West Asset Holdings Pty Ltd v Sara Investments (NSW) Pty Ltd - [2020] NSWSC 1841

Supreme Court

New South Wales

Medium Neutral Citation: West Asset Holdings Pty Ltd v Sara Investments (NSW) Pty Ltd [2020] NSWSC 1841
Hearing dates: 7 December 2020
Decision date: 16 December 2020
Jurisdiction: Equity - Duty List
Before: Robb J
Decision:
See pars [99] to [103].

Catchwords:
EQUITY — Equitable remedies — Interlocutory injunctions — whether there is an arguable case — where the defendants’ case ignored the history and context of the transaction between the parties — where an interlocutory order should be made to preserve the status quo.

Cases Cited:
Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63
Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions v Benuga Pty Ltd ACN 001 131 997 [2020] NSWSC 1667

Category: Consequential orders (other than Costs)
Parties: West Asset Holdings Pty Ltd (applicant)
Sara Investments (NSW) Pty Ltd (first respondent)
Bulolo Investments Pty Ltd (second respondent)
Representation:
Counsel: J Morris SC / S Woodland (applicant)
J Raftery (respondents)
Solicitors: Gibson Howlin Lawyers (applicant)
Tzovaras Legal (respondents)

File Number(s): 2020 / 320619

Judgment

The plaintiff, West Asset Holdings Pty Ltd (West Asset), commenced these proceedings by summons filed on 10 November 2020.
The defendants are related companies, being Sara Investments (NSW) Pty Ltd (Sara), and Bulolo Investments Pty Ltd (Bulolo).
The interlocutory application the subject of this judgment concerns the continuation of a licence to occupy part of warehouse premises in Lidcombe in this State that I will call the “Lidcombe property”.

Relief and procedural history

The substantive relief sought by West Asset in its summons was:

A declaration that the call option exercised by [West Asset] on 13 July 2020 pursuant to the Put and Call Option between [West Asset] and [Sara] dated 18 October 2019 in relation to [the Lidcombe property] is valid.
An order that [Sara] specifically perform and carry into execution its obligations pursuant to the Put and Call Option referred to in prayer 1 above.
1. On 30 November 2020, West Asset was given leave by Parker J, as duty judge, to file a notice of motion. By prayer 3, West Asset sought an order that a company associated with West Asset, being Central Cleaning Supplies (Aust) Pty Ltd (Central Cleaning), be joined as a plaintiff to these proceedings.
2. Prayer 4 to the notice of motion sought leave to file an amended summons in the form of the draft annexed to an affidavit of Joseph Frank Camilleri sworn 26 November 2020. Some of the amendments are not relevant to the present interlocutory application. However, the amendments included the following:

1C. A declaration that the purported termination of the agreement for the licence/sub-lease of [the Lidcombe property] by Bulolo to West Asset is invalid.

The notice of motion also sought the following order:

An order that pending final order of the Court, [Bulolo] by itself and by its servants and agents, be restrained from re-entering and/or taking possession of that part of [the Lidcombe property] shown in Annexure "B" of the Licence Agreement between [West Asset] and [Bulolo].
1. On 30 November 2020, a number of orders were made by Parker J by consent of the parties. They included that Central Cleaning be joined as a plaintiff and that the matter proceed by way of pleadings. The plaintiffs were ordered to file and serve their statement of claim by 2 December 2020.
2. Parker J made the following notation:
The Court notes the undertaking provided by [the defendants' solicitor] on behalf of the Defendants that they will take no steps to remove the Plaintiffs from the premises until the hearing of the Plaintiffs' Notice of Motion dated 26 November 2020 (Motion) so long as the Plaintiffs will pay a daily occupation fee of $800 plus GST which shall be paid under protest and subject to the Plaintiffs' reservation of their right to apply for any credit on final orders.
1. The notice of motion was listed for hearing in the duty list on Monday 7 December 2020.
2. A hearing took place on that day before me as duty judge. I reserved judgment and made the following interlocutory orders:
Upon the plaintiffs giving to the Court the usual undertaking as to damages the Court orders that the defendants will not until the publication of judgment on the plaintiffs' interlocutory application take any steps to remove the plaintiffs from the premises the subject of these proceedings.
Orders the plaintiffs to pay [Bulolo] a daily occupation fee of $800 plus GST until the publication of the judgment on the plaintiffs' interlocutory application on the basis that the amount will be a debt payable after the full amount is known noting that the amount is paid under protest and subject to the plaintiffs' reservation of the right to apply for credit on the making of final orders.
1. In the meantime, on 2 December 2020, the plaintiffs filed their statement of claim. In the circumstances, the defendants have not yet been required to file their defences. At the hearing, the defendants put a submission that the statement of claim does not specifically plead the ground upon which the plaintiffs seek to maintain the interlocutory relief that they have claimed. The plaintiffs responded that, as a matter of pleading, it would be expected that the plaintiffs would raise the claim by way of reply. That may or may not be true as a matter of pleading principle. Given the recency of the filing of the statement of claim, I do not accept that the outcome of the plaintiffs’ application for interlocutory relief should depend upon issues of pleading. The question is whether the evidence justifies the interlocutory relief sought by the plaintiffs.

Outline of issues

The facts as pleaded by the plaintiffs and the evidence tendered in support of their interlocutory claims, in-so-far as it concerns the legal relationship between the parties, are complex. It is not necessary to describe all of the issues that arise in detail for the purpose of determining this interlocutory application. As will be seen, that is because Bulolo has resisted the plaintiffs’ claim on the basis that, even if the claim against Sara is substantially valid, Bulolo’s legal position gives it exclusive rights in relation to the occupation of the Lidcombe property that are inconsistent with the rights claimed by the plaintiffs, so that there is no basis at all for the Court to grant the interlocutory relief sought by the plaintiffs.
In short, the plaintiffs claim that they are entitled to an order preventing Bulolo from terminating or otherwise interfering with the licence that the plaintiffs have exercised to occupy part of the Lidcombe property for the purpose of conducting the business of Central Cleaning, pending the determination of the proceedings. Bulolo’s response is that it is entitled to exclusive possession of the whole of the Lidcombe property under a valid lease from Sara. Further, the licence that Bulolo granted was for a limited period that has expired. Consequently, whatever the dispute may be between the plaintiffs and Sara, Bulolo has a legal right to terminate the licence. Moreover, Bulolo submits that the balance of convenience favours the Court rejecting the plaintiffs’ claim for interlocutory relief, partly on the ground that Central Cleaning’s continuing occupation of part of the Lidcombe property is causing Bulolo substantial commercial damage. Bulolo’s argument also rests, in part, on a claim that the evidence does not establish that Central Cleaning is unable, with reasonable effort, to obtain alternative commercial accommodation for its business.

Background

It is necessary to set out in outline the background to this interlocutory dispute.
It appears that West Asset was established recently to act as the trustee of a trust with the intention of acquiring the Lidcombe property. Central Cleaning is said to be one of the largest distributors of cleaning materials, chemicals and equipment in Australia. It was deemed during Victoria’s recently completed lockdown as an essential service or business. It currently supplies New South Wales Government departments including schools, and also private enterprises such as shopping centres and small and medium-sized businesses, with all of their COVID-19 related cleaning product needs.
The shareholders of West Asset and Central Cleaning are related, as are the persons who are the directors of the two companies. Mr Camilleri is a shareholder and director of both companies, and the managing director of Central Cleaning.
The defendants made a submission that, as West Asset has issued capital of 100 ordinary shares of one dollar each, and that its date of incorporation was “some 10 days prior to the date it entered into the licence agreement”, and has no assets of substance, the usual undertaking as to damages that it has proffered to the Court has no substance. Even if that is true, I am satisfied that Central Cleaning appears to be of financial substance, and it will be sufficient if both plaintiffs give the usual undertaking as to damages to the Court.
Vini Songuilay (sometimes called Vini Songuilay Rossi) is the sole shareholder of Sara and Bulolo. Vini Songuilay has at all material times been the sole director of Sara. Vini Songuilay was appointed as the director and secretary of Bulolo on 25 July 2019, but was replaced by Angela Rossi on 26 July 2019.
Sara is the registered proprietor of the Lidcombe property. From 1 October 2019, by an undated lease, Sara leased the Lidcombe property to Bulolo for a term of 12 months terminating on 30 September 2020, with a single option to renew for a period of 12 months. The lease was signed on behalf of both companies by Vini Songuilay Rossi, even though that person was not a director or the secretary of Bulolo at the date of the commencement of the lease.
On 4 October 2019, Mr Camilleri made an offer to the selling agent appointed by Sara for the purpose of the sale of the Lidcombe property to purchase it on the following terms:

1. $7,500,000 (no GST as going concern)

2. 12 Months delayed settlement

3. $375,000 released to the vendor upon exchange

4. An additional $375,000 released to the vendor after 6 months

5. I will have the sole use of the rear dry storage warehouse closest to Francis Street as part of the deal

6. All the pallet racking and the forklift remain with the property.

The evidence included a document called “HEADS OF AGREEMENT Subject to Contract” on the letterhead of the selling agent dated 10 October 2019. The parties were described as Sara as vendor and West Asset as purchaser. The terms were those offered by Mr Camilleri on 4 October 2019, with the two payments of $375,000 described as being the deposit. The settlement date was to be 12 months following exchange of contracts, or earlier by mutual agreement between the parties. The document that is in evidence has not been signed by the parties.
The heads of agreement included the following terms:

