Plaintiffs v Defendants

2 The defendants are Gannawarra Shire Council ('the Council') and Coliban Regional Water Corporation ('Coliban'). Coliban, is the registered proprietor of land situate and known as 112 Chuggs Road, Cohuna, upon which the Cohuna Airfield is located.

3 In around 1998, Coliban granted permission to the Council to occupy the land at Chuggs Road, Cohuna for the purposes of operating the Cohuna Airfield. Initially it did so pursuant to a licence dated 18 June 1998 for a term of 20 years ('the 1998 Coliban Licence'). A subsequent licence was granted for a term of five years commencing 1 January 2019 ('the 2019 Coliban Licence').

4 It was a term of both licences that the Council would not sub-licence the Cohuna Airfield without the express prior written consent of Coliban. It was a term of both licences that the licence could be determined by the Council upon giving one month's written notice to Coliban.

5 On 16 June 2016, the Council granted a planning permit to the plaintiffs to construct an aircraft hangar at the Cohuna Airfield to house three aircraft. The works were completed by August 2017 at a cost to the plaintiffs of approximately $120,000 and, on 18 August 2017, an occupancy permit was granted in relation to the hangar.

6 On 7 June 2017, a sub-licence agreement was entered into between the plaintiffs and the Council, pursuant to which the Council gave a sub-licence in favour of the plaintiffs for a term of one year to use part of the Cohuna Airfield ('the 2017 Sub-Licence').

7 The land the subject of the 2017 Sub-Licence had an area of approximately 360m² and corresponded to the location of the hangar. The 2017 Sub-Licence was given by the Council with the consent of Coliban. Item 4 of Schedule 1 to the 2017 Sub-Licence specified the following as the permitted use of the land:

The Premises can only be used for the purposes of storage of aeroplanes. The Occupant is by sub-licence occupying the land only and is to construct, to the satisfaction of the Council and Coliban Region Water Corporation a removable hangar.

8 The terms of the 2017 Sub-Licence included an acknowledgement by the plaintiffs of the terms and conditions of the 1998 Coliban Licence, a copy of which was annexed. It included an acknowledgement and confirmation that the 1998 Coliban Licence might be determined on the terms set out therein and that the plaintiffs, as occupant, accepted the sub-licence was subject to the rights contained in clauses 8 and 9 of the 1998 Coliban Licence. Clause 9 of the 1998 Coliban Licence provided that the licence could be determined by the Council at any time upon one month's notice in writing to Coliban.

9 In March 2019, following entry by the Council into the 2019 Coliban Licence, the Council informed the plaintiffs that it was prepared to renew the 2017 Sub-Licence. A new sub-licence was entered into between the plaintiffs and the Council on 26 July 2019 ('the 2019 Sub-Licence'). The 2019 Sub-Licence related to the same area and specified the same use as the 2017 Sub-Licence.

10 Recital 1.1 of the 2019 Sub-Licence refers to the 2019 Coliban Licence as the 'Head Licence' and records that the Council has agreed, at the request of the plaintiffs to grant them a sub-licence for that part of the land which, in essence comprises the hangar.

11 Clause 3.1, containing the grant of the sub-licence, expressly provides that the grant of the sub-licence is for the term set out in Item 2 of Schedule 1 (from 1 January 2019 to 31 December 2024) subject to the terms and conditions set out in the sub-licence.

12 Clause 4 of the 2019 Coliban Licence (not clause 9 as was the equivalent clause in the 1998 Coliban Licence) provides that the licence may be determined, relevantly:

4.3 By the licensee (the Council) upon one months' notice in writing.

13 Clause 7 of the 2019 Sub-Licence is central to the dispute between the parties and the application for injunctive relief. It is in the following terms:

7.1 The Occupant acknowledges the terms and conditions of the Head Licence Agreement, a copy of which is attached as an Annexure 2, and shall observe and perform the obligations and liabilities imposed upon Council therein as though such obligations and liabilities were imposed upon the Occupant in respect of the Premises...

7.2 The Occupant acknowledges and confirms that the Head Licence Agreement may be determined on the terms set out in clauses 8 and 9 of the Head Licence, and the Occupant hereby accepts this sub-licence subject to the rights contained in clauses 8 and 9 of the Head Licence.

