Bagata Pty Ltd v Sunstorm Pty Ltd

[2023] QSC 104

SUPREME COURT OF QUEENSLAND

CITATION:

Bagata Pty Ltd and Anor v Sunstorm Pty Ltd [2023] QSC 104

PARTIES:

BAGATA PTY LTD ACN 010 431 820

(first applicant)

AND
RUNNER PTY LTD ACN 053 149 698
as trustee for the RUNNER UNIT TRUST

(second applicant)

v

SUNSTORM PTY LTD ACN 010 887 591

(respondent)

FILE NO:

14424 of 2022

DIVISION:

Trial Division

PROCEEDING:

Decision on a separate question

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

16 May 2023

DELIVERED AT:

Brisbane

HEARING DATE:

14 April 2023, Written Submissions 21 April 2023

JUDGE:

Applegarth J

ORDER:

The separate question is answered “No”

CATCHWORDS:

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS – where the Landlord and Tenant entered into a lease of premises - where the Landlord and Tenant came into dispute over the Landlord’s storage of certain property on the premises and whether the Tenant’s activities were within the Permitted Use under the lease - where the dispute was referred to an Expert under a dispute resolution clause - where the Landlord challenges the validity of the Expert’s Determination on the basis of manifest error - where the Landlord contends that the Expert was in manifest error in concluding that the Tenant was entitled to vacant possession of the leased premises and that the Tenant’s activities were within the Permitted Use under the Lease - whether the Expert Determination is unenforceable by reason of manifest error

LANDLORD AND TENANT – LEASES AND TENANCY AGREEMENTS – CONSTRUCTION AND INTERPRETATION – OTHER MATTERS – where the Landlord’s chattels remained on the premises after the commencement of the lease – where the Expert concluded that the lease required the Landlord to deliver vacant possession – where the Landlord contends that the Expert erred because of an alleged oral agreement with the Tenant that the property could remain - where the Landlord contends that the Expert erred in construing the lease because vacant possession was not expressly required by the lease – whether the Expert was in manifest error in concluding that the Tenant was entitled to vacant possession at the commencement of the lease

Canaipa Developments Pty Ltd v TLC Jones Pty Ltd [2021] QSC 237, cited

Craigmoor Pty Ltd v Harvest Investment Co (No 2) Pty Ltd [2020] QSC 131, cited
Cumberland Consolidated Holdings Ltd v Ireland [1946] 1 KB 264, cited
Drane v Aqualyng Holdings [2017] QSC 233, cited
Flowgroup plc (In Liquidation) v Co-Operative Energy Ltd [2021] EWHC 344 (Comm), cited
Funtastic Ltd v Madman Film and Media Pty Ltd [2016] VSC 708, cited
Equuscorp Pty Ltd v Glengallan InvestmentsPty Ltd (2004) 218 CLR 471; [2004] HCA 55, cited
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133, cited
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited (2015) 256 CLR 104; [2015] HCA 37, cited
Natoli v Walker (1994) 217 ALR 201, cited
Sara& Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd [2023] UKSC 2, cited
711 Hogben Pty Ltd v Tadros [2016] NSWSC 697, cited
711 Hogben Pty Ltd v Tadros [2016] NSWSC 1683, cited
Shaolhaven City Council v Firedam Civil Engineering Pty Ltd (2011) 244 CLR 305; [2011] HCA 38, cited
TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4, cited
Vale Belvedere Pty Ltd v BD Coal Pty Ltd [2011] 2 Qd R 285, cited
Vale Belvedere Pty Ltd v BD Coal Pty Ltd & Anor [2012] QCA 77, cited
Veba Oil Supply & Trading GmbH v Petrotrade Inc [2001] EWCA Civ 1832; [2002] 1 All ER 703, cited

COUNSEL:

P Dunning KC and S J Carius for the applicants

S P Colditz for the respondent

SOLICITORS:

AJ & Co Lawyers for the applicants
JML Rose for the respondent

1. Since 2005, the respondent (“the Tenant”) has been in the business of manufacturing and supplying artworks to wholesale and retail customers.

2. In early 2022, it negotiated with the applicants (“the Landlord”) a lease of premises at Murarrie.  The Tenant requested a rent-free period of six months.  But after some negotiations, the parties agreed that, instead, the Tenant would receive a different form of incentive and would be given four months early access before the Commencement Date (1 July 2022) under the ten-year Lease.  This was to enable the Tenant to move into the premises, move its equipment into an area where the Landlord’s unused manufacturing equipment was located, and be in a position to start its operations at full capacity from the Commencement Date.

3. The Landlord had recently purchased a new warehouse and planned to use the four months early access period to move stock and equipment to its new premises. 

4. Clause 43.1 of the Lease that was executed by the Tenant on 28 March 2022, and by the Landlord on 6 April 2022, granted the Tenant a non-exclusive licence to access the premises prior to the Commencement Date for the purpose of installing and making operational plant and equipment and for planning purposes.  Any works carried out by the Tenant were to be completed in accordance with the drawings and specifications approved by the Landlord.  The Tenant was to give the Landlord a floor plan of the manufacturing floor space and a timetable by which specific sections of the premises were to be set up so that the Tenant could manufacture at full capacity from the Commencement Date.

5. Soon after that date the parties came into dispute.  A major issue was that many items that the Landlord had not sold or removed remained on the premises.  The Landlord said that it no longer intended to move some of the equipment to its new premises and, instead, intended to sell it.  The items included large industrial presses, industrial compressors, between 50 and 100 pallet loads of miscellaneous stock, and a large wooden boat.  The Tenant asked the Landlord to remove those chattels, but they remained on the premises.  The Landlord contended that it was not obliged to remove them. 

6. On 19 July 2022, the Tenant filed a proceeding in this Court seeking the removal of the property from the premises.  The Landlord applied to stay the proceeding in reliance upon the Expert Determination provisions in the Lease.  On 3 August 2022, Boddice J made a consent order that referred a series of disputes for Expert Determination.

   The Expert Determination

7. One part of the Landlord’s argument was that it had reached an oral agreement with the Tenant to allow it to store the items ultimately intended for sale until they were sold.  The Tenant denied that there was any such oral agreement. 

8. The Expert found the Landlord’s proof of the alleged oral agreement wanting.  The Landlord only provided general statements about the details of the alleged oral agreement.

9. The Expert also determined that vacant possession of the premises was required to be delivered to the Tenant by the Landlord on the Commencement Date, and that it had not been delivered. 

10. Another issue that was referred to the Expert for determination was whether the Tenant’s proposed use of the premises for its manufacturing and other activities was within the Permitted Use under the Lease.  The Tenant’s business included the storage of raw materials, such as inks, and the use of equipment that is very similar to a large 3D printer and other industrial-sized printers.  The equipment reproduces artwork on canvas, paper and other materials. 

11. Before the Lease was executed, the Landlord’s representative, Mr Sandy Corrie, went to where the Tenant was then conducting its business.  He went with the Tenant’s sole director, Mr Van de Beld “for a walk through that location prior to signing the Lease”.  Understandably, the Expert concluded that prior to executing the Lease, the Landlord knew that the Tenant was in the business of manufacturing reproduced artwork, having inspected the Tenant’s then premises. 

12. The Expert had regard to the terms of the Lease and extrinsic evidence in deciding the Permitted Use issue.  The terms included clause 43.1 about early access for the purpose of installing and making operational certain plant and equipment.  The expert concluded that upon a proper construction of the Lease, the Tenant’s manufacturing activities were within the Permitted Use.

    These proceedings

13. In this new proceeding, the Landlord challenges the validity of the Expert’s Determination.  In essence, it says that manifest errors were made in concluding that:

    ·the Tenant was entitled to vacant possession of the leased premises; and

    ·the Tenant’s activities were within the Permitted Use under the Lease.          

14. The Landlord seeks a declaration that the Expert Determination is “unenforceable by reason of manifest error”, and an order setting aside the Expert Determination, or such of the referred disputes as the Court determines ought be set aside in Equity.  The Landlord seeks declarations by the Court in substitution for the Expert Determination on the issues of vacant possession and Permitted Use.  In the alternative, it seeks consequential orders that the referred disputes that are set aside be determined by another expert.

15. The parties agreed that it was just and convenient for the Court to first decide the following separate question:

    “Is one or more of the matters alleged in paragraph 12 of the amended statement of claim a “manifest error” within the meaning of clause 39.3 of the lease between the parties, with the result that the expert determination of Mr Thirgood is not conclusive and binding under that clause?”

    I shall return to the meaning of “manifest error”.

