New South Wales Supreme Court CITATION : Elite Promotion and Management Pty Ltd v 5A Investments Pty Limited [2009] NSWSC 556 HEARING DATE(S) : 15 June 2009 JUDGMENT OF : Gzell J EX TEMPORE JUDGMENT DATE : 15 June 2009 DECISION : Defendant ordered to permit plaintiff to re-enter upon sole director of plaintiff undertaking to cause plaintiff to pay future rent when due CATCHWORDS : PROCEDURE - Interlocutory Relief - lessee locked out of premises for failure to top up bank guarantee called upon by lessor for failure to pay rent - no obligation to top up under lease - invalid notice to quit - no notice under the Conveyancing Act 1919, s 129 - whether interlocutory mandatory injunction should be granted LEGISLATION CITED : Conveyancing Act 1919 TEXTS CITED : Meagher, Gummow & Lehane's Equity, Doctrines and Remedies, 4th ed (2002) Butterworths LexisNexis, Australia PARTIES : Elite Promotion and Management Pty Ltd (Plaintiff) 5A Investments Pty Limited (Defendant) FILE NUMBER(S) : SC 3204/09 COUNSEL : J Stevenson SC/ J Anderson (Plaintiff) SOLICITORS : Simpson Freed Lawyers (Plaintiff) Mr S Barry CKB Partners (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J MONDAY 15 JUNE 2009 3204/09 ELITE PROMOTION AND MANAGEMENT PTY LTD v 5A INVESTMENTS PTY LIMITED EX TEMPORE JUDGMENT 1 The plaintiff is the lessee of premises from the defendant. On 28 October 2008 a mortgagee went into possession, and moneys were paid by the plaintiff either to the mortgagee or to the defendant as lessor. The mortgagee ceased to be in possession on 4 May 2009. In the meantime, on 1 May 2009 the defendant drew on a bank guarantee of $50,000 the plaintiff had provided under the lease, for rent for the period 16 April to 15 May 2009. 2 Tax invoices were subsequently issued with respect to the rent for the period 16 May to 15 June and in respect of a CPI increase in rent from 16 November 2008 to 15 April 2009. 3 The defendant also drew on the bank guarantee in an amount of $10,879.26 prospectively with respect to rent that would become due for the period 16 June to 15 July 2009. Rent was payable in advance. This drawing exhausted the bank guarantee except for $100. 4 On 8 May 2009 an e-mail was sent by the defendant to the plaintiff stating that the bank guarantee stood below $50,000 in breach of the lease and if not rectified, the defendant would lock out the plaintiff until written confirmation was received from the plaintiff's bank that the guarantee value of $50,000 had been established. 5 An email containing a notice was sent to the plaintiff by the defendant on 29 May 2009. It was in the following terms: "You are given formal Notice to vacate the premises. 1. Elite has failed to maintain the Bank Guarantee and reinstate its face value. 2. Elite has failed to comply with the notice dated 1 May to reinstate the Bank Guarantee. 3. Elite by its conduct has repudiated the Lease which repudiation is accepted by the Lessor. The Lease is Terminated. Elite is required to vacate the Premises and to comply with its obligation for delivery up of the Premises to the Lessor. Continued occupation of the Premises by Elite is trespass and addition to claim for damages for Elite's breach of the Lease may lead to claims for further consequential loss including mesne profits." 6 The allegation in the email that a notice dated 1 May 2009 to reinstate the bank guarantee had been given to the plaintiff was not made out on the evidence at this stage. The evidence of Michael Lawrence Pinn, the sole director and secretary of the plaintiff, was that to the best of his knowledge, information and belief, the plaintiff did not receive any notice dated 1 May 2009. This evidence was not controverted and while Mr Pinn was cross-examined, this issue was not raised in that cross-examination. 7 The lease provided in Part 15 for the provision of a bank guarantee in an amount specified in the schedule at $50,000. Part 15 was in the following terms: "The Lessee will prior to the commencement of this lease hand to the lessor a Bank Guarantee drawn in favour of the lessor by a bank registered under the Banking Act of Australia under which such bank binds itself to pay upon demand to the lessor a sum equal to the amount stated in the Schedule." 8 There is no provision in the lease giving specific power to the lessor to draw against the bank guarantee in the event of a default on the part of the plaintiff to carry out any of its terms and, in particular, the clause providing for the payment of rent. But its nature must be that of a performance guarantee and it must be inferred that the defendant had that right. 9 The problem with the current notice is that there is no provision in the lease that the plaintiff was required to top up the bank guarantee to its original figure of $50,000 in the event of any draw upon it and I am not prepared to infer that such an obligation was within the parties' agreement. The nature of a performance guarantee is to provide security in a specific amount to a lessor against breaches of the lease. 