FEDERAL COURT OF AUSTRALIA

Dickson Property Management Services Pty Ltd v Centro Property Management (Vic) Pty Ltd [2000] FCA 1742

DICKSON PROPERTY MANAGEMENT SERVICES PTY LTD

and G K MANAGEMENT PTY LTD

  v  CENTRO PROPERTY MANAGEMENT (VIC) PTY LTD

V802 of 2000

RYAN J

MELBOURNE

10 NOVEMBER 2000

THE COURT ORDERS THAT:

1.         The application for an interlocutory injunction be refused.

2.         The undertaking giving to the Court on 19 October on behalf of the respondent be discharged. 

3.         The directions hearing be adjourned to a date to be fixed. 

4.         The costs of all parties of the application for interlocutory relief including the costs of this day be costs in the cause.

5.         Liberty be reserved to any party to apply on not less then 48 hours' notice in writing to the other parties.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     There is before the Court a motion for an interlocutory injunction to restrain the respondent, Centro Property Management (Vic) Pty Ltd (“Centro”) from terminating a contract for the cleaning of the Box Hill Central Shopping Centre.  The contract was concluded on 5 November 1999 when the shopping centre was owned and managed by Lustig and Moar Corporation Pty Ltd (“Lustig and Moar”).

2                     The second applicant, G K Management Pty Ltd, was erroneously named as cleaning contractor in the contract.  However, nothing turns on that, because it is common ground that it was always intended that the first applicant, Dickson Property Management Services Pty Ltd (“Dickson Property”) should assume the benefit and the burden of the cleaning contractor under the contract. 

3                     The contract was expressed to enure for three years.  However, by cl 16 it was recited that:

“The shopping centre [the building owner] may at its sole discretion:

(a)        terminate the entire agreement by giving 90 days' written notice.”

4                     After concluding the contract with Dickson Property, Lustig and Moar sold the shopping centre to Centro which went into possession on 1 July 2000.  It was a term of the contract of sale, according to an affidavit of Mr Moar, a principal of Lustig and Moar, that Centro was required to assume the liability of Lustig and Moar under each of the subsisting contracts with auxiliary service providers, which I take to include the cleaning contract.

5                     By letter dated 21 July 2000 Centro advised Dickson Property that it was executing:

“the right to terminate this agreement by giving 90 days' written notice from today's date.”

6                     Dickson Property has drawn attention to the considerable specific financial obligations which it has undertaken in order to obtain on lease the machinery and equipment necessary to clean the shopping centre.  It also contends, that if it loses the benefit of the cleaning contract, it will be forced to terminate the services of the loyal staff which it has employed at the shopping centre.  That staff comprises something of the order of 20 full-time employees. 

7                     There is a considerable body of evidence tending each way on the question of whether Dickson Property has satisfactorily performed cleaning services at the shopping centre both before and after the advent of Centro as the building owner.  It is inappropriate for me, without having had the benefit of cross-examination, to express even a tentative view about the conclusion which the Court should reach on the basis of that evidence.

8                     The inference is also open that Centro has been prompted to bring about an early termination of the cleaning contract by a perception that it may be able to have the work done more cheaply if fresh tenders are called for and a new contract is entered into.  Dickson Property points, in support of that inference, to the fact that it has been invited to participate in the new tender process.

9                     It is contended on behalf of Dickson Property that Centro is obliged to act in good faith reasonably and not capriciously in exercising its discretion to bring about an early termination of  the cleaning contract.  It has pointed, in this context, to Alcatel Australia Ltd v Scarcella (1988) 44 NSWLR 349, Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41-703, Far Horizons Pty Ltd v McDonald's Australia Ltd (2000) VSC 310, Reynard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, and Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR 1.

10                  It is also contended, further or alternatively, on behalf of the applicant that an implied term that Centro will act in good faith and fairly in the administration of the cleaning contract is to be imported into that contract by application of the principles enunciated, for example, in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.  The applicant contends, as well, that Centro's conduct in giving notice of early termination of  the cleaning contract has been unconscientious or unconscionable within the meaning of s 51AA of the Trade Practises Act 1974 (Cth).

11                  Against this background, the applicant argues that there are serious questions to be tried at the final hearing of this application.  I am prepared to accept for the purposes of this interlocutory application that there are serious questions to be tried as to the grounds on which Centro can legitimately exercise its discretion of early termination of the cleaning contract.  Even if it be accepted that Centro has been actuated by commercial self-interest in seeking to have the cleaning of the shopping centre performed more cheaply than is provided for in the cleaning contract, it by no means follows inexorably, in my view, that its conduct has been unreasonable, capricious or unconscionable in any of the various senses urged by Dickson Property.  However, I am prepared to assume that there are also serious questions to be tried in those respects. 

12                  Despite these conclusions, I have come to the clear view that it would not be an appropriate exercise of the Court's discretion to grant the interlocutory injunction which the applicant seeks.  That reflects principally my conviction that damages will be an adequate remedy if Dickson Property makes out its entitlement to relief either in contract or under s 51AA of the Trade Practices Act.  The measure of those damages will be the remuneration which Dickson Property would have derived had the cleaning contract run its full term less the costs which it would have incurred in performing the contract over that term.

13                  There is in the evidence nothing to suggest that Centro could not satisfy an award of damages measured in that way.  I am not unaware that Dickson Property will be required, if an injunction is refused, to mitigate those damages by making redundant or otherwise redeploying the employees presently engaged at the shopping centre.  Nor am I without sympathy for the prospects of unemployment which will be visited on those employees.  I also realise that Dickson Property will be required to relieve itself, as far as it can, of its liability under leases of centre-specific equipment.  However, all of those considerations will be matters of mitigation on which Centro will bear the onus at trial.  Cash-flow implications for Dickson Property can, I consider, be ameliorated, if it succeeds in the event, by having an early trial pursuant to the liberty to apply which I propose to reserve.

14                  On the other hand, if Centro be compelled to keep the contract on foot until trial and it ultimately succeeds, it will be confined to looking to Dickson Property's undertaking as to damages to compensate it for the consequential loss.  That loss will be difficult to quantify because of the respondent’s inability to obtain a realistic alternative price if it cannot call for tenders capable of actual acceptance.

15                  A related consideration is that, if the Court by injunction keeps the cleaning contract on foot, it can only do so on the basis that it is conditional on Dickson Property’s maintaining a satisfactory standard of cleaning.  That, I think, has the potential to involve the Court, to an unacceptable extent, in supervising the performance of a detailed contract equivalent to a contract for personal services by a party, in whom the other part asserts, not totally unbelievably, that it has lost confidence;  c.p. K & S Freighters Pty Ltd v Linfox Transport (Aust) Pty Ltd (1999) FCA 1325 at para 23.

16                  Accordingly, the application for an interlocutory injunction will be refused.  The undertaking giving to the Court on 19 October on behalf of the respondent will be discharged.  The directions hearing will be adjourned to a date to be fixed in consultation with my Associate.  I shall order that the costs of the application for interlocutory relief, including the costs of this day, be costs in the cause.  I shall reserve liberty to any party to apply on not less then 48 hours' notice in writing to the other parties. 

Associate:

Dated:              10 November 2000