16. In summary, paragraph 12 of the amended statement of claim alleges that the Expert erred:      

    ·in failing to find that there was an oral agreement between the parties that the property could remain on the premises until it was sold;

    ·in finding that if there had been any such oral agreement the Landlord would not have been entitled to rely upon it because any such agreement was contrary to the terms of the Lease;

    ·in construing the Lease in determining that the Landlord was required to deliver “vacant possession” to the Tenant as at the Commencement Date;

    ·in taking extrinsic evidence into account in construing the Lease; and

    ·in determining that the Tenant’s intended use was within the meaning of the Permitted Use under the Lease.

    Paragraph 12 also contends that the Expert exceeded his jurisdiction in considering and giving reasons for his opinion as to whether the intended use of the premises was lawful.  The Landlord also alleges that the Expert failed to give adequate reasons for the Expert Determination. 

    The issue

17. The Expert determined a number of other disputes and those findings are not challenged.  The alleged errors pleaded in paragraph 12 relate to the Expert’s determination of issues of vacant possession and Permitted Use.  The alleged errors raise two basic issues:

    (a)Was the Expert Determination in error?

    (b)If so, was it a “manifest error” within the meaning of clause 39.3 of the Lease that was material to the determination of the referred questions?

    The meaning of “manifest error”

18. The Dispute Resolution clause provides for the appointment of an Expert to determine a dispute and a process to do so, with submissions and determination within a short timeframe.  In making a determination, the Expert must “act as an expert and not as an arbitrator”.  Clause 39.3(c) provides:

    “In the absence of manifest error, the determination of the Expert is conclusive and binding on the parties.”

19. The term “manifest error” has a settled meaning in the context of such expert determinations, and the parties should be taken to have adopted that meaning in clause 39.3(c).

20. A “manifest error” is an error presented on the face of the Expert’s determination and accompanying reasons.[1]  A key requirement is that the error be apparent on the face of the determination and reasons.[2]

    [1]TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4 at [20] (“TX”).

    [2]Drane v Aqualyng Holdings [2017] QSC 233 at [20] (“Drane”); Craigmoor Pty Ltd v Harvest Investment Co (No 2) Pty Ltd [2020] QSC 131 at [51] (“Craigmoor”).

21. The error may be one of fact or law,[3] but it still must be “manifest”.

    [3]TX at [20]; Trampoline Enterprises Pty Ltd v Fresh Retailing Pty Ltd [2019] VSCA 74 at [158] (“Trampoline”).

22. Australian authorities have adopted definitions or tests for “manifest error” drawn from English authorities.  For example, in 711 Hogben Pty Ltd v Tadros,[4] Stevenson J described a “manifest error” as:

    “… an ‘oversight [or] blunder so obvious as to admit no difference of opinion’ R Banks, Lindley and Banks on Partnership, (19th ed 2013, Sweet & Maxwell) at 10–73, cited with approval by Peter Smith J in Walton Homes Ltd v Staffordshire County Council [2013] EWHC 2554 (Ch) or a conclusion ‘obviously wrong’ and ‘apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument’.”

    [4][2016] NSWSC 697 at [50] (“711 Hogben (No 1)”).

23. Beech-Jones J described this passage as succinctly stating the effect of various cases concerning the meaning of “manifest error” in a commercial setting.[5]  Beech-Jones J added, by reference to a New South Wales Court of Appeal authority, that a manifest error is one that “requires swift and easy persuasion and rapid recognition of the suggested error”.[6]

    [5]711 Hogben Pty Ltd v Tadros [2016] NSWSC 1683 at [19] (“711 Hogben (No 2)”).

    [6]711 Hogben Pty Ltd v Tadros (No 2) at [20], citing Natoli v Walker (1994) 217 ALR 201 at 215 [50] (“Natoli”).

24. A frequently cited definition of “manifest error” is that given by Simon Brown LJ in Veba Oil Supply & Trading GmbH v Petrotrade Inc,[7] which stated that manifest errors were:

    “… oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion.”

    [7][2001] EWCA Civ 1832; [2002] 1 All ER 703 (“Veba Oil”).

25. The Veba Oil test has been applied in a number of decisions and was referred to with approval by the Supreme Court of the United Kingdom in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd.[8]  That case concerned a challenge to a certificate, rather than an expert determination, on the grounds of “manifest error”.  The Supreme Court stated:[9]

    “It is therefore clear that the permitted defences of ‘manifest error or mathematical error or fraud’ are indeed narrow.  An arguable error will not suffice, however well-founded the allegation of error may ultimately prove to be.”

    [8][2023] UKSC 2 at [31]-[32] (“Sara”).

    [9]At [34].

    The requirement of obviousness

26. The requirement for a manifest error to be obvious or apparent has been confirmed by many Australian authorities.  Henry J reviewed the authorities in Drane.  The following passage from Funtastic Ltd v Madman Film and Media Pty Ltd[10] was quoted with approval:[11]

    “The Oxford English Dictionary defines ‘manifest’ as ‘clear obvious to the eye or mind’.  The Macquarie Dictionary similarly defines ‘manifest’ as ‘readily perceived by the eye or the understanding; evident; obvious; apparent; plain’.  A ‘manifest error’ in the context of arbitral awards liable to be set aside for ‘manifest error of law on the face of the award’ has been variously described as an error that is ‘apparent to the understanding of the reader’, ‘obvious rather than arguable’, ‘easily demonstrable without extensive investigation’, ‘an oversight [or] blunder so obvious as to admit no difference in opinion’ or ‘apparent to the judge upon a mere perusal of the reasoned award’.  It is clear that an error that is ‘abstruse, obscure or inconsequential’ will not fall within the definition of ‘manifest error’.”

    [10][2016] VSC 708 at [53] (“Funtastic”).

    [11]Drane at [17].

27. Henry J referred to the purpose of such a dispute resolution procedure and authorities that manifest error is “confined to clear and obvious errors”, and that “manifest” means “plain and obvious”.[12]

    [12]Drane at [17].

    The material from which the error must be apparent

28. A manifest error has been said to be one that “requires swift and easy persuasion and rapid recognition of the suggested error”.[13]  An often cited definition of “manifest error” is one that is “obvious or easily demonstrable without extensive investigation”.[14]  The error must be apparent on the face of the determination and reasons.

    [13]Natoli at 215, cited in 711 Hogben (No 2) at [20].

    [14]IIG Capital LLC v Van der Merwe [2007] EWHC 2631 (Ch), [2008] 1 All ER (Comm) 435 at [52] approved in Sara at [31]-[32].

29. The possibility that an expert’s determination may not be binding and conclusive permits regard to the reasons for the determination in order to detect a manifest error that was material to the determination.  This is not an invitation to a court to review all of the material that was before the Expert, or to conduct a fresh assessment of all of the submissions put to the Expert.  Depending on the nature and form of the reasons, including the concision with which submissions are summarised, and material and submissions referenced, the court may be required to refer to that material in order to properly understand the reasons.  In Drane,[15] Henry J observed:

    “Whether an error which exists objectively on the face of the determination or reasons is realised to be an error may itself depend upon knowledge of facts which were before the decision-maker.  Putting it differently, the need for the error to be manifest in the articulated determination or reasons does not mean the assessment of whether it has that quality must be performed in a vacuum in ignorance of what information the decision-maker worked with.  That is because it may sometimes only be in the light of that information that the existence of an error on the face of the determination or reasons will be realised.”

    [15]Drane at [21].

30. The possible need to read a submission or other document that is specifically referred to by the Expert in the determination does not detract from the principle that:[16]

    “It is axiomatic that a ‘manifest error’ consists of an error which is presented on the face of the expert’s determination or the reasons provided by the expert for that determination.”

    [16]Trampoline at [158].

    Errors of law must be manifest

31. A “manifest error” may be an error of law.  In Canaipa Developments Pty Ltd v TLC Jones Pty Ltd,[17] I discussed the principles governing challenges to an expert determination and observed:[18]

    “The issue in each case turns on the matter or matters the parties have entrusted to the expert determination.  That involves the proper construction of the contract at hand, bearing in mind the context in which it was created.  It does not involve finding points of similarity and difference between the case at hand and the facts of other cases.”

    [17][2021] QSC 237 at [57]-[77] (“Canaipa”).

    [18]At [74].

32. The Expert in this matter is an experienced solicitor and the disputes that were referred for his determination required him to consider questions of law such as the proper interpretation of the Lease, and to apply principles of contractual construction in doing so. 