7.3 In the event notice is given under either clauses 8 or 9 of the Head Licence the parties serving such notice will concurrently serve the Occupant with a copy of such notice and this Agreement shall be determined upon expiration of the relevant notice period.

14 The reference in clause 7.3 of the 2019 Sub-Licence to clauses 8 and 9 of the 2019 Coliban Licence is incorrect. As properly conceded by Mr Sowden, who appeared with Ms Fernando for the plaintiffs, the reference to clauses 8 and 9 should be a reference to clause 4 which includes clause 4.3 set out at [12] above. When the 2019 Sub-Licence was prepared, in error, it adopted the same references to clauses in the 1998 Coliban Licence as had been contained in the 2017 Sub-Licence.

15 The events that gave rise to the application by the plaintiffs commenced with a decision of the Council in June 2020 to give notice pursuant to clause 4.3 of the 2019 Coliban Licence to determine that licence.

16 It appears from the evidence that the cost to the Council of operating and maintaining the Cohuna Airfield, part of which only is sub-licensed to the plaintiffs, was $37,105 in the 2018-2019 financial year and that over the next ten years, if the airfield continues to be operated by the Council, the cost will be approximately $400,000.

17 On 24 June 2020, the Council resolved to endorse the Chief Executive Office, Mr Tom O'Reilly, to surrender the 2019 Cohuna Licence back to Coliban.

18 It is no part of the relief claimed in the proceeding to seek to impugn the resolution of the Council. The case for the plaintiffs turns on the proper construction of the terms of the 2019 Coliban Licence and the 2019 Sub-Licence and the rights of the parties to those agreements. In particular, whether as a matter of construction of the two agreements, the right of the Council to determine the 2019 Coliban Licence and the 2019 Sub-Licence on one month's notice is a qualified right that may only be exercised in limited circumstances.

19 On 7 August 2020, the Council gave notice of determination of the 2019 Coliban Licence to Coliban, as contemplated by clause 4.3 therein ('Notice of Determination'). As specified in the Notice of Determination, the 2019 Coliban Licence will determine effective 11 September 2020.

20 On the same day, 7 August 2020, the Council gave notice to the plaintiffs of determination of the 2019 Sub-Licence ('Notice'). The Notice to the plaintiffs referred to clause 7.3 of the 2019 Sub-Licence agreement. It noted that the Council was required to concurrently serve the plaintiffs in their capacity as sub-licensee with a copy of the Notice of Determination served on Coliban that day.

21 The Notice informed the plaintiffs that if Coliban did not approve an alternative licensee to replace the Council, then the plaintiffs should be aware that from 11 September 2020, being the date of determination of the licence, they will have seven days to remove any of their property from the land.

The proceeding and the application for interlocutory relief

22 On 24 July 2020, the plaintiffs initiated this proceeding. By the statement of claim annexed to the writ, they claimed an injunction restraining the Council and Coliban from terminating the 2019 Coliban Licence, together with further and other relief. The pleading alleges that in serving notice on Coliban of its intention to terminate the 2019 Coliban Licence, the Council will, unless restrained, breach the terms of the 2019 Sub-Licence and cause loss and damage to the plaintiffs. On 11 August 2020, the Council filed its defence in the proceeding.

23 On 22 July 2020 the plaintiffs filed a summons seeking orders:

(a) restraining the termination of the 2019 Coliban Licence; and

(b) an interim injunction restraining the Council from surrendering, assigning or otherwise dealing in any licences, permits or authorities with the Civil Aviation Safety Authority or any other regulatory body or authority in connection with the operation and use of the Cohuna Airfield.

24 In support of the claim for injunctive relief, the plaintiffs rely upon the affidavit of Mr Link sworn 23 July 2020.

25 The evidence establishes that on 1 July 2020, after learning of the decision taken by the Council on 24 June 2020 to give notice to terminate the 2019 Coliban Licence, the plaintiffs' solicitor wrote to the Council and Coliban putting them on notice that if a sufficient response was not received by 7 July 2020, they would seek orders enjoining the Council and Coliban from acting on the termination notice. The plaintiffs had earlier requested the Council remove consideration of the termination of the 2019 Coliban Licence from the agenda for the 24 June 2020 Council meeting, but to no avail.

