In the matter of Hengrove Hall Pty Ltd [2015] NSWSC 1632

In the matter of Hengrove Hall Pty Ltd [2015] NSWSC 1632 | Case summary | Zoe

Judgment

HIS HONOUR: This is an application for a mandatory interlocutory injunction. The plaintiff, Angela Campbell Pty Ltd, moves on a notice of motion, that has been re-styled as an interlocutory process, filed on 8 October 2015. She seeks orders requiring the defendant to provide two swipe cards to premises in Macquarie Street, Sydney (of which the defendant is the registered proprietor), which will provide for after-hours access to the building. She also seeks an order requiring the defendant to provide a second key to the premises to allow access to the suite. She sought an order that the defendant provide her with a meter number in order to have electricity turned on to the suite.
The building in question in Macquarie Street is held under company title. It is used for professional rooms and offices by medical practitioners, dentists, solicitors and other professionals.
In 2009 a Dr Angela Campbell acquired 3,268 shares in the company which gave her a right of occupancy of the Suite 23 in question. The shares were acquired by her in her capacity as trustee of the Halina Superannuation Fund. Under the articles of association of the defendant company, a shareholder who is not in default in payment of any moneys due to the company, is entitled to occupy a unit or suite referable to the shares acquired. The articles provide for the entry of the shareholder into a licence agreement. The articles also provide, in substance, that even if a licence agreement is not signed, the shareholder and the company will be taken to have entered into a licence agreement in the terms which are a schedule to the articles. No signed licence agreement has been produced. But there was no issue that Dr Campbell acquired the right to occupy the area known as Suite 23, and there was no dispute that she acquired that right in terms of a licence agreement in the form provided for in the company's articles.
From at least December 2010 until 25 February 2013, Dr Campbell carried on the practice of providing hair treatments and transplants. According to a media release published by the South Eastern Sydney Local Health District sometime after 25 February 2013, a public health assessment of the clinic at which Dr Campbell's practice was carried out had found evidence of poor infection-control practices, including problems with the cleaning and sterilisation of surgical instruments and equipment. An announcement was made recommending that patients attend their local general practitioner for screening in respect of potential diseases that might have been contracted as a result of such practices.
On 27 March 2013 the defendant company gave notice to Dr Campbell, through her solicitor, that the board terminated her right to occupy Suite 23 and required the suite to be delivered up to the company. A number of grounds was provided for that action, including the carrying out of unapproved building works, the refusal of Dr Campbell to allow the company or its duly authorised representative to inspect the suite, failure to maintain the suite in a good and clean state of repair, and failure to store and supply controlled substances in accordance with legal requirements. It was also said that the member, Dr Campbell, was in default of financial obligations.
Perhaps inconsistently with the terms of that letter, on the same day, the board gave a notice addressed to the trustee of the Halina Superannuation Fund giving notice that upon the expiry of 14 days, such right of occupancy as might vest in the registered holder of the shares would be determined. The trustee, which at the time was Dr Campbell, was afforded 14 days in which to make submissions.
After correspondence between solicitors, Hudson Law, who acted for Dr Campbell, wrote to the company on 16 April 2013. After taking issue with a number of matters the company had raised, they advised that: "I am instructed that my client presently has no intention of continuing to personally occupy or use Suite 23 or any facilities thereof. My client instead wishes to grant an exclusive license to a suitable person to use Suite 23 and will now set about engaging an agent to find a suitable person before seeking to obtain the Board of Director's [sic] written consent to such person being granted such license pursuant to Rule 12(a) of the License agreement".
Mr Hudson of Hudson Law deposes to being informed by Dr Campbell that on 29 April 2013 she attempted to obtain access to the premises but was unable to do so because the lock had been changed. She observed a sign on the door to the premises, indicating that the directors had taken possession of the premises on 15 April 2013.
The evidence is sparse as to what happened over the following period of about 18 months. Dr Campbell's medical registration was suspended from 20 February 2013 and her name was removed from the Register of Medical Practitioners on 9 July 2014.
