100 PS Pty Ltd v Adelaide Equity Partners Ltd

[2021] SADC 140

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

100 PS PTY LTD & ORS v ADELAIDE EQUITY PARTNERS LTD

[2021] SADC 140

Judgment of her Honour Judge Thomas  

13 December 2021

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHERE CONCLUDED CONTRACT

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - MATTERS NOT GIVING RISE TO BINDING CONTRACT - VAGUENESS AND UNCERTAINTY

CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - CREATION OF RELATIONSHIP OF AGENCY

ESTOPPEL - ESTOPPEL BY CONDUCT - PROMISSORY ESTOPPEL - GENERAL PRINCIPLES

The lessor Applicants seek damages for the lessee Respondent’s breaches of contract and repudiation of an agreement to lease in the form of a letter prepared by the lessor’s managing agents and signed by representatives of the parties.  The Respondent vacated in October 2018 before the lease term specified in the letter had expired.

The signing of the agreement to lease was the culmination of months of negotiation initiated by the Respondent to secure the lessor’s agreement to depart from the terms of a binding registered lease.  The Respondent made known that its commercial purpose in doing so was to reduce its monthly cashflow on rent and outgoings for a tenancy larger than its needs in a difficult market.

The Respondent initially offered an early exercise of its right of renewal for five years under the registered lease in return for a rent-free period. Ultimately, it was agreed to achieve the Respondent’s commercial purpose by the surrender of part of its tenancy and a new lease of the reduced tenancy for a five-year term.  The parties’ concluded bargain was reflected in the letter signed by the parties’ representatives.

The Respondent contended it was not bound by the terms of the signed letter constituting the alleged agreement to lease, despite substantial performance of its terms, because the signed letter was not intended to create contractual relations.  This was said to be apparent from the multiple ‘subject to’ references and the conferral of rights of negotiation and to withdraw from negotiations. Whilst formal documentation was prepared it was not negotiated or signed and the requirement for the lessor’s formal approval was not ever satisfied.  A further fundamental difficulty with any conclusion that it was binding was that its terms were said to be incomplete and uncertain.

The Respondent also challenged the authority of the parties’ representatives to bind their principals to the terms of the letter.

It was the Respondent’s executive director who had signed the letter for and on its behalf.  This was so despite his actual authority to negotiate a departure from the terms of a registered lease for the commercial purposes the subject of deliberations at successive meetings of the Respondent’s board of directors and the Company Secretary’s knowledge and active participation in the execution and exchange of the signed letter and performance of its terms.

The letter was signed by the sole director of the company formed to manage the building on behalf of the syndicate of owner Applicants.  The Respondent challenged the management company’s authority to bind the Applicants in the absence of any formality such as a power of attorney.

In the alternative, the Applicants brought a claim based on promissory estoppel.

Held:

1.      The evidence of the parties’ uncontentious written communications and their conduct surrounding execution of the letter, objectively assessed, manifested a mutual intention to create immediately binding contractual relations so strong as to outweigh any contrary indications in the text of the letter.

2.      Despite some drafting anomalies, all the terms essential for a lease and a concluded bargain were agreed and specified in detail in the letter.

3.      The letter did not provide for an unqualified right of withdrawal from subsequent negotiations.

4.      The terms of the letter were sufficiently certain.

5.      The requirement for the lessor’s formal approval of the terms and conditions of the letter was satisfied by the sole director of the management company signing for and on behalf of the lessor after the lessee’s representative had signed. 

6. On the evidence, the Respondent’s executive director had implied actual and ostensible authority to sign the letter and bind the Respondent to its terms. The Applicants are entitled to the benefit of the assumption provided by s 129(2)(b) of the Corporations Act.

7.      By its conduct in occupying its tenancy according to the terms of the letter following the circumstances of its execution, the Respondent ratified the authority of its executive director to sign it and bind the Respondent to its terms.  In context, this conduct is not referable to any other agreement than that reflected in the terms of the letter.

8.      On the evidence, the owner Applicants conferred on the sole director of the Management Company actual authority to bind them to the terms of agreement to lease constituted on the terms of the signed letter.

9.      The institution of these proceedings constitutes sufficient evidence of the Applicants’ ratification of their agent’s authority to bind them to the terms of the agreement sued upon.

10.    The Applicants’ pleaded claim of promissory estoppel fails on the evidence.  The Applicants failed to show any relevant assumption or inducement.  There was no relevant or sufficient detrimental reliance pleaded or shown on the part of the Applicants.

Corporations Act 2001 (Cth) s 126, s 127, s 128, s 129; District Court Act 1991 (SA) s 39; Supreme Court Civil Supplementary Rules 2014 (SA) SR 208; Trustee Act 1936 (SA) s 17(3); Uniform Civil Rules 2020 (SA) r 182.3, referred to.

Ermogenous v Greek Orthodox Community of SA Inc (2003) 209 CLR 95; Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631; Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549; Jenkin R Lewis Ltd v Kerman [1971] Ch 477; Masters v Cameron (1954)] 91 CLR 353; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, applied.
ACME Properties Pty Ltd v Perpetual Corporate Trust Limited as trustee for Braeside Trust [2019] FCA 1189, distinguished.

Aalborg CSP A/S v Ottoway Engineering Pty Ltd (2017) 129 SASR 283; Adelaide (SA) Pools & Spa Manufacturing and Installation Pty Ltd & Ors v Westcourt General Insurance Brokers Pty Ltd [2021] SASC 123; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 17 ALD 658; Barclays Finance Holdings Ltd v Sturgess (1985) 3 ACLC 662; Baulkam Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Carter v Brine [2015] SASC 204; Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606; Commercial & General Corporation Pty Ltd v Manassen Holdings Pty Ltd & Anor [2021] SASCFC 40; Crabb v Arun District Council [1976] Ch 179; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co. Pty Ltd (1975) 133 CLR 72; Crest Nicholson (Londinium) Ltd v Akaria Investments Ltd [2010] EWHC 243; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; Darzi Group Pty Ltd v Nolde Pty Ltd [2019] NSWCA 210; Electricity Generation Corporation v Woodside Energy Ltd & Ors (2014) 251 CLR 640; Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50; Fallon v Johnston [2018] VSC 273; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251; Garnac Grain Co Inc v HMP Faure & Fairclough Limited [1968] AC 1130; Gissing v Gissing [1971] AC 886; Giumelli v Giumelli (1999) 196 CLR 10; Godecke v Kirwan (1973) 129 CLR 629; Grundt v Great Boulder Gold Mines Pty Ltd [1937] 59 CLR 641; Harrisons & Crossfield Ltd v London and North-Western Railway [1917] 2 KB 755; Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313; Long v Piper [2001] NSWCA 342; Manassen Holdings Pty Ltd & Anor v Commercial & General Corporation Pty Ltd [2019] SASC 171; Manatee Towing Co v Ocean Bulk Maritime SA [1999] 1 Lloyd's Rep 227; Maria Myers v Aquarell Pty Ltd & Anor [2000] VSC 429; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Penny v Craber [1967] 1 NSWR 683; Perkins v National Australia Bank Ltd (1999) 30 ACSR 256; Pole v Leask (1860) 54 ER 481; Press v Mathers [1927] VLR 326; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 ; Robinson v Harman (1848) 154 ER 363; Rossiter v Miller (1878) 3 App Cas 1124; Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149; Scammell (G) & Nephew Ltd v Ouston [1941] AC 251; Sidhu v Van Dyke (2014) 251 CLR 505; Sion v NSW Trustee & Guardian [2013] NSWCA 337; Stefanovski v Digital Central (Assets) Pty Ltd (2018) 368 ALR 607; Summergreene v Parker (1950) 80 CLR 304; Suncorp Insurance and Finance v Milano Assicurazioni Spa [1993] 2 Lloyd’s Rep. 225; The Commonwealth v Verwayen (1990) 170 CLR 394 ; The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Tomko v Palasty [2007] NSWCA 258; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270; Truro Diocesan Board of Finance v Foley [2009] 1 WLR 2218; Walsh v Lonsdale (1882) 21 Ch D 9; Willmott Growers Group Inc v Willmott Forests Ltd (Recs and Mgrs Apptd) (in liq) (2013) 251 CLR 592, considered.

100 PS PTY LTD & ORS v ADELAIDE EQUITY PARTNERS LTD
[2021] SADC 140

Civil

PART A: INTRODUCTION

Overview

The Issues

Applicants’ Contract Case

Applicants’ Estoppel Case

Confinement to Pleadings

Conclusion

PART B: THE TRIAL AND EVIDENCE

The Trial

The Witnesses Generally

The Applicants’ Witnesses

Mr Rocca

Mr Pepe

Mr Hoban

Mr Shinnick

Mr Bahr

Directors of the Applicant Companies

Witnesses for the Respondent

Mr Gordon

Mr Lindh

Ms Smith

Ms Watts

PART C: DETAILED FACTUAL FINDINGS

The Registered Lease

Extension of Lease/Rent-free Proposal

First Colliers Letter

Requirement for a Bank Guarantee

December 2015 Meeting

Colliers Letter

Execution of the Colliers Letter

The New Arrangements

Tenancy 3B and the Samfra Lease

Formal Documentation

Respondent’s Decision Not to Enter a New Lease

Cancellation Letter

Termination and Acceptance of Repudiation

PART D: RELEVANT LEGAL PRINCIPLES

Contractual Principles

A Masters v Cameron Question

Objective Assessment

Prior and Subsequent Conduct

Completeness and Uncertainty

Essential Terms for a Lease

The Nature of a Surrender

Agency

Actual Authority

Implied Authority

Ratification

Ostensible Authority

Authority of Company Directors

Statutory Assumptions

Estoppel

PART E: CONSIDERATION

The Masters v Cameron Question

The Terms of the Colliers Letter

“Offer to Lease”

“main terms and conditions” and “subject to”

Completeness

Subsequent Negotiations and Right to Withdraw

Certainty

Formal Approval of the Lessor

Identity of the Lessor

Surrounding Circumstances

Conclusion on Applicants’ Contract Case

Mr Gordon’s Authority

Actual Authority

Ostensible Authority

Statutory Assumptions

Ratification

Management Company’s Authority

The Issues

Actual Authority

The First and Ninth Applicants and Mr Rocca

Second, Third and Ninth Applicants and Messrs Chakiris and Roscio

The Fourth and Fifth Applicants

The Sixth Applicant

The Seventh Applicant

The Eighth Applicant

Ratification

The Trustee Act

Applicants’ Claim of Promissory Estoppel

Conclusion on Applicants’ Estoppel Case

Representations and Assumption

Inducement

Reliance

Detriment

Minimum Equity

Respondent’s Conventional Estoppel Claim

PART F: QUANTUM

Damages and Debt Claim

Mitigation

Damages for Lost Rent, Outgoings and Expenses

Arrears Shortfall Debt and Make Good Costs

Marketing Costs

Interest on the Arrears Shortfall Debt

Interest on Damages

PART G: CONCLUSION AND FORM OF JUDGMENT

PART A: INTRODUCTION

Overview

1. This case concerns a Masters v Cameron[1] question as to whether the parties to an agreement to lease in the form of a letter signed by their representatives were immediately bound to perform its terms.  The Respondent contended it was not binding because the parties did not intend to make a concluded bargain at all, unless and until they executed formal documentation and the lessor’s formal approval was given.

   [1] (1954) 91 CLR 353 at 360.

2. The Respondent also challenged the authority of the parties’ representatives to contractually bind their principals to the terms of the agreement to lease.

3. As a fallback to their contract case, the Applicants claimed the Respondent is estopped from denying that the terms of the agreement to lease recorded in the letter are binding by reason of representations made by the Respondent prior to signing.  

4. The dispute arose in the following circumstances.

5. The Applicants were the owners of an office tower in the Adelaide CBD, 100 Pirie Street (100 Pirie St).  100 PS Management Pty Ltd (the Management Company), by its sole director Mr Guiseppe Rocca, was the asset manager for the syndicate of owner Applicants, responsible for all dealings with the property managing and leasing agents (Colliers International (Colliers), CBRE and Savills), the tenants and prospective tenants.

