Tavcol v Valbeet [2014] NSWSC 1563

Supreme Court New South Wales

Medium Neutral Citation: Tavcol v Valbeet [2014] NSWSC 1563 Hearing dates: 04/11/2014 Decision date: 04 November 2014 Jurisdiction: Equity Division - Technology and Construction List Before: McDougall J Decision: Dismiss with costs the application for interlocutory mandatory injunction Catchwords: EQUITY - equitable remedies - injunctions - application for interlocutory mandatory injunction - where lessee seeks order that lessor undertake works to property - where lessee is not at risk of suffering damage - where damage, even if it were suffered, is not substantial - where problems have been evident for at least 2 ½ years - whether matter of urgency Legislation Cited: State Environmental Planning Policy (Exempt And Complying Development Codes) 2008 Cases Cited: Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 Category: Procedural and other rulings Parties: Tavcol Pty Limited (First Plaintiff) Batroon Pty Limited (Second Plaintiff) Simion Pty Limited (Third Plaintiff) Valbeet Pty Limited (Defendant) Representation: Counsel: M Pesman SC (Plaintiff) D S Weinberger (Defendants) Solicitors: ERA Legal (Plaintiff) Thomsons Lawyers (Defendants) File Number(s): 2012/373706

Judgment 1HIS HONOUR: The defendant (Valbeet) is the proprietor of premises at Parramatta. The ground floor of those premises comprises what is known as the Collector Tavern. The first plaintiff (Tavcol) is the lessee of the tavern. It became lessee by way of a transfer of lease back in October 1999, which transfer has been registered (as has the underlying lease). 2The plaintiffs say that Tavcol entered into the lease as agent for undisclosed principals, namely the second and third plaintiffs (respectively, Batroon and Simion). The merits of that claim are yet to be tested in a final hearing. Batroon and Simion say that, because they were the undisclosed principals of Tavcol for whom it entered into the transfer of lease, they are entitled to enforce the lease as against Valbeet. Again, the merits of that proposition are yet to be tested in a final hearing. 3It is convenient to mention at this point that the plaintiffs have made it clear that Tavcol has not suffered any monetary loss and makes no claim for damages, past or future. That reflects the fact, as the plaintiffs have also made clear, that the profits of trading at the tavern are divided between Batroon and Simion. (For a period of one year, there was a third entity involved; but it can be put to one side for present purposes.) 4Among the many complaints made by the plaintiffs is a complaint that Valbeet has failed to perform its obligations of maintenance and repair under the lease. The plaintiffs - specifically, I think, Batroon and Simion - claim to have suffered damages. Although the proceedings were commenced in 2012 (by Tavcol alone, with Batroon and Simion being added by amendment in 2013), no hearing date has been fixed. 5The plaintiffs' complaints date back over a substantial number of years. However, they have brought the matter before the court today by way of a notice of motion filed on 13 October 2014. That notice of motion sought an order that Valbeet be ordered to permit the plaintiffs to arrange for the performance of certain works relating to the air conditioning and mechanical ventilation system in the tavern. When I raised with Mr Pesman SC, who appeared for the plaintiffs, the question of the contractual or other right that his clients sought to enforce by mandatory interlocutory injunction, he sought and was granted leave to amend to seek in the alternative an order that the defendant itself do the works. Mr Pesman made it clear that the plaintiffs would pay for the works, the cost of which has been estimated at somewhere between $20,000 and $32,000. The variation in the costing seems to reflect various "options" in the two quotations that are in evidence. 6Valbeet opposes the making of the orders sought (both as originally sought and as now sought by amendment). Its primary point is that the case for Batroon and Simion is hopeless, because they have no standing to sue. Accordingly, as Mr Weinberger of counsel, who appeared for them, put it, any case of urgency must fail. 7Mr Pesman responded that the rights of Batroon and Simion raised a difficult question of law, and not one that should be decided on an interlocutory hearing. 8I am not sure that the question is indeed difficult. The parties to the lease, by virtue of registration of the transfer, are Valbeet as lessor and Tavcol as lessee. The effect of registration of the transfer is that there is privity of estate and of contract between them. The difficulty of finding that anyone, in the position of an undisclosed principal, can have some right as a party to a registered lease is self-evident. However, since the point was not fully argued, I do no more than record that in my view the claims of Batroon and Simion, based on their asserted standing as lessees by virtue of agency, cannot be regarded as strong. I wish to make that clear because it is in my view an important element in the discretionary calculus. 9The plaintiffs' case is that because of some works that have been carried out to the ventilation system, noxious odours are emitted into a courtyard which forms part of the tavern. If the air conditioning is operating, those noxious odours are spread through the hotel, presumably because the inlet for the air conditioning system takes air from or adjacent to the courtyard. On the other hand, if the air conditioning is not operating, the tavern is said to be very cold in winter and excessively hot in summer. 10The works sought have been set out in a scope of works prepared by the plaintiffs' expert, Mr George Floth. Mr Floth has described the works in a scope which is to be supplemented by some sort of drawing. Since the copy of the drawing in evidence was virtually illegible, it did not do a great deal to aid in an understanding of the scope. Nonetheless, as I understand it, Mr Floth has recommended that the ventilation system be amended in various ways, and that a make-up air supply unit, which Valbeet removed about 2½ years ago, should be reinstated. 