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Darktone Pty Ltd (in liq) v Bate

 

[2003] QSC 189

 

SUPREME COURT OF QUEENSLAND

PARTIES:

DARKTONE PTY LTD (IN LIQUIDATION)

ACN 007 398 905

(plaintiff/applicant)
v
ROBERT NORMAN BATE
(first defendant/respondent)
MARGARET MARY BATE
(second defendant/respondent)

FILE NO:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

25 June 2003

DELIVERED AT:

Brisbane

HEARING DATE:

12 May, 3 June 2003

JUDGE:

B W Ambrose J

ORDER:

1.I dismiss the plaintiff’s application and action. 

2.The defendants should recover their costs to be assessed. 

3.I will reserve two questions upon which further submission in writing may be made –

(i)Whether the liquidator ought pay the costs of this application and action personally and not out of whatever monies remain of those already received upon the plaintiff’s liquidation; and

(ii)Whether such costs ought be assessed on an indemnity basis. 

4.Those written submissions should be exchanged and forwarded to my associate within one month.  Should counsel wish to make oral submission in addition to those in writing they should notify my associate so that a convenient time may be fixed. 

CATCHWORDS:

CORPORATIONS LAW – Liquidation – Application for directions – application for a declaration that a bakery business including plant, equipment, chattels and other assets is owned by the liquidator of the plaintiff – where bakery business went into liquidation – where business continued by defendants’ children – where the plaintiff used to facilitate moneys received and payment of outlays – where the plaintiff was an earth moving business – where plaintiff went into liquidation – where agents of liquidator of the plaintiff excluded from bakery by defendants – where liquidator of plaintiff claims better right to possession of lease and equipment of bakery business – whether plaintiff has any interest in the bakery premises or plant and equipment or goodwill of the business

Property Law Act 1974 (Qld), s 129, s 129(1)

Minister of State for the Interior v Brisbane Amateur Turf Club (1949) 80 CLR 123

COUNSEL:

G D O’Sullivan for the plaintiff/applicant
L Aitken for the defendant/respondents

SOLICITORS:

James Conomos Lawyers for the plaintiff/applicant

The defendant/respondents appeared on their own behalf

[1] AMBROSE J:  This action was commenced against the defendants by the liquidator of the plaintiff (“Darktone”) on 29 April 2003.  Darktone claims amongst other things a declaration that it owns a bakery business in Goondiwindi operated under the name or style of “Batesy’s Bread Basket” including plant, equipment, chattels and other assets of that business. 

[2] It also claims recovery of possession of the land and structures from which the bakery business operates and recovery of possession of all plant, equipment and chattels of the business.  It then seeks a variety of other relief including damages for trespass to land, trespass to and conversion of goods and in particular it seeks an injunction restraining the defendants Robert Norman Bate and his wife Margaret Mary Bate by themselves or their servants or agents from entering or trespassing upon the premises and otherwise interfering with Darktone’s possession, use and occupation of the bakery premises or conducting or dealing directly or indirectly with the business or in any way interfering the plaintiff’s conduct and operation of the business . 

[3] It seeks an account of profits earned by the defendants since 8 March 2003 and various other forms of relief including exemplary damages and costs on an indemnity basis. 

[4] In its statement of claim Darktone pleads that it was placed in liquidation by a resolution of its creditors on 17 December 2002 with Allan Richard Nicholls (“Nicholls”) being appointed liquidator. 

[5] It pleads that the plaintiff is the lawful owner and operator of a bakery business named “Batesy’s Bread Basket” that operates from the land in Goondiwindi to which I have referred. 

[6] In para 3 of the statement of claim it is alleged that “as owner and operator of the bakery the plaintiff also:

“(a)has an immediate right to possession of the Premises to the exclusion of the defendants;

(b)has an immediate right to use and possession of the plant, equipment and chattels (“the chattels”) of the business to the exclusion of the defendants.” 

[7] In para 4 of its statement of claim the plaintiff pleads:

“On or about 7 March 2003 the first and second defendants forcibly took control of the Bakery business and the premises and commenced trading the Bakery business themselves and to the exclusion of the plaintiff.”

[8] When the matter first came on for hearing on 12 May 2003 the plaintiff sought in effect an interlocutory injunction against the defendants to immediately exclude them and indeed their children who conducted the bakery business allegedly as their agents or employees, from the premises. 

[9] The first defendant Robert Norman Bate (“Bate”) appeared upon that application without legal representation.  There is much affidavit evidence (principally from the liquidator Nicholls) who is an accountant who conducts his business as a liquidator in a number of centres in Northern New South Wales; his principal office seems to be at Tamworth. 

