Barecall Pty Ltd v Hoban

[2009] NSWSC 1104

CITATION:	Barecall Pty Limited v Hoban [2009] NSWSC 1104
HEARING DATE(S):	18, 19 and 20 February; 25 and 26 August 2009
JUDGMENT DATE :	16 October 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Ward J
DECISION:	Plaintiff's claim dismissed.
CATCHWORDS:	GUARANTEE AND INDEMNITY - the contract of guarantee - original lease, sub lease and variation of lease contained guarantee covenants - whether defendants guaranteed performance of lessee’s obligations under lease, as varied, and sub-lease - whether failure to register leases fatal to lessor’s claim - whether failure of some defendants to sign documents would discharge other defendants from liability - held that defendants not liable as guarantors - lease, as varied, did not provide for guarantee by five defendants - applying Chan v Cresdon, guarantee obligation only extended to registered lease - failure of intended co-guarantors to sign documents would be effective to discharge other defendants from liability - ESTOPPEL - general principles - whether certain defendants estopped from denying obligation to guarantee performance of lessee’s obligations - whether representation made and relied upon giving rise to equitable estoppel - whether common assumption between lessor and defendants, giving rise to estoppel by convention - held that defendants not estopped from denying guarantee obligation - representation not made by relevant defendants - no sufficiently clear, unequivocal and unambiguous common assumption to give rise to estoppel by convention
LEGISLATION CITED:	Corporations Act 2001 Family Provision Act 1982 Real Property Act 1900
CATEGORY:	Principal judgment
CASES CITED:	Amalgamated Investment & Property Co v Texas Commerce International Bank [1982] 1 QB 84 Andrews v Racken Pty Limited [2007] NSWSC 1010 Ankar v Westminster Finance (Australia) Limited (1987) 162 CLR 549 Bell Group Limited (in liq) v Westpac Banking Corporation [2008] WASC 239 Bosaid v Andry [1963] VR 465 Chan v Cresdon Pty Limited (1989) 168 CLR 242 Clark Equipment Credit Australia Limited v Kiyose Holdings Pty Limited (1989) 21 NSWLR 160 Coghlan v Lock (1987) 8 NSWLR 881 Corumo Holdings Pty Limited v C Itoh Limited (1991) 5 ACSR 720 Discount & Finance Limited v Gehrig’s NSW Wines Limited (1940) 40 SR (NSW) 588 Evans v Bremridge (1856) 8 DeG M & G 100; 44 ER 327 Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 Farrow Mortgage Services Pty Limited (In liq) v Slade and Nelson (1996) 38 NSWLR 636 FCA Finance Pty Limited v Cummings (unreported, QSC, 8 February 1988) Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 GEC Marconi Systems Pty Limited (2003) 128 FCR 1 Hadid v Redpath (2001) 35 MVR 152 Holme v Brunskill (1877) 3 QBD 495 James Graham Limited v Southgate-Sands [1986] 1 QB 80 James Thane Pty Limited v Conrad International Hotels Corp [1999] QCA 516 Jones v Dunkel (1959) 101 CLR 298 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 62 Macrory v Scott (1850) 5 Exch 906; 155 ER 396 Marston v Charles H Griffith & Co Pty Limited (1985) 3 NSWLR 294 Masters v Cameron (1954) 91 CLR 353 Monie v Commonwealth of Australia (2005) 63 NSWLR 729 NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 National Commercial Banking Corporation of Australia Limited v Cheung (1983) 1 ACLC 1326 National Westminster Finance NZ Limited v National Bank of New Zealand Limited [1996] 1 NZLR 548 NEC Information Systems Australia Pty Limited v Linton (Wood J, 17 April 1985, unreported) Scottish Amicable Life Assurance Society v Reg Austin Insurance Pty Limited (1995) 9 ACLR 909 Print National Pty Limited v Helps [2007] NSWSC 1050 R v Burdett (1820) 4 B & Ald 95 Rhoden v Wingate [2002] NSWCA 165; (2002) 36 MVR 499 RT & YE Falls Investments Pty Ltd v State of NSW [2001] NSWSC 1027 Schellenberg v Tunnel Holdings Pty Limited (2000) 200 CLR 121 Telado Pty Limited v Vincent (1996) 7 BPR 14,844; (1996) NSW Conv R 55-786 Toll (FGCT) Pty Ltd v Alphapharm Pty Limited (2004) 219 CLR 165 Tozer Kemsley & Millbourn (A’Asia) Pty Limited v Collier’s Interstate Transport Service Limited (1955) 94 CLR 384 Trade Credits Limited v Burnes [1979] 1 NSWLR 630 Trade Indemnity Co v Workington Harbour and Dock Board [1937] AC 1 Waterman v Gerling Australia Assurance Co Pty Limited (2005) 65 NSWLR 300 Wilton v Farnworth (1948) 76 CLR 646
TEXTS CITED:	Cross on Evidence Phillips & O’Donovan, The Modern Contract of Guarantee, 2nd edn Rowlatt on Principal & Surety 3rd ed Spencer Bower and Turner, Estoppel by Representation, 3rd edn
PARTIES:	Barecall Pty Limited (Plaintiff) David Hoban (First Defendant) Deon Russell Harvey (Second Defendant) Anthony Rossi (Third Defendant) Radoslav Spadina (Fourth Defendant) Jason Lussick (Fifth Defendant)
FILE NUMBER(S):	SC 3278 of 2006
COUNSEL:	D E Baran (Plaintiff) G Blank (First Defendant) M B Evans (Second and Third Defendants) In person (Fourth Defendant) B Haverfield (Fifth Defendant)
SOLICITORS:	Schreuder Partners (Plaintiff) Goodman Law (First Defendant) Latham Lawyers (Second and Third Defendant) In person (Fourth Defendant) Medcalf Grant (Fifth Defendant)

