BETWEEN : METROPOLITAN PROPERTIES PTY LIMITED (ACN 009 209 125)

Injunctions - Interim injunction - Undertaking as to damages - Discontinuance before trial on merits - Enquiry as to damages sought by defendant

Australian Securities Commission & Ors v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194

City of Keilor v O'Donoghue [1971] HCA 77; (1972) 126 CLR 353

F Hoffman-La Roche & Co A G v Secretary of State [1975] AC 295

Fourmile v Selpam Pty Ltd & Anor [1998] FCA 67; (1998) 152 ALR 294

Mercantile Credits Ltd v Shell Co of Australia Ltd [1976] HCA 9; (1976) 136 CLR 326

Newington v Windeyer (1985) 3 NSWLR 555

Pearson & Anor v Leichhardt Municipal Council [1997] 93 LGERA 206

Permanent Trustee Company of New South Wales Ltd v Campbelltown Corporation [1960] HCA 62; (1960) 105 CLR 401

Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622

1 HEENAN J: The plaintiff company ("Metropolitan") wishes to discontinue this action but seeks a discharge of its undertaking as to damages given when obtaining an interim injunction against the defendant company ("Caltex"), as well as an order for costs of the action. In turn Caltex seeks enforcement of the undertaking and an order that Metropolitan pay its costs.

2 In 1978 a company which owned a large area of land at Willetton constructed a shopping centre there. On 5 September 1978, on the application of the owner and upon condition that the public continue to have access over the land from Burrendah Boulevarde to the shopping centre, the Town of Canning consented to the construction of a service station on the land. The condition was expressed in these terms:

"The owners and occupiers to allow unrestricted public access at all times over the northern access way (as shown on Plan) to and from the shopping parking areas to Burrendah Boulevarde. If the service station area is subdivided from the existing shopping lot, a suitable easement for public access, to the satisfaction of the Town of Canning, be placed on the title of the new lot."

In 1981 a service station was built and a separate title was issued for Lot 107, the land on which it was situated, but no easement was registered and no reference to the above condition appeared on the title. The owner leased Lot 107 to Caltex and the lease was registered on the title.

3 Mr R Prineppi, a business manager employed by a company related to Caltex, has sworn as follows:

"The Caltex file for the Service Station shows, and I verily believe, that no notice or communication concerning any Town Planning condition of approval on the construction or operation of the Service Station was given to the defendant prior to the registration of the first Lease on 12 June 1981 nor has any notice or communication whatsoever in this regard been given to the Defendant since that time until I was notified of the existence of the condition by an officer of the City of Canning in 1998."

4 In 1988 Metropolitan purchased Lot 101, the land on which the shopping centre was situated, and Lot 107. In 1992 it sold the latter to Tilby Nominees Pty Ltd ("Tilby"). Tilby provided a written undertaking, the relevant provisions of which read as follows:

"2. Tilby hereby covenants and agrees with Metropolitan to grant Metropolitan a 6 metre wide right of carriageway from Burrendah Boulevard to Lot 101 along the Western boundary of the Land for a period of 15 years from the date of this Undertaking in accordance with the attached plan marked "A" PROVIDED THAT the Lessee of the Land (presently Caltex Oil (Australia) Pty Ltd) consents to the creation of the right of carriageway on terms including no reduction in the rent in accordance with the existing lease.

3. Tilby will not sell, assign, transfer or dispose of any interest in the Land unless Tilby first obtains a Deed of Covenant executed by the person to whom Tilby proposes to sell, transfer, assign or dispose of an interest in the Land by which that person covenants in favour of Metropolitan to be bound by the obligations of this Undertaking."

Mr T R Rankin, another business manager employed within the Caltex group, has testified that Caltex was not a party to the undertaking and that "there is no record on the Caltex file of Caltex ever having been asked to consent, or having given consent, to the easement granted by the registered proprietor of the Service Station by the Undertaking". It was not until December 1996 that Metropolitan lodged a caveat against Lot 107 claiming to be the grantee of an easement pursuant to the undertaking.