11The application could be described as one for specific performance, on an interlocutory basis, of various obligations under a contract. It could be described, perhaps less pejoratively, as an application for interlocutory mandatory relief. However it is described, the underlying reality is that it will have the effect of deciding, on a final basis, one of the numerous issues, as to defects, that the plaintiffs assert against Valbeet. Thus, it seems to me, the warning uttered by McClelland J in Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535 - 536 is of particular relevance. As is well known, his Honour there expressed the view that where a decision to grant or refuse interlocutory injunctive relief would, in a practical sense, determine the substance of the matter in issue, the court should undertake some evaluation of the strength of the case for final relief. That is why I referred earlier to what I see as being some legal difficulties standing in the path of Batroon and Simion. 12Whether I am right in that or not, no such legal difficulty stands in the path of Tavcol. It is common ground that Tavcol is the lessee, and as I have said, that it enjoys (if that be the correct word) privity of estate and privity of contract, on the terms of the lease, with Valbeet. 13However, basing the application on the undoubted legal strength of Tavcol's position directs attention to the relative weakness of its case in terms of urgency. 14The plaintiffs' evidence, as to the urgency, rests on the assertion that a number of functions have been booked at the hotel, which may be cancelled if the problems are not rectified, and on the wider proposition that regardless of the fate of particular functions, the Collector Tavern business will suffer reputational damage if the asserted defects are not rectified. That case is made out in particular in paras 51 to 56 of the affidavit of Ms Jenny Honan, a director of one or more of the plaintiff companies it seems, sworn 13 October 2014. 15The plaintiffs relied on a spreadsheet which purported to summarise events and functions booked up until the end of January 2015. The spreadsheet contained data as to the projected number of persons likely to attend those functions, and the projected additional gross sales and gross profit that would be derived, from various aspects of the tavern's activities, by reason of those functions. Mr Pesman pointed out that there was a lot of "repeat business", including that, so it appears, the tavern has become the venue of choice for members of what is known as the "Red and Black Bloc" to meet and celebrate, or commiserate, as the case may be, the fortunes of the football team that they support. 16It is correct to say that if one looks at the projections and works on an assumption that a significant number of the functions referred to in the spread sheet might be lost then there could be a significant loss of sales and gross profit. However, for a number of reasons, that analysis is somewhat simplistic. 17Mr Weinberger pointed out that there were some 52 functions listed in the spread sheet for the period 17 October 2014 to end January 2015. Some 14 of those functions have now been conducted, because they were October functions. A further four functions either have been conducted or, by the close of today, will have been conducted. Thus, of the 52, there are at most 34 which might be said to be "at risk". 18Further, and again as Mr Weinberger pointed out, even if it is correct to say that development consent is not needed (a matter to which I shall return), it would necessarily take some little time before the works could be done. That is clearly correct. The plaintiffs have identified two contractors. It is said that those contractors are able to undertake the works. It is said that the works will take one to two days to complete. However, there is no evidence of the immediate availability of those contractors, that is to say, no evidence as to whether, if the order were made today, they could start work tomorrow. 19In any event, it turns on more than the availability of the contractors. Realistically, if an order is to be made, it must be an order that Valbeet do the works. Valbeet is not to be regarded as a mere cipher, or bearer of the burden. It is the proprietor of the property. The works will have an impact on its property. It is entitled to be satisfied, on reasonable grounds, that whoever does the work is competent to do it and able to stand behind the results. I do not think that it is realistic to expect that work could commence immediately. Even if the plaintiffs could identify contractors who have immediate availability to start, it would nonetheless take some time for Valbeet, acting reasonably, to decide which contractor to engage. 20Thus, by the time those events have worked their course, some further functions will have been held (or cancelled) as the case may be. 21Another complicating factor relates to the time at which the functions are to be conducted and the dates on which they are to be conducted. Under the lease, Valbeet is only required to make the air conditioning available from 8 am to 6 pm Mondays to Fridays. At least half of the future functions are to be held on days other than Mondays to Fridays. And as I understand it, many of the ones that might be held on days falling within the Monday to Friday range are likely to be conducted in the evening. Thus, if Valbeet offers no more than performance of its contractual obligations under the lease, there must be a very real question as to the utility of, at least, the air conditioning works. 