2022] NSWCA 207

West Asset Holdings Pty Ltd v Sara Investments (NSW) Pty Ltd [2022] NSWSC 674

Category:

Consequential orders

Parties:

First Plaintiff: West Asset Holdings Pty Ltd ACN 636 708 042
Second Plaintiff: Central Cleaning Supplies (Aust) Pty Ltd ACN 112 644 587
First Defendant: Sara Investments (NSW) Pty Limited ACN 099 530 275
Second Defendant: Bulolo Investments Pty Ltd ACN 624 228 164

Representation:

Counsel:
Plaintiffs: Mr J. Morris SC; Ms S. Woodland

Solicitors:
Plaintiffs: J. Green, Gibson Howlin Lawyers
Second Defendant: Mr T. D. Tzovaras, Tzovaras Legal
Independent Expert: Mr A. Hack, Matthew Folbigg Lawyers

File Number(s):

2020/320619

Publication restriction:

No

Judgment

1. Commercial landlords seeking to evict hostile tenants can avoid the risk of breaches of the peace by obtaining a judgment for possession and proceeding to eviction in an orderly way under the supervision of the Office of the Sheriff, Civil Operations Unit. The perceived attraction of direct eviction action is often illusory, as this case illustrates.

2. Here a former landlord seeks the appointment of a receiver to deal with substantial quantity of goods left by a commercial tenant on the premises after the tenant’s eviction. The tenant seeks their removal to other premises to continue its business. The issue for determination by the Court is whether a receiver should be appointed to sell the tenant’s perishable goods, plant and equipment.

An Eviction from the Lidcombe Property

3. After strongly contested litigation the plaintiff, West Asset Holdings Pty Limited (“West Asset”) became the registered proprietor of warehouse premises in Lidcombe identified in the Summons (“the Lidcombe property”). West Asset had successfully obtained orders for specific performance of a contract for sale from corporate interests closely associated with the second defendant, Bulolo Investments Pty Limited (“Bulolo”). Among the orders made at the conclusion of the primary litigation Lindsay J declared on 9 June 2022 that Bulolo’s then current occupation of the Lidcombe property was as a monthly tenant holding under the lease between it and West Asset, a copy of which was annexed to the contract for sale: West Asset Holdings Pty Ltd v Sara Investments (NSW) Pty Ltd [2022] NSWSC 674. An appeal by the vendors under the contract for sale of the Lidcombe property was dismissed in October 2022: Sara Investments (NSW) Pty Limited v West Asset Holdings Pty Ltd [2022] NSWCA 207. Consequential issues are yet to be resolved.

4. On 16 December 2022, West Asset gave 30 days’ notice to Bulolo of termination of the monthly lease of the Lidcombe property. On 20 January 2023 Mr Joseph Camilleri, a principal of West Asset together with four security guards and a locksmith attended the Lidcombe property and sought to re-enter the premises. There he confronted Mr Furio Rossi, the principal of Bulolo and Mr Rossi’s daughter, Ms Angela Rossi.

5. According to both Mr Rossi and Mr Camilleri a hostile conversation then took place between them. Immediately following this an aggressive confrontation took place between Mr Camilleri and Mr Rossi. Concerned as to what might follow from this exchange Mr Rossi's daughter, Angela, called the police complaining that assaults had occurred. The police kept the peace but did not otherwise intervene.

6. Mr Rossi and Ms Rossi were evicted that day, leaving behind perishable goods, namely foodstuffs, mainly smallgoods, together with plant and equipment. The perishable goods needed to be kept under controlled temperatures in the four chiller and freezer rooms on the leased part of the Lidcombe property. The perishable goods have an estimated market value of between $2 and $3 million. The plant and equipment Bulolo left behind is said to have included several valuable forklifts and similar vehicles.

7. Then followed a number of days of somewhat one-sided negotiations in which Mr Camilleri sought to use the goods on the premises as a bargaining chip to resolve the various outstanding claims for relief and damages in the specific performance proceedings. Given the high tensions between the parties these efforts were fruitless. West Asset then gave Bulolo limited time to retrieve its goods from the Lidcombe premises. Bulolo regarded the time as inadequate.

