Kimale Pty Ltd v Morial Pty Ltd
[2005] QSC 215
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- Notable Unreported Decision
- Kimale Pty Ltd v Morial Pty Ltd[2005] QSC 215
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Kimale Pty Ltd v Morial Pty Ltd[2005] QSC 215
Kimale Pty Ltd v Morial Pty Ltd[2005] QSC 215
SUPREME COURT OF QUEENSLAND
CITATION: | Kimale P/L v Morial P/L & Anor [2005] QSC 215 |
PARTIES: | KIMALE PTY LTD ACN 010 003 442 (applicant) v MORIAL PTY LTD ACN 070 145 407 (first respondent) and ATLAS PROPERTY SOLUTIONS PTY LTD ACN 113 071 891 (second respondent) |
FILE NO: | BS4533 of 2005 |
DIVISION: | Trial Division |
PROCEEDING: | Application for interlocutory injunction |
DELIVERED ON: | 13 July 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 7 July 2005 |
JUDGE: | Wilson J |
ORDER: | Application dismissed. |
CATCHWORDS: | CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER MATTERS – where the contract was a commercial lease for a shop in a shopping centre - where the contract contained an exclusivity clause – where the applicant contends there has been a breach of the exclusivity provision – where the applicant seeks an interlocutory injunction to enforce the exclusivity provision – whether there is a serious question to be tried – whether the balance of convenience favours the grant of an interlocutory injunction Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited [1991] 1 QdR 301, applied Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, cited Multinail Australia Pty Ltd v Pryda (Aust) Pty Ltd [2002] QSC 105, cited Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997, cited |
COUNSEL: | PW Hackett for the applicant KE Downes for the first respondent MD Martin for the second respondent |
SOLICITORS: | AM McNally for the applicant McCullough Robertson for the first respondent Baker Johnson for the second respondent |
- Wilson J: The applicant has operated a real estate agency Eureka Realty at a shopping centre in Deception Bay for about 25 years. By an originating application filed on 3 June 2005, it seeks an interlocutory injunction to enforce an exclusivity provision alleged to be contained in its lease and pursuant to an oral agreement on the basis that –
- the first respondent (the landlord) is in breach of the lease and agreement respectively;
- the second respondent (another real estate agent now operating at the same shopping centre) has induced the first respondent’s breach of contract; and
- the second respondent is passing itself off as the applicant by conducting the same business from the shopping centre using the same corporate colour schemes, signage and premises layout.
- Over the years the applicant has rented different shops in the shopping centre pursuant to written and oral leases. More particularly it occupied shop 8 (after being relocated from shop 46) until its lease, which apparently it never executed, expired on 31 March 2000; between 31 March 2000 and about late 2002 it was a monthly tenant of shop 8; then it moved temporarily to shop 15; and it now occupies shop 12 pursuant to a written lease for 5 years from 12 May 2003. It contains the following provision: -
“4.35 Exclusivity
The Lessor agrees that the Lessee will be entitled to exclusivity within the Centre for its Permitted Use for so long as the current building design, size and configuration remains as it is at the Commencement Date of this Lease.”
- The first respondent became the owner of the shopping centre in about August 1999. It entered into a deed of covenant with applicant, by which it undertook to discharge the lessors’ obligations under the then existing tenancy agreement, and in particular to honour (inter alia) any “right to exclusivity or semi-exclusivity of permitted use.” It has retained Jones Lang LaSalle as its managing agent, and since 31 March 2002 Mr Terry Lewis has been employed by the managing agent as the centre manager.
- Negotiations for the present lease between the applicant and the first respondent began in about October 2002. The first respondent’s letter of offer dated 31 October 2002 contained the following –
“Non-Exclusivity: We acknowledge that the described permitted use does not imply any form of exclusivity.”
The applicant replied that it wanted –
“Exclusivity whilst Centre in its current format.”
Mr Lewis agreed to this, and ultimately a lease document was executed containing the exclusivity clause set out in para 2 above.
- Since May 2003 there have been a number of reconfigurations of shops within the shopping centre, and the lettable area has increased by 0.7% from 17,196.30 m2 to 17,330.60 m2.
- Over a period of about 6 months from about August 2004 there were negotiations between the applicant and Mr Tony Tonakis for the sale of the applicant’s business to Mr Tonakis. To protect commercially sensitive information which would be disclosed in the course of the negotiations, the applicant and Mr Tonakis entered into a confidentiality agreement. There is a dispute as to whether Mr MW Ebert on behalf of the applicant informed Mr Tonakis or his son of the exclusivity provision in the lease. The negotiations eventually broke down.
