Caledonian Property Holdings Pty Ltd v Hudson [2007] QDC 72

DISTRICT COURT OF QUEENSLAND CITATION: Caledonian Property Holdings Pty Ltd v Hudson [2007] QDC 072 PARTIES: CALEDONIAN PROPERTY HOLDINGS PTY LTD (ACN 121 356 965) Applicant v ANTHONY HUDSON Respondent FILE NO/S: 156/07 PROCEEDING: Application ORIGINATING COURT: District Court Southport DELIVERED ON: 20 April 2007 DELIVERED AT: Southport HEARING DATE: 17 April 2007 JUDGE: Newton DCJ ORDER: Upon the Plaintiff, by its Counsel, giving the usual undertaking as to damages And Upon the Plaintiff undertaking to pay rental monthly in advance in the sum of $5,117.00 to the Defendant (“the rental undertaking”) from Monday the 23rd day of April 2007 (“the date of possession”) 1. The Defendant, by its servants or agents, be restrained from the date of possession and pending determination of these proceedings at trial or until further order from keeping the Plaintiff out of possession of premises at Shop 10, No.2 Universal Drive, Pacific Pines in the State of Queensland (“the Premises”). 2. The Defendant, by its servants or agents, take all steps necessary to allow the Plaintiff to enter into possession of the Premises on -- 1 of 14 -- 2 and from the date of possession. 3. Should any payment of rent not be made in accordance with the rental undertaking, the Plaintiff is to immediately vacate the said Premises. 4. The Partnership under the name and style “Phoenix Property Centre” be added into the action herein and to this Application as a Defendant. 5. Liberty to apply on 3 days notice. 6. The costs of and incidental to the Application be costs in the cause. THE COURT DIRECTS THAT: 7. The monthly rental of $5,117.00 be paid into the Defendant’s bank account held at the ANZ Bank in the account name of Anthony Hudson, BSB 014739 and account number 551362745. 8. On or before 7 May 2007 the parties jointly engage a registered accountant to take an Account of the Partnership. 9. On or before 7 May 2007 the parties provide to the accountant referred to in paragraph 8 of this order and to each other a copy of all documents in their possession relevant to the taking of the Account. CATCHWORDS: INJUNCTIONS – Interlocutory Injunctions – Principles on which granted – Relevance of Applicant’s sufficient undertaking as to damages – Not granted if compliance impossible and breach inevitable COUNSEL: District Court of Queensland Act 1967 Property Agents and Motor Dealers Act 2000 Active Leisure (Sports) Pty Ltd v Sportsman's Australia Limited [1991] 1 Qd.R 301 Mr M Taylor for the applicant Ms N A Martin for the respondent SOLICITORS: JC Lawyers for the applicant -- 2 of 14 -- 3 Whitehead Gupta Lawyers for the respondent [1] The applicant, Caledonian Property Holdings Pty Ltd (“Caledonian”) has as its sole director, secretary and share holder one Margo Gibb. Ms Gibb states that she has worked as a real estate agent on the Gold Coast for some five years. She met the respondent, Mr Hudson, approximately two years ago and has worked with him for most of the time since they first met. Ms Gibb, when she first commenced working with Mr Hudson, sold properties under Mr Hudson’s real estate licence and business name of “Pot of Gold”. Ms Gibb paid 10 per cent of her commission on properties sold by her to Mr Hudson. [2] According to Ms Gibb she was asked by Mr Hudson, to use 10 per cent of the commission she received from property sales towards set up costs of a real estate business. The business was to be operated by a partnership between Caledonian and Mr Hudson, with expenses and profit to be shared equally. Because Mr Hudson was unable to contribute to the set up costs it was agreed by him and Ms Gibb that “he would repay me his half share of the set up costs over time”. (Affidavit of Ms Gibb sworn 3 April 2007, par 7). [3] Ms Gibb states that it was agreed that the partnership would operate from one of the commercial units being built at Universal Drive, Pacific Pines, which Mr Hudson had purchased. She claims that Mr Hudson told her that instead of paying rent Caledonian could deduct rent monies owing by the business “by deducting the rental monies that [were] payable on the unit against what was owed by [Mr Hudson] to [Caledonian] for the set up and outgoing expenses.” (Affidavit of Ms Gibb, par 11). [4] Ms Gibb deposes at par 12 of her affidavit that it was further agreed by her and Mr Hudson to leave 40 per cent of all commissions on sales in the partnership account (with the remaining 60 per cent to be paid to the person who was responsible for the sale), and that this account would pay all of the outgoings, including rent once sales were sufficient to allow the office to run without further contributions from the partners. -- 3 of 14 -- 4 [5] A partnership agreement was subsequently drawn up between Mr Hudson and Caledonian. Ms Gibb was described as the “nominated employee” of Caledonian. The agreement was executed on 28 August 2006. The business name was “Phoenix Property Centre”. [6] Ms Gibb states that she spent many months setting up the office, buying furniture and hiring equipment. [7] The parties entered into a lease for the commercial unit at Shop 10, No.2 Universal Drive, Pacific Pines. [8] The partnership experienced problems, according to Ms Gibb, from the very beginning. She claims that Mr Hudson was rarely in the office and could not be contacted for most of the time. As a result, Ms Gibb had to perform much of the administrative work and struggle to keep the business going. [9] Ms Gibb states that she was told by Mr Hudson towards the end of 2006 that he had purchased a block of land. In January 2007 Mr Hudson became very difficult to deal with. Settlement on the block of land was due on 8 February 2007. It was at this time that Mr Hudson began sending emails and text messages to Ms Gibb demanding that she pay rent. Threats were made, she claims, to lock her out of the commercial unit and to remove his real estate licence so that she could no longer sell real estate under the partnership agreement. Other threats were also made. [10] Ms Gibb complains that on 16 February 2007, without reference to herself, Mr Hudson removed partnership files and records together with property that had been leased by Ms Gibb, presumably on behalf of the partnership. On 22 February 2007 Mr Hudson forwarded to the commercial unit a Notice to Remedy Breach of Covenant and Notice to Tenant under a covering letter which stated that Mr Hudson had terminated the partnership effective from 8 March 2007. Correspondence was exchanged by the parties’ solicitors thereafter. [11] Ms Gibb states that by 21 March 2007 Mr Hudson had the locks on the commercial unit changed and that she has not been allowed into possession since that time. On 2 April 2007 Caledonian purported to exercise its option under clause 16 of the partnership agreement to purchase Mr Hudson’s interest in the partnership. -- 4 of 14 -- 5 [12] Ms Gibb is seeking an order from this Court that would enable her to regain possession of the premises so that she can continue the business of a real estate agency. If denied possession of the commercial unit, the business will, according to Ms Gibb, find it almost impossible to locate suitable office space in the Pacific Pines area and be forced to close. [13] Undertakings to pay rent and damages have been given by Ms Gibb. I shall return in due course to the undertaking in respect of the payment of rent. [14] For his part, Mr Hudson’s evidence is contained in his affidavit sworn on 16 April 2007. He confirms that he is the legal owner of the premises at Unit 10 No.2 Universal Drive, Pacific Pines. He has held a real estate agent licence for approximately six years. He agrees that he met Ms Gibb some two years ago and states that he has worked with her since 25 April 2006. Mr Hudson deposes to owning and operating the business “Pot of Gold”. He resumed trading under this name after the partnership with Caledonian was dissolved on 8 March 2007. [15] Mr Hudson claims (in par 5 of his affidavit) that he has never been paid any money by Ms Gibb in respect of any property sold by her and that he has no record of any property having been sold by her. He claims that Ms Gibb and he verbally agreed before the partnership agreement was executed that Ms Gibb would pay $20,000.00 to set up the business of the partnership and that this was not to become a debt of the partnership. The office was furnished by Ms Gibb as agreed. Ms Gibb was not asked to rent or lease any equipment. Mr Hudson refers to clause 7(d) (ii) of the partnership agreement which requires that any purchase over $500.00 must be made only with the consent of both parties. Mr Hudson holds Ms Gibb entirely responsible for any purchase or lease over $500.00 as this, he says, was a breach of the partnership agreement. [16] As landlord of the premises, Mr Hudson states that access was given to the partnership for a rent free period from 28 August 2006 (when the partnership agreement was signed) until 9 October 2006 (when the lease was signed). After that period Mr Hudson expected rent to be paid by the partnership. [17] Mr Hudson denies that an agreement ever existed between the partners enabling Caledonian to deduct rent monies owing by the partnership business from set up and -- 5 of 14 -- 6 outgoing expenses. Clause 5(a) of