Victorian Civil and Administrative Tribunal|2006-09-15

State of Victoria v Bradto Pty Ltd (Retail Tenancies) [2006] VCAT 1864 (15 September 2006)

Victorian Civil and Administrative Tribunal Act 1998 - S.124 - declaration as to meaning and enforcement of previous prohibitory injunction - whether positive act required - principle to be applied.

1. Pursuant to s.60 of the Victorian Civil and Administrative Tribunal Act 1998, Jerry Pilarinos and Genovefa Pilarinos are added as respondents to the proceeding.

2. Subject to any application to vary the precise wording thereof, which application is to be made on or before 22nd September 2006, a declaration is granted in accordance with the terms sought by the Respondents (Bradto Pty Ltd and Jerry & Genovefa Pilarinos) as set out in their application dated 18th May 2006.

3. Question of any ancillary orders reserved.

4. Liberty to apply.

Mr Garde QC, with Mr Fox of counsel, instructed by the Victorian Government Solicitor.

Mr O'Callaghan QC, with Mr Hopper of counsel, instructed by Mitrakas Savas & Co., Lawyers & Consultants.

1 This matter comes before me by way of an application for a declaration by Bradto Pty Ltd ("Bradto") and by Jerry and Genovefa Pilarinos, the Directors of Bradto, to whom I shall refer collectively as "Pilarinos", although it would seem to be Jerry Pilarinos, rather than his 80 year old mother, who has been more actively involved in this litigation. Virtually all references to "Pilarinos" throughout this ruling are references to Jerry Pilarinos.

2 I say at the outset that the application by Pilarinos has been entertained on the basis of an undertaking given by Mr O'Callaghan QC, who, with Mr Hopper, appeared on their behalf and on behalf of Bradto. This was to the effect that the appropriate documentation would be attended to so that a proper application by Pilarinos has been issued out of this Tribunal, and the application so far as it involves Pilarinos is properly before me. I accepted without hesitation Mr O'Callaghan's undertaking. Whilst I appreciate that the matter was brought on with very considerable urgency, nevertheless it seemed to me important that the position of Pilarinos be regularised so that a proper appearance before this Tribunal was recorded. What if, for example, a costs order was sought against them or by them? What if a substantial undertaking, such as the usual undertaking given in relation to injunctions, was required? All sorts of difficulties might arise in relation to a non-party. In any event, the undertaking to attend to the necessary paperwork was given. I proceeded to hear the matter as if all parties represented by Mr O'Callaghan were properly before me. The paperwork referred to was filed on 19th May 2006. Thus, a proper and detailed application was placed before the Tribunal. It includes an application that Jerry and Genovefa Pilarinos (the spelling of the latter's Christian name seems to vary from document to document) be joined as respondents pursuant to s.60 of the Victorian Civil and Administrative Tribunal Act 1998 ("the Act"). It seems to me that their interests are clearly affected by this proceeding, and accordingly I order that they be joined as respondents to this proceeding and as applicants for the declaration sought.

FACTUAL BACKGROUND AND PRESENTATION OF THE CASE

3 The application by Bradto and Pilarinos is one for a declaration, presumably pursuant to s.124 of the Act. Again, as at the commencement of this hearing, there had not been issued any formal or written application setting out the details of the declaration sought. However, Mr O'Callaghan assured me that the declaration which Bradto sought was in the terms of that contained in the letter of Mr Mitrakas, his instructing solicitor, such letter being dated 18th May 2006, and nothing broader than that was sought. He stated that this position would be regularised (which it was). Thus, Mr Garde QC, who, with Mr Fox, appeared on behalf of the State of Victoria ("the SOV"), being familiar with the contents of that letter, knew the precise nature of the relief which is being sought. The SOV opposed the granting of the declaration.

4 The declaration which is being sought is in the following terms:-

"A declaration that Bradto Pty Ltd, Jerry Pilarinos and Genovefa Pilarinos are not in breach of the order of the Tribunal made 8th February 2006 or in contempt of the Tribunal if:-

(b) The State of Victoria is unable to enter upon and examine the state and condition of the demised premises; and

5 This dispute has a long, tortuous and painful history, and I will not go through the factual background again, it being well known and set out in a number of decisions of mine and of the Court of Appeal. For the purposes of the declaration sought, the central issue relates to what Bradto is required to do in order to comply with the injunction granted by me on 8th February last. Without setting out the precise wording of that injunction again, it is prohibitory in nature and restrains Bradto from, in essence, impeding, obstructing, refusing or denying access to certain persons, being effectively agents of the SOV, onto premises of which Bradto is the lessee. Another entity, Maztan Pty Ltd ("Maztan") is the occupier of the premises pursuant to a sub-lease from Bradto. The principal application before me also involved Tymbook Pty Ltd ("Tymbook"), the tenant of adjoining land and an entity against which the SOV also obtained an injunction. Tymbook was not involved in this application, and there was no appearance on its behalf. I also understand and accept that Maztan has issued an application essentially seeking an injunction that the agents of the SOV be restrained from entering the premises. Whilst the file in that matter has not been before me, I accept that Maztan has commenced a proceeding of this nature.

6 Bradto appealed in relation to the granting of the injunction. The Court of Appeal refused leave to appeal on 21st April 2006. In a somewhat unusual application, on 16th May 2006 the SOV returned to the President of the Court of Appeal, Maxwell P, who, with Charles JA, had determined the leave application. The SOV sought some explanation of the meaning of part of the decision. Whilst Charles JA by this time had retired, Maxwell P helpfully offered some explanation as to the meaning of certain paragraphs in the original decision. In particular, attention was focussed on paragraph 19. Thus, before me, there has been argument centering upon not only the judgment of 21st April 2006, but also upon the transcript of what occurred before Maxwell P on 16th May 2006.

7 Much of the debate which occurred before me concerns the following statements which are to be found in paragraphs 18 and 19 of the judgment of 21st April:-

"18. Clearly, the order prevents the lessee from doing anything which would have the effect of "impeding, obstructing, refusing or denying access" to the premises. It is not difficult to think of steps which might - but for the order - be taken to obstruct or prevent access, such as the erection of a barricade or the boarding up of a door. In this sense, the order is truly prohibitory. It prevents action. It does not require it.

19. At the same time, there is one positive act which the lessee company will be called on to perform in order to comply with the injunction. It is the act of opening the door, or gate, to the premises when requested to do so. To fail to do so would be to refuse or deny access, in breach of the order."

8 On 19th May 2006 Maxwell P stated that the above paragraphs were general statements concerning the obligations of the lessee companies. His Honour also referred to the fact that precisely how those statements applied to a tenant not in possession was not for him to say, and agreed that there was a vast difference between the position of Bradto, which had a sub-tenant (Maztan) and that of Tymbook which did not. He also pointed out that it was not for the Court of Appeal to play any role in the administration or enforcement of the injunction, agreeing with the proposition that, if there was a dispute as to the rights of parties, a declaratory judgment could be sought "from the appropriate place".

9 What immediately provoked the present application are letters dated 4th May, 17th May, and 18th May 2006, from the SOV to Bradto and to Pilarinos. In essence, these letters asserted that, pursuant to the injunction granted on 3rd February 2006, Bradto and its directors were required to "open the door" at the subject premises, being in fact the Palace Nightclub. According to the letter, the requirement to open the door had been confirmed by the Court of Appeal. The later letters stated that the authorised agents of the SOV were intending to obtain access to the premises in accordance with the injunction at 9.00am on 19th May 2006. If Bradto or its directors impeded, obstructed, refused or denied them access, the terms of the injunction would be breached. Bradto and its directors would be in contempt. This correspondence provoked a written response from Bradto and its directors, and also appears to have been the immediate spur for the present application. A letter was also sent by the SOV to Maztan essentially warning it that the head lease between the SOV and Bradto would expire on 31st March 2006, warning it to vacate the premises, and reserving its rights to recover possession and seek any further injunctive relief that may be thought necessary. This letter was dated 21st March 2006. A subsequent letter was sent by the SOV on 16th May 2006, which letter quoted various conditions contained in the sub-lease, referred to paragraph 19 of the judgment of the Court of Appeal, also referred to the subsequent observations of Maxwell P, and emphasised that Maztan was under exactly the same duties and obligations to the SOV as the head lessor (Bradto), and was accordingly under a duty to comply with the terms of the injunction. Accordingly, the granting of access was required, and the letter threatened to take further steps to enforce compliance.

10 I should add that, very sensibly, Mr Garde on behalf of the SOV obtained instructions that no such access would be demanded by the investigators or other authorised agents of the SOV pending my ruling concerning the present application. That the delivery of this ruling has taken longer than might have been anticipated is something for which I apologise, but such delay was in part caused by some queries subsequently raised by me and the chain of written submissions which followed. These shall be discussed subsequently. The delay thus caused, when combined with circuit obligations and annual leave, has resulted in the delivery of the determination of this somewhat complex matter occurring later than might have been anticipated.

11 It is against this background that Bradto seeks the declaration set out above. As previously indicated, Mr O'Callaghan QC with Mr Hopper appeared on behalf of Bradto. Mr Garde QC with Mr Fox appeared on behalf of the SOV. No viva voce evidence was adduced, the parties relying upon documentary material placed before the Tribunal and upon submissions. Subsequent to the hearing I raised two questions for the consideration of the parties. They involved earlier observations of mine in the Reasons for Decision of 3rd February 2006. These concerned firstly the nature of the injunction sought against Bradto and Tymbook and my observation that they did not ask the persons to whom they were addressed to do anything; and secondly the nature of the obligations flowing from Maztan to Bradto by reason of the sub-lease and thence to the SOV by reason of the head lease and the capacity for enforcement of such obligations. The raising of these issues prompted the filing of very detailed and helpful written submissions by both parties. In arriving at my ruling in this matter, I have taken into account both the submissions advanced and relied upon during the conduct of the hearing and the written submissions subsequently received.

12 In addition, I should now express my appreciation for the manner in which oral submissions were presented in this application. Both Mr O'Callaghan and Mr Garde presented clear, well based, relevant and helpful submissions which were to the point, accurate, and not repetitive. Given the criticisms which I have made of some aspects of the presentation of Bradto's case prior to Mr O'Callaghan's involvement, which criticisms have been repeated in more truncated form in my recent costs ruling of 1st September, the submissions presented by Mr O'Callaghan in the present application came as what the poet described as rare and refreshing fruit.

13 Having dealt with the background of this matter, I shall now briefly summarise the submissions advanced on behalf of the parties before delivering my ruling.

14 The submissions advanced by Mr O'Callaghan on behalf of Bradto could be summarised as follows. This summary includes the later written submissions of Mr O'Callaghan and Mr Hopper.

15 Because the directors of Bradto ("Pilarinos") have received from the SOV a letter stating, "in essence", that they will be in contempt if access to the subject premises is not granted to the various inspectors in accordance with the terms of the injunction, this situation is a classic example of where a declaration of the rights and obligations of the parties should be made. This is particularly so given that one of the parties is the Crown (the SOV). Accordingly, it is appropriate that a declaration be made so that Bradto and Pilarinos are clear as to the position which they are in and as to their obligations in accordance with the injunction.

16 Before the Court of Appeal the issue was raised as to whether the injunction sought by Bradto was futile in that Bradto was not in exclusive possession of the premises, whereas Maztan was entitled to such possession. Whilst the SOV originally propounded that, if Maztan, being in exclusive possession, refused entry to the inspectors of the SOV, Bradto would be in contempt of court, ultimately it resiled from this position. The remarks of Charles JA during the hearing before the Court of Appeal would indicate that there was no ambiguity in relation to the injunction obtained, and that it did not require Bradto to take any positive step. The injunction was found to be prohibitory in nature.

17 If Maztan forms the view that, pursuant to the terms of the head lease to which it is ultimately subject, it is not obliged to give access to the inspectors of the SOV, and it does not do so, this cannot be attributed to Bradto so that it could then be said to be in breach of the injunction or in contempt of court. It was conceded by Mr Garde on behalf of the SOV before the Court of Appeal that Bradto would only be in contempt if it did one of the things proscribed in the injunction - that is, impeding, obstructing and the like. He conceded that, if nothing was done of that type, there would be no contravention. It was also conceded by Mr Garde that, if Bradto did nothing other than leaving the door to the premises locked, it would not be in contravention of the injunction. Maxwell P effectively stated that, if the SOV had a problem gaining access for its inspectors because of the behaviour of Maztan, that was a problem which the SOV had with Maztan and not with Bradto. The President noted the submission on behalf of the SOV as being that the wording of the injunction did not require any positive action on the part of Bradto, and that accorded with the provisional view formed by the Court. As stated by the President, if Maztan did not co-operate, the SOV would need to take other steps, which was a matter for it.

18 Following the decision of the Court of Appeal on 21st April last, a stay was granted for a short period. On the 4th May 2006, the solicitors for the SOV wrote to Bradto referring to an extract from the judgment of the Court of Appeal, and stating that one obligation which Bradto had was to open the door or gate to the premises when called upon so to do. The letter warned that a failure or refusal to do so would constitute a breach of the order and contempt of the Tribunal. No reference was made in it to the transcript of what occurred before the Court of Appeal because at that time the SOV had not obtained a copy of the transcript.

19 By letter dated 5th May 2006, the solicitors for Bradto responded, pointing out that the proceeding before the Court of Appeal had made it clear that the order obtained by the SOV was futile because it required Bradto to do nothing and because Maztan, which was not a party, was in exclusive possession of the premises. The letter reminds the SOV that Maztan has proceedings on foot before this Tribunal seeking an interlocutory injunction restraining the SOV from entering the property. The letter also states that Bradto does not intend to do anything, but will not act in any way in contravention of the injunction. It also draws the distinction between the position of Tymbook and that of Bradto. The letter also asserts that it is misleading to quote paragraph 19 of the judgment of the Court of Appeal as applying to Bradto, in the sense that such paragraph supports the proposition that Bradto was obliged to open the door of the premises and would be in breach of the injunction if it did not. Apart from what is asserted in the letter, the fact is that the Court of Appeal found that the injunction was prohibitory in nature.

20 It was as a result of this correspondence that the SOV took the unusual step of returning before Maxwell P for further discussion as to the meaning of the judgment, and of paragraph 19 in particular. Subsequently, the SOV wrote to Bradto saying that Maxwell P had confirmed that Bradto was required to open the door. Such a statement is fallacious and misleading. Bradto has no power to open the door. Paragraph 19 appears in the general context of discussion concerning whether the injunction is mandatory or prohibitory. The reference to the obligation to open the door concerns Tymbook, and not Bradto, which has no such power. The references to the observations in the transcript, which are not orders, are made in order to bolster the submission that, so as to comply with the injunction, Bradto does not have to do anything. Reference is made to various excerpts from the transcript of the discussions with Maxwell P on 16th May 2006 in order to demonstrate that the assertion contained in the correspondence to Bradto and its directors from the SOV is misleading. Maxwell P did not confirm that paragraph 19 of the judgment applies to Bradto in the sense that it has a positive obligation to open the door. To state this ignores the fundamental problem of the position of Bradto, given the existence of a sub-tenant in possession. The explanatory remarks made by Maxwell P should be of a highly persuasive nature.

21 It is incorrect to assert or imply that Maztan is a servant or agent of Bradto for the purposes of the injunction, and that a refusal on the part of Maztan to permit access constitutes a breach. Maztan is Bradto's tenant, not its servant or agent. There is ample authority for the proposition that a tenant is not the agent of the landlord, and the absurdity of that proposition can be demonstrated by the fact that logically this would make Bradto the agent of the SOV. Furthermore, Maxwell P stated that "... this is Bradto by itself, its servants or agents and the sub-lessee is none of those". Vicarious liability cannot attach to Bradto consequent upon any actions of Maztan.

22 In summary, it is clear that if Bradto does nothing it cannot be in breach of the injunction, given its language, and cannot be in contempt. That this is so is underlined by the fact that the SOV has corresponded with Maztan, as tenant in possession, threatening it with possible injunctive remedies should it deny access.

23 The submissions advanced by Mr Garde on behalf of the SOV could be summarised as follows. This summary includes the later written submissions of Mr Garde and Mr Fox.

24 In relation to possible contempt of the Tribunal, reliance is placed upon s.137(1)(f) of the Act. Further, it is agreed that, in matters of contempt, directors of a company cannot hide behind the corporate veil.

25 In considering the present application, it is important to bear in mind the factual circumstances which now prevail. When the matter was previously before the Tribunal and when Bradto was seeking leave to appeal, there was a sub-lease to Maztan in existence. That sub-lease has since expired. What must be addressed is the current position. Mr Pilarinos is in a position to know what is going on in this regard, as, in an affidavit previously sworn by him, he sets out his involvement with the premises both through Bradto and through Maztan. Bradto clearly has power and control over the premises, and is choosing to do nothing. It is not a situation where Bradto is prevented from doing anything. Bradto and Maztan are complicit in non-compliance with the injunction. Maztan has in fact no right to exclusive possession, but Bradto is using it as the bar or obstacle to compliance with the injunction. By using Maztan as the barrier, Bradto is engaging in a potential contravention of the terms of the injunction. The directors of Bradto will have contravened the terms of the injunction if access is not permitted - that is, if the door is not opened. In this regard, paragraphs 18 and 19 of the judgment of the Court of Appeal are relied upon. The meaning of paragraphs 18 and 19, and indeed of the judgment as a whole, is clear. Paragraphs 18 and 19 refer to both Bradto and Tymbook. The SOV took the matter back to the Court of Appeal in order to ensure that the approach which it considered to be correct was that which the Court of Appeal intended. The guidance given by the Court of Appeal is that there is one positive act which Bradto is required to perform. The positive act required to be performed by Bradto is the opening of the door, and the Court of Appeal made this clear following discussion and argument. The wording of paragraphs 18 and 19 of the judgment of the Court of Appeal was clearly intended to embrace both Bradto and Tymbook. This is made even clearer by the definitions of Bradto and Tymbook contained in paragraph 1 of the judgment. The findings in paragraphs 17, 18 and 19 of the judgment of the Court of Appeal refer to both Bradto and Tymbook. The SOV went back to the Court of Appeal, and thus to Maxwell P, in order to ensure that there was no misunderstanding as to what had been stated in paragraph 19. It was important to establish that Bradto could not ignore the conclusions reached. The bottom line is that Bradto and its directors are obliged to comply with the injunction as worded, and as interpreted in paragraphs 18 and 19 of the judgment of the Court of Appeal.

26 In the absence of any affidavits supplied by Pilarinos, there is no reason to suspect that, for example, the keys to the premises could not be supplied, as Bradto is entitled to insist on the return to it of all such keys. There is no evidence from Pilarinos in relation to the degree of power and control which Bradto possesses.

27 Pursuant to its terms, the sub-lease expired on 1st March 2006. On that date, possession of the property reverted to the lessor. Therefore, the power and control of possession of the premises rests with Bradto. In relation to over-holding, the sub-lease provides that the lessee (Maztan) may remain in possession without any objection from the lessor (Bradto). Accordingly, Maztan has no right to be in occupation of the premises unless there is an absence of objection from the lessor (Bradto). Therefore, Bradto has the immediate capacity to order Maztan to vacate the premises. Alternatively, it could impose any condition which it desires upon Maztan's continuing occupation of the premises. Maztan is there at the whim of Bradto. Maztan's holding over is totally under the control of Bradto. In relation to over-holding, the tenant (Maztan) continues to be a tenant from month-to-month, and the conditions of the lease continue to apply as if for a monthly tenancy. Accordingly, as previously argued, Maztan's occupation of the premises is totally within the power and control of Bradto. If there is an objection by Bradto to such ongoing occupation, that is the end of any right that Maztan may have.

28 Further, the injunction has a significant vicarious aspect. There is included the impeding, obstructing, refusing or denying of access "by itself, its servants or agents or howsoever otherwise". It is clear from the correspondence that Bradto has continued to allow Maztan to occupy the premises, and to it being the obstructor to the inspections in accordance with the injunction. This is an illustration of the control which Bradto has over Maztan. Bradto has used this as an excuse for not honouring its obligations to comply with the terms of the injunction. Into the sub-lease there are imported the terms of the head lease. The covenants contained in the head lease bind the sub-lessee, via the sub-lease. Pursuant to this arrangement, Bradto can control Maztan in various ways. Since 1st March 2006, Bradto has had the right to require Maztan to return to it all the keys of the premises. Because of the absence of affidavit material, no-one can be sure as to whether or not this has occurred. There can be no certainty as to whether Maztan has returned all the keys. Bradto is in a position to demand them in order that there be compliance with the injunction and in accordance with the direction of the Court of Appeal. Bradto should have no difficulty in providing keys for the premises. It is clear that Bradto has control over the premises.

29 Pursuant to the covenants in the sub-lease, Maztan has undertaken to Bradto that it will comply with all relevant laws, regulations and the like relating to the occupation of the premises. Further, Maztan is obliged to perform and observe the covenants, conditions, and the like contained in the head lease as if it were a party to that lease. Thus, all the covenants of the head lease are imported into the relationship between Maztan and Bradto, and that includes the covenant which I described as "the key clause" in my Reasons for Decision of 8th February last, being clause 2(i) of that head lease. Accordingly, that clause goes into the sub-lease, and Maztan had an obligation both to Bradto and to the SOV in that regard. There is an obligation on Maztan not to do anything that might constitute a breach of that covenant. This further enhances the power and control of Bradto in the current situation.

30 It is further specified that Bradto shall have the rights contained in s.111 of the Landlord and Tenant Act 1958 in relation to the premises. Pursuant to s.111(1)(a) of that Act, Bradto has its own rights of entry to an inspection of the premises. Further, because of the expiration of the sub-lease, Bradto has an immediate right to vacant possession; it has the right to the keys; and it has the most extensive capacity to control the premises in relation to the injunction. When the expiry date of the sub-lease had passed, the SOV wrote to Maztan's solicitors (at that time, the solicitors also acting for Bradto). That letter, dated 22nd March 2006, pointed out that the sub-lease had expired and had not been renewed. A copy of the injunction was provided. It was also pointed out that the head lease expired on 31st March 2006, and that the SOV required Maztan to vacate the premises on or before that date. The SOV reserved its rights to recover possession of the premises. It also reserved its rights to obtain injunctive relief, and to seek damages and costs.

31 A letter in reply was received from Maztan's solicitors. This stated that Maztan occupied the premises pursuant to the over-holding provisions of the sub-lease (which statement would confirm that it is common ground between the parties that the sub-lease has expired, and which in turn must mean that Maztan can only be there if there has been no objection by Bradto). The letter goes on to say that, whilst Bradto remains in possession of the premises, Maztan occupies the premises with the consent of Bradto, and is not a trespasser. This demonstrates connivance and complicity between Bradto and Maztan. Bradto permits Maztan to occupy the premises, and Maztan then provides the resistance to the access and examinations.

32 It has never been stated on oath on behalf of Bradto that it does not have the keys, or that it has encountered any difficulties in relation to compliance with the injunction. Bradto has never asserted that it has written to Maztan as foreshadowed by Charles JA in the Court of Appeal. In support of the declaration sought, there is no affidavit material indicating what Bradto has done or what it intends to do in terms of compliance with the injunction. There is no evidence as to any conversations or correspondence between representatives of Bradto and representatives of Maztan. This leads to the conclusion that no declaration should be contemplated. There are no facts upon which the Tribunal can base any conclusion. Further, the absence of adequate and relevant affidavit material from persons such as Pilarinos, from whom such material would normally be expected, invites the application of the rule in Jones v Dunkel. Given the power and control over the premises exercised by Bradto, there will be a contempt if no entry to the premises by the officers and agents of the SOV is permitted by Maztan or by anyone else associated with Bradto. Bradto and Maztan may well be unwilling to comply with the injunction, but that is a different matter from an inability to comply. No material has been provided indicating any such inability. The clear authority which Bradto has in relation to the premises is of such a high order that it puts it in an equivalent position to Tymbook. Without sufficient facts (which may involve cross-examination of witnesses), a declaration in the nature of an advisory opinion should not be granted.

33 Effectively, in terms of non-compliance, the deed has already been done by reason of Bradto's consent to Maztan remaining in possession and providing the block to access. The barrier to inspection has already been put in place by Bradto. Thus, the position is that already there may or may not be a contempt, and in that situation the Tribunal should not entertain an application for a declaration of this nature.

34 No reason has been demonstrated as to why there would be any difficulty in Bradto or its officers complying with the terms of the injunction, including the positive obligation to open the door as referred to by the Court of Appeal in paragraph 19 of its judgment. It is repeated that the transcript of what took place before the Court of Appeal must be viewed in the context of the circumstances then prevailing. The vital question is whether paragraphs 18 and 19 of that judgment apply to Bradto, and this is what the SOV sought to have clarified by Maxwell P. If paragraph 19 does apply to Bradto, then it means that the obligations therein described have to be fulfilled by it, whether in the period prior to the expiration of the sub-lease or after that expiration. Maxwell P stated that the Court of Appeal was not asked to, and in any event would have declined to, rule in any anticipatory way on what would be required of Bradto or Tymbook in a particular circumstance, and this was obviously an appropriate position to adopt. This statement of Maxwell P also underlines the fact that a declaration based upon speculation as to what might or might not happen should not be granted.