6. In August 2014, the Applicant owners had purchased 100 Pirie St subject to a registered lease (the Registered Lease)[2] with the Respondent over a portion of the third floor. The term of the Registered Lease was from 1 October 2013 to 30 September 2018, with one five-year right of renewal.  Under the Registered Lease the Respondent was entitled to exercise its right of renewal if it was not in breach by giving written notice six to three months prior to expiry of the lease term.

   [2]    The Registered Lease is addressed in more detail below at [122]-[132].

7. In August 2015, not two years into the lease term, the Respondent initiated negotiations with the lessor’s then managing agent, Colliers, by offering an early exercise of its right of renewal under the Registered Lease in return for an immediate six-month rent holiday.  The Respondent told Colliers in writing that, as a long-standing tenant, it intended to remain a tenant for the “long-haul” and its purpose in offering an early commitment to a five-year lease extension was to make it attractive for the lessor to renegotiate the Respondent’s payment obligations under the Registered Lease because it needed the lessor’s assistance “right now in what is a very tough market for us”.

8. In November 2015, Colliers sent the Respondent a letter of offer of extension of the Registered Lease (the First Colliers Letter), specifying terms for the requested six-month rent-free period and an extension of five years on expiry of the term of the Registered Lease.  The terms proposed included the provision of an unconditional bank guarantee by the Respondent as security for its payment obligations under the extended Registered Lease. 

9. The Respondent asked for the requirement for a bank guarantee to be deleted.  There were further negotiations, and a meeting was held in early December 2015 between representatives of the parties (Mr Rocca and Mr Enzo Pepe of Colliers for the lessor and Mr Duncan Gordon, the Executive Director, and Ms Kaitlin Smith, the Company Secretary, for the Respondent), at which it was suggested that the lessor would consider the surrender of part of the existing tenancy and a new five-year lease for the reduced area as an alternative to the proposed five-year lease extension for a rent-free period.

10. On 23 December 2015, the Respondent pressed Colliers to “mark up our existing lease agreement to reflect” the revised proposal, suggesting it take effect from 1 January 2016 and reaffirming its commitment to make good on its rent arrears for November and December.[3]

    [3]    TB2/31/723-724.

11. Colliers sent the Respondent the revised proposal in the form of a letter (the Colliers Letter) dated 12 January 2016 for a new lease for a reduced tenancy.  It was expressed as an offer to lease on execution for and on behalf of the lessee, open to acceptance by execution for and on behalf of the lessor.  It outlined what were described as the “main terms and conditions” proposed for a new lease of a reduced tenancy area, Tenancy 3C,[4] and commensurate reductions in rent, outgoings and car parks and a new five-year term commencing on 1 February 2016, with the surrender of Tenancy 3B from 31 January 2016. Its terms contemplated further negotiations, execution of formal documentation (a Deed of Surrender of Lease and a Memorandum of Lease) within 30 days of the lessor’s acceptance of the terms of the offer, using the expression ‘subject to’ formal documentation and the formal approval of the lessor.

    [4]    Referred to and defined in the Statement of Claim – Revision 2 (SOC) [10.2] as the “New Premises” and otherwise known as Tenancy 3C.

12. The Respondent’s Executive Director Mr Gordon replied by email proposing the deletion, “if possible”, from its terms of the requirement for a bank guarantee for any sublease, stating that the Respondent was otherwise ready to execute the “revised agreement”.[5]

    [5]    TB3/41/832.

13. In late January 2016, Colliers sent the Respondent an invoice for February’s rent calculated under the terms of the Registered Lease and due on the first day of the month.

14. On 2 February 2016, the Respondent queried the rent invoice with Colliers by email from Mr Gordon stating that he was “under the impression that we were moving forward for Feb under [the] revised lease arrangement”.  Mr Gordon asked for feedback on the “one small change” and when “you’re ready to sign as we can give back the car parks etc”.[6]

    [6]    TB3/43/852.  References to documents are to the volume, tab and page of the Tender Book, comprising Exhibit A1.

15. On 5 February 2016, Mr Gordon signed the Colliers Letter for and on behalf of the Respondent, without doing anything to resolve the issue of the “small change” he had proposed.  A few days later, Mr Rocca signed it for and on behalf of the lessor in his capacity as the sole director of the Management Company.

16. On 18 February 2016, Colliers sent the Respondent the executed Colliers Letter by email, attaching a revised invoice for February’s rent and outgoings calculated under the terms of the Colliers Letter.  The email further advised that the lessor’s solicitors were instructed to prepare a deed of surrender and new lease to be delivered shortly for signing, that the previous February invoice had been withdrawn and revised to reflect the reduced rent under the new agreement and gave instructions about which car parks to use and not use going forward.  The Respondent was already in possession of the reduced Tenancy 3C and kept using three car parks.

17. From February 2016, the Respondent was invoiced monthly, and paid (albeit in arrears) the reduced rent and outgoings for the reduced tenancy and car parks as specified in the Colliers Letter.  The lessor’s agents took steps to let the surrendered Tenancy 3B. A formal memorandum of lease was made between the lessor and Samfra Pty Ltd (Samfra) for Tenancy 3B commencing on 1 October 2016 for a five-year term (the Samfra Lease).

18. Formal documentation was not provided to the Respondent until 2 August 2016, five and a half months later.  It was neither negotiated nor signed by any of the parties, despite Colliers’ follow-ups for its execution by the Respondent over the next two years.

1. On 17 September 2018, the Respondent gave notice of its intention to vacate by letter (the Cancellation Letter) and vacated in late October 2018. Solicitors letters were exchanged and demands made by the Applicants for the Respondent to comply with its obligations under the lease constituted by the terms of the Colliers Letter. The Applicants served a warrant to distrain claiming the arrears for rent and outgoings due and payable since 1 May 2018 calculated under the terms of the Colliers Letter. Most of the arrears were paid in late October 2018, leaving a shortfall,[7] and the Respondent denied any lease beyond 31 October 2018. The Applicants purportedly terminated the new lease, re-entered and ultimately instituted these proceedings. The Respondent failed to make good and reinstate its tenancy before or after it vacated.

   [7]    The outstanding balance of the arrears shortfall of $27,000 including GST was agreed at trial as owing; see [507] below.

2. Despite the Applicants’ efforts to re-lease the tenancy by marketing it as well as renovating it and the common areas, the Respondent’s tenancy remained untenanted for the period from 1 November 2018 to 31 January 2021, the latter date being the expiry of the lease term under the Colliers Letter.  The Applicants claim compensation for loss and damage for breach of contract calculated on the basis of the lost rent and outgoings payable for the balance of the lease term specified in the Colliers Letter and contract debts for the shortfall in arrears[8] and make good costs incurred.[9]

   The Issues

   Applicants’ Contract Case

   [8]    Ibid.

   [9] $35,000 was agreed at trial for make good and reinstatement costs including interest and GST. See [507] below.

3. The Applicants’ pleaded case in contract was that from 1 February 2016, the Respondent took occupation of the “New Premises” (that is, the reduced Tenancy 3C) with the consent of the lessor and occupied its tenancy in accordance with the terms of the Colliers Letter,[10] or in the alternative, the Registered Lease as adjusted by the Colliers Letter.[11]  

   [10] SOC [16].

   [11] SOC [15].

4. These alternate pleas are referred to and defined in the Statement of Claim as the “Lease”. The Cancellation Letter is alleged to constitute “an anticipatory fundamental breach and repudiation” of the “Lease”, as defined.[12]By failing to pay rent and other expenses, vacating and failing to make good and reinstate the “New Premises”, the Respondent is alleged to have further breached the “Lease,” entitling the Applicants to re-enter, terminate and damages.

   [12] SOC [18].

5. As such, these alternate pleas are the claimed basis of the allegedly new contract made between the parties giving rise to the parties’ respective rights and obligations as lessor and lessee by which the lessee had the right to exclusive possession of the new demised premises for a five-year term from 1 February 2016 on the terms specified in the Colliers Letter.

6. Since the Respondent was already only occupying the reduced Tenancy 3C as of 1 February 2016, had surrendered Tenancy 3B and three car parks and was invoiced and paid a reduced monthly rent from 1 February 2016,[13] the single underlying matter of commercial importance in dispute at trial was the term of any binding lease.  The Applicants claimed the Respondent was bound to a new five-year term of lease from 1 February 2016 to 31 January 2021, expiring beyond the expiry of the term of the Registered Lease.[14]   By vacating early, the Respondent breached its payment obligations under its lease, repudiating the lease, which repudiation the lessor accepted, entitling them to terminate the lease and re-enter, which they did.  The Applicants claimed as damages lost rent and outgoings for the balance of its term from 1 November 2018 to 31 January 2021. 

   [13] Albeit payment was continually late.

   [14] SOC [23].

7. The Respondent’s challenge to the Applicants’ case in contract was threefold.  First, the terms of the Colliers Letter were submitted not to be binding because its terms did not manifest an intention to create binding contractual relations on its execution, its terms were subject to conditions that were not met and further agreement that did not occur and were incomplete and uncertain.[15]  This Court was urged to focus its objective assessment of the parties’ contractual intentions on the terms of the key document in the case, the Colliers Letter, as a ‘starting and ending point’.  Further, it was submitted that this Court should be reluctant to find any contrary intention based on extrinsic matters.

   [15] Defence [9.2].

8. Secondly, Mr Gordon was not authorised to execute the Colliers Letter and bind the Respondent to its terms.[16] 

   [16] Defence [9.2.5]; Rejoinder [10.2].

9. Thirdly, the Management Company was not the lessor nor authorised by its sole director Mr Rocca to execute the Colliers Letter and bind the lessor Applicants to its terms.[17] 

   [17] Defence [9.3]; Rejoinder [12.2].

10. Contrary to the Applicants’ case, the Respondent alleged it occupied the reduced Tenancy 3C at the reduced rent under the terms of the Registered Lease with the lessor’s consent until 30 September 2018 and thereafter on a monthly tenancy.  It was submitted that the surrender and rent reduction was simply a bare variation to the Registered Lease, consistent with the parties’ conduct. [18]

    [18] Defence [15]-[16]. 

11. If there was no variation of the Registered Lease, the Respondent submitted in the alternative, there was no binding agreement made at all and no basis for the Applicants’ claim for rent payable beyond the term of the Registered Lease by reason of an estoppel arising from the common assumption that only the Registered Lease would determine liability between them.  Further, there is no loss given Tenancy 3B was leased to Samfra.

12. The Respondent denied any liability to the Applicants for rent, outgoings or common area and marketing expenses for the period after expiry of the Registered Lease. Further, the Respondent submitted that the Applicants have failed to mitigate their loss by finding a replacement tenant.

    Applicants’ Estoppel Case

13. The Applicants amended their pleadings shortly before trial to include an alternative claim in promissory estoppel if the terms of the Colliers Letter were found not to be contractually binding.  By their Reply,[19] the Applicants claimed the Respondent is estopped from denying that the Registered Lease, as amended by the Colliers Letter, and the terms of the Colliers Letter are not binding on the Respondent.[20]

    [19] FDN 36.

    [20] Reply [3]-[21].

14. The Applicants’ ‘fall back’ claim was not addressed in the Applicants’ opening and was the subject of limited evidence and submissions in their written and oral closing.   Despite the extensive criticism made by the Respondent of the Applicants’ pleaded estoppel case,[21] the Respondent anticipated and addressed potential arguments in favour of a promissory estoppel arising on the facts of this case. 

    Confinement to Pleadings

    [21] Closing Submissions at [6] and [144]-[178].

15. In closing, the Respondent submitted the Applicants should be confined to their pleaded case as presented at trial, relying on the general principles as articulated in Stefanovski v Digital Central (Assets) Pty Ltd.[22]

    [22] (2018) 368 ALR 607; Respondent’s Closing Submissions [179]-[184].