On 20 February 2014 the plaintiff, that is, Angela Campbell Pty Ltd, was appointed as trustee of the superannuation fund. Dr Campbell's daughter was appointed as a director of the plaintiff and her son was later appointed as another director.
It appears that there were discussions between the directors of the defendant and Dr Campbell's children.
On or about 30 October 2014, a key was made available to representatives of Angela Campbell Pty Ltd. Apparently a request for two keys had been made, and one was provided. On 18 November 2014 the company's agent sent an email to Angela Campbell Pty Ltd's solicitor stating: "We have received the following response from the board ... The present view, as best as I am able to ascertain, is that the Board does not propose to issue any further key or swipe cards. If the real estate agent appointed by the trustees of the Halina Superannuation Fund to obtain a suitable licensee to occupy the Suite requires access to display the Suite 'out-of-hours', it requires only a phone call on reasonable notice to the building manager who will endeavour to accommodate any reasonable request. The building manager is available at the building on Saturday mornings and by prior arrangement at other times. In this way, the board will be able to maintain control of the security of the building".
It appears that in December 2014 a request was made for access to the building and suite on the afternoon of the Saturday. The request was apparently made by a Mr Francis Fusco, a real estate agent who had been engaged to attempt to find a suitable tenant for the premises. There may be some dispute about this because the building manager denies that any such request was made.
Nothing further appears to have happened until September this year.
Earlier, on 10 September 2015, Ms (formerly Dr) Angela Campbell had written to the building manager, Mr Allen, advising that she urgently required the meter number for the suite in order to reconnect electricity. Correspondence from solicitors followed in October and these proceedings were commenced on 8 October 2015.
The plaintiff is Angela Campbell Pty Ltd. The defendant is Hengrove Hall Pty Ltd, the owner of the building. Ms Campbell is not joined as a party. She was made bankrupt on 1 October 2015.
There has been some suggestion that in the exercise of powers conferred on the board, the board has taken some steps or put some conduct in motion with a view to selling the shares. But there is no evidence of any material steps taken.
The plaintiff's claim is that the plaintiff, being the new trustee of the superannuation fund, is presently entitled to a licence to occupy the suite and that the right of quiet enjoyment provided for in the licence agreement includes the right to 24 hours per day access in using swipe cards, as well as the right to information to enable electricity to be connected to the premises.
The last matter seems no longer to be an issue because an affidavit sworn by the building manager on 12 October 2015, that is to say the day of the hearing, provides the meter number which is apparently all that the plaintiff requires in order to arrange for the reconnection of the electricity.
In essence, the remaining issue concerns the plaintiff's asserted right to the provision of swipe cards to allow 24-hour access to the premises. Both of the premises on which the plaintiff's claim rests are contested. The defendant says, amongst other things, that the licence agreement was determined in 2013. In any event, the licence agreement is with the shareholder. Ms Campbell is the shareholder. She is not entitled and does not seek to use the suite for the conduct of her practice as a medical practitioner. Moreover, she is not a party. The new trustee is not entered on the register of members as a shareholder and does not have the benefit of any licence agreement. The defendant also says that 24-hour access is, in any event, not required for the only use of the premises the plaintiff seeks, namely, to attempt to locate a new professional occupant of the premises to whom a right of occupancy could be assigned with the consent of the board of the defendant.
The following issues are raised. The first is whether the plaintiff has standing to bring these proceedings as it is not registered as the shareholder. Secondly, if the plaintiff is entitled to bring these proceedings, but only to enforce the rights of Ms Campbell as the shareholder and as the party to a licence agreement with the defendant, whether the Court lacks jurisdiction to entertain this proceeding, or is required to transfer the proceeding to the Federal Court as a special federal matter pursuant to s 6 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) by reason of Ms Campbell's bankruptcy. Thirdly, whether it is seriously arguable that any licence is on foot. Fourthly, if so, whether it is seriously arguable that any such licence agreement requires the provision of swipe cards which will afford the plaintiff with 24-hour access to the premises as claimed. Fifthly, if so, where the balance of convenience lies. Next, whether damages would be an adequate remedy, and finally, whether in any event any injunctive relief should be refused by reason of delay.