[10] Bate had prepared a good deal of material himself to contradict much of the content of the Nicholls affidavits. 

[11] Some of this material made serious allegations concerning the propriety with which Nicholls had acted as liquidator.  Allegations were made concerning his failure to account for a large amount of money in cash that he had been paid by members of the Bate family from the proceeds of sale of items produced by members of the Bate family in the conduct of the bakery business under the name of Batesy’s Bread Basket. 

[12] After a long hearing on 12 May 2003 I gave certain directions which it is unnecessary to record here with a view to permitting Nicholls to be called to answer the serious allegations made against him with respect to his conduct of the liquidation, but more importantly to test the assertions made in the statement of claim and affidavit material filed by Darktone that it was Darktone which had conducted the bakery business which was property to which it was entitled upon its liquidation. 

[13] At that time Bate asserted that he had never personally baked or conducted a bakery business in Goondiwindi.  He had only every conducted an earthmoving business through his company Darktone.  Various other matters arose which to my mind made it far from clear that Darktone (in liquidation) had any interest in the bakery business conducted in Goondiwindi sufficient to support its claim or indeed that the two defendants Bate and his wife had ever conducted the bakery business or purported to occupy the bakery or use the plant and equipment in it at any material time.  It was the contention of Bate that over the years he had financed and assisted a number of his children some of whom were highly qualified bakers to establish and run that business and had used the Darktone company which was his earthmoving company merely for the purpose of making financial resources available to a landlord and an equipment leasing company, suppliers etc involved with the bakery business. 

[14] Further material was filed prior to the matter again coming on for hearing again on 3 June 2003.  On that occasion Nicholls was called to give evidence, as was Bate.  Moreover statutory declarations were tendered which had been prepared and executed by some of Bate’s children who worked in the bakery business. 

[15] More importantly however on 3 June 2003 the defendants were represented by counsel who cross-examined Nicholls at some length not merely on the manner in which he had acted as liquidator of Darktone but also perhaps more importantly upon the basis upon which he asserted that he had a sufficient interest as liquidator in the bakery business and the land upon which it was conducted to obtain the relief which he sought. 

[16] For reasons which will emerge, if there ever was at a time material to this application a subsisting lease of the premises, which seems a little uncertain, it would if it existed at all, expire on 13 June 2003.

[17] There has been a great deal of evidence and argument presented on this application on 12 May 2003 and 3 June 2003. 

[18] I do not propose to analyse in detail all the affidavit evidence or all the exhibits that have been filed.  I propose to deal only with those facts as far as they emerge from the material, relevant to Darktone’s right to exclude the first and second defendants from the bakery business in Goondiwindi on the basis that Darktone was the owner of it at the time it went into administration in December 2001 and liquidation in December 2002.

[19] To no small degree in my view the defendants’ problems which have brought them to court at the instance of Nicholls arise from what seems to have been rather unsophisticated if not questionable professional  advice they received when they decided to acquire the bakery business in Goondiwindi for their children to run essentially as partners selected from a family group.  Bate had no experience whatever in baking anything.  His experience was in the use of very heavy earthmoving equipment in the Goondiwindi area.  His older children at that stage apparently were keen to acquire and run a bakery business in Goondiwindi when it came onto the market and Bate to achieve this for them after obtaining professional advice in 1997 acquired the bakery business in the name of Batesy’s Bread Basket Pty Ltd (“Batesy’s Bread”) of which the two defendants were the shareholders and directors.

[20] It is clear from newspaper articles published as early as June 1998 and July 1999 that the bakery business was well advertised and promoted as indeed it was still being promoted in May 2001.  The newspaper articles extolled the quality of the foodstuffs produced by the bakery and recorded various prizes that were won by some of the Bate children as bakers and apprentice bakers. 

[21] Before considering the arguments advanced by Darktone to support its claim for possession of the bakery and its plant and equipment I observe merely that all the evidence indicates that the bakery business has been and is presently conducted essentially by the Bate family children who have qualifications and experience as bakers and not by either of the defendants.  The utility of obtaining any relief of the kind sought by Darktone against the two defendants even if successful seems to be questionable.  There is no evidence whatever that the two defendants employ any of their children or relatives involved in the conduct of the bakery business.  Darktone has not sought any relief in this action against any of the Bate children who on the evidence actually conduct the bakery, but only against their parents on the basis presumably that the children do so either as employees or agents of their parents.  Not merely is there no evidence whatever that the children are the servants or agents of their parents, the evidence from Bate is quite to the contrary. 

[22] However that may be it is desirable to trace the history of the Batesy’s Bread Basket business conducted in Goondiwindi since about 1997 insofar as it touches upon Darktone’s claim to have any interest in the bakery business including its goodwill or the building in which it is conducted or in its contents to support the orders it seeks in this action.

[23] The family (or perhaps more accurately the Bate children’s) bakery business was commenced in about June 1997 with the incorporation of Batesy’s Bread.

[24] It emerges that the eldest Bate child had qualifications as a baker and some of his siblings became apprentices and acquired qualifications during the first few years of the conduct of the business.  It seems clear that Bate and his wife and perhaps other relatives also assisted the Bate children in the establishment of their bakery business.

[25] There were two assets upon which the business relied from the outset.  The first was a lease of six years with an option of renewal for a further six years held from Rozzener Pty Ltd controlled by Mr Rozzener who lived behind or near the bakery premises.  The second asset essential to the conduct of the business was the plant and equipment contained in the bakery and used to manufacture various items for sale.  All this equipment was leased by Batesy’s Bread from AGC. 

[26] All the materials used to manufacture items for sale out of the bakery were purchased by Batesy’s Bread presumably on credit.  They were paid for out of the proceeds of sale of items produced by the bakery. 

[27] The wages/living allowance etc of the children working in the bakery as bakers and/or bakers apprentices were drawn in some way from the proceeds of sale of items manufactured in the bakery.  At least this seems to have been the business practice eventually adopted.

[28] The skills of the Bate children whether as bakers or apprentice bakers may have been high.  Their skills as business managers seem not to have been high.  Eventually Batesy’s Bread went into liquidation on 5 June 2001 – about 6 months before Darktone went into administration. 

[29] It is unclear on the material precisely what was done or not done by the liquidator of Batesy’s Bread (“Batesy’s liquidator”).  What does seem clear is that he made no effort to sell the business the operation of which depended upon the skills and labour of the Bate children.  Undoubtedly the lease together with an option for its renewal had some value.  However for whatever reason no effort seems to have been made by the Batesy liquidator to sell that lease together with its option for renewal.  Similarly no effort seems to have been made to deal with the plant and equipment used in the bakery business – presumably because it was owned by AGC as lessor.  Batesy’s liquidator disclaimed that property on 21 June 2001. 

[30] As far as the evidence discloses the Bate children simply continued to conduct the bakery business after the liquidation of Batesy’s Bread as they had always done.  Bate and his wife had guaranteed the performance of Batesy’s Bread’s obligations under the AGC lease.  They had also guaranteed performance of the company’s obligation to the lessor’s company Rozzener Pty Ltd by way of payment of rent. 

[31] What seems to have happened is that the Bate children simply continued to conduct the bakery business as they always had – presumably having learnt by experience the necessity for conducting it in a more business like way than the way which had led to the initial failure of the business.  AGC received its payment of the monies due under the lease of the bakery equipment and Mr Rozzener received the rental due to his company Rozzener Pty Ltd under the lease and the Bate children who by this time had more baking qualifications, skills and experience continued to conduct the bakery business taking remuneration which they considered the business could afford. 

[32] Bate at this stage wished to keep his children’s bakery business quite separate from his business interest in earthmoving.  After consultation with an accountant after Batesy Bread’s liquidation it was decided to open a special bakery account under the name of Darktone in which money received for goods sold by the bakery business were to be deposited, and from which payments to the suppliers of various baking ingredients and services – such as electricity, rental etc would be made.  I am satisfied that this bank account was opened at a time when Darktone was thought to be financially stable and a Darktone bakery account was substituted for the account previously operated by Batesy’s Bread which of course had then been put into liquidation. 

[33] Things appear to have proceeded without undue problems and the bakery business’s financial health seems to have improved by about mid 2002.  Batesy’s liquidator seems to have shown little if any interest in what the Bate children were achieving by in effect continuing to conduct the same business on their own behalf personally as they had conducted it as employers under the auspices of Batesy’s Bread. 

[34] It seems that the owner of the bakery was content to receive the equivalent of the rent to which he was entitled under his lease with Batesy’s Bread.  AGC was content to receive the lease payments on the equipment which it had leased to Batesy’s Bread and the various bills for services, ingredients etc were being paid out of the proceeds of sales of goods produced by the bakery which were banked in the Darktone “bakery account”.  Bate explained that some creditors wished to make out accounts for goods and/or services provided to the bakery business in the name of the person from whose bank account the bills were to be paid.  Bate explained that this was the reason why some such accounts were directed to Darktone because bakery monies to be used to meet the obligations of the bakery business were held in effect on trust in the Darktone bakery account.  I accept this explanation on the whole of the evidence adduced. 

[35] According to Bate as the bakery business under the guidance of his maturing children was commencing to become profitable the profitability of Darktone’s earthmoving business commenced to decline.  Initially in December 2001 Darktone’s creditors were persuaded to appoint Nicholls to administer the company.  Eventually in December 2002 Darktone went into liquidation when Nicholls was appointed liquidator.

[36] For reasons which were not explained it was Bate who was apparently employed by Nicholls as liquidator of Darktone to do something in connection with bakery operations.  How this came about was not explained because on the evidence Bate had no experience in baking bread or running bakeries.  It is clear however that his children had made much effort to establish the bakery business and Bate was quite dissatisfied with the way its creditors were not being paid by Nicholls.  I accept his evidence to the effect that he was anxious to ensure the bakery business creditors were paid to protect an asset built up by his children with his support and that of Darktone before December 2001.  Significant disagreements soon commenced to occur between Bate and Nicholls.  Bate asserts that he sold earthmoving equipment and provided the proceeds to Nicholls and he and/or one of his children provided cash out of the bakery takings which together were sufficient to meet nearly all the creditor’s claims – with the exception of a claim by the Deputy Commissioner of Taxation.  It seems unsurprising that such a poorly managed business and the absence, as far as I can glean from the material of any proper business system in place, meant that the Bate children had presumably not been meeting their obligations to pay tax due.  There may have been other explanations for non-payment of the amount of tax they should allegedly have been paying.  The whole matter seems to have become confused by the fact that not merely was the bakery account opened in the name of Darktone but also apparently some of the wages were recorded for taxation purposes as being paid by Darktone because they were sometimes paid out of the Darktone bakery account. 

[37] It emerged in the course of cross-examination of Nicholls that no creditor has ever been paid anything out of all the monies that were received from the sale of Darktone’s earthmoving equipment and according to Bate, paid to him out of monies received from the conduct of the bakery business.  A complaint of Bate was that the bigger part of the money that had been obtained from selling Darktone’s equipment which he regarded as his had been eaten up in expenses of various sorts incurred by Nicholls as liquidator who not merely had not applied in payment of creditors any monies that he admitted he received but also denied receiving some payments that according to Bate he was paid in cash from the bakery business takings.

[38] For a month or two Nicholls with the assistance of an agent or agents purported to conduct the financial side of the business himself.  According to Bate nearly the whole of the income generated by the business during this period was taken by Nicholls and not well accounted for while the cost of all the ingredients purchased was not met out of that income but has been met by the moneys generated by the Bate children after the expulsion of Nicholls’ agents on 7 March 2003.  Apparently the Bate children were not being paid a living wage and eventually Bate, who at that time seems to have been employed by the liquidator in connection with work of some kind performed in the bakery business, which Nicholls regarded as having passed to him when appointed liquidator of Darktone, expelled Nicholls’ agents on 7 March 2003 when they paid a daily visit to count and/or collect the money that had been generated by the bakery business.  Bate has since then undertaken payment of various of the unpaid creditors himself.  To the extent that they were creditors of Darktone in its earth moving operations rather than creditors of Batesy’s Bread is unclear on the evidence. 

[39] At the hearing Bate complained that indeed Nicholls had also taken steps to redirect to his office at Tamworth mail sent to Darktone at Bate’s bakery in Goondiwindi enclosing cheques for sales of items produced by the bakery business.  The dispute between Bate and the liquidator seems not really to involve the Bate children bakers at all.  There is no suggestion that they had either the desire or capacity to become involved with the issues ventilated and debated upon the hearing of this action to which they were not made parties.

[40] One thing that emerged quite clearly in the evidence is that Nicholls made no effort to obtain an assignment or transfer of the lease which Batesys Bread held from Rozzener Pty Ltd.  It is clear that to the extent that the lease and renewal option of a viable bakery site had any value, no steps were taken by Nicholls to put himself in to the position of Batesy’s Bread’s liquidator. 

[41] It emerged, although not clearly, in the evidence that the owner and lessor of the bakery premises where Batesy’s Bread carried on business, did prove as a creditor in its liquidation.  No evidence however was led to suggest Batesy’s liquidator avoided the lease of the bakery premises as he had for all the plant and equipment needed to conduct the bakery business.  Although I raised the matter there was no evidence led as to whether any question of mutual setoffs etc arose in the Batesy Bread liquidation. 

[42] There is no evidence as to the value of the goodwill of the bakery business (if any) at the time of the Batesy’s Bread liquidation.  In my judgment it seems clear that if any goodwill did exist for the bakery business – which might be gleaned from the newspaper articles to which I have referred – it was attributable to the efforts and skill of the Batesy’s Bread Basket business conducted by the Bate children. 

