Astor Theatre WA Pty Ltd v Zimmermann Investments Pty Ltd
[2014] WASC 329
•17 SEPTEMBER 2014
ASTOR THEATRE WA PTY LTD -v- ZIMMERMANN INVESTMENTS PTY LTD [2014] WASC 329
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 329 | |
| 17/09/2014 | |||
| Case No: | CIV:1860/2014 | 28 AUGUST 2014 | |
| Coram: | CHANEY J | 28/08/14 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Summary judgment be entered for the defendant | ||
| B | |||
| PDF Version |
| Parties: | ASTOR THEATRE WA PTY LTD ZIMMERMANN INVESTMENTS PTY LTD |
Catchwords: | Application by defendant for summary judgment Whether an option to renew a lease was exercised |
Legislation: | Rules of the Supreme Court 1971 (WA) |
Case References: | Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) SR (NSW) 122; (1957) 76 WN (NSW) 72 Jones v Daniel [1894] 2 Ch 332 Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673 Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192 Theseus Exploration NL v Foyster (1972) 126 CLR 507 Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
ZIMMERMANN INVESTMENTS PTY LTD
Defendant
Catchwords:
Application by defendant for summary judgment - Whether an option to renew a lease was exercised
Legislation:
Rules of the Supreme Court 1971 (WA)
Result:
Summary judgment be entered for the defendant
Category: B
Representation:
Counsel:
Plaintiff : Mr J C Yeldon
Defendant : Mr M D Cuerden
Solicitors:
Plaintiff : Bowen Buchbinder Vilensky
Defendant : Lavan Legal
Cases referred to in judgment:
Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115
Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) SR (NSW) 122; (1957) 76 WN (NSW) 72
Jones v Daniel [1894] 2 Ch 332
Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673
Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192
Theseus Exploration NL v Foyster (1972) 126 CLR 507
Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229
- CHANEY J:
(These reasons were delivered extemporaneously on 28 August 2014 and have been edited from the transcript.)
1 This is an application by the defendant for summary judgment pursuant to O 16 of the Rules of the Supreme Court 1971 (WA). The background to the matter is that the plaintiff is the lessee of premises which are known as the Astor Theatre pursuant to a lease which commenced in 2009 and is due to expire on 1 September 2014, that is, in a matter of a few days.
The plaintiff's claim
2 The plaintiff's claim is set out in its further amended statement of claim which was filed a few days ago on 20 August 2014. The relief which is sought in the statement of claim is a declaration that the lease of the theatre has been extended for a further term of 5 years, beginning on 2 September 2014. There is also a claim for specific performance of the lease and a claim that the defendant is estopped from relying upon a default notice. It is common ground that the claim for equitable estoppel falls away if the first two heads of claim are not successful, on the basis that a notice of default would, for practical purposes, have no effect if, in fact, the lease has not been extended as the plaintiff submits. There is also a claim for damages, which the plaintiff has acknowledged has fallen away by reason of some deletions from the statement of claim in the latest version that has been filed.
Whether the notice of 30 May 2014 was an effective exercise of the option to renew the lease
3 Essentially, the case turns on a pleading in par 7 of the further amended statement of claim, which is that on 30 May 2014 the plaintiff gave notice under the lease to the defendant which, in substance and effect, was a request within the meaning of cl 5(15)(a) of the lease. That clause is headed 'Option of Renewal' and reads:
On the written request of the Lessee made not more than six months nor less than three (3) months before the expiration of the Term, and provided that there shall not at any time during the Term, have been any breach non-observance or non-performance of the Lessee's Covenants which have not been rectified at the date of the Lessee's written request for renewal the Lessor shall grant to the Lessee an extension of the term for the First Extended Term containing like covenants and provisos as are herein expressed and implied (except for the right of extension, the subject of this clause 5(15)(a)) and reserving to the Lessor a rent and an Equipment Rent from the commencement date of the First Extended Term to be calculated and determined in accordance with clause 2(6) (Market Rent Review).
4 The 'First Extended Term' is a reference to a period of five years commencing at the expiration of the initial term, which is on 2 September 2014.
