New South Wales Supreme Court CITATION : Digital Eskimo Pty Ltd v Hanave Pty Ltd [2008] NSWSC 438 HEARING DATE(S) : 30 April 2008 JUDGMENT DATE : 30 April 2008 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 30 April 2008 DECISION : Undertaking to Court given by Defendant. CATCHWORDS : INJUNCTION – Application to restrain lessor from taking possession on expiry of term – no question of principle. LEGISLATION CITED : Trade Practices Act 1974 (Cth) – s 52, s 87 CATEGORY : Procedural and other rulings PARTIES : Digital Eskimo Pty Ltd (Plaintiff) Hanave Pty Ltd (Defendant) FILE NUMBER(S) : SC 2557/08 COUNSEL : P. King (Plaintiff) P. Folino-Gallo (Defendant) SOLICITORS : Segal & Associates (Plaintiff) Gilbert Mane Solicitors (Defendant) PALMER J. 2557/08 Digital Eskimo Pty Limited v Hanave Pty Limited JUDGMENT – On application for injunction 30 April, 2008 1 The Plaintiff is the lessee of certain commercial premises of which the Defendant is the lessor. The lease expires today. 2 The Plaintiff carries on an active business in the premises, employing a number of staff and requiring a considerable quantity of goods, materials and equipment. The Plaintiff says that, at least since December 2007, the lift in the premises has been largely non-operational. The consequence, so the Plaintiff says, is that it has been unable to remove from the premises its goods and materials because the premises leased are on the eighth floor of the building and it is impossible to get all of the material out of the building except by use of the lift. 3 The Plaintiff, by its Summons and Notice of Motion, seeks an injunction restraining the Defendant from regaining occupation of the premises until such time as the Plaintiff has had a reasonable opportunity of removing its goods from the premises by use of the lift. The Plaintiff says that a reasonable time for removal of its goods is one month from the time the lift becomes operational. The Plaintiff says that it needs that time in order to minimise the damage to its business which would otherwise be occasioned by a more precipitous removal. 4 The Defendant says that the lift has been non-operational for some periods of time since December but that it has procured the lift to be made operational as from yesterday. That contention is disputed by the Plaintiff and particularly by Mr Gavina, who says he observed that the lift was not operating yesterday morning and this morning. It is not necessary for the purposes of this application to decide the disputed question of fact as to whether or not the lift is now operational. 5 The Plaintiff seeks the relief which I have outlined upon a number of bases. First, it says that it has the benefit an implied tenancy for a period of one month by reason of the provisions of clause 4(b) of the lease. Clause 4(b) of the lease provides that if the lessee continues to occupy the premises beyond expiry of the term "with the consent of the lessor" , he shall do so as a monthly tenant at a rental payable monthly in advance equal to one-twelfth of the rent due under the lease. 6 Mr King of Counsel, who appears for the lessee, says that by failing to keep the lift in the building operational so as to enable the lessee to move out, the lessor has consented to the lessee continuing to occupy within the meaning of clause 4(b) of the lease. 7 I do not think that this argument is sufficiently compelling to raise a serious question to be tried so as to support the interlocutory relief sought by the Plaintiff. Although I do not give a final decision on the point, I am of the view that if the lessor fails to comply with a covenant to keep the lift in good repair, what it has done is simply breach its obligations under the lease; it has not, ipso facto, also consented to a holding over within the terms of clause 4(b). 8 The second basis upon which Mr King says the injunction ought to go is that the Defendant has been guilty of misleading and deceptive conduct in and about the vacation of the premises by the Plaintiff. Mr King says that the Defendant has misrepresented to the Plaintiff that the lift would be operational and that by reason of that representation the Plaintiff has suffered, or would suffer, loss and damage unless an injunction were granted in the terms which he seeks. Mr King submits that if misleading conduct under s 52 of the Trade Practices Act 1974 (Cth) is found to have been committed by the lessor in relation to representation about the lift, then the court has power under s 87 of the Trade Practices Act in effect to re-write the terms of the lease and to give the lessee the benefit of a monthly tenancy or holding over clause in terms of clause 4(b) of the lease. 9 I have to say again that I do not find this argument sufficiently compelling to raise a serious question to be tried. All that the evidence so far reveals is an apparent breach by the Defendant of a covenant for repair in the lease. If the Defendant has breached a covenant of its lease, then it is liable on a contractual basis for its breach and there is no occasion for calling into operation the provisions of the Trade Practices Act , particularly s 87, so as to re-write a term of the lease. Damages would be an adequate remedy for breach of such a covenant, if damage is found. 10 The third basis upon which Mr King submits that the injunction should be granted is that the lessor has been guilty of unconscionable conduct in the formation of the lease itself, some almost three years ago. This allegation is largely unparticularised. 11 There is scant evidence in the case, but I think the correspondence which has passed between the parties throws a great deal of light on the dispute. In my opinion, it demonstrates the lack of substance of the Plaintiff's foreshadowed case on the Trade Practices cause of action and, as well, it demonstrates where the balance of convenience lies if there is any case made out for the granting of any relief. 