Caboolture Property Investments Pty Ltd v Caboolture Bowls Club Inc [2004] QDC 306

DISTRICT COURT OF QUEENSLAND CITATION: Caboolture Property Investments Pty Ltd v Caboolture Bowls Club Inc. [2004] QDC 306 PARTIES: Caboolture Property Investments Pty Ltd (Applicant) V Caboolture Bowls Club Inc. (Respondent) FILE NO/S: 3170/04 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court Brisbane DELIVERED ON: 10 th September 2004 DELIVERED AT: Brisbane HEARING DATE: 9 th of September 2004 JUDGE: Forde DCJ ORDER: That upon the Caboolture Bowls Club Inc. paying to Caboolture Property Investments Pty Ltd. the sum of $15,000.00 within seven days and to pay the monthly rental for September, October, November and December 2004 of $1,666.66 per month, it is ordered that: 1. The application for interim injunctive relief by Caboolture Property Investments Pty Ltd. is dismissed. 2. The application for relief against forfeiture is adjourned for final determination beginning on 6 December 2004. 3. Pending final determination or judgment, Caboolture Property Investments Pty Ltd. Do deliver up possession of the said premises to the Caboolture Bowls Club Inc. and that the Caboolture Bowls Club Inc be entitled to access and remain in possession of the said premises so as to be able to conduct its usual activities including trading. 4. Pending final determination or judgement, Caboolture Property Investments Pty Ltd is restrained from granting a lease of the said premises to any person. 5. Either party is entitled to apply to the trial judge upon three days notice for further directions or in the event of a breach of these orders or conditions. -- 1 of 9 -- 2 6. Costs of this application are to be costs in the cause. CATCHWORDS: INTERIM INJUNCTIVE RELIEF – RESTRAINING ORDER – Balance of convenience – Breach of lease condition Property Law Act 1974 (Qld) Hyman v Rose [1912] AC 623 Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 B.P.R. 18, 563 Vale & Anor v Skygarden Pty Ltd 4.06.93 World By Nite Pty Ltd. v Michael (2004) 2 Qd R 338 COUNSEL: Mr P Bickford for the Applicant Ms D Skennar for the Respondent SOLICITORS: Mullins Lawyers Files Stibbe & Associates Introduction [1] The Caboolture Bowls Club Inc. (the “Bowls Club”) has over five hundred members. It is situated north of Brisbane but in a developing area. Like many smaller clubs in recent times, it has had some financial hardship. Its members attempted to find a solution to its malaise by entering into a contract of sale of its premises to the plaintiff, Caboolture Property Investments Pty Ltd. (“CPI”). A lease back arrangement of the premises for a period of ten years with two five year options was part of the contract. A management agreement with the Caboolture and District Services Memorial Club Inc. (the “RSL”) allowed the RSL to manage the Bowls Club. [2] The management agreement was suggested by the manager of the RSL, Mr. Stephen Bunz and Mr. Robert Jones, a director of CPI. The arrangements were represented as securing the financial security of the Bowls Club. The contract for sale was entered into based on those assurances. Mr. Jones and a Mr. Lombardi were both directors of CPI and sat on the Board of the RSL. CPI also owns the freehold of the -- 2 of 9 -- 3 RSL premises. The RSL took over management of the Bowls Club in October 2001. That arrangement continued up until 18 September 2003. The end of the said arrangement was prompted by correspondence from the Gaming Commission. Up until July 2003 the RSL had advised the Bowls Club that the operations of the Bowls Club were progressing well. According to one deponent, Mr Goodwin who was Chairman of the Bowls Club. The first he knew of arrears of rent was when the management agreement with the RSL came to an end. 1 [3] On or about 29 July 2004 a Notice to Remedy Breach of Covenant was served on the Bowls Club. It related to unpaid rent from February 2002 to July 2004. The Bowls Club was given fourteen days to remedy the breach. Pursuant to its right of re-entry, CPI entered into possession. The appropriate Notice was posted on the premises of the Bowls Club on 30 August 2004. On the same day, six persons took possession of the premises of the Bowls Club. Some minor damage was caused. At this point, police officers have not acted. Persons who are members of the Bowls Club have continued to squat at the premises. They are not parties to the action. Nature of the Applications [4] The application on behalf of CPI seeks a restraining order against the servants, agents and members of the incorporated association constituted by the Bowls Club from continuing to occupy the subject premises. There is no evidence that the person or persons occupying the premises are the servants or agents of the Bowls Club. As the individual members are not parties to the application, I would not be prepared to make orders against them. Those facts in themselves would be 1 Para 8 of the affidavit of A J Goodwin. -- 3 of 9 -- 4 sufficient to dispose of the application by CPI. However, it is intended to deal with the matter in more detail. [5] The application by the Bowls Club seeks relief against forfeiture. Relief against forfeiture of the lease [6] Relief against forfeiture requires the court to exercise its discretion under the provisions of s.124 of the Property Law Act. That section provides as follows: ‘124 Restriction on and relief