Farnol Holdings Pty Ltd v Penridge [1992] QSC 433

CD .m CD CD THE SUPREME COURT OF QUEENSLAND BETWEEN: FARNOL HOLDINGS PTY LTD PHYLLIS CATHERINE PENRIDGE JUDGMENT - MOYNlliAN J Delivered the 17th day of December, 1992. CATCHWORDS: COUNSEL: SOLICITORS: EM O'Reilly for Plaintiff P Bickford for Defendant Feez Ruthning for Plaintiff Clayton:_ Utz for Defendant HEARING DATE: 25-26 November, 1992 No. 1684 of 1992. Plaintiff Defendant -- 1 of 8 -- I I (11\\~/ CD IN THE SUPREME COURT OF QUEENSLAND No. 1684 of 1992 BETWEEN FARNOL HOLDINGS PTY LTD Plaintiff PHYLLIS CATHERINE PENRIDGE Defendant JUDGMENT - MOYNIHAN I Delivered the 17th day of December, 1992 The plaintiff in this action seeks interlocutory injunctions requiring the defendant to deliver up possession of Lot 135 on building unit plan 70885 and restraining her from taking or attempting to take possession of the lot. The lot, of which the defendant is the registered proprietor, is an accommodation unit which is part of a resort complex which is presently called the Travelodge Palm Cove Resort - it has previously had other names. The plaintiff is the registered lessee of a lease of the defendants and 116 other lots which are accommodation units forming part of the resort complex. 39 of the units are owned by Ladbrolli Pty Limited with the remaining 78 owned by other entities including the defendant. -- 2 of 8 -- 2 The plaintiff took its interest in the lease on assignment from a company called Cofordo 384 Pty Ltd in circumstances to which it will subsequently be necessary to refer. Cofordo took its lease from the resort developer Ladbrolli from which company the defendant acquired her lot. The lease was entered into on 5 June, 1989 and is for a term of 10 years with options for renewal up to a further 15 years. As part of the development of the resort Ladbrolli had also entered into an agreement with Tourism and Leisure Corporation Limited for the management and operation of the resort complex. By the contract pursuant to which she acquired her lot the defendant agreed to the sub-lease of her lot by Cofordo to Tourism & Leisure and to that company's management of her lot in the context of its obligations for the operation and management of the resort complex as a whole pursuant to its agreement with Ladbrolli. The contract, which in this context refers specifically to Tourism & Leisure Corporation, does not seem to provide for the management of the complex by any other entity. The management agreement between Ladbrolli and Tourism & Leisure Corporation contains provisions as to term and option parallel to those provided for in Ladbrolli's lease from the defendant. The owners of the other accommodation units entered into comparable arrangements involving Cofordo and Tourism and Leisure in respect of their units. Under the arrangements by which she acquired title to her lot the plaintiff is entitled to; a) title in fee simple subject to the registered lease to Cofordo which has been assigned to the plaintiff and the sub-lease to Tourism & Leisure. -- 3 of 8 -- · .. 3 b) a proportion of "net room rental" calculated in accordance with the lease .. pursuant to a formula the complexities of which are of no present concern. c) . two weeks occupation per year of her unit or a comparable unit if . available at a reduced tariff .. An ability to provide this is expressed to be not a breach of the lease. The defendant .is liable for outgoings, body corporate fees and the like and "net room rental" reflects the bringing of certain costs to account. The defendant's expectations as to the return on her investment in the resort consequent upon her acquisition of the lot and entering into the arrangements to which I have--referred have· been disappointed and she is concerned at the ongoing cost of the arrangement. Tourism & Leisure ·went into receivership and Ladbrolli determined the agreement with it in·respect of the management and operation of the re8ort. Ladbrolli entered into a fresh agreement with South Pacific Hotels Corporation Limited for the 0 management and operation of the resort. Subsequently receivers and managers were appointed to Ladbrolli which is now in liquidation. The plaintiff, in which the receivers and Ladbrolli have an interest as shareholders and directors, acquired Cofordo's interest in the lease of the accommodation units, including the plaintiff's in the context of the compromise of a large number of disputes involving Ladbrolli and those who stood behind that company and their financiers iri the development of the resort complex. At the present time South Pacif~c continues to manage and operate the resort apparently pursuant to the -- 4 of 8 -- 4 management agreement it entered into with Ladbrolli although it seems that company's position may justify South Pacific terminating the agreement if it chooses. The defendant, having gained possession of her unit, intends to let it out with a view to gaining income. Ladbrolli, Cofordo ·and Southern Pacific Hotels on the other hand apparently regard the unit as forming part Of the resort·complex and so available to be let exclusively by Southern Pacific Hotels as manager and operator of the resort. The situation which I have outlined has been the subject of· a great deal of 1 (]) correspondence between solicitors for the plaintiff and for the defendant, among others some of which are in evidence. It does not seem necessary to ·refer to them in any detail. · · ·. ·• The defendant has unsuccessfully pressed to have the lease and sublease to which I have referred removed from the title. By an originating summons issued in July. this year the defendant sought declarations that the lease and the sub-lease of her lot were void or unlawful and of no effect for reason of their having contravened the Company's. (Queensland) Code or further and alternatively the Corporations Law~ No such relief:. is sought with respect to the contractual arrangements by which the defendant acquired·, · ~ her title. On 17 August 1992 directions were made in the originating summons~ As at.