8. Throughout this period, Bulolo was legally represented. But on 9 February 2023 Mr Rossi sought and was granted leave to appear on its behalf himself in the Equity Division duty list, seeking relief by motion for access to the premises to remove Bulolo’s goods, stock and equipment. West Asset was served and a number of hearings followed in the duty list to manage the parties’ competing claims.

9. To briefly return to December 2022, it is difficult to fathom why West Asset did not seek judgment for possession in this case, as it was well positioned to do so. On 13 December 2022, shortly before West Asset completed its acquisition of the Lidcombe property on 16 December 2022, it filed a motion in the specific performance proceedings, seeking payment into Court of the proceeds of sale of the property and findings of contempt of court, for Bulolo’s alleged breaches of prior court orders. The primarily relief on the motion was not ultimately pursued on 15 December 2022.

10. But the notice to quit was issued the following day. It must have then been obvious to West Asset that it would soon face a bitter contest about eviction from the property or from a tenant, which had just lost its specific performance litigation. Relationships were extremely tense. Given the perishable goods on the premises and the difficulty of moving them rapidly, any party in West Asset’s position should have utilised the Court’s processes to obtain possession. This would have allowed for an orderly entry and the management of perishable goods under a structured and supervised process.

11. In the event that did not happen. Instead, the matter has been dealt with in the duty list on 10, 13, 16, 17, 20 and 22 February 2022. It is not necessary to detail all the orders made during that period. But the Court has made a range of orders including for the following purposes: Bulolo to have access to the premises to inspect the state of its goods; the retainer of a Court expert to supervise aspects of that access; the supply of information by West Asset to Bulolo about the cool room and freezing room temperatures being maintained since the eviction; the ordering of West Asset to maintain the supply of electricity to the cool rooms and to keep them within acceptable temperature ranges; the provision by Bulolo of a plan to remove the goods from the premises to other premises and the retention by West Asset of digital evidence from CCTV cameras on the property.

The Issues for Resolution

12. The Court’s primary duty is to quell the dispute between these parties. Bulolo’s perishable goods are still housed on the Lidcombe property. Bulolo has advanced unsatisfactory evidence which is yet to give the Court confidence as to its capacity to transport the goods to alternative premises in a short space of time. The Court has indicated an intention to appoint a receiver under Supreme Court Act 1970, s 67 unless Bulolo makes satisfactory arrangements to remove its goods in the short term. The Court has decided that it will appoint Mr Schon Condon of Condon Advisory Group as a receiver of the Bulolo’s plant, equipment and stock at the Lidcombe property unless satisfactory alternative arrangements are made by Bulolo in the short term for removal of the goods.

13. But neither the Court nor the parties have a sufficiently clear understanding of the nature and the value of the stock in order to determine whether any realistic alternatives to a receivership are available. A receivership will effectively liquidate the stock that Bulolo might use to continue trading as a going concern at other premises. There is some evidence that stock has been sold by Bulolo to a related company, Europe Foods Pty Ltd (“Europe”). This ownership issue has not yet been resolved. If that proves correct Europe will have to be joined as a party before the appointment of a receiver.

14. On the evidence available the Court is presently ill equipped to decide between appointing a receiver and allowing Bulolo an opportunity to remove its stock, plant and equipment. The Court has decided therefore to appoint Mr Condon as a Court expert under Uniform Civil Procedure Rules2005 (“UCPR”), r 31.46 to go onto the Lidcombe property, assess the state of Bulolo’s stock, plant and equipment and the likely course of a receivership and report by 2 March 2023. West Asset has agreed to underwrite Mr Condon’s fees upon appointment as a Court expert up to the sum of $10,000. The Court has been told Mr Condon is likely to consent to this course. Based on the performance of these orders after a report is received from Mr Condon the Court will decide the terms of the receivership, or upon a plan for removal of Bulolo’s goods.