16. The Respondent sought to confine the Applicants’ case to it pleadings in circumstances where the trial proceeded on pleadings by both parties that were general, lacking in material detail and did not set out clearly the basis of the causes of action relied upon, yet the evidence led was largely uncontentious and common to all causes of action. 

17. The Applicants’ case in contract was agitated at trial by reference only to the issue of whether the Colliers Letter had binding contractual effect.  I accept the Respondent’s submission that it is not open to this Court to consider whether a binding contract was formed on some other basis, such as an inferred acceptance of an offer by taking the benefit of an offer knowing its terms and the offeree’s intention to contract,[23] despite the generality of the Applicants’ pleading that may have suggested a wider contest than that which was ultimately agitated.[24]

    [23]  Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523.

    [24]  SOC [15]-[16].

18. As for the ratification of agency issues, the Respondent submitted that it was “difficult to make submissions without some reference point”[25] because the Applicants had not pleaded or presented such a case at trial.  Further, it would be procedurally unfair if this Court were to make findings of fact in an entirely different case, such that the Applicants must be confined to their pleaded case.

    [25]  Respondent’s Closing Submissions at [179]-[183].

19. I do not accept the Respondent’s submissions on ratification.

20. The Respondent put both parties’ representatives’ authority in issue by its pleaded defence.  Mr Gordon’s authority to execute the Colliers Letter and bind the Respondent to its terms was expressly denied.[26]  The Management Company’s authority was put in issue by operation of the defence pleading rules, given its non-admission and denials of the allegation that Mr Rocca as its sole director had signed for and on behalf of the lessor.[27] 

    [26]  Defence [9.2.5].

    [27] SOC [9]; Defence [9]; Reply [12]; Rejoinder [12].

21. Despite the Applicants’ pleadings not disclosing the basis of the Management Company’s authority, no objection was taken to the generality of the Applicants’ pleaded case in contract or as to agency, including the bare allegation that the Respondent occupied its tenancy with the lessor’s consent in accordance with the terms of the Colliers Letter.[28] Evidence was led on the general topic of agency from numerous witnesses without objection and the agency issues fully agitated at trial. In their closing submissions, the Applicants sought to rely on ratification of the authority of the parties’ representatives as well as actual and ostensible authority and the statutory presumptions under ss 128 and 129 of the Corporations Act 2001 (Cth) (Corporations Act).

    [28] SOC [16].

22. I accept, as the Applicants submitted, ratification is a legal conclusion to be drawn about a putative agent’s authority from the relevant evidence.  Whether in this case the putative agents’ execution of the Colliers Letter was ratified by their principals and thereby bound them to its terms was, in my view, an issue open on the evidence and fairly within the bounds of the litigated dispute. 

    Conclusion

23. Ultimately, I have found that the Colliers Letter constituted a legally binding lease and the parties’ representatives who signed it had authority to bind their principals.  I have found that the Applicants’ estoppel claim fails.  I set out my reasons for my findings below.

    PART B: THE TRIAL AND EVIDENCE

    The Trial

24. The trial took place over four days, with a further short hearing for supplementary submissions on the status of the bank guarantee provided as security under the Registered Lease.  A joint tender book of documents common to both parties’ cases on liability was tendered in the Applicants’ case.[29]  A separate volume of documents on quantum was also tendered by the Applicants.[30]  Both parties filed lengthy written closing submissions which they supplemented orally.

    The Witnesses Generally

    [29]  Exhibit A1. 

    [30]  Exhibit A11.

25. The parties called lay witnesses who gave their evidence-in-chief primarily by way of affidavit and were subject to varying degrees of cross-examination.  Generally, the evidence of these witnesses concerned events and conversations that occurred five years or more ago.  As such, some witnesses’ recall of the detail was limited, and their memory was inevitably refreshed by the contemporaneous documents to the extent they now exist.  I have generally relied on the contemporaneous documents for matters of detail.

    The Applicants’ Witnesses

    Mr Rocca[31]

    [31] Mr Rocca’s affidavit sworn on 27 January 2021 was tendered and marked Exhibit A2.

26. Mr Guiseppe Rocca is the sole director, secretary and shareholder of the Management Company, the sole director of the First Applicant, 100 PS Pty Ltd, and a director of the Ninth Applicant, 100 Group Pty Ltd, together with Mr Roscio and Mr Chakiris, who are his partners in their accounting practice. 

27. Mr Rocca signed the Colliers Letter for and on behalf of the Applicants in his capacity as a director of the Management Company.  In this capacity, since 2014, Mr Rocca performed various asset management functions for the owner Applicants, including liaising with the other owner Applicants and providing instructions to the property managers (Colliers and CBRE), leasing agents (CBRE and Savills) and property advisors (Upstream Property Solutions[32]) and negotiating with third parties from time to time.  The Management Company contracted directly with the leasing and property agents.

    [32] Upstream Property Solutions Pty Ltd (Upstream) provide specialist property advisory and transaction management services to commercial property owners.

28. Mr Rocca’s authority to legally bind the Applicants to a new lease was challenged by the Respondent as being confined to an authority to negotiate and not to contractually bind the Applicants to the terms of the Colliers Letter. Alternatively, it was submitted that Mr Rocca’s authority was limited to binding the Applicants to a surrender only (and not a new lease).  Given his various roles, Mr Rocca was an important witness on the challenge to the agency of the Management Company.

29. Mr Rocca’s written evidence did not address the agency issue, is consistent with the contemporaneous documents, and as such uncontentious.  His oral evidence addressed the important topic of his role in carrying out his functions as agent for the Applicants generally and, specifically for the Respondent’s tenancy, his role in negotiations in late 2015 that led to the execution of the Colliers Letter and subsequent lease of part of the Respondent’s tenancy (Tenancy 3B)[33] to Samfra, his instructions in dealing with the Respondent upon receipt of the Cancellation Letter in September 2018 and subsequent (unsuccessful) efforts to re-lease the tenancy. 

    [33] Tenancy 3B is the area marked B in GP 296 of 1990 as comprised in the Schedule to the Registered Lease.  TB2/12/518.

30. Mr Rocca was challenged in cross-examination about his recollection of the details of this matter and whether he could recall the details of this matter at all.[34]  He was specifically challenged as to the timing of Mr Shinnick’s[35] involvement in formulating the Applicants’ position in response to the Respondent’s proposals for a new lease not being until February 2016.[36]  Mr Rocca’s recollection was in fact correct because Mr Shinnick was involved in late 2015 in his capacity as a national director of Colliers, as is demonstrated by the emails exhibited to Mr Pepe’s affidavit,[37] contrary to the Respondent’s suggestion that he was not.

    [34]  T64.4-.12.

    [35]  A director of Upstream referred to above; T63.2-64.3.

    [36]  T63.2-T64.12.

    [37]  “EP1” of Exhibit A7.

31. It was suggested that Mr Rocca’s error in cross-examination in recollecting that the five-year extension was from the expiry of the Registered Lease (and inconsistent with the Colliers Letter) was of significance.  I am not persuaded it was.  As I have said, the relevant events occurred over five years ago.  The initial proposal for a new lease volunteered by the Respondent was based on an early exercise of its option to renew, that is, a five-year extension from the expiry of the Registered Lease.  The early commitment to a five-year extension was a prominent detail in the early negotiations, and thereafter a further five-year term was treated by the parties as a given and referred to generally as such without reference to its commencement date until the Colliers Letter. 

32. It was also suggested to Mr Rocca that the Respondent was intentionally not given the formal documentation until after its arrears were paid.  I accept Mr Rocca’s denials that this was not the case and that “we would never do that”.[38] His evidence was supported by his lack of involvement in the preparation of the formal documentation and consequent lack of knowledge about any delay in providing it to the Respondent at the relevant time.[39]

    [38]  T47.21-.27.

    [39]  T49.25-.38; T52.35-53.1.

33. Bearing in mind that Mr Rocca’s involvement in the negotiations and execution of the Colliers Letter was high-level and handled by Mr Pepe, I found Mr Rocca’s recollection of relevant detail satisfactory and consistent with the documentary evidence.  I consider his concessions as to matters he could not recall were honest, consistent with his role and understandable given the passage of time.  I found his recollections of dated matters better than some other witnesses and plausible given his central role as the Applicants’ asset manager in dealing with the directors of the owner Applicants and instructing representatives of Colliers, Savills and CRBE.

34. I am satisfied that Mr Rocca’s evidence was honest and reliable to the extent of his recollection of matters.

    Mr Pepe

35. Mr Enzo Pepe is a director of Colliers. In his then capacity as Associate Director, Real Estate Management, Mr Pepe managed the Respondent’s tenancies for the Applicants whilst Colliers were the managing agent for 100 Pirie St from September 2014 until May 2018.  Mr Pepe received his instructions from Mr Rocca and Mr Nicholas Shinnick of Colliers until Mr Shinnick started his own consultancy business, Upstream, and acted as property advisor to the Applicants in that capacity from about February 2016.  From June 2018, CBRE was appointed in place of Colliers.

36. As managing agent, Mr Pepe’s main dealings with the Respondent were through its executive director, Mr Gordon, and Ms Sonja Watts, the administrative assistant. He dealt with Mr Gordon on higher-level issues and with Ms Watts on day-to-day ones, such as rent arrears and maintenance. Ms Watts also contacted Mr Pepe regarding the possible subleasing of some of the Respondent’s tenancy in 2014, and in September 2015 he referred her to his colleague, Mr Nick Bond, a leasing agent with Colliers.  Mr Pepe was peripherally involved in putting in place the Samfra Lease for Tenancy 3B by instructing solicitors to prepare the formal documentation after the commercial terms were negotiated by Mr Rocca.  

37. As such, Mr Pepe was centrally involved in the negotiations with Mr Gordon that culminated in the preparation and execution of the Colliers Letter. All correspondence on behalf of the parties on this topic was exchanged between them.  Mr Pepe was present at the critical December 2015 meeting with Mr Rocca and Mr Gordon at which a surrender and new lease was discussed as an alternative proposal to a rent-free period.

38. On Mr Rocca’s instructions, Mr Pepe prepared and sent the Respondent an earlier letter of offer to lease in November 2015 and, after the December meeting, the Colliers Letter. He then arranged for execution of the Colliers Letter and instructed the Applicants’ solicitors, Cowell Clarke, to prepare the formal documentation contemplated by the Colliers Letter.  On 2 August 2016, he hand-delivered that documentation to the Respondent.

39. Much of Mr Pepe’s evidence of his dealings with Mr Gordon and Ms Watts was recorded in the contemporaneous correspondence and referred to in his written evidence.  As such this evidence was uncontroversial and there were only a few matters of relevance beyond the dealings recorded in the contemporaneous correspondence.

40. In his oral evidence, Mr Pepe’s recollection of some matters was limited.  I formed the impression that Mr Pepe’s recollection of the detail of past events was informed by the contemporaneous correspondence.  Given the passage of time and considering that the Respondent’s tenancy was one of many tenancies managed by him until he ceased to have any authority for its management in June 2018, I make no criticism of this.

1. On the other hand, there were other matters where Mr Pepe’s recollection in oral evidence was clear, such as his recollection that the initial proposal of a lease extension was not “always about the surrender”.[40] His evidence on this topic was supported by the contemporaneous documents and I found his evidence on this topic credible.

   [40]  T96.10-.22.

2. He was cross-examined at length about delay between him providing instructions to solicitors to prepare formal documentation and his delivery of it to the Respondent.  He could not recall the reason for this delay, although he was quick to say it was not because he had forgotten about it.  I accept he genuinely had no recollection of the reason for the delay and consider he was embarrassed about it.  I also accept Mr Pepe’s denials that the delay was not deliberate and the formal documentation was not held back for the Applicants to ‘hedge their bets’ in case the Respondent did not make good on paying its arrears or until a sub-tenant for Tenancy 3B was found, as was put to him.