33. The terms of the Dispute Resolution clause, clause 39, mean that the parties must be taken to have accepted that the Expert in arriving at a determination of a referred dispute might make an honest error and, provided the error was not a “manifest error”, the determination would be conclusive and binding on the parties.  For the determination to not be conclusive and binding, the error had to be “manifest” in the sense described and be apparent to a judge from reading the determination and the accompanying reasons that led to it.  As noted, the reasons might include evidence or submissions that were incorporated into the reasons by specific reference if this were necessary for the court to understand the reasons.

1. The Landlord submits that the manifest errors alleged by it concern specific errors of law about the proper construction of the Lease.  It submits that the proper construction of a contract involves an objective analysis that can only produce one true meaning.[19]  Allsop P in Onesteel went on to observe “that there is one true meaning does not detract from the pervasive reality that a contract will often have potentially more than one meaning” and that “reasonable minds often differ about what is the true meaning”.[20]  His Honour added:[21]

   “In the context of litigation over the meaning of words, the true meaning is the choice made from the competing potential meanings by the last court that has authority on the matter.”

   [19]Onesteel Manufacturing Pty Ltd v Bluescope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1 at 20; [2013] NSWCA 27 at [61] (“Onesteel”).

   [20]At 20 [61].

   [21]At 21 [61].

2. If it be the case that certain questions of law, such as the proper construction of a contract, can only produce one right answer, this does not circumvent the requirement for a “manifest error”.  The error in answering the question of law must be apparent or obvious from a reading of the reasons.  I respectfully adopt what was said in Flowgroup plc v Co-Operative Energy Ltd:[22] 

   “If, pursuant to the contract, the expert is engaged … to make determinations on matters of contractual interpretation, I see no reason why a challenge should not have to circumvent the manifest error test as I have enunciated it.”

   [22][2021] EWHC 344 (Comm) at [32] (“Flowgroup”), a decision approved by the UK Supreme Court in Sara at [31]-[32].

3. Having regard to the subject matter of some of the referred questions, the parties agreed, absent manifest error, “to be bound by the expert’s determination on the question of construction (or some other question of law) as well as the application of the relevant provision to the facts”.[23]

   [23]Canaipa at [69].

4. In some cases, the term “manifest error” is applied in the context of a determination that involves questions of fact in which an expert, such as a valuer, applies principles in evaluating the value of a property.  In other cases, an expert may be required to apply a principle of law in construing a contractual provision in order to determine a matter.  Irrespective of the nature of the case, the Australian authorities, like their English counterparts, have emphasised the requirement that a “manifest error” whether of fact or law be “apparent”,[24] “clear and obvious”, or “plain and obvious”.[25]  As was stated in 711 Hogben (No 1),[26] a “manifest error” is a conclusion that is “obviously wrong” and “apparent to the judge upon a mere perusal of the reasoned award itself without the benefit of adversarial argument”.

   [24]See, for example, Craigmoor at [51].

   [25]See, for example, Drane at [17].

   [26]At [50].

5. The fact that a question of law permits only one right answer does not mean that an erroneous answer will be plain and obvious, and therefore a “manifest error”.

6. An arguable error of law, or an error of law that would only be apparent upon a re‑litigation of the issue in a court with the benefit of adversarial argument is not a manifest error that is apparent upon a reading of the reasons. 

   The reason for the error to be obvious or plain from a reading of the reasons

7. Courts have emphasised the need for restraint in arriving at a conclusion of “manifest error” and that the process by which such an error might be detected should not resemble a trial.  Circumscribing the circumstances in which an expert’s determination can be challenged is necessary to give effect to the parties’ bargain.[27]  As Philip McMurdo J (as his Honour then was), explained in Vale Belvedere Pty Ltd v BD Coal Pty Ltd:[28]

   “The parties have agreed to balance the competing considerations of accuracy against certainty and finality by depriving the valuation of effect but only where there is a manifest error.  That is not only because such an error would be apparent, without the need for any substantial factual inquiry, but also because it could be promptly corrected.”

   [27]Flowgroup at [21].

   [28][2011] 2 Qd R 285 at 399 [40].

8. An inquiry into the existence of a “manifest error” that is apparent from a reading of the determination and the reasons should not become a reassessment by a court of the evidence and submissions that were before the decision-maker.  This is because of the subject matter of the determination and the process that governs it.  In a case like this, the Expert acts as an expert, not as an arbitrator or judicial decision‑maker.  The process is truncated by the agreement of the parties.  The parties commit to such a form of rapid determination by an expert, where the scope for honest error must be significant and taken to be accepted by the parties.[29]  Having committed to such an expedited, non-judicial determination, it would be odd if the parties were taken to have countenanced a Court engaging in something akin to a rehearing of the matter with the benefit of adversarial argument, unconstrained by a need for expedition in deciding whether there was a “manifest error”. 

   [29]Vale Belvedere Pty Ltd v BD Coal Pty Ltd & Anor [2012] QCA 77 at [37].

9. The limited scope to refer to submissions and material that are specifically referred to in the reasons, in order to understand the reasons and decide whether they are affected by “manifest error”, does not permit a Court to wander through the material that was before the decision-maker or to conduct anything in the nature of an appeal by way of rehearing or a trial of issues that the parties committed to expert determination.  To do so would not give effect to the parties’ bargain.

10. By the same token, effect should be given to the parties’ bargain by allowing a party to demonstrate a “manifest error”, if it can.  This is because the parties agreed to a process of expert determination by which the determination would be conclusive and binding on them, but only in the absence of “manifest error”.  The parties did not agree to be bound by a determination where a manifest error was material to the determination or a determination that otherwise did not constitute an expert determination in accordance with their agreement.

    Materiality

11. In 711 Hogben (No 2),[30] Beech-Jones J observed that in Veba Oil, Simon Brown LJ added:

    “… a requirement of materiality such that his Honour described manifest errors as ‘oversights and blunders so obvious and obviously capable of affecting the determination as to admit of no difference of opinion’ (at [33]).”

    [30]At [20].

12. In the passage earlier quoted from Funtastic,[31] the Supreme Court of Victoria stated that an inconsequential error “will not fall within the definition of ‘manifest error’”.

    [31]At [17].

13. In supplementary submissions the Landlord contended that even if there is a requirement of materiality as part of the law of Australia, it has no application in the present case.  This is because, according to the Landlord, any manifest error in the construction of the Lease or in ascertaining the rights and obligations of the parties necessarily would be material.

14. It is not necessary for me to decide whether “materiality” is an element of the term “manifest error”.  However, I do not regard the requirement of materiality as flowing so much from the meaning of “manifest”.  The requirement of materiality is derived more from the words of the clause and its purpose.  The parties agreed to an expert determination that would be conclusive and binding on them, absent “manifest error” in the determination.  A manifest error on a point that was not part of the reasoning in support of the determination of a question would be immaterial or inconsequential.  It would not prevent a determination that did not depend upon that point from being conclusive and binding.

15. Principles of contractual construction would not lead one to suppose that the parties intended an error that was inconsequential or immaterial to the determination to be one that prevented the determination from being conclusive and binding.    

Was there a manifest error in not finding the alleged oral agreement?

1. The Expert addressed the Landlord’s submission that there was an oral agreement about the storage of property on the premises after the Commencement Date, and that, accordingly, the Tenant was not entitled to vacant possession.  The Expert noted that the Landlord “only provided general statements regarding the details of the Alleged Oral Agreement in its submissions”, being conversations that are alleged to have preceded the execution of the Lease.  The Expert cited the relevant evidence.  It is unnecessary to quote that evidence to the extent that it might be taken to have been incorporated into the Expert’s reasons.  It is sufficient to conclude that the Expert’s view about the absence of proof of specific statements that were said to have founded the alleged collateral oral agreement was open to the Expert in evaluating the evidence and submissions.

2. In addition to the absence of the kind of specific statements that would need to be proven to establish that a binding oral contract was formed, claims that there was an additional collateral contract alongside an apparently complete written contract “naturally excite scepticism”.[32]

   [32]J D Heydon, Heydon on Contract (Lawbook Co., 2019) at [7.60], citing Heilbut, Symons & Co v Bickleton [1913] AC 30 at 47.

3. The Expert’s conclusion about proof of the alleged collateral oral agreement has not been shown to be in error, let alone to be a manifest error.

   An estoppel argument

4. In this Court the Landlord complains that the Expert failed to consider whether the Tenant was estopped from resiling from the representation that the property could remain on the premises until sold, even if not sold during the early access period.

5. It submits that even if the Expert was correct in concluding that there was no oral agreement, this does not rule out the possibility that the Tenant’s conduct gave rise to an estoppel.  The alleged failure to consider the estoppel argument is said to be an error in reasoning on the face of the record that is a manifest error within the meaning of clause 39.3.