26 By email dated 3 July 2020 the Council advised that there was a confidential, possible licensee replacement, and that they were supportive of the continuation of the 2019 Sub-Licence. However, at the date of swearing his affidavit, Mr Link said the Council has not undertaken any consultation process with him in respect of the 2019 Sub-Licence. Mr Link says that on 8 July 2020, the Council issued a press release confirming that the 2019 Coliban Licence will cease on 11 September 2020, noting that there will be a transition period in which Coliban will invite expressions of interest to determine the new licensee.

27 The evidence relied on for the plaintiffs includes that on 10 July 2020, the Shepparton News published an article stating that the Cohuna Airfield will be closed from 11 September 2020 to December 2020 whilst Coliban undertakes a due-diligence process examining whether it is viable for another party to operate the Airfield.

28 Mr Link says at the date of swearing his affidavit (23 July 2020), there has been no communication from Coliban with himself or other members of the Cohuna Aviation Club to whom he has spoken, regarding the closure of the Cohuna Airfield.

29 The potential closure of the airfield is a matter of considerable concern to the Cohuna community. The plaintiffs say that a petition, signed by just short of 1,500 people, opposing the Council's decision was given to Councillor Mr Andrew Gibbs on 13 July 2020, and to the Chief Executive Officer of the Council, Mr O'Reilly on 14 July 2020. The plaintiffs say that Mr O'Reilly stated that the petition did not meet the basic tenets of a petition as it had not been signed and did not have authenticity.

30 Mr Link deposes that in or about May 2019 the Cohuna Aviation Club, a club of 10 members of which Mr Link is the secretary, secured approximately $2.57 million in funding from the Commonwealth government for the purpose of developing and upgrading the Cohuna Airfield.

31 The Council rely, in opposition to the application for injunctive relief, upon the affidavit of Mr O'Reilly, sworn 11 August 2020.

32 Mr O'Reilly says that the Council does not have any licences, permits or authorities with the Civil Aviation Safety Authority or any other regulatory body or authority in connection with the operation and use of the Cohuna Airfield. As that evidence is not challenged, it is clear that there is no factual basis for the second limb of the relief claimed by the plaintiffs in their summons.

33 Both parties filed submissions prior to the oral hearing directed to the first limb of the plaintiffs' summons, the application to restrain the termination of the 2019 Coliban Licence.

34 Due to the COVID-19 pandemic, and the restrictions currently in place in Victoria as a consequence of the pandemic, the hearing was conducted by audio-visual means.

35 The principles that the Court must apply on an application for an interlocutory injunction such as the present are those set out by Hayne and Gummow JJ, with whom Gleeson CJ and Crennan J expressed their agreement in Australian Broadcasting Corporation v O'Neill:[1]

1. The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued:

"The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."

By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:

"How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks."

36 In Bradto Pty Ltd v State of Victoria Maxwell P and Charles JA held that:

1. The "serious question to be tried" test has been applied throughout Australia for more than 20 years. It has been found, in countless cases, to afford an appropriate criterion for determining - at the threshold - whether the claims of the party seeking injunctive relief are of sufficient substance to justify the court's consideration of the exercise of its injunctive power pending trial....
2. Whether there is a "serious question to be tried" requires a judgment to be made, for the purpose of which the Court or Tribunal will examine both the legal foundations of the claim(s) made in the proceeding and such of the evidence in support as is exposed on the interlocutory application. Unless upon such examination the court concludes that the applicant's claims are not reasonably arguable, that is, they do not have "any real prospect of succeeding", then the court will ordinarily be satisfied that there is a serious question to be tried.[2]

37 In determining whether or not an injunction should be granted, the critical issue addressed in the submissions of the parties is the question of whether or not the plaintiffs are able to show a prima facie case as discussed in Australian Broadcasting Corporation v O'Neill[3] or whether, as contended on behalf of the Council, there is no prima facie case with sufficient likelihood of success at trial, such that the application should be dismissed. Adopting the language of Bradto Pty Ltd v State of Victoria, whether the court should conclude that the plaintiffs' claims are not reasonably arguable, or, put another way, that the claims do not have 'any real prospect of succeeding'.[4]