3. Mr Pepe was thoroughly cross-examined about his understanding as to why the Respondent did not sign and return the formal documentation after August 2016.  His knowledge was relevant to the collateral issue arising from the statement in the Cancellation Letter that Colliers (as the previous property manager) had been told numerous times that the Respondent had deliberately not executed the formal documentation and did not consider it was bound by the documentation sent to it on 2 August 2016. 

4. Mr Pepe maintained that the Respondent did not ever tell him ‘exactly’ or otherwise express to him that it was not going to sign the formal documentation despite him chasing execution up from time to time.  The statement in his 17 May 2018 email[41] to Mr Shinnick that the Respondent was “refusing to sign” was put to him and it was suggested that he had used this turn of phrase because he knew that the Respondent had refused to sign and was not intending to sign it. [42]   Ultimately, Mr Pepe accepted he eventually became concerned about the Respondent not signing it. This was evident from him having sought advice from Cowell Clarke about his concerns. However, he maintained he was never told by the Respondent it did not intend to sign.

   [41]  TB4/4/87.

   [42]  T88.25.

5. I accept Mr Pepe’s evidence on this topic to the effect that no-one on behalf of the Respondent ever told him that the Respondent had intentionally not signed the formal documentation or that the Respondent did not consider it was bound by the formal documentation.  Mr Gordon’s evidence in cross-examination supported Mr Pepe’s evidence on this topic.[43]

   [43]  T299.18-T300.13.

6. I also accept his explanation that the expression “refusal to sign” was his expression and he did not use it because he had been expressly told by the Respondent it refused to sign.  However, the Respondent’s continuing failure to sign would eventually have been understood by a reasonable person as a refusal to sign, and I find Mr Pepe had reached this conclusion when he sought legal advice about the Respondent’s failure to execute the formal documentation. I concluded his initial defensiveness on this topic arose from his sensitivity about his role in the delay in delivering the formal documentation to the Respondent in the first place and his inability to facilitate its execution by the Respondent in a timely manner or at all.

7. Accordingly, I accept Mr Pepe gave his evidence honestly to the best of his limited recollection of the detail of relevant matters. 

   Mr Hoban

8. Mr Luke Hoban is a director of CBRE and formally took over management of the Property from Mr Pepe of Colliers on 1 June 2018.  During May 2018, there was a hand-over between Colliers and CBRE and Mr Hoban was provided with copies of the Registered Lease and the Colliers Letter. From June 2018, Mr Hoban invoiced the Respondent in accordance with the terms of the Colliers Letter, dealt with Ms Watts regarding the continuing issue of arrears in rent, outgoings and cleaning charges and from about August 2018 unsuccessfully attempted to meet with Mr Gordon.

9. Mr Hoban and Mr Ned Holmes of CBRE finally met with Mr Gordon on 17 September 2018 at 2pm, to discuss the arrears of rent for June to September 2018 and the Respondent’s latest proposal to lease reduced space.  After this meeting, Ms Watts emailed Mr Hoban the floor plan discussed in his meeting with Mr Gordon and the Cancellation Letter.

10. The Applicants rely on Mr Hoban’s evidence for their claim for damages for rent, outgoings, common area cleaning and electricity expenses under the terms of the Colliers Letter, the calculation of which the Respondent does not challenge.[44]

    [44] Closing Submissions at [181].

11. None of this evidence about Mr Hoban’s dealings with the Respondent is contentious and I have no reason to doubt the reliability of the Mr Hoban as a witness.

    Mr Shinnick

12. Mr Nicholas Shinnick, a director of Upstream, provided specialist property advisory and transaction management services to commercial property owners from February 2016.  Prior to that, Mr Shinnick was a national director of Colliers and in that capacity acted as leasing agent for the Applicants on instruction from Mr Rocca.  

13. In October 2015, in his capacity as a director of Colliers, Mr Shinnick was involved in confirming Mr Rocca’s instructions to Colliers for preparation of the First Colliers Letter.

14. Mr Shinnick gave evidence about his involvement in the Respondent’s final proposal to sublet or surrender and a new lease for all its tenancy which was entertained between about late March and early September 2018.  He initially referred the matter to the then joint leasing agents for the Property, Savills (Mr Adam Hartley) and CBRE (Mr Andrew Bahr).  Shortly before the Respondent gave notice of its intention to vacate, Mr Shinnick spoke with representatives of the Respondent (Mr Gordon and Mr Bill Partington) about the difficulty of subletting and advised that the owner Applicants could do nothing further to assist.

15. After the Respondent had vacated, Mr Shinnick was involved in efforts to find new tenants, along with the joint leasing agents Savills and CBRE, who had been appointed to market the vacated tenancy for lease.  He was involved in the make good works carried out by the Applicants and continuing efforts to find new tenants, which have been unsuccessful to date.

16. Mr Shinnick gave evidence primarily in writing, by reference to the contemporaneous documents. I found his evidence uncontentious and reliable.

    Mr Bahr

17. Mr Andrew Bahr is a national director of CBRE, the joint leasing agents with Colliers for the Property from February 2016 until 1 September 2017 under a verbal agreement.  A further agreement was formalised in September 2017 when Mr Rocca as sole director of the Management Company executed CBRE’s marketing agency agreement on behalf of the Applicants.  Mr Bahr is a specialist in commercial leasing in Adelaide and was the lead leasing contact and responsible for the marketing program for 100 Pirie St at the relevant times.

18. Mr Bahr was responsible for adding the Respondent’s tenancy to CBRE’s marketing campaign for the building in November 2018 and continued to manage the campaign with Mr Lucas of CBRE.  Mr Bahr inspected the Respondent’s tenancy in November 2018 and gave evidence about the poor condition of the premises, what was done to market it and make it more attractive to lease, as well as the nature of the interest shown by prospective tenants in what he described as a ‘difficult’ market.

19. Mr Bahr gave evidence primarily in writing, by reference to some contemporaneous documents, and was subject to limited cross-examination.  I accept Mr Bahr’s evidence as a witness of truth and found his evidence of assistance on the topic of the Applicants’ attempts to minimise their loss by leasing Tenancy 3C to another tenant from about mid-November 2016.

    Directors of the Applicant Companies

20. The Applicants called oral evidence at trial from the following directors of the Applicant companies as to whether Mr Rocca had authority to enter into the Colliers Letter on their behalf.

    ·Mr George Chakiris, director of the Second Applicant, 100 CVGM Holdings Pty Ltd, and co-director of the Ninth Applicant with Mr Rocca and Mr Roscio

    ·Mr Alessio Roscio, director of the Third Applicant, 100 Pirie AFR Pty Ltd, and co-director of the Ninth Applicant 

    ·Mr Franco Quaini, director of the Fourth and Fifth Applicants, 100 LSPQ Pty Ltd and 100 Quaini Pty Ltd respectively

    ·Mr Michael Talladira, a director of the Sixth Applicant, 001 Pirie Street Pty Ltd

    ·Mr Alan Fassina, the sole director of the Seventh Applicant, AEIBL Pty Ltd

    ·Mr Eugene Khor, director of the Eighth Applicant, HC Khor Pty Ltd

21. Mr Chakiris and Mr Roscio are partners in Mr Rocca’s accounting practice.  Mr Roscio is involved in other business ventures with Mr Rocca and a friend.  Mr Roscio acts as accountant for the syndicate of Applicant owners for 100 Pirie St.  All three are also directors of the Ninth Applicant.  As such they speak to one another daily about their various business affairs, including matters concerning the joint ownership of 100 Pirie St.s

22. Mr Quaini is the director of the Fourth and Fifth Applicants.  Mr Talladira is a director of the Sixth Applicant.   Mr Fassina is a client of Mr Rocca’s accounting practice, dealing with both Mr Rocca and Mr Roscio.  All are also tenants in 100 Pirie St.  Mr Khor is one of Mr Rocca’s business partners in another venture, speaking to him daily.

23. I accept that each of the directors gave evidence honestly and did his best to recall details of events and conversations that occurred more than five years ago about matters in which some of them were peripherally involved.  Understandably, some of their evidence was generalised, partly in response to the general questions put to them and partly because of their limited recollections of detail of passing conversations occurring more than five years ago. 

24. I did find Mr Roscio’s and Mr Fassina’s evidence helpful in providing context to the asset management function carried out by Mr Rocca through the Management Company and supportive of Mr Rocca’s evidence on this topic. I observe, without being critical, that Mr Quaini’s evidence was of limited assistance given his lack of recollection of matters other than that Mr Rocca represented the syndicate of owners and was involved in all negotiations. 

    Witnesses for the Respondent

25. The Respondent read and relied on affidavits of evidence-in-chief and called at trial its two directors, its company secretary/accountant and administration/executive assistant as follows.

    Mr Gordon

26. The Respondent read and relied on an affidavit sworn by Mr Gordon two days before he gave oral evidence as his evidence-in-chief.[45]  Mr Gordon was subjected to extensive cross-examination.

    [45] Exhibit R13.

27. Mr Gordon’s uncontentious written evidence was that the Respondent provides corporate advisory services to predominantly listed companies.  Whilst its operations are conducted in South Australia, its business is not limited geographically.  Mr Gordon held himself out as its Executive Director, as is apparent from his signature block on all his emails and the Respondent’s board minutes in evidence. He is a qualified mechanical engineer with more than 20 years’ experience in mergers and acquisitions, initial public offering and debt capital, globally.

28. Mr Gordon described his responsibilities relevant to this dispute as involving the review and setting of the agenda for meetings of the board, primary responsibility for overseeing day-to-day operations and meeting the Respondent’s and his obligations as a director under the Corporations Act and otherwise. He gave evidence about his role in negotiating lease arrangements for the Respondent’s tenancy at 100 Pirie St, both with the Receivers and Managers of the previous lessor and the Applicants’ agents, culminating in his execution of the Collier Letter on behalf of the Respondent.

29. As such, Mr Gordon was a critical witness given his involvement in the negotiations with Mr Pepe and Mr Rocca, notwithstanding that these negotiations were largely recorded in the contemporaneous documentary evidence.  His evidence was also relevant on the topic of his authority to sign the Colliers Letter on behalf of the Respondent and bind the Respondent to its terms to the extent that his evidence addressed the Respondent’s decision-making practices.

30. My first observation of Mr Gordon’s evidence was the stark divergence between the detail and colour in his written and oral evidence in cross-examination of the same events.  His written evidence was largely a narrative of the contemporaneous documentary evidence, which speaks for itself, and, as I have said, I have found the more reliable evidence than the recollections of witnesses given the passage of time, particularly in the case of Mr Gordon.

31. In cross-examination, Mr Gordon’s answers tended to be non-responsive and discursive unless pressed to answer the point.  A prime example was his response to my question as to his readiness at the 25 January board meeting to execute the Colliers Letter following his 20 January email to that effect.[46] 

    [46] T286.22-T287.3.

32. Mr Gordon described himself in his written evidence as a co-director of the Respondent with Mr Mark Lindh.  He referred to an established practice of every major business decision being formally approved by both, whether by conferral in a board meeting or formal consultation in emails managed by the Company Secretary.  I found this evidence to be self-serving and artificial in so far as Mr Gordon tailored it to create an impression of limited authority to bind the Respondent in creating legal relations.  I find he overstated the formality with which he dealt with decision-making with his “co-director” Mr Lindh, and at times his evidence on this topic was less than credible given their small office, obvious close working relationship and the documentary evidence of his dealings before me.  

33. Similarly, I found he overstated the Respondent’s “meticulous” practice in only executing legal documents and documents of any significance after formal resolution of the board and with both directors’ signatures.[47]  It was inconsistent with him signing the key document in this case, the Colliers Letter, a significant document given the commercial context and the importance to the Respondent of the new leasing arrangement taking effect from February 2016.  Yet Mr Gordon insisted in cross-examination that its execution was not significant to him and he could not remember if he told Mr Lindh he had signed it.[48] 

    [47] Exhibit R13 [14].

    [48] T274.32.