the partnership agreement is relied upon by Mr Hudson. This provides: “5 Any advances to the partnership of money or any other property by either partner (a) shall be repayable on the terms and shall bear interest at such rate as may be agreed upon in writing. In the absence of any agreement in writing to the contrary, such advance shall be paid ahead of any drawings by the partners and at the same time and on the same terms that any such funds advanced were borrowed by the lending party from a bank or financial institution. …" Mr Hudson at par 10 of his affidavit claims that according to this clause where advances are paid back ahead of any drawings there was an agreement between the partners for Ms Gibb to take 60 per cent from all sales commission received by the partnership to pay off the remainder of the capital input by her until her capital contribution was repaid. There was no commission available to either of the partners and the other 40 per cent was to go to the running of the office. Mr Hudson states that he and Ms Gibb had agreed that all commission received by the partnership of her repayment of her capital investment was to be money into the partnership and was to be dealt with in accordance with the partnership agreement as the sharing of profits equally between the partners. [18] Mr Hudson complains that when he had any conversation with Ms Gibb concerning the accounting of her expenses she would avoid the issue. No figures were ever provided by her. He claims that Ms Gibb had “in fact overdrawn money as repayment of her capital advanced”. (Par 11 of his affidavit). Mr Hudson states that he started to demand that Ms Gibb provide to his accountant an accurate cross referenced and fully detailed assessment of the expenditures. When this was not forthcoming he demanded that the rental on the commercial unit be paid to the landlord’s (his) account up until the middle of January 2007. [19] Mr Hudson complains that the partnership started to have problems when Ms Gibb was never in the office. He claims that his personal assistant and flatmate Ms Pomytkina performed the administrative duties for the office and that Ms Gibb did no administration work whatsoever. -- 6 of 14 -- 7 [20] Towards the end of 2006 and early in 2007 Mr Hudson purchased two blocks of land. He states that in no way did these purchases affect his role in the partnership or as landlord of the premises. [21] On 30 January 2007 he emailed a detailed tax invoice to Ms Gibb as the rent was overdue. Mr Hudson states that he has a mortgage over the premises with Liberty Financial at $2,204.59 per month. Rates are in excess of $2,000.00 per year and body corporate charges amount to $2,160.00 per year. He relies on the rental to offset those amounts and says that he had no other income which may be used to pay them. [22] Mr Hudson acknowledges having removed from the premises on 16 February 2007 the current property listing files but says that the Office of Fair Trading requires that these remain in his possession. He denies having sold or given any files to any person since they were removed. [23] It is alleged by Mr Hudson that after 16 February 2007 Ms Gibb had the locking systems changed and he was consequently locked out of the premises. On 22 February 2007 he arranged for the locks to be changed again to enable him to enter the premises. Mr Hudson claims that he delivered a key to Ms Gibb later that day by dropping it into her letterbox at her residential address. [24] A Notice to Remedy Breach of Covenant and Notice to Tenant were served on Ms Gibb on 22 February 2007. On that same date he notified Ms Gibb of his termination of the partnership agreement as from 8 March 2007. The lease was terminated on 14 March 2007. [25] Mr Hudson entered into a new lease with respect to the premises on 24 March 2007 with PM Consolidated Pty Ltd to take effect on 1 April 2007. A deposit has been paid by the new lessee. However, an undertaking was given on 5 April 2007 by Mr Hudson not to enter the premises, nor to have any dealings whatsoever with the premises, nor allow or assist anyone to enter or deal with the premises. That undertaking remains in force until the handing down of the decision in respect of this application. [26] The payment of rental by the proposed new tenant is required immediately as Mr Hudson has used up all funds available from Liberty to pay expenses related to the -- 7 of 14 -- 8 premises. Under the lease with PM Consolidated the rent is $4,333.00 per month plus GST. This amounts to a total monthly payment of $4,766.00. Outgoings of $351.00 per month are also to be paid. I note that under the lease agreement