JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: ACTIV FOUNDATION INCORPORATED -v- WBHO-CARR PTY LTD [2014] WADC 174
CORAM: DERRICK DCJ
HEARD: 3-6 NOVEMBER 2014
DELIVERED : 23 DECEMBER 2014
FILE NO/S: CIV 3579 of 2012
BETWEEN: ACTIV FOUNDATION INCORPORATED
Plaintiff
AND
WBHO-CARR PTY LTD
Defendant
Catchwords:
Offer to lease - Acceptance of offer to lease - Whether acceptance of offer to lease created binding agreement to lease - Repudiation - Damages for breach of agreement to lease
Legislation:
Corporations Act 2001 (Cth)
District Court Rules 2005 (WA)
Result:
Judgment for the plaintiff
Damages awarded
Representation:
Counsel:
Plaintiff: Mr M F Holler
Defendant: Ms K J Levy
Solicitors:
Plaintiff: Rockwell Olivier Lawyers
Defendant: Danaghers Commercial and Corporate Lawyers
Case(s) referred to in judgment(s):
African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268
Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Chillingworth v Esche [1924] 1 Ch 97
Crossly v Maycock (1874) LR 18 Eq 180
Durban Roodepoort Deep, Limited v Newshore Nominees Pty Ltd [2005] WASCA 231
Farmer v Honan [1919] HCA 13; (1919) 26 CLR 183
Fink v Fink [1946] HCA 54; (1947) 74 CLR 127
Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166
Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629
Keppel v Wheeler [1927] 1 KB 577
Luxer Holdings Pty Ltd v Glentham Pty Ltd [2007] WASCA 209; (2007) 35 WAR 254
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
May & Butcher Ltd v R [1934] 2 KB 17
Niesmann v Collingridge [1921] HCA 19; (1921) 29 CLR 177
NZI Insurance Australia Ltd v Baryzcka [2003] SASC 190; (2003) 85 SASR 497
Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601
Regional Power Corporation v Pacific Hydro Group Two Pty Ltd [No 2] [2013] WASC 356
Rossiter v Miller (1878) 3 App Cas 1124
Sinclair Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310
Spottiswoode, Ballantyne & Co Ltd v Doreen Appliances Ltd [1942] 2 KB 32
Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
DERRICK DCJ: The plaintiff claims damages for an alleged breach of an agreement to lease commercial premises. The defendant denies that any binding agreement came into existence.
Factual background
The plaintiff is the registered proprietor of land situated at…
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- Case
- [2014] WADC 174
- Decision Date
CaseChat Overview and Summary
The central legal issue in this case was whether the signed offer to lease constituted a legally binding agreement between the parties. The court needed to determine the intention of the parties in signing the offer to lease and whether it created a binding agreement. The court also had to decide if the agreement was merely an agreement to negotiate a lease or if it was a binding agreement to lease the premises.
The court examined the terms of the offer to lease and the surrounding circumstances, including pre-contractual negotiations and commercial circumstances. It found that the intention to create legal relations was to be determined objectively, based on what would be conveyed by the document and the surrounding circumstances. The court concluded that the signed offer to lease amounted to a legally binding agreement between the parties, not merely an informal offer or an agreement to negotiate.
The court's reasoning was based on the objective interpretation of the offer to lease and the surrounding circumstances. It found that the terms of the offer, including the payment of a sum by the defendant and the provision of a standard form lease agreement and car park licence by the plaintiff, indicated a binding agreement. The court rejected the defendant's arguments that the agreement was merely an informal offer or an agreement to negotiate. The court held that the defendant's actions, such as providing an unconditional bank guarantee and negotiating the terms of the lease, further supported the conclusion that a binding agreement existed.
The final orders of the court were that the defendant's defence was dismissed, and judgment was entered in favour of the plaintiff. The court held that the defendant had breached the binding agreement to lease and awarded damages to the plaintiff. The court also ordered the defendant to pay the plaintiff's costs of the proceedings.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The question whether parties, by signing a particular document, intended to create a legally binding agreement between them is to be determined objectively having regard to the terms of the document when read in light of the surrounding circumstances: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540, 548 ‑ 549; Anaconda Nickel v Tarmoola [1], [26]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165; Bowen v Alsanto [86]. 'Intention' in this context means intention to contract not what the parties intended by the terms of the contract: Anaconda Nickel v Tarmoola [1], [26]. Thus as was stated by the court in Toll (FGCT) v Alphapharm [38]:In their consideration in Ermogenous v Greek Orthodox Community of SA Inc [(2002) 209 CLR 95 [25]] of the requisite intention to create contractual relations, Gaudron, McHugh, Hayne and Callinan JJ said:Although the word 'intention' is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened [Codelfa ConstructionPty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 348 ‑ 353; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436]. It is not a search for the uncommunicated subjective motives or intentions of the parties. The surrounding circumstances may include pre-contractual negotiations and pre-contractual conduct as well as post-contractual conduct: Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166 [20]; Anaconda Nickel v Tarmoola [26]; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [25] ‑ [27], [139]; African Minerals Ltd v Pan Palladium Ltd [2003] NSWSC 268 [28] ‑ [30]; Bowen v Alsanto [87] ‑ [89]. The surrounding circumstances also include the commercial circumstances surrounding the particular transaction: Allen v Carbone [1975] HCA 14; (1975) 132 CLR 528, 531 ‑ 532. Against this background of applicable legal principles I turn to answering the question whether the signed offer to lease amounted to a legally binding agreement. As I have said, the defendant's primary case is that the signed offer to lease amounted to nothing more than an informal offer by the defendant to lease the premises subject to a final binding lease agreement being entered into between the parties. As I have also already said, the defendant's alternative case is that if a binding agreement did come into existence between the plaintiff and the defendant from the point in time that Mr Blayney informed the plaintiff that the defendant's board had approved the offer to lease, then the agreement was merely an agreement to negotiate a lease. In relation to this alternative case the defendant contends that the terms of the agreement to negotiate, on a proper construction of the offer to lease and in particular cl 4, cl 17 and cl 19, were as follows:1.The defendant would pay to the plaintiff the sum specified in cl 17.2.The plaintiff would provide to the defendant its standard form lease agreement and car park licence (cl 4).3.The parties would negotiate for a period of up to two months the terms of the lease agreement and the terms of the car parking licence which were additional to the terms set out in the offer to lease.4.During the two month negotiation period the plaintiff would not offer to enter into a lease of the premises with any other party.5.The defendant would pay the legal costs incurred by the plaintiff in negotiating with the defendant and preparing the formal lease documentation.6.Prior to entering into an agreement to lease the premises the defendant would provide to the plaintiff an unconditional bank guarantee equal to $189,090.18 as provided for in cl 19 of the offer to lease.7.If the parties were unable to reach an agreement in relation to the terms and conditions of the lease and the car parking licence the agreement to negotiate a lease would come to an end and the plaintiff would repay to the defendant the amount paid by the defendant under cl 17.8.If the parties did reach agreement in relation to the terms and conditions of the lease agreement and car parking licence but the defendant failed to execute the negotiated and prepared formal document, the plaintiff would be entitled to retain the amount paid under cl 17.