34. Whilst Mr Gordon’s uncommunicated subjective intentions are not relevant to the issue of contractual intention, his evidence on the significance of executing the Colliers Letter lacks credibility.  His evidence that he did not consider the Colliers Letter binding, just a “marketing document”, its execution just a “pleasant” or “happy” reflection of the status of his discussions with Colliers at that point in time and a proposal or “framework by which everyone would get together and prepare some formal lease documentation” was particularly unimpressive. 

35. By contrast, Mr Gordon referred to it as a “revised lease agreement” twice in his email of 20 January 2016 stating the Respondent was ready to sign it other than one change he would like (if possible). Despite this, he said in cross-examination that the Respondent was nonetheless considering all sorts of permutations and ideas to manage rent on an ongoing basis,[49]  all proposals were on foot and nothing off the table[50] and if a subletting proposal came through, the Respondent might not have moved forward with the deal in the Colliers Letter.[51]  Yet he acknowledged the signing of the Colliers letter as an end to the Respondent’s obligation to pay an above-market rental[52] and while he did not assume the lessor would change its position, he said he also assumed anyone could change their mind.[53]

    [49] T266.31-.34.

    [50] T267.28-268.1.

    [51] T281.25-.36.

    [52] T280.27-.33.

    [53] T280.36-T281.5.

36. Mr Gordon’s evidence in response to the proposition put in cross-examination that his signing of the Colliers Letter was the culmination of his work in negotiating the best deal he could was also unsatisfactory.[54]  It was inconsistent with the language used in his written evidence,[55] clearly self-serving and I do not accept that he expected “a lot of detail to follow, probably not by myself but in the process of a final lease.”[56]   As I have found, Mr Gordon signed the Colliers Letter without resolving the one small issue outstanding in order to secure the commercial benefit of an immediate reduction in monthly rent that he had first proposed in August 2015.

    [54] T274.7-.26.

    [55] Exhibit R7 at [39].

    [56] T274.18-.19.

37. Similarly, I found unsatisfactory his oral evidence regarding his 2 February 2016 email (about moving forward from February under the revised lease agreement with reduced rent) as reflecting an expectation of everyone acting in good faith, “working together to look after us and them”[57] and “if the whole thing falls in a steaming pile of whatever then I assume we had to make up the differences”.[58]           

    [57]   T276.17.

    [58]   T277.30.

38. On any view of the matter, Mr Gordon was an experienced and commercially astute businessman. Mr Gordon’s attempts to distance himself from the commercial benefits of the deal reflected in the Colliers Letter by comments such as “I’m not real good with numbers”[59] or “lease agreements aren’t my thing”[60] were not credible, nor was his account of his report to the board on 25 January 2016 about the lease proposal tabled for review and discussion that he had negotiated.[61] 

    [59]   T269.13.

    [60]   T269.24

    [61]  T292.17-293.25.

39. For these reasons, I found Mr Gordon to be an unsatisfactory and unimpressive witness in key respects, and I do not accept his evidence as reliable.  Where his evidence diverges from that of other witnesses or a contemporaneous document, I prefer that other evidence.

    Mr Lindh

40. Mr Mark Lindh is a qualified financial and corporate advisor, with more than 20 years’ experience in the investment and corporate advisory industry in Australia and globally.  Aside from his role as a founding director of the Respondent with Mr Gordon, he has held many senior positions and outside directorships.  Mr Lindh is an experienced and commercially astute businessman and presented as such in giving evidence.

41. Mr Lindh (like Mr Gordon) described himself in his written evidence[62] as a co-director of the Respondent, despite the Respondent’s board minutes recording him as a non-executive director.[63] Mr Lindh’s evidence was relied on to establish that Mr Gordon was not authorised by the Respondent to execute the Colliers Letter and for his expectation that formal lease documentation would be prepared and jointly signed, in support of the Respondent’s defence that execution of the Colliers Letter was not intended to constitute a binding lease.

    [62] Exhibit R17 [1].

    [63]  TB2/42/788.

42. Mr Lindh presented confidently and gave his evidence with care.  For example, at times in cross-examination, Mr Lindh properly corrected matters of detail in the cross-examiner’s question, sought clarification as to what was being asked or whether it was a question, preferring to answer questions about documents with them in front of him. 

43. Since Mr Gordon tended to deal with leasing matters, Mr Lindh’s recollection of specific details of dealings regarding the Respondent’s lease arrangements that occurred more than five years ago was limited. For example, when being shown the Respondent’s board meeting minutes, he found it “difficult to recall”[64] the exact specifics.  He did not recall the expiry date of the Registered Lease but quickly saw it in the document before him.  He had a “vague recollection”[65] of the proposed rent holiday being discussed by the board and could not recall specifically any objection or otherwise to extending the existing lease for eight years.  Nor could he specifically remember details of subleasing or recollect the 25 January 2016 board meeting.  His recollection of discussion about the “current lease offer to be executed in February” was similarly “vague”.[66]  In February 2018, he had to ask Ms Smith to update him on the status of the lease before he returned Mr Pepe’s call.  As such, his evidence regarding these matters was of limited assistance in shedding light on what transpired at the board meeting given the heavily truncated minutes.

    [64] T334.37.

    [65] T337.28.

    [66] T343.

1. There were some aspects of Mr Lindh’s evidence in cross-examination that were unsatisfactory and self-serving.

2. Early on, Mr Lindh said he did not recall that there had been a downturn in the market for the Respondent’s services in November 2015 and referred to good results over a long period of time demonstrating that there was no downturn in his business despite the general industry downturn.  His evidence was inconsistent with Mr Gordon’s reports to Colliers to the contrary in his 24 November 2015 letter[67] and Mr Gordon’s written evidence about the Respondent’s continuing difficulties in meeting its monthly rent obligations on time. [68] 

   [67] TB2/32/761.

   [68] Exhibit R13 [31].

3. When cross-examined about the proposal for an early commitment to a lease extension of five years in return for a rent-free period and asked whether he would have considered that possibility, Mr Lindh evaded the question by saying that they were at the time looking to secure some premises for their operations and a normal lease “whether it be the party that is referred to here or any other party”, and would be looking for an extension of at least five years.[69]  This answer was unsatisfactory.  It was inconsistent with Mr Gordon’s evidence on the topic. The Respondent was bound by the Registered Lease to its existing tenancy until 30 September 2018, some three years away, with a five-year renewal option.  The commercial imperative for considering an early exercise of its option to renew was to secure the immediate benefit of a rent-free period that the Respondent would not otherwise be entitled to. 

   [69] T335.22-T335.33.

4. These matters led me to scrutinise his further evidence with care.

5. Of significant concern was his evidence about the board’s consideration of the Colliers Letter, that he did not read it (ever) despite his normally meticulous reading of documentation before its execution and that it was not obvious to him that it was the lease offer referred to in the minutes “to be executed in February.”[70]

   [70] T347.31.

6. After being taken through the minutes for three board meetings of which he had limited recollection of any specifics, Mr Lindh was asked whether it was unusual that there were no resolutions in the minutes. He volunteered his assumption that the comments recorded in the minutes were “passing comments”.[71]  Mr Lindh was clearly reconstructing in making this observation, it was self-serving, and I do not read the minutes as he suggests.

   [71] T341.19.

7. He was then taken to the agenda and minutes for the board meeting held on 25 January 2016 and the email he was sent attaching the agenda and the “office lease proposal” that the agenda stated was “tabled for review and discussion”.[72] The attached proposal was the Colliers Letter. 

   [72] Exhibit A14.

8. Mr Lindh could not recall it or whether he read the attached letter at the time and, further, said he would not have normally read it in detail in the absence of “some commentary attached to it from the person who is working on it”.[73]That was a surprising answer from an experienced and capable company director given the immediate commercial imperative (and his obvious personal interest) in reducing the net monthly rent outlay since it was his and Mr Gordon’s business. 

   [73] T342.15-.31.

9. Mr Lindh was then taken to the minutes[74] and referred to the extract: “DG discussed the current lease offer, to be executed in February …”, of which he again had a “vague recollection” and assumed that Gordon was giving a high-level view of the “things he has been negotiating or discussing”.[75] He denied that he understood, or that the minutes showed, that it was proposed that the Colliers Letter was to be executed in February, saying the reference in the minutes “was more in relation to the discussions he was having and negotiations at the time”.[76]

   [74] TB3/42/850.

   [75] T343.10-.31.

   [76] T344.34-T345.10.

10. When asked what he considered the Colliers Letter to be if not a lease offer, he said: “A discussion of items in relation to the negotiations that Duncan…”.[77]He realised his error and retreated to his earlier position that he did not recall reading the specifics of the letter and possibly never read it at all in the calendar year 2016 and that possibility:

    … supports what I stated that a talking topic and that Duncan at this particular meeting was giving an overview of where he was at with his negotiations and so it’s quite possible I never specifically read this and in fact, a document of this kind, I would normally read in quite detailed form in conjunction with legal advice we would obtain before we even considered any form of execution.[78]

    [77] T346.1-.4.

    [78] T346.34-T347-3.

11. In the circumstances, I found Mr Lindh’s insistence that it was not obvious to him that the Colliers Letter was the offer that the minutes referred to as being proposed to be executed in February 2016 unconvincing, particularly when he could not identify any other document that reflected such an offer.[79]

    [79] T348.19-.23.

12. This topic of cross-examination concluded with the following exchange:

    Q.    So you did eventually read this letter of 12 January, didn’t you.

    A.    No, I’m not suggesting I did at all.

    Q.    And still haven’t.

    A.    No, I’ve never read this full document, no nor have I been required to.

    Q.    Not even as a director of Adelaide Equity.

    A.No, as I mentioned before, I am normally meticulous in reading documentation prior to execution and normally after normal things like third party, legal advice etc.[80]

    [80] T349.14-.23.

13. This was surprising evidence for two reasons.  At the time of its negotiation and proposed execution, the Colliers Letter offered the Respondent significant commercial benefits compared to the Registered Lease.  The importance of these benefits was underscored by the fact that the Respondent had initiated negotiations mid-lease term to effect a rent reduction in circumstances where it was experiencing cashflow difficulties and “absolutely” needed the lessor’s immediate assistance.  Secondly, the Colliers Letter was central to the later dispute and litigation that ensued after the Respondent vacated in September 2018, given the Respondent’s denial its terms did not have any binding effect. 

14. In my view, this evidence undermines the credibility of Mr Lindh’s written evidence that he and Mr Gordon as the Respondent’s board of directors “always operated as a joint committee and stringently maintained good corporate governance in all decision making”[81] and his evidence about Mr Gordon’s lack of authority to bind the Respondent to a lease by executing the Colliers Letter.

    [81] Exhibit R13 [13].

15. It also does not fit with the evidence in his affidavit to the effect that he did not consider the Colliers Letter “legally binding and justifiably assumed it was more akin to an indicative proposal”.[82]   To hold such a view Mr Lindh must have read it.

    [82] Exhibit R13 [29].

16. Accordingly, I am cautious about the reliability of Mr Lindh’s evidence overall and do not accept certain aspects of his evidence, particularly on the topic of Mr Gordon’s authority to bind the Respondent to the terms of the Colliers Letter.

    Ms Smith

17. Ms Kaitlin Smith is the Company Secretary of the Respondent, responsible for preparing board agendas, papers and minutes and for the finance and HR function since her appointment in May 2015.  She is a chartered accountant, with a Bachelor of Commerce and 12 years’ experience as a chartered accountant and nine years as a company secretary.

18. Ms Smith’s written evidence largely restated the contents of contemporaneous documents and ultimately did not add much at all to the contemporaneous record of her involvement in relevant matters. Since she had no recollection of any discussions at board meetings beyond the content of the heavily truncated minutes, her evidence in this regard was of limited assistance.  I found Ms Smith’s lack of recollection in oral evidence odd given the importance of the lease negotiations, her involvement as shown by the contemporaneous correspondence, and her qualifications and experience. I formed the impression that her lack of recollection in oral evidence, despite her detailed written evidence, may have been the result of her loyalty to the directors. As such, I found her evidence less than frank and of limited assistance.