I have concluded that the proceeding and the claim for interlocutory relief should not be dismissed for want of standing, although to the extent the plaintiff seeks to enforce any rights enjoyed by Ms Campbell as shareholder and as party to a licence agreement with the defendant. Ms Campbell should be joined as a party to the proceeding either as a plaintiff or if she does not consent to be joined as plaintiff, then as defendant. That is so because her rights as shareholder, or as party to a licence agreement with the defendant, could be enforced for the benefit of the beneficiaries of the trust on which legal title to the shares and any chose in action under the licence agreement are held. Ms Campbell remains the member. She has the legal title to the shares.
As to the second matter going to the Court's jurisdiction, or to the question whether the proceeding should be transferred to the Federal Court or the Federal Circuit Court, I have concluded that as there is no issue that the shares and the rights to which the shareholding gave rise were and still are held by Ms Campbell as trustee for the benefit of the superannuation fund, the shares do not vest in her trustee in bankruptcy (Bankruptcy Act 1966 (Cth) s 116(2)(a)). There being no controversy about that question, I have concluded that this proceeding does not involve the exercise of jurisdiction "in bankruptcy" within the meaning of s 27 of the Bankruptcy Act. That is to say, there is no issue, and no reason to think, that there will be any ground for impugning the trust. For those reasons I do not consider that this Court has jurisdiction to deal with the claim only by reason of s 4(1) of the Jurisdiction of Courts (Cross-Vesting) Act and the matter is not required to be transferred.
Next, I have concluded that it is seriously arguable that from April 2013 the parties conducted themselves on the agreed basis that the licence would remain on foot for the purposes of allowing Dr Campbell (as she then was) and subsequently allowing the plaintiff to find a new "tenant". In any event, it is arguable that the defendant has reached an agreement with the plaintiff (acting through its directors) to allow the plaintiff to locate a suitable occupant and that even if no agreement with Ms Campbell is enforceable, an agreement with the plaintiff may be.
However, I do not consider it seriously arguable that that licence requires the provision of cards to provide 24-hour access to the suite whilst a suitable occupant is sought.
In any event, I have concluded that the balance of convenience is against the grant of the mandatory interlocutory relief sought and I have also concluded that the plaintiff's delay is an additional and independent reason for refusing relief.
Because this is an interlocutory application, I will deal with those matters in more detail only insofar as is necessary to explain those conclusions.
I turn first to the terms of the defendant's articles of association. Subclause 3(1) provides, in substance, that the holder for the time being of a group of shares who is not in default in the payment of any moneys due to the company, is entitled to occupy a unit which is appurtenant to that group if, but only if, he has first executed and delivered to the company a licence agreement in accordance with subclause 3(2) and only so long as he or his executors or administrators continue to hold such shares. Clause 3(1) goes on to provide that if a holder of shares has commenced to occupy the unit appurtenant to the shares held without having executed and delivered to the company a licence agreement, he shall nonetheless, forthwith on so occupying the unit, be bound by the conditions and provisions set out in the licence agreement which is a schedule to the articles. I think it arguable that if the shareholder, by having commenced occupation of a unit, becomes bound by the terms of the licence agreement, then the company, for its part, by allowing the shareholder to take occupation, is also bound by the terms of the licence agreement. Thus the fact that no signed licence agreement has been produced does not defeat the plaintiff's claim.
Subclause 3(3) provides that: "There shall be payable to the company by the licensee under any such licence agreement a quarterly sum being one-fourth of such annual sum as is fixed by the directors from year to year and as in the opinion of the directors in each year is sufficient to provide the licensee's proportion of the estimated outgoings of the company in that year ...".
The significance of this clause is that notwithstanding the company's termination of the licence agreement in April 2013, it continued to make quarterly levies on Ms Campbell or the plaintiff. So far as appears, its only basis for rendering such levies was pursuant to clause 3(3) and such levies are only payable by a person who is "the licensee under any such licence agreement". Hence it is said for the plaintiff that the defendant, notwithstanding its purported termination of the licence agreement in April 2013, by its conduct it has kept the licence agreement on foot.
