Gold rush: subtenant races to court for urgent injunction

The recent decision of the Supreme Court of Western Australia in Nu-Fortune Gold Ltd v Roxbury Trading Pty Ltd [2019] WASC 307 is a timely reminder as to the factors that the court will consider when deciding whether to grant an interlocutory injunction.

Background

By a writ of summons dated 1 August 2019, the plaintiffs Nu-Fortune Gold Ltd (Nu-Fortune) and Eco Minerals Research Ltd (Eco-Minerals) (Plaintiffs) commenced proceedings against first defendant Roxbury Trading Pty Ltd (Roxbury) and second defendant, a director of Roxbury, Mr Paul Kennedy. The Plaintiffs alleged that:

• Pursuant to a deed of sublease entered into between West Australian Mint as Landlord, Roxbury as the tenant, and Nu-Fortune and Eco-Minerals as subtenants, Roxbury granted Nu-Fortune and Eco-Minerals a sublease over two crown reserves. The reserves were known as the ‘Menzies State Battery’.
• The initial term of the sublease is due to expire on 17 May 2020.
• Under the terms of the sublease, Nu-Fortune and Eco-Minerals are entitled to peaceable and quiet possession without interruption from Roxbury.  
• In breach of the sublease, Roxbury purported to take possession of the two crown reserves to the exclusion of Nu-Fortune and Eco-Minerals.

Nu-Fortune and Eco-Minerals seek an injunction restraining Roxbury and its director, Mr Kennedy, from entering upon the Menzies State Battery, and damages.

On 14 August 2019 Nu-Fortune and Eco-Minerals filed a summons for an urgent interim injunction. They sought an injunction until further order, to restrain Roxbury and Mr Kennedy from entering upon the two crown reserves, along with an order to deliver up possession of the reserves to the Plaintiffs. Further, the Plaintiffs also sought damages.

The key events which led to the writ being issued were as follows:

• On 17 May 2019 Roxbury sent a letter (Notice of Dispute) claiming that Nu-Fortune had failed to pay the $25,000 ‘Sub-Tenant Bond’ as required under the sublease.
• On 28 May 2019 Roxbury issued a Notice of Termination to the Plaintiffs (Notice of Termination). It asserted that their failure to pay the ‘Sub-Tenant Bond’ constituted an Event of Default and Roxbury was entitled to retake possession of the Menzies Battery and terminate the Sub-Lease.
• In response, the Plaintiffs argued that the Notice of Termination was not enforceable, by action or otherwise because it was not compliant with section 81 of the Property Law Act 1969 (WA) (PLA).
• The Plaintiffs assert that on or about 28 June 2019, Mr Bourne, the caretaker for Nu-Fortune at the Menzies State Battery, found that Mr Kennedy and two others had arrived at the site and that Mr Kennedy was retaking possession. Mr Bourne claims that Mr Kennedy told him that he was staying at one of the residences on site and would soon commence changing the locks and moving chains with the assistance of an angle grinder.
• Mr Kennedy denied excluding Mr Bourne and others from site and said that he had lived in quarters on the site for many years and, further, that it was Nu-Fortune that had removed their locks and surrendered the site to Roxbury.
• Following a site visit, the Department of Mines, Industry Regulation and Safety wrote to Nu-Fortune listing a series of defects or breaches of regulation observed and required compliance and evidence of compliance by 30 August 2019. One of the defects listed was that the Nu-Fortune Registered Manager was not in daily control and supervision of the mine site, as required by s 33(3) of the Mines Safety and Inspection Act 1994 (WA). A person who contravenes s 33 (3) commits an offence.

After the Plaintiffs had commenced the proceedings, the defendants later claimed that the Plaintiffs had also failed to pay rent for the Menzies State Battery as required by the sublease

Principles relating to the grant of an interlocutory injunction

Section 25(9) of the Supreme Court Act 1935 (WA) empowers the court to grant an interlocutory injunction in cases in which it appears to be just or convenient that the order be made. However, an injunction is a discretionary remedy, not a remedy at large.

As His Honour Justice Allanson noted, it is well established that when considering whether or not to grant an interlocutory injunction, the court will address itself to two main inquiries:

1. whether the applicant has made out a prima facie case? Essentially, this means that if the evidence remains as it is, there is a possibility at the trial of the action the plaintiff will be held entitled to relief; and
2. whether the inconvenience or injury which the applicant would be likely to suffer if an injunction were refused, outweighs or is likely to be outweighed by the injury which the respondent would suffer if an injunction was granted.

In relation to these inquiries, His Honour also re-affirmed the following principles:

• that it was sufficient for the Plaintiffs to show a sufficient likelihood of success to justify, in the circumstances, the preservation of rights pending a trial;
• that it is unnecessary for the Plaintiffs to demonstrate that it is more probable than not that they will succeed at trial; and
• that the ‘governing consideration’ is that the requisite strength of the probability of the ultimate success is dependent upon on the nature of the rights asserted and the practical consequences likely to flow from the interlocutory orders sought. 

First inquiry - Plaintiffs' likelihood of success 

In relation the first inquiry, the Plaintiff’s likelihood of success, his Honour relied upon the background facts mentioned above, to find that it was not reasonably arguable that the Notice of Dispute complied with section 81 of the PLA. This was because the letter itself expressly stated it was a dispute notice made under a clause in a separate Heads of Agreement (HOA) between the parties and was designed to invoke the dispute mechanism under the HOA.  

Further, the Plaintiffs claimed that there was no obligation to pay the rent claimed if the sublease were properly constructed.

When interpreting the sublease, Allanson J relied on the well established principles of contractual construction, as well as the recent comments of Edelman J at [83] in Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13, that “no meaningful words, whether in a contract, a statute, a will, a trust, or a conversation, are ever acontextual”, to find that on the evidence before him, that it was likely that the plaintiffs had no obligation to pay rent to the first defendant. However, he reserved his final decision on this point, and noted that the construction of the sublease could be influenced by further evidence yet to be discovered.  

Second Inquiry – Balance of Convenience

His Honour noted that in some cases the appropriate question on the balance of convenience will be whether damages would provide applicants with an adequate remedy. Whereas in other cases, it may be more appropriate to ask whether it is just in all the circumstances that the applicant should be confined to a remedy of damages. The guiding consideration remains what is necessary to do justice between the parties.

In this case his Honour granted the injunction on an interim basis (as the defendants had not yet had the opportunity to put on any evidence) on the basis that the balance of convenience favoured the preservation of the Plaintiffs’ position in circumstances where they:

• were being kept out of possession to land to which they are entitled under the sublease; and
• may face liability for a failure to comply with regulations under the Mines and Safety Inspection Act 1994 (WA) unless the Plaintiffs’ Registered Manager was able to resume direct control and supervision of the site and remedy the identified defects.   

Lavan comment

This case is another example of the court’s approach when deciding whether to grant interlocutory injunctive relief and highlights the types of matters that the court will take into consideration when exercising its discretionary powers.

It also acts as a reminder for parties that when purporting to terminate a lease and exercise any right of re-entry:

• that any breach relied on is in fact a breach of the lease that gives right to re-entry upon termination; and
• the notice requirements of section 81 of the PLA are complied with.

Lavan’s Litigation and Dispute Resolution Team can assist you in choosing the most appropriate relief for your claim.

If you have a query or would like further information in relation to anything covered in this article, please do not hesitate to contact Cinzia Donald.