    Ms Watts

19. Ms Sonja Watts worked closely with the Respondent’s executive directors, Mr Gordon and Mr Lindh, as an administration and executive assistant. Her day-to-day role included assisting the Respondent’s Company Secretary and accountant, Ms Smith.  Ms Watts’ written evidence similarly restates the contents of contemporaneous documents and she had little independent recollection of events in cross-examination.  As such, her evidence is also of limited assistance.

    PART C: DETAILED FACTUAL FINDINGS

20. The primary facts were largely uncontentious and recorded in the contemporaneous documents in evidence.  There were some issues that were not fully explained on the evidence.  One was why it took over five months for the lessor’s solicitors to prepare the formal documentation.  Another was the detail and timing of the negotiations resulting in entry into the Samfra Lease.  Ultimately, the reason for the delay or this detail was not important.  My detailed factual findings are as follows.

    The Registered Lease

21. The Respondent was a longstanding tenant of 100 Pirie St, conducting since 2006 its investment banking business from offices located on the third floor, known as Tenancy 3C,[83] comprising a lettable area of 492 sqm.  The Respondent subleased a portion of its tenancy[84] to Centrex Metals Ltd trading as Maximus Resources.  The adjacent Tenancy 3B comprising 123.5 sqm was occupied by Mr Alan Yates until he vacated on 30 November 2013.

    [83] As described as areas C, D and F in GP 296 of 1990 in the Schedule to the Registered Lease (the Schedule).

    [84] The areas described as D and F in the Schedule.

22. On 15 October 2013, Receivers and Managers (Korda Mentha) were appointed to Melis Developments Pty Ltd (Melis), the former registered proprietor of 100 Pirie St.  On their appointment, negotiations commenced between Korda Mentha and Mr Gordon for the Respondent for a new lease of a larger tenancy comprising Tenancies 3B and 3C, so the property could be sold subject to such lease.  By December 2013, the key commercial terms were agreed between Korda Mentha and Mr Gordon for the Respondent for a lease of Tenancies 3B and 3C, that is rent, term, incentives, rental security and rent reviews, including a rent-free period of four months commencing from 1 October 2013.

23. Formal documentation was prepared but not immediately signed.  In February 2014, after the agreed rent-free period had ended, the Respondent attempted to re-open negotiations seeking more favourable terms (including an increased incentive and reduced rent review increases).  The contemporaneous email correspondence shows that Korda Mentha rebuffed the attempt to re-negotiate, noting there had been no hint about amending the terms since they were agreed in December, despite a commercial deal that effectively meant the Respondent would pay the same total rent for an increased area, receive a rent-free incentive of approximately $80,000 and a reduction of approximately $43,000 in the amount of its bank guarantee required as security for its payment obligations.

24. Ultimately, a formal memorandum of lease reflecting the agreed commercial terms was executed and dated 9 April 2014, then registered on 3 September 2014.[85]  The Respondent’s directors, Mr Gordon and Mr Lindh, executed it for the Respondent.

    [85] For convenience, this lease is referred to as the Registered Lease throughout.

25. On 29 August 2014, the Applicants purchased 100 Pirie St from Melis, subject to the Registered Lease.[86]   Colliers were appointed managing agent for the lessor Applicants in place of LJ Hooker (agent for Melis) and Mr Pepe of Colliers began managing the Respondent’s tenancy for the lessor Applicants.

    [86] The transfer was lodged on 29 August 2014 and registration completed on 18 September 2014.

26. In September 2014, Melis, the Applicants and the Respondent executed a formal written “Lessee’s Deed” effective from 29 August 2014, by which the Applicants agreed to comply with all the obligations of the lessor under the Registered Lease and the Respondent agreed to be bound by and perform the terms of the Registered Lease as if the Applicants were the lessor.

27. The Respondent’s directors, Mr Gordon and Mr Lindh, knew the identity of the lessor Applicants from this document, if not otherwise.

28. The Registered Lease provided for a lettable area of approximately 615.5 sqm, described as areas B, C, D and F in GP 296 of 1990.  The initial term was five years, commencing on 1 October 2013 and expiring on 30 September 2018, with a right of renewal of five years.  The commencing rent was $256,000 per annum excluding GST,[87] payable monthly in advance, to be increased by 4% per annum on and from 1 October every year until 2018, with a market review on renewal, if that right was exercised. Operating Expenses (as defined) were payable as provided in clause 2.4.  On expiry, the Respondent had make good obligations as provided for in clause 3.  The Respondent was permitted to sublease or licence without the lessor’s consent on the terms of clause 4.6.9.  The Respondent was required to provide security in the form of an unconditional bank guarantee, which was provided on 11 September 2014 in the amount of $89,550 and unlimited in time.[88]

    [87] $21,338 (excluding GST) per month.

    [88] TB2/21/664.

29. The agreed incentive of four months rent-free had been taken before the Registered Lease was executed.  At the Respondent’s request, the number of car parks was increased from four to six at a rent per car park space of $350 plus GST per calendar month.[89]

    [89] Clause 2 of Item 7 of the Schedule incorrectly provided that the amount for each car park space was payable per annum, not calendar month.

30. At the agreed commencement date under the Registered Lease, 1 October 2013, the Respondent was already in possession of Tenancy 3C, having been in possession since April 2006 under various unregistered lease arrangements.  The Respondent claimed it did not take possession of Tenancy 3B until 22 May 2014, when it was first given access after Mr Yates had removed equipment he had stored there since vacating.[90]

    [90] Apparently, despite vacating on 30 November 2013, Mr Yates stored some equipment in Tenancy 3B.

31. From May 2014, the Respondent was in arrears for rent.  As at 31 August 2014, it owed $118,792.77 for rent to the end of August.  These arrears were paid in instalments after Mr Gordon negotiated a rent reduction of $15,000 with Korda Mentha for a dispute over a claimed rent rebate for Tenancy 3B for the period until 22 May 2014 and a waiver of interest on unpaid rent in return for the Respondent’s acknowledgement of the error in the Registered Lease relating to the car park cost.  This compromise of the Respondent’s rights and obligations under the Registered Lease was confirmed in an email sent on 29 August 2014 by Mr Mirams of Korda Mentha to Mr Gordon.

    On 31 March 2015, the bank guarantee securing the Respondent’s payment obligations under the Registered Lease was cancelled.[91]

    Extension of Lease/Rent-free Proposal

    [91]  T465.32-.38.

32. The prospective subleasing arrangement for Tenancy 3B after Mr Yates vacated fell through so that this area remained vacant and was not being used or sublet by the Respondent throughout 2014.   In October 2014, Ms Watts contacted Mr Pepe for advice as to which parts of its tenancy to sublease to try and recoup some money. 

33. A year later (and two years after taking up this extra space) Tenancy 3B was still vacant and not being used or sublet by the Respondent, there had been a downturn in the Respondent’s industry, it was under financial strain[92] and having difficulty meeting its rent obligations under the Registered Lease for an area that was excess to its needs.

    [92] Exhibit R13 [31]; Exhibit R17 [22].

34. On 31 August 2015, Ms Watts, at Mr Gordon’s request, contacted Mr Pepe by email again asking if he knew anyone interested in renting “next door”, referring to Tenancy 3B.[93]  Several weeks later she followed him up asking for his suggestions about what could be done because “its [sic] ridiculous paying for rent on an area this [sic] isn’t used”.[94]  Mr Pepe replied that other than trying to sublease he was not sure what could be done. 

    [93] TB2/23/671.

    [94] TB2/23/670.

35. Mr Pepe’s observation was to the point and highlights a fundamental difficulty with the Respondent’s commercial position that was obvious to both parties throughout their negotiations. The Respondent was bound to a Registered Lease for a tenancy larger than its needs until 30 September 2018 for another three years.

36. Mr Pepe offered Colliers’ help and he put Mr Bond of Colliers in touch with her, who sent her an agency agreement on 30 September 2015 for Colliers’ appointment as the Respondent’s leasing agent. Mr Bond inspected Tenancy 3B with Mr Gordon on 6 October 2015.

37. By September 2015, the Respondent’s rental arrears were about $29,000.  Meanwhile, Mr Gordon, with the agreement of Mr Lindh,[95] explored a different option for reducing the Respondent’s monthly rent outlay to subleasing.  He met with Mr Pepe on 23 September 2014 and discussed a proposal to extend the term of the Registered Lease on expiry by five years in consideration of a six-month rent holiday.  Mr Gordon’s proposal was in effect an early take-up and commitment to the option to renew the lease for a further five-year term. This meeting was left on the basis that Mr Pepe would consult with the lessor. 

    [95] Exhibit R13 [31].

38. Mr Shinnick, the then National Director, Office Leasing of Colliers, liaised between Mr Rocca and Mr Pepe for instructions to offer a new lease with an incentive of six months rent-free based on the early take-up of the renewal option.[96]

    [96] Exhibit A7 “EP1”.

39. I reiterate that the Respondent was bound by its payment obligations under the Registered Lease for the duration of its five-year term.  In September 2015, there were 37 months of its term left and little prospect of subleasing part of the tenancy based on history.  As I said, the Respondent was in a difficult position. It could not simply relocate its business to a more suitable tenancy, contrary to Mr Lindh’s suggestion in cross-examination on this topic. The only benefit the Respondent could offer the lessor in return for a rent-free period to alleviate its financial strain was an early exercise of its option to renew and extension of the existing lease term.  Otherwise, there was no commercial advantage to the lessor Applicants in varying the Registered Lease by providing a rent holiday. The Respondent’s directors clearly appreciated that an early extension would be valued by the lessor by improving the WALE (Weighted Average Lease Expiry) for 100 Pirie St, increasing its saleability and value, since tenure was important.  As Mr Rocca said in cross-examination, tenure was a more important issue than arrears in rent because “if someone cannot pay, they cannot pay”.[97] 

    [97] T53.9-.38.

40. This was ‘the genesis, background and context’ informing the commercial purpose or object of the new lease arrangements ultimately reflected in the terms of the Colliers Letter and relevant to the objective determination of the parties’ intention to create contractual relations.

41. The Respondent’s board of directors met on 6 October 2015.  Mr Gordon and Mr Lindh were present. The minutes are redacted to show only the item of business relevant to this dispute, that is, Mr Gordon reporting on the “Rent” meeting with Mr Pepe and “the landlord”.[98] The minutes further record:

    If granted a 6 month rent holiday AE may sign a lease extension for 5 years.  DG noted that an agency agreement will be signed on the same day as the rent holiday and lease extension subject to receipt of approved agreement.  It was also noted that Enzo was showing people through Maximus and AE areas on the 7^th October.

    [98] TB2/26/693.

1. The Applicant’s claim in estoppel is pleaded at [3] of the Reply[315] in the most general terms:

   3.  The applicants say further that in the circumstances set out below the respondent is estopped from denying that:

   3.1the Registered Lease as amended by the Agreement is not binding upon the respondent; and

   3.2the Agreement terms are not binding upon the respondent.

   [315] FDN 36; and this plea is repeated at [21] save to refer to the matters set out above instead of the circumstances below.

2. This is the first issue with the pleading. These implicit “assumptions” as to the way rights will be exercised or enforced are mutually exclusive and logically cannot be cumulated. The grant of a lease under the Colliers Letter is inconsistent with the grant under the Registered Lease by reason of the different terms, as discussed above.[316]  I have proceeded on the basis that the relevant assumption is that which is pleaded in [17.3] and [20] of the Reply: that at all times the Respondent was bound by the terms of the Colliers Letter.

   [316] See above at [257]-[258] above.

3. The next difficulty arising is that the pleaded assumption is devoid of material particulars: upon which terms of the Colliers Letter do the Applicants rely as binding the Respondent?  Was it all of them? Was it an assumption that the parties would execute formal documentation in like terms?  Was it an assumption that the Respondent was bound to pay rent and outgoings for Tenancy 3C until 31 January 2021?  The Applicants’ case in this regard was never clearly articulated, although it seems that the basal complaint might be that the Respondent by its conduct promised to be bound to an extended lease term in all the circumstances, which the Applicants assumed to be the basis of their legal relations.

