Are the Cross Claimants entitled to Immediate Possession of the Equipment?
218 The facts clearly establish that prior to the execution of the Writ of Possession on 27 November 1998 a gymnasium business known as Pace Fitness Club was carried on at the subject premises.
219 On 30 July 1998 an agreement was reached between the defendants and the plaintiff, details of which are set out earlier in this judgment, under which the defendants were given the right to occupy the subject premises up to midnight on 30 October 1998. Judgment was entered in accordance with this agreement.
220 The terms of that agreement, however, related solely to the occupation of the premises and in no way covered the equipment and goods within the premises.
221 By the time of the execution of the Writ of Possession on 27 November 1988, the equipment and goods had not been removed from those premises.
222 According to the evidence of Mr Burnett a demand for the return of the equipment and goods was made by him as early as 1 December 1998. His evidence is that it was refused unless he produced to the plaintiff evidence of the defendants' ownership of the goods.
223 It is common ground that on 14 May 1999 the defendants' solicitors sent a letter (set out earlier) to the plaintiff's solicitors requesting the return of those goods and equipment.
224 The reply of the plaintiff's solicitors was that the onus was upon the defendants to prove ownership of goods currently in the possession of the Council before the Council would entertain any proposal to have goods collected, released or otherwise dealt with. Details of the relevant correspondence have already been set out in full.
225 Paragraph 1 of the Amended Cross Claim states:-
"In or about November 1998 the Cross Claimants managed and operated for and on behalf of Northbow Pty Ltd a gymnasium known as "Pace Fitness Club" which gymnasium was located upon land known as Heffron Park, Matraville of which the Cross Defendant was the appointed manager under the Crown Lands Act 1989."
226 Thus in this paragraph the defendants are alleging not that they in their own right operated the gymnasium, but that they did so for and on behalf of Northbow Pty Ltd.
227 Paragraph 3 of the Amended Cross Claim alleges that at the time the plaintiff entered into possession of the gymnasium and at all material times prior thereto, the defendants were the owners of and or alternatively, had in their actual possession within the gymnasium the subject equipment.
228 In effect, the defendants allege that it was they personally who exercised control and dominion over the subject equipment and goods. Accordingly at the time of the demands, whether in December 1998 or May of 1999, they were the persons who had the immediate right to possession.
229 On the other hand, the plaintiff submits that whatever dealings were performed with the equipment and goods by the defendants was performed by them in their capacity as servants and/or agents and/or directors of corporations and that the immediate right to possession was vested, not in the defendants, but in the corporations on behalf of which they acted.
230 The Appeal Division of the New Brunswick Supreme Court of Canada in the case of Richard v Nolan 19 DLR (2d) 229 considered this very question.
231 At p 232 McNair C.J.N.B. at p 232 quoted with approval from Clerk and Lindsell On Torts 11th Edition p 454 the following passage:-
"A mere servant who has custody or charge of goods on behalf of his master has not a possession in the sense now under consideration. The master has not only the right of possession, but constructively the possession itself."
232 In that case the chattel was a motorcar. His Lordship distinguished the situation where the car had been lent to the plaintiff to use on his own business. In that case he would have the immediate right to possession. In that situation he would, as bailee, be entitled, by virtue of his possession, to sue for any injury to the car caused by the wrongful act of another.
233 A further possible situation considered was where the plaintiff's case is that he was operating the car in the business of the owner as her servant. In those circumstances the apparent de facto possession of the plaintiff would in fact be the possession of the owner.
234 In the case of Willey v Synan (1936-1937) 57 CLR 200 the High Court considered a case where the plaintiff who was the boatswain of a ship claimed to have been the finder of coins on that vessel.
235 The issue was whether because he was a servant on the ship the right to immediate possession of the coins vested in him in his own right or vested in his employer. At p 216 Dixon J (as he then was) points out:-
"To avoid the nonsuit, therefore, it was necessary for the appellant to adduce evidence of such a right to possession of the goods as would entitle him to recover from a person seizing them without statutory or other lawful authority."
