FEDERAL COURT OF AUSTRALIA

Tait v P.T. Ltd as Trustee of the Scentre Tuggerah Trust [2015] FCA 1015

THE COURT NOTES the undertaking by the applicant:

(a)    to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; and

(b)    to pay the compensation referred to in (a) to the person there referred to.

THE COURT ORDERS THAT:

1.    The Respondent, P.T. Limited ACN 004 454 666, forthwith:

1.1    permit the Applicant, Robert Grahame Tait, to re-enter into possession of the retail shop premises known as Kiosk K23 in the shopping centre Westfield Tuggerah (“the Premises”) as defined in Lease number A1576072F registered over the Premises and dated 2 September 2013 (the “Lease”) on and subject to the terms of the Lease and as if the Applicant was lessee thereunder; and

1.2    reinstate the Premises to the condition they were in immediately before the Respondent entered into possession thereof on 14 August 2015.

2.    The Respondent, P.T. Limited ACN 004 454 666, by itself, its officers, its employees, its agents or otherwise howsoever, be restrained until further order from:

2.1    evicting the Applicant from the Premises;

2.2    preventing or in any way hindering the Applicant from:

2.2.1    conducting a business within the meaning of the “Permitted Use” in Item 12 of the Schedule to the Lease; and

2.2.2    accessing and occupying the Premises, including but not limited to all Common Areas as that term is defined in the Lease, on the terms of the Lease;

2.3    requiring the Applicant to remove any “Wendy’s” branded livery from the Premises; and

2.4    acting in any way contrary to the Lease being on foot, other than in these proceedings;

2.5    without the leave of the Court, enforcing or purporting to have any entitlement to enforce any right, title or interest arising out of or in connection with the guarantee and indemnity granted by the Applicant pursuant to clause 25 of the Lease for the bank guarantee granted by the Applicant pursuant to clause 11.13(a) of the Lease.

3.    The Applicant file and serve a Statement of Claim and an Amended Originating Application (if so advised) on or before 9 September 2015.

4.    The Respondent file and serve any further affidavits in support of its application for transfer of the proceeding on or before Friday, 28 August 2015.

5.    The Applicant file and serve any affidavits in response to the Respondent’s application for transfer of the proceeding on or before Monday, 7 September 2015.

6.    The matter be adjourned to Friday, 11 September 2015 at 9:30 am.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 26 August 2015, I made the following orders in this proceeding, relevantly:

1.    The Respondent, P.T. Limited ACN 004 454 666, forthwith:

1.1    permit the Applicant, Robert Grahame Tait, to re-enter into possession of the retail shop premises known as Kiosk K23 in the shopping centre Westfield Tuggerah (“the Premises”) as defined in Lease number A1576072F registered over the Premises and dated 2 September 2013 (the “Lease”) on and subject to the terms of the Lease and as if the Applicant was lessee thereunder; and

1.2    reinstate the Premises to the condition they were in immediately before the Respondent entered into possession thereof on 14 August 2015.

2.    The Respondent, P.T. Limited ACN 004 454 666, by itself, its officers, its employees, its agents or otherwise howsoever, be restrained until further order from:

2.1    evicting the Applicant from the Premises;

2.2    preventing or in any way hindering the Applicant from:

2.2.1    conducting a business within the meaning of the “Permitted Use” in Item 12 of the Schedule to the Lease; and

2.2.2    accessing and occupying the Premises, including but not limited to all Common Areas as that term is defined in the Lease, on the terms of the Lease;

2.3    requiring the Applicant to remove any “Wendy’s” branded livery from the Premises; and

2.4    acting in any way contrary to the Lease being on foot, other than in these proceedings;

2.5    without the leave of the Court, enforcing or purporting to have any entitlement to enforce any right, title or interest arising out of or in connection with the guarantee and indemnity granted by the Applicant pursuant to clause 25 of the Lease for the bank guarantee granted by the Applicant pursuant to clause 11.13(a) of the Lease.

The applicant gave an undertaking to pay compensation as the Court may consider to be just by the operation of the interlocutory orders or any continuation thereof.

These are my reasons for making those orders.