12 The correspondence is attached to the affidavit of Mr Burke, a director of the Defendant and also a solicitor. By letter dated 19 March 2008 from the Plaintiff's solicitors to the Defendant's solicitors, the Plaintiff's solicitors advise that the Plaintiff would vacate the premises on 30 April 2008 and that "at least seven days prior to 30 April 2008 the lift (is) to be made operative so that our client can remove the tenant's fixtures." That statement was made in the course of an offer to resolve the dispute between the lessor and the lessee. The offer was contained in a 'without prejudice' letter, but no objection has been taken to the tender of that letter. 13 That letter was answered by the Defendant's solicitors on 15 April 2008. In that letter the Defendant's solicitors said: "Our client is prepared to organise the lift to be made available for the removal of its goods (sic) during the final seven days of April as requested by your client in your letter of 19 March 2008. Your client should make direct contact with our client to arrange for the temporary activation of the lift, solely for the client to remove its goods." 14 One would have thought that that proposal would have settled the manner in which, and the time at which, the Plaintiff was to remove its goods from the premises. However, on 22 April 2008 the Plaintiff's solicitors wrote to the Defendant's solicitors requiring a letter from a lift mechanic certifying that the lift would be operable and stating that the Plaintiff would vacate the premises "no more than one month after it has received such notification" . It will be seen that that proposal was quite contrary to the agreement which had already been concluded by exchange of correspondence, to the effect that one week would be all that was required for the Plaintiff to remove its goods. Thereafter, there ensued correspondence which brought the parties to loggerheads and occasioned this application. 15 It seems to me that the evidence clearly suggests that the Plaintiff has decided that it would be better for it commercially to remain in the premises for some additional time, that is, longer than the period of seven days which it had previously agreed was sufficient to remove its goods from the premises. It may well be commercially advantageous and less disruptive for the Plaintiff to have additional time to remove itself from the premises, but that is not the basis upon which the court can act in this case. The parties have contractual obligations and duties. It is the duty of the Plaintiff to give possession upon expiration of the term of the lease unless it is prevented from doing so by the Defendant. 16 I am satisfied that there is a sufficient basis for concluding that the Defendant has, by not keeping the lift in repair, breached its covenants under the lease, whereby it has prevented the Plaintiff from removing its goods during such time as the lift was non-operational. However, the Plaintiff is excused from performance of its contractual duty to vacate the premises only for such time as it is prevented from doing so by breach of the Defendant's covenant to keep the lift in good repair. 17 Once the lift is put into operation, I am satisfied that a reasonable time for removal of the Plaintiff's goods will be seven days, in accordance with the proposal put by the Plaintiff in its letter of 19 March 2008. 18 I find that there is a serious question to be tried as to whether the Plaintiff's failure to vacate has been caused by the Defendant's breach of its covenant to keep the lift in good repair. As to the balance of convenience, I would have been prepared to grant an injunction preventing the Defendant from re-taking possession of the premises for a period of seven days from the certification of the lift as operational. 19 However, the Defendant has now offered an undertaking to the court which will remove the necessity for an injunction. The undertaking is in the following broad terms: that the Defendant will file an affidavit in court from a responsible and qualified lift mechanic that the lift in the premises is fully operational and may safely be used for the removal of the Plaintiff's goods and effects from the premises. Further, the Defendant undertakes that it will procures that there is a lift maintenance mechanic in attendance for a period of seven days thereafter so as to ensure the continued operation of the lift. 20 Finally, the Defendant undertakes to the court that during a period of seven days, commencing from 10am on the next business day after the filing and service of such an affidavit, the Defendant will not seek to regain possession of the premises and will otherwise co-operate with the Plaintiff in the removal of the Plaintiff's goods. 21 If those are the undertakings which are proffered to the court, then they are in the same terms as the injunction I would have been prepared to grant and I would accept those undertakings in lieu of granting the injunction. The terms of the undertaking should be embodied in formal Short Minutes of Order, which the Defendant can prepare and which may be submitted to me in chambers for confirmation. I will then note the undertakings formally as undertakings to the court. 22 The effect of this judgment is, assuming the Defendant is able to file an affidavit from the lift mechanic tomorrow, Thursday, that the Plaintiff will have seven days, starting from and including Friday, within which to remove its goods from the premises and that period of seven days will be the time during which the undertaking to the court by the Defendant prevents the Defendant from taking any step to remove the Plaintiff. 23 As to costs, neither party has had the result that it sought. The Plaintiff has not obtained an injunction for a period of a month but it has secured some additional time by way of undertaking from the Defendant. The Defendant has not been successful in resisting any form of order or undertaking. I think that the costs of today should abide the outcome of the proceedings. 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