236 Dixon J quotes with approval from McDowell v Ulster Bank (1899) 33 Irish Law Times Journal 233. This was a case where a porter of a bank sweeping up the banking chambers after the hours of business, found a roll of notes near the tables where customers wrote out cheques. He handed the notes to the manager, but afterwards, on the true owners failing to appear, he sought to recover the money from the bank. In that case, Palles CB said:-
"I decide the case on the ground of the relation of master and servant and that it was by reason of the existence of that relationship and in the performance of the duties of that service that the plaintiff acquired possession of the property. I can see that it is the duty of the porter of the bank, who acts as caretaker, to pick up matters of this description, and to hand them over to the bank. I hold that the possession of the servant of the bank was the possession of the bank itself, and that therefore, the element is wanting which would give the title to the servant as against the master."
237 At p 218 Palles CB points out that it is necessary to examine, in the cases of master and servant, the scope of the servant's duties in order to determine whether the right to possession is in the master or the servant.
238 More relevant to the present case is whether the use of the gymnasium equipment and goods within the subject premises by the defendants was in their own right or in right of the corporations of which they were at the relevant times sole directors and shareholders and by which they were employed as managers and were paid a fortnightly wage.
239 It is now necessary to consider the evidence relating to this issue.
240 As at 27 November 1998 and through 1999, 2000 and 2001 the defendants were the directors and sole shareholders in the following companies:-
Henagrow Pty Ltd from 1 May 1996
Huron Holdings Pty Ltd from 9 July 1992
Northbow Pty Ltd from 22 December 1995
Pace Fitness Corporation Pty Ltd from 10 July 1992
Paristen Pty Ltd from 1 May 1996
Windcurve Pty Ltd from 9 October 1990.
241 A business names search for Pace Fitness Centre shows that the proprietor of that name was John Robert Burnett from an unknown date and in particular from 9 October 1990 to 28 June 1997.
242 From 28 June 1997 the proprietors of that business name were Northbow Pty Ltd and Paristen Pty Ltd.
243 The defendants moved from Maroubra to the Gold Coast area of Queensland in about January 1996.
244 Exhibit 39 comprises documents produced under subpoena by the National Australia Bank. Those documents include bank statements for Northbow Pty Ltd trading as Pace Fitness Club (Maroubra) from January to June 1997; of Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise from January from June 1997 and of Paristen Pty Ltd trading as Pace Fitness Club at Bondi Junction for the same period.
245 Exhibit 39 includes a letter dated 3 September 1997 from John Burnett to the Bank seeking finance for the purchase of a house at 40 Cottlew Street East, Southport, Queensland.
246 The application is supported by details of the income and expenditure for the months of January to June 1997 of Northbow Pty Ltd trading as Pace Fitness Club, Maroubra. Included within the expenditure is an item "licensing fees - Pace Corporation $12,000" and a further entry of "licensing fees - for Bondi, March, April, May and June $8,000".
247 There are similar details of income and expenditure for the same period in respect of Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise and of Paristen Pty Ltd trading as Pace Fitness Club, Bondi Junction.
248 The letter also includes what is described as "Pace Fitness Club's Overview" which continues as follows:-
"Pace Fitness Corporation Pty Ltd/Burnett Family Trust. This is a non-trading company. It is simply purchasing the family home.
The Trust grants the three clubs a licence to use the Pace name and in return each club pays a monthly fee of $2,000. This is how the Trust has been able to meet interest repayments on the current vendor finance and would also cover any future housing loan and other associated expenses."
249 It describes Northbow Pty Ltd, trading as Pace Fitness Club, Maroubra, as having a quite stable income as the club is now well established.
250 Henagrow Pty Ltd trading as Pace Fitness Club, Surfers Paradise, is described as a club which had opened recently and had high advertising costs for the first half of the year.
251 In respect of Paristen Pty Ltd trading as Pace Fitness Club, Bondi Junction, the documents says:-
"The Bondi Junction club has experienced some difficult times recently. As a result of our previous landlord being in financial difficulties with the Bank, he sold an option to buy our premises to a party associated with our opposition. Consequently, we did not renew our lease option and were forced to find alternative premises".
252 It then goes on to point out that alternative premises were found at Eastgate Shopping Centre but there was a three-month relocation period during which Bondi members were allowed to use the Maroubra facilities.
253 Exhibit 40 comprises bank statements produced by the National Australia Bank for the personal account of the defendants. It shows salary being paid into the account on a regular fortnightly basis in the amounts of $359.00 and $588.00.
254 The salaries were paid into the Maroubra Junction branch of the NAB until 24 October 1996. From 7 November 1996 they were paid into the Surfers Paradise branch of NAB at the same rate until 2 July 1998. These latter payments are described as having been made by Paristen Pty Ltd.
255 From then until 6 December 1998 the wages appear to have increased to $510.00 and $825.00 per fortnight and paid by Paristen Pty Ltd.
256 From 17 December 1996 until 22 April 1996 the fortnightly payment into the account of the defendants reverted to $358.76 and $587.10 per fortnight and are described as having been paid by Paristen Pty Ltd.
257 Exhibit 42 comprises bank statements from the Maroubra Branch of the National Australia Bank of "Northbow Pty Ltd - Pace Fitness Club" from 2 August 1996 to 18 December 1998. These statements show what are described as "cash and/or cheques". On the probabilities I am satisfied that they are receipts from the business being conducted on those premises and note that the last credit occurred on 7 December 1998.
258 Exhibit 73 comprises documents relating to the ownership of the equipment in the gymnasium and refers to goods purchased by Pace Fitness Corporation Pty Ltd and Pace Fitness. There is also a letter from the valuer of some of the goods, Grey Eisdell Timms Pty Ltd to the effect that the goods were represented as belonging to Pace Fitness Corporation Pty Ltd.
259 The plaintiff and his wife moved from Sydney to Queensland in about January 1996. Thereafter operations co-ordinators were employed to run the day-to-day affairs of the gymnasiums at Maroubra and Bondi Junction. John Burnett frequently came to Sydney to supervise and was in almost daily contact by telephone. Mrs Burnett came to Sydney less frequently.
260 Mr Burnett swears in his affidavit of 18 April 2005 that, during 1994, Huron Holdings Pty Ltd entered into a licence agreement with a US corporation for the use of the name Gold's Gym. Late in 1994 the name on the Maroubra premises was changed to Gold's Gym. Thereafter until about July 1996, all expenses relating to the running of the gymnasium were paid by Huron Holdings Pty Ltd.
261 Annexure E to his affidavit is a letter from the Australian Taxation Office addressed to Huron Holdings Pty Ltd trading as Gold's Gym dated 20 December 1995 regarding group tax instalment deductions.
262 On 28 June 1997 the ownership of the name Pace Fitness Centre was transferred to Northbow Pty Ltd and Paristen Pty Ltd, companies of which the defendants were the sole shareholders and directors.
263 In paragraph 28 of this affidavit Mr Burnett says:-
"During the whole of the time I managed the gym, my wife and I were paid a wage or salary by the company that operated the gym at the relevant times. All expenses relating to the operation of the gym were paid from time to time by the company that was the operator of it."
264 In paragraph 30 of his affidavit he says:-
"Whilst I worked in and managed the business in conjunction with my wife during the whole of the time the gymnasium was conducted from the subject premises I did so for and on behalf of one or more of the companies to which I have referred in this affidavit and never on my account. During the whole of that time, I did not personally employ any of the persons who worked in the business nor did I personally assume or regard myself as being responsible for the debts of the business, including rent or occupation fees."
265 Mr. Burnett swore that the documents relating to the running of the business from 1986 onwards including those relating to the acquisition of assets had been left in the subject premises to which he was denied access. It is common ground that the plaintiff changed the locks on the premises and would not allow him access thereto.
266 In paragraph 43 of his affidavit he refers to a number of documents, Annexure M, which were produced by the plaintiff on discovery and which had been in filing cabinets in the storeroom of the subject premises at the time of the execution of the Writ of Possession.
267 Annexure H to the affidavit of Mr Burnett is a membership agreement between a member of the Pace Fitness Club dated 17 December 1997. At the top left-hand corner of the document are the words "Pace Fitness Club" and at the bottom left-hand corner are the words "Northbow Pty Ltd ACN 072207151".
