NSL Pty Ltd v 2 Roslyn Street Pty Ltd

Judgment 1HIS HONOUR: The plaintiffs claim damages for the wrongful detention and conversion of certain fittings, cash and trading stock that were used by them in the course of a business conducted from premises leased to them by the first defendant. The plaintiffs allege that the first defendant validly exercised its right of re-entry on 15 June 2004 but failed to comply with the terms of the lease requiring the first defendant to permit the removal of tenant's fixtures and other chattels within a reasonable time. 2The first defendant did not appear at the hearing. The plaintiffs did not seek leave to proceed against the second defendant, which is in liquidation. 3The first plaintiff operated a nightclub business known as "The Venus Lounge" between October 2001 and June 2004 at and from premises known as 2 Roslyn Street, Kings Cross. F & B Trading Co Pty Ltd originally leased the premises to Panvena Pty Ltd for a term of three years commencing on 1 July 2001. The first plaintiff took an assignment of the lease from Panvena on or about 10 October 2001. The first defendant subsequently purchased the freehold from F & B Trading Co on 23 May 2003. 4Panvena had been operating a nightclub business from the premises. The first plaintiff purchased that business at or about the time it took an assignment of the lease. The purchase price of the business was $85,000, of which $63,000 was paid for fittings and equipment used on the premises for the purposes of conducting the business. The premises were at that time in a rundown and dilapidated condition. The first plaintiff therefore commenced a fitout on 27 October 2001, which it completed by approximately 1 March 2002. The first plaintiff commenced trading as a nightclub shortly thereafter and continued to trade until re-entry by the first defendant in June 2004. 5The first defendant effected its re-entry by locking the first plaintiff out of the premises and terminating the lease. Clause 39 of the lease provided as follows: "39. If the lessor shall enter into possession of the demised premises and the lessee shall not have removed his goods or any of them after the lessor has given the lessee a reasonable opportunity to do so, the lessor shall be at liberty to sell or otherwise dispose of such goods or any of them as if the lessee were at all times the beneficial owner thereof and had assigned all his right, title and interest in and to such goods to the lessor and the lessor shall not be liable to account to the lessee in respect of the net amount (if any) actually received by the lessor following the sale or disposal of such goods after deduction of all moneys outstanding by the lessee including expenses incurred by the lessor in detaining or maintaining possession of the goods or selling or disposing of the same." 6The evidence establishes that the lessee's goods were sold or otherwise disposed of in purported compliance with that clause. The plaintiffs contend, however, that the sale and disposal of the goods by or on behalf of the first defendant constituted a conversion of the goods, inasmuch as the first plaintiff had not been given a reasonable opportunity to remove them. Although the statement of claim originally pleaded a wide range of alternative causes of action, these had been limited to claims in detinue and conversion when the matter came before me for hearing. 7The plaintiffs rely upon an affidavit sworn by John Rossell Innes on 3 March 2008. It extends to over 150 paragraphs and nearly 70 pages. It has exhibited to it 28 annexures contained in a folder consisting of some hundreds of pages. I have read this material at length. 8Upon the basis of Mr Innes' account of events, it seems that negotiations for the sale to the first defendant of the items in question commenced shortly following the re-entry. These negotiations ultimately came to nothing. The first defendant's representatives were apparently concerned to use the goods as security for recovery of monies that the first defendant contended were still owing to it under the terms of the now terminated lease. These claims were presumably reflected in a cross-claim filed by the first defendant on 2 June 2005 seeking recovery of almost $132,000 for outgoings, legal fees, removalist and storage fees and unpaid rent. That cross-claim has not been pursued before me. 9Mr Innes said that by about 12 October 2004 the first defendant had re-let the premises to the second defendant. The first plaintiff had not been permitted to remove its goods from the premises before that occurred. However, it was not until 13 October 2004 that Mr Innes was relevantly permitted to inspect the premises. When he did so on that day Mr Innes observed that a considerable amount of the first plaintiff's stock had been removed from the premises. A list of the missing items is to be found in paragraph 138 of his affidavit. Mr Innes said that at the time of his inspection there were a number of people wandering around the premises. 10Whilst at the premises on this occasion Mr Innes says that he was told by a person apparently authorised to represent the first defendant that he had been instructed by the first defendant to remove and store certain of the first plaintiff's goods. It would appear that all parties thereafter retreated to the advice of their lawyers. On 12 October 2004 the first plaintiff's solicitor wrote to the first defendant in terms that included the following: "We confirm that you have informed us that: (i) the premises located at 2 Roslyn Street, Kings Cross formerly leased to our client have been re-let and you will receive rent in respect of those premises on and from 1 November 2004; (ii) what you have identified as our client's assets (apparently in accordance with an inventory) have been put in storage. We further confirm your allegation that our client does not own the bar, refrigeration, beer lines and cool room located on the premises. Our client strongly denies such allegation... We note your comment that you are unwilling to provide our client with access to the premises to inspect what of its assets remain there, apparently on the basis that the premises have been re-let and you do not have any other right to go into the premises. With respect, your suggestion that our client wait until the premises are open and trading and attend same socially is totally unacceptable. We assume that as lessor you have certain rights to enter the premises, even if on notice to current lessee." 11The first plaintiff's solicitor wrote to the first defendant's solicitor three days later. No further correspondence of any sort is in evidence before me. 12Mr Innes deposed at paragraph 147 of his affidavit that at all times after 15 June 2004 the first defendant prevented the first plaintiff from removing its assets from the premises. None of the items in question has ever been returned to the first plaintiff and the first defendant has never accounted to it for anything that might have been recovered following a sale or disposal. 13As part of the agreement in September 2004 that the first defendant would lease the premises to the second defendant, it was agreed between them that the first defendant would sell some, but not all, of the first plaintiff's fitout and fittings to the second defendant for $66,000 inclusive of GST. The first plaintiff's claim in these proceedings in respect of any of its goods allegedly converted by the first defendant is limited to these items. Although the first plaintiff originally sought to recover the price that it had paid for the goods, it reduced that claim when the matter came before me to the value of the goods at the date of the conversion, represented for present purposes by the sale price to a third party in accordance with an arm's length transaction. 14The first plaintiff also claims that the sum of $20,800 was stored in cash upon the premises at the time of the first defendant's re-entry and that the money was never accounted for by the first defendant. Mr Innes has deposed to this matter as well: see paragraphs 76-91 of his affidavit. I am satisfied that the first plaintiff's money was taken and not returned to it by the first defendant or by servants or agents on its behalf. 15Finally, Mr Innes has deposed that certain stock in trade that was present upon the premises at the time of re-entry was not returned to the first plaintiff. This stock consisted of bottled liquor and kegs of beer and similar goods, to the details of which Mr Innes has also deposed: see paragraphs 60-61 of his affidavit. The purchase price of the stock in trade was $29,800 and the first plaintiff claims that sum representing its value at the time the first defendant converted it to its own use. 16I am satisfied upon the balance of probabilities that the fixtures and fittings, cash and stock in trade allegedly converted by the first defendant were all items in respect of which the first plaintiff was either the owner or entitled to immediate possession and that the first defendant converted all of these items to its own use. It is unnecessary to consider whether the first plaintiff has a claim in detinue as well. I find that the first plaintiff is entitled to the sums claimed. 17I therefore make the following orders: