The Trust Company (Australia) Ltd in its capacity as custodian of The Asia Pacific Data Centre Trust v NEXTDC Limited

HIS HONOUR: This is a contest between a landlord and a tenant concerning the landlord’s rights under provisions of leases between them, to have access to the premises.

The first plaintiff (the Landlord) is the trustee of a listed management investment scheme, known as the Asia Pacific Data Centre Limited Trust (the Trust). The second plaintiff is the responsible entity of the scheme.

By three separate leases, in identical terms, the Landlord leased to the defendant (the Tenant) premises in Macquarie Park, New South Wales, Port Melbourne, Victoria, and Malaga, Western Australia, from which the Tenant operates secure data facilities.

Each lease has a 15 year term, [1] with two options of 10 years and a further option of 5 years. The Tenant is a security holder in the Trust, holding a 29.2% interest in it.

Each lease contains the following relevant clauses:

A brief summary of the factual background will suffice.

From 28 November 2017, the Landlord commenced seeking access to the premises. An extensive exchange of correspondence between the parties’ lawyers ensued. Rights to access under cll 8.2(a) and 12.2 were asserted by the Landlord and disputed by the Tenant. They took different positions on the proper construction and operation of the provisions of the leases. The Tenant took up the position that the Landlord needed, and it was entitled to withhold, its written agreement to access under cl 12.4 for entry or access. One field of discourse was whether the Tenant’s prior written agreement, under cl 12.4, was needed at all; another was whether cl 12.4 gave the Tenant unfettered discretion to withhold its written agreement.

By 18 April 2018, the Landlord had not had access. This prompted the plaintiffs to commence these proceedings. They sued out a Summons seeking final relief in the form of a raft of declarations, including that the Tenant had, in breach of cl 12.2, refused to allow access to the premises.

By notice of motion filed on 8 May 2018, the plaintiffs sought an interlocutory injunction permitting a valuer to inspect the premises on such terms as are reasonably necessary to protect the interests of the Tenant, including any reasonable requirements concerning security having regard to cl 12.4.

On 18 May 2018, Parker J heard the application for interlocutory relief.

The plaintiffs advanced four grounds as to why a valuation was necessary: for the purposes of refinancing, to prepare a financial report for the year ended 30 June 2018, to comply with the obligation imposed on a responsible entity by s 601FC(1)(j) of the Corporations Act 2001 (Cth) to value scheme property at regular intervals, and to recommence the process of sale of the properties. At other times, it has apparently been contended by the Landlord that access by a valuer was necessary to assess any offer by a prospective purchaser, to make an offer to the Tenant as part of a first right of refusal (for which the lease provides) and to re-finance debts.

On 23 May 2018, Parker J dismissed the application: The Trust Company (Australia) Ltd v NEXTDC Ltd [2018] NSWSC 736.

On 4 May 2018, the proceedings were fixed to be heard on a final basis on 20 July 2018, but that hearing was vacated on 18 July 2018 at the plaintiffs’ instance. It was re-fixed to commence on 27 August 2018 for two days.

On 9 August 2018, the Landlord made a request for access to the leased premises pursuant to cl 8.2(a), amongst other things, to assess whether the Tenant has kept the premises in good repair.

On 14 August 2018, the Tenant’s lawyers wrote to the Landlord’s lawyers that without prejudice to their client’s rights under, and position in respect of, the leases, their client was prepared to allow a representative of the Landlord accompanied by valuers to access the premises.

Access was given (without incident, according to the Tenant) to the Macquarie Park premises on 15 August 2018, to the Port Melbourne premises on 17 August 2018 and to the Malaga premises on 20 August 2018.

In a letter dated 20 August 2018, from the Tenant’s lawyers to the Landlord’s lawyers, the Tenant took the position that, where it had received a proper notice under cl 8.2(a), it was prepared to provide access. It did not consider that there was any continuing dispute between them. The Tenant’s position is that the question of whether it permits access to the premises is to be considered on a case by case basis and in response to specific requests from the Landlord.

Despite having had access, the Landlord nevertheless pressed on for declaratory relief.

When the hearing commenced before me on 27 August 2018, the Landlord, with leave, filed in Court a Second Further Amended Summons seeking a raft of declarations. Declarations in the following form were initially pressed:

It would be inappropriate for the Court to make such declarations.

They are purely theoretical and they are inutile. They seek to declare the meaning and operation of cll 8.2(a), 12.2 and 12.4 (read with other provisions of the leases) in a vacuum, without reference to any actual factual circumstance let alone any prevailing one. Making them will produce no foreseeable consequences for the parties. No breach of any provision of the leases by the Tenant is alleged. No assessment of the quality of the Tenant’s conduct (or the Landlord’s conduct for that matter), in the context of their legal relationship, is called for. To make them would not resolve or quell any dispute about access because there is no extant request for access to the premises and no denial of any request. The Landlord may never again properly ask for access and, if it does, the Tenant may give it. It is not a matter simply of the Court declining to exercise discretion to make declaratory orders. To do so here would not be directed to the determination of a particular legal controversy: University of New South Wales v Moorehouse (1975) 133 CLR 1 at 10, 24; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582, 596; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at [52]; Ian Huntly Philip v JPM Developments Pty Ltd [2015] NSWSC 495 at [8].

By the proposed declarations, the plaintiffs’ seek, impermissibly, a legal advisory opinion: Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at [47]-[49].

After some debate, senior counsel for the plaintiffs correctly conceded that declarations as sought were insupportable. The plaintiffs’ submission, that the declarations will inhibit the parties from taking up future positions, serves merely to highlight their hypothetical nature.

Towards the end of the first day, there was discussion about whether some form of declaration (not then sought) could or should nevertheless be made. The plaintiffs took up an opportunity offered by the Court to consider the position overnight.

The next day they sought to amend by way of a proposed Third Further Amended Summons, seeking the following declarations:

The Tenant did not oppose, and the Court permitted, the amendment of the Summons to include declarations 1 and 2.

The Tenant, however, opposed the inclusion of declaration 3 on the footing that it would be prejudiced because it would have adduced factual material concerning the ‘events’ to which the declaration makes reference. It would have challenged, it says, the existence of the necessary facts which would have entitled the Landlord to have made requests for access under cll 8.2(a) and 12.2 in the first place.

It also argued that the amendment is futile because the Court would not make declaration 3 anyway because it is of academic interest only. The Landlord has been let in.

The Landlord put that there is a real controversy because the Tenant let it in without prejudice to its rights under, and position in respect of, the leases. It put that this reflects a controversy about the true construction and operation of the leases. It puts that there is utility in making the declarations because it will inhibit the parties in future from taking up positions inconsistent with the terms of the declarations.

I reserved for determination in this judgment the question of whether leave to amend to seek declaration 3 should be given. I heard argument as to whether it should be made if leave were given.

Leave to amend should be refused.

First, to grant the amendment would cause unfair prejudice to the Tenant. It is late. It requires examination of factual circumstances, which examination is not fairly in play in the manner in which these proceedings have been conducted on both sides, that is, as a matter of construction based on documents in evidence without the necessity to resolve any factual controversy. [2] I accept that, had this relief been sought earlier, the Tenant may well have taken a different forensic course. At the lowest, to grant the amendment would entail denying it a fair opportunity to do so.

Second, the amendment is futile. The declaration does not quell any real existing dispute. It is about past history. The fact that the Tenant stated that the Landlord was let in without prejudice does not change this. It does not convert a dispute previously resolved into one presently existing.

Declarations 1 and 2 have the same difficulties as the declarations which were abandoned. They too are hypothetical, academic, inutile and seek a legal advisory opinion.

They declare the existence of implied terms of good faith and reasonableness.

There is not now, and there has not to date been, any assertion of conduct on behalf of the Tenant which has either been not in good faith or not reasonable.

Given my conclusion that the declarations in the form sought cannot properly be made, it would be inappropriate for the Court to embark upon a determination of whether the implied terms, to which they are directed, are to be implied.

The proceedings are dismissed.

I will hear the parties on costs if necessary.

The exhibits are to be returned.