268 Annexure I to that affidavit is a letter from Centrelink addressed to Northbow Pty Ltd trading as Pace Fitness Club requiring the company to deduct from payments it makes to an employee the total sum of $293.89 owed by that person to the Commonwealth.
269 Part of Annexure M to the affidavit of Mr Burnett is a letter dated 15 July 1996 from Pace Fitness Club to a bank signed by James Khoo, Financial Controller advising that Pace Fitness Club - Bondi will now be operating under the name of Paristen Pty Ltd and that Pace Fitness Club - Maroubra under the name of Northbow Pty Ltd. As a result each company will require new merchant summary cards as soon as possible.
270 The same Annexure also includes a number of documents evidencing purchase of and repairs to equipment addressed to Pace Fitness Club or to Pace Fitness Centre or to Gold's Gym.
271 Annexure N is an inventory and appraisal by Grey Eisdell Timms Pty Ltd of gymnasium equipment at the premises at Maroubra and also at the premises at Bondi Junction dated 20 February 1996. At that stage the value of the goods at Gold's Gym on the basis of a going concern was $168,800 and had an auction value of $97,550. The value of the equipment at Bondi Junction on a going concern value was $250,500 and its auction value was $146,425.
272 The evidence of Mr Burnett was that because of the relocation of the Bondi Junction gym to smaller premises some third to a half of the equipment formerly at Bondi Junction was removed to Maroubra.
273 The evidence of Mr Burnett, p 304, is that in 1997 he changed the ownership of the Pace business name to ownership by Northbow Pty Ltd and Paristen Pty Ltd because there were two gymnasiums using the name of Pace Fitness Club - one at Bondi Junction which was operated by Paristen Pty Ltd and the other at Maroubra which was operated by Northbow Pty Ltd.
274 His evidence was that from 1996 until 1998 the customers' fees at the Maroubra gym were paid into the bank account of Northbow Pty Ltd. (p 307).
275 At p 318 he said that the day-to-day expenses of the Maroubra gym were all paid out of the Northbow Pty Ltd. cheque account. He added:-
"Yes, the only thing that was paid by anybody else was in 1998 my wife and I were given occupation of the premises for a three month period. We had to pay some occupation fees. $2000, $3000, $4,000 for those three months we paid those. Even in that time Northbow paid all the wages, and cleaning, buying any of the stock and all the money was banked into that account as it had been in 1997. All the money went into Northbow's account and it paid all the running day-to-day expenses."
276 When asked why the name of the Maroubra business which changed from Gold's Gym back to Pace Fitness Club he responded (p 434):-
"Well there were two reasons, the first reason was that there was a problem with getting the name registered Gold's Gym. While it was an international licence, we couldn't actually register the name in Australia or New South Wales. Someone else had it registered so there wasn't much benefit when I couldn't register the name. Another reason was the clubs were called Gold's at Maroubra and at Bondi, Pace. We had a lot of advertising in newspapers and colour brochures, so we would have to do two lots. So it was becoming very expensive and we thought it wasn't working very well, so it would be more cost effective to change it back to Pace so that you would do one lot of brochures, you know, printing and letterhead. If we could put both names on it, it would probably more cost effective."
277 There was produced an account from Carney, solicitors which indicated that before August 1996 that firm did work in connection with the agreements for sale and purchase of the business Pace Fitness Centre and the company structure connected therewith.
278 At p 471 Mrs Burnett described the division of managerial functions between herself and her husband before they moved from Maroubra to Queensland in about January 1996 thus:-
"We had our own job descriptions, and looking at the - John was in charge of advertising, marketing. He would have possibly have more contact with the accountant than I would. My job then was looking after staff training, systems within the various departments, that is the gym, the reception, aerobics and also conducting workshops for the staff, typing up staff manuals. That was mainly it."
279 Both Mr. And Mrs Burnett gave evidence that most of the subject equipment was owned by Pace Fitness Corporation Pty. Ltd. although some belonged to Northbow Pty. Ltd.