[43] I do not propose to analyse or attempt to determine questions relating to the performance by Nicholls of his professional obligations as liquidator of Darktone.  If the matters in dispute between Bate and Nicholls need to be determined it is inappropriate to attempt to do so upon this application because they are irrelevant to the only issue which I have to determine – which is whether Darktone has established that it has a superior interest to the defendants and their children (if they are shown to be their employees or agents) to be on the bakery premises and to use the bakery plant and equipment for the purpose of conducting the bakery business. 

[44] I have already observed that neither Bate nor his wife seem to be directly involved in the conduct of that business although presumably from time to time as parents of their children conducting it, they have entered and probably still enter upon the bakery premises to give their children some assistance from time to time. 

[45] On my evaluation of the rather unsatisfactory state of the evidence, the lease that Batesy’s Bread held from the owner of the bakery premises, Rozzener Pty Ltd, either survived the liquidation or it did not.

[46] If the lease did survive the liquidation, the Batesy liquidator did not effect any assignment or transfer of it to the Darktone liquidator, or to anybody else for that matter.  If the lease did survive the liquidation it has now expired and the option for renewal it contained has never been exercised. The Darktone liquidator can claim no interest in the bakery premises under that lease even accepting (which I do not) its arguments relating to assignment and sublease.

[47] With respect to the plant and equipment contained in the bakery premises, the lease of that equipment from AGC did not survive the liquidation of Batesy’s Bread because the Batesy liquidator disclaimed it as onerous property.

[48] The ownership of all that plant and equipment has always remained in AGC. There has never been any assignment of any interest in that leased equipment to Darktone.

[49] The plant and equipment has remained in the bakery premises owned by Rozzener Pty Ltd with the consent of AGC because Bate until very recently, ignoring the effect of the disclaimer by the Batesy liquidator, has met the obligation of Batesy’s Bread of its payment of its lease fee as guarantor with the consent of Rozzener Pty Ltd. That obligation seems to have been met by Bate, to some extent at least, by recourse to money generated by the bakery business conducted by his children. Similarly, the business conducted by the Bate children has been conducted in the bakery premises owned by Rozzener Pty Ltd because Mr Rozzener has permitted them to occupy and use them for the purpose of making bread etc in consideration of their making a payment to him of a sum the equivalent of the rental to which he was entitled under the lease he gave to Batesy’s Bread which together with the option to renew vested in the Batesy liquidator who neither assumed the obligations of the lessee nor exercised its right to renew the lease. 

[50] In my judgment on the evidence, payment of moneys the equivalent of rent due under the Batesy’s Bread lease was not shown to be made by Darktone as the operator of the bakery business conducted by the Bate children in that bakery – either before or after Darktone went into liquidation just because a Darktone account was opened by Bate entitled “bakery account”.  Any statement made by Bate on 2 July 2002 that the Batesy’s Bread Basket business “had continued to trade through Darktone” is as consistent with the arrangement sworn to by Bate as it is with the arrangement advanced by Nicholls. 

[51] To the extent that a Darktone “bakery account” was opened before Darktone went into administration or liquidation, I find that account was simply opened by Bate as director of Darktone when it was solvent, to provide the equivalent of a trust account to facilitate the continued operation of the bakery business by the Bate children subsequent to the liquidation of Batesy’s Bread with the acquiescence of or at least with the absence of any complaint by the Batesy liquidator who by reason of his disclaimer of the plant and equipment on 1 June 2001 was unable either to conduct the bakery business or sell it as a going concern. 

[52] In my judgment at no time since the liquidation of Batesy’s Bread on 5 June 2001 have the Bate children while operating the bakery business occupied the bakery premises as tenants of the owner. I am inclined to take the view that they have merely occupied them as licensees – either licensees of the Batesy liquidator if the lease did survive the liquidation, or the licensees of the owner Rozzener Pty Ltd if it did not. 

[53] If the equivalent of rental under the Batesy’s Bread lease was paid from the proceeds of sale of items manufactured by the Bate children conducting the Batesy’s Bread Basket business Darktone contends that they may have occupied the premises on a tenancy of some sort – perhaps a monthly tenancy from the owner Rozzener Pty Ltd.

[54] If the Bate children occupied the premises as the licensees of the owner of the bakery premises at the time Darktone went into administration and/or liquidation and the administrator-liquidator Nicholl acquired any interest in either the bakery premises or its plant and equipment – and for reasons already given I think the better view is that he did not – then with respect to the bakery premises he also acquired merely a licence to occupy the premises from the owner of them on condition that Darktone continued to pay the equivalent of the rental that was payable under the Batesy’s Bread lease.  If the Bate children had ever acquired a tenancy terminable upon one months notice, there is no evidence that such a tenancy was ever terminated by notice given by the owner of the premises pursuant to s 129 of the Property Law Act. There is no suggestion that the owner of the premises has ever given anybody a notice purporting to terminate any tenancy which Darktone contends may have arisen by reason of the occupation of the bakery by the Bate children (and/or by Darktone) and payment from the proceeds of sale of bakery products of a sum equivalent to the rental payable under the Batesy’s Bread lease – whether it survived or did not survive the liquidation of Batesy’s Bread.