Clause 3(7) provides, in substance, that if a member who has entered into occupation of a unit makes default in the payment of any quarterly sum payable under the licence agreement or in the performance or observance of the conditions and provisions contained in the licence agreement, and the company determines the licence by reason of such default, then the directors can require the member to sell the group shares to which the unit is appurtenant to a purchaser approved by the directors, and if no such approved purchaser is found within one month, then the directors can sell the shares at their fair market price as determined by evaluation.
The chairman of the defendant's board, Mr Barry Tozer, deposes that over several years, the defendant made efforts to contact Ms Campbell seeking to provide her with the opportunity to re-let the suite or to sell it, but she did not do so and in the absence of a satisfactory response, the board took possession of the suite and "has been in the process of seeking to market the suite and to sell it although no formal steps have yet been taken". There is no elaboration on this evidence and it does not appear that any steps have been taken by the defendant to sell the plaintiff's shares pursuant to subclause 3(7) or otherwise.
The first schedule to the articles of association provides the form of licence agreement that the member is taken to have entered into if he or she takes occupation of the suite without having executed a licence agreement. Clause 7 requires a member to maintain the interior of the unit in a good state of repair and cleanliness. Clause 12 provided: "12.(a) The Member shall not without first obtaining the written consent of the Company which shall not be unreasonably withheld, (i) assign his interest hereunder or any part thereof …"
Clause 14 provided that the company could give a member 14 days' notice of termination of the right to occupy a unit and the member was required to deliver up the unit to the company on the expiry of such notice in the case of any one of a number of events. These included that if a member was judged bankrupt, or if the member was in default in the performance or observance of any term for a period of 30 days after written notice of default was given to the member by the company.
Clause 15 of the licence agreement provided an additional source of power by the board to sell shares if a member's right to occupy a unit was terminated in accordance with the licence agreement.
As I have said, on 27 March 2013 the board gave both notice of purported termination of the licence agreement and 14 days' notice of the termination of the licence agreement for various breaches that were alleged. Notwithstanding that some of these alleged breaches were contested in correspondence, it is clear from the evidence read on this application that Dr Campbell was in breach of the licence agreement and that the defendant was entitled to terminate the licence agreement, as it purported to do in April 2013.
There was uncontested evidence as to the unclean state of the premises. There was clear evidence of failure to make payment of levies. No submission was advanced for the plaintiff that the licence was not terminated in April 2013. The plaintiff's contention was that the defendant has acted inconsistently with that termination in three respects. First, it continued to render invoices and collected payment of those invoices. Secondly, on or around 30 October 2014, it provided the plaintiff with a key to the premises, and thirdly, on 18 November 2014, it advised that access to the premises could be obtained after-hours by making contact by prior arrangement with the building manager. This conduct, however, was only done in the context of Dr Campbell's advising the board that she wished to exercise the facility provided by clause 12 of the licence agreement to find a suitable person to use Suite 23.
Whilst clause 12 of the licence agreement is expressed as a prohibition on a member's assigning his interest or granting a licence to any person to use the unit, it carries the clear implication that a member is entitled to assign his interest under a licence, or to grant a licence to another person to use the unit, if the written consent of the company is obtained. That consent is not to be unreasonably withheld. Having regard to the defendant's conduct after the purported termination of the licence, I consider it seriously arguable either that a new licence agreement was made between the company and Ms Campbell, or that a new licence agreement was made from October 2014 between the company and the plaintiff, for the limited purpose of Ms Campbell's or the plaintiff's attempting to locate a suitable new occupant, or alternatively, that the defendant is estopped from denying that it has terminated the existing licence agreement. But such estoppel would be limited to its denying the termination of the licence agreement so as to permit the member or the plaintiff to exercise rights that are implied by clause 12 of the licence agreement.
If the only licence agreement that remains on foot is between the defendant and Ms Campbell, being a licence agreement that arises by virtue of her shareholding in the company and from her having taken occupation of the suite, then the question arises as to whether the plaintiff has standing to sue.