5 Over the years the shopping centre grew and buildings were added. Between October 1995 and October 1997 Metropolitan and Tilby sought to negotiate reciprocal parking and access arrangements with Caltex, but the negotiations were not successful. On 19 March 1998 Mr Prineppi wrote to the City of Canning (as the Town of Canning had become) complaining about shopping centre customers who parked on Lot 107. The text of the letter includes the following:

"Although a caveat has been registered on our property to secure a right of access into the shopping centre this was not done with our permission and, therefore, is not binding on Caltex. In addition when the shopping centre extensions were undertaken by the owners they created an entry into the shopping centre from our service station which is not aligned to the easement anyway. Thus shopping centre customers and delivery vehicles are crossing a large portion of our land without our agreement.

In addition, the way the entrance to the shopping centre has been created customers assume they have the alternative of parking on our land along the western boundary. We now find that shopping centre customers are parking along this section of land and because many park all the way down to the crossover we find a dangerous situation is occurring. Accordingly I have instructed our contractor to erect a chain link fence along the western boundary of the site to prevent vehicles parking there without the express permission of the dealer.

Could you please provide me with details of the procedure for us to have any vehicles illegally parked on our premises issued with an infringement notice by Council.

If congestion continues to be a problem we may consider taking steps to prevent trucks from the shopping centre from using this exit, although this may require further reduction in shopping centre parking bays to allow sufficient turning circle for trucks to use another exit.

We understand that the shopping centre owners have advised Council that they have reciprocal parking rights for their customers on our property. I wish to confirm that this has never been agreed to by Caltex.

With respect to the suggestions to merge the exit from the service station and that of the adjacent library and health clinic, I wish to advise that we are not prepared to agree to any of the proposed changes to the service station crossover at this time."

The evidence does not show that Caltex made any approach to Metropolitan regarding the matters to which the letter referred.

6 Meanwhile, ever since the building of the service station vehicles and pedestrians had enjoyed uninterrupted passage across Lot 107, along an access way of approximately 12 to 15 metres wide. The access way was one of the most important means of passage to the shopping centre. It carried much traffic and provided the main, if not the only, way by which large service vehicles could transport goods to the businesses within the centre.

7 In or about November 1998 Tilby sold Lot 107 to another company. Settlement of the transaction was expected to take place before the end of the year. The lease of Lot 107 to Caltex was due to expire on 31 December 1998 and the service station ceased trading early in November. The current franchisee, to whom Caltex had granted a sub-lease, had set about preparing to leave the premises. In order to remove its underground petrol storage tanks and to complete other works Caltex arranged for contractors to fence the site.

8 When Ms Maxine Rogers, the manager of the shopping centre, arrived at work on the morning of Thursday 3 December 1998 she found a fencing contractor installing star pickets around the Caltex site. He told her that the access way was to be fenced off. After urgent representations were made to Caltex the contractor stopped what he was doing and left the premises. On Monday 7 December Caltex's senior engineer, Mr Peter Graham, told Metropolitan's managing director, Mr M R Coleman, that Caltex would erect the fence but would respect Metropolitan's right of way. Nevertheless, before the shopping centre opened the next morning the access way had been fenced and gated. Again Mr Coleman complained, and the fence was moved to allow suitable access. But by then much traffic had been disrupted and inconvenience had been caused to tenants and customers of the shopping centre.

9 On the afternoon of the following day, Wednesday 9 December, the plaintiff's solicitor, Mr G R Dean, received a telephone call from Caltex's solicitor, Mr D H Solomon, stating that his client wanted $20,000 in exchange for access rights, that it was prepared to negotiate the amount and that the access way would be closed that night if there was no agreement by the close of business that day. Mr Solomon refused Mr Dean's request to seek instructions from Caltex for extension of time to enable discussions to take place.

10 On the morning of Thursday 10 December contractors employed by Caltex again attempted to close the access way but they left after police attended. That afternoon the plaintiff's solicitors issued the writ which began these proceedings. On the following day, having heard counsel representing each party, Scott J granted an interim injunction restraining Caltex until further order from impeding or obstructing the access way. The injunction was granted upon the usual undertaking to the Court that Metropolitan pay compensation, to be assessed by the Court, to any party restrained or affected by the restraint.