6. A noteworthy point raised by the Tenant is the omission of the word “estoppel” or any variation of that term in the written submissions to the Expert.  Instead, the Landlord now relies upon the fact that among the material provided to the Expert was a copy of the defence that had been filed in the Supreme Court proceeding.

7. The Landlord’s submissions to the Expert at [76] reproduced some sub-paragraphs from that document in contending:

   “Further, or in the alternative:

   (a)  prior to executing the lease, the tenant orally agreed that Willem could store the fixtures and chattels for sale at the premises [and] they could remain at the premises until they were sold, even if they were not sold during the early access period; and

   (b)  the respondents relied upon this representation, as the respondent provided the early access period on the basis of the representation and there was no reason to doubt the accuracy or veracity of the representation;

   (c)  the respondents did not take steps to remove the fixtures and chattels for sale during the early access period because of the representation; and

   (d)  it would be inequitable to allow the applicant to resile from the representation, as the respondents have relied upon the representation and would suffer the detriment of being in breach of the lease because of the representation and applicant’s subsequent conduct.”

8. These submissions appeared in a section concerned with the issue of whether the Tenant “obstructed or otherwise prevented the Landlord from accessing the premises to remove the fixtures and chattels, and if so, which fixtures and chattels, how, and when?”      

9. The Landlord’s submissions to the Expert addressed the parol evidence rule and provided the Expert with a number of cases about collateral contracts, but no authorities about estoppel.  In any case, the Tenant’s submissions in reply to the Expert denied the alleged oral agreement and made a submission about how the Expert should evaluate the evidence about alleged conversations.  The Landlord’s last set of submissions were that the parol evidence rule:

   “leaves open the possibility of a collateral agreement to the lease (which is the [Landlord’s] position in relation to the oral storage agreement), but prohibits any evidence to establish any obligation or interpretation of the Lease contrary to the express terms of the Lease.”

10. Given the way in which the parties presented their submissions about an alleged oral agreement made prior to executing the Lease, it is not surprising that the Expert did not conduct an excursion into the law governing estoppel.  He was not required to do so.  This is because the absence of satisfactory proof by the Landlord of specific statements that were alleged to have founded a collateral oral agreement was also an answer to any alleged representation founding an estoppel. 

11. The Landlord’s submissions to the Expert at [76] indicates that its case about it being inequitable to allow the applicant to resile from “the representation” does not relate to a representation that fell short of, or was different to, the statements that were alleged to have constituted an oral agreement.  Paragraph 76(b) indicates that the alleged representation arose from the oral agreement itself.  The absence of satisfactory proof of the alleged oral agreement disposed of the submission in [76], as well as any unarticulated, unstated reliance by the Landlord on an estoppel.

12. In addition, had I found that the Expert was required to address an estoppel submission and failed to do so, any failure to do so would have been inconsequential or immaterial to the determination for the same reason.

13. I conclude that the Expert did not fail to deal with an estoppel argument, even an argument that did not use the word “estoppel” or any variation of it.  The factual foundation for that argument, namely a representation arising from an alleged oral agreement, was not proven by the Landlord.   

    Legal consequences if the alleged collateral oral agreement had been proven

14. After finding that the Lease was a complete contract between the parties and regulated all their rights and responsibilities, including any rights in relation to possession and any permission for the Landlord to store its property at the premises after the Commencement Date, the Expert stated:

    “The Landlord is not permitted, by operation of the parol evidence rule, to rely upon any oral agreement regarding the Landlord’s property to establish any obligation or interpretation of the Lease contrary to the express terms of the Lease.”

    This correct observation about the parol evidence rule needs to be seen in the context of the arguments put to the Expert by the Landlord.  

15. The Landlord made submissions to the Expert about the operation of the parol evidence rule in order to persuade the Expert to not rely on recordings of conversations made by the Tenant.  The Expert noted:

    “Notwithstanding that submission, it stated that I should also find that there was a collateral oral agreement to the Lease regarding the storage of the Landlord’s property on the Premises after the Commencement Date, and accordingly, that the Tenant is not entitled to vacant possession.”

16. The Expert stated the principle embodied in the parol evidence rule, namely, that:

    “where a contract is reduced into writing, where the contract appears in the writing to be entire, it is presumed that the writing contains all the terms of it and evidence will not be admitted of any previous or contemporaneous agreement which would have the effect of adding to or varying it in any way.”

17. As already noted, the Expert did not find that the alleged collateral oral agreement was made.  The Landlord’s case, including the evidence of Mr Sandy Corrie and his son, provided only general statements about the alleged oral agreement, such that it was not proven.  The Tenant made persuasive submissions to the Expert about the quality of the evidence about what was said by the parties about the sale and removal of the relevant chattels. 

18. The Expert gave three convincing reasons, based on the Landlord’s submissions, as to why the Lease was the entire agreement between the parties, thereby enlivening the parol evidence rule.  Having reached that conclusion, the Expert considered its implications in the manner that I have already quoted.  One such consequence concerns the operation of the parol evidence rule. 

19. In this proceeding, the Landlord submits that the Expert erred in law because a collateral contract, if proven, is separate from the main contract and is not subject to the parol evidence rule. 

20. The Landlord is correct that the parol evidence rule cannot exclude the possibility of a collateral oral contract.[33]  The parol evidence rule applies only to contracts that are wholly in writing.  A different situation to that governed by the parol evidence rule may arise where there is a contract wholly in writing and an oral collateral contract.[34]

    [33]Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 144-145 (‘Hoyt’s’); Equuscorp Pty Ltd v Glengallan InvestmentsPty Ltd (2004) 218 CLR 471 at 484 [36]; [2004] HCA 55 at [36].

    [34]State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 191E; County Securities Pty Ltd vChallengerGroup Holdings Pty Ltd [2008] NSWCA 193 at [8]; New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 76G.

21. The Expert considered and answered the question of whether the contract is wholly in writing.  In that regard, he applied settled principles that were stated in the Landlord’s submissions to the Expert, and that are restated in the Landlord’s submissions in this Court.  I adopt the Landlord’s statement of those principles in the next paragraph. 

22. When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties.[35]  Once a written document is brought into existence, which on its face indicates that it is the record of the bargain, it will be taken to be just that unless evidence is led to displace this presumption.[36]

    [35]Gordon v MacGregor (1909) 8 CLR 316 at 319-320, 322-323 (“Gordon”); Hoyt’s at 143-144; Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 at 517; Jessop v McInteer [2003] QCA 170 at [53].

    [36]Gordon.

23. Therefore, as a matter of legal principle, a collateral oral contract, if proven, has the potential to affect the parties’ rights.  The problem for the Landlord was that no such collateral oral contract was proven by the general statements that it proffered as proof of its existence. 

24. The fact that the Expert did not address all of the potential legal implications of a collateral oral agreement is of no consequence in circumstances in which the alleged collateral oral agreement was not proven. 

25. In addition, if it had been, and the terms of the alleged oral agreement were inconsistent with the terms of the Lease, then they would have been ineffective to alter its operation.  The requirement for consistency, often described as the rule in Hoyt’s v Spencer,[37] means that while a collateral contract may supplement the main contract, it must not alter its terms.  If the alleged oral agreement had been proven and the Lease provided for vacant possession, then there would have been such an inconsistency.  A collateral contract to permit the chattels in question to remain on the premises would qualify and be inconsistent with an obligation to deliver vacant possession at the Commencement Date.  The Expert noted that any oral agreement to store property at the premises after the Commencement Date was contrary to the express terms of the Lease. 

    [37]Hoyt’s at 141, 147-148.

1. The essential point, however, is that the alleged collateral oral agreement was not proven.  Therefore, the Expert’s consideration of the various legal consequences that may have followed if the collateral oral agreement had been proven are not material to the Expert’s determination of the disputes that were referred to him.

   Was there a manifest error in determining that the Landlord was required to deliver vacant possession at the Commencement Date?

2. The Tenant submitted to the Expert that it was entitled to vacant possession of the premises and the Landlord was required to remove certain identified chattels to enable this.  The chattels, as listed in a schedule to the Tenant’s pleadings, are:

   “(a)about 50 to 100 pallet loads of miscellaneous stock;

   (b)one wooden boat on a stand together with its disassembled internal componentry;

   (c)one conveyor belt and table;

   (d)one hopper with a stand;

   (e)three industrial compressors;

   (f)one frame (with dimensions of about 7 metres by 2.2 metres by 2 metres);

   (g)one 390 tonne industrial press;

   (h)one 300 tonne industrial press;

   (i)five incline industrial presses; and

   (j)the shelves, tables, stock, and machine present inside two internal rooms within the Premises.”