35 Maxwell P went on to say that the Court of Appeal had no occasion to decide any issue in relation to Maztan. The injunction is the Tribunal's, and not the Court's. Maxwell P also stated that the leases to Bradto and Tymbook were relevantly indistinguishable, and the remarks made in paragraphs 18 and 19 were general statements that applied to both Bradto and Tymbook. Maxwell P specifically said that paragraphs 18 and 19 were general statements about the obligations of the lessee companies.

36 In summary, when the words contained in paragraphs 18 and 19 are given their ordinary meaning, and particularly when the explanatory remarks of Maxwell P are taken into consideration, it is clear that the obligations set out in those paragraphs do arise in the context of the injunction. This is in addition to the fact that there is a breach of the terms of the injunction if the person the subject of it puts forward another entity, consents to that person's presence on the premises, and that person then does the impeding and the like. The terms of the injunction apply where a surrogate is put forward to do the impeding and the denying of access. In addition, Bradto has the power and control to enable it to perform the positive act which it is obliged to do.

37 Reference is again made to various extracts from the transcript of what took place before the Court of Appeal. In one such excerpt, Maxwell P set out the following question as representing the manner in which Bradto and Tymbook might approach their obligations pursuant to the injunction:-

"Is there anything that we are in control of which, if we don't act, will constitute obstruction? If there is not, there could not possibly be a breach."

Bearing that in mind, Bradto has virtually complete authority in respect of the premises. This means that Bradto has responsibility for the obstruction.

38 Returning to the excerpts from the transcript, Maxwell P, speaking of the premises, used the words "whether you're physically present, or entitled to be". Thus, the question of entitlement is to be looked at in addition to actual physical presence. If a party is not actually present at the relevant time and has no entitlement, it could not be obstructing. That theme continues throughout the reasoning expressed by the Court of Appeal. Charles JA also looked at the question of the degree of power and control of Bradto over Maztan when raising the question of whether Bradto should send to Maztan a letter setting out Maztan's obligations. In relation to some of the discussions recorded in the transcript, it is to be remembered that, at that time, the sub-lease had not expired and Maztan was in possession pursuant to it. Charles JA was asked concerning whether Bradto was entitled to unlock the door. The position following the expiration of the sub-lease is that Bradto is not only entitled to unlock the door, but is entitled to exclusive control of the keys.

39 Furthermore, and in relation to the second question raised by me, Maztan's possession of the premises is subservient to the terms and conditions relating to access contained in the sub-lease, and thus to those contained in the head lease. Bradto is not prevented by Maztan's occupation from entering the premises, opening the door, and obtaining entry for the SOV and its agents in accordance with the terms of the injunction. Maztan is specifically required by the sub-lease to observe the covenants contained in the head lease. These covenants include that set out in clause 2(i) of the head lease. Maztan does not have exclusive possession as against Bradto, because its occupation of the premises is subject to the covenants in the sub-lease, and this in turn requires observance of the covenants in the head lease. Maztan cannot do anything which would result in non-compliance with the head lease. By allowing Maztan to stay in occupation and then failing to require it to comply with the terms of the head lease (and admit the agents of the SOV), Bradto is breaching the terms of the injunction. A consideration of the obligations which exist pursuant to the head lease and the sub-lease reinforces the proposition that Bradto is basically in control of the premises. Clause 2(i) of the head lease operates as a negative covenant in that the lessee must not prevent an agent of the SOV from entering upon and examining the premises. That is binding upon Maztan as a negative covenant of which it has notice. Even if the sub-lease terms do not apply, Maztan will still be bound by the negative covenants contained in the head lease.

40 In summary, the Tribunal is being asked to provide an anticipatory and advisory opinion. It is extremely difficult for the Tribunal to contemplate that in the absence of any material or evidence. What is clear is that, following the expiration of the sub-lease, Bradto is now entitled to possession at any time. The only reason that Maztan is over-holding is because Bradto has not objected to that over-holding. The letter earlier referred to from Bradto's solicitors in response to the SOV's demand for possession of the premises makes it clear that, far from objecting to Maztan's ongoing occupation, such occupation is occurring with the consent of Bradto. Bradto has the immediate capacity to provide access. It has control over the keys. Maztan is held out by Bradto in order to provide the impeding and the denying of access. Additionally, Bradto has all the other rights earlier discussed. There would be no difficulty in providing access, but Bradto is unwilling so to do. The application for a declaration should be dismissed.

41 The reply of Mr O'Callaghan on behalf of Bradto could be summarised as follows.

42 Accusations of connivance and complicity are totally rejected. An historical company extract of 18th May 2006 (which is tendered) shows that Pilarinos is not the current director of Maztan, and has not been a director previously. A company associated with Pilarinos has shares in Maztan, but the control of Maztan is in the hands of its sole director, who is not Pilarinos.

43 One of the fundamental propositions advanced on behalf of the SOV is centred upon the expiration of the sub-lease on 1st March 2006, which is the fact. However, the fact that the lease has expired and Maztan is now a monthly tenant, as opposed to a tenant pursuant to the sub-lease, means that the position has not changed in relation to the substance of the matter. Maztan's rights remain, for essential purposes, completely unchanged. It continues in exclusive occupation of the premises as a monthly tenant, and the over-holding clause provides that the provision of the sub-lease apply to that over-holding to the same extent as they did during the period of the sub-lease. It is apparent from the transcript that the fact that the sub-lease had expired on 1st March 2006 was brought to the attention of the Court of Appeal. Maztan was described as being a tenant from month-to-month at the discretion of Bradto. That Maztan, as a monthly tenant, was entitled to exclusive possession and was thus the only one that could open the door was an issue raised by Maxwell P. There is a dispute about whether Bradto is entitled to an extended lease, and consequently there is a dispute as to whether Maztan is entitled to remain in occupation pursuant to the over-holding clause. That dispute has not been determined. Until it is, the relationship between Bradto and Maztan remains that of sub-lessor and sub-lessee, and the relationship which each has with the SOV as head lessor remains the same as that which existed before the Court of Appeal. As stated, the Court of Appeal was aware of the expiration of the sub-lease and accepted that Maztan had exclusive possession as a monthly tenant.