38 At the heart of the submission in support of the asserted prima facie case for the plaintiffs is that to give one month's notice under the 2019 Sub-Licence is to act contrary to the statement of principle in Butt v M'Donald, namely:

Each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.[5]

29 It was submitted on behalf of the plaintiffs that the Council has a positive duty not to terminate the 2019 Sub-Licence without proper cause and that financial considerations or, for that matter, policy considerations would not constitute 'proper cause'. In argument it was submitted that an example of 'proper cause' would be if the Civil Aviation Safety Authority determined that the airport must close, in those circumstances, it would then be appropriate for the Council to give one month's notice to terminate but, essentially, not otherwise.

39 The problem with the submission on behalf of the plaintiffs is that it ignores the express terms of the contract which entitles the Council, without any limitation, to determine the 2019 Coliban Licence of one month's notice and, at the same time, to determine the 2019 Sub-Licence.

40 Recently, in Adaz Nominees Pty Ltd v Castleway Pty Ltd,[6] Whelan JA and Riordan AJA outlined the circumstances in which the Butt v M'Donald duty relied upon by the plaintiffs will be implied in contracts such as the 2019 Coliban Licence and the 2019 Sub-Licence and also the limitations that apply:

1. On this basis, the law will imply, in appropriate circumstances, a positive obligation to take action (to co-operate and to do all such things as are necessary to enable the other party to have the benefit of the contract), and a negative covenant not to hinder or prevent the fulfilment of the purpose of the express promises made in the contract.
2. The relevant duty 'is a duty to afford the other party the benefit of what he has contracted for; not a duty to act generally in the other party's best interests'. A term implied by law cannot be used as a basis for imposing on a party something commercially advantageous to the other party but for which the contract does not provide. The implied term is necessarily informed by the express terms of the contract. Thus, this Court has not accepted contentions that a term implied by law can, in effect, turn a contractual non-exclusive licence into an exclusive one; or require a party to act as if an express contractual right did not exist. As the Court of Appeal of the Supreme Court of Western Australia recently observed, the term implied by law, whether expressed positively or as a negative covenant, is not only limited by the criterion of necessity but must relate to bringing about something which the contract requires to happen. Even more recently, the Court of Appeal of the Supreme Court of Queensland has held that the implied duty to co-operate is 'conditioned' by the concept of reasonableness.[7]

41 The plaintiffs' contention is that the benefit of the contract entitles them to occupy the land in question pursuant to the 2019 Sub-Licence until 2024. However, as submitted by Mr Gisonda who appeared on behalf of the Council, the benefit of the contract is to occupy the land on which the hangar is located until 2024, but subject always to the terms and conditions of the 2019 Sub-Licence.

42 So much is clear from the express wording of clause 3.1 of the 2019 Sub-Licence which states:

3.1 Subject to and conditional upon the consent of Coliban Water, Council hereby grants a sub-licence to the Occupant to occupy the Premises for the term set out in Item 2 of the Schedule, (the "Term"), subject to the terms and conditions set out in this Agreement.

43 Applying the passage from Adaz[8] at [118] as set out above, the Butt v M'Donald[9] implied term for which the plaintiffs contend, necessarily informed by the express terms of the contract, cannot operate to displace the fact that the right granted to the plaintiffs to occupy the land is subject to the Council's right to terminate on one month's notice.

44 The text of clause 4.3 of the 2019 Coliban Licence, reproduced at [12] above is clear and unequivocal. The 2019 Coliban Licence may be determined by the Council upon one month's notice in writing. The right of the Council to determine the licence is absolute and unqualified.

45 Similarly the language of clause 7.3 of the 2019 Sub-Licence is clear and unequivocal. If a notice is given pursuant to clause 4.3 of the 2019 Coliban Licence, the Council, as the party serving that notice, is to concurrently serve the plaintiffs with a copy of that notice, and upon it so doing, the 2019 Sub-Licence is determined upon the expiration of the period stated in the notice.

