Harbourside Catering Pty Ltd v TMG Developments Pty Ltd [2006] NSWSC 631 | Case summary

2075/06 HARBOURSIDE CATERING PTY LIMITED & ORS v TMG DEVELOPMENTS PTY LIMITED JUDGMENT - Ex Tempore 1 HIS HONOUR: Harbourside Catering Pty Limited is a company controlled by Mr Nikopoulos and Mr Antonopoulos. It had a sublease, prior to 2000, of some restaurant premises on the Manly Wharf. The lessor to it was TMG Developments Pty Limited. TMG's interest in the land was, in turn, derived from a head lease from the Waterways Authority. 2 In 2000, and going onwards into 2001, TMG developed, it seems, plans for the refurbishment of Manly Wharf. It appears to be common ground that Harbourside surrendered the sublease which it had, and took out a new sublease. 3 The motion now before me is one which TMG brings, seeking orders under section 140(1) of the Civil Procedure Act 2005 that District Court proceedings number 4275 of 2003 be transferred to the Equity Division of the Supreme Court, and an order under Part 28 Rule 5 Uniform Civil Procedure Rules 2005 that the District Court proceedings be heard together with proceedings number 2075 of 2006 in the Supreme Court. TMG also seeks an order that evidence in each proceeding be evidence in the other, or alternatively, an order for the consolidation of the two sets of proceedings. 4 The District Court proceedings are ones which were begun on 15 September 2003 by Harbourside, Mr Nikopoulos, and Mr Antonopoulos. They sued TMG. The Statement of Claim alleges that Mr Nikopoulos and Mr Antonopoulos were partners in a partnership which operated the restaurant business, and that Harbourside provided services for management and operation of the restaurant to that partnership for a service fee. 5 In the District Court proceedings, the plaintiffs allege that TMG was aware of that relationship between the plaintiffs. They also allege that various representations were made about the way in which refurbishment of the Manly Wharf would be carried out. 6 The plaintiffs in the District Court allege that it was these representations which induced Harbourside to surrender the old sublease and enter the new sublease, and also induced the plaintiffs to discontinue marketing the sale of the business of Mr Nikopoulos and Mr Antonopoulos, and to discontinue seeking refinancing of their business. 7 The District Court proceedings allege that there were breaches of various terms of the new sublease, and also conduct contrary to the various representations which had been made, in the manner in which the refurbishment of the wharf was carried out. That refurbishment is alleged to have taken place beginning in February 2002. The allegation of the plaintiffs in the District Court proceedings is that the manner of conduct of the refurbishment, contrary to various covenants in the leases and contrary to various representations, significantly interfered with the business, and caused loss to, in particular, the second and third plaintiffs. 8 The Statement of Claim in the District Court proceedings is not altogether consistent about who it is that has suffered loss, as sometimes it alleges that the plaintiffs collectively have sustained loss and damage. The District Court proceedings allege that a personal duty of care was owed by TMG to Mr Nikopoulos and Mr Antonopoulos, concerning the manner in which the refurbishment was carried out, and that that duty of care was also breached. The manner of conduct of the refurbishment is also alleged to have involved breaches of the Retail Leases Act 1994. 9 The District Court proceedings have reached the stage where the plaintiffs have not quite completed filing their evidence. There is still, it seems, an expert report to be filed. 10 The new lease was, it seems, one which was entered into in June 2004, for three years, with two options to renew, each for three years. 11 In February 2005 Harbourside, Mr Nikopoulos and Mr Antonopoulos sought the consent of TMG to assign that sublease to a purchaser, who was interested in acquiring it. TMG refused to consent to the assignment on or about 21 March 2005. The Supreme Court proceedings are ones which arise from that refusal of consent. 12 The Supreme Court proceedings were started in March 2006. It may be that a motive for starting them was that, by that time, there was another prospective purchaser, concerning whom consent to assignment of the lease either was about to be, or just had been, sought. 13 The Supreme Court proceedings were commenced by the same plaintiffs as began the District Court proceedings, and sued TMG. Even though, as originally commenced, there were three plaintiffs, today Ms Chrysanthou of counsel, for the plaintiffs, informs the Court that Mr Nikopoulos and Mr Antonopoulos will cease to be plaintiffs in the Supreme Court proceedings. 14 The Supreme Court proceedings allege that the refusal of consent to assignment by TMG in March 2005 involved contravention of provisions of the Retail Leases Act 1994, contravention of sections 132 and 133B of the Conveyancing Act 1919, and was for an improper purpose, such that there was a breach of section 51AA of the Trade Practices Act 1974 (Cth). 15 The purchase price of the business in accordance with the contract was said to be $750,000, and that is, the plaintiffs claim, the prima facie measure of one head of claim of their loss. As well, they suffered from consequential damage, in the form of wasted legal expenses connected with the sale which did not proceed, and furthermore, the business now is less valuable than it had been at the time of entering into the contract for sale in February 2005. 16 Section 140 of the Civil Procedure Act 2005 provides: "(1) The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court or a Local Court, order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court." 17 That section does not seem to be materially different to the former section 145 of the District Court Act 1973. Concerning the old section 145, Bryson J in Sanderson Motors Pty Limited v Kirby [2000] NSWSC 924, at [4] said: "These are reported decisions which refer to this power: I was referred to Ex parte Delporte; Re Thiess Bros Pty Ltd [1965] NSWR 1468 (Asprey J) and Ex parte Dusmanovic; Re Dusmanovic [1967] 2 NSWR 125 (Moffitt J). No limits or restrictions on the discretion are established by authority. When asked to exercise this power the Court should, in my opinion, appraise the facts and circumstances of the case before it and consider whether the applicant has shown something which, within the framework of the purposes for which the power exists, is a sound ground or a good reason why an order ought now to be made. The subject does not admit of more particular exposition."

I respectfully agree with those remarks of Bryson J. 18 Ritchie's Uniform Civil Procedure NSW, paragraph [140.15] gives examples of proceedings where transfer has been made. Those examples are: "(a) where there are concurrent proceedings in two courts and the proceedings in the lower court may give rise to an issue estoppel affecting the proceedings pending in the higher (ie, the proposed transferee) court … (b) where the damages are likely to exceed the lower court's jurisdictional limits, especially where the risk has become apparent since the commencement of the proceedings … (c) where there are significant procedural advantages in the transferee court … (d) where the proceedings involve complex and important issues of law or fact … (e) where the proceedings involve allegations of significant notoriety or public importance …" 19 I am not persuaded that the present case falls within any of those examples. However that does not conclude the application. While those examples are illustrations which are sometimes useful, the correct principle is that which was stated by Bryson J. 20 In support of the application for transfer, the defendant relies on several factors, which it submits will be common in the two sets of proceedings. One is that the capacity of each of the plaintiffs and their legal relationship with each other will need to be determined in each set of proceedings. 21 As I understand it, the defendant would, in the Supreme Court proceedings, as amended by deletion of the second and third plaintiffs, seek to cross-examine the directors of the first plaintiff, with a view to establishing that it was they, not the plaintiff, who owned the business which was conducted in the restaurant. I accept that, if the proceedings were to continue to be tried separately, it is likely that cross-examination of that type would occur, and it would be necessary for the Supreme Court proceedings to involve a decision about whether, assuming for the present time that the plaintiffs succeeded in showing that $750,000 was indeed agreed as the price for sale of the lease and/or business in February 2005, that sum of money related to the assignment of the sublease, or to the sale of the business. 22 The defendant also submits that there is considerable similarity and overlap in the loss and damage which is claimed in the two sets of proceedings. The plaintiffs correctly point out that the loss claimed in each set of proceedings is sustained at different times, and is alleged to arise from different causes. Even so, it appears that, at present, there is evidence in the District Court proceedings, filed by the plaintiffs, which aims to prove that there had been a very significant diminution in the value of the business, as a consequence of mismanagement of the refurbishment. 23 The defendant submits that it is inconsistent for the plaintiffs to allege in the District Court proceedings there had been this significant diminution in the value of the business, yet at the same time in the Supreme Court proceedings, to assert that they had suffered the loss of a contract for $750,000. I do not accept that there is any such inconsistency. The case which the plaintiffs seek to make in the District Court is that the goodwill of the business, remaining in their hands, had been diminished through the mismanagement of the refurbishment. The case which they seek to make in the Supreme Court is not to do with what the business was really worth in their hands at all. Rather, it is a loss which derives from the loss of an opportunity to sell the sublease or business to an interested purchaser for $750,000. 24 While I accept that the background to the two claimed losses is the same, in my view they are conceptually different, and the extent of factual overlap is not one which I am persuaded is sufficient to warrant the removal of the District Court proceedings. 25 The plaintiffs submit, in my view correctly, that the wrongful conduct alleged in the two sets of proceedings occurred at fairly widely spaced periods of time - the District Court conduct from February 2002 onwards, the Supreme Court wrongful conduct only in February and March of 2005. 26 Soon after the defendant had refused consent to assignment of the lease, the plaintiffs began some proceedings in the Administrative Decisions Tribunal, seeking to obtain an order in effect compelling consent to be given. The plaintiffs were beaten by time, in that those proceedings could not be brought on for hearing before the time that the purchaser under the contract was entitled, according to the terms of the contract, to terminate it, and the purchaser in fact terminated it. 27 The Administrative Decisions Tribunal proceedings resulted in there being some delay in the advance of the District Court proceedings. In an affidavit explaining that delay to the District Court, the solicitors for the plaintiffs said that it was the plaintiffs' intention to amend the District Court proceedings to include the losses sustained as a result of the refusal of consent. 28 This is relied upon by the defendant as an indication that the issues are in fact closely related. While the making of the submission counts as an admission, I do not regard it as something of particular weight. 29 The District Court proceedings are ones which are presently estimated to take something like ten days to hear. The Supreme Court proceedings are ones which are likely, on present indications, to be concluded within one week, and possibly in less than five days. There is an additional party in the District Court proceedings, a builder from whom TMG seeks indemnity if TMG is found liable. 30 In all these circumstances, I am not persuaded that it is appropriate to order that the District Court proceedings be transferred to the Supreme Court. The Notice of Motion is dismissed. (Ms Chrysanthou made application that the defendant pay the plaintiffs' costs of today. Application opposed. Dr Birch submitted there should be no order as to costs with the intention that the parties pay their own costs on the motion.) 31 The plaintiffs seek costs of the motion. To some extent, the decision which was made today was influenced by the plaintiffs' decision to simplify the Supreme Court proceedings by eliminating the second and third plaintiffs. The elimination of those plaintiffs is something which can be achieved by comparatively simple pleading, and is likely to result in a comparatively simple amendment to the defence. 32 In all the circumstances, the order I make is that there be no order as to the costs of the Notice of Motion, to the intent that each party bear their own costs of that Notice of Motion. 33 I grant leave to the plaintiffs to amend the Statement of Claim by deleting the second and third plaintiffs. I direct that an Amended Statement of Claim be filed and served by 5.00 pm, 22 June 2006. I direct the defendant to file and serve a defence by 5.00 pm, 29 June 2006. 34 In all the circumstances, I order that each party bear their own costs of those respective amendments. **********

Harbourside Catering Pty Ltd v TMG Developments Pty Ltd

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