44 Maztan has independent and exclusive rights of occupation because the sub-lease has not been terminated. The SOV is effectively submitting that the injunction requires Bradto to terminate the monthly tenancy, and thereby obtain possession of the premises so that the SOV can be let in. That is an untenable proposition which would, in any event, require a positive act far beyond that of opening a door. For example, the termination of the sub-lease would involve the deprivation of Maztan's liquor licence, it being the operator of the nightclub on the premises. Commercially and legally, it would be an amazing proposition to suggest that there would be a contempt of court if Bradto did not terminate the sub-lease. Unless those steps to terminate the lease are taken, exclusive possession rests with Maztan. Further, the surrender of the keys is only to occur at the termination of the sub-lease. There is no power pursuant to which Bradto can have control of or access to the keys during the ongoing existence of the sub-lease, and to determine otherwise would defeat the right to exclusive possession. The whole premise upon which it is asserted that Bradto has control is baseless.

45 Whilst the solicitors presently acting for Bradto have previously also acted for Maztan, Maztan was advised to get its own independent legal advice, which it has done. The solicitors now acting for it responded to the SOV's letter demanding possession with a denial that Maztan was a trespasser. Further, the letter went on to say that there is no privity of estate or privity of contract between the SOV and Maztan. The question of the date of termination of the head lease is to be determined in the possession proceeding. The letter concludes by pointing out that, whilst Maztan has obligations to Bradto pursuant to the sub-lease, it has no direct obligations to the SOV, and it will not be permitting access to the agents of the SOV.

46 That letter highlights a feature of the SOV's approach in that it has failed to take any step against Maztan other than relying upon implications. The position is clear. It has virtually been conceded by the SOV in discussions before the Court of Appeal. If Bradto does nothing, it is not in breach of the injunction.

47 Paragraph 19 of the judgment relates to the general characterisation of the injunction as being prohibitory and not mandatory. Because of the gravity of the threat of contempt should Bradto do nothing, which it says it is entitled to do, what is being sought is not an anticipatory advice, but a declaration clarifying that there is no breach of the injunction if nothing is done by Bradto. The granting of a declaration would remove the threat of worrisome and costly contempt proceedings.

48 In relation to the allegations of a lack of material before the Tribunal, there is in fact sufficient material to support the application. The existence of the sub-lease to Maztan and its provisions have been demonstrated. The sub-lease has expired. The Court of Appeal knew of this. There has been no substantial change in the position. As far as the allegation of collusion or complicity is concerned, no material has been adduced by the SOV in support of such a proposition, and the burden is not on Bradto to prove a negative.

49 The SOV is in effect asserting the presence of a mandatory injunction, but no such injunction was sought or granted. No positive act is required. As was said by the Court of Appeal, if Bradto is not present at the premises, it cannot be in breach. The fact that Maztan, as an over-holding tenant, occupies the premises with the consent of, or without objection from, Bradto is irrelevant in the context of this case. There is no privity of estate or contract between the SOV and Maztan. Further, the SOV consented to the grant of the sub-lease.

50 In relation to the writing of the letter referred to by Charles JA, the material placed before the Tribunal establishes that Maztan has full knowledge of the circumstances prevailing, and has stated that it is not agreeing to access. If that creates a problem between the SOV and Maztan, that is not Bradto's problem. It is clear from the correspondence and from Maztan's action in initiating its own proceeding that it is fully aware of the situation and of the demands of the SOV. Armed with the knowledge which it possesses, it has responded accordingly.

51 In relation to arguments advanced by the SOV concerning Maztan's obligations pursuant to the sub-lease, and therefore to the head lease, Maztan clearly has exclusive possession of the premises pursuant to clause 2(a) of the sub-lease. This right to exclusive possession continues because of the over holding clause. Obligations which, because of the sub-lease, Maztan may have to the SOV is not the issue. The issue is the obligations of Bradto pursuant to the injunction. To do nothing is not to contravene the terms of the injunction.

52 The declaration should be granted. It is an outstanding form of judicial relief given when there is a dispute between citizens, and particularly in circumstances where there is a dispute between the State and its citizens.

53 In answer to a question of mine as to the use which should be made of the excerpts from the transcript of the hearing before the Court of Appeal and of that before Maxwell P, Mr O'Callaghan submitted that I should treat these as being highly persuasive. Mr Garde argued that they should be treated with some caution. This is because arguments wax and wane during the hearing of a case. The judgment was delivered some six weeks after argument, which would indicate that, understandably, the Court of Appeal had reflected upon matters put to it. This can also be seen from the language ultimately used in the judgment, and the forceful manner in which the Court of Appeal dealt with some issues.

54 The first matter to be considered is whether Bradto's application for a declaration should be entertained. In other words, before the merits of the application can be addressed, I should first be satisfied that the circumstances are appropriate for the possible granting of a declaration. In so considering, I should bear in mind arguments concerning the adequacy of the material before me, and as to whether what is really being sought is some type of advisory opinion or determination of an academic or hypothetical question.

55 In my opinion the application should be entertained. Section 124(1) of the Act gives to a presidential member the power to make a declaration "... instead of any orders it could make, or in addition to any orders it makes, in the proceeding". This power seems to me to be clearly broad enough to include an application in circumstances such as this. Indeed, the present situation seems to me to fall within both alternatives set out in s.124(1).

56 The power to make such a declaration is discretionary. It has previously been determined that this Tribunal will be influenced by the principles governing the making of declarations at common law when exercising its discretion pursuant to s.124 - see, for example, Moira Shire Council v Demaio (unreported, 7th September 1999), and I would fully agree with that proposition. If those principles are then applied, it seems to me that this is a situation of the type where an application for a declaration is appropriate. There is a real dispute in existence. It concerns real and established facts. The dispute is of practical importance, and the making of the declaration is of practical use. In my opinion, if persons face the risk of being charged with contempt should there be a misinterpretation of the requirements of an injunction issued by this Tribunal, it is entirely appropriate that such persons the subject of the injunction seek a declaration as to what constitutes a breach of it. That is particularly so when the President of the Court of Appeal has referred to the issue under consideration as being one that should be explored first and last by the tribunal whose order is sought to be enforced.

