B & F Operations Pty Ltd v Riviera Garden Suppliers Pty Ltd [2000] VSC 127

11. Vincenzo and Giovanni are the registered proprietors of the property at 16 Richard Street, Maidstone (the Richard Street property).

14. The case for the plaintiff B.& F. Operations Pty Ltd is that on or about 31 January 2000 the defendants agreed to grant to the plaintiff and the plaintiff agreed to take a lease of the Hampstead Road property, the Richard Street property (save for a small area of land on that property) and plant and equipment including a loader which was on the two properties and which was to be used by the plaintiff for a concrete production business to be conducted by it from the properties.

17. The lease was to be for three years with two options each of three years. For the first three years the rental of the properties was to be $4,500 per calendar month. The plaintiff was to go into occupation of the properties on 1 February 2000 and the commencement date of the lease was to be 1 April 2000.

20. On 1 February 2000 the plaintiff went into occupation of the properties and thereafter incurred significant expenses in preparing to operate the concrete production business from the properties. For example it negotiated the termination of a five-year cartage contract between it and CSR Limited which was worth $3.5 million so that the trucks committed to the cartage contract could be used in the concrete production business; it entered into a binding contract to purchase six concrete agitator barrels at a cost of $190,000; it had 3,000 business cards printed for the directors of the plaintiff containing the telephone number of the properties; and it expended between $15,000 and $20,000 cleaning up and landscaping the properties.

23. The plaintiff alleges that on a date unknown to it but after 31 January 2000, the defendants commenced negotiations with one Peter Malarchi with a view to selling the property to Malarchi or interests associated with him.

26. On 23 February the defendants caused the plaintiff to be wrongfully removed from the properties and since that date have refused to prepare and execute a lease of the properties to the plaintiff.

29. On 25 February the plaintiff made an urgent application to me in the Practice Court seeking interim relief.

32. Upon counsel for the plaintiff giving to the court the usual undertaking as to damages on behalf of the plaintiff and counsel for the defendants undertaking that until 4 p.m. on 17 March 2000 or further order of the court the second, third and fourth defendants, whether jointly or severally or by themselves, their servants or agents or howsoever otherwise, would refrain from entering into any binding contract for the sale of the premises situate at 38-40 Hampstead Road, Maidstone and 12 and 16 Richard Street, Maidstone, I adjourned the further hearing of the matter to 17 March. On that same day the plaintiff filed a writ in the court by which it seeks the following relief:

A. An order that the defendant specifically perform its obligations under the agreement for lease by granting a lease of the property to the plaintiff for a period of three years.

B. An interlocutory injunction restraining the defendant, whether by itself or through its servants or agents or any of them, from entering into and/or taking any or any further action or dealings in relation to any contract for the sale of properties and/or plant and equipment situated at 38-40 Hampstead Road and 12 & 16 Richard Street, Maidstone, in the State of Victoria.

C. Any other order which the court considers appropriate pursuant to section 87 or 87A of the Trade Practices Act (Cth) and/or section 158 of the Fair Trading Act 1999 (Vic).

38. On 17 March and by consent of the parties I made (inter alia) the following orders in the matter:

1. Until the trial of the proceeding or further order, each of the defendants, whether by themselves, their employees or agents or howsoever otherwise, be restrained from -

(a) entering into any binding contract for the sale of or the lease of premises situate at 38-40 Hampstead Road Maidstone and 16 Richard Street Maidstone in the State of Victoria ("the Maidstone premises"); and

(b) selling, disposing of, encumbering, transferring, or parting with possession of plant and equipment, including the loader, which was in their possession at the Maidstone premises on 23 February 2000.

44. On 1 March 2000 the plaintiff lodged in the Land Titles Office caveat No. W635406A in respect of the Hampstead Road property and caveat No. 635407W in respect of the Richard Street property.

47. Each caveat claims an equitable interest in the property pursuant to an agreement to lease.

50. On 17 March the defendants filed a summons in the court seeking orders that the caveats be removed.

53. The properties are presently the subject of mortgages to the National Australia Bank Ltd (NAB) to secure the repayment of moneys advanced to the defendants by NAB.

56. The defendants wish to re-finance the mortgages by discharging the mortgages to NAB and replacing them with mortgages to Suncorp Metway Ltd (Suncorp).

59. Suncorp is prepared to lend to the defendants $150,000 more than the moneys presently owed by the defendants to NAB and upon more favourable terms than those presently applying to the loan from NAB.

62. Suncorp will not proceed with the re-financing until such time as the caveats are removed because it is not prepared to have any interest which the plaintiff may have in the properties rank in priority to the interest it will acquire on the registration of its mortgages.

65. Neither the defendants nor Suncorp have any objection to the plaintiff withdrawing its present caveats and re-lodging them after registration of Suncorp's mortgage or mortgages.

68. The plaintiff on the other hand contends that it should be entitled to maintain the priority of its interest in the properties ahead of any interest which Suncorp may acquire in them. However, it is prepared to give to the Registrar pursuant to s.90(1)(a) of the Transfer of Land Act 1958 its consent in writing to the registration of the discharges of NAB's mortgages and the registration of the mortgage or mortgages to Suncorp. In that way it would preserve the priority of its interest in the properties.

71. The fact is that at the present time any interest the plaintiff has in the properties does not rank in priority to that of NAB. Further, as NAB has not given its consent to a lease of the properties to the plaintiff, if NAB was to ever take possession of the properties and to effect a sale of them, that sale would not be subject to any lease to the plaintiff.

74. One asks then, why should the plaintiff be in any better position vis-à-vis Suncorp by insisting its interest in the properties take priority to that of Suncorp.

77. For the defendants it is said that, as a matter of commercial reality, had NAB been asked for its consent to any lease of the properties to the plaintiff it would have given that consent, thereby ensuring that if NAB did ever foreclose and effect a sale of the properties, the new owner would take them subject to the lease to the plaintiff.

80. It is said that a similar situation would apply in the case of Suncorp. If the plaintiff withdraws its caveats and Suncorp registers its mortgage or mortgages, as a matter of commercial reality Suncorp would then consent to a lease of the properties to the plaintiff.

83. As these are commercial properties in respect of which the plaintiff is prepared to pay an appropriate commercial rental, I consider that that is probably so.

86. It would seem to me that the practical solution to the problem is this.

89. I order that within seven days each of the defendants give a written undertaking to the solicitors for the plaintiff that in the event this court orders specific performance of the alleged agreement for a lease of the properties between the plaintiff and the defendants or some of them, they will use their best endeavours thereafter to obtain the consent of Suncorp to such lease.

92. I order that within three days of the receipt by the plaintiff's solicitors of the said undertakings the plaintiff withdraw caveats W635406A and W635407W from the Land Titles Office to enable registration of the discharge of NAB's mortgage or mortgages over the properties and the registration of the mortgage or mortgages of the properties to Suncorp to occur. The plaintiff shall then be entitled to re-lodge fresh caveats in respect of its alleged interest in the said properties if it is so advised.

98. I direct that this order be prepared by the plaintiff's solicitors and within 72 hours be brought to me for authentication.