4. The conduct alleged to have given rise to the formation of the relevant assumption is set out in the following eight paragraphs comprising a chronology of various words and conduct of the Respondent’s representatives that occurred before the Applicants’ representative executed the Colliers Letter.[317] These matters are alleged to constitute “representations”, without expressly specifying their effect, in the following circular fashion:[318]

   15. The matters set out in paragraph 4 to 11 above amount to representations and conduct amounting to representations by the respondent to the applicants (representations).

   [317] Reply [4]-[11].

   [318] Reply [15].

5. The failure to plead the precise representations conveyed by the matters relied on makes it difficult to determine whether these matters are capable of giving rise to any representations allegedly occasioning the formation of the relevant assumption (assumption) or to conceive as to how these matters allegedly caused the formation of the relevant assumption (inducement).  Indeed, it is unclear whether the alleged representations and the relevant assumption are intended to be the same or different. 

6. Reconsideration of the matters relied on is not illuminating.  Paragraphs 4 to 11 plead the Respondent’s efforts to negotiate “amended lease terms” later defined as a proposal “as to the surrender of part of the demised area subject of the Registered Lease and the reduction in the rent payable by the respondent”.[319] Surprisingly, this definition and the other matters allegedly giving rise to the “representations” omit reference to the key commercial term in dispute, the “extended term” as defined.[320] A passing reference is made in [4] to communications about the possibility of extending the Registered Lease.

   [319] Reply [5.2].

   [320] Reply [14.5].

7. It is therefore unclear as to which representations the Applicants intended as the foundation of the alleged assumption that the Respondent was bound by the Colliers Letter as pleaded at [17.3] and [20] (noting that this pleaded assumption is inconsistent with the estoppel claimed at [3] and [21]).

8. The Applicants failed to prove that any representative of the Applicants held the relevant assumption at any time, apparently relying solely on inferences from the conduct of Mr Rocca and/or Mr Pepe in reissuing the February 2016 invoice for the reduced rental.

   Inducement

9. It is then alleged the “representations” were intended to induce the Applicants to relinquish or modify their rights under the Registered Lease,[321] including as to its term in exchange for the reduced demise, rent and car parks and the “extended term”.[322]  There are no material facts pleaded as to the alleged “intention” of the Respondent, the alleged “rights and entitlements” or how they are allegedly relinquished or modified as is relevant to the alleged assumption, save the most general descriptions of the nature of such rights and entitlements.

   [321] Emphasis supplied.

   [322] Reply [16].

10. It is then alleged that in reliance on the “representations”, the Applicants relinquished or modified their rights and entitlements as provided for in the Registered Lease by entering into the Colliers Letter, assuming the Respondent was bound by its terms.[323]  

    [323] Reply [17].

11. How the Applicants allegedly and relevantly relinquished or modified their rights and entitlements is not pleaded, save that the Respondent paid invoices after February 2016 reflecting the reduced charges provided for in the Colliers Letter, putting aside defaults.[324] In Reply Closing Submissions, it was submitted in most general terms that the Applicants were induced to adopt an expectation (assumption) that the terms of their relationship were as set out in the Colliers Letter by the three months of negotiation that led to it and the Respondent’s request that the Applicants act in accord with the terms of the expectation.[325] 

    [324] Reply [18]-[19].

    [325] Reply Closing Submission [84].

12. The Respondent engaged with the Applicants’ case as to the representations arising by contending that the matters relied on merely constituted a representation that the Respondent would sign the Colliers Letter (which it did)[326] or no more than the Respondent represented the matters stated in it.[327] As to the latter, the Respondent submits the Applicants’ pleaded case was limited to the Respondent’s conduct in negotiations for extended terms for rental arrears and the surrender of Tenancy 3B and does not give rise to any relevant assumption or detrimental reliance thereon. 

    [326] Closing Submissions [146].

    [327] Closing Submissions [149].

13. Contrary to the Respondent’s submission, I do not consider that the representation naturally arising from the matters relied on is that the Respondent would sign the Colliers Letter.  The Respondent’s second suggested effect is more logical: that the matters relied on gave rise to representations about the Respondent’s commitment to the matters stated in the Colliers Letters.  However, that case was not pleaded nor was it developed in this way at trial, let alone established on the evidence that anyone on behalf of the Applicants considered the Colliers Letter was binding on its execution and they were induced to think that way by the Respondent’s conduct. 

14. The clearest articulation of the Applicants’ case was put in their Reply Closing Submissions:  that is, the Applicants were induced to adopt the expectation (ie assumption) that the terms of their legal relationship would be the terms of the Colliers Letter after three months of negotiation and by the Respondent’s request they act in accordance with the terms of their expectation (assumption).  However, the Applicants did not develop their case in their pleading or at trial and have not established any such a case on the evidence of either Mr Rocca or Mr Pepe.

    Reliance

15. The Applicants’ case on reliance was not developed beyond the bare assertion in their Reply of a relinquishment or modification of rights under the Registered Lease in exchange for the terms of the Colliers Letter.  The Respondent relied on the Applicants’ delay in providing formal documentation and the legal advice received by Mr Pepe from Cowell Clarke in the circumstances of the Respondent’s continuing refusal to execute as contrary to any alleged reliance at all, let alone reasonable reliance, and further as disentitling the Applicants to the intervention of equity in any event.

16. The Respondent’s submissions are persuasive but not completely so.  There is an important distinction between refusal to execute and an express communication of an intention not to be bound by the terms of the Colliers Letter.  Whilst I accept that the Respondent’s failure to execute despite regular follow-up does not immediately communicate an intention not to be bound, there comes a point where such intention is implicit.  In this case, the evidence suggests that point was reached by at least May 2018, by which time Mr Pepe had sought advice from Cowell Clarke.  The difficulty for the Applicants’ case, however, is not that their reliance became unreasonable after this time but that their case on detrimental reliance is just not articulated at all and this core element of promissory estoppel is not established by the evidence.

    Detriment

17. The Applicants’ pleaded case on detriment is similarly bare: “the applicants will suffer detriment if the respondent is permitted to depart from the alleged assumption that [the Respondent] was bound by [the Collier Letter]”. 

18. Such detriment is not identified, save that which might be implied from the allegation that such departure “is unjust as the applicants relinquished and/or modified their rights and entitlements as provided by the Registered Lease in relation to the demised area, the car parks, the rent and car park fees based on the assumption that the respondent would at all times treat the [Colliers Letter] reached in its place as binding on the parties”.[328]

    [328] Reply [20].

19. The only pleaded right and entitlement appears to be that the Respondent paid invoices after February 2016 reflecting the reduced charges provided for in the Colliers Letter, putting aside defaults.[329]

    [329] Reply [18]-[19].

20. The Applicants did not expressly address this essential matter in their opening or their written closing submissions.  However, in addressing the question of the appropriate relief, the Applicants submitted that:[330]

    The appropriate remedy is aimed at avoiding the detriment caused by the defendant resiling from the promise or assumption arising from his or her representation.[331]

    [330] Closing Submissions [192].

    [331] Emphasis supplied.

21. Finally, their Reply Closing Submissions stated:[332]

    [332] [84]; emphasis supplied.

    (c) The applicants have acted in reliance on the expectation by allowing the respondent to pay significantly less rent than it was legally obliged to pay under the registered lease, at a time when the respondent was having trouble meeting its financial obligations.

    …

    (e)The respondent’s conduct has occasioned detriment to the applicants if the expectation is not fulfilled because they have not been able to find tenants for the space which was to have been paid for by the respondent, and they have not received rental payments for the period from 1 October 2018 to 31 January 2021.

    
    
    

    (f)The respondent has failed to avoid that detriment by paying the rental agreed during the term agreed under the [Colliers Letter].

22. The Applicants’ submissions demonstrate a misconception as to the concept of detrimental reliance, apparently conflating this core element of promissory estoppel with remedy. As the High Court has repeatedly held since Dixon J’s seminal judgment in Grundt v Great Boulder Gold Mines Pty Ltd,[333] detrimental reliance is the basal purpose of the doctrine of estoppel.  Equity intervenes to protect against the detriment flowing from the Applicants’ change of position if the Respondent were to be permitted to depart from the assumption that led to their change of position.  It is not the existence of the unperformed promise, but the promisor’s responsibility for the detrimental reliance by the promissee that makes it unconscionable for the promisor to resile from their promise. 

    [333] Op cit at 674-675.

23. As Brennan J (as he was then) explained in The Commonwealth v Verwayen:[334]

    The relevant detriment in a case of equitable estoppel is detriment occasioned by reliance on a promise, that is, detriment occasioned by acting or abstaining from acting on the faith of a promise that is not fulfilled.  The relevant detriment does not consist in a loss attributable merely to non-fulfilment of the promise.

    [334] (1990) 170 CLR 394 at 429.

24. Therefore, it is the Applicants’ conduct in acting upon the expectation that the Colliers Letter was binding on the Respondent that must form the basis of any claim for promissory estoppel, not the Respondent’s failure to fulfil its promise to pay rent and outgoings for the period after 1 October 2018 for Tenancy 3C.

25. This presents several fundamental difficulties for the Applicants’ case as pleaded and presented at trial.  First, whilst it is alleged the Applicants changed their position by receiving a reduced rent from the Respondent for Tenancy 3C, under the terms of the Samfra Lease they received rent for Tenancy 3B from 1 October 2016 for a longer term of five years that exceeded in total the loss suffered for the eight-month period during which no rent was received.  Secondly, the Applicants did not articulate in their pleading or in their case as presented at trial how their reliance on the pleaded assumption led to the detriment of them not being able to find a tenant for Tenancy 3C after 1 October 2018, which was first asserted in Closing Reply Submissions.  Thirdly, no attempt was made to prove what was not done earlier that could have been done to locate an alternative tenant for Tenancy 3C. Nor was any attempt made to prove any valuable alternative transaction to reposition Tenancies 3B and 3C to avoid any detriment that may have arisen by the exchange of rights and entitlements under the Registered Lease in exchange for those in the Colliers Letter. 

26. In the circumstances, the Applicants have not demonstrated that they have suffered any relevant detriment as pleaded or otherwise contended sufficient to establish a promissory estoppel. 

    Minimum Equity

27. The Applicants focussed their case in estoppel on the question of the appropriate remedy, without first establishing the foundation for equity’s intervention to prevent the detriment caused by the Applicants’ change of position as induced by the Respondent’s conduct.  For this reason, the Applicants’ claim in promissory estoppel fails and it is not necessary to say more than that in the circumstances of this case. There is no reason pleaded or established on the evidence to find that the value of the promise would be the just measure of relief and proportionate to the relevant detriment suffered by the Applicants.

    Respondent’s Conventional Estoppel Claim

28. The Respondent pleaded a conventional estoppel in its defence based on an alleged “Common Assumption” between the parties that liability between them would be determined by reference to only the Registered Lease.[335]  The pleading was devoid of material particulars and not seriously pressed at trial other than by a bare reference in Closing Submissions.

    [335] Defence [15.4].

29. The pleaded basis of the alleged common assumption was the execution of the Registered Lease, that the Colliers Letter was not binding and that the parties acted consistently, and not inconsistently, with the Registered Lease.  No material facts were pleaded as to the alleged knowledge or intention of the parties or their consistent and inconsistent conduct.

30. This claim fails given my factual findings do not support there being a common assumption as alleged, irrespective of the pleading deficiencies

    PART F: QUANTUM

    Damages and Debt Claim

31. For all the reasons set out above, I have concluded that the Colliers Letter constituted a legally binding lease and the parties’ representatives who signed it had authority to bind their principals.  It follows that the Applicants are entitled to be compensated for the loss and damage suffered in consequence of the Respondent’s breaches of contract by vacating its tenancy, failing to pay rent and outgoings and failing to make good and reinstate its tenancy.