57 The circumstances in which a declaration should be granted have been the subject of considerable judicial consideration. In ASC v Ampolex Limited (1995) 38 NSWLR 504, Kirby P referred to the greater willingness of courts to provide declaratory relief as being "... a beneficial development, at least where there is a real, practical question in controversy, in being or in potential, which the intervention of the court may help to resolve". His Honour went on to describe the limits which might impinge upon the use of declarations, such limits including the request for a declaration which arises from a wholly theoretical concern or out of idle curiosity. That is not the situation here. The declaration sought is in relation to a real dispute; the outcome is of practical importance; the making of the declaration is of practical use. The application is not one made concerning a hypothetical situation or one made out of idle curiosity.

58 I appreciate that Mr Garde has argued that the alleged contempt may or may not occur, and that there is insufficient material available, the latter part of which argument I shall turn to shortly. He argues that the declaration sought is anticipatory. I cannot agree with this. Bradto and Pilarinos are seeking a declaration as to whether, if they follow a particular course of action or inaction, they will breach the terms of an injunction previously granted by me, and thus face, potentially, a charge of contempt as threatened by the SOV. I agree with the submissions of Mr O'Callaghan that this is the type of situation in which a declaration should be entertained, and where, to adopt the terminology of Kirby P in Ampolex, the Tribunal might seek to respond to pressing issues proffered for resolution.

59 I am also not persuaded by the argument that Bradto has not placed before me adequate material to support its application. In my view, no great amount of material is required in this situation. I have previously found for the SOV and granted an injunction in the specific terms sought by it. Bradto is now, in essence, seeking a declaration as to what it (and its directors) must do in order not to breach that injunction. Must it do something, or can it do nothing? Whilst that concept is simple and would appear not to require a great deal of supporting material, the argument otherwise centres upon the existence of the sub-lease, the way in which the existence of this distinguishes the position of Bradto from that of Tymbook, and the particular effect which its existence has upon the requirements of the injunction. The voluminous material with which I have been provided seems to me to establish quite adequately the basis of the application. Sufficient material exists for me to consider questions relating, for example, to the degree of control over the premises exercised by Bradto. It does not seem to me that I need further material concerning particular individuals who may have been involved with the various entities the subject of this litigation, or their predecessors. In summary, in my opinion adequate material exists to enable me to consider the application. Furthermore, as stated, I am not of the view that the question to be considered is hypothetical in nature. Given that I am of the view that adequate supporting material has been supplied, there is no scope for the application of the rule in Jones v Dunkel even assuming that it could be applied in a situation such as this.

60 Having determined that the application has been brought in appropriate circumstances, I now turn to a consideration of its merits. In my opinion the declaration should be granted. The injunction is in the terms ultimately fixed upon by the SOV. In my Reasons for Decision of 3rd February 2006, I expressed the view that the injunction sought was prohibitory in nature. The Court of Appeal endorsed this view. In those Reasons, I also commented that I agreed with Mr Garde that the orders sought were orders seeking to restrain the persons to whom they were addressed from doing something, and that they were not asking such persons to do anything. Leaving to one side arguments concerning whether mandatory injunctions are granted or declined on the same principles as prohibitory injunctions, the view which I then expressed (agreeing with Mr Garde's submissions) was that the injunctions then granted against Bradto and Tymbook were not injunctions asking those persons to do anything.

61 I am not suggesting that those remarks form part of the orders made, or are in some way binding. Nor am I overlooking the fact that the matter has since been the subject of careful analysis and a detailed judgment by the Court of Appeal. In no way am I ignoring the judgment of the Court of Appeal, the remarks made during the running of the application for leave and as recorded in the transcript, or the observations of Maxwell P in the application before him on 16th May 2006. The essential parts of the judgment are binding, and the balance of it, combined with the other observations recorded in the transcripts, are very helpful. Much attention has been paid to paragraph 19 of the judgment, together with argument which transpired during the course of the hearing and the subsequent explanatory remarks of Maxwell P. Indeed, as I believe I observed during the conduct of this application, the content of paragraphs 18 and 19 of the judgment of the Court of Appeal has been examined as if what is involved is a question of statutory interpretation. As part of this exercise, portions of the transcript of what occurred before the Court of Appeal and before Maxwell P have in turn been scrutinised and analysed as part of this process of "statutory interpretation". From reading these documents, I do not believe that the Court of Appeal intended that such an approach should be adopted. Indeed, it seems clear to me that the Court intended that matters of enforcement of the injunctions would not be determined by it, but would be determined by the body granting the injunctions, namely this Tribunal.

62 The SOV persuaded me to grant the injunction which it sought against Bradto. It made several attempts at perfecting the wording of the injunction sought. Ultimately a final version was achieved, and after I had allowed some "fine tuning". That injunction restrains Bradto by itself, its servants or agents or howsoever otherwise, from impeding, obstructing, refusing or denying access at reasonable times to the demised premises to specified persons. That, in summary, is part (1) of the order granted. It has not been suggested that parts (2) and (3) of such order otherwise affect the situation. I cannot see that the order, carefully drafted as it was after several attempts, requires Bradto to do anything. When what was said by the Court of Appeal in paragraph 19 of its judgment is considered in context, even taking into account the transcripts of the proceedings before it and subsequently before Maxwell P, I am far from satisfied that the Court of Appeal was taking a different view. I am far from persuaded that the obligation to take a positive step - namely, opening the door - was being imposed upon Bradto. While there may still exist conflicting views as to what the Court of Appeal intended by reason of paragraph 19 (and the existence of so much ongoing argument highlights that), it seems to me that the observations made in that paragraph were so made in the context of characterising the type of injunction granted. The Court of Appeal was considering a quite complex and challenging argument concerning the distinction between mandatory and prohibitory injunctions, and the degree of satisfaction required on the part of the decision-making body. When one reads the transcripts of all that occurred before the Court of Appeal and before Maxwell P, the overwhelming impression gained is that paragraph 19 was a general statement made in the context of the characterisation of the injunction relating, in broad terms, to both lessee companies, but not one taking into account the particular situation of Bradto and its sub-tenant. As has been stated by Maxwell P, "... it is the tribunal's injunction, not the court's.", and, later, "... This court has no role ... in the administration or enforcement of the injunction". As previously stated, in my Reasons for Decision of 3rd February 2006 at paragraphs 45 and 46 I expressed the following opinion:-

"... in my opinion both in wording and in substance the injunction sought is prohibitory in nature. ... I agree with Mr Garde that the orders sought are orders seeking to restrain the persons to whom they are addressed from doing something. They are not asking such persons to do anything".