The Purchaser will have the sole use of Room 5 & 6 and the adjoining awning structure directly in front of Rooms 5 & 6 upon exchange of contracts. A lease or licence agreement will be prepared by the Lessors solicitor at an amount of $1.00 pa and annexed to the contract of sale. A plan identifying Rooms 5 & 6 has been annexed to this sales advice.
The Purchaser will be liable for 40.74% of the total outgoings from the date of exchange, until settlement has occurred.
1. The other terms of the heads of agreement dealt with other practical matters relevant to West Asset occupying Room 5 & 6, which was part of the Lidcombe property, between exchange of contracts and settlement.
2. The interlocutory application was conducted on the basis that the effect of the price being “$7,500,000 (no GST as going concern)” was that, if the sale to West Asset took place on the basis that the Lidcombe property was already occupied by West Asset, and used for business purposes up to and including the date of settlement, GST that would otherwise be payable on the sale would not be payable and the amount of stamp duty would be reduced. The legal basis of this advantage was not explored in the evidence. However, it was sufficiently established that the purpose of a licence of part of the Lidcombe property being given to West Asset was not merely to enable the plaintiffs to carry on business from the Lidcombe property, but it was also necessary to ensure that the price agreed was the total price payable by West Asset, when GST and liability for stamp duty was taken into account.
3. The parties decided to enter into a put and call option agreement rather than immediately enter into a contract for sale.
4. West Asset’s solicitor, in an email to Sara’s then solicitor dated 10 October 2019, proposed, in relation to point 1 in the special conditions in the unsigned heads of agreement (set out at [23] above), the following:
Point 1 in the Special Conditions section. We propose that the lease is prepared on the basis of a 4 year initial term ×4 year option period, with the rent to be $40,000 + GST. The rent can either be paid up front and the purchase price reduced accordingly or alternatively it be charged per month with the deposit reduced by the total. It would be in the name of [Central Cleaning]. Licence to use toilets and other areas as set out in HOA. The lease to commence on or before the exchange of option date;
1. As will appear, the purchase price that was ultimately inserted in the contract for sale prepared on behalf of West Asset following the purported exercise of the call option by West Asset stated the purchase price as $7,385,000 rather than $7,500,000. This led to a dispute later between West Asset and Sara as to whether the wrong purchase price had been inserted in the contract for sale. As I understand it, the lower purchase price was inserted on the basis that the parties had agreed that the rent payable by West Asset would be deducted from the purchase price. The Court has not been required to consider or resolve this dispute on this interlocutory application.
2. This email was the source of the suggestion that, in association with the proposed contract for sale of the Lidcombe property by Sara to West Asset, which would have a settlement date 12 months after the contract, a lease would be granted by Sara to Central Cleaning.
3. Sara’s solicitor responded by email on 11 October 2019 by saying in response to West Asset’s solicitor’s point 7:
As discussed, we propose that a licence for the use and occupation of rooms 5 & 6, the loading dock and part of the driveway be granted to the purchasing entity (licence fee of $1.00), expiring approximately 8 months after the exchange of the put & call option.
1. West Asset’s solicitor responded to this suggestion on 14 October 2019 by inserting the word “Agreed” beside point 7.
2. The plaintiffs’ solicitor’s 10 October 2019 email also contained the following paragraph:
[Bulolo] lease to be 1 year initial term x 1 year option for remainder of property not leased by Central Cleaning. There could be a clause in the lease that states it is able to hold over after completion on a week to week basis to assist, instead of month-to-month;
1. The reason for the suggestion that there be a lease to Bulolo is not explained in the evidence. It is to be noted that this suggestion was that Bulolo would take a lease of that part of the Lidcombe property that was not leased by Central Cleaning. It is also to be noted that the proposed lease to Bulolo was proposed to be for the remainder of the Lidcombe property not leased by Central Cleaning. This is the first mention of a proposal that the licensed area would be used by Central Cleaning. As it happened, Bulolo granted a licence to West Asset. However, Central Cleaning exercised the licence for the purposes of its business. No point was made at the hearing by the defendants based upon the fact that the licence was to West Asset and no complaint was made at any time about the fact that the licence was exercised by Central Cleaning.
2. Sara’s solicitor said in his 11 October 2019 email in response to West Asset’s solicitor’s point 12:
As discussed, we are instructed that the current tenant wishes to vacate the property prior to exchange of contracts and, on this basis, it appears that [Bulolo] will vacate approximately 8 months after the exchange of the put & call option.
1. This letter was written after the commencement date of Bulolo’s lease, which was 1 October 2019. The statement that the solicitor was instructed that the current tenant wish to vacate the property approximately 8 months after the exchange of the put and call option appears to dovetail with the defendants’ solicitor’s suggestion that the licence to West Asset would expire approximately 8 months after the exchange of the put and call option.
2. This exchange appears to be the source of the plaintiffs’ stated belief that they had been advised by the defendants’ solicitor that Bulolo would vacate the Lidcombe property approximately eight months after the put and call option became effective.
3. West Asset’s solicitor in turn responded in his 14 October 2019 email by inserting the following response to point 12:

Noted. We do advise however that our client will not agree to his related company becoming a tenant and paying rent on top of the purchase price. Our client originally agreed to purchase the property for $7.5 million and to use the property for the fee of $1 until completion. As suggested in prior correspondence our client can attend to payment of rent but the purchase price will need to be reduced by this amount, so that in essence our client is only ever paying the agreed purchase price, plus any agreed outgoings.

This is another reference to the agreement being that any rent that was payable would be deducted from the purchase price for the Lidcombe property.
Sara’s solicitor responded on 14 October 2019 to West Asset’s solicitor’s point 12 by saying: “Noted”.
It appears from the exchanges of the solicitors’ emails that, by 15 October 2019, the parties had resolved their negotiations in principle, and on that date Sara’s solicitor said that he would commence the preparation of the licence, and West Asset’s solicitor said that he would now prepare the put and call option agreement.
On 18 October 2019, the solicitor acting for Sara sent an email to West Asset’s solicitor that attached documents described as follows:

I refer to the above matter and attach here the following documents, signed by my client’s director:

Licence Agreement between [Bulolo] and [West Asset];
the Put & Call Option;
lease to [Central Cleaning]; and
for completeness, my client’s signed front pages of the Contract for Sale.
1. The evidence justifies an interlocutory finding that in fact the solicitor for Sara was at material times also the solicitor for Bulolo. The Licence Agreement was to be made by Bulolo, and the Put and Call Option Agreement and the Lease to Central Cleaning were to be granted by Sara.
2. It is important to the determination of the present dispute to note that the parties contemplated, in respect of the Lidcombe property, that Bulolo would grant a licence to occupy to West Asset and that Sara would grant a lease to Central Cleaning (the Central Cleaning Lease). That proposal raises issues about overlap in respect of both the terms of the Licence Agreement and the Central Cleaning Lease and as to the portions of the Lidcombe property to which the documents applied.