against forfeiture (1) A right of re-entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, obligation, condition or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice— (a) specifying the particular breach complained of; and (b) if the breach is capable of remedy, requiring the lessee to remedy the breach; and (c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same; and the lessee fails within a reasonable time after service of the notice to remedy the breach, if it is capable of remedy, and, where compensation in money is required, to pay reasonable compensation to the satisfaction of the lessor for the breach. (2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-entry or forfeiture, or has re-entered without action the lessee may, in the lessor’s action (if any) or in proceedings instituted by the lessee, apply to the court for relief, and the court, having regard to the proceedings and conduct of the parties under subsection (1), and to all the other circumstances, may grant or refuse relief, as it thinks fit, and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the court in the circumstances of each case thinks fit. (3) The making of an application under this section shall not of itself be construed as an admission on the part of the lessee— (a) that any such notice as is mentioned in subsection (1) has been served by the lessor; or (b) that any such breach as is mentioned in subsection (1) has occurred or that any right of or cause for re-entry or forfeiture has accrued or arisen; and the court may, if it thinks fit, grant relief without making a finding that, or arriving at a final determination whether, any such notice has been served, or any such breach has occurred, or that any such right has accrued or cause arisen.’ -- 4 of 9 -- 5 [7] Of particular importance is that the court may grant relief without making a final determination that a breach has occurred or that any such right has accrued or cause arisen: “ …the discretion given by the section is very wide. The Court is to consider all the circumstances and the conduct of the parties. Now it seems to me that when the Act is so express to provide a wide discretion meaning, no doubt, to prevent one man from forfeiting what in fair dealings belongs to someone else by taking advantage of a breach from which he is not commensurately and irreparable damaged, it is not advisable to lay down any rigid rules for the guiding of that discretion”.2 [8] The factors relied upon in the present case include: a. The period during which the rent was not paid included the period that the RSL was managing the Bowls Club. Two of the directors of CPI were also serving on the governing body of the RSL. b. There was no suggestion that the Bowls Club were made aware of the non- payment of rent during that period from October 2001 to September 2003. c. In a letter dated 3 January 2004, Mr. Jones states that the expenses for rent should be added to the profit and loss statement even though the rents were not paid. He was writing on behalf of CPI. d. In the books of account for the year ended 30 June 2003, an amount of $20,303 is recorded as having been paid. This suggests that the monthly rent was paid or that the advice from Mr Jones was accepted. e. Statutory Declarations or affidavits by members of the Bowls Club state that at meetings in, both Mr. Jones in October and Mr Jones and Mr. Lombardi in December regarded any monies as owing by the Bowls Club had been “written off” by CPI. In that event only rent from January 2004 2 per Earl Loreburn LC in Hyman v Rose [1912] AC 623 at 631: Duncan and Vann “Property Law Act 1974 para.8.1420. -- 5 of 9 -- 6 to the present would owe. The latter is contested3 and oral evidence is necessary from both sides before this and other conversations alleged can be assessed. [9] The Bowls Club is willing to pay the sum of $15,000.00 to reduce the amount of rent owing. If there was a waiver of the rent to December 2003, as suggested, then the liability of the Bowls Club is more limited. It does not dispute that some rent owes. From January 2004 to the present it would amount to some $13,328. There are other monies owing for legal costs, security guards etc. The total is $71,443.54. If one deducts the rent from February 2002 to December 2003, a sum of $34,776.00 is calculated. The Bowls Club has proved details of its trading position for the past couple of months. Despite its difficulties in the past, its net profit in August of $3000.00 would allow it to meet the rent payment if that continued in the short term. [10] In order to expedite matters, the action is set for trial on 6 December 2004 for five days. These are all matters which have been taken into account in deciding the appropriate orders in this case. It is not essential that all arrears be paid on an application for relief against forfeiture. That has been conceded.4 Injunctive relief sought by CPI [11] Before granting injunctive relief, it is necessary to be satisfied that there is a serious question to be tried. There is no doubt about that aspect. There is no doubt that monies are owed to CPI for rent and other outgoings. The amount is problematical. The Bowls Club seeks to explore its case against CPI and Messrs. Jones and 3 Affidavit of Robert David Jones sworn 10 th of September 2004. 