[55] On my evaluation of the lengthy and rather confusing evidence, I am unpersuaded that the Darktone liquidator acquired any interest in either the bakery premises or the plant and equipment in it or in the goodwill of the business which had been built up by the Bate children over a period of five or six years and long before Darktone went into administration in December 2001 and liquidation in December 2002. The only relevant asset upon the issues debated upon this application connected with the bakery business which did vest in the liquidator was the Darktone “bakery account” which in my view upon the evidence had been set up and organised as a sort of trust account for the use of the Bate children’s bakery business to avoid the problems to which I have already averted in that business being permitted to continue its operation after the liquidation of Batesy’s Bread by any person other than the Batesy liquidator.

[56] I accept the evidence of Bate and in effect that of his children none of whom were cross-examined by Darktone,  that the defendants played little if any part in conducting the bakery business from day to day.  I am unpersuaded that Darktone did acquire and conduct the bakery business or any part of it merely because both before and after the Darktone administration/liquidation, a Darktone Bakery account had been opened and used essentially as a trust account into which monies received from the conduct of the business by the Bate children could be paid and out of which the overhead and running expenses of the business which included income of the persons running it – the Bate children – could be paid. 

[57] I will deal only briefly with the various contentions advanced by Darktone. 

[58] Counsel for Darktone submitted that there was really no doubt that it had “the right to possession which could be characterised in a number of ways” and that it was unnecessary for me to come to any conclusion as to the appropriate characterisation. 

[59] A number of these “characterisations” were suggested.  The first was that it was an assignee of the right to possession from the Batesy liquidator.  Not an assignment in writing but an assignment “by conduct”.  The second characterisation suggested was that it might be a “sublease by performance” – ie a sublease from the Batesy liquidator.  It was next suggested that it might be a mere licensee either of Batesy’s liquidator’s interest or alternatively that of the owner of the bakery premises – Rozzener Pty Ltd. 

[60] Alternatively it was contended that Darktone “may be a tenant pursuant to s 129 of the Property Law Act” – that is a tenant of the owner of the bakery premises Rozzener Pty Ltd.

[61] I observe merely that none of these bases for Darktone’s right of possession was pleaded in its statement of claim.  Not surprisingly objection was taken by counsel for the defendants who complained that the advancing of these arguments disregarded the pleadings and he pointed out that neither Rozzener Pty Ltd the owner of the bakery premises nor AGC the owner of the plant and equipment contained in those premises had been made parties to the plaintiff’s claim which should be required if arguments and contentions of the sort advanced on behalf of Darktone were to be considered.

[62] I observe merely that no relevant authority was cited to support any of the propositions advanced by Darktone to support its right to possession of the bakery premises and plant and equipment in them on 29 April 2003. 

[63] One of the bases of support for Darktone becoming a sublessee of Batesy’s Bread was founded on what might be regarded as an implied agreement between Batesy’s liquidator and Darktone’s liquidator by virtue of the Darktone liquidator actually assuming the role of sublessee with the acquiescence of Batesy’s liquidator and without objection raised by Rozzener Pty Ltd, the owner of the bakery premises.  Similarly AGC the owner of the plant and equipment in the premises by “an implied agreement” accepted Darktone as lessee in substitution for Batsey’s Bread.

[64] The obstacles in the way of all these contentions in my view are insurmountable.  No authority was advanced to support the proposition that rights could be assigned orally without notice.  There was no evidence even to suggest that Batesy’s liquidator could sublease to Darktone the Rozzener bakery premises without any reference to Rozzener Pty Ltd.  Neither AGC nor Rozzener Pty Ltd are parties in the plaintiff’s action. 

[65] Counsel for Darktone submitted that it was “a possibility” that Batesy’s liquidator had abandoned any rights that he had with respect to the lease together with the option to renew it. 

[66] Indeed when it was suggested that the effect of Darktone’s contention was that the Batesy liquidator may have simply abandoned whatever claims he may have had under the Batesy Bread lease and that Darktone had just come along and picked up those claims as one might pick up an abandoned bank note on a footpath; it was contended for Darktone that that was possible.  To support this line of argument it was submitted that even without an assignment of the lease Darktone could acquire it “by part performance” – ie by occupying and presumably using the leased premises and equipment and paying rent to do so. 

