New South Wales Supreme Court CITATION : Margwyn Holdings Pty Ltd v Hodgkinson [2007] NSWSC 787 HEARING DATE(S) : 05/07/07 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq EX TEMPORE JUDGMENT DATE : 5 July 2007 DECISION : Interlocutory injunction granted. CATCHWORDS : EQUITY [334]- Equitable remedies- Injunctions- Interlocutory injunctions- Evidence that notice was sent sufficient to establish arguable case- Balance of convenience considered- Injunction granted. LANDLORD & TENANT [39]- Option to renew- Plaintiff tenant to give landlord notice of intention to exercise option by certain date- Plaintiff says notice sent to landlord's solicitor- Alleged that notice never received- Notices sent in accordance with usual office procedure are presumed to have reached their destination unless there is evidence to the contrary- Therefore case to go for trial on the facts. LEGISLATION CITED : Conveyancing Act 1919, s 170 Interpretation Act 1987, s 76 Connor v Blacktown District Hospital [1971] 1 NSWLR 713 CASES CITED : Cushing v Lady Barkly Gold Mining Co (1883) 9 VLR (E) 108 Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729 Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647 PARTIES : Margwyn Holdings Pty Limited (P) Lisa Jane Hodgkinson (D) FILE NUMBER(S) : SC 3331/07 COUNSEL : E White (P) H Woods (D) SOLICITORS : Delves & Wain (P) Robert King & Associates (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Thursday 5 July 2007 3331/07 – MARGWYN HOLDINGS PTY LTD v HODGKINSON JUDGMENT 1 HIS HONOUR: This is an application for an interlocutory injunction brought by the former lessee of commercial premises in Broulee who is still in possession at least under a holding over clause. 2 The plaintiff had a lease which expired on 15 October 2006. The lease in cl 4 provided that there was an option for a further term but a condition was that in cl 4.4.1: "the tenant serves on the landlord a notice of exercise of option not earlier than the first day stated in item 12D in the schedule and not later than the last day stated in item 12E in the schedule." 3 There was no date stated in either item 12D or item 12E of the schedule. It may be argued, however, that the drafter of the lease intended that to be a reference to cl 11. That matter has not been argued before me. Item 11E provided that the last day the option for renewal could be exercised was 16 July 2006. 4 Clause 14 of the lease provided that a document under or relating to the lease is served if it is served in the manner provided in s 170 of the Conveyancing Act 1919. That is not an exclusive method of giving notice. Section 170 provides essentially that a notice is sufficiently served if delivered personally or if sent by post to the last known residential or business address of the person to be served. When this section is read with s 76 of the Interpretation Act 1987 service by post is effected by properly addressing, prepaying and posting a letter containing the document and it is taken to have been effected at the time the letter would have been delivered in the ordinary course of post unless there is evidence to the contrary. 5 The plaintiff says that on 29 June 2006 its controller, Mr Mark Melrose, prepared a letter which reads, omitting formal parts: "In accordance with Clause 4 of the above registered lease, we hereby advise that we wish to exercise our option under the original lease conditions to renew this lease for a further 3 years, from the current termination date of October 15, 2006. We would appreciate your confirmation of this in due course." The letter was addressed to the landlords, Edward Joseph and Norma Margaret Schell, C/- David Hawdon, BHM Lawyers, 8 Beach Rd, Batemans Bay, NSW, 2536. 6 The evidence from Mr Melrose is that in early 2006, he was told by Mr Schell that the latter's marriage to Mrs Schell had broken down and that he was to refer any matters he may have regarding the lease to the Schells' solicitor, David Hawdon, and he will take care of it. 7 The Schells transferred the property to the defendant in July 2006. Mr Hawdon acted on the sale. 8 Mr Hawdon gave evidence that on 30 June 2006, he forwarded a letter to the defendant's solicitors and it had no mention of the alleged exercise of the option. He wrote a further letter on 7 July 2006, again making no mention of the exercise of the option. He then says that the first time he saw the alleged letter of 29 June 2006 was on 1 June 2007. 9 Mr Melrose says that on 29 June 2006 he prepared a letter that he carries on business as a real estate agent in Broulee, the office practice was that when a letter was signed, it was put in an envelope and stamped, it was lodged in an outgoing mail rack. The system was that the mail would be posted each morning by a member of staff before 11 a.m. at the Broulee sub-agency post office. The inference is that the letter was dispatched in accordance with this procedure. 10 The authorities show that such evidence is prima facie evidence that the letter reached its destination; see Connor v Blacktown District Hospital [1971] 1 NSWLR 713; Trade Practices Commission v TNT Management Pty Ltd (1984) 56 ALR 647 at 702 and Cushing v Lady Barkly Gold Mining Co (1883) 9 VLR (E) 108. 11 Of course, that presumption is to be put in the mix with evidence the other way, such as evidence that the letter was not received, though the presumption is usually not displaced merely by non-recollection of the receipt of the letter. See the Cushing case at 122 (though this may relfect the efficiency of the Victorian postal service in 1883!) 12 In the instant case, at the final trial there will need to be a decision on a matter of fact as to whether the letter was ever written; if it was written, whether it was posted; and if it was posted, whether it was actually received. 13 Mr Woods, who appears for the defendant, points out that for a notice of exercise of option to be effective, actual notice is required and the letter exercising the option must be received. That is not necessarily a full statement of the law. There are cases where letters have been delivered to the lessor where they have slid under the linoleum or otherwise not actually come to someone's notice where the option has been held to be properly exercised, but all this is a matter of fact. 14 All that a plaintiff has to do in the case of an interlocutory injunction is to show that if the evidence he or she tenders is accepted at the trial, there is a serious prospect of the plaintiff succeeding at the trial. If the defendant gives evidence contrary to the plaintiff's evidence, the court does not evaluate that but merely takes into account the material that the defendant has given. 