3. The Landlord’s case was that it was not required to deliver vacant possession to the Tenant because:

   (a)it was not a term of the Lease; or

   (b)the Tenant agreed prior to the execution of the Lease that the property for sale could remain on the premises, even if not sold by the Commencement Date.  

4. As matters transpired, the chattels were not sold.  The industrial equipment was of no use to the Tenant’s entirely different activities and, in any event, some of it was unworkable and therefore not in a condition to enable it to be easily sold.  If there had been a collateral oral agreement that allowed the chattels to remain at the premises until they were sold, then potentially they may have remained on the premises for a substantial time.  In any event, their presence on the premises after the Commencement Date was of such a magnitude as to constitute a substantial impediment to the Tenant’s use of the premises.  No challenge is made to the Expert’s determination in that regard.  Also, no challenge is made to the Expert’s determination that the large industrial presses were chattels. 

5. On the issue of vacant possession, the parties provided the Expert with written submissions about the terms of the Lease and whether, properly construed, the Lease required vacant possession to be delivered. 

6. In essence, the Tenant submitted that in granting it possession of the premises on the terms that it did, and in making specific provision in relation to certain “Landlord’s Property”, the Lease could not be construed as requiring anything other than the delivery of vacant possession to the Tenant upon the Commencement Date.

7. The requirement to grant possession of the premises created the presumption that the possession that the Tenant would enjoy would be “vacant possession”, subject to any specific terms in the Lease, such as one dealing with the “Landlord’s Property”. 

8. The Landlord’s position during the Expert Determination process was that the Lease entitled it after the Commencement Date to use the premises to which it had granted exclusive possession to the Tenant as a place to store a large boat, unsold or unsaleable equipment, stock and other chattels that were of no use to the Tenant, and to do so even if this impeded the Tenant’s use of the premises.  According to the Tenant, the Landlord’s position was contrary to the terms and purpose of the Lease, and such a construction would be absurd.  A reasonable businessperson would not have understood that the Lease allowed the Landlord to leave or store equipment and other items on the premises that were of no use to the Tenant and that impeded its activities. 

9. The Landlord submitted to the Expert that:

   (a)“vacant possession” was not an express term of the Lease;

   (b)the Tenant agreed in clause 15.1 to accept the Premises in an “as is/where is” condition, and this included the presence of the contentious chattels; and

   (c)the Lease did not contain a clause that required it to remove that property.

10. The Expert gave detailed consideration to the parties’ arguments.  He had regard to the legal meaning of “vacant possession”, as explained in the often cited judgment of Lord Greene MR in Cumberland Consolidated Holdings Ltd v Ireland.[38] 

    [38][1946] 1 KB 264 at 270-271 (“Cumberland”).

11. The Expert appreciated the distinction between a right to “exclusive possession” that is granted by a lease and “vacant possession”.  He applied the principles of construction of commercial contracts, to which I will return in the next section.  He had regard to the terms of the Lease, by which the Landlord leased the premises to the Tenant for the term, subject to the covenants and conditions contained in the Schedule attached to the Lease.  The Expert reached the conclusion that a reasonable businessperson would have understood the terms of the Lease to grant the Tenant possession of the premises for the term on the basis that the Tenant paid the Landlord the rent and that this arrangement was subject to the terms and conditions set out in the Lease. 

12. Relevant terms included clause 41.9, by which each party has an obligation to do all things necessary to give effect to the Lease.  The Tenant also was entitled to “quiet possession”.  Quiet possession is, of course, a different concept to “vacant possession”.  However, the “quiet possession” clause provided textual support for the perhaps obvious point that the Lease granted possession, not simply “exclusive possession” to the Tenant, as that term is understood in law.  A requirement to grant “possession” will ordinarily be construed as requiring delivery of vacant possession.

13. The Expert also had regard to provisions of the Lease granting the Landlord restricted access rights, the inclusion of special conditions in the Schedule of the Lease, and the absence of any special condition allowing the Landlord to store chattels of the kind under consideration on the premises after the Commencement Date.  The Expert at [53] observed:

    “Despite the Parties including their own special conditions in the Schedule of the Lease, apart from some limited access rights which I deal with later, the Parties did not limit the possession of the Premises granted to the Tenant.  The Parties did not give the Landlord a right to store the Landlord’s Property on the Premises.  To permit the Landlord to restrict the core commercial bargain between the Parties would require, in my view, clear words of limitation somewhere in the Lease.  There are no such restrictions.”

14. The Expert concluded that a reasonable businessperson construing the terms of the Lease would find that the Landlord had no right to leave the chattels, which I have listed above, at the premises after the Commencement Date.  He continued at [55]:

    “In other words, a reasonable businessperson would construe the Lease as providing the Tenant with vacant possession.  Therefore, I agree with the Tenant’s submissions that possession under a lease such as the present one is presumed to be vacant possession.  If the Parties intended for this to be qualified in some way, it would need to have been expressly dealt with in the terms of the Lease.  Despite going into some detail on other conditions, there is nothing in the Lease which qualifies what would otherwise be presumed to be the case from the ordinary meaning of the terms of the Lease.  In my view, there is no other reasonable construction of the Lease.  Any other interpretation would, in my respectful view, be absurd.”

    Did these reasons disclose a “manifest error”?

15. I am not persuaded that the Expert’s Determination that vacant possession of the premises was required to be delivered to the Tenant by the Landlord on the Commencement Date, or the reasons for that conclusion, are affected by manifest error.  On the contrary, the reasons are convincing.

16. My finding that the determination about vacant possession is not affected by manifest error is made according to the meaning of “manifest error” that I have discussed above.  My consideration of the issue was not confined to the Expert’s reasons or based on a cursory consideration of the part of the reasons relating to vacant possession in order to decide whether there was some blunder on the issue of contractual interpretation or that the conclusion was “obviously wrong”.  My finding is not based on a “mere perusal” of the actual reasons.  I have had regard to the relevant parts of the parties’ submissions to the Expert that were summarised by him.  Having done so, I am not persuaded that the Expert was in error on the issue of vacant possession, let alone that he was in manifest error.

17. The Landlord correctly submits and the Expert accepted that the question as to whether the Lease required the Landlord to give “vacant possession” involved a construction of the parties’ contract.  The question is one of law.  That being the case, there is only one right answer.  The issue being determined differs from one involving different kinds of evaluation, such as the kind of evaluation that an expert may make in arriving at the value of a property or a fair market rent.  In that different context there may be scope for different figures or outcomes that are not in error. 

18. The Landlord argues that the proper construction of a document involves a binary choice that is resolved on the basis of well-settled principles, and that a certain construction is either in error or it is not.  It might be said in response that the task of construction involves an exercise in evaluation, where different considerations captured by the governing principles are weighed.  I will, however, accept the general proposition that the proper application of those principles permits only one right answer.  On this view, the fact that a construction of the document is open, strongly arguable, or even persuasive, is not good enough if it is erroneous.

19. In a proceeding like this, the task of the Judge is not to match the qualities of Dworkin’s imaginary Justice Hercules in arriving at the one right answer to an issue of contractual construction.  The proceeding is not an appeal by way of rehearing based on the materials that were before the Expert.  The Court’s task is not to search for error in reasons that are not expected to include the type of reasons expected of a Judge or arbitrator.  The parties entrusted the determination to an expert, not an arbitrator.  The parties also were paying the Expert’s costs under an expedited process.  They were not paying the Expert to write a treatise.  Instead, they were paying him to consider the evidence and their submissions and to provide a written statement of his reasons for reaching a determination.

20. I should say at this point that the Expert’s reasons are clear, comprehensive, and expose his reasoning.  This includes his reasoning on the issue of vacant possession.  I will return to the adequacy of his reasons later. 

21. The parties might have, but did not, include a provision in the Lease that made the determination conclusive and binding, in the absence of manifest error or an error of law.  Instead, any error of law, like any error of fact, must be a manifest error. 

22. The parties agreed that an error on the part of the Expert would not invalidate the decision, unless it was manifest. 

23. The reasons of the Expert on the issue of vacant possession, including submissions and material that were incorporated into those reasons by reference or footnoting, have not been shown to be in manifest error.  No error of law is apparent.  The Expert applied settled principles of contractual construction, considered competing arguments and reached a conclusion on the issue of construction that is not apparently in error.  Having considered the Expert’s reasons and the written submissions made to him that were summarised in the reasons, I conclude that there was no manifest error in determining that the Landlord was required to deliver vacant possession at the Commencement Date.   