I think it arguable, in any event, that a new licence agreement was made between the plaintiff and the defendant. Mr Hudson deposes that he is informed by a Mr David Williams, that Mr Williams accompanied Ms Campbell's children to meet with the board of directors of the company to obtain the board's approval of Angela Campbell Pty Ltd, that is, the plaintiff, being the new shareholder of the relevant shares in Hengrove Hall. That meeting is said to have taken place in October 2014. Mr Hudson deposes that no letter has been received from the defendant stating that the directors of the plaintiff were not approved by the board. Rather, following that meeting advice was given as to arrangements that could be made for after-hours access. It may be that those events could arguably give rise to a new licence agreement, partly oral and partly by conduct, between the defendant and the plaintiff. If that is so, then questions of standing which arise because the plaintiff is not the shareholder would not arise. Insofar as the plaintiff's claim depends upon the exercise of the rights of a shareholder (including the right of occupation derived through the articles) then the question of standing does arise.
It appears that the defendant keeps a register which operates as a register of members, although it is called a Strata Roll. Section 231 of the Corporations Act 2001 (Cth) provides that a person is a member of a company if, relevantly, they (sic) agree to become a member of the company after its registration and their (sic) name is entered on the register of members. The defendant is required by ss 168 and 169 of the Corporations Act to keep a register of members and such register is to contain the members' names, addresses and the shares held by each member. The Strata Roll satisfies those requirements and it appears to be the register. The member named in the register is "Angela Campbell ATF The Halina Superannuation Fund". It is clear that Ms Campbell does not own the shares beneficially, notwithstanding an entry made in the ASIC register.
The company asserted on 27 March 2013 that the "registered proprietor" (sic) of the relevant company shares was the Halina Superannuation Fund. The board asked to be advised of the names or identity of the trustee of the superannuation fund. It is clear that the ASIC return lodged by the company is in error in this respect. However, the plaintiff has not become a member of the defendant merely because there has been a change of trustee. Nonetheless, the new trustee is entitled to enforce the rights that Ms Campbell as the former trustee of the superannuation fund has against the company (see, for example, Young v Murphy [1996] 1 VR 279).
Ms Campbell should be joined as a party to the proceeding either as plaintiff or, if she does not consent to be joined as a plaintiff, as a defendant, so that rights she has as the legal owner of the shares and a party to the licence agreement can be enforced for the benefit of the trust (Lewis v Condon [2013] NSWCA 204; (2013) 85 NSWLR 99 at [107]-[109]).
There being no controversy about the fact that the shares are held by Ms Campbell for the benefit of the trust, that is to say, there being no controversy that the shares and associated rights under the licence agreement do not vest in her trustee in bankruptcy, I do not consider that this case involves the exercise of jurisdiction in bankruptcy within the meaning of s 27 of the Bankruptcy Act.
This case can be compared with Truthful Endeavour Pty Ltd v Condon (as Trustee of the Bankrupt Estate of Rayhill) [2015] FCAFC 70; (2015) 321 ALR 483 where the Full Federal Court observed that in its opinion the earlier proceedings in this Court, which were dealt with by the Court of Appeal in Lewis v Condon, ought to have been transferred to the Federal Court under s 6(1) of the Jurisdiction of Courts (Cross-Vesting) Act. But that was because in that case there was a controversy as to what property vested in the trustee of the bankrupt's estate by the operation of s 58(1) of the Bankruptcy Act and was divisible among creditors under s 116 (see, for example, at [36]).
Whilst I have found that it is seriously arguable that the parties conducted themselves on an agreed basis that a licence would remain on foot for the purposes of allowing Dr Campbell and subsequently the plaintiff to find a new occupant of the suite, I do not think it follows that it is seriously arguable that such a licence requires the provision of cards to give 24-hour access to the suite. There is no express term in the form of licence agreement provided as a schedule to the articles of association that any particular form of access need be provided.
