Medlab Pathology Pty Ltd v UTSG Consortium Pty Ltd [2014] NSWSC 402

Supreme Court New South Wales

Medium Neutral Citation: Medlab Pathology Pty Ltd v UTSG Consortium Pty Ltd [2014] NSWSC 402 Hearing dates: 28 March 2014 Decision date: 28 March 2014 Jurisdiction: Equity Division Before: Young AJA Decision: Proceedings discontinued. Decision on costs. Cases Cited: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Category: Costs Parties: Medlab Pathology (Plaintiff) UTSG Consortium (1st Defendant) Sydney Medical Group (2nd Defendant) Lasalle Funds Management (3rd Defendant) Jayantial Kovartee (4th Defendant) Representation: Counsel: Mr J. P. Donahoe (Plaintiff) No appearance (1st Defendant) Mr P. Afshar (2nd Defendant) Ms K. Dawson (3rd Defendant) Mr B. Zipser (4th Defendant) Solicitors: Avondale Lawyers (Plaintiff) No appearance (1st Defendant) Spinks Eagle Lawyers (2nd Defendant) Gadens Lawyers (3rd Defendant) Macquarie Partnership (4th Defendant) File Number(s): 2013/00255603 Publication restriction: None

Judgment 1These proceedings were brought by an alleged sub-lessee of part of premises in Pitt Street, Sydney, which appear to be used as a pharmacy, a medical centre and a pathology laboratory. The plaintiff as its name would suggest, conducts the last mentioned. 2The plaintiff received, on or about 14 August, 2013, a document headed "Formal Notice" which is addressed "To Whom it May Concern", and states in part: - You are formally notified that Medlab does not hold least agreement with the Sydney Medical Group. You are requested to vacate the premise, however in the interim should you wish to continue to defy this request; we require restraint and professional behaviour at all time. ... Yours sincerely, Sydney Medical Group - Management Team, Roselyn Singh. 3Ms Roselyn Singh, at that stage, was also the sole director the first defendant, UTSG Consortium Pty Ltd, a company that went into liquidation on 3 February, 2014. She also signed a transfer of lease, AH969028, both as the director of the transferor, UTSG, and the director of the transferee, another company, Sydney City Medical Pty Ltd. 4The plaintiff commenced these proceedings to protect its position at the Pitt Street premises. It approached the Duty Judge and obtained an injunction to protect its position in August, 2013. That injunction has been continued up until recently. 5The plaintiff claims that it had a sub-lease for two years from March 2012 with a five-year option. 6The case was fixed for final hearing today. The court book was served last Friday and I read the material. Because today the proceedings were discontinued, not all of that material was actually read to me. However, for the purpose of dealing with the only outstanding question, which is the question of costs, I will take cognisance of it, or at least its flavour. 7It is not at all clear from the material whether the plaintiff ever had a lease at law, or whether it merely had an agreement for lease in equity. The document was never registered and, indeed, there was some debate as to whether it was ever binding on UTSG Consortium because it was not signed by any of its directors. If it did have a lease, that lease terminated on 27 February, 2014. There was a five year option. The plaintiff purported to exercise that option, however that option only existed if its lessor, the first defendant, had exercised its own option. The material suggested that it never did. However, there is evidence to suggest that somewhere around about 1 August, 2013, the interest of the first defendant was transferred to Sydney City Medical Pty Ltd. 8The plaintiff obtained a search of the register. That search indicated that dealing, AH969028, was an unregistered dealing. One would have thought that most conveyancing solicitors would have been alerted to that document and tried to obtain particulars of it. However, the document itself shows that it was uplifted by the person who lodged it and not re-lodged until 13 January, 2014, which may mean that even if a search had been made, it would not have been discovered. 9There is material to show that there was a purported exercise of the option by Sydney City Medical Pty Ltd. That is indeed actually denied by the fourth the defendant, the sub-lessor, but there is always the problem as to whether the transfer of the lease also transferred the option; an awkward question which, thankfully, has not been debated before me. 10The question is whether, in these circumstances, it was proper for the plaintiff to commence proceedings to protect its interest, naming as defendants not only the company that gave it its interest, the first defendant, but secondly, the company which appeared to give it what it calls the notice of termination, (the gravamen of which I have already set out), the proprietor in fee, the third defendant, and the sub-lessor, the fourth defendant. 11So far as the first defendant is concerned, it is in liquidation. No leave has yet been given to continue these proceedings against it. Accordingly the proceedings are stayed against it under section 471B of the Corporations Act, 2001 (Cth). It may well be that the plaintiff can make a claim in the liquidation, but what is another matter. 