Licence Agreement

The attached Licence Agreement was signed by Vini Songuilay, even though that person was not at the time Bulolo’s director.
The interlocutory application was conducted on the basis that no significance should be attributed to the fact that Vini Songuilay was not a director of Bulolo either at the time the lease from Sara to Bulolo was granted or at the time the licence from Bulolo to West Asset was granted. As Vini Songuilay was the sole shareholder of both Sara and Bulolo at material times, it is likely to be the case at the final hearing that it will be established that the documents were effective, notwithstanding apparent deficiencies in the way that they were executed. That is not, however, an issue that now arises for determination.

The Background to the Licence Agreement stated:

A. The Licensor is entitled to occupy and use the [Lidcombe property] under the lease attached to this Licence Agreement as Annexure “A” (Lease).

B. The Licensee has requested the Licensor grant the Licensee a licence to occupy part of the Property as set out in Annexure “B” (Licensed Premises).

C. The Licensor has agreed to grant the Licensee a Licence to occupy the Licensed Premises on the terms of this Licence Agreement.

Annexure A is the lease from Sara to Bulolo described above that commenced on 1 October 2019 (the Bulolo Lease).
The Licence Agreement was to commence on 25 October 2019. The terminating date was defined as 31 May 2020. By clause 4, the Licence Agreement was stated to continue until the earlier of the terminating date, the residue of the term remaining in the Bulolo Lease, less one day; or the termination of the Bulolo Lease.
In the result, the termination date for the licence agreement was 31 May 2020, as the other two alternatives would happen after 31 May 2020.
The “rent” payable by West Asset under the Licence Agreement was one dollar plus GST for the term of the Licence Agreement. West Asset was also required to pay a proportion of outgoings in respect of the Lidcombe property.
Clause 10 of the Licence Agreement provided:

(a) If the Lease contains any option for the Licensor to renew the Lease for a further term, the Licensor must use its best reasonable endeavours to negotiate and obtain a renewal of the Lease of the Licensed Premises for any further term from the Landlord.

(b) The Licensor makes no representations or warranties in respect of the availability or likelihood of obtaining a renewal of the Lease.

The intended relationship between clause 4 and clause 10 is not clear. There is no reason why Bulolo should have been obliged to endeavour to obtain a renewal of the Bulolo Lease from 30 September 2020, if, under clause 4, the term of the Licence Agreement was to end on the earlier of 31 May 2020 or the residue of the term remaining of the Bulolo Lease, less one day, which was 29 September 2020. These provisions would have the effect that the Licence Agreement would always end before the Bulolo Lease did, and, in the absence of a provision having the effect that the Licence Agreement would continue while the Bulolo Lease was on foot, there should have been no reason to oblige Bulolo to endeavour to obtain a renewal of the Bulolo Lease from Sara.
Further, as the term of the Bulolo Lease was until 30 September 2020, the 31 May 2020 terminating date would necessarily be earlier than 29 September 2020, so the alternative termination date based upon the residue of the term of the Bulolo Lease, less one day, could never have taken effect.
Finally, and more significantly, the alternative whereby the Licence Agreement would terminate upon the date of termination of the Bulolo Lease is consistent with an expectation that the Bulolo Lease might terminate before 31 May 2020. Otherwise, this third alternative would also have been pointless. This aspect of clause 4 provides some support for the conclusion that there was an expectation that Bulolo would terminate the Bulolo Lease before the end of its initial term. In that event, the proposed lease from Sara to Central Cleaning could have commenced from the earlier date of termination of the Licence Agreement.
Clause 11 of the Licence Agreement provided:

(a) The Licensee acknowledges that the use and occupancy of the Licensed Premises granted by this Licence Agreement:

does not confer any tenancy or other proprietary interest in the Licensed Premises or Property on the Licensor; and
confers a personal contractual right on the Licensee which is not capable of being transferred, assigned or otherwise dealt with in whole or in part without the Licensor’s express written agreement.
1. It is likely that the reference in clause 11(a)(i) to “Licensor” was an error and “Licensee” was intended, as there was no question of the Licensor acquiring any proprietary interest under the Licence Agreement.

Put and Call Option Agreement

The Put and Call Option Agreement that was attached to the defendants’ solicitor’s 18 October 2019 email was signed by Vini Songuilay on behalf of Sara.
Relevantly, clause 2 gave West Asset a call option to purchase the Lidcombe property for the price and on the terms and conditions as described in the contract for sale attached to the agreement as Annexure “A” (the Contract). The option fee was $375,000. West Asset was also required to pay a second amount of $375,000 within 6 months. West Asset was given a right to exercise the call option in the period between 8 and 9 months after the date of the Put and Call Option Agreement. If the call option was exercised, the option fee was to be credited to the price under the Contract.

The Contract

The front page of the Contract that was Annexure A to the Put and Call Option Agreement was signed on behalf of Sara by Vini Songuilay. The price specified was $7,385,000, with a deposit of $750,000 and a balance of $6,635,000 payable on completion.
The stated price of $7,385,000 is relevant to a position taken later by Sara that the price under the contract should have been $7,500,000. Although Sara later asserted that the Contract should be amended to provide for a price of $7,500,000, the initial draft Contract signed by Vini Songuilay had the price of $7,385,000 inserted.