22Although, as Mr Pesman submitted, there is evidence in a relatively general sense of noxious odours and adverse impact, there is no evidence that any of the functions that were completed between 18 and 31 October were in any way adversely affected by noxious odours or by any defects in the air conditioning. Mr Pesman said that the want of evidence simply reflected the cut-off date for his clients to serve their evidence. However, had there been a real problem over that fortnight, one would have thought that his clients might have sought to lead further evidence. They have not done so. 23As against that, it could be said that Valbeet's attitude towards complaints of offensive odours and the like has not been to deny the complaint but, rather, to trifle with them in an obfuscatory fashion. One might wonder why it did not seek to deal with the complaints on their merits, but that I suppose is another matter for a final hearing. 24I referred some time ago to the question of development consent. That was one of the many matters raised in the penumbra of arguments that surrounded the essential core of Valbeet's unwillingness to do the work. Mr Weinberger submitted that it was "likely" or "possible" that development consent would be required. On analysis, however, I am not sure that those submissions should be accepted. The better view appears to me to be that the air conditioning work is likely to fall within the exemption provisions of the State Environmental Planning Policy (Exempt And Complying Development Codes) 2008 (the policy). 25Under that policy, a number of kinds of what would otherwise be development that requires consent may be exempted from the requirement for consent. One of those relates to air conditioning. Although there is an exception to or carve-out from that exemption for certain kinds of evaporative air conditioning, what is proposed does not appear to fall within that exception. It has not been suggested that what had been proposed does not meet the specified standards for air conditioning for purposes other than residential use only. Thus, in relation to the air conditioning works proposed, I think the better view is that development consent is not required. 26There is likewise an exemption in respect of specified complying mechanical ventilation systems. If there is to be an exemption, the development must comply with the standards set out in cl 5.8 of the policy. Mr Weinberger said that there was no evidence that it did. However, it may be noted that Mr Weinberger relied on a report from an expert, an air conditioning or mechanical services engineer, who did not express any view as to whether what was proposed in the scope of works would or would not enable the works to comply with the specified standards. 27The significance of that observation is magnified in my view when one takes into account the fact that the expert did seek to express, in a wholly inadmissible form, a general "fear" or "concern" that there might be a problem with development consent. That evidence was objected to and rejected. Nonetheless, given that the topic of development consent was one raised by Valbeet, it does seem to me that Valbeet's failure to demonstrate any way in which the mechanical ventilation works proposed do not meet the standards is something that one could take into account. 28Accordingly, I am not satisfied that there is a need for development consent for the works that are proposed. 29However, that conclusion does not resolve the issue. The requirement for development consent was only one of the myriad of objections raised by Valbeet. 30Mr Pesman enquired, perhaps rhetorically, why a landlord in Valbeet's position would refuse to carry out work, for the benefit of its property, for which the tenant, although not obligated to do so, had offered to pay. Effective as that may have been in a rhetorical sense, it does not seem to me to do any more than obscure the burden resting on the plaintiffs, which is to justify why the court should take the unusual step of granting interlocutory mandatory relief. And an examination of that real issue must take into account the various circumstances, including matters that go to what I have called the discretionary calculus. 31There were many other issues argued. I do not propose to deal with them. I have come to the conclusion that the application must fail. In essence, distilled from what I have said, the reasons are these. 32First, the problems have been evident for some time. The complaints go back beyond 2012, and it was in 2012 - as I have said about 2½ years ago - that Valbeet removed an element of the air conditioning system which the plaintiffs now seek to have replaced. 33Secondly, in my view, the claim that the plaintiffs other than Tavcol have is weak, because their claim to be entitled to enforce the lease, as lessees, is weak. 34Thirdly, to the extent that urgency is relied upon because of the functions that are scheduled between here and the end of January, the projected losses will be losses of Batroon and Simion and not losses of Tavcol. And, in any event, as I said earlier when dealing with some aspects of that evidence, it appears to me that the real losses might be substantially less than the evidence, without any proper inspection, might suggest. 35Fourthly, and flowing from that, I see no reason for concluding that damages would not be an adequate remedy in all the circumstances of this case. 36Fifthly, it is a serious matter to foist upon an owner of land an obligation to undertake works in respect of that land. It is more serious to do so after an interlocutory hearing, in which, of necessity, not all the issues have been investigated. 37Finally, when one looks at the questions as to the timing of the functions which may be imperilled, it does not seem to me that the risk to the plaintiffs' interests (even if they are to be considered as the interests of all the plaintiffs) is so grave as to require intervention at this stage, after what I have said has been a period of many years in which the plaintiffs have not sought to have the lessor, Valbeet, perform its obligations. 38For those reasons I order that the notice of motion be dismissed with costs. 39I direct that the exhibits be handed out.