5 Clause 11 of the lease contains a guarantee provision. The parties to the lease are not only the plaintiff as lessee, and the defendant as lessor, but include Glenn Francis Connell and Robert Ian Denman, who are together referred to in the lease as 'the guarantor'. Clause 11 provides for a guarantee by the guarantors. Clause 11(3) provides that:
Without limiting the generality of any other provision of this Lease the rights remedies and recourse of the Lessor pursuant to this Guarantee and Indemnity shall not in any way be prejudiced or affected and shall remain fully enforceable and the liability of the Guarantor under this Lease shall not be abrogated prejudiced limited or affected, notwithstanding any one or more or all of the following circumstances:
(c) Any variation of the provisions of this Lease and any holding over or extension of the Term or other continued occupation of the Premises by the Lessee.
6 Clause 11(9) provides that:
If this Lease shall contain an option to renew this Lease and the Term for a further term, and the Lessee shall exercise the option, the Lessor's obligation to grant that further term shall be subject to the Guarantor guaranteeing the Lessee's obligations under that further lease and indemnifying the Lessor in terms of the Guarantee and Indemnity contained in this Clause.
7 On 30 May 2014, which was a day or two before the date three months before the expiry of the lease, the plaintiff delivered to the lessor a notice which was entitled 'Notice of Exercise of Option to Renew'. The notice referred to the lease and continued as follows:
Take notice that pursuant to clause 5(15)(a) of the Lease, and subject to and conditional upon acceptance by the Lessor that Mr Robert Denman shall not be continuing as a Guarantor for the obligations of the Lessee for the First Extended Term, or any subsequent extension of the Lease, the Lessee hereby exercises its option to renew the Lease and requests an extension of the Term of the Lease for the First Extended Term, being a further period of five (5) years commencing on 2 September 2014.
8 It is that notice which is the document referred to in par 7 of the further amended statement of claim, to which I made reference above, as being the request within the meaning of cl 5(15)(a) of the lease which founds the plaintiff's claim to an entitlement to an extended term under the lease.
9 The defendant contends, in essence, that by reason of the conditional nature of the notice, it does not constitute an effective request for the purposes of cl 5(15)(a). If that is correct, the consequence is that the time for the making of a request pursuant to that clause has passed and the lease will terminate as from 1 September 2014.
10 In support of that contention, the defendant submits that a conditional exercise of an option is, in effect, not an exercise of the option, but constitutes a counter-offer to the grantor of the option and thus does not effectively bring about the conclusion of the contract which is the subject of the option. In support of that proposition, it relies on Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd,1 where the Full Court of the Supreme Court of New South Wales said:
An option for which consideration is given, or which is under seal, is a contract, but is also an offer which, when accepted, will create another contract or a sale. If no consideration is given for an option it is merely a revocable offer. (Williston on Contracts, revised ed, Vol 1, s 25.)
In the present case the lessor irrevocably offered to grant a lease. Its offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted and result in an agreement for a lease. A purported acceptance without performance of the prescribed conditions would not and could not be an acceptance of the offer. It would in reality be a counter offer by the original offeree requiring acceptance by the original offeror if an agreement were to result.
11 Essentially, the defendant contends that that is the proper characterisation of the notice of 30 May 2014.
12 The same topic was touched upon in Quadling v Robinson,2 a decision of the High Court, in which Gibbs J, as he then was, said:
In Laybutt v Amoco Australia Pty Ltd I discussed the nature of an option, but whether (as I think) the option in the present case was a conditional contract of sale, or whether it was merely an irrevocable offer to sell, it is clear that the exercise of the option, to be valid, must have been absolute and unqualified and must have bound the respondents to perform the very terms set out in the option. Authority is hardly necessary to support this statement, but some of the cases are collected in the judgment of Smith J in Ballas v Theophilos ... . (footnotes omitted)
13 So whether or not one characterises the nature of cl 5(15)(a) as a conditional contract of lease, or an irrevocable offer to grant a lease, the defendant's position is that the conditional nature of the notice of 30 May 2014 cannot amount to an effective exercise of the option such as to bind the lessor to grant a further term.
