Carlovers Carwash v Southmore [2004] NSWSC 466

Reported Decision : 49 ACSR 697

New South Wales Supreme Court

CITATION : Carlovers Carwash v Southmore [2004] NSWSC 466 HEARING DATE(S) : 24/5/04 & 26/5/04 JUDGMENT DATE : 8 June 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Proceedings not transferred

CATCHWORDS : CORPORATIONS - practice and procedure - whether claim by administrator to be transferred to Supreme Court of Western Australia LEGISLATION CITED : Corporations Act 2001 (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987 Carlovers Carwash Limited (Subject to a Deed of Company Arrangement) - First Plaintiff Stuart Karim Ariff - Second Plaintiff PARTIES : Southmore Pty Limited - First Defendant Innercity Pty Limited - Second Defendant Arcane Pty Limited - Third Defendant FILE NUMBER(S) : SC 2578/04 COUNSEL : C R C Newlinds SC; R Francois - Plaintiffs M K Minehan - Defendants SOLICITORS : Clayton Utz - Plaintiffs Letherbarrow - Defendants

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST

CAMPBELL J

8 JUNE 2004

2578/04 CARLOVERS CARWASH LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) AND ANOR v SOUTHMORE PTY LIMITED AND ORS JUDGMENT HIS HONOUR: Nature of the Application 1 This is an application by the defendants for the proceedings to be transferred to the Supreme Court of Western Australia, either under section 1337H Corporations Act 2001 (Cth), or section 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987. Circumstances Leading to the Application 2 The First Plaintiff ("Carlovers") is one of a group of companies which operated self-service carwashing facilities at numerous sites throughout Australia. On 10 July 2003 the Second Plaintiff, Mr Stuart Ariff, was appointed as voluntary administrator of the companies in that group. 3 Carlovers was, at the time of Mr Ariff's appointment, lessee of three pieces of real estate in Western Australia. From Southmore Pty Limited ("Southmore") it was the lessee of land at O'Connor. From Innercity Pty Limited ("Innercity") it was the lessee of land at Belmont. From Arcane Pty Limited ("Arcane") it was the lessee of land at Warwick. The three lessor companies are the defendants in these proceedings, who seek the transfer of the proceedings to the Supreme Court of Western Australia. Each of the lessor companies carries on business in Western Australia, and has its principal place of business there. Mr Jim Low, a Western Australia resident, is a director of all three lessor companies and has acted for them in the events from which this application arises. 4 On 16 July 2003 Mr Ariff executed a Notice of Administrator's Intention not to Exercise Property Rights, pursuant to section 443B(3) Corporations Act 2001 (Cth), concerning each of the O'Connor, Belmont and Warwick sites. He arranged for such a notice to be sent to each of the lessor companies. He did this because he formed the view that the rental payable for the three sites made them unprofitable. 5 On 23 and 24 July 2003 three people from Mr Ariff's firm (Ms Yazni Ariff, Mr Andrew Hamilton, and Mr Heydon Moore) had a meeting at the Sheraton Hotel, Perth, with Mr Low. Mr Ariff contends that following that meeting, on 28 July 2003, an agreement was reached between Ms Ariff and Mr Low whereby Carlovers would remain in occupation of the sites, but the lessors would accept a reduced rental for the period of the voluntary administration, namely $7,000 per month in respect of the O'Connor site, $2,000 per month in respect of the Belmont site, and $5,000 per month in respect of the Warwick site. It was a common understanding, according to Mr Ariff, that the parties would negotiate lease terms which were more favourable for Carlovers if Carlovers continued in occupation after the voluntary administration period. Mr Low contends that no such agreement was reached. 6 On 28 July 2003 Mr Ariff's office issued a purchase order to each of the lessor companies, for rental at the rate which Mr Ariff contends had been agreed, for the period up to 31 December 2003. Mr Ariff paid rental at that reduced rate for the period of the voluntary administration, and the defendants accepted rent at that reduced rate. 7 By September 2003 Mr Ariff was not hopeful that negotiations for a reduced rental, once the administration had ended, would come to fruition. On 29 September 2003 he caused Carlovers to vacate the premises at Belmont leased to it by Innercity. 8 On 18 November 2003 a meeting took place at a restaurant in Victoria Park, Western Australia, to discuss Carlovers' obligations under the lease agreements. Attending for the defendants were Mr Low and Mr Brian Letts, the manager of Westpoint Realty (the defendants' managing agent with respect to the leased properties). The evidence does not otherwise disclose the substance of what either side to this dispute alleges transpired at that meeting. 9 Negotiations continued concerning the sites at O'Connor and Warwick. In connection with the O'Connor and Warwick sites, Mr Ariff's solicitors prepared agreements for the sale of the fixtures on the sites, and Deeds of Surrender of the leases. A settlement, which had been fixed for 5 December 2003 between the solicitors for Mr Ariff and the solicitors for the defendants did not proceed when it became clear that the defendants would not execute a Deed of Surrender which released certain rights against Carlovers. 10 Meanwhile, this Court had extended the convening period for the second meeting of creditors of Carlovers. The second meeting of creditors was held on 3 November 2003, and resolved that the company should enter a Deed of Company Arrangement. The administration ended when such a Deed was executed on 5 December 2003. 11 Carlovers eventually vacated the premises at Warwick and O'Connor on 31 January 2004. 12 On 19 February 2004 six sets of proceedings were filed in the District Court of Western Australia. Innercity was the plaintiff in two of them, Southmore the plaintiff in another two, and Arcane the plaintiff in the final two. Each of those plaintiffs brought one set of proceedings against Mr Ariff personally, and one set of proceedings against Carlovers. Insofar as the proceedings were brought against Mr Ariff personally, each plaintiff claimed that, pursuant to section 443B(2) of the Corporations Act 2001 (Cth), Mr Ariff was liable to pay the contractual rate of rental and outgoings under the lease from that plaintiff to Carlovers for the period of the administration. All three of the plaintiffs sought from Mr Ariff the amount of rental and outgoings which had been underpaid during the period of the administration, plus interest. In addition, Innercity sued Mr Ariff in detinue and conversion, arising from an alleged removal of certain equipment from the Belmont land when Carlovers vacated that site on 29 September 2003. The primary relief claimed for the detinue or conversion was an order for delivery up of the goods, with a claim for damages to the extent that delivery up was not ordered. Insofar as each plaintiff brought proceedings against Carlovers, it was a claim for rental and outgoings, at the contractual rate under the leases, accruing in the period after the administration ended, plus interest. The amounts claimed, exclusive of interest and costs, are as follows: Innercity from Carlovers - rent and outgoings $45,299.18 Southmore from Carlovers – rent and outgoings $45,861.03 Arcane from Carlovers – rent and outgoings $41,415.26 Innercity from administrator – rent and outgoings $62,802.37 Innercity from administrator – conversion $92,210.16 Southmore from administrator – rent and outgoings $49,583.99 Arcane from administrator – rent and outgoings $37,453.56 TOTAL $374,625.55