Central Cleaning Lease

The Central Cleaning Lease attached to the defendants’ solicitor’s 18 October 2019 email was signed by Vini Songuilay on behalf of Sara.
The Central Cleaning Lease is expressed to be for a term of three years commencing on an unstated date in June 2020 and terminating on an unstated date in May 2023. There is one option to renew for a period of three years. The rent is stated in the summary as being $300,000 plus GST per annum by equal monthly instalments of $25,000 plus GST.
The Central Cleaning Lease is significant because it was expressed to commence at a time before the Bulolo Lease terminated on 30 September 2020. That implies that Sara expected that the lease that it had granted to Bulolo over the Lidcombe property would have terminated before June 2020. Otherwise, Sara would have been in the position of having granted leases of the Lidcombe property to two separate lessees for overlapping periods of time.
It is also probable that the explanation for the commencement date for the Central Cleaning Lease being a date in June 2020 was that it was expected that the Licence Agreement would in fact terminate on 31 May 2020.

Documents signed by the plaintiffs

The plaintiffs’ solicitor sent a signed Licence Agreement, a signed Put and Call Option Agreement, and an amended and signed Central Cleaning Lease to the defendants’ solicitor on 18 October 2019. The exhibit to Mr Camilleri’s 9 November 2020 affidavit that contained the documents only included the signature page for the Licence Agreement and, in particular, did not include the Central Cleaning Lease, so the nature of the amendments is not known.

Attempts by Bulolo to find alternative premises

Evidence was given on behalf of the defendants by means of an affidavit of Furio Rossi sworn on 4 December 2020. Mr Rossi described himself as a business consultant to the Rossi family group of companies, which includes the defendants, and said that he was authorised by the defendants to make the affidavit.
Mr Rossi said that since about early February 2020, he has been searching for an alternative property for Bulolo to conduct its business. It follows from Mr Rossi’s evidence that his search had been unsuccessful in the period up to 31 May 2020, which was the terminating date for the Licence Agreement.

Correspondence concerning Central Cleaning Lease

On 29 May 2020, West Asset’s solicitor sent an email to Sara’s then solicitor which said:

As discussed, please find attached signed lease, which is to be held in escrow at this point in time.

We confirm that although our client’s licence is set to terminate on 31 May 2020 and the attached lease is to commence on 1 June 2020, your client or their tenants still remain in the property and therefore our client will not enjoy full use of the property as is envisage (sic) under the terms of the lease.

Look forward to resolving this situation to the benefit of both of our clients, next week.

The solicitor responded by advising West Asset’s solicitor that he was no longer acting for Sara, and that Sara’s present solicitor was acting for that company.
West Asset’s solicitor wrote to Sara’s new solicitor on 4 June 2020, saying in part:

…

[Central Cleaning] has signed the lease and provided same in escrow to your client’s former solicitor. We also act for [Central Cleaning].

Your client has not provided vacant possession to our client of the entire property, as is required under the lease, nor has your client enforced make good provisions on your client’s prior tenant, which we understand is a related party to your client. At least 80% of the property is occupied by your client or their former tenant and this occupation is also restricting our client’s use and enjoyment of the whole of the driveway.

We therefore demand that your client yield up the property to our client and provide vacant possession forthwith.

Further, all make good requirements are to be actioned against your client’s former tenant.

Until such time as the above has been actioned, our client shall not proceed to pay any rent whether an invoice for rent is present or not.

…

Sara’s present solicitor replied on 19 June 2020, saying:

…

In your letter you state that [Central Cleaning] has “signed a lease and provided same in escrow” to our client’s former solicitor. Based on our instructions, it is our view that our client did not enter into any agreement with your client for the grant of a lease over the Property to your client. Nor any such agreement could have been entered, in circumstances where part of the Property was, and remains, subject to an existing lease by our client to [Bulolo], commencing on 1 October 2019 for an initial term of 12 months, and with an option to renew the lease for a further period of 12 months. The existence of that lease was acknowledged by your other client and related entity, [West Asset] in clause 54 of the sale contract attached to the Put and Call Option between our client and [West Asset] dated 18 October 2019.

Exercise of call option

By letter to the defendants’ new solicitor dated 13 July 2020, the plaintiffs’ solicitor enclosed a notice of exercise of call option dated 7 July 2020, an executed contract together with an executed counterpart, and a cheque in favour of Sara for the one dollar option exercise fee.
The executed contract contained a notation that it was not a taxable supply for GST purposes, and that the sale was GST-free because the supply was the supply of a going concern under the relevant taxation provision.
Special condition 54 of the contract provided:

LEASE

54.1 The Vendor discloses and the Purchaser acknowledges that the Property is sold subject to an unregistered lease to [Bulolo] (the Lease).

54.2 An unsigned copy of the Lease is annexed to this Contract and the Purchaser acknowledges that the Vendor is under no obligation to register the Lease prior to completion AND that no adjustment will be made for the Lease’s registration at completion of this contract.

54.3 At settlement the Vendor will provide the original fully signed Lease to the Purchaser.

54.4 The Purchaser will not make any objection, Requisition, claim or rescind, terminate or delay completion of this Contract as a result of the Lease or any matter set out by this Special Condition 54.