4 Transcript p 33. -- 6 of 9 -- 7 Lombardo for misleading and deceptive statements when the contract for sale was entered into. The Bowls Club has indicated that it may join the RSL. Counsel for CPI has suggested that the joinder does not affect the relief it seeks. However, if there has been some breach of fiduciary duty given the tripartite arrangements, then there may be some liability attaching either to CPI or its two directors Mr. Jones or Mr. Lombardo. There were payments made totalling $102,000.00 from the Bowls Club to the RSL. The reasons for those payments were not explored on this hearing but will be relevant at trial. On the settlement of the contract of sale, $55,000.00 was paid to the RSL presumably to pay creditors of the Bowls Club. On One version it was to be used to pay for greens maintenance.5 [12] The balance of convenience is in favour of the Bowls Club. If it cannot trade it will have no income until the determination of the issues at trial. Both the club and other groups which use the premises will suffer. If the trial was in the New Year, different considerations may apply. The Bowls Club is prepared to continue to pay the rent and part of the arrears. What are appropriate orders? [13] The decision of World By Nite Pty Ltd. v Michael6 is illustrative. When the matter came before Byrne J. in the first instance and before a final determination he made orders (341) which can apply in the present case. It was an application against forfeiture. He ordered pending final determination of the application or until further order and upon the payment of some of the monies owing for insurance and rent that the applicant should, together with its servants and agents, be entitled to access to the premises and to remain in possession of the premises until a certain date when the application could be finally determined. 5 Para 5 of affidavit of A J Goodwin. -- 7 of 9 -- 8 [14] Helman J. made the final determination in the World By Nite case. He stated at 343: “A tenant is not entitled to relief against forfeiture as a right. The Court has a discretion in the matter. The test is one of unconscionability. In a recent case in which there had been a forfeiture for non-payment of rent Barrett J. put the test in this way: “whether, in the light of the tenant’s remedying of the default in the payment of rent, resort by the landlord to his strict legal right of re-entry would be unconscionable; or, if I may put this another way, whether the tenant has been guilty of conduct over and above the remedied default in payment of rent which is of such gravity that, even accepting that the default for which the right of re-entry is security has been satisfied, it would not be unconscionable on the landlord’s part to insist on his strict legal right.”7 [15] It is not necessary to make a final determination on the issues in the case or this application. It is clear that the Bowls Club has not paid its rent. The extent of its liability is problematical. There is a suggestion of unconscionable conduct involving two directors of CPI. Pending the final determination in December 2004, orders consistent with the decision in Vale & Anor v Skygarden Pty Ltd8 and World By Nite9 will be made. The additional material delivered by each party since the hearing yesterday has been considered. Leave to read and file that material is given.10 The objections to evidence have been noted and where necessary accepted as original evidence. A final determination will be made at trial. Undertaking as to Damages [16] There is less than three months to trial. The order proposed requires the Bowls Club to pay some arrears of rent and part of the other outgoings. If there is a default on 6 (2004) 2 Qd R 338 7 His Honour referred to Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 B.P.R. 18, 563 at 18,568. See also Tanwar Enterprise Pty Ltd [2003] HCA 57 para 20-39. 8 Per Beazley J Federal Court of Australia NG 803 of 1992. 9 Op. cit p341 10 Affidavits of Mr Little, Mr Goodwin & Mr Jones as well as submissions from counsel for CPI (Exhibit 4). -- 8 of 9 -- 9 any of the rent payments prior to trial, CPI is entitled to seek a review of the orders. In those circumstances, the usual undertaking as to damages is not required. Orders That upon the Caboolture Bowls Club Inc. paying to Caboolture Property Investments Pty Ltd. the sum of $15,000.00 within seven days and to pay the monthly rental for September, October, November and December 2004 of $1,666.66 per month, it is ordered that: 1. The application for interim injunctive relief by Caboolture Property Investments Pty Ltd. is dismissed. 2. The application for relief against forfeiture is adjourned for final determination beginning on 6 December 2004. 3. Pending final determination or judgment, Caboolture Property Investments Pty Ltd. Do deliver up possession of the said premises to the Caboolture Bowls Club Inc. and that the Caboolture Bowls Club Inc be entitled to access and remain in possession of the said premises so as to be able to conduct its usual activities including trading. 4. Pending final determination or judgement, Caboolture Property Investments Pty Ltd is restrained from granting a lease of the said premises to any person. 5. Either party is entitled to apply to the trial judge upon three days notice for further directions or in the event of a breach of these orders or conditions. 6. Costs of this application are to be costs in the cause. -- 9 of 9 --