Whether clause 5(15)(a) is an option for renewal
14 The plaintiff raises a number of arguments in response. The first, which was not pursued orally, and I take to have been abandoned, was an argument that, on its proper construction, cl 5(15)(a) is not in fact an option. As I have said, I do not understand that contention to have been maintained in oral submissions but, in any event, if it were, I would reject it. The clause is headed 'Option of Renewal'. I accept that, as the plaintiff correctly points out, cl 1(2)(c) lease provides that headings are not to be construed as part of the agreement and are for indexing purposes only. However, in my view, the heading correctly identifies the true character of what is found in cl 5(15)(a). It is, in essence, a provision which allows the lessee the choice of whether or not it wishes to seek a further extension of the term, and in the event that it does choose to seek an extension of the term, or to request an extension of the term on the basis of a lease with like provisions, it obliges the landlord to grant the extended term. In substance, therefore, it is an option, regardless of whether or not the word 'option' is used in the context of the clause itself.
Was the notice a request for the purposes of cl 5(15)(a)?
15 The principal argument raised by the plaintiff is, as I understand it, that all that is required for the purposes of cl 5(15)(a) is that a request be made, and that, on its proper construction, the notice of 15 May 2014 was a request and that therefore the obligation arises for the landlord to grant the lease. That argument requires that certain terms of the notice be effectively ignored, specifically, the words 'subject to and conditional upon acceptance by the Lessor that Mr Robert Denman shall not be continuing as a Guarantor for the obligations of the Lessee for the First Extended Term.' In other words, as I understand the argument, it is that the request should not be construed as conditional but, rather, the making of the request within the timeframe created the entitlement to an extended term and imposed an obligation on the lessor to grant an extended term, and that the words to which I have referred did no more than, in effect, give the lessor a choice to choose an alternative arrangement, namely, a lease which is not subject to the same guarantees as the original lease.
16 In my view, that argument is simply untenable. It is inconsistent with the terms of the document which are clear and indisputable. In a decision of the Court of Appeal of this State in Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd3 Buss JA said:
If the lessee purports to exercise the option to renew by letter, proof of the election to enter into the lease for the renewed term depends on whether a hypothetical reasonable person who received the letter, and was aware of all the circumstances of its receipt including the dealings between the parties, would fairly understand the option to be exercised.
17 In supporting that proposition, his Honour referred to Jones v Daniel [1894] 2 Ch 332;4Carter v Hyde;5 and Prudential Assurance Co Ltd v Health Minders Pty Ltd.6
18 At [57] of the decision, his Honour made reference to the passage from Prudential Assurance Co Ltd v Health Minders Pty Ltd7 where Kirby P said:
What is in issue is whether, objectively, a reasonable person receiving that letter and reading all of it against the background of the dealings between the parties would, objectively speaking, draw the conclusion that the option was being exercised or not.
19 In my view, the objective meaning conveyed by the notice of 30 May 2014 is precisely in accordance with its terms. It could not be clearer than by the use of the words 'subject to and conditional upon acceptance by the Lessor that Mr Denman shall not be continuing as a Guarantor' that what was being proposed was, and was only, that the lessee was requesting a lease, or an extension of the term of the lease, subject to different conditions and, indeed, different parties, or at least not all of the same parties, given that Mr Denman would have been effectively released as a party to the lease. Those words simply cannot be ignored in the proper construction of the option to renew. In my view, it cannot be said that, in addition to the conditional request, the document somehow operates with a dual meaning being an unconditional request for the purposes of cl 5(15)(a).
Whether the notice contained sufficiently like covenants and provisos to invoke clause 5(15)(a)
20 The other argument which was raised by the plaintiff was that, contrary to the position argued by the defendant, all that was required to be the subject of a request under cl 5(15)(a) was the grant of an extension containing like covenants and provisos. As I understand the submission, it was that what was proposed was that all of the covenants, save Mr Denman's guarantee, were the subject of the request and that, therefore, the request is for sufficiently like covenants and provisos to invoke cl 5(15)(a).
21 There are some problems with that argument. First, if that is correct, what is the nature of the obligation of the lessor? Is it obliged to enter into a new lease which contains a material difference unilaterally imposed by way of a request from the lessee? For the lessor to be obliged in that way seems to me to be an untenable position, if that is the plaintiff's position; and, if it is not, then the alternative, that the lessee is obliged to take a lease on all the same conditions, which is inconsistent with the request that has been made, is also untenable.