- 88 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WARD J

FRIDAY 16 OCTOBER 2009

3278/06 BARECALL PTY LIMITED V DAVID HOBAN & ORS

JUDGMENT

1 In these proceedings Barecall Pty Limited seeks declaratory and other relief in relation to the alleged guarantee of a lease (as varied in 2003) and Sub-Lease it granted in 2001 to Aqualounge Manly Pty Limited in respect of premises in Manly which were occupied and used by Aqualounge as a nightclub/restaurant. Aqualounge went into liquidation in mid 2005 leaving considerable debts owing to Barecall in respect of its tenancy of the premises.

2 Barecall contends that each of the defendants (David Hoban, Deon Russell Harvey, Anthony Rossi, Radoslav Spadina and Jason Lussick) is a guarantor of the obligations of Aqualounge under the lease arrangements. At various (but by no means all material) times each of the defendants (other than Mr Spadina) was a director of Aqualounge.

3 Alternatively, Barecall relies upon the doctrine of estoppel for the proposition that it is not open to two of the five defendants (Mr Harvey and Mr Lussick), who did not sign documentation in relation to the varied lease in 2003, to deny liability under the alleged guarantee. This is put on two bases.

4 First, it is alleged that those defendants are estopped from denying their obligations as guarantors in relation to the lease (including any variation thereof) of the premises by reason of representations made by them allegedly on or about 20 November 2003 that, in exchange for Barecall’s agreement to vary the lease, they would guarantee (or continue to guarantee) the due and punctual performance by Aqualounge of the covenants of the lease together with all moneys payable thereunder. This is referred to in the pleading as the Guarantee Representation.

5 Secondly, it is alleged that it was a common assumption between Barecall and each of the defendants that, in consideration of the variation of the original (2001) lease, the defendants, including Messrs Harvey and Lussick, would guarantee the obligations of Aqualounge under the lease as varied, by reason of which Messrs Harvey and Lussick are said to be estopped from denying their obligations as guarantors. This is referred to in the pleading as the Common Assumption Representation.

6 It is alleged that, in reliance both upon the Guarantee Representation and the Common Assumption Representation, Barecall to its detriment entered into the 2003 Variation of Lease; extended the area of the leased premises to include a first floor restaurant/café; accepted the Guarantee Representation; and took no further steps to procure the execution by Messrs Harvey and Lussick of documentation in relation to the 2003 Variation of Lease or to terminate Aqualounge’s occupation of the premises and the lease as varied on account of the non-execution of the guarantee by Messrs Harvey and Lussick.

7 Barecall seeks an order that the defendants, or any of them, pay to it sums allegedly owed by Aqualounge under the lease arrangements. The sum claimed in the Second Amended Statement of Claim is $1,124,709.94 plus interest and costs. That sum is comprised of outstanding rent, outgoings and expenses. A claim for outstanding licence fees was abandoned prior to the hearing. The quantum of the claim has varied more than once since the commencement of the proceedings. It was ultimately revised downwards during the course of the hearing to $932,076.53 as explained in the various affidavits tendered from Barecall’s bookkeeper, Ms Branson.

8 The defendants, for a variety of reasons some of which differ as between the respective defendants, deny that they owe Barecall obligations as guarantors in respect of the 2003 lease arrangements. They also dispute the amounts claimed by Barecall as owing by Aqualounge.

Issues

9 Broadly summarised, the following issues arise for determination:

(i) Have the defendants guaranteed the performance by Aqualounge of its obligations as lessee of the Manly premises under the 2001 Lease, as varied, and Sub-Lease? This, in turn, raises a number of issues:

(a) of the three defendants who signed the variation of lease documentation in 2003, in what capacity did they sign?

(b) if any of those three defendants signed as a guarantor, as a matter of construction of the lease documents what in fact was he (or were they) guaranteeing?

(c) at the time of the signing of the execution page submitted in connection with the 2003 variation of lease documentation was there consensus on its terms?

(d) does the lack of registration of the 2001 Lease, as varied by the 2003 Variation of Lease, and the Sub-Lease preclude Barecall from relying on the guarantee clauses in those documents?

(e) does the fact that two of the proposed co-guarantors did not sign the variation of lease documentation operate to discharge all of the guarantors from liability?
(f) what is the consequence, for the claim against Mr Rossi, of Mr Rossi’s deposition (in an affidavit sworn by him but not read in other court proceedings) that he had personally guaranteed a lease of the business premises of Aqualounge?