12I was concerned for a little while as to whether this case might concern the property of a company in liquidation and so section 471B means I should not hear it because it was stayed. However, when seen that the company in liquidation had purported to transfer its interest in the property on 1 August to another company in its group for $1 and that had been registered, that worry went away. 13So far as the second defendant is concerned, there is no material to suggest that any order can be made against it. Mr P Afshar of counsel appeared for that company and asked that it receive its costs on an indemnity basis, either from the commencement of the proceeding or, alternatively, shortly afterwards. Normally I would be very sympathetic to that request, except the evidence does show that if there is anyone at fault for this litigation, it is probably Ms Singh, who appears to be the brains behind the first defendant, the second defendant and Sydney City Medical Pty Ltd and I do not think in, in my discretion, I should give indemnity to a company that, on the material before me, is quite clearly within her group of companies. Accordingly, the order will be that the second defendant gets it costs on the ordinary basis. 14So far as the third defendant is concerned there have been negotiations during the day. Unfortunately the third defendant is evidently controlled in Brisbane and whether it is a Public Holiday in Brisbane I do not know, but it has been difficult to get instructions. Accordingly I will reserve my decision in respect of the third defendant. 15So far as the fourth defendant is concerned, the sub-lessor, Mr Zipser of counsel very fairly concedes that it was a proper party to the proceedings, probably a necessary party to the proceedings, and that in the heat of getting an urgent injunction, it is probably reasonable for the plaintiff to make allegations which may have to be modified as soon as there is time to give more mature consideration to everything. 16He is certainly entitled to his costs on an indemnity basis from the time the first defendant company went into liquidation, 3 February, 2004. However, Mr Zipser argues that either from 1 September, that is shortly after proceedings commenced, but with a small opportunity for the plaintiff to consider its position, or at least on 27 November, 2013, when it must have been clear to the plaintiff that there was no exercise of the option by its lessor, there should be indemnity costs. I think that latter submission is right. The proceedings should not have continued against the fourth defendant after 27 November because it had no hope of success. 17I understand that short minutes of order are being prepared and I will, in due course, make orders in accordance with them. [At this point the Judge is informed of the failure of negotiations] 18I have now been told that the discussions between the solicitors for the plaintiff and the third defendant have broken down. I can see no reason why the registered proprietor should have been a party to the proceedings, or how there could be any relief obtained against it. It was claimed that there was some estoppel which bound it, but I cannot see any evidence of any such estoppel or, indeed, find it hard in my mind to conceptualise how there ever could have been. 19Accordingly I order that the plaintiff pay the third defendant's costs of the proceedings on an indemnity basis. I make orders in accordance with the short minutes which have been handed up which I will date and place with the papers. 20Although the proceedings are discontinued, I should formally dispose of the Notice of Motion seeking that today's proceedings should have been adjourned. 21On the notice of motion I am not satisfied that sufficient ground has been shown to vacate the hearing of today. The matters raised would not seem likely to have any direct effect on the rights and duties of the plaintiff vis-à-vis the second and fourth defendants. 22Any right against a person who should have been a party but is not, subject to the Anshun problem (see Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589), which, if it exists is, of the plaintiff's own making, can be dealt with by a new action. 23The leave sought under s 471B of the Corporations Act 2001 can only be obtained after the Liquidator has been consulted and I think it is just too late. When the final hearing of the application is set down, I think on the 19 February, all these things should have been dealt with well in advance of the final hearing and it is idle to come on the morning of the hearing and for the first time ask for that leave. 24Accordingly, I dismiss the notice of motion filed in court this morning with costs. I note that the notice of discontinuance that was annexed to the notice of motion is not what the plaintiff seeks and that there has been agreement that the court should give leave to discontinue against the third defendant on terms that will be discussed later in the day.