Sky Shine Pty. Limited v. Lenjade Pty. Limited [2001] NSWSC 56

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

NO. 1409 OF 2001 SKY SHINE PTY. LIMITED V. LENJADE PTY. LIMITED

1 Since January 2000, the plaintiff Sky Shine has conducted a hand car wash and cafe business at 1010 King Georges Road, Blakehurst, as lessee of those premises. 2 At about the end of January 2001, the defendant Lenjade became the owner of those premises. During the night of Friday 9 February 2001 or the early morning of Saturday 10 February 2001, the defendant caused the locks of those premises to be changed and excluded the plaintiff from those premises. 3 On 10 February 2001, an ex parte injunction was granted by Simos J restoring possession to the plaintiff and preventing the defendant from re-taking possession until and including today. 4 I have heard a contested application to continue the injunction. I will commence with a brief outline of the facts. 5 On 14 April 1997, Kogarah Council granted a development consent permitting use of the premises for a car wash and ancillary confectionary shop. Condition 29 of that consent was in the following terms: The duration of this consent is limited to a period of twelve months from the date of endorsement of the consent. In this regard, any continued use of the premises beyond such 12 month period will require separate approval from Council. 6 On 19 June 1998, the defendant's predecessor in title, Simoon Pty Limited, granted a lease of the premises to Sydney Car Wash Pty Limited for five years commencing 21 February 1997. A number of terms of that lease are relevant to this application. 7 Clause 5.01(b)(ii) provided that all taxes including land tax levied on the building, at the rate payable by the lessor, should with certain exceptions be included as outgoings to be reimbursed by the lessee. 8 Clause 6.02(c) provided that the lessee shall only assign the lease subject to certain conditions, including the condition that prior to any assignment there should be no existing unremedied breach of any terms of the lease. 9 Clause 7.04(g) provided that the lessee shall at the lessee's expense comply with all statutes etc. affecting the premises. 10 Clause 7.08 dealt with a development application made to the Council, in the following terms: 7.08(a) The lessee has made a development application (the application) to the relevant Council for approval to use the premises in accordance with this lease.

(b) If the application is not approved by 21st March, 1997 or is approved but in terms not acceptable to the lessee then the lessee may immediately by written notice to the lessor, terminate this lease and, excepting any existing breach of the terms hereof and each parties' obligations on termination, neither party will be liable to the other. 11 Clause 9.01 provided that the lessee should not use the premises otherwise than for the purpose stated in item 5 of the appendix to the lease, namely, "hand car wash with ancillary use being light refreshment rooms". 12 Clause 9.02 provided that the lessee did not warrant that the premises were suitable for any of the purposes of the lessee. 13 Clause 10.04 gave the lessor a right to re-enter the premises in certain circumstances. Paragraph (b) of that clause stated one such circumstance as being a default by the lessee in respect of any obligation, other than payment of rent, where such default was continued for seven days after service of a notice by the lessor requiring the default to be remedied. 14 On 19 January 2000, the plaintiff purchased the business conducted on the premises from Sydney Car Wash Pty Limited for $550,000. The lease was assigned to the plaintiff with the consent of Simoon, that consent including a consent by the lessor to the use of the premises for the purposes of carrying on the business of a hand car wash and cafe. 15 It appears that on 28 August 2000 the plaintiff's solicitor, Mr Pappas, inspected the Council's file on the matter and discussed with one of the Council planning officers the effect of the original consent. It appears that on that occasion Mr Pappas was told that the Council was aware of the continuing use and that the requirement in the original consent "for separate approval" did not necessitate a further development application. 16 It appears that on 31 August 2000 Mr Pappas advised Simoon Pty Limited by e-mail that "Kogarah Council has confirmed that the current development consent for the premises relates to its use as a car wash and ancillary confectionary shop and milk bar". That appears to have been in response to an inquiry whether the plaintiff had made application to the Council seeking an extension/renewal of the development approval. 17 It appears that the contract for sale of the premises from Simoon to the defendant was entered into on 1 September 2000. 18 On 20 September 2000, Mr Pappas wrote a letter to the Council in the following terms: I act for Skyshine Pty Limited which owns and operates the Sydney Car Wash at the above premises. My client acquired the business and took an assignment of the existing lease in January this year.