(ii) Are one or both of Mr Harvey and Mr Lussick estopped from denying an obligation to guarantee Aqualounge’s obligations as lessee either on the basis of an equitable estoppel (the Guarantee Representation claim) or on the basis of a conventional estoppel (the Common Assumption claim)? This raises the following issues:

(a) was the alleged Guarantee Representation made by or on behalf of Messrs Harvey and Lussick on which Barecall relied to its detriment so as to make it unconscionable for Messrs Harvey/Lussick to resile therefrom?
(b) was there a Common Assumption Representation as pleaded between Barecall and all the defendants on which Barecall relied to its detriment so as to make it unconscionable for Messrs Harvey/Lussick to resile therefrom?

(iii) If Barecall succeeds in establishing liability on the part of one or more of the defendants to guarantee the lease obligations of Aqualounge, what is the quantum of its claim, ie what amount is owing by Aqualounge under its lease arrangements and recoverable under any guarantee?

Summary

10 For the following reasons, I find in respect of the above issues that:

(i) It has not been established, as a matter of contract, that the defendants have guaranteed (or, in the case of Messrs Hoban and Harvey, remain liable under the guarantees given by them in 2001 of) the performance by Aqualounge of its obligations under the 2001 Lease, as varied, and Sub-Lease.

(a) The three defendants who signed the single page execution sheet submitted in November 2003 in connection with the variation of lease documentation (Messrs Hoban, Rossi and Spadina) there did so in their individual capacity as intended guarantors and not as directors or officers of the company.

(b) As there was no amendment in 2003 to Article 18 or item 14 of the Reference Schedule to the 2001 Lease, as a matter of construction of the lease documentation there was no contractual obligation on either Mr Rossi or Mr Spadina to guarantee the lease obligations by Aqualounge. While Mr Hoban, by signing the said execution page, may otherwise have remained bound under the guarantee given by him in the 2001 Lease and hence bound to guarantee the obligations of Aqualounge as varied by the Variation of Lease (having thereby manifested his consent to the alteration of those obligations), by reason of the facts that the lease was unregistered and that not all of the intended co-guarantors of the varied 2003 lease obligations were bound thereby, Mr Hoban is released from liability under the guarantee of the lease obligations as varied.

(c) While there seems to have been a dispute as to the substance of at least some of the varied lease obligations when the execution page submitted in connection with the 2003 Variation of Lease was signed by Messrs Hoban, Rossi and Spadina, if Mr Tocchini was authorised to affix that page to the Variation of Lease signed on behalf of Aqualounge then this would be taken as assent to be bound by that agreement.

(d) On the proper construction of the 2001 Lease documents, the guarantee contained in the 2001 Lease (and Sub-Lease) did not cover the lease obligations of Barecall under those unregistered documents (applying Chan v Cresdon Pty Limited (1989) 168 CLR 242).

(e) The fact that not all of the intended co-guarantors had bound themselves to the guarantee of the varied lease obligations means that no liability arises thereunder for any of the co-guarantors.
(f) In the circumstances, there is not a clear admission of liability contained in the earlier affidavit sworn by Mr Rossi and I do not place any weight on that affidavit.

(ii) Neither Mr Harvey nor Mr Lussick is estopped from denying an obligation to guarantee Aqualounge’s obligations as lessee.

(a) Although I consider that there was a representation made by Aqualounge’s solicitor that Messrs Harvey and Lussick would attend to sign the execution page provided with the variation of lease documentation in 2003, I am not satisfied that the Guarantee Representation was authorised by or made on behalf of either Mr Harvey or Mr Lussick.
(b) No sufficiently clear, unequivocal and unambiguous common assumption has been established on the part of Barecall and all the defendants to the effect pleaded in order to give rise to the application of the doctrine of conventional estoppel.
(c) Had I found otherwise on (a) and (b), then I would have found as a matter of fact that Barecall had relied upon the said representation or common assumption in proceeding with the agreement to lease the first floor of the premises to Aqualounge at a time when variation to lease documentation binding the defendants to guarantee the varied lease obligations had not been executed by each of the defendants and in not taking steps thereafter to terminate the lease arrangements or to compel the defendants to execute the variation of lease documentation.
(d) Even if I had reached the point where the conclusion in (c) above was made, the finding I have made in relation to (i)(b) above means that I would not have found in the circumstances that it was unconscionable for the defendants to resile from the said representation or common assumption (since even had they signed the execution page, on the construction of the lease documentation no binding contract of guarantee would have arisen).

(iii) By reason of my earlier findings, there is no liability under the alleged guarantee. However, had this question arisen, I would not have allowed any claim for amounts not proven on the face of the material before me actually to have been paid by Barecall in relation to the Aqualounge tenancy and being amounts for which Aqualounge under the leases would have been liable. The evidence in this regard was unsatisfactory and a recalculation based on my general rulings would have been required. I would not have permitted any further enquiry into damages in light of the way in which this part of the matter had been conducted.

11 I dismiss Barecall’s claims against each of the defendants with costs.

Conduct of the proceedings

12 Before turning to the facts, I outline briefly the conduct of the proceedings before me.

13 Each of Mr Hoban, Mr Rossi and Mr Lussick (the first, third, and fifth defendants) was separately represented during the whole of the hearing. Mr Harvey (the second defendant) was not represented when the hearing commenced on 18 February 2009 but, when the hearing resumed on 24 August 2009 (after an adjournment, the reason for which I explain below), he was represented by Counsel appearing for Mr Rossi (Mr Evans). Mr Spadina (the fourth defendant) was self-represented during the course of the hearing.