[67] Ultimately it was contented that it was quite clear that Darktone had a right to possession one way or another and that the fact that the Bate children had been actually occupying the bakery premises and using the equipment in it for a period of five or six years and using the money that was produced by that business operation to pay the rent, meet the overheads etc could not be said to give them a better right to possession than that of Darktone. 

[68] Towards the end of submissions it was contended for Darktone that the strongest argument to support its right to possession of the premises as against the Bate children who had been operating the bakery business out of them for five or six years was acceptance of the fact that at material times after Darktone went into liquidation the Bate children had been employed first by Darktone and secondly by the administrator/liquidator of Darktone to run the bakery business.  It flowed from this, so it was said, that upon liquidation of Darktone, Nicholls had vested in him whatever interest in the premises and plant and equipment in it that Darktone possessed.  It was contended that whatever that interest might be whether a licence or preferably a tenancy at will pursuant to s 129 of the Property Law Act, it was Darktone’s interest which would persist until the owner of the premises and/or AGC lawfully terminated that interest.  There was no evidence that either Rozzener Pty Ltd or AGC had taken any steps to terminate whatever interest Darktone had acquired in the bakery business at the time it went into administration and more importantly at the time of its liquidation. 

[69] Towards the end of argument counsel for Darktone seemed to submit as his strongest contention, that Darktone had a tenancy at will of the business premises terminable upon one month’s notice which had not been terminated by the owner, whether or not the original lease by Batesy’s Bread which had been the subjected to the analysis to which I have referred did exist.  The entitlement of Darktone to the rights of a monthly tenant at the time of action would give it priority over any lease that might be created subsequent to the expiration of the six year lease in question – on the assumption apparently that it had survived the liquidation of Batesy’s Bread.

[70] In my view the onus is on Darktone in this case to establish that it has a better right to possession of the premises and the equipment in it than do the defendants or their children on the basis that the defendants’ children are their employees or agents. 

[71] I accept the evidence of Bate that he claims no right to possession of the bakery premises and no right to conduct the business which only his children have conducted in those premises using the plant and equipment contained in them.  It is Darktone’s case that the Bate children who have conducted the bakery business in premises owned by Rozzener Pty Ltd at Goondiwindi have done so since its liquidation only as the employees of Darktone but in some fashion apparently since March 2003 they have become the employees of the defendants.  It is quite unclear to me at the end of the day upon the evidence why it should be inferred that they have become the employees or agents of the defendants rather than conducting the business as mature skilled bakers on their own behalf.  

[72] In my view the notion that a lessor under a registered lease for years may also find itself bound by a contemporaneous tenancy to somebody other than the registered lessee, terminable at the will of either party upon one month’s notice in writing expiring at any time under s 129(1) of the Property Law Act 1974 is insupportable. 

[73] No authority was cited to support this proposition and in my view it is quite inconsistent with the nature of a tenancy involving the right of the tenant to exclusive possession, that two tenancies may be created by the owner of land to operate so that with respect to precisely the same period of time and in respect of precisely the same parcel of land two tenants have an interest in that land entitling each to exclusive possession.  There is a lot of learning concerning the nature of concurrent leases.  It is discussed in Lang – Leases and Tenancies in NSW (1976) paras 1325 seq and in Brooking and Chernov – Tenancy Law and Practice Victoria (2nd ed) 1980 para 9. 

[74] In Minister of State for the Interior v Brisbane Amateur Turf Club (1949) 80 CLR 123 at 148 Latham CJ observes –

“Where a concurrent lease is made by deed it operates at common law as an estoppel and as an assignment of the reversion upon the already existing term.  But where it is not made by a deed it is void as to any excess over the residue of an existing term.  Where the parol lease is for a term less than the residue of an existing term it is void: Neal v. Mackenzie.

Latham CJ continues –

“The law with respect to concurrent leases is based on the simple fact that the owner of the land who was granted a lease for, say, three years, cannot effectively grant another lease to another person for the same three years:  see Neal v Mackenzie.”

[75] At 162 Dixon J comments –

“A concurrent lease, if made by deed, operates as an assignment of the reversion upon the first lease for the term of the second or concurrent lease.  But if made by parol for a term less than the original lease it is ineffectual at common law.”

[76] On the facts of this case I proceed on the basis that the original six year lease with an option for renewal which apparently was registered entitled Batesy’s liquidator to possession of that bakery site until 13 June 2003.  As a consequence it was impossible for the owner/lessor of those premises to grant either to the Bates children or to Darktone a tenancy of any kind to operate during the period of that lease – even one “deemed to be a tenancy determinable at will” pursuant to s 129(1) of the Property Law Act.  That section only has operation “if there is a tenancy” and a tenancy can only be granted for a period of time with respect to land not already leased for that period. 