15. There are two other complicating factors. First, Mr Camilleri’s evidence suggests that criminal activity has taken place on the premises since the re-entry in January 2023. Mr Camilleri says in his affidavit of 10 February 2023 that “sometime between 21 January 2023 and 24 January 2023 the forklifts were removed from the property without permission by an unknown party”. This is a reference to two forklifts that Mr Camilleri says were on the premises at the time he retook possession. Bulolo claims more than two forklifts were on the premises together with a mobile goods handling device, referred to as a scissor lift, and various other pieces of machinery, including a wrapping machine. Mr Rossi says that all the forklifts and the scissor lift have been removed from the property. The disappearance of these items is likely to be the product of criminal activity, as according to West Asset the property has been kept secure since the re-entry.

16. Mr Rossi and Ms Rossi also claim that their stock, plant and equipment including the wrapping machine have been deliberately maliciously damaged by West Asset’s agents after West Asset’s re-entry, preventing their re-use in Bulolo’s continued business. These allegations are contested. The circumstances suggest at least that persons unknown may have engaged in theft and malicious damage to property, which might warrant a preliminary investigation before a receivership commences.

17. Before any receivership commences, which the Court anticipates should occur within approximately two weeks, the New South Wales Police should have an opportunity to investigate any criminal activity that has occurred in respect of the disappearance of these forklifts. If the forklifts can be found, as they are specialised equipment, they will considerably assist the conduct of the receivership.

18. But even if they cannot be found, the Court cannot condone criminal activity. The Court will draw this matter to the attention of the Superintendent of the Auburn Police Area Command in which the Lidcombe property is situated. The Court requests that any police investigation that is to occur relevant to the matters raised in these reasons should if possible take place in the next two weeks. Police may find it necessary to conduct that investigation with knowledge of the present state of the premises. The Court will then be in a position to commence the receivership without interfering with police operations. This is not a suggestion by the Court that police investigation should occur. Rather, these reasons are designed to ensure that any evidence necessary for a police investigation is not destroyed in the course of a receivership.

19. Second, another complicating factor is that there is still a number of unresolved issues to which the re-entry into the premises has added further burden. Whatever the outcome of a police investigation, Bulolo may wish to litigate against West Asset the alleged damage to its goods, the theft of its property and the damage caused by the alleged excessive use of the power of re-entry to the Lidcombe property. Those issues will need to be added to the matters identified by Lindsay J as outstanding in the proceedings, described in Order 10 of the orders made by his Honour on 9 June 2022. Directions will need to be given in due course for their resolution in these or other proceedings.

20. The Court’s power to appoint Court experts, under UCPR, r 31.46 is a flexible one. This appointment shows yet again circumstances in which it can usefully be deployed.

21. By 28 February 2023, Bulolo should serve on West Asset and the Court expert by 28 February 2023, its proposed plans for the removal of the plant, equipment and stock from the Lidcombe premises, if a receiver is not appointed. This should be done so the Court expert has an opportunity to review those plans if he so chooses.

Conclusion and Orders

22. For these reasons the Court will make the orders, notations and directions set out below. These orders will be stayed temporarily until Mr Condon’s written consent to the precise terms of his appointment has been received:

1. NOTE that if circumstances do not change, the Court proposes approximately within the next two weeks to appoint Mr Schon Condon of Condon Advisory Group as a receiver ("the proposed receiver/ship") of certain plant, equipment and stock ("the stock") now situated in the warehouse premises formerly leased to the Second Defendant situated at [address not published] Lidcombe NSW 2141 ("the subject premises") unless other satisfactory orders can be made to deal with the stock to remove it from the subject premises.

Reference to Auburn Police Area Command

2. NOTE that the available evidence in these proceedings suggests that criminal activity may have taken place in respect of plant, equipment and stock at the subject premises, namely certain forklift trucks and possibly other equipment may have been stolen from the subject premises and malicious damage may have occurred to stock left on the subject premises after the second defendant was locked out of the subject premises on 20 January 2023.

3. NOTE that the Court refers these orders to the Superintendent in Charge of the Auburn Police Area Command, the Police Command in which the subject premises are located, so that New South Wales Police can decide whether to conduct any investigation into criminal activity on the subject premises prior to the commencement of the proposed receivership.

4. DIRECT the parties must cooperate to provide evidence to New South Wales police conducting investigations in relation to events at the subject premises. The provision by a party of copies of digital material retained by CCTV cameras at the subject premises to New South Wales Police, would not be inconsistent with any orders the Court and specifically the Court's Order (7) on 16 February 2023 for the preservation of such material.

Appointment of the Court Expert

5. NOTE that to finalise the terms of the proposed receivership or to settle any orders alternative to the proposed receivership it is desirable for the proposed receiver to review the plant, equipment and stock in question and report to the Court and for that purpose the Court has decided to appoint Mr Condon as a Court expert and for that purpose makes the following orders.

6. ORDER that Mr Condon is appointed as a Court expert under Uniform Civil Procedure Rule, r 31.46 to undertake the functions described in Order 7 below and to report in writing to the Court within a reasonable time, which on the presently available evidence the Court expects to be approximately one week after Mr Condon gains access to the subject premises pursuant to these orders.

7. NOTE that Mr Condon's functions as Court expert appointed pursuant to Order 6 are:

1. to assess and record the quantities of and the present state of the plant, equipment and stock;

2. to ascertain what proportion or categories of the stock, most of which appears to be perishable, is presently saleable and in what market, and whether any of the plant, equipment and stock is saleable, subject to the determination of any third party claims to such items;

3. if it is possible to do so, and the Court accepts that it may not be able to be done, to offer an opinion as to the likely ranges of revenues to be derived upon realisation of the plant, equipment and stock, or any part thereof in respect of which an opinion can be reached at present;

4. to ascertain, whether there are any foreseeable obstacles or expenses to executing the proposed receivership and to give as reliable an estimate as possible of the cost of completing the proposed receivership;

5. to ascertain whether any special precautions should be taken in respect of the plant, equipment and stock if there is delay to commencing the proposed receivership;

6. to make any comment that he sees fit about the second defendant’s plans for removal of stock, plant and equipment from the premises;

7. to report on these matters to the Court and the parties, giving short reasons for his opinion on each of the matters identified above;

8. Mr Condon, and Mr Condon by his employees and agents, has the following additional powers as Court expert, until he submits his report to the Court:

1. he may enter the subject premises during business hours on reasonable notice to the plaintiff to execute any activity pursuant to his appointment;

2. he may authorise anyone else to enter the premises under his supervision to execute or assist in the execution of any activity pursuant to his appointment;

3. he may engage any agents or contractors to assist in the execution of any activity pursuant to his appointment;

4. he may deal with:

1. any member of the New South Wales police force, who may be conducting an investigation at or in relation to the subject premises;

2. any relevant food health authority necessary for the purpose of ascertaining the value of perishable foodstuffs at the subject premises; and

3. any other third party that he assesses it is necessary for him to deal with in order to fulfil the functions of his appointment.

9. Mr Condon is at liberty pursuant to UCPR, r 31.47 to apply for further directions from the Court as he may require.

10. Mr Condon is requested to report to the Court by 12.00 noon on 2 March 2023 but if this is not feasible he should indicate to the Court an alternative appropriate reporting date.

11. At the conclusion of his work as Court expert Mr Condon is at liberty to provide a memorandum of fees to the parties and to the Court of up to $10,000 and the Court will consider it for approval and make directions for its prompt payment.

9. The Court notes the undertaking of the First Plaintiff to the Court to meet Mr Condon's fees up to $10,000.

10. The second defendant is directed by 4:00pm on 28 February 2023 to serve on Mr Condon and West Asset its plan for the removal of its plant, equipment and stock from the subject premises.

11. Stay Orders (5) to (13) until Mr Condon has provided his written consent to the terms of his appointment.

12. Adjourn these proceedings for further directions to 2:15 PM on 2 March 2023.

13. Grant liberty to apply.

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Amendments

25 February 2023 - Order numbering corrected to be in sequence.
[1] line 3, the "The" in the phrase "The office of the sheriff" changed to a small "t".

[6] line 4, full stop after "Lidcombe property". Then next sentence commences "The perishable goods have an estimated market value of…”

[12] line 6, deletion of “there" and substituted with “its”.

[14] line 6, change "as appointment of a Court expert" to "upon appointment as a Court expert ".

[16] line 5, change “which made a preliminary investigation" to "which might warrant a preliminary investigation"

Decision last updated: 25 February 2023