14 The hearing commenced on 18 February 2009. It was listed for three days. On the third day of the hearing, Counsel appearing for Barecall (Mr Baran) applied for an adjournment of the hearing on the basis that, as the evidence had emerged in cross-examination of Ms Branson (the bookkeeper who had prepared a reconciliation or summary of the various amounts claimed under the guarantee), Barecall needed to adduce further evidence to explain the way its claim was sustained. That application was opposed. For the reasons set out in my reasons for judgment on 20 February 2009, I acceded to Barecall’s application and the matter was adjourned and relisted for hearing for three days commencing 24 August 2009.

15 When the hearing resumed, Mr Baran read a further affidavit from each of Ms Branson (sworn 26 March 2009) and Mr John Oppedisano, the managing director of Barecall, (sworn 15 April 2009). Ms Branson and Mr Oppedisano were subject to further cross-examination and then Mr Baran closed the plaintiff’s case.

16 At that point I was informed by Counsel for each of the defendants (and, in Mr Spadina’s case, by Mr Spadina) that each chose not to read any of the affidavit evidence which had been served on his behalf in the proceedings. Apart from a handful of documents (tendered on behalf of Mr Hoban, Mr Harvey and Mr Lussick, respectively), the defendants closed their cases.

17 Mr Baran immediately sought to reopen Barecall’s case in order to tender extracts from an affidavit which had been sworn on 11 December 2008 by the third defendant (Mr Rossi) in separate Family Provision Act 1982 proceedings which had been brought by his wife in this Court in 2008. For the reasons set out in my reasons for judgment of 24 August 2009 I allowed the admission into evidence (against Mr Rossi only) of two paragraphs from that affidavit. I subsequently gave leave for Mr Evans to file in court an affidavit in reply affirmed by his instructing solicitor, Mr Stuart Latham, on 25 August 2009 in which Mr Latham deposed as to matters relating to the circumstances in which the two paragraphs tendered from Mr Rossi’s earlier affidavit had been prepared. Mr Latham was cross-examined. The matter then proceeded to oral closing submissions.

18 Fortunately, having regard to the disrupted course of the hearing as outlined above, I have had the benefit of reference not simply to the transcript of the proceedings but also to my contemporaneous notes of the evidence and demeanour of the respective witnesses and, of course, to Counsels’ various written submissions (see generally Hadid v Redpath (2001) 35 MVR 152 at 159 [34] per Heydon JA; Expectation Pty Limited v PRD Realty Pty Limited (2004) 140 FCR 17 at 33 [73]; Monie v Commonwealth of Australia (2005) 63 NSWLR 729 at 742 [43] per Hunt AJA; NAIS v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 228 CLR 470 at 504 [109]-[111] per Kirby J, at 525 [169] per Callinan and Heydon JJ).

Background facts

19 The factual background is not uncomplicated and, having regard to the matters raised by the defendants, needs to be set out in some detail, particularly in relation to the manner in which the various lease documents were executed.

· Barecall

20 Exhibit D2/1 is a copy of an ASIC extract as at 26 March 2009 which shows that, in the period from 2001-2003, there were two directors of Barecall, Mr Paul Oppedisano and Mr Antonio Cartiere, and that Mr Paul Oppedisano was secretary of the company at that time. Mr John Oppedisano was not appointed as a director of the company until 27 July 2005. It was he, nevertheless, who negotiated with the respective defendants and has apparently instructed Barecall’s lawyers in the conduct of this claim. He appears to have conducted himself in such a fashion as would constitute him a director under the expanded definition of that term in the Corporations Act 2001.

21 For the defendants, it was submitted that I should draw inferences against Barecall due to its failure to call evidence, amongst others, from Ms O’Toole and Mr Paul Oppedisano (or anyone else from Barecall) to establish the quantum of Barecall’s claim and to establish that Mr John Oppedisano had the authority to negotiate and commit Barecall to an agreement with the defendants. For the reasons set out below, I do not consider it necessary to draw any such inference, since Barecall’s claim would fail even apart from any issue as to Mr Oppedisano’s authority or lack thereof.

· Aqualounge

22 ASIC’s records (Exhibit O pp 190-195) show that Mr Hoban was appointed as a director of Aqualounge on 30 November 2001. Each of Mr Harvey, Mr Lussick and Mr Rossi is shown in ASIC’s records as having been appointed a director of Aqualounge on 30 November 2001. Their appointments seem to have ceased on 27 February 2003. Mr Spadina is not recorded as having been a director of Aqualounge at any time. Mr Hardy was noted as having been appointed a director on 20 November 2000 but his appointment ceased on 30 January 2003. He was recorded as the secretary of the company over that period.

· The leased premises

23 Barecall’s title to the leased premises is a mixture of freehold and leasehold.

24 Barecall has at all material times been the registered proprietor of the property comprised in Folio Identifier 1/1034722 (“the Property”) and the lessee, under two separate leases granted by Manly Council, of the property comprised in Folio Identifiers 1 and 4/1042657 and 2/1042657, respectively, (“the Leasehold Property”). Both properties are located in Manly and form part of the same street address. There is a multi-storey building established on parts of the Property and the Leasehold Property.

· The Manly Council head leases

25 The two Manly Council leases are of the land below the surface of the road and the airspace above the surface of the road, respectively.