22 The second difficulty which I see with the argument is that it leads to great uncertainty as to what covenants might acceptably be varied, and to what degree, in order to create the obligation under cl 5(15)(a) on the part of the lessor to grant an extended lease. Counsel for the plaintiff was unable to identify some dividing line as to which requests would properly fall within cl 5(15)(a) and which would not. In my view, that is simply impossible to do, which suggests that the approach urged by the plaintiff is not sustainable.
23 In my view, the word 'like' in cl 5(15)(a) contemplates, in substance, the same covenants and provisos as are in the original lease, changed only on a mutatis mutandis basis, for example, to account for the different termination date. I do not consider that that argument merits a conclusion that the notice of 30 May 2014 was within the terms of cl 5(15)(a).
24 In my view, and as counsel for the defendant submitted, the request which is required to be made in order to comply with cl 5(15)(a) is a request for an extension of the term on the basis of like covenants and provisos as are in the lease and, if it is a request for something different, as the request in this case was, then it does not fall within cl 5(15)(a). For those reasons, I have reached the view that the fundamental plank of the plaintiff's case cannot be made out.
Whether summary judgment ought be granted
25 It was urged on me by counsel for the plaintiff that this matter should not be dealt with by way of a summary judgment application but, rather, should be left to go to trial. In my view, the nature of the issue in this case is susceptible to a confident determination on the basis of the materials which are now before the Court which are, so far as I can ascertain, the only relevant factual matters that are required in order to determine the question of construction of the relevant clause of the lease and of the notice.
26 In Theseus Exploration NL v Foyster,8 reference was made to the undesirability of a court embarking on a determination of questions of law in the context of summary judgment applications. The passage to which I was taken from Gibbs J's decision in that case, at page 515, clearly supports the proposition that when difficult questions of law are raised in a summary judgment application, leave to defend should generally be given. It is clearly a matter of discretion for the court, in any given case, as to whether or not questions of laws raised are so difficult they ought not be decided summarily.9
27 In my view, given the very narrow factual compass involved in determining the questions in this matter, which really go no further than the existence of the clause of the lease and its terms, and then the giving of the notice (which is not in issue) and the terms of the notice itself, there is no reason why this question should await determination at trial. That is because there is nothing which could not have been said today which might be said at trial, given that the evidentiary foundation for the determination of the question is already before me.
28 So on that basis, and noting, as I do, that summary judgment should only be exercised with great care and should not be exercised unless it is clear that there is no real question to be tried, I consider this to be a case where summary judgment ought be granted. In my view, the notice of 30 May 2014 was clearly not an unconditional request for the purposes of cl 5(15)(a). It was, in substance, an offer to take an extended term on different terms and conditions, with one less party as guarantor. In its terms, it called for acceptance of that amended term by the lessor before the request was to be effective. The evidence establishes, and is not in issue, that the lessor did not accept the amended term. It was a term which clearly conflicted with cl 11(3)(c) and cl 11(9) in the lease to which I have referred earlier, and, therefore, was not a request to grant an extension of the term on the same covenants and provisos as in the original lease.
Conclusion
29 For those reasons, there should be judgment for the defendant.
1Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1959) SR (NSW) 122; (1957) 76 WN (NSW) 72.
2Quadling v Robinson [1976] HCA 31; (1976) 137 CLR 192, 200 - 201.
3Whitegum Petroleum Pty Ltd v Bernadini Pty Ltd [2010] WASCA 229 [34] (Buss JA), [111] (Murphy JA agreeing).
4Jones v Daniel [1894] 2 Ch 332, 335 (Romer J).
5Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115, 126 (Isaacs J).
6Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 683 (McHugh JA).
7Prudential Assurance Co Ltd v Health Minders Pty Ltd (1987) 9 NSWLR 673, 678.
8Theseus Exploration NL v Foyster (1972) 126 CLR 507.
9Theseus Exploration NL v Foyster (1972) 126 CLR 507, 514 (Barwick CJ), 515 (Gibbs J).
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