between Mr Hudson and Phoenix Property Centre the rent is $3,207.00 per month plus GST and outgoings of $40.00 per week are to be paid. [27] Ms Gibb has given an undertaking to pay the same rental and outgoings as agreed by PM Consolidated should this application be granted. [28] Ms Gibb will not have obtained her real estate licence enabling her to operate a real estate business (as distinct from being able to sell real estate) for some eight to ten weeks. She remains confident of being able to put in place an arrangement that would overcome this difficulty, although what that arrangement will prove to be is at present unknown. [29] Caledonian has not accepted that the lease has been terminated and has commenced an action in this Court claiming (a) that the partnership agreement gives an option to Caledonian to purchase Mr Hudson’s interest in the partnership; (b) that Caledonian has validly exercised this option; (c) that the lease is an asset of the partnership; and (d) the purported termination of the lease by Mr Hudson is invalid. [30] The present application is one for injunctive relief allowing Caledonian to re-enter the premises at Shop 10, No.2 Universal Drive, Pacific Pines, and preventing Mr Hudson from entering into any lease with any person. Both injunctions are sought on an interim basis until the determination of the action. [31] The jurisdiction of this Court to grant injunctions is found in the District Court of Queensland Act 1967. Section 69(2)(b) of that Act relevantly provides: “(2) …, the District Court shall, in any proceedings in which jurisdiction is conferred under this part, have power to grant relief – … (b) by way of injunction, whether interim, interlocutory or final, in the proceedings; … ". [32] In Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited [1991] 1 Qd.R. 301 at 311 Cooper J stated: -- 8 of 14 -- 9 “In Australia there are only two issues that arise on an application for an interlocutory injunction. The first is whether the plaintiff has made out on the material a serious question to be tried. The second is if such a case has been made out, where the balance of convenience lies. This position is amply supported in my view by the decision of the High Court in Murphy v Lush [1986] 60 ALJR 523 and in this Court in Queensland Industrial Steel [v Jensen [1987] 2 QD.R. 572] per Andrews CJ with whom Ryan J agreed at 575 and per Thomas J at 581. The adequacy of an award of damages, or the availability or sufficiency of an undertaking of the part of a plaintiff, are two important matters to be considered in the balancing process whereby the Court is required to determine where the greater convenience lies.” [33] In the present case there is a number of serious questions to be tried. As counsel for Mr Hudson very properly conceded, the factual dispute that exists between her client and Caledonian involves allegations of oral agreements which can only be resolved by a trial of the issues relating to the partnership dispute. With respect to the tenancy agreement there is a dispute as to whether there was a separate oral agreement between Mr Hudson and Ms Gibb which disentitles Mr Hudson as landlord of the commercial unit to any past rental income from the use of the premises by the partnership. Whether such oral agreement exists is a question of fact which cannot be determined on this application. I am satisfied, then, that the first of the two matters referred to by Cooper J arises on this application. [34] The second issue identified by his Honour requires a consideration of where the balance of convenience lies. Matters which the applicant points to as determining the balance of convenience in its favour are said to include: (a) the overall strength of its case; (b) the fact that the applicant will be put to expense in attempting to find new office space; and (c) the fact that the applicant’s income has been seriously affected if not destroyed by the actions of Mr Hudson. Counsel for Caledonian submits that the consequence of not granting the orders would be devastating for the applicant and its business. Employees of the partnership would no longer be in employment and the effect of not granting the order would be final because a trial of the matter will take some months to be heard. In this regard it may be noted that a Defence has yet to be filed. I accept that, in these circumstances, an award of damages, should Caledonian ultimately succeed in its action, would be inadequate. [35] In her affidavit Ms Gibb states: -- 9 of 14 -- 10 “39. My income has been reduced to almost nil by the termination of the Partnership and the refusal of the Respondent to allow me and the