2    This case raises an issue about the right to occupy a shop or store in the Westfield Shopping Centre in Tuggerah in the State of New South Wales. I will refer to the shop or store as “the premises”. For 20 years, the applicant has conducted a Wendy’s franchise from the premises. He holds the franchise under a Franchise Agreement with Wendy’s Supa Sundaes Pty Ltd (“WSS”), and has the right to occupy the premises under that agreement. WSS is the lessee of the premises under a written lease (“the Lease”) with the owner of the shopping centre. The owner and lessor is the respondent.

3    On 2 July 2015, WSS went into voluntary administration (Chapter 5, Part 5.3A of the Corporations Act 2001 (Cth)). On 14 August 2015, the respondent “hoarded up” the premises and locked them so that the applicant could not gain access.

4    The applicant issued a proceeding in this Court and he sought interlocutory relief with a view to enabling him to resume occupation of the premises and to continue the operation of his business.

5    The test for an interlocutory injunction is well-known. In Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Limited [2015] FCA 460 (“Ocean Dynamics Charter v Hamilton Island Enterprises”), Edelman J, referring to the decision of the Full Court in Samsung Electronics Company Ltd v Apple Inc and Another (2011) 217 FCR 238; [2011] FCAFC 156 (“Samsung Electronics v Apple”), said the following (at [26]-[27]):

.... Where an interlocutory injunction is sought in respect of private rights, it is necessary to identify the legal or equitable rights which are to be determined at the trial and in respect of which the final relief is sought (Samsung, 256 [52]). There are two questions:

(1)    has the applicant established a prima facie case (in the sense that if the evidence remains as it is there is a probability that at the trial of the action the applicant will be held entitled to relief); and

(2)    does the balance of convenience and justice favour the grant of an injunction or the refusal of that relief?

The balance of convenience includes a consideration of whether the refusal of the injunction would have the effect that the applicant will suffer irreparable injury for which damages will not be adequate compensation (Samsung, 259-260 [61] – [63]).

6    The orders sought by the applicant include a requirement that the respondent take action by way of reinstating the premises to the condition they were in before it took possession and not merely orders that it refrain from taking identified action. However, the respondent did not suggest, correctly in my view, that that meant that the applicant had to establish a stronger prima facie case than if the interlocutory injunction was only prohibitory. There is no principle to that effect and, in this case, the interlocutory injunction seeks to restore or re-establish a pre-existing situation (Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499; Ocean Dynamics Charter v Hamilton Island Enterprises at [30]-[35]).

7    The applicant’s case is as follows. The Westfield Shopping Centre in Tuggerah was opened in October 1995 and the applicant has operated his Wendy’s franchise from the premises since that date. He is the only remaining personal tenant who has conducted his business in the shopping centre since October 1995. He has personally paid all rental payments and outgoings in respect of the premises to the respondent.

8    The Franchise Agreement between WSS as franchisor and the applicant as franchisee in respect of the premises is dated 3 June 2013. The term of the agreement is from 8 May 2013 to 5 May 2018. Under the Franchise Agreement, the applicant is given a right to occupy the premises. Clause 6.4.3 provides that the occupancy rights given under the Franchise Agreement terminate on the occurrence of certain events, and those events include the termination of the Lease or the loss by WSS or its associates of any tenancy rights in respect of the premises. Clause 6.4.3(e) provides that the occupancy rights granted by the agreement do not involve a grant of exclusive possession of the premises or give the applicant any property rights in or over the premises. On the face of it, if the Lease comes to an end or WSS loses its tenancy rights in relation to the premises, then so does the applicant’s right to occupy the premises under the Franchise Agreement.

9    In June 2005, the applicant was advised by the Wendy’s area manager that the Franchise Agreement had been assigned from WSS to Supatreats Australia Pty Ltd. In July 2015, the applicant received an email from Wendy’s confirming the assignment of the Franchise Agreement from WSS to Supatreats Australia Pty Ltd.