46 It is clear from clause 7.1 of the 2019 Sub-Licence, which expressly refers to the 2019 Coliban Licence, which is itself an annexure to the 2019 Sub-Licence, that the objective intention of the parties is that once notice is given to determine the 2019 Coliban Licence, the same period of notice will operate to determine the 2019 Sub-Licence.

47 The argument on behalf of the plaintiffs that as a matter of construction the right to terminate the head licence and therefore the sub-licence on one month's notice is to be read down or qualified so as to be confined to a cause outside the control of the Council, such as in response to a directive from the Civil Aviation Safety Authority, must be rejected. Such an argument gains no support from the text of the contract and nor can it be supported by reference to purpose or context.

48 It is plain that the term of the 2019 Sub-Licence which as recorded in clause 7.1 annexes a copy of the 2019 Coliban Licence, is intended to be co-extensive with the term of the 2019 Coliban Licence. If one is determined, so is the other. As between the Council and Coliban, there is no objective commercial reason why the right of the Council to terminate the 2019 Coliban Licence on one month's notice should be qualified and no reason was identified in argument.

49 In the course of the hearing there was discussion as to whether, nonetheless, a term might be implied into the 2019 Coliban Licence and into the 2019 Sub-Licence to restrict the circumstances in which the Council might exercise its right to terminate.

50 For such a term to be implied, the criteria in BHP Refinery (Westernport) Pty Ltd v Shire of Hastings, would need to be satisfied:

(1) it must be reasonable and equitable;

(2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) it must be so obvious that "it goes without saying";

(4) it must be capable of clear expression;

(5) it must not contradict any express term of the contract.[10]

51 Not only does the statement of claim not seek to contend for an implied term conditioning or limiting the right of the Council to terminate the 2019 Coliban Licence on one month's notice, there would be no proper basis for the implication of such a term in this case in either the 2019 Coliban Licence or the 2019 Sub-Licence. To do so would be contrary to the express terms of clause 4.3 of the 2019 Coliban Licence and clause 7 of the 2019 Sub-Licence. To imply such a term would be to impose a constraint upon the exercise of the power by the Council to terminate including for financial or policy reasons. There is no arguable basis to imply such a term.

52 Quite properly in reply submissions, counsel who appeared for the plaintiffs did not contend to the contrary.

53 For the reasons discussed above I consider that the Council was entitled to give notice to terminate the 2019 Coliban Licence and the 2019 Sub-Licence. The case for the plaintiffs based on construction of the 2019 Coliban licence and the 2019 Sub-Licence, that the Council was not entitled to give notice, is not a case that has any real prospects of success.

54 In circumstances where the plaintiff is not able to make out a prima facie case and there is no serious question to be tried, the Court has no alternative but to dismiss the plaintiffs' application for interlocutory injunctive relief.

55 The Court does so, accepting that the circumstances in which the plaintiffs find themselves and the local Cohuna community are regrettable. As discussed during the hearing, it is to be hoped that the plaintiffs and the Cohuna Aviation Club are able to come to an arrangement with Coliban and the Council that allows the plaintiffs to continue in occupation of the hangar and for the proposed redevelopment for which it appears funding from the Commonwealth has been secured to be undertaken. However, these matters are not considerations that can influence the Court in its approach to this application where no prima facie case as described by the High Court in Australian Broadcasting Corporation v O'Neill[11] is made out.

56 Accordingly, I will dismiss the plaintiffs' application.

57 I order that the plaintiffs pay the defendants' costs of the application by summons filed on 24 July 2020 on a standard basis.

[1] [2006] HCA 46; (2006) 227 CLR 57, [65]; [19] (Gleeson CJ and Crennan J).

[2] (2006) VR 65, [12]-[13] (citations omitted).

[3] [2006] HCA 46; (2006) 227 CLR 57.

[4] (2006) VR 65, [13] (citations omitted).

[6] [2020] VSCA 201 ('Adaz').

[7] Ibid [117]-[118] (citations omitted).

[8] [2020] VSCA 201.

[11] [2006] HCA 46; (2006) 227 CLR 57.