26 By registered lease commencing 10 December 2001, Manly Council leased to Barecall the property known as Lot 2/1042657 for a term of 24 years with three options to renew each for a 25 year period. The lease was signed, sealed and delivered as a deed on behalf of Barecall by Mr John Oppedisano (in the space marked “director/secretary”) and by his brother, Mr Paul Oppedisano (in the space marked “director”). (At that time, as apparent from the ASIC records referred to above, Mr John Oppedisano was not a director of Barecall.)

27 The common seal of Barecall was affixed to the lease and certified correct pursuant to s 127 of the Corporations Act 2001 by Mr John Oppedisano (in the space marked “director”) and Mr Paul Oppedisano (in the space marked “secretary”).

28 A copy of the lease is to be found from p 8 in Exhibit O. The land the subject of this lease was the land below the surface of the road and the lease was described in the header to the annexure forming part of it as the “Below Ground Lease”.

29 The guarantors named in the reference schedule to the Below Ground Lease were Mr Paul Oppedisano and Mr Antonio Cartiere (the then directors of Barecall).

30 Also commencing on 10 December 2001, and for a similar term, was a lease to Barecall from Manly Council of the air space above the surface of the road, being Lots 1 and 4/1042657. It was similarly executed on behalf of Barecall by John and Paul Oppedisano (and guaranteed by Paul Oppedisano and Antonio Cartiere). In the Annexure thereto the lease was described as the “Above Ground Lease”. A copy of this lease is to be found from p 44 of Exhibit O.

· Lease to Aqualounge - November 2001 (“the 2001 Lease”)

31 As between Barecall and Aqualounge, Barecall entered into a lease (dated 29 January 2002) commencing 10 November 2001 in respect of the Property (ie Folio Identifier 1/1034722). A copy of this lease (defined in the pleading as the “Lease”) appears from p 81 of Exhibit O. I refer to this as the 2001 Lease.

32 Prior to the commencement of the 2001 Lease, Aqualounge was permitted to go into possession of the premises to be leased by it (broadly speaking the basement/sub-basement and ground floor), for the purposes of fitting out the premises. Mr Oppedisano, in his 17 August 2007 affidavit, says that this occurred in the first half of 2001. He deposed to a meeting during the course of the fitout (therefore, according to the time frame set out in his affidavit, within the 8 months prior to the commencement of the lease) with each of Messrs Rossi, Hoban, Lussick and Hardy, in which he says Mr Rossi introduced the others as his “partners”. (Mr Oppedisano has described Mr Rossi as the “driving force” behind Aqualounge, although it is Mr Hoban who was ultimately the sole director of that company.) In that meeting, Mr Oppedisano says that he asked what they had as back up security for the payment of rent and (when given some general information by Mr Rossi as to his, Mr Lussick’s and Mr Hoban’s assets) said that “As long as you can satisfy my solicitor with personal guarantees I can’t see it being a problem”.

33 That conversation is of note for a number of reasons. First, it would appear from the content of the conversation as relayed by Mr Oppedisano that he had not up until then raised the issue of personal guarantees with Mr Rossi and his “partners” but had nevertheless been prepared for Aqualounge to take possession and commence fit-out. Secondly, this had occurred without any lease documentation being signed (or even perhaps prepared). Thirdly, of the four named “partners” with whom this discussion took place, personal guarantees for the 2001 Lease were ultimately provided by only two of them, Mr Hoban and Mr Hardy (which suggests that it was not Mr Oppedisano’s unvarying requirement that all individuals associated with the business provide personal guarantees or even perhaps that all directors provide guarantees, since by January 2002 each of Mr Rossi and Mr Lussick was a director but there is no suggestion that either gave a guarantee in respect of the original 2001 Lease).

34 Insofar as Mr Oppedisano went on in this affidavit to depose to it being his standard practice (and his unvarying instructions to his solicitor) over at least twenty years to require that directors of any companies who leased premises from him or his companies provide personal guarantees, this is one occasion on which that practice or those instructions appears not to have been followed at least prior to Aqualounge being given possession of the premises to be leased. (This assumes some significance when considering what Mr Oppedisano says he would have done had he been aware in November 2003 that the variation of lease documentation had not been signed by each of the five defendants.)

35 The 2001 Lease bears a stamp duty imprint but was not registered. It was for a term of four years with two options to renew each for a period of three years. The permitted use of the leased premises was as a nightclub for the basement and sub-basement level and as a restaurant/café for the ground floor.

36 The common seal of Aqualounge (but not that of Barecall) was affixed to the 2001 Lease both on the page numbered 2 of 28 (in the certification of the dealing as correct for the purposes of the Real Property Act 1900) and on what is (rather confusingly) numbered page 31 of 28 (in what appears to be an execution page immediately following the reference schedule). The 2001 Lease was signed on behalf of Barecall by Antonio Cartiere as director and Paul Oppedisano as secretary.

37 The manner in which Barecall executed the 2001 Lease is inconsistent with what appears on the attestation clauses in that document, insofar as the signatures of the director and secretary (appearing next to the statement that “THE COMMON SEAL OF BARECALL PTY LIMITED ACN 060 567 095 was hereunto affixed in accordance with the Memorandum and Articles of Association and with the consent of the Directors”) appear to be witnessing the affixation of a non-existent seal. If those signatures are not read as amounting to execution by the officers of the company for the purposes of s 127(1) of the Corporations Act, then there is no lease executed as such by Barecall. Of the many technical arguments raised in this matter, there was not argument as to this point and, given the other difficulties which Barecall faces on its claim, it is not necessary to determine this issue.