~ 30 October, 1992 the defendant had not complied completely with those directions insofar as they applied to her. On that date the defendant checked in to stay in. her unit at the 'resort and caused the locks to be changed. On 6 and 9 November ·there was an exchange of· correspondence between the solicitors for the plaintiff and the solicitors for the defendant in respect of the defendant's activities. The defendant's solicitors put in issue the plaintiff's assertion that the defendant is not entitled to act as she has and -- 5 of 8 -- 5 maintained that she has "over (sic. every) right to remain on the ·property." The defendant has remained in possession and the plaintiff brings this application. The plaintiff's case is that it is the registered lessee and is entitled to possession with the defendant's rights being restricted to the right of occupation of two weeks per year to which I have earlier referred . . The defendant's case is that the lease will ultimately be pronounced void as contrary to the prescribed interests provision of the Companies (Queensland) Code or the Corporations Law. Put shortly, the defendant contends to the effect that a brochure which is in evidence amounts to an invitati.on to the public to subscribe for or purchase a prescribed interest-in terms of Section 169 of the Code and that Sections 170(1) and 171(1) have been breached by· Ladbrolli through its agent the Mackellar Development Corporation Pty Ltd. In this context it is contended that there has been an offer or .invitation to the public to purchase leaseback units in terms of Section 169 of the Code; Australian Softwood Forest Pty ltd -v-ex rel Corporate Affairs Commission (1982) 148 C.L.R. 121, 129 and 134,_ Corporate Affairs Commission (South Australia) and Anor -v- Australian Central Credit Union, (1985) 157 C.L.R. 201, 208 and 213. The defendant sets about, plausibly enough on the face of it, to distinguish Tones & Anor -v- Acfold Investments Pty Ltd & Anor (1983) 8 A;C.L.R. 488 ant Maunder-Hartigan -v- Hamilton (1984) A.C.R. 987. In the former case there was no sharing or pooling of rents and profits, there was a right .. for the owner to let the unit independently and no expectation of profit generated by the promoter. The latter case is also hard to be distinguishable on a comparable basis. The plaintiff's claim to regain possession is, it is then submitted, founded on the lease which is void and unenforceable and should fail; Thomas Brown & -- 6 of 8 -- 6 Sons Ltd -v- Fazal Deen (1962) 108 C.L.R. 391 and Hurst -v- Vestcoro Ltd (1988) 12 N.S. W.L.R. 394. . It is contended for the defendant in the present case that the lease and sublease are an integral part of the scheme which constituted the offer of a prescribed interest from which they cannot be severed and are hence void and unenforceable. The defendant's applications are in respect of the lease rather than the contract but it is submitted that if the contract was void and unenforceable Section 174(2) of the Code provides a basis to preserve the plaintiff's interest in the unit; O'Brien -v- Melbank Corn & Anor (1991) 7 A.C.S.R .. 19. In my view the contentions of the defendant are· of sufficient weight to require consideration of the balance of convenience and other issues. Those other issues include - that, although a mandatory injunction is sought,· this is not a case where its being granted will have the consequence of denying the defendant-an effective right to trial . by finally deciding if the issues in favour of the plaintiff; Cayne -v- Global Natural Resources Pty Ltd (1984) 1 or E.R. 225 at 236, Active Leisure (Sports) Pty Ltd -v- . Sportman's Australia Limited (1991) 1 Qd. R. 301 at 314. Moreover, the defendant's. taking possession, understandable as her frustration in the situation in which she finds herself may be, was a simple and summary act easily remedied by which she obtained an advantage over the plaintiff without it having the opportunity of testing her action by itself applying for an · injunction; State · of Queensland -v- Australian Telecommunications Commission (1985) 59 A.L.J .R. 562 at 563; Active Leisure (supra) : at 304, 313-315. The granting of the mandatory injunction sought by the plaintiff seeks to restore the "relative status quo" which was the position prior to the conduct of the defendant in re-claiming possession; see Garden Cottage Foods Ltd -v- Milk Marketing -- 7 of 8 -- 7 Board (1984) 1 A.C. 130. It seems likely that the plaintiff overstates the consequences of clause 7.01 of the lease. It is at least arguable that the plaintiff will not be in breach of that clause by virtue of the defendant's action and the lease can be terminated only by all unit owners, including Ladbrolli, acting jointly. As against these considerations the management and operation agreement between Ladbrolli and South Pacific Hotels seems to have been made without the defendant's knowledge or concurrence. By virtue of the terms of the agreement its operation is liable to be terminated at the option of South Pacific Hotels by virtue of Ladbrolli's insolvency. There is evidence that the plaintiff may suffer damages as a consequence of being kept out of occupation or being liable for outlays in respect of the unit and precluded from the opportunity to rent it and earn income. The issue is, on account of the considerations just identified, perhaps more formally balanced than the plaintiff would have it. In the end, however, I think that the appropriate course is to grant the relief sought by the plaintiff. I am not prepared to dispense with a requirement that the plaintiff provide the usual undertaking as to damages. -- 8 of 8 --