15 Accordingly, a defendant who denies a vital factor put forward by the plaintiff, if there are no other circumstances which show that the plaintiff's material may be unreliable, does not achieve very much on an interlocutory application; see Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729. 16 In the instant case, Mr Woods says that there are some indications externally that what the plaintiff says is not right because it is very hard to imagine that a solicitor would, if he had received the letter, have written the letters to the purchaser's solicitors that he did in fact write. I recognise that point, but it does not seem to me that it sufficiently diminishes the situation that the plaintiff has shown material which, if accepted at the trial, would mean that it had a good chance of success. 17 In an interlocutory application the court considers, first of all, whether there is a prima facie or arguable case; secondly, whether the balance of convenience favours the grant rather than the refusal of an injunction, and it can also take into account certain other matters such as whether damages would be an adequate remedy and whether any equitable defence such as clean hands etc applies. Those ancillary matters do not arise in the instant case. 18 So far as the question of the balance of convenience is concerned, there is limited commercial accommodation in Broulee. The plaintiff has been carrying on a real estate agency business there for some years. The defendant says that she purchased the property and believed on what she considered to be reliable information that the property was available to open a pharmacy. She has since proceeded with the Commonwealth authorities for the appropriate authorisation to open a pharmacy and has been given the opportunity of opening a pharmacy provided that everything is in order by 31 July 2007. 19 The material here is a bit odd because it would seem from the material put in the affidavit of Mr Flaherty that the 31 July date is not a firm date, but one on which a decision may or may not be made unless an extension is requested. Secondly, it would seem that the defendant is not going to open a pharmacy personally, she intends to lease it to a Mr Sidhom. 20 However, there is a very peculiar document in the affidavit, which is a draft contract, whereby Mr Sidhom sells the business at Broulee for a large sum of money to a Mr Louttit, the large sum of money including the amount of $330,000 for goodwill, which is very odd for a business that just does not exist. 21 The plaintiff says that there is nowhere else for it to go. The defendant says that her proposal to open a pharmacy will be frustrated if the plaintiff is to remain in possession. The plaintiff's need is clear. The defendant's is a bit murkier in view of the various transactions that I have mentioned. She has not yet opened her business and I am not convinced that 31 July is a realistic deadline. 22 Accordingly, the balance of convenience favours the grant of an injunction until the hearing. 23 Two things I should have mentioned. The first is that the plaintiff's alternative claim is that the defendant is estopped from alleging that the option has not been exercised. Again this is odd. A letter was sent by Mr Melrose on 8 October 2006 to the defendant, which reads: "Dear Lisa, re: shop 1/77 Coronation Drive, Broulee - lease to Margwyn Holdings. Thank you for your recent letter confirming your purchase of the above property. In accordance with our existing Lease we would like to exercise our option to renew our lease of this office for a further three years from October 15, 2006. We would appreciate your confirmation of this and look forward to a long association with you." The reply of 25 October 2006 was simply: "Dear Mark, I have forwarded your note regarding the lease to our solicitor and will get back to you when we have heard from him." There was no follow-up to that letter. 24 Mr White says that there was an estoppel based on reliance on this letter because had the plaintiff been told in October that it was alleged that it had not exercised its option when it believed it had, then there was a possibility of it being able to relocate into other commercial premises, premises which are not now available. However, the letter may harm the plaintiff's case because it is odd that a person who had exercised its option in June would be writing a letter in October stating that it would like to exercise its option. This will have to be explored at the trial. 25 There is a weak arguable case on estoppel at the moment. This may expand when more evidence comes in, but it does not matter too much because I consider that the earlier ground is sufficient to get over the arguable case barrier. 26 The second thing I should say is that I am told that the case will take about two months to get ready, so that what I am doing will freeze the position for about two months. However, that two-month assumption is made on the basis that the parties will each move as quickly as they can to get ready and one of them at least will approach the expedition judge for an expedited hearing. 27 My feeling at the moment is that the key issue is whether the letter of 29 June 2006 actually was created and sent on that date. It may be that some forensic examination will have to be made of the plaintiff's computer etc, which may take time, so that possibly it will not be ready in two months, but I cannot see it being ready in less than two months. 28 Accordingly, upon the plaintiff by its counsel giving to the court the usual undertaking as to damages and on a without prejudice basis increasing the monthly rent to $2900 per month, I make order 1 in the notice of motion. Costs of the application to be costs in the cause. 29 I direct that all evidence by the plaintiff be filed and served by 4 pm on 20 July 2007 and the defendant's evidence by 4 pm on 17 August 2007. I stand the matter over to the Registrar's list at 9.30 am on 20 August 2007. 30 Any subpoenas and notices to produce may be made returnable before a Deputy Registrar at 9 am on 19 July 2007. ************* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.