On 14 April 1997, Council granted development consent to development application number 29/97 for the use of the premises as a car wash and ancillary confectionary shop and milk bar. One of the conditions to that consent was that the consent was expressed to be limited to a period of 12 months from the date of approval. Subsequently, on 3 December 1997, Council also granted development consent to an application by the then owner of the business for the erection of an illuminated flash wall sign in respect of the car wash business, again subject to certain conditions. Since then, the business has continued to trade and is now an established part of its district.

My client was informed by the prior owner that all necessary steps had been taken to extend Council's consent in respect of the use of the premises beyond the initial 12 month period. Indeed, the vendor has covenanted with my client that the premises may lawfully be used as a car wash.

The purpose of my letter is to seek your confirmation that the approved use of the premises is a continuing one. If this is not the position, please inform me immediately and I will arrange for my client to lodge the appropriate application with Council so as to bring matters up to date. In this regard, I would be grateful if you could advise whether an extension of the approved use would be of unlimited duration or merely for a defined period.

It appears that the Council did not reply to that letter. 19 On 1 January 2001, Simoon made a demand upon the plaintiff for payment of the land tax for the 1999 year of about $7,000. It appears that the plaintiff had paid to Simoon the land tax for the year 2000, and it appears that the previous lessee, Sydney Car Wash Pty Limited, had not paid Simoon the land tax for the 1999 year. 20 The sale of the premises to the defendant was completed on 30 or 31 January 2001. On 2 February 2001, the defendant's solicitors wrote a letter to the plaintiff's solicitors in the following terms: We act for Lenjade Pty Limited, the new owner of Lots 17 and 18 in DP 262240 known as 1010 King Georges Road, Blakehurst and understand you act for the current tenant Sky Shine Pty Limited.

We have been advised the tenant is operating a car wash on the site without council approval and therefore in breach of the Environrnental Planning and Assessment Act (NSW). This is also a breach of the lease. Please be advised the owner does not in any way consent to a breach of the law on its land and requires that the tenant remedy its default under the lease immediately. The tenant should therefore cease and desist in its activities and lodge a development application. Should the default continue for seven days, the lease may be put in jeopardy as a result.

Please note nothing herein is to be taken as waiving any other right the owner may have under the lease. 21 The plaintiff's solicitor responded with a letter of 5 February 2001. In relation to the allegation that the plaintiff was operating its car wash "without Council approval", Mr Pappas wrote: Our inquiries and correspondence to Kogarah Municipal Council have indicated that my client is operating its car wash lawfully and with the full knowledge of the Council. In this regard please refer me to the provisions in the lease which your client claims my client is currently breaching in operating its car wash business. 22 The defendant's solicitors responded with a letter on 5 February 2001, alleging a breach under clause 7.04(g). 23 On 6 February 2001 Kogarah Council wrote to the plaintiff a letter in the following terms: The recent sale of the abovementioned property and a review of Council's files has revealed that the current use of the premises as a car wash and ancillary confectionary shop and milk bar is operating without Council approval.

A review of Council's files reveals that Development Consent No.29/97 (copy attached) was granted approval on 14th April 1997. It should be noted that Condition No.29 of that consent reads as follows:

29. The duration of this consent is limited to a period of twelve months from the date of endorsement of the consent. In this regard, any continued use of the premises beyond such 12 month period will require separate approval from Council.

Council's files do not indicate that any further separate approval has been granted by Council for the continued use of the premises and as such, the premises is operating without development consent.

Please find attached a Development Application form and checklist to enable you to submit an application to Council for its consideration. You are requested to submit the application within twenty-eight (28) days from the date shown hereon.