[77] In my view it is impossible successfully to contend that Rozzener Pty Ltd could grant any sort of tenancy whether at will or otherwise either to Darktone or to the Bate children during the subsistence of the lease vested in the Batesy liquidator. 

[78] It is for this reason in my view that the best analysis of the rather unusual circumstances in this case leads to the conclusion that occupation of the premises by the Bate children subsequent to the liquidation of Batesy’s Bread and Darktone’s occupation, to the extent that it may even arguably have occupied the premises for a period of time prior to the expiration of the lease vested in the Batesy liquidator, could not in either case have resulted in any sort of tenancy granted by Rozzener Pty Ltd and at most could have been based only upon a revocable licence given by either Batesy’s liquidator or Rozzener Pty Ltd to any persons who for the time being occupied or were in possession of those premises. 

[79] The lessor of course was the owner of the premises.  It held the reversion in them upon the expiration of the Batesy’s Bread lease.  While it may have been irregular for the owner of the premises to grant a licence to other persons to occupy and use its premises for a bakery business during the currency of a registered lease.  Batesy’s liquidator as lessee apparently took no objection to other persons occupying the premises to which he was entitled.  If he had objected he could clearly have taken what steps were necessary himself to recover possession of the bakery premises to which he was entitled and undoubtedly in my view the lessor upon compliance by Batesy’s liquidator with the obligations of Batesy’s Bread under the lease would have supported him in any action he took to evict persons who were occupying the premises to which he was entitled as lessee should he wish to do so.  In this case Batesy’s liquidator clearly acquiesced in the Bate children occupying the leased premises – as indeed did the lessor Rozzener Pty Ltd. 

[80] Even if Darktone did ever occupy the premises for a period of time it could only have done so as licensee of either Batesy’s liquidator or Rozzener Pty Ltd.  The expulsion of Darktone’s agent from the bakery premises by Bate on 7 March 2003 while it could not of itself revoke any licence which originally it may have had from either Batesy’s liquidator or Rozzener Pty Ltd did in fact terminate any occupancy which it may have had approximately 6 weeks before it commenced this action on 9 April 2003.  By that time the Bate children had occupied the premises as licensees of either the Batesy’s liquidator or Rozzener Pty Ltd – whether as Bate contends in their own right or as Darktone contends as agents of the defendants. 

[81] While I am conscious of the need to protect liquidators from interference with their statutory rights to exercise all rights of any company they liquidate, in my judgment that need could not justify in this case drawing an inference that any licence which Darktone may arguably have had to occupy the bakery premises prior to 7 March 2003 in some way survived to found a right of occupation vis a vis the defendant (or their children) six weeks later when the licensor had clearly licensed the Bate children (whether or not as agents of the defendants) to occupy the bakery premises to conduct the business “Batesy’s Bread Basket”. 

[82] When it commenced this action Darktone did not in fact occupy the bakery premises as licensee of either Batesy’s liquidator or Rozzener Pty Ltd and whether it ever did so occupy them prior to Bate expelling its agents on 7 March 2003 seems to me irrelevant to the existence of any right to possession when it commenced this action on 29 April 2003.  It has never occupied those premises since the expulsion of its agents on 7 March 2003.  The premises since that date at least up to 13 June 2003 have been occupied and conducted as a bakery with the license of either Batesy’s liquidator or Rozzener Pty Ltd by a number of Bate children.  Since 13 June 2003 they have been occupied and conducted as a bakery with the license only of their owner Rozzener Pty Ltd. 

[83] I dismiss the plaintiff’s application and action. 

[84] The basis upon which counsel appeared for the defendants was not really canvassed upon this application. 

[85] The defendants should recover their costs to be assessed. 

[86] I will reserve two questions upon which further submission in writing may be made –

1.Whether the liquidator ought pay the costs of this application and action personally and not out of whatever monies remain of those already received upon the plaintiff’s liquidation; and

2.Whether such costs ought be assessed on an indemnity basis. 

[87] Those written submissions should be exchanged and forwarded to my associate within one month.  Should counsel wish to make oral submission in addition to those in writing they should notify my associate so that a convenient time may be fixed. 

Close

Editorial Notes

  • Published Case Name:

    Darktone P/L (in liq) v Bate & Anor

  • Shortened Case Name:

    Darktone Pty Ltd (in liq) v Bate

  • MNC:

    [2003] QSC 189

  • Court:

    QSC

  • Judge(s):

    Ambrose J

  • Date:

    25 Jun 2003

Litigation History

No Litigation History

Appeal Status

No Status