11 Caltex complied with the injunction, but the area which had been excavated in order to remove the tanks was unfilled, and the fence around the site remained, until some time in February 1999. Only then was the excavated area filled and resurfaced and the fence removed. Later that month Metropolitan re-purchased Lot 107. Since then it has had the service station removed.

12 In opposing discharge of the undertaking which Metropolitan had given to the Court when obtaining the interim injunction counsel for Caltex submitted that it had acquired an indefeasible interest in Lot 107 when its lease was registered in 1981. He submitted also that, as Caltex did not consent and was not asked to consent to the creation of the "right of carriageway" referred to in the undertaking of 1992, its indefeasibility was not affected by that document. Finally, he submitted that there had been no dedication of the access way by reason of the provisions of any applicable legislation or at common law. That being so, he argued that Metropolitan had no enforceable right to the grant of an injunction and that, had it gone to trial, the action would have failed. He went on to contend that Caltex was justified in asserting its legal rights as it did on the afternoon of Wednesday 9 December 1998 and that it had demonstrated a willingness to negotiate. He pointed out that Metropolitan could have paid the $20,000 under protest, reserving the right to recover the money if its demand proved to be unlawful.

13 In Graham v Campbell (1878) 7 Ch D 490 at 494 the Court of Appeal, James, Cotton and Thesiger LJJ, said:

"The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which, on the hearing, is found to have been wrongly asked for, justice requires that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so."

In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1979) 146 CLR 241, after citing the above passage, at 261-2 Aickin J commented:

"The cases display a substantial variation in the language in which the principle is expressed. The following are examples of expressions used: some cases speak of damages being available if it turns out that the injunction was 'wrongfully granted'; others of where 'The court is ultimately of opinion that the order ought not to have been made', and others again say that the damage should not fall on the 'litigant who has without just cause been made so'. It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction. At the trial the issues are of necessity different from those involved in the question of whether or not an interlocutory injunction should be granted."

In McCleary & Ors v Director of Public Prosecutions (Cth) (1998) 157 ALR 300 at 321, having reviewed the above and other authorities, Ipp J extracted the following propositions:

"(a) The Court has a discretion not to enforce an undertaking as to damages given in ordinary civil litigation, but that discretion is to be exercised in accordance with well-settled principle.

(b) Where a plaintiff has failed on the merits, the undertaking will be enforced unless special circumstances exist.

(c) Generally, special circumstances will involve conduct of the defendant (unrelated to the plaintiff's failure on the merits) such that would render it inequitable to enforce the undertaking.

(d) Special circumstances will not be constituted by the reasons for the plaintiff's ultimate failure, or by the fact that the plaintiff acted reasonably in obtaining the injunction, or that the injunction was granted by a mistake of law or fact on the part of the Court."

After considering the above authorities and others to which counsel referred me, and after having particular regard to the observations of White J in Associated Confectionery (Aust) Pty Ltd v Logan & Ors, unreported; SCt of WA; Library No 940596; 3 November 1994, I am satisfied that the principle of law which is applicable in the circumstances of this case can be expressed as follows. When the issue is resolved before trial and the action terminates without fault on the part of the plaintiff, the defendant is not entitled to enforce the undertaking if the plaintiff was right in seeking the injunctive relief granted.

14 It is unnecessary to decide whether, as a matter of strict law, Metropolitan was entitled to the access across Lot 107 which it claimed. Bearing in mind that the access way had been used without objection for more than 18½ years, that Caltex was able to remove its underground tanks and to restore the site without closing the access way and that its closure at that time without reasonable notice would have caused disruption of deliveries to tenants of the shopping centre and severe loss of patronage, the attempt to close it was reprehensible. The blameworthiness of Caltex's conduct was aggravated by its outrageous demand for payment of $20,000. In those circumstances Metropolitan clearly was right in bringing this action and in seeking the injunctive relief which was granted. As we have seen, the issue was resolved simply by the passage of a comparatively short time. The termination of the action is not due to any fault on the part of Metropolitan.

15 I conclude that Metropolitan is entitled to discontinue the action on terms that its undertaking as to damages be discharged and that Caltex pay its costs of the action, including the application for the interim injunction and all reserved costs, to be taxed.