38 The affixation of Aqualounge’s common seal on page 2 of 28 was witnessed by three signatories. It does not seem to be disputed that those are Mr Ian Hardy (who is not a party to these proceedings) and each of Mr Hoban and Mr Harvey. (There was no certification of the dealing in the space marked below that for signature by the “guarantor”.)

39 The affixation of Aqualounge’s common seal on page 31 of 28 [sic], ie in the execution clause for Aqualounge, was witnessed by Mr Hardy (in the space marked “director”) and Mr Harvey (in the space marked “secretary”). Following the execution for Aqualounge was the execution by three individual signatories – Mr Hardy (who is described simply as having “signed” the document), Mr Hoban and Mr Harvey (the latter two being described as having “signed, sealed and delivered” the document). The first two signatures are witnessed by “S Hardy”. The signature of Mr Harvey was witnessed by “P Oppedisano”.

40 From this, it can be seen that Mr Harvey had signed the 2001 Lease in three places, twice witnessing the affixation of the common seal and once in an individual capacity; Mr Hoban had signed it twice, once witnessing the affixation of the common seal and once in an individual capacity.

41 As the 2001 Lease was not signed until January 2002, by the time it was signed each of Mr Hardy, Mr Hoban and Mr Harvey was a director of Aqualounge and Mr Hardy was the company secretary (though as at the commencement date of the 2001 Lease, neither Mr Hoban nor Mr Harvey had been a director of the company).

42 The 2001 Lease is described in Annexure A thereto as being a lease “between BARECALL PTY LIMITED ACN 060 527 095 the Lessor and AQUALOUNGE MANLY PTY LIMITED ACN 095 121 832 the Lessee and IAN HARDY the Guarantor”. However, item 14 of the Reference Schedule identifies the guarantors as being each of Mr Hardy, Mr Hoban and Mr Harvey.

43 Article 18 of Annexure A to the 2001 Lease contained the guarantee provision. Relevantly, it stated:

In consideration of the Lessor at the request of the guarantors named in Item 14 of the Reference Schedule [ie Mr Hardy, Mr Hoban and Mr Harvey] granting the within lease to the Lessee the guarantor covenants with the Lessor as follows:
(a) The guarantor guarantees the punctual payment by the Lessee of all rent and interest and all other monies … owing under this lease …
…
(c) The provisions of this Covenant shall be a continuing guarantee and shall not be considered as wholly or partly satisfied or discharged by the payment at any time or times of any part of the guaranteed amount and they shall extend to cover and be security for the whole of the guaranteed amount and the performance of the obligations fully performed.
…

(g) The liability of the guarantor shall not be abrogated, prejudiced or affected by:

(i) The granting of time, credit or any indulgence or other concession given to the Lessee or any other person or to the guarantor by the Lessor or by any neglect or forbearance on the Lessor’s part to require or enforce payment of the whole or part of the guaranteed amount by the Lessee or by any party to any negotiable instrument or by any compounding compromise, release, abandonment, waiver, variation, assets or any of the rights of the Lessor against the Lessee or by anything done or omitted or neglected to be done by the Lessor in exercise of the power and discretions vested in the Lessor by the lease which, but for this provision, might operate to abrogate, prejudice or affect the guarantee created by this covenant. (my emphasis)

44 Article 18.01(h) provided that where there was more than one guarantor, the guarantee was to bind the guarantors jointly and each of them severally. Article 18.01(i) provided that the expression “ the lease”, where used in the guarantee covenant, included “this lease as amended or varied from time to time and any renewal thereof”. Article 18.01(j) provided that the guarantee covenant was for all purposes to be construed as a deed. (Therefore, while not all the named guarantors were recorded in the attestation clauses on p 31 of 28 as having signed under seal, the guarantee covenant itself operated in effect as a deed.)

45 Article 23 of the 2001 Lease referred to a Sub-Lease. Broadly speaking, it contained a disclosure by Barecall that, as a condition of obtaining the relevant consent from Manly Council to develop the building, it had transferred to Manly Council an area of 55.3 square metres (being the land described in Folio Identifier 2/1034722) and that Barecall would lease from the Council the area below the road surface forming part of the basement area and the area above the ground level upon which the lessor’s improvements had been constructed and would grant a Sub-Lease of those areas to Aqualounge “to the extent that they relate to the basement and ground floor of the building”.

46 Article 23.04 provided that the Sub-Lease would be substantially in the same terms and conditions as the head lease and for a term coinciding with the 2001 Lease. Article 23.08 contained an acknowledgement that the 2001 Lease was concurrent and interdependent with the Sub-Lease and that, upon the expiry or termination of the 2001 Lease for any reason, Barecall would be entitled to terminate the Sub-Lease without being required to provide any reason for such termination.

· Sub-Lease – 10 November 2001 (“Sub-Lease”)

47 Commencing on the same date as the 2001 Lease, although undated and not (at least on the face of the copy contained in Ex O) stamped for duty, is the Sub-Lease from Barecall, as sub-lessor, to Aqualounge, as sub-lessee, of part Folio Identifier 2/1034722. A copy of the Sub-Lease appears from p 114 of Exhibit O.