    The vacant possession arguments in greater detail

24. Some authorities suggest that the conclusion about whether a determination contains a “manifest error” is made upon “a mere perusal of the reasoned award itself without the benefit of adversarial argument”.[39]  In this proceeding, counsel for the Landlord in both written and oral submissions contended that the Expert’s Determination on vacant possession was wrong.  These arguments developed submissions made by the Landlord to the Expert.  The Tenant relied upon its written submissions to the Expert in support of the correctness of the Expert’s Determination and, therefore, why it was not in manifest error.

    [39]711 Hogben (No 1) at [50], approved in 711 Hogben (No 2) at [19].

25. The following observations are not intended to be an independent determination of the issue of contractual construction.  Instead, they provide additional reasons as to why I conclude that the Expert’s Determination was not in manifest error.

    The absence of an express, specific obligation to deliver vacant possession

26. The Landlord relies on the absence of an express obligation to deliver vacant possession at the commencement of the Lease.  The Tenant’s response is that such an obligation is implicit from the granting of possession under the Lease, which also entails the grant of “exclusive possession”, and other terms of the Lease.

27. The starting point is that the grant of the Lease would be understood by a reasonable businessperson to implicitly grant possession of the premises to the Tenant for the term of the Lease, subject to the covenants and conditions contained in it.  An obligation to give possession would ordinarily be construed as requiring delivery of vacant possession, unless the terms of the Lease qualified that obligation by permitting or requiring the Landlord to leave certain property on the premises. 

28. Vacant possession is a possessory right free of “people, chattels and interests”.[40]

    [40]Goldman Sachs International v Procession House Trustees Ltd [2018] EWHC 1523 (Ch) at [39], approved in Capital Park Leeds plc v Global Radio Services Ltd [2021] EWCA Civ 995 at [13].

29. The view that, upon a proper construction of the Lease, the Landlord was required to give vacant possession does not rest upon the proposition that a lease grants “exclusive possession” free from other interests.  It relies on the terms of the Lease as a whole and its commercial purpose. 

30. As to the commercial purpose or objects to be secured by the Lease and the need to construe it so as to avoid working commercial inconvenience, it would make little or no sense to allow the Landlord under the Lease to store or use stock and equipment that was not removed at the start of the Lease, including using the premises as the location to store equipment that might be sold at some future date, without granting the Landlord a right of access to move, repair, secure or sell the chattels.  More importantly, it would make little or no commercial sense to allow the Landlord to leave such items on the premises if they substantially prevented or interfered with the enjoyment of the right of possession that was granted to the Tenant under the Lease.

31. The term “vacant possession” is used in the context of vendor and purchaser cases,[41] and also in the context of the obligation of a tenant to deliver up vacant possession at the conclusion of a lease.[42]  The interest of a landlord in obtaining vacant possession at the end of a lease is obvious.  Vacant possession is required by the landlord to use the premises or to sell the property.  Leases like the present Lease often provide for the consequences of a tenant leaving its property at the premises at the conclusion of the lease.

    [41]See, for example, Cumberland.

    [42]See, for example, Waterhouse v Waugh [2003] NSWCA 139; Ibrend Estates BV v NYK Logistics(UK) Ltd [2011] 4 All ER 539; [2011] EWCA Civ 683.

32. The Tenant relied upon authorities about “vacant possession” in other contexts by way of analogy.  In the vendor and purchaser case of Cumberland, Lord Greene MR stated:[43]

    “Subject to the rule de minimis a vendor who leaves property of his own on the premises on completion cannot … be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment … the right to actual unimpeded physical enjoyment is comprised in the right to vacant possession.  We cannot see why the existence of a physical impediment to such enjoyment … should stand in a different position to an impediment caused by the presence of a trespasser … When we speak of a physical impediment we do not mean that any physical impediment will do.  It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property.”

    [43]Cumberland at 270-271.

33. By way of analogy, the Tenant’s case is that the implicit and fundamental requirement to deliver possession to it at the commencement of the Lease would be understood as requiring delivery of vacant possession.  A landlord that does not give vacant possession may be said to be claiming a right to use the premises for its own purposes, namely, as a place of deposit of its own chattels inconsistent with the right of the tenant that is entitled to possession, unimpeded physical enjoyment of the premises and quiet enjoyment from intrusion by the landlord to deal with the chattels that it left on the premises (subject to any express right to access the premises for specified purposes).

34. The Landlord points to the fact that the only place where the Lease uses the expression “vacant possession” is in clause 32.5(b), which concerns the rights of the Landlord to re-enter the premises in certain circumstances where the Tenant is in default.  One such right stated by clause 32.5(b) is to seek “a warrant for vacant possession”. 

35. In my view, that clause is an unpersuasive reason to conclude that the Landlord was not required to give vacant possession at the start of the Lease.  It concerns a certain process, namely, “a warrant for vacant possession”.  The specific reference to “vacant possession” at the termination of the Lease, in the context of “a warrant for vacant possession”, might be said to highlight the absence of an express requirement to give the Tenant the same thing at the Lease’s commencement.  However, if anything, clause 32.5(b)’s reference to the Landlord’s right to seek a warrant for vacant possession suggests that, in those circumstances, the Tenant was required to give to the Landlord the very thing that the Landlord had to give to it at the start of the Lease, namely vacant possession. 

36. Clause 22 of the Lease expressly addresses a failure to remove the Tenant’s property.  The Lease obliges the Tenant to remove its chattels at the end of the Lease, to enable the Landlord to regain unimpeded use of the Premises in a state of vacant possession upon the termination of the Lease. 

37. The Lease implicitly requires the Tenant to give vacant possession at the end of the Lease (subject to any specific provisions to the contrary) in order to allow the Landlord to exercise its unimpeded use of the premises.  There seems no reason in principle why there should not be a corresponding implicit requirement for the benefit of the Tenant at the start of the Lease to deliver vacant possession.  Such a requirement flows from the grant of possession and is reinforced by the express obligation contained in clause 41.9, by which each party has an obligation to do all things necessary to give effect to the Lease. 

1. By granting possession of the premises to the Tenant, subject to the covenants and conditions contained in the Lease, the parties intended that the Tenant should have possession of the premises.  Consistent with the interpretation of contracts in other contexts, including a contract for the sale of land, an obligation to grant possession ordinarily is construed as requiring delivery of vacant possession.  If this construction were not adopted, then the existence of a significant quantity of chattels or rubbish on the premises at the commencement of the Lease that impeded, substantially prevented or interfered with the enjoyment of the right of possession that the Lease granted, would be allowed.  This is not a business-like interpretation of a document the purpose of which is to grant possession for the Tenant’s use and enjoyment.

2. The Landlord argued that the provisions of the Lease in relation to the “Landlord’s Property” supported its argument against vacant possession.  The term “Landlord’s Property” as used in the Lease should not be confused with, or used interchangeably with, the “Landlord’s Property” referred to in the Expert Determination.  The latter term was used by the Expert to describe the industrial equipment, stock and the dilapidated boat, whose continuing presence on the premises was the subject of dispute.

3. Clause 1.1 of the Lease defines the Landlord’s Property to include “the Landlord’s chattels (if any)”.  Item 25 of the Schedule defines “Landlord’s chattels” as “all specific items owned by the Landlord in the Premises available for the exclusive use of the Tenant”.

4. The contentious chattels that the Tenant asked to be removed, and which the Tenant sought orders to remove, were not “Landlord’s chattels” as defined in Item 25.  They were not made available for the use of the Tenant, let alone for its exclusive use.  On the contrary, they were of no use to the Tenant and substantially impeded its use of the premises.  The old boat was not available for the Tenant’s use, nor was the many pallet loads of miscellaneous stock or industrial equipment.  Some of the equipment was not in a condition to be sold because it did not work properly.

5. Rather than supporting the Landlord’s case, the express provisions of the Lease about chattels that were made available for the exclusive use of the Tenant imply that other chattels, including the contentious chattels, were to be removed in order to give vacant possession.  In other words, insofar as the Lease provided for certain specific items owned by the Landlord to be available for the exclusive use of the Tenant, this qualified a requirement to deliver vacant possession.

6. The Landlord also relies upon clause 22.1(b) of the Lease.  It imposes an obligation upon the Tenant at the end of the Lease to deliver up the “Landlord’s chattels” in good repair.  That clause is referable to the “Landlord’s chattels” as defined, being items owned by the Landlord that were made available for the exclusive use of the Tenant during the term.  It does not refer to the chattels in dispute.  Also, it makes no sense to suggest that clause 22.1(b) obliged the Tenant to deliver up at the end of the 10-year lease the old boat in “good repair” or to deliver up in “good repair” the Landlord’s industrial presses and other equipment that it had no interest in using and which the Landlord had been unable to sell because of their condition. 