10    The Lease between WSS and the respondent is dated 2 September 2013 and is for a term of five years commencing on 6 May 2013 and expiring on 5 May 2018. The applicant was involved in the negotiations for the Lease, in particular the negotiations as to the amount of rent to be paid under the Lease and as to the amount of refurbishment costs to be paid by him. His evidence is that he was required to expend approximately $6,000 to $7,000 in refurbishment costs. The applicant is a guarantor under the Lease and has given an indemnity in relation to the payment of rent and other moneys payable under the Lease and the due and punctual performance and observance by WSS of all of its obligations under the Lease (cl. 25). He has signed the Lease in the capacity of guarantor. The applicant also provided a bank guarantee dated 9 October 2007 to the respondent in respect of WSS’s obligations under the Lease for the premises in the amount of $14,582.68. The Lease provides that if WSS, being a corporation, goes into voluntary administration, then the respondent can re-enter the premises or terminate the Lease or both (cl. 22.1(f)). The Lease provides that the permitted use is as a Wendy’s store and that WSS may grant a licence to occupy the premises, but expressly provides that a licence agreement does not grant any rights to the licensee as a lessee or sub-lessee (cl. 13.4B(a)(iii) and see 13.4B(b)(ii)). As part of the leasing arrangements, the applicant was required to complete a “Westfield Document Checklist”.

11    The applicant’s case is that since 1995, the respondent has dealt with the applicant directly as if the applicant were the lessee of the premises. Since 2007 or 2008, the applicant has had access to the Westfield rental portal and he has made rental payments direct to the respondent. Under the Lease, WSS is obliged to have property and public liability risk insurance. In fact, for 20 years the applicant has had such insurance in respect of the premises. In April 2013, it was the applicant who signed various documents in connection with the respondent’s disclosure statements. Over many years the applicant has corresponded with the respondent about issues concerning the premises. In late 2013, the respondent corresponded with the applicant about a shortfall in the payment of rent.

12    WSS was placed in voluntary administration on 2 July 2015. By memorandum dated 13 August 2015, the respondent advised the applicant of this fact and it also advised him that the administrators did not intend to exercise property rights in relation to the premises and had granted consent to the respondent to re-enter the premises. The respondent also said that it had advised the administrators that it intended to re-enter and repossess the premises following close of trade on 14 August 2015. The applicant had paid rent in advance in respect of the premises to the respondent for the month of August 2015. As I have said, at the close of business on 14 August 2015, the respondent “hoarded up” the premises and locked the premises so that the applicant no longer had access to the premises. The applicant has his plant and equipment and his fixtures and fittings in the premises. He also has a large volume of stock from his Wendy’s business in the premises. The applicant’s sole source of income is the income generated by his Wendy’s franchise.

13    The applicant said that on 14 August 2015, representatives of the respondent approached him and said that he could continue to occupy and trade from the premises on the same terms and conditions as are contained in the Lease provided he agreed to take down all Wendy’s branding from the premises and not sell Wendy’s products from the premises.

14    On 5 August 2015, the respondent issued proceedings in the Supreme Court of New South Wales against WSS and the administrators seeking a number of orders, including a declaration that WSS is not using or occupying or in possession of identified properties, including the premises within the meaning of s 440B of the Corporations Act 2001 (Cth) (“the Act”), and a declaration that the respondent is not precluded by s 440B(1) of the Act from taking possession of the properties, including the premises. Other orders were sought in the alternative, but the details do not need to be mentioned. Evidence from the respondent establishes that the administrators served a notice dated 7 July 2015 stating that they did not propose to exercise rights in relation to the lease between WSS and the respondent in respect of the premises. However, they also asserted that pursuant to s 440B of the Act, the respondent was not entitled to take possession of the premises without the leave of the Court, or the administrators’ consent.

15    The respondent’s case is that on 10 August 2015, the administrators gave their consent to the respondent going back into possession of the premises.

16    On 11 August 2015, the respondent gave WSS a notice to remedy a breach of covenant pursuant to the Conveyancing Act 1919 (NSW) s 129 in relation to the breach of cl. 22.1(f). On 17 August 2015, the Supreme Court of New South Wales made an order for costs in the respondent’s favour but, as I understand it, no other orders.

17    The applicant submitted that the relevant law to be applied to the dispute was the law of New South Wales.

18    He submitted that he has rights in respect of the premises, and that it does not matter whether the Lease has been determined by surrender or forfeiture. He wished to reserve his position in relation to that matter. In the alternative, he submitted that even if he has no proprietary interest in respect of the premises, he was nevertheless entitled to the orders he sought.