48 The Sub-Lease was certified and executed by Barecall (again with no common seal affixed) in similar (but not identical) fashion to the 2001 Lease. The common seal of Aqualounge was affixed both on the Real Property Act certification of the dealing and in the execution page at the conclusion of Annexure A to the Sub-Lease. However, this time the affixation of the common seal was witnessed in both places by Mr Harvey and Mr Hardy (not by Mr Hoban), each there being described as director, and there was no provision for separate execution by any of the three identified guarantors as individual signatories (unlike the 2001 Lease). There is no signature attributable to Mr Hoban anywhere on the Sub-Lease. (The header to Annexure A to the Sub-Lease referred simply to a Sub-Lease between Barecall as lessor and Aqualounge as lessee, with no reference to a guarantor.)

49 Clause 6.01 of the Sub-Lease contained an almost identical guarantee provision to that in the 2001 Lease. However, it did expressly name the guarantors in the body of the Sub-Lease. It provided, relevantly:

In consideration of the Lessor at the request of Ian Hardy David Hoban and Deon Harvey hereinafter referred to as the guarantor granting the within lease to the Lessor the guarantor covenants with the Lessor as follows …

and then went on to include identical terms to those contained in Article 18 of the 2001 Lease.

50 Under the Sub-Lease the “lease” is defined as meaning “this Lease and includes any other tenancy which exists between the Lessor and Lessee in relation to the premises”. The “Principal Lease” is defined as meaning the lease between the parties “in respect of that part of the ground floor and basement of the [premises] which is not constructed upon land owned by Manly Council”.

· 2003 consent to modified use

51 It appears that in or about March 2003, Aqualounge sought Barecall’s consent to a change of permitted use in respect of the premises since, by letter dated 13 March 2003 (pp 122-3, Exhibit O), Barecall consented to the modification of a consent given to Aqualounge by Manly Council (Consent No. 104/01). The effect of this was apparently to change the permitted use of the ground floor from restaurant/café to that of a nightclub. Barecall’s consent was given on the condition that agreement was given to certain matters itemised in the letter, Barecall’s letter relevantly stating:

On the condition that Aqualounge Manly Pty Limited and its directors agree to the following matters, Barecall is prepared to consent to such a modification …(my emphasis)

52 I interpose to note that by this stage there was only one remaining director of Aqualounge as shown in the ASIC records (Ex O pp 190-195), namely Mr Hoban. No explanation was proffered for the change in the officers of the company. In referring to “directors” in plural, it seems that Barecall may have been acting on the assumption that those individuals who had earlier signed the 2001 Lease and/or Sub-Lease as directors of Aqualounge remained as directors of the company (which would be consistent with the 13 March letter, prepared I assume by Barecall or its lawyers, bearing room for three directors’ signatures). Be that as it may, the letter makes it clear that Barecall required Aqualounge to execute a formal variation of lease and that it required an indemnity from not just the company but also its directors as to certain matters.

53 The further matters on which Barecall’s consent was conditional included the 2001 Lease being varied so as to include a provision in relation to any noise complaints and an agreement by Aqualounge “and its directors” to indemnify Barecall in respect of claims that might be made against it as a result of having consented to the variation of lease so as to permit the amended use of the ground floor (including but not limited to any claims made by the then lessee of the first floor, Mr Keith Long, and in respect of any loss of rent which might be suffered by Barecall as a result of other occupiers of the building complaining or terminating leases as a consequence of any noise emanating from the ground floor). (Mr Oppedisano was cross-examined as to the basis on which instructions had been given for such an indemnity, from which it seemed clear that this was his lawyer’s wording, not his. However, nothing turns on that in my view. More relevant, it seems to me, is that at this stage no reference was made to a guarantee of the lease as varied or to any change in the existing guarantors.)

54 The 13 March 2003 letter was not signed by Barecall. Rather, there was provision (at the conclusion of the list of conditions set out in the letter) for the common seal of Aqualounge to be affixed (as it was). There was space marked for three signatures attesting to the affixation of the common seal (each with the typed designation of “director” appearing underneath the dotted line for the relevant signature). The signatures appearing on those lines (and thus designating the signatories as directors) purport to be those of Messrs Spadina, Hoban and Lussick. I say purport to be because some of the signatures are not readily decipherable and a number bear little resemblance to signatures appearing elsewhere, as noted below. Following those signatures, but not in any space allocated for or designated as directors’ signatures, are two additional signatures which purport to be those of Messrs Rossi and Harvey. Mr Harvey’s initials appear ascribed to the edge of the common seal.

55 A number of comments may be made about this document. First, as at this stage only Mr Hoban remained a director of Aqualounge. Secondly, Mr Spadina was never formally appointed as a director of Aqualounge (although he may of course have conducted himself in that role). Thirdly, while I am no handwriting expert, and while none of the defendants gave evidence denying that he had signed this document, even the briefest comparison between the signatures on this letter and the signatures appearing on the documents to which I have thus far referred (or others to which I will refer below) gives me doubt as to the provenance of the signatures on this letter.