10 The notice of 29 May 2009 was, therefore, bad. Furthermore, there was no notice under the Conveyancing Act 1919, s 129. The defendant had no right to evict the plaintiff and change the locks on the doors. 11 The plaintiff seeks an order that the defendant be restrained from interfering with the plaintiff's possession of the premises. The plaintiff is not in possession of the premises and it is a somewhat strained use of language in those circumstances to couch an injunction in those terms. The plaintiff also seeks an order that the defendant forthwith permit the plaintiff to re-enter the premises. That seems to me to be a more logical form of order. 12 The relief that is sought by the plaintiff is in the nature of an interlocutory mandatory injunction and it used to be thought that an injunction of the mandatory type given on an interlocutory basis was rare and that it required some higher proof of entitlement than other forms of injunction of the restrictive kind. But it is said in Meagher, Gummow & Lehane's Equity, Doctrines and Remedies, 4th ed (2002) Butterworths LexisNexis, Australia at [21-395] that a judge hearing an application for an interlocutory mandatory injunction must apply exactly the same tests that would be applied in the case of an application for an interlocutory prohibitory injunction, not some different or more exacting test. 13 In my view an entitlement to an interlocutory mandatory injunction, subject to discretionary matters, has been established in this case. 14 The discretionary matter of significance to this type of interlocutory injunction is the balance of convenience. Since a mandatory injunction at the interlocutory level will disturb the status quo, it will more often than not be the case that a judge will regard the balance of convenience as being in favour of refusing the application. 15 In this case a further feature in favour of that result was the temporary accommodation has been vouchsafed to the plaintiff by the next door tenant. He had allowed computer systems and telephone systems to be set up on a temporary basis and telephones to be manned by an employee of the plaintiff so that communication with clients was not totally thwarted. 16 It seems to me, however, that on the evidence that convenience is of a temporary kind. It does not in the balancing of factors outweigh the convenience of having the plaintiff restored to possession. If it is not, it suffers the prospect of losing contact with clients. But he who comes to equity must do equity and such restoration should be subject to giving a suitable undertaking in relation to the future payment of rent as well as the usual undertaking as to damages. 17 The submission was made that an undertaking as to damages by the plaintiff company would not provide the defendant with any security because, in cross-examination, Mr Pinn accepted that the company had $2 of paid-up capital, one share being held by him, the other by his wife. 18 The undertaking as to damages should be by the plaintiff and by Mr Pinn, its sole director. 19 Mr Pinn by his counsel should undertake that he will procure that the plaintiff, upon receipt of a tax invoice for the amount of rent in respect of the period 16 June 2009 to 15 July 2009 ($17,303.00 including GST) after allowing a credit of $10,879.26, pay the net amount of $6,424.74; and thereafter, upon receipt of tax invoices for the amounts of rent in respect of the periods 16 July 2009 to 15 August 2009 and following, pay such invoices. 20 If the plaintiff and the sole director of the plaintiff, Mr Pinn, by their counsel give to the Court the usual undertakings as to the damages and if Mr Pinn by his counsel gives to the Court without admissions and without prejudice the above undertaking, I will order that the defendant forthwith permit the plaintiff to re-enter the premises at suites 9A and 9C, 2-4 Northumberland Road, Taren Point being part of lot 12 in strata plan 81444 together with the exclusive use of car spaces 4, 7, 8 and 42-55 inclusive. 21 I will also make an order that the defendant forthwith provide the plaintiff with keys to the premises and do all the things otherwise necessary to restore to the plaintiff possession of the premises. 22 A difficulty arose with respect to the elevator to the premises. For safety reasons it had been decommissioned by the defendant. Agreement has, however, been reached with respect to making good the elevator service and I will make an order that the defendant do all things necessary to restore the elevator services to the premises including, without limiting the generality of the foregoing, instructing the maintenance organisation, Kone Elevators Pty Limited to reactivate the elevator service. I will also order the defendant to instruct Kone that it is to accept instruction exclusively from the plaintiff in relation to the operation, service and maintenance of the exclusive use elevator, lift No 2, servicing the premises. 23 The defendant is to pay the plaintiff's costs of the interlocutory proceedings payable forthwith upon assessment of agreement. 24 The parties are to bring in short minutes of order in accordance with these reasons. ********** 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.