- In about February or March 2005 Mr Lewis was approached by a representative of the Tonakis family about the possibility of renting floor space in the shopping centre. Construction of the tenancy shell of shop 54 commenced on 21 March 2005 and the fitout commenced on about 1 May 2005. The first respondent expended over $18,000-00 on “lessor works” for the shop. Messrs A & J Tonakis are directors of the second respondent which took a 5 year lease of shop 54 from 1 May 2005. It trades as Atlas Property Solutions, and is paying the first respondent approximately $2,500-00 rent per month.
- On about 27 April 2005 the applicant (by Mrs MJ Ebert) first heard that a shop in the food court area of the shopping centre was being fitted out for another real estate agent. She promptly complained to Mr Lewis of breach of the exclusivity obligation. Correspondence ensued until mid May 2005, the first respondent denying any breach. This application was not filed until 3 June 2005, when it was made returnable on 7 July 2005.
- As against each respondent the applicant must show that there is a serious question to be tried and that the balance of convenience favours the grant of an interlocutory injunction.
- Whatever earlier agreements there may have been about exclusivity, and whatever may have been said about it during the negotiations for the current lease (and there is a factual dispute about whether Mr Lewis agreed to exclusivity while the shopping centre remained the same size), the applicant’s present rights are to be found in the current lease, which contains the entire agreement between the applicant and the first respondent (clause 20.1). The first respondent contends that the exclusivity provision in clause 4.35 has expired because of changes in the building design and configuration since the commencement of the lease. The applicant contends that the proper construction of clause 4.35 requires one to look to the building’s external shell and size, not its internal layout or lettable area. The respondents contend that clause 4.35 was intended to give the applicant exclusivity only while the internal design and configuration and the location of the various tenants remained as it was when the lease was executed.
- It is true that the size of the shopping centre has not changed – but, of course, its internal configuration and the Lettable Area have changed, and various tenants have been moved around within the building.
- The lease contains the following provisions as well as clause 4.35 -
“1.22Lettable area
Those parts of the Centre leased or licensed or intended to be leased or licensed to Lessees at a commercial rental but not including any part of the Centre leased or licensed at a nominal rental or as a temporary or casual letting or leased or licensed by a separate instrument to be used exclusively for the purpose of storage and not including any part of the Centre leased or licensed for the purpose of an office associated with the management of the Centre.
8.4 Additions to Centre
The Lessor may at any time during the term hereof at its absolute discretion extend, alter, renovate, build additions to or refurbish the Centre and for that purpose may (without incurring any liability to the Lessee) interrupt the water gas electrical and other services to the Demised Premises PROVIDED ALWAYS that the Lessor shall carry out such works in such a manner as to minimise so far as may be practicable any inconvenience to or interruption to the business of the Lessee caused thereby.
23.1 Further stages
The Lessee acknowledges the Lessor may (without being under any obligation to do so) expand the Centre through a number of further stages during the term of the Lease and the Lessee warrants it will not object to the construction of the further stages. The Lessor shall cause such further stages to be carried out in a manner as to minimise so far as may be practicable any inconvenience or interruption to it has been minimised so far as may be practicable no compensation shall be payable as the Lessee will participate in the benefits of the large Centre. This clause will not merge but will continue for the benefit of the parties at all times.”
There is a distinction between internal reconfiguration (whether or not resulting in a change to the Lettable Area) and an expansion of the overall size of the shopping centre. Clause 8.4 arguably addresses inconvenience to or interruption of the applicant’s business during either such event, while clause 23.1 is clearly directed at an expansion of the overall size of the shopping centre. By clause 4.35 the applicant was given exclusivity “for so long as the current building design, size and configuration remains as it is at the Commencement Date of this Lease.” It is clear that an internal reconfiguration of the shopping centre (with or without the relocation of existing tenants) would result in the loss of exclusivity, and arguable that a change in the overall size of the shopping centre would do so, too. There is no ambiguity in the clause such as would warrant resort to the factual matrix in against which the lease was executed: Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 997; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.
- I do not think that there is a serious question to be tried as to the expiration of the exclusivity. Even if there were, the balance of convenience would be against the grant of an interlocutory injunction.