Counsel for the plaintiff submitted that clause 3 of the licence agreement that provided a member should have a right of quiet enjoyment of the unit without interference by any person deriving title under or through the company or acting with its authority, implied that the member should have a right of occupancy that enabled it to have access to the premises at any time.
That may well be right if a person had an unfettered right of occupancy in accordance with the terms of the licence agreement. But I do not think that the acquiescence by the defendant from April 2013 in the requests made by Dr Campbell and later by the plaintiff to be allowed to find a new occupant of the suite gives rise to any such continued general right of occupation.
It is said that unfettered access to the premises is necessary so that a real estate agent engaged by the plaintiff can market the premises to prospective licensees. I am not persuaded that that is so. There is some second-hand hearsay evidence to that effect, but there is also sworn evidence given by a Mr Skufris, a licensed real estate agent. He is familiar with the particular building. His evidence is that such access would not be required.
He deposed to being unaware of any reason why an agent instructed to sell or lease Suite 23 would require after-hours access to the building. He noted that the caretaker is usually in attendance from 7.00 am and the building remains open to the public until 6.00 pm. He says that were he formally retained to lease or sell the suite, he would not require general access outside normal business hours. He says that in the years in which he has been involved with commercial leasing it has been very much the exception if inspections were to occur after-hours or on weekends. He deposed that in the normal case no such arrangements are made, the reason for this being generally there is no access to lifts after-hours and agents are not provided with swipe cards to activate lifts after-hours.
Mr Fusco, who is said to have advised Ms Campbell that he requires a swipe card to access the premises outside business hours, particularly on Saturdays, did not give evidence.
In any event, I think the balance of convenience is against the grant of mandatory injunctive relief to require the provision of swipe cards to allow access 24 hours per day, seven days per week.
One of the complaints made by the defendant which gave rise to the termination of the licence in April 2013 involved the triggering of security alarms and a fire alarm on 19 November 2012. Alldis & Cox, estate agents, who appear to have managed the building for the defendant, wrote to Dr Campbell advising that they were instructed that there had been at least one and possibly two false fire alarms at the premises after business hours resulting in the company's having incurred call-out fees from NSW Fire and Rescue. They said that the call-out fee that had been charged to the building had been passed on to Dr Campbell's levies and applied against the last payment she had made on 5 July 2012. They also said that the building security alarm had been activated on a number of occasions outside of business hours by persons referable to her shareholding and that charges, which were yet to be passed on, had been incurred as a result.
Having regard to those prior complaints in November 2012, I do not think that the balance of convenience favours the grant of the mandatory relief claimed that would give the plaintiff unfettered 24-hour access to the premises.
Finally, delay is always a factor in considering injunctive relief. It is a particular factor when interlocutory injunctive relief is sought and that is even more so when mandatory relief is sought.
The dispute between the parties has been ongoing since at least 2012. The particular issue concerning unfettered access to the premises has been ongoing since November 2014, almost a year ago. There has been no adequate explanation for the delay in commencing these proceedings. Indeed, the proceedings appear to me to have been brought, if anything, precipitously, as there appear to have been ongoing discussions between the parties and I am dismayed that arrangements could not have been made between the parties on a consensual basis to provide after-hours access, if required, by prior arrangement with the building manager, as had been foreshadowed or proposed by the defendant in November 2014.
For all of these reasons, I decline to grant the interlocutory relief sought.
I will hear the parties on the further conduct of the proceedings and on whether the proceedings should be in the Corporations List, as they presently are, and as to costs. [Parties addressed.]
The plaintiff has had some success in relation to the question of electricity and had some success on some of the matters which were argued. But the defendant has had the greater measure of success on the interlocutory application. I think the appropriate order is that the costs of the notice of motion should be the defendant's costs in the proceedings.
I order that the proceeding be removed from the Corporations List to the General List.
I direct that the summons that was re-named an Originating Process again be styled a summons and that the notice of motion, which was re-named an Interlocutory Process, again be named as a notice of motion.
I stand over the proceedings to the Registrar's list on Thursday 5 November 2015 for directions.
I note that this matter should proceed on pleadings.

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