63 As I also said at paragraph 77, I was not (and am not) of the view that the wording of the orders sought was inadequate, ambiguous, or otherwise unsatisfactory. The Court of Appeal expressed a similar, if not more forceful, opinion. At paragraph 89 of its decision, it stated as follows:-

"The orders made are, in our view, clear and readily comprehensible. The orders are expressed in terms which use ordinary English words, in everyday use. There is nothing in the orders which should give rise to any difficulty of application."

64 Given the clear wording of the orders, ultimately made after several drafting attempts by the SOV, and given that the orders have been found by the Court of Appeal and by myself to be prohibitory in nature, it does not seem to me that the SOV can then seize upon one observation made by the Court of Appeal whilst addressing the characterisation argument (an argument apparently advanced by Tymbook) so as to impute into the injunction against Bradto a positive obligation of the type now demanded. As stated, the wording of the injunction is clear.

65 Mr Garde placed substantial reliance upon the expiration of the sub-lease and the degree of control which this has afforded to Bradto. I prefer the submissions advanced by Mr O'Callaghan. The fact of the matter is that, pursuant to the over-holding clause in the sub-lease, Maztan as sub-tenant remains in exclusive possession of the property. Its rights continue. True it is that Bradto can bring the arrangement to a conclusion, and that Maztan continues in occupation with its consent, whether explicit or tacit. However, Bradto is not obliged to terminate the sub-tenancy. The injunction does not require it. It is one thing to say that a tenant in occupation and with exclusive possession, such as, for example, Tymbook, is required by the injunction to open the door. Not so to do, and to leave the door locked, would be impeding, obstructing, refusing or denying access. It is a vastly different thing to say that a party not in occupation must bring to an end a valid sub-tenancy arrangement, or infringe upon a sub-lease, so as to cause a door to be unlocked and thereby enable access for the purposes of the injunction. It is yet another step to say that, by not so terminating the sub-tenancy arrangement or otherwise infringing upon Maztan's right to exclusive possession, Bradto and its directors may be in contempt.

66 In relation to the obligations of Maztan pursuant to the sub-lease, and insofar as these dovetail with the obligations of Bradto pursuant to the head lease, I am of the view that ultimately these do not affect the obligations imposed by the injunction and the plain meaning of its terms. I appreciate that I raised this issue with the parties, and gave them the opportunity to advance submissions. These submissions were very helpful and were gratefully received. However, after considering them, I am of the view that Mr O'Callaghan and Mr Hopper are correct when they submit that questions concerning possible obligations of Maztan to the SOV (via its obligations to Bradto) have no direct bearing upon the obligations imposed upon Bradto pursuant to the injunction. The immediate question to be determined concerns the obligations imposed on Bradto pursuant to an interlocutory injunction. The final hearing of this matter, and any determinations in respect of related matters, may well alter the situation in relation to the various rights and obligations of the parties. What I am required to determine is, in essence, and in the context of possible contempt, what constitutes a breach of an interlocutory injunction granted by me. In this regard, I am persuaded by the arguments advanced by Mr O'Callaghan.

67 I also agree with the submissions of Mr O'Callaghan concerning the allegation of complicity and connivance between Bradto and Maztan. That they have interests in common seems beyond dispute. That their histories and interests, and those of at least some of their respective officers and representatives, are interwoven also seems beyond dispute. I have little doubt but that, in the context of the present litigation, Bradto has a valuable ally in Maztan. However, the fact remains that they are separate legal entities and that Maztan has a sole director who is not the director of Bradto. I also accept that Maztan possesses the liquor licence for the premises. If Bradto wishes to sub-let the premises to Maztan and to allow it to remain in exclusive possession pursuant to the over-holding clause, that is its business. However comfortable, if not cosy, might be the relationship between Maztan and Bradto, nothing has been put before me which persuades me that there has been some type of connivance or complicity such as to improperly defeat the injunction, or so as to cause me to order its enforcement on a basis other than that which is disclosed on its face.

68 As I have stated in my recent ruling of 1st September 2006 in relation to costs, none of this is to say that the injunction obtained by the SOV is patently futile. Nor is it to say that the injunction is futile unless interpreted or enforced in the manner urged by the SOV. In the particular circumstances prevailing, the SOV, as landlord, may well deem it prudent to obtain an injunction of this type against Bradto as its tenant. Indeed, Bradto resisted the application of the SOV at extraordinary length and with great vigour, and as if the proposed injunction was anything but futile. Whether the SOV wishes to pursue an application for a similar injunction against Maztan remains a matter for it. As was stated by Maxwell P on 16th May 2006:-

"Lastly, as I recall, you said to us - and I think the transcript records this - that your client as advised by you would deal with the Maztan issue as it played out and if it turned out that you needed an order against Maztan you would seek one and that seems to me to be a matter for your client ..."

69 As I understand it, these observations of Maxwell P were being directed to Mr Garde on behalf of the SOV. They follow an earlier observation that "... in the end we had no occasion to decide any issue in relation to Maztan".

70 In summary, the course of action which the SOV may wish to adopt in relation to Maztan is a matter for it. What does seem to me clear is that the observations of the Court of Appeal in paragraph 19 of its judgment were made, to quote Maxwell P, "For a quite limited purpose, namely to characterise the injunction". The wording of the injunction is clear. It is prohibitory in nature. Whatever may be the position in relation to Tymbook and the injunction concerning it, the injunction relating to Bradto, it not being in occupation and with Maztan having exclusive possession, requires no positive act to be performed by it. If Maztan alters its present position and decides to open the door and permit access, so be it. This prospect seems highly unlikely, but if it did occur and Bradto attempted to intervene and close the door, the situation would be different. However, if Bradto, not being in possession, sits on its corporate hands and does nothing, it is not in breach of the injunction. Neither it nor its directors would be in contempt of this Tribunal.

71 In my opinion Bradto is entitled to the declaration which it seeks. Little or no argument has been directed to the precise wording of that declaration, and it shall be made in those terms unless there is some persuasive argument to the contrary. I shall also reserve the question of any ancillary orders that may be sought, and reserve liberty to apply.

State of Victoria v Bradto Pty Ltd

At a glance

Court

Decision date

Source

Judgment (28 paragraphs)

State of Victoria v Bradto Pty Ltd (Retail Tenancies) [2006] VCAT 1864 (15 September 2006)

Parties

Cases Cited (1)