- In the originating application the applicant claims against the second respondent and an interlocutory injunction and, by way of final relief, damages for inducing the breach of the lease between the applicant and the first respondent. As counsel for the second respondent submitted, it would be a little strange for the applicant to obtain an interlocutory injunction in circumstances where it does not seek final injunctive relief. That may be cured by amendment of the application. At any rate on the interlocutory hearing counsel for the applicant added claims for breach of confidentiality agreement and for passing off.
- The effect of an interlocutory injunction against the second respondent would be mandatory in nature – that is, to force it to vacate the shop out of which it has been trading. To grant an interlocutory injunction in such a case, the court would need to have a high degree of assurance that at trial it would appear the injunction was rightly granted: Active Leisure (Sports) Pty Ltd v Sportsman’s Australia Limited[1991] 1 QdR 301.
- For the reasons I have already expressed, I do not consider that there has been a breach of the exclusivity provision. But assuming there had been, in order to make out a case of inducing breach of contract, the applicant would have to prove –
- that the second respondent intended to induce the first respondent to breach the lease;
- that the second respondent’s conduct in fact caused the first respondent to breach the lease; and
- that the applicant suffered loss as a consequence.
See Multinail Australia Pty Ltd v Pryda (Aust) Pty Ltd [2002] QSC 105 at para 24. According to Mr Lewis’s evidence, while representatives of the first respondent approached him about renting a shop, he agreed to rent space to the second respondent because he believed that the exclusivity provision in the applicant’s lease did not apply. There is dispute about whether the second respondent knew of the exclusivity provision, but in any event there is no evidence which would raise a serious issue to be tried as to the second respondent’s having intentionally induced the first respondent to breach the lease. Nor is there any evidence that any conduct on the part of the second respondent caused the first respondent to breach the lease. Thus there is no serious question to be tried as to the tort of inducing breach of contract.
- During the negotiations between the applicant and the Tonakis family in relation to the possible purchase of the applicant’s business, a confidentiality agreement was entered into between the applicant and Mr Tony Tonakis. The applicant relies on clause 5 –
“You will not use the Confidential Information in any manner which is in any way prejudice [sic] or detrimental to the business operator.”
There is no evidence that Mr Tonakis was acting on behalf of the second respondent when he entered that agreement. Even if he was, there is no evidence of use of confidential information. The evidence does not go beyond the facts that the second respondent has been trading in the same shopping centre and some former members of the applicant’s staff have gone to work for the second respondent. Thus there is no serious question to be tried as to breach of the confidentiality agreement.
- Counsel for the applicant did no more than touch lightly on the passing off claim. The only evidence in support of it was some photographs of the shopfronts. The names under which the rival businesses trade are quite dissimilar, and the designs of their window displays different: the fonts in which the wording is printed and the graphics at the bottom of the second respondent’s display bear no resemblance to the applicant’s display. It is impossible to judge the degree of similarity or difference in the blue colour used – by the applicant for the word “Atlas” and by the second respondent for background. On this evidence, there is no serious question to be tried as to passing off.
- The applicant’s counsel has submitted that damages would not be an adequate remedy, and that they would be difficult to quantify over the term of a 5 year lease. It is difficult to see why this should be so. He has submitted further that the second respondent does not have the capacity to pay damages because it is a $6 company established recently. That is speculation.
- There is no explanation for the applicant’s delay in commencing this proceeding and bringing the interlocutory application on for hearing. Although it first learnt that another shop was being fitted out as real estate agency on 27 April 2005, this application was not listed for hearing until 7 July 2005. The Court frequently receives requests to accommodate urgent applications for injunctive relief, and it almost invariably does so. In the intervening period the first and second respondents incurred very considerable expense in fitting out the shop, a lease was executed with effect from 1 May 2005,and the second respondent commenced trading. The second respondent is willing to maintain appropriate books of account until trial.
- If an injunction is granted, the first respondent stands to lose the rent from the shop let to the second respondent ($23,600 pa) as well as the $18,000 it has expended on “lessor’s works” on the shop. The second respondent stands to lose the $70,000 it has expended on fitting out the shop, and it will have to face relocation costs. The applicant has offered the usual undertaking as to damages, but there is no evidence as to the worth of that undertaking. Mrs Ebert has offered a personal undertaking as to damages, but again there is no evidence whether she could satisfy the undertaking.
- In all the circumstances the balance of convenience is against the grant of the interlocutory injunction sought.
- The interlocutory application is dismissed. I will hear counsel on costs and on directions for the future conduct of the litigation.