7. Clause 22.1(b) supports, rather than weakens, the Tenant’s position. 

8. The Landlord also relies upon clause 15.1 by which the Tenant “acknowledges that the Premises and the Landlord’s Property were in Good Repair as at the date of execution of this Lease by the Tenant and the Tenant accepts the Premises in an ‘as is/where is’ condition”.    

9. The Expert correctly disposed of the Landlord’s “as is/where is” submission.  He was not persuaded that clause 15.1 altered the Landlord’s obligation to provide vacant possession.  The Expert concluded that clause 15.1 simply acknowledged that the Tenant accepts the condition of what was being leased to it, being the premises and the Landlord’s property that was made available for its exclusive use.  Clause 15.1 did not provide the Landlord with a right to store other property at the premises after the Commencement Date.  The Expert’s view drew support from similar “as is/where is” provisions in other contexts.  For example, in the context of a contract for the sale of land, a contractual obligation to accept property in its present state and condition refers only to the state and condition of the property being sold and not rubbish or other chattels.[44]

   [44]Halsbury’s Laws of Australia at [355-4935].

10. The Landlord’s ultimate submission to me is that the interpretation urged by it “is consonant with the purpose of the Lease and gives the Lease a business-like interpretation”.  I do not agree, but it is sufficient to conclude that the Expert did not err, let alone commit a manifest error, in rejecting any similar argument.

11. In my view, there is nothing business-like about a lease that grants possession of premises to a tenant for the purposes of conducting its own activities but entitles the landlord to leave items of plant, equipment, chattels or rubbish, and to use the premises for storage and other purposes.  A lease, like the Lease here, might specifically permit a landlord to leave property owned by it on the premises, being property that was made available to the tenant for its activities and enjoyment of the Lease.  That would make commercial sense.  A lease might specifically permit certain other property belonging to the Landlord to be left on the premises on the Commencement Date.  But a reasonable businessperson would be unlikely to interpret a lease as conferring an unstated right upon the Landlord to leave property in storage to such an extent that its presence substantially prevents or interferes with the tenant’s enjoyment of the right of possession that the lease grants.  Expressed differently, a reasonable businessperson would interpret the lease as requiring the landlord to remove such property by the Commencement Date and thereby grant to the tenant vacant possession.

12. As the Expert noted, while this Lease provides the Landlord with limited access rights, those rights do not extend to access to chattels that the Landlord might leave on the premises for storage, future sale or other purposes.  The absence of a right of access to facilitate such purposes tends to support the argument that the Lease does not entitle the Landlord to use the premises after the Commencement Date for such a purpose, and thereby qualify the Tenant’s entitlement to vacant possession.

13. On the Landlord’s theory, it was entitled to leave many and varied chattels on the premises after the Commencement Date, being chattels that the Tenant did not want left there, that were of no use to the Tenant, and which substantially impeded the Tenant’s use of the premises.  Moreover, the Landlord’s supposed entitlement to leave such useless chattels on the property might last, in the absence of a specific term limiting the duration of such storage, for the entire term of the Lease.  During that time the chattels might deteriorate or even pose a hazard, without the Landlord having a right of access to secure or sell the chattels.  An interpretation of the Lease that permitted the Landlord to leave the kind of chattels that it did on the premises, in a state that impeded the Tenant’s use of the premises, seems inconsistent with the purpose of the Lease and is not an interpretation that a reasonable businessperson would adopt.

14. If the Landlord wished to enjoy a right to not remove the contentious chattels and to leave the chattels on the premises for an ill-defined period, then a reasonable businessperson would expect such a right to be granted by way of a special condition.  The absence of a special condition granting the Landlord such a right favours the interpretation adopted by the Expert. 

15. I conclude that the Expert did not err in construing the Lease in relation to the issue of vacant possession.

16. Unsurprisingly, given the absence of any term in the Lease that entitled the Landlord to not remove the contentious chattels by the Commencement Date, the Landlord advanced a second reason as to why it was not required to give vacant possession.  This is the argument that there was an oral agreement prior to the execution of the Lease that the contentious property could remain on the premises.  For the reasons that I have given, the Expert’s finding that the alleged oral agreement was not proven by the Landlord, did not involve an error, let alone a manifest error.  

    Was there a manifest error in taking extrinsic evidence into account in construing the Lease?

17. The principles governing the interpretation of a commercial contract are not in dispute.  The Expert stated them.  They include the statement of general principle by French CJ, Nettle and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited:[45]

    “[46] The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.

    [47] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.

    [48] Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.

    [49] However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.  It may be necessary in determining the proper construction where there is a constructional choice. …

    [50] Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.

    [51] Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties ... intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.”

    [45](2015) 256 CLR 104; [2015] HCA 37 at [46]-[51] (emphasis added).

18. The principles include the classic statement of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.[46]The relevant principles permit a court in construing a contract to consider objective external circumstances that were known to the parties or which assist in identifying the purpose or object of the transaction.  Evidence of the parties’ actual intentions are irrelevant.  Objective surrounding circumstances that were known to the parties may assist in arriving at a construction of the contract that serves its commercial purpose or objects and on the assumption that the parties intended to produce a commercial result. 

    [46](1982) 149 CLR 337 at 352.

19. The Landlord’s pleadings in this proceeding do not identify the extrinsic evidence that the Landlord contends the Expert had regard to, but which were not permitted by these principles.

20. The Expert’s reasons indicate that he had appropriate regard to the commercial context and background of the Lease.  The Expert applied settled principles that allow regard to surrounding circumstances to determine the commercial purpose or objects of the Lease and to construe its terms.

21. The Landlord has not shown that the Expert erred in taking extrinsic evidence into account in construing the Lease, let alone that such an error constituted a “manifest error”.    

    Was there a manifest error in determining that the Tenant’s intended use was within the Permitted Use under the Lease?

22. Clause 23 of the Lease, when read in conjunction with Item 17 of the Reference Schedule, described the Permitted Use as “Industrial – warehouse and ancillary office”.  The Landlord submitted that while the word “Industrial” was capable of capturing a wide range of activities, it was narrowed by the reference to “warehouse and ancillary office”, such that the Tenant’s activities exceeded what the parties intended when they agreed upon the Permitted Use.

23. In addressing that issue, the Expert had regard to the contents of Item 17, and also the Lease as a whole.  This included clause 43.1, which was said to make it “objectively clear that the Tenant would be using plant and equipment at the Premises”, and that the relevant plant and equipment to the extent it involved manufacturing activities, fell within the Permitted Use.  The Expert concluded that this was how a reasonable businessperson would construe the contract.      

24. The Landlord suggested a number of reasons as to why this conclusion was erroneous.  The first was that the licence granted under clause 43.1 may be read harmoniously with the restricted definition of Permitted Use for which it contends.  The licence allows for the installation of plant and equipment in conformity with the Permitted Use.  The Landlord submits that to interpret the clause by having regard to the specific plant and equipment that the parties contemplated would require reference to inadmissible extrinsic evidence.

25. I accept the Landlord’s contention that the licence to install plant and equipment “does not expand the use as to which the premises can be put”.  But the type of plant and equipment that the parties contemplated being installed and made operational during the early access period does assist in the interpretation of the Permitted Use.  The plant and equipment that the parties contemplated being installed and made operational during the early access period was the same plant and equipment that they contemplated being used as part of the Permitted Use.  Any other view would make no commercial sense. 

26. The parties contemplated that the plant and equipment that the Tenant’s business used at its former premises would be installed during the early access period and be used during the term of the Lease.  That plant and equipment was used to manufacture artworks.  The term “Permitted Use” should be interpreted to accommodate the use of that plant and equipment and the Expert was correct to have regard to clause 43 and the Lease as a whole in interpreting Permitted Use. 

27. Principles of contractual interpretation require one to ask what a reasonable businessperson would have understood the term “Permitted Use” to mean, and to do so by considering both the language used in the contract, the circumstances addressed by the contract and its commercial purpose.  A reasonable businessperson would have understood the Permitted Use to encompass the activities of the Tenant that the Landlord knew the Tenant carried on at its current premises, that the Tenant planned to continue at the Landlord’s premises, and that clause 43 of the Lease enabled the Tenant to undertake by installing and operating plant and equipment during the early access period.  This favours the interpretation adopted by the Expert.

28. The Landlord’s second argument attaches significance to clause 23, and particularly, clause 23.2 of the Lease.  Clause 23.1 provides for the Tenant to operate its business from the premises in accordance with the Permitted Use.  Clause 23.2 states:

    “23.2 Tenant approvals

    (a) The Tenant must (at its cost) obtain and maintain all licences, permits and approvals (including, if necessary, the Prescribed Approvals) required by law for the use or occupation of the Premises under this Lease. The Landlord will not unreasonably withhold consent to a change to the Permitted Use provided the Tenant complies with this clause.