Disputes between parties

The defendant’s new solicitor wrote a further letter on behalf of Bulolo to the plaintiffs’ solicitor on 16 July 2020, in which he stated that the License Agreement expired on 31 May 2020, and that, as West Asset continued to remain in occupation of part of the Lidcombe property, it was liable to pay a portion of outgoings and an amount of rent each month.
By letter from the new solicitor for Sara dated 17 July 2020, West Asset’s solicitor was informed that Sara had instructed that the contract sale price was $7,500,000 and not $7,385,000, as stipulated in the counterpart contracts signed by West Asset. Sara required West Asset to sign and return contracts for sale that provided for a price of $7,500,000.
There was correspondence between the parties concerning disagreements about the appropriate basis for the apportionment of the rent under the Licence Agreement between Bulolo and West Asset.
By letter dated 6 October 2020, Sara’s new solicitor advised West Asset’s solicitor that it was Sara’s position that West Asset’s exercise of the call option was ineffective because the sale price as stated in the Contract signed by West Asset was $7,385,000 rather than $7,500,000. It was also asserted on behalf of Sara that the exercise of the call option was ineffective because West Asset had failed to deliver a guarantee on the date of delivery of the contract for sale, contrary to special condition 48.
West Asset’s solicitor responded to Sara’s solicitor’s claims by letter dated 28 October 2020. The letter contained reasons denying the validity of Sara’s position. The letter contained the following observation concerning the exercise by Bulolo of its option to renew:

… We assert that our client’s exercise of the Option was effective and, in addition, your client did not disclose to our client at that point in time when providing the fresh Contract that your client’s tenant (who is controlled by your client) had actually taken up the Option to remain in the property for a further year on top of what was actually attached to the Contract. Therefore, your client would have not provided proper disclosure under the Contract in any event and the Lease would not have been binding on our client…

Bulolo’s offer of new licence agreement

On 28 October 2020, the defendants’ new solicitor wrote a letter to West Asset’s solicitor on behalf of Bulolo. The letter stated that the Licence Agreement had terminated on 31 May 2020, and that after that date West Asset had been occupying the Lidcombe property at Bulolo’s will. The letter purported to terminate West Asset’s right of occupation, effective at 12 AM on 31 October 2020.
The letter contained an offer of a new licence agreement, and required West Asset to execute the agreement by 4 PM on 30 October 2020. The licence offered was in respect of the same portion of the Lidcombe property that was the subject of the Licence Agreement. The period of the proposed licence was 1 November 2020 to 31 October 2021. A bond of $75,900 inclusive of GST was required. The licence fee was to be $25,300 inclusive of GST payable monthly in advance.
This offer of a new licence was made on 28 October 2020. The terms of the offer justify a conclusion that, as at that date, Bulolo was not being caused unsustainable injury by Central Cleaning’s continuing occupation of the portion of the Lidcombe property the subject of the Licence Agreement. The making of the offer for a new agreement is inconsistent with Bulolo having an essential need to occupy the relevant portion of the Lidcombe property in order to avoid incurring substantial ongoing injury. The period of the new licence offered by Bulolo was the remaining term of its renewed Bulolo Lease.
Following a complaint from West Asset’s solicitor on 30 October 2020 that Bulolo had given inadequate notice of the termination of the Licence Agreement, Bulolo on 30 October 2020 withdrew the notice of termination, and gave another notice of termination effective at midnight on 30 November 2020.

Consequences of termination of Licence Agreement

Mr Camilleri gave evidence in his 26 November 2020 affidavit that, in November 2020, West Asset began to make enquiries with various local commercial real estate agents of the availability of suitable premises in the surrounding area that could accommodate the plaintiffs’ businesses, and would be available by the deadline imposed by Bulolo of 30 November 2020. Those efforts were unsuccessful by the date of Mr Camilleri’s evidence.
Mr Camilleri elaborated upon his concerns by explaining that, not only was there no certainty that the plaintiffs would be able to secure satisfactory alternative premises in the near future, but if they were able to do so, they would be likely to be required to enter into a long-term lease that would be superfluous if they succeeded in their claims against the defendants in these proceedings. Mr Camilleri said that, even if alternative premises could be obtained, in order to avoid disruption and cash flow difficulties to Central Cleaning’s business, it would take between eight and 12 weeks for the plaintiffs to transition to the new premises.
Mr Camilleri said that, if the plaintiffs were permitted to remain in occupation of the portion of the Lidcombe property the subject of the Licence Agreement, West Asset would continue to pay the current rent together with required outgoings.

Consequences of not terminating Licence Agreement

Mr Rossi gave evidence of attempts made by Bulolo after 31 May 2020 to find alternative premises from which to conduct its business. Those attempts have been unsuccessful.
Mr Rossi said that the area of the Lidcombe property that Bulolo has been occupying to carry on its business since West Asset commenced its occupation pursuant to the Licence Agreement has been insufficient to store all of Bulolo’s stock in trade. Consequently, since about late October 2019, Bulolo has had to store large quantities of its food and beverage products stock outside the warehouse on the Lidcombe property and on the driveway in front of the warehouse. There has been significant spoilage as a result of the food and beverage products being stored outside.

Consideration

The parties accepted the well-established principle that the issue is whether the plaintiffs have established a sufficient likelihood of achieving the final relief sought, sometimes expressed in terms of whether there is a serious question to be tried, and if so, whether the balance of convenience warrants the making of the interlocutory order sought: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63.
The approach to the plaintiffs’ interlocutory application taken by the defendants has been to assert that, as Bulolo exercised its option to renew its lease from Sara over the Lidcombe property until 30 September 2021, it has a right to exclusive possession of the whole of the property. Further, as the Licence Agreement gives only a contractual right of occupation, and has expired by effluxion of time, the plaintiffs have no right to resist Bulolo terminating the licence by a notice that it has given.
In Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions v Benuga Pty Ltd ACN 001 131 997 [2020] NSWSC 1667, Slattery J made the following observations concerning the supposed rule that the Court will never grant an injunction to restore possession of property to a contractual licensee. I gratefully adopt his Honour’s statement:

[28] The owner challenged the availability of the remedy of injunctive relief that the builder sought upon a principle said to follow from Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605; [1937] ALR 273; [1937] HCA 17 (“Cowell”). The owner submitted that an injunction does not lie to restrain the wrongful revocation of a mere license not coupled with the grant of an interest in land, such as a license given to a builder to enter land to carry out building works. The owner cited the judgment of Latham CJ, where his Honour said (at 621):

… an ordinary building contract enables the building contractor to go upon land for the purpose of conducting building operations so that he can perform his contract and earn his expected profit. This right continues to exist even if the building owner wrongfully repudiates the contract. But the only remedy of the building contractor for an infringement of the right is in damages. If he goes on the land against the will of the owner he may be treated as a trespasser.