19    The applicant submitted that he had established a prima facie case on one or more of the following grounds:

(1)    The respondents had engaged in unconscionable conduct within s 21 of the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)) by making the statements it did in the memorandum dated 13 August 2015 which it sent to the applicant. The applicant submitted that if there was unconscionable conduct, orders could be made under s 238 of the Australian Consumer Law which have the same effect as orders made or rights recognised under s 130 or s 122 in the Conveyancing Act. The factors said to constitute unconscionable conduct by the respondent were as follows:

(a)    not advising the administrators of its relationship with the applicant and allowing the administrators to grant consent in ignorance of such matters;

(b)    treating the applicant as the lessee of the premises;

(c)    concealing the forfeiture process so that the applicant could not exercise rights under s 130;

(d)    victimising the applicant for the conduct of Wendy’s; and

(e)    not indicating and thereby reserving the right to enforce the guarantee and indemnity in the Lease against the applicant.

(2)    The respondent engaged in unconscionable conduct within s 62B of the Retail Leases Act 1994 (NSW) and the applicant, as the guarantor under the Lease, is entitled to relief under the section;

(3)    The applicant is entitled to relief under s 130 (forfeiture) or s 122 (surrender) of the Conveyancing Act;

(4)    The applicant and the respondent have acted over a long period on the basis that the applicant would have the rights of a lessee for as long as he complied with the terms and conditions of the Lease and an estoppel by convention arose. The estoppel meant that the respondent was precluded from denying the applicant the benefits of the Lease for as long as the applicant complied with its terms and conditions; and

(5)    The applicant had a licence, coupled with an interest, to occupy the premises.

20    I had difficulty following some of the grounds advanced by the applicant. For example, the first ground may depend on evidence not presently before me such as evidence from the administrators of their knowledge of relevant matters, and evidence from the applicant as to his knowledge and his actions had he been informed as it is claimed he should have been. Other grounds seem to overlap. For example, ground five seems to overlap with ground four. However, I do not need to address each ground because I am satisfied that there is a prima facie case of an estoppel by convention.

21    Professor Butt in his book, Land Law (6th ed, Lawbook Co., 2010) discusses this issue at [15.46]. He identifies five requirements for an estoppel by convention in this area. I think the matters identified earlier in these reasons are sufficient to establish a prima facie case that an estoppel by convention arose to the effect that the applicant could remain in possession of the premises as if he was the lessee for so long as he complied with the terms and conditions of the Lease with which he could comply (Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 (at 244-245); TEC Desert Pty Ltd and Another v Commissioner of State Revenue (Western Australia) (2010) 241 CLR 576). There are substantial arguments to be put against a conclusion that an estoppel by convention arose, not the least being the terms and conditions of the Franchise Agreement and Lease referred to earlier in these reasons. However, the question at this stage is whether there is a prima facie case, and I think there is such a case. I turn to consider the balance of convenience.

22    The balance of convenience clearly favours the applicant. His sole source of income is the business he conducted from the premises. He is obliged to make repayments in connection with business finance facilities he has and repayments of a loan which is secured by a mortgage over his family home. If the interests of third parties are relevant, then it may be noted that the applicant usually employs nine to ten casual employees in his business. I think that it is also relevant to the balance of convenience that the respondent had no objection to the applicant conducting an ice cream business from the premises providing it was not conducted as a Wendy’s outlet. The respondent may have good reason for that proviso and that may be revealed in due course. However, it was not described or explained on the hearing of the application.

23    The balance of convenience is relevant to the weight to be placed on the strength of the prima facie case. In other words, the two are inter-related. A prima facie case, in the relevant sense, must be established whatever the result of an assessment of the balance of convenience. However, the significance of the strength of the prima facie case will be less where, as in this case, the balance of convenience clearly favours the applicant than in a case where the balance of convenience favours the respondent, or considerations of convenience are evenly balanced (Samsung Electronics v Apple at 261 [67]). In this case, the fact that the balance of convenience clearly favours the applicant has been an important factor in my decision to grant the applicant the relief which he seeks.

24    It was for these reasons that I made the orders set out at the beginning of these reasons.

Associate:

Dated:    11 September 2015