company to enter the commercial unit. I have worked exclusively in the Pacific Pines area in excess of 5 years and am very familiar with the area and have many contacts in the area. In the prior 5 years, I was one of the most successful agents in the area and have received many acknowledgements and awards for this. 40. As a result of not being able to work out of the commercial unit, I am finding it extremely difficult to gain worthwhile employment. I am currently employed in a real estate agent’s office in Gaven. This is somewhat out of the area that I am used to operating in and am finding it difficult to adjust. The office where I am working at the moment is somewhat out of the way and not worthwhile given the traffic flow. I am struggling to make sales at present and I still have numerous obligations under equipment and chattel leases entered in the Company and my name associated with the partnership.” [36] In her written submissions Counsel for Mr Hudson noted that the effect of an interlocutory injunction against her client would be mandatory in nature; it would force him to allow Caledonian to retain possession until a determination of the action. Given the nature of the dispute, it is unclear as to the exact amount of time it may take for the matter to proceed to trial. In addition, it was submitted, Mr Hudson has a signed lease for the premises which will enable him to receive rental payments to assist with mortgage repayments and outgoings. Counsel submitted that if the injunction is granted, Mr Hudson stands to lose the rent from the premises as well as potentially, any past entitlement to rent owed by the partnership. [37] In my view the balance of convenience favours the granting of the relief sought by Caledonian provided that rent is paid to Mr Hudson as landlord of the commercial unit at the same rate as was negotiated with PM Consolidated Pty Ltd, and also provided that should any payment of rent not be made in accordance with Ms Gibb’s undertaking, Caledonian is immediately to vacate the premises. I am satisfied that the position of both parties can be adequately preserved until trial by such an arrangement. [38] There remains for consideration, however, one further matter. In his judgment in Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited [1991] 1 Qd.R. 301, Cooper J at p.308 stated: “Injunctions must be formed in precise language so that the person -- 10 of 14 -- 11 enjoined knows exactly what is prohibited by the injunction and what conduct is permissible (see Morris v Redland Bricks Ltd [1970] AC 652 HL at 666-667). The court will not make injunctive orders if they cannot be complied with and their making would lead inevitably to their breach (see H.C. Sleigh Ltd v Blight [1969] VR 931, 934 and Locabail Finance Ltd v Agroexport [1986] 1 WLR 657 CA at 664).” [39] As noted previously in this judgment, Mr Hudson has alleged in his affidavit (at par 27) that if Caledonian is allowed into possession of the commercial unit, Ms Gibb will be unable to continue to run the real estate business as she does not posses her own real estate licence and would not be legally entitled to operate a real estate business. Oral evidence from Ms Gibb was adduced in respect of this matter: “Now, you’ve been sitting in the back of the Court so you know the areas that we’re going to. Perhaps you could just explain – there’s a suggestion that you won’t be able to work out of this office at – that is the subject of this lease. Could you just explain what your position is and what you intend to do, were his Honour to grant the injunction?-- Okay. I’m – almost completed my licence, so I should have it through fairly soon. The REIQ, Karen Woodrow has said that she will rush it through under the---- HIS HONOUR: Who is Karen Woodrow?-- She’s one of the girls who actually – she coordinates everything within the REIQ, people doing their licences at cetera and she said under the circumstances, she’s giving it priority and it will go through with priority; however, you can get a temp in cases where you’ve been sick, et cetera. By a temp, do you mean a temporary-----?-- A temporary licensee -- --- -----licence?-- -----that you can work under for a period of time for cases due to illness or partnership dissolving or something like this. In this case, I can get a temp straight away. How long is the REIQ able to grant a temporary licence for?