    (b) The Tenant must display a laminated or framed copy of any certificate of classification relating to the Premises as near as practicable to the main entrance of the Premises.”

29. The Landlord notes that clause 23.2 contemplates that the Tenant may seek to change the Permitted Use and that the Landlord cannot unreasonably withhold consent to such a change, provided the Tenant obtains and maintains all necessary approvals.  This is said to add textual support for a more restricted reading of Permitted Use at the Commencement of the Lease.

30. I disagree.  The first sentence in clause 23.2(a) builds upon the obligation contained in clause 23.1 to operate the business in accordance with the Permitted Use.  It imposes an additional obligation on the Tenant to obtain all licences, permits and approvals required by law for that use.  The second sentence of clause 23.2(a) concerns a different matter, namely, a change to the Permitted Use.  In my view, clause 23.2 does not support the restricted reading of Permitted Use contended for by the Landlord.

31. The Landlord’s third argument is that clauses 19 and 25.1 of the Lease are relevant, in that they confirm that responsibility for the suitability of the Premises lies with the Tenant.  The clauses are said to tend to favour a more limited construction of the initial Permitted Use.  I disagree.  Clause 19 concerns the Tenant’s compliance with laws and permits.  Clause 25.1 says that the Landlord makes no warranty about whether the Premises is suitable for any use, including the Permitted Use.  It does not illuminate what that Permitted Use is. 

32. A fourth argument relies upon the suggestion that the Expert’s discussion of the lawfulness of the use was in error and outside the scope of the Expert’s jurisdiction.  The Landlord adds that even if the use was entirely lawful, that cannot assist the Tenant in demonstrating that the use was permitted.  As will appear in the following section of these reasons, the Expert’s views about the lawfulness of the use followed his conclusion at [159] of the Expert’s Determination that, upon a proper construction of “Permitted Use”, the Tenant’s manufacturing activities were within the meaning of those words.  The Expert did not rely upon his later expressed views about the lawfulness of the use to construe those words.

33. In summary, the construction of “Permitted Use” adopted by the Expert had regard to the terms of the Lease as a whole, including clause 43, to the commercial context in which the parties reached their agreement, and adopted an interpretation that was consistent with the commercial purpose and objects to be secured by the Lease.  Those matters did not support the limited interpretation of “Permitted Use” for which the Landlord contends, even if the Landlord’s argument derived support from Item 17, when viewed in isolation.  It would make no commercial sense for the parties to agree to a Permitted Use that did not allow the Tenant to install and operate the plant and equipment, which the parties contemplated would operate during the early access period and thereafter.  This is so irrespective of whether the use was lawful or unlawful or the Tenant had to obtain an approval from an authority like a council to use the premises that way.  If the use was unlawful then clause 23.2 obliged the Tenant to obtain the necessary approvals before using the premises in the way contemplated by the parties. 

1. A more business-like interpretation of “Permitted Use” to the interpretation contended for by the Landlord is that it includes use of the Tenant’s equipment to manufacture artworks by using the plant and equipment that was to be installed and made operational during the early access period.  The parties knew that the equipment was used for manufacturing activities. 

2. This conclusion does not ignore the terms of Item 17.  It interprets its words in the commercial context in which the parties used it in respect of factory premises where manufacturing activities had been undertaken by the Landlord and were proposed to be undertaken by the Tenant under the Lease.  In those circumstances, there is much to commend the Tenant’s submission to the Expert that the word “Industrial” referred to the primary purpose of the premises, with secondary purposes being a warehouse and an office.

3. The Expert was correct to conclude that the Tenant’s activities were within the Permitted Use. 

   The Expert’s consideration of the Landlord’s allegation of unlawful use of the premises

4. Having concluded that the Tenant’s manufacturing activities were within the Permitted Use, the Expert addressed assertions made by the Landlord that the Tenant’s use of the premises was not lawful.  It is apparent that the Expert did so in the hope of assisting the parties to resolve their differences and avoid further disputes during the remainder of a long lease.  The Expert’s intent is apparent from [220] of the Expert Determination.  Those observations were made after the Expert had determined the relevant disputes.  The Expert pointed to the opinion of a senior town planner, Mr Hanly, that the use was lawful.  The Expert noted that the Landlord had previously used the premises itself for manufacturing activities.  Mr Hanly’s opinion was supported by a Pre-Lodgement Advice dated 1 September 2022 from the Brisbane City Council.  The Expert’s parting observation encouraged the parties to work together and observed that Mr Hanly’s opinion (supported by the BCC) as to Permitted Use was “not only critical to the Tenant’s ongoing business, but it is also potentially very valuable to the Landlord, both in respect of the lawfulness of any of its previous manufacturing activities that were undertaken by it at the Premises, together with any future valuation of the Premises”.

5. In other parts of the Expert Determination the Expert made clear that the lawfulness of the use, including compliance with clause 23.2(a), was not an issue before him.  His response to the Landlord’s allegation of unlawful use was intended to assist the parties.  This is apparent from [189] of the Expert Determination.  The Expert in [190] further clarified that the issue that he was required to determine was whether the Tenant’s proposed manufacturing activities were within the Permitted Use, not whether the intended use was lawful. 

6. In this proceeding the Landlord submits that any determination of the lawfulness of the Tenant’s use of the premises was outside the scope of the Expert’s jurisdiction.  The Tenant does not suggest that the Expert was required to determine the issue of lawfulness or did so.  The Expert Determination did not purport to determine that issue.  The Expert made clear that it was not an issue before him to decide.  The final Determination and Disposition part of the document, whereby the Expert determined and declared a number of matters, did not include any declaration as to the lawfulness of the Tenant’s use of the premises.

7. Therefore, the Expert’s opinion about lawfulness was not the subject of a determination by the Expert.  There is no need to formally declare that matter, as the Landlord’s Supplementary Submissions suggest I do, since there is no dispute between the parties on that point.

   The adequacy of the reasons

8. Clause 39.3 of the Lease required the Expert to provide the parties with “a written statement of reasons for the determination”.  The Landlord submits that the Expert failed to provide such a statement of reasons because of the alleged errors in reasoning that it has complained about and which I have addressed.  I have not found the Expert’s reasoning to be erroneous. 

9. The Landlord cites Shaolhaven City Council v Firedam Civil Engineering Pty Ltd[47] as authority for the proposition that a deficiency or error in the reasons given by an expert may affect the validity of an expert determination in at least two ways:

   (a)   the deficiency or error may disclose that the expert has not made a determination in accordance with the contract and that the purported determination is therefore not binding; or

   (b)   the deficiency or error may be such that the purported reasons are not reasons within the meaning of the contract and if it be the case that the provision of reasons is a necessary condition of a binding determination then the decision or error will have the result that the determination is not binding.          

   [47](2011) 244 CLR 305; [2011] HCA 38 at [27].

10. In deciding whether or not a statement of written reasons has been given, one is not concerned with the correctness of the stated reasons.  The issue is whether the statement is of the kind that clause 39.3 requires.  The Expert must act as an Expert and not as an arbitrator and is under a time constraint to deliver a determination.  If the Expert fails to do so, either party may require the appointment of a further expert.  That said, the “written statement of reasons for the determination” should be sufficient to inform the parties of the essential reasoning of the Expert in resolving each of the referred disputes.  In doing so it may disclose a manifest error. 

11. In my view, the Expert’s reasons are more than adequate and constituted “a written statement of reasons” for each of the determinations that he made.  They dealt in appropriate detail with the evidence, the arguments and relevant principles, and exposed the Expert’s reasons for the determinations that he made. 

    Conclusion

12. The Landlord has not established that the Expert Determination in respect of the referred disputes is unenforceable by reason of manifest error.  The separate question should be answered, “No”. 

13. In the absence of manifest error, the Expert Determination is conclusive and binding as between the applicants and the respondent. 

14. Because there is no basis to set aside the Expert Determination, no occasion arises to grant the applicants the consequential relief that they seek. 

15. I will hear the parties as to other miscellaneous declarations that are sought in the Originating Application and the prayer for relief in the amended statement of claim.

16. At this stage, the orders will be that the separate question be answered, “No”.  Having answered the question, it seems appropriate to dismiss at least paragraphs 1, 2, 3 and 4 of the Originating Application pursuant to rules 484 and 485.  It also seems appropriate to order the applicants to pay the respondent’s costs of and incidental to the hearing and determination of the separate question.  However, I will hear the parties as to the appropriate form of order, including any order as to costs.