56 In that regard, the second signature (which purports to be the signature of Mr Hoban) does not bear any resemblance to his signature at it appears on the 2001 Lease and Sub-Lease. Nor does the signature purporting to be that of Mr Lussick bear any marked resemblance to that appearing on his Defence to Second Amended Statement of Claim. Mr Rossi’s signature bears some (but not a marked) resemblance to that appearing on the Variation of Lease (p 124, Ex O) or on the execution page submitted with that Variation of Lease (p 128, Ex O). Mr Spadina’s signature also bears some resemblance but is not a ready match to his signature on p 128 Exhibit O. The only signature on this page which looks to me to be clearly comparable to other signatures of that person is the last signature on the page, which appears to be Mr Harvey’s signature. That said, I am not position to make a determination in this regard and nothing in my conclusions turns on the provenance or authenticity of the signatures in question.

· Agreement to vary 2001 Lease

57 Around the time that Aqualounge was seeking a consent to change of use of its leased premises, it was also seeking to occupy additional space in the building for use as a nightclub – the first floor. This area was leased at the time by Keith Long Enterprises Pty Limited for use as a restaurant (hence the reference to Mr Long in the 13 March consent modification).

58 Mr Oppedisano gave evidence that at different times each of Messrs Harvey, Rossi and Spadina had approached him saying that they wanted to take over the first floor restaurant and equipment. Mr Oppedisano says that he understood in that context that they meant that Aqualounge and those running the existing business (“same company”, “same partners”) wanted the upstairs area (T 16). Mr Oppedisano’s affidavit of 17 August 2007 deposes to a conversation in about June/July 2003 to that effect and further conversations a month or so later with Messrs Rossi, Spadina and Hoban in which he says they pressed him to evict Mr Long for non payment of rent and he refused to do so (out of loyalty to the existing tenant). (Interestingly, in light of a submission made for Barecall in these proceedings, there was no suggestion in Mr Oppedisano’s 17 August 2007 affidavit of Aqualounge being anxious to acquire the first floor premises so as to prevent a competitor from doing so – the first suggestion that it take over the premises being at a time when there was seemingly no intimation that the premises would be available for lease by others.)

59 Mr Long’s company went into receivership (or perhaps administration) at some stage around August 2003 and Mr Oppedisano says that after a “receiver” was appointed to that company he agreed to Aqualounge taking a lease of the first floor (see 17 August 2007 affidavit; T 17). He was not able to identify the particular conversation in which he conveyed to any of the defendants that agreement or in which a “deal” to that effect was reached (nor did he recall precisely its contents) (something on which in due course Counsel for the various defendants placed some weight).

60 There was some discussion as to the basis on which Aqualounge would take the first floor – particularly to do with the kitchen equipment in the premises; a matter which later became the subject of ongoing dispute. Mr Oppedisano said the defendants (in particular, Mr Spadina) had offered to pay $200,000 for the equipment (T 17), though his 17 August affidavit deposes to Mr Spadina saying they would pay that amount for the first floor lease itself. Though there is some inconsistency in this regard, it appears that by the time the variation of lease documentation was being signed the dispute between the parties in relation to this issue was whether Aqualounge or Barecall was entitled to ownership of the equipment (and perhaps precisely what that equipment comprised).

61 Mr Oppedisano said that Barecall’s position was it had bought the equipment from the “administrator” of the outgoing first floor tenant and that the equipment or at least part of it was to remain the property of Barecall unless Aqualounge paid for it (T 17-18; T 24). (The debate in this regard was continuing both at the time Aqualounge went into possession of the first floor (in September 2003) and when the Variation of Lease was signed in November 2003, with Aqualounge’s solicitor still asserting that Aqualounge had property in the kitchen equipment.)

62 Mr Oppedisano says that in August 2003 he advised Aqualounge that it could have the first floor “on the same terms as Keith Long”, by which he says he meant on the same rent (T 26), though he also seemed to accept that the August “deal” included an agreement that Aqualounge could have the fixtures and fittings (T 26; T 28) provided that it made payment for the latter.

63 Nevertheless, Mr Oppedisano accepts that by the time he gave instructions to Barecall’s lawyers (Cara Marasco) to prepare the Variation of Lease, some time after September 2003, the August 2003 “deal” was “off the table” (T 28).

64 Aqualounge was permitted to take possession of the first floor of the Manly premises on or about 1 September 2003 (T 39.6). At that stage, no variation of lease documentation had been provided to Aqualounge, let alone signed by it or by its then sole director (Mr Hoban) or any of the other individuals associated with the business.

65 There was some uncertainty on Mr Oppedisano’s part as to precisely when the various events relating to the first floor tenancy occurred (even though in the witness box he had a tendency to state matters in absolute terms as being “100% correct” (T 35)), the confusion as to when Aqualounge took possession seemingly arising over when he had travelled to America in that time. Mr Oppedisano was positive that he had left on a trip overseas prior to Aqualounge taking occupation of the first floor (saying “When they took over … 100% I was in America. 100% certain. They went into occupation of the first floor”). He at first put his trip in his affidavit as being October, but in the witness box then seemed to suggest that he had left six weeks before that, finally conceding “to be honest right now I can’t remember” (T 38). (By reference to a passport immigration entry later noted on the transcript record by Mr Baran, the date of Mr Oppedisano’s arrival in the USA seems to have been September 2003.)

66 Whatever the actual date on which Aqualounge took possession seems immaterial. The significance, as I see it, is that Mr Oppedisano accepts that Aqualounge went into occupation of