-- I believe it’s three or four months but I’m not a hundred per cent sure on that. And I’m not sure about the rules of getting your own, if you get someone who can go in yourself; I’ll have to find out that, but you can actually go in with a temp.” [40] Counsel for Mr Hudson called evidence from Mr Entricken, an inspector appointed under the provisions of the Property Agents and Motor Dealers Act 2000, and employed by the Office of Fair Trading at Southport. His evidence was in the following terms: -- 11 of 14 -- 12 “Are you in a position to tell the Court whether or not Ms Margo Gibb is a licensed real estate agent?-- Yes, I have made inquiries under the Act and Ms Gibb is a real estate sales person. She holds a certificate in real estate sales. She does not hold the real estate agent’s licence. Thank you. Now, what is the distinction between a certificate in real estate sales and a real estate agent’s licence?-- A real estate agent is the principal responsible person for a real estate agency. A real estate sales person is a sales person who holds a certificate and must be employed by a real estate agent. So, to confirm then, if you hold simply a real estate sales – if you hold the certificate that is held by Ms Gibbs, she is unable to work for herself; is that correct?-- That’s correct. If you work yourself, you would be acting as a real estate agent. Thank you. Now, I have – I have a few further questions. In respect of the licences, are you – are you aware of a temporary licence being issued in circumstances where a real estate agent separates from a business that employs somebody such as Ms Gibb?-- I’m not aware of any temporary licence. What is the shortest licence which is issued by the Department?-- One year. And is there any distinction between that licence and the general licence which is applied for?-- No, you – it’s purely a matter of economics. You can apply for one year or three years, whichever the applicant wishes to do. Thank you. So, there’s nothing, in the short term, which can be done to bridge a gap where an employee finds himself unable to continue business simply because they’ve lost their licensed principal?-- No, there’s no licence that can be issued, to the best of my knowledge.” [41] Ms Gibb may be able to arrange for another principal licensee to work for Phoenix Property Centre until she has obtained her own principal’s licence. Counsel for the respondent conceded that she could not conclusively rule out the possibility that Ms Gibb will be able to make appropriate arrangements (see Transcript p 43, lines 45- 50). In any event, if arrangements cannot be put in place in this regard, presumably Phoenix will not be able to conduct its business from the commercial unit in which case rent will fail to be paid to Mr Hudson and Caledonian will be obliged to vacate the premises. -- 12 of 14 -- 13 [42] I should indicate that Counsel have agreed that the partnership under the name and style “Phoenix Property Centre” be added into the action and to this application as a defendant. [43] Counsel have also agreed that an account of the partnership be taken, and further that the costs of this application be costs in the cause. [44] I therefore make the following orders: Upon the Plaintiff, by its Counsel, giving the usual undertaking as to damages And Upon the Plaintiff undertaking to pay rental monthly in advance in the sum of $5,117.00 to the Defendant (“the rental undertaking”) from Monday the 23rd day of April 2007 (“the date of possession”) 1. The Defendant, by its servants or agents, be restrained from the date of possession and pending determination of these proceedings at trial or until further order from keeping the Plaintiff out of possession of premises at Shop 10, No.2 Universal Drive, Pacific Pines in the State of Queensland (“the Premises”). 2. The Defendant, by its servants or agents, take all steps necessary to allow the Plaintiff to enter into possession of the Premises on and from the date of possession. 3. Should any payment of rent not be made in accordance with the rental undertaking, the Plaintiff is to immediately vacate the said Premises. 4. The Partnership under the name and style “Phoenix Property Centre” be added into the action herein and to this Application as a Defendant. 5. Liberty to apply on 3 days notice. 6. The costs of and incidental to the Application be costs in the cause. THE COURT DIRECTS THAT: 7. The monthly rental of $5,117.00 be paid into the Defendant’s bank account held at the ANZ Bank in the account name of Anthony Hudson, BSB 014739 and account number 551362745. 8. On or before 7 May 2007 the parties jointly engage a registered accountant to take an Account of the Partnership. -- 13 of 14 -- 14 9. On or before 7 May 2007 the parties provide to the accountant referred to in paragraph 8 of this order and to each other a copy of all documents in their possession relevant to the taking of the Account. -- 14 of 14 --