[29] The owner cited other building contract cases including Graham H. Roberts Pty Ltd v Maurbeth Investments Pty Ltd [1974] 1 NSWLR 93, Chermar Productions Pty v Prestest Pty Ltd (Supreme Court of Victoria (VIC), 5 May 1989, unrep) and Linga v C & N Constructions Pty Ltd [2012] NTSC 8 . The owner submitted that in these cases an owner had allegedly wrongfully revoked the builder’s license to be on the land, whereby the builder had become a trespasser but the Court had not granted injunctive relief to reinstate the builder’s licence to be on the land. The owner submitted that in the event that the owner’s termination of the contract here was invalid, the builder has a right to damages because of its consequent exclusion from the site and the builder is now not entitled to an injunction preventing the owner from accessing the premises which it owns.

[30] But the law is more nuanced than is profiled in the owner’s submissions. It is well summarised in Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed 2015, Lexis Nexis Butterworths) in its discussion of the remaining three “contentious questions” in this area of law concerning the grant of injunctions to restrain wrongful revocation of mere licences (at [21–275]):

The first is whether Cowell v Rosehill Racecourse Co Ltd is correctly decided. The answer to this question is in the affirmative insofar as it decided: (a) that Wood v Leadbitter (1845) 13 M & W 838; 153 ER 351 is still good authority for the view that at law a contractual licence can be effectively revoked in breach of contract, whereupon the licensee becomes a trespasser; and (b) that Hurst v Picture Theatres Ltd [1915] 1 KB 1 was wrongly decided on its first two propositions. The answer to the question is in the negative insofar as Cowell’s case decided: (a) that the wrongful termination of a contractual licence cannot be restrained by injunction unless the licence is coupled with the grant of an interest; or (b) that such a wrongful termination cannot be restrained by injunction unless the contract as a whole would be appropriate for a decree of specific performance; or (c) that, even if an injunction were available, the matter could not in New South Wales have been properly raised before 1957 by means of an equitable replication.
The second contentious question is whether there is any inconsistency involved in both denying that a mere contractual licensee has no proprietary interest in the land to which the licence extends and asserting that the licensee’s occupation of the land can be protected by injunction. There is no inconsistency. What is meant by denying that the licensee has an interest in the land is to deny any estate or interest recognised as such by law or equity, anything the assignment of which would attract the Statute of Frauds. It does not follow that the licensee should necessarily be without curial remedies to remain on the land.
The third contentious question is whether there is any anomaly involved in equity granting an injunction in any circumstances for the purpose of protecting a trespasser. There is, it is submitted, no anomaly. When an injunction is granted in favour of a licensee, it is to enforce the licensor’s implied stipulation not to treat the licensee as a trespasser until the licence has been lawfully revoked. After all, even in the case of a bare licence, once the licence is revoked and the licensee becomes a trespasser, presumably equity will protect the licensee’s rights during the ‘packing up’ period. Moreover, there is nothing more inherently surprising in equity lending its aid to a trespasser in a case involving the wrongful revocation of a licence than there is in equity decreeing specific performance of a contract for the sale of land in favour of a purchaser who is in breach of a term in that very contract to settle on a named day (when time is not of the essence).

[31] In some circumstances, equity will protect a licensee by enforcing the licensor’s implied negative stipulation not to treat a licensee as a trespasser, until the licence has been lawfully revoked. So much is consistent with the principles in cases such as Doherty v Allman & Dowden (1878) 3 App Cas 709 (“Doherty v Allman”) authorising the grant of injunctive relief to support implied negative stipulations in contracts. But the Court will be cautious in applying a Doherty v Allman principle to ensure that it does not in substance specifically perform a contract which involves the provision of personal services.

[32] Here, the interlocutory relief that the builder seeks to restrain the owner acting on the revocation of its licence to enter the site under the contract until the Tribunal’s determination of the lawfulness of that revocation is an arguable remedy on an interim and final basis. This conclusion is compatible with Sigma Constructions (VIC) Pty Ltd v Maryvell Investments Pty Ltd [2005] ANZ ConvR 108; (2005) ATPR 42–048; [2004] VSCA 242 at [29] to [33], which was referred to by the parties in the course of argument.