For any further information regarding this matter please contact Mr Darryll Quigley of Council's Development & Health Department on 9330-9433 during business hours. 24 The plaintiff's solicitor responded on behalf of the plaintiff by a letter dated 8 February 2001, expressing willingness to lodge a development application and asking confirmation whether a separate development application was required, having regard to the previous communications with the Council, which were referred to in that letter. 25 As stated earlier, it appears that the defendant forcibly re-took possession of the premises on the night of the 9th or early morning of 10 February 2001. 26 On 10 February 2001, the defendant's solicitor sent a facsimile to the plaintiff's solicitor alleging failure to cease carrying on its car wash business and to apply for Council consent, and purporting to terminate the lease. 27 In those circumstances, Mr Scheib for the plaintiff submits that there is a serious question to be tried as to whether the defendant is entitled to re-take possession. He submitted that any breach had been waived by the landlord's consent to the assignment of the lease to the plaintiff. He submitted that the letter from the defendant's solicitor dated 2 February 2001 was not a notice satisfying either cl.10.04(b) of the lease or s.129 of the Conveyancing Act. He submitted that, having regard to all the circumstances, the plaintiff would in any event be entitled to relief against forfeiture. 28 On the balance of convenience, Mr Scheib submitted that the plaintiff had paid $550,000 for its business, employed several people, and would plainly suffer serious damage if it was excluded from the premises. 29 In response to the contention on behalf of the defendant that the plaintiff was carrying on an illegal activity and should not be permitted to continue to do so, Mr Scheib referred to s.124 of the Environmental Planning & Assessment Act and to the discretion there given to the Land & Environment Court to refuse to grant injunctions to prevent breaches of the planning laws, and the discretion there given to adjourn proceedings to permit development applications to be made. He referred me to the cases of Warringah Shire Council v Sedevcic (1987) 10 NSWLR 335 and ACR Trading Pty Ltd v Fat-Sel Pty Ltd (1987) 11 NSWLR 67, as cases where the Court of Appeal plainly contemplated that illegal activity would be continued, yet did not grant an injunction to prevent such activity. 30 Mr Scheib submitted that the Council, being the relevant prosecuting authority, had not required that the activity cease, had invited the submission of a development application, and on the evidence did not intend to bring any prosecution. He submitted that in all the circumstances the breach could be regarded as a technical one: the activity being carried on was not an impermissible one but was one in respect of which there had been consent for a period, and there was no evidence that any of the conditions of approval had been breached. The development consent had contemplated the erection of a car wash building, and that had been carried through and approved by the Council. There was no evidence of any harm to the community. 31 Mr Sahade for the defendant submitted that to grant an injunction would condone the continuance of serious criminal conduct. He referred me to s.125 of the Environmental Planning and Assessment Act, and pointed out that the conduct in question carried a fine of up to $1,100,000 plus $110,000 for each day it is continued. He submitted that the Council was not the only prosecuting authority: prosecutions could be brought by the Director of Public Prosecutions or by private persons. He submitted that s.124 of the Environmental Planning & Assessment Act did not invite the Court to grant an injunction so as to permit or encourage unlawful use of land. 32 He submitted that the case of Botany Municipal Council v Tsolkis, Holland, J, Land and Environment Court, 30 November 1988, showed that if the defendant permitted this unlawful use to continue, the defendant itself could be subject to injunction proceedings. In taking the action it had done, the landlord was doing just what the landlord ought to do, according to that decision. 33 Mr Sahade submitted also that the failure to pay the land tax as required was a further breach justifying termination of the lease. 34 In my opinion, but for the question of possible illegal conduct by the plaintiff, there would be little doubt that an injunction should be granted. In my opinion, for the reasons given by Mr Scheib, there is a serious question to be tried. In my opinion, but for the question of illegal conduct, the balance of convenience very much favours the plaintiff. 