32. It is uncontroversial that, as articulated in Robinson v Harman,[336] where the Applicants have sustained a loss by reason of the Respondent’s breaches of contract, they are, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. 

    [336] (1848) 154 ER 363.

33. In this case, the Applicants’ damages have been formulated by reference to the rent and outgoings that would have been payable for Tenancy 3C and the three car parks under the terms of the Colliers Letter between 1 November 2018 and 31 January 2021 (the expiry of the term of the new lease) plus GST. 

34. The Applicants also claimed amounts for unpaid rent and outgoings due and payable for the period to 31 October 2018, make good and reinstatement costs and marketing expenses as contract debts due under the new lease.  At trial, liability was conceded, and quantum agreed for the unpaid rent and outgoings and make good contract debts.

35. The Applicants accept that their entitlement to damages is subject to the rules as to remoteness of damage and their duty to mitigate their loss.[337]  No issue was taken about remoteness of damage.

    Mitigation

    [337] Applicants’ written closing [146].

36. Despite their endeavours to find a new tenant, the Applicants have been unable to lease the Respondent’s tenancy since its lease was terminated on 9 November 2016 and its term expired on 31 January 2021.  The Respondent submitted that the Applicants’ alleged election not to reduce the rental, not to split or otherwise sub-divide the tenancy and the Applicants’ failure to prove that they were unable to re-licence the surrendered car parks amounted to a failure to mitigate their alleged loss, and (unquantified) deductions should be made to any damages award.  No attempt was made to show the extent of any deduction for any alleged failure to mitigate.    

37. As a matter of principle, if the Applicants have acted unreasonably in failing to minimise the loss arising from the Respondent’s breach of contract, their damages will be reduced to the extent to which, had they acted reasonably, their damages would have been less.  What is reasonable is to be assessed objectively in the circumstances, based on the evidence before the court. [338]      

    [338] Adelaide (SA) Pools & Spa Manufacturing and Installation Pty Ltd & Ors v Westcourt General Insurance Brokers Pty Ltd (No 2) [2021] SASC 123 [1027] (Doyle J) quoting Fallon v Johnston [2018] VSC 273 at [23] (per Bell J).

38. This principle is often misleadingly referred to as a duty to mitigate, although the Applicants are not under any positive duty and do not have to prove they fulfilled any so-called duty.[339] It is for the Respondent to prove that the Applicants have acted unreasonably, and the extent to which they have done so.

    [339] Karacominakis v Big Country Developments Pty Ltd (Karacominakis) [2000] NSWCA 313 at [187] (Giles JA, Handley and Stein JJA agreeing).

39. The applicable standard of reasonableness is not a high one, as explained by Giles JA in Karacominakis: [340]

    Since the defendant is a wrongdoer, in determining whether the plaintiff has acted unreasonably a high standard of conduct will not be required, and the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did (Banco de Portugal v Waterlow and Sons Ltd (1932) AC 452; Pilkington v Wood (1953) Ch 770: Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd (1976) 1 NSWLR 5).

    [340] Ibid.

40. In this case, the Respondent did not go further than suggesting ‘other and more beneficial conduct’.  It has not discharged its onus of proof and shown that the Applicants acted unreasonably and failed to take reasonable steps to prevent or reduce their loss.

1. I find the Applicants have acted reasonably in all the circumstances, objectively considered and having regard to the evidence of the Applicants’ witnesses on this topic: Mr Rocca, Mr Bahr, Mr Shinnick and Mr Hoban.[341]

   [341] Reply Closing Submissions [48]-[52].

2. I accept the Applicants’ (unsuccessful) attempts made to market and lease Tenancy 3C were reasonable in a declining and difficult market, acknowledging that the Applicants’ agents were independent professional consultants with considerable expertise and experience in commercial leasing in Adelaide.   Substantial financial incentives were offered to potential tenants, including a 35% rent reduction for the five-year term of the lease, and instructions were provided to the leasing agents that the Applicants were open to negotiating incentives.  Substantial upgrades were made to the common areas, improving the overall marketability of the building and indirectly the attractiveness of Tenancy 3C.  Mr Bahr recommended against subdividing the space for sensible reasons.  Mr Hoban gave evidence that the car parks were connected to the tenancies so could not be licensed separately without diminishing the marketability of Tenancy 3C.

3. Accordingly, I am satisfied that the Applicants acted reasonably in all the circumstances in their attempts to lease Tenancy 3C and the three car parks and minimise their loss. 

   Damages for Lost Rent, Outgoings and Expenses

4. The Respondent did not take issue with the quantification of the following amounts claimed as damages set out in the Applicants’ written closing:[342]

   ·lost rent and GST of $624,654.89 from 1 November 2018 to 31 January 2021[343]

   ·lost car park rent and GST of $38,453.84 from 1 November 2018 to 31 January 2021[344]

   ·lost recovery of outgoings and common area cleaning and utility expenses and GST of $48,536.01[345]

   [342] Applicants’ Closing Submissions [154], [159]-[172].  Respondent’s Closing Submissions [186]-[187]

   [343] SOC [25.2].

   [344] SOC [25.3].

   [345] SOC [25.4]-[25.5]. This is the total of outgoings of $25,261.21, plus cleaning charges of $22,025.50 and utility charges of $1,249.30, all inclusive of GST.

5. Accordingly, I find the Applicants are entitled to the damages claimed totalling $711,644.74 including GST.

   Arrears Shortfall Debt and Make Good Costs

6. The Applicants claimed a contract debt for unpaid rent, outgoings and expenses for the period of the Respondent’s occupancy until 31 October 2018 of $27,000 including GST but not interest (the Arrears Shortfall Debt)[346] and make good and reinstatement costs of $35,000 including interest and GST.[347]  Liability and quantum for both claims were conceded by the Respondent at trial.[348]

   Marketing Costs

   [346] SOC [25.1].

   [347] SOC [25.7]; Applicants’ Closing Submissions [153]-[154]; T56.6-.8.

   [348] T5.31-T616; Respondent’s Closing Submissions [185.1]-[185.2].

7. The Applicants claimed a proportion of expenses incurred between 1 November 2018 and 31 January 2021 in marketing vacant space in 100 Pirie St as expenses recoverable under clauses 8.3 to 8.7 of the Registered Lease. [349] The Respondent disputed liability and quantum.

   [349] SOC [25.8]; Applicants’ Closing Submissions [154] and [173]-[175].

8. The amount claimed at trial was $6,986.01 including GST, calculated as a proportion of the expenses incurred for all vacant space in the building, based on the area of Tenancy 3C to the total space marketable for rent from time to time during the period claimed.[350]

   [350] Exhibit A15 [25.14].

9. I accept that clauses 8.3 to 8.7 of the Registered Lease were incorporated by reference into the lease agreement on the terms of the Colliers Letter by its “All Other Terms & Conditions” clause.  I am therefore satisfied that the Respondent had a contractual obligation to compensate the lessor for any expenses of whatever nature in respect of any breach of an essential term (as specified in clause 8.1)[351] or where the Respondent’s conduct constitutes a repudiation or breach of any covenant.[352]

   [351] By reference to clause 8.3 of the Registered Lease [Compensation for Breach].

   [352] By reference to clause 8.4 of the Registered Lease [Lessor’s Right on Repudiation].

10. However, I am not satisfied on the evidence that the claimed marketing expenses were incurred in respect of any breach of an essential term or repudiation within the meaning of the relevant contractual provisions.  The marketing invoices[353] show that these expenses were incurred generally for the building and all vacant spaces in it.  These expenses would have been incurred irrespective of Tenancy 3C’s vacancy by reason of the Respondent’s breaches of contract and repudiation of its lease obligations.  In cross-examination, Mr Bahr (CBRE’s leasing manager for the building) confirmed that the marketing program was for the whole building, and not specifically Tenancy 3C.

    [353] Tab 11 of Quantum Tender Book.  The first one refers to another building, 19 Grenfell Street.

11. The Applicants’ claim for marketing costs fails.

    Interest on the Arrears Shortfall Debt

12. Although the parties at trial agreed liability and quantum for the Arrears Shortfall Debt, the calculation of interest was disputed. 

13. I consider that interest is due and payable on the agreed amount of $27,000 for the Arrears Shortfall Debt in accordance with the “All Other Terms & Conditions” clause of the Colliers Letter that incorporated by reference clause 2.6 of the Registered Lease, providing as follows:

    The Lessee must pay to the Lessor interest at a rate being two (2) percentum per annum higher than the rate charged from time to time by the Commonwealth Bank Corporation on overdraft accounts on amounts no greater than the annual rental payable hereunder, on any rent or other moneys becoming payable under this Lease if not paid within ten days of becoming due and payable and such interest shall be computed on and from the due day  for payment and shall accrue from day to day until the date of actual payment.  Such interest and other moneys shall be recoverable in like manner as rent in arrears.

14. The applicable Commonwealth Bank overdraft interest rates were proved, and the Respondent took no issue with those rates. 

15. Interest should be calculated on a simple interest basis in accordance with clause 2.6 of the Registered Lease.  There is no entitlement to compound monthly as the Applicants have done.  

16. I will hear the parties further as to the calculation of interest on the Arrears Shortfall Debt on a simple interest basis.

    Interest on Damages

17. The Applicants’ successful claim for liquidated damages is not a claim for an amount due and payable under the lease agreement constituted by the terms of the Colliers Letter, the contract having been terminated on 9 November 2018.  I do not consider there is good reason to calculate pre-judgment interest by reference to clause 2.6 of the Registered Lease as claimed by the Applicants.[354]

    [354] Exhibit R16.

18. I consider pre-judgment interest on the liquidated damages awarded should be calculated under s 39 of the District Court Act. 

19. As to the applicable rate of interest, having regard to the rates of interest specified by SR 208 of the Supreme Court Civil Rules 2014 for the period from 1 November 2018 to 17 May 2020 (both inclusive) and by UCR 182.3 from 18 May 2020 up to and including the date of judgment, I fix the following rates of interest based on the Reserve Bank of Australia cash target rate of interest prevailing from time to time:

    ·from 1 November 2018 until 4 June 2019, 5.5%

    ·from 5 June 2019 until 2 July 2019, 5.25%

    ·from 3 July 2019 until 1 October 2019, 5%

    ·from 2 October 2019 until 3 March 2020, 4.5%

    ·from 4 March 2020 until 17 May 2020, 4.25 %

    ·from 18 May 2020, 5%

20. As to the period from which interest runs, I determine that the Applicants are entitled to have interest calculated by reference to the GST exclusive running total balance of rent, outgoings and expenses from each successive first day of each calendar month, on a simple interest basis, using the amounts set out in columns 2 to 6 of the schedule prepared by Mr Hoban.[355]  Interest should be calculated exclusive of GST because the parties will have to account to the Australian Tax Office for the GST paid and received. 

    [355] Exhibit R16.

21. I will hear the parties further as to the calculation of interest on the total liquidated damages awarded. 

    PART G: CONCLUSION AND FORM OF JUDGMENT

22. For the reasons I have given, I have upheld the Applicants’ claim in contract and found they are entitled to:

    ·damages on account of the lost rent, lost recovery of outgoings and common area expenses and utilities and GST for the period from 1 November 2018 to 31 January 2021 in the amount of $711,644.74

    ·$27,000 including GST for the Arrears Shortfall Debt, being the agreed amount of the contract debt for unpaid rent, outgoings and common area expenses and utilities and GST as at 31 October 2018

    ·$35,000 including GST but not interest, being the agreed amount of the contract debt for make good and reinstatement costs

23. As I have said, I will hear the parties further on the calculation of interest on the liquidated damages awarded and on the Arrears Shortfall Debt in accordance with the determinations I have made.

24. I will hear the parties on the form of the judgment to be entered in favour of the Applicants and costs.

    
    

Perkins v National
Australia Bank Ltd (1999) 30 ACSR 256 at 262.

That is, the grant of a new lease for a different term is inconsistent with the existing Registered Lease.

See [257]-[258] above.