The approach taken by the defendants may have been warranted if Bulolo had been independent of Sara and had simply exercised an option to renew the Bulolo Lease in circumstances where the plaintiffs had notice of the existence of that lease.
However, the defendants' case entirely ignored the history of the transaction between the parties, the relationship between Sara and Bulolo, and that Vini Songuilay was the sole shareholder of both plaintiffs and had purported to act as the director of both plaintiffs in signing all relevant documentation on behalf of the defendants.
In my view, the plaintiffs clearly have an arguable case that West Asset exercised the call option and paid the total fee of $750,000 to Sara for the purchase of the Lidcombe property on the basis of an agreement between West Asset and Sara that Sara would procure Bulolo to grant a licence of part of the Lidcombe property to the plaintiffs until 31 May 2020, and that Sara would then lease the whole of the Lidcombe property to Central Cleaning, pending West Asset becoming the lessor upon completion of the Contract for the sale of the Lidcombe property. It is therefore arguable that Sara’s agreement to lease the Lidcombe property to Central Cleaning takes this case out of the situation where the plaintiffs only had a contractual licence to occupy part of the Lidcombe property. At this interlocutory stage, there is a serious question as to whether the plaintiffs, or one of them, had a proprietary interest in the Lidcombe property.
The plaintiffs have an arguable case that the defendants misrepresented to them the likelihood that Bulolo would vacate the Lidcombe property before the end of the initial term of the Bulolo Lease. It seems to be relatively clear that Vini Songuilay used her apparent position as the controller of Bulolo to exercise Bulolo's option to renew the Bulolo Lease, notwithstanding that the renewal arguably put Sara in breach of its agreement with West Asset. The representation arose not only out of the defendants' solicitor's 11 October 2019 email (see [34] above), but more significantly out of the provision by Sara to West Asset of the draft lease to Central Cleaning that was signed by Vini Songuilay (see [41] and [61]-[64] above).
The evidence justifies a finding that the plaintiffs caused Central Cleaning to move its business operations into the portion of the Lidcombe property that was the subject of the Licence Agreement in the expectation that Sara would grant the Central Cleaning Lease as soon as Bulolo was able to vacate the Lidcombe property. It is also arguable that the offer of the Central Cleaning Lease partly induced West Asset to exercise the call option and to pay the $750,000 to Sara. At the time the call option was exercised, although Bulolo had not yet vacated the Lidcombe property, West Asset had not been informed that Bulolo would exercise its option to renew and act to terminate the Licence Agreement.
Furthermore, the purchase price of $7,500,000 that West Asset originally agreed to pay, which appears to have been reduced to $7,385,000 to take into account rent payable before completion, was on the agreed basis that the sale would take place as if the business conducted from the Lidcombe property was a going concern. As explained above (see [25]), the interlocutory application was conducted on the basis that the achievement of this advantage depended upon the plaintiffs being in continuing occupation of the Lidcombe property up until the time of completion of the Contract. That term of the agreement may imply that Sara would not interfere with the continuation of the occupation of the portion of the Lidcombe property from which Central Cleaning conducted its business.
It may well be that the occupation of a portion of the Lidcombe property by Central Cleaning impedes the optimal conduct by Bulolo of its business from the Lidcombe property. However, Central Cleaning does not have an alternative, convenient premises from which to operate, and the termination of its present right of occupation will cause it substantial disadvantage, and there is a real likelihood that Central Cleaning will incur substantial wasted costs if it is forced to enter into a lease of alternative property, and West Asset then succeeds in its claims against Sara.
I am satisfied, in these circumstances, that the Court is justified in making the interlocutory order sought by the plaintiffs, which will have the result of preserving the status quo. That was the position created by the parties themselves before the dispute between them arose. The defendants must have calculated that the plaintiffs could be given possession of a portion of the Lidcombe property without undue interference with Bulolo's business. That position obtained in the period from the commencement of the Licence Agreement up to 31 May 2020. As noted above ([81]-[82]), Bulolo offered to renew the licence, albeit for a price that was in addition to the licence fee that it had originally agreed to accept.
The plaintiffs accept that, if the Court makes the interlocutory order sought by them, Central Cleaning should be ordered to pay an appropriate licence fee or rent, as well as an appropriate proportion of outgoings. An order will be made to that effect, although I am unable on the evidence to determine the appropriate terms of that order. The order should be appropriately proportional to the area occupied by Central Cleaning compared to the whole of the lettable area of the Lidcombe property.
Temporary order 2 (set out above at [11]) will end with the publication of these reasons. That order was made having regard to the urgency of the duty list and the need to make a holding order. Now that I have had the opportunity to consider the evidence, I think it appropriate to vacate order 2, on the basis that Central Cleaning's obligation to pay a licence fee or rent on an interim basis should be created in a way that it covers the period to which order 2 has applied.
The costs of the interlocutory application should be the parties' costs in the cause.
The parties are to confer and prepare short minutes of order to give effect to these reasons and to provide the short minutes of order to my Associate. If the interlocutory orders can be made in chambers, the usual undertaking to the Court as to damages may be given by the plaintiffs by sending the written undertaking required by the COVID-19 Duty List practice note to my Associate.

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Decision last updated: 16 December 2020

Medium Neutral Citation:	West Asset Holdings Pty Ltd v Sara Investments (NSW) Pty Ltd [2020] NSWSC 1841
Hearing dates:	7 December 2020
Decision date:	16 December 2020
Jurisdiction:	Equity - Duty List
Before:	Robb J
Decision:	See pars [99] to [103].
Catchwords:	EQUITY — Equitable remedies — Interlocutory injunctions — whether there is an arguable case — where the defendants’ case ignored the history and context of the transaction between the parties — where an interlocutory order should be made to preserve the status quo.
Cases Cited:	Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 Duzenli Developments Pty Ltd ACN 623 852 031 trading as Zen Group Constructions v Benuga Pty Ltd ACN 001 131 997 [2020] NSWSC 1667
Category:	Consequential orders (other than Costs)
Parties:	West Asset Holdings Pty Ltd (applicant) Sara Investments (NSW) Pty Ltd (first respondent) Bulolo Investments Pty Ltd (second respondent)
Representation:	Counsel: J Morris SC / S Woodland (applicant) J Raftery (respondents) Solicitors: Gibson Howlin Lawyers (applicant) Tzovaras Legal (respondents)
File Number(s):	2020 / 320619