35 However, there is force in Mr Sahade's submission that the Court should not do anything to encourage illegal conduct. On the other hand, as submitted by Mr Scheib, s.124 of the Environmental Planning & Assessment Act does contemplate that a Court may permit conduct in breach of planning laws to continue, at least in the sense of declining to grant injunctions, and adjourning proceedings to permit development applications to be made. The two cases to which he refers are cases in which that course was either taken or decided to be open to the Land and Environment Court, and in which relevant principles were set out. In declining to grant an injunction in such circumstances, the Court plainly leaves the defendant subject to the possibility of prosecution, and does not in effect say that the illegal conduct of the defendant is acceptable. The Court in those circumstances simply refuses the remedy of injunction. 36 In this case, it is put by the defendant that the plaintiff is asking for positive help from the Court, through the grant of an injunction, to be permitted to continue its illegal conduct. I do not think that is a fair characterisation of these proceedings. The defendant has indulged in forcible self-help in a dispute. In my opinion, the general policy of the law is to encourage disputes to be resolved by negotiation or by court resolution in cases where there is a genuine dispute about the matter, rather than to have the landlord in this position resorting to forcible self-help, although it is not unlawful for the landlord to do this. 37 The plaintiff is in effect seeking to reverse the effect of the forcible self-help indulged in by the defendant, so that the Court can determine the rights of the parties, rather than having that matter pre-empted by the forcible action of the landlord. 38 If the Court does take that stance, it does give rise to a situation where the plaintiff will be able to continue conduct which, on the material before me, is probably unlawful. However, that is a situation contemplated as I have said by s.124, and the two Court of Appeal cases to which I have referred. 39 A further consideration is that it seems to me that the development approval was less than clear as to what was required after the expiry of twelve months. It could even be that a grant of building approval satisfied the requirement of condition 29. The matter was taken up with the Council in the middle of last year, and taken up further with the Council by a letter sent in September last year. It appears on the material before me that the Council has at all times been fully aware of the situation, yet apparently in the middle of last year indicated that there was no problem, and in September of last year did not even reply to the letter that was sent to it. 40 In my opinion, it is appropriate to grant an injunction. In doing so, I should not be taken as saying that the plaintiff has permission to continue what may be unlawful conduct. Plainly it would be open for the Council or any appropriate person to apply for an injunction against the plaintiff, or to seek to prosecute the plaintiff. I have not heard all the relevant evidence on this matter, and indeed I have not heard enough to come to a final conclusion that what the plaintiff is doing is illegal, although I am proceeding on the basis that, on the material before me, this seems probable. 41 So, nothing I say or do in this hearing should be taken as giving permission to the plaintiff to do anything unlawful, or to discourage prosecution of the plaintiff or the imposition of a penalty on the plaintiff. 42 I do not think for the same reasons that it is appropriate to impose a condition on the plaintiff that the plaintiff cease its car wash activities. However, I would impose the condition that the plaintiff submit a development application for the defendant's consent within seven days, and also that the plaintiff notify the defendant of any written requirement that it receives from the Council in relation to the premises and of its intentions in relation to such requirement within 48 hours of receiving any such requirement. 43 I would reserve liberty to either party to apply on two days' notice, in the case of the plaintiff if the defendant does not consent to the development application, and in the case of the defendant if there is any requirement by the Council which the plaintiff does not comply with. 44 My present view is the costs should be costs in the proceedings. 45 On the plaintiff by its counsel giving to the Court the usual undertaking as to damages, I continue the existing injunction until further order. 46 It is a condition of the injunction that the plaintiff pay the sum claimed in respect of the 1999 land tax on account of that land tax; that the plaintiff submit to the defendant for its consent an appropriate development application within seven days; and that the plaintiff, within 48 hours of receiving any written requirement from the Council in relation to the premises, notify the defendant of that requirement and of the plaintiff's intentions in relation to that requirement. 47 I give liberty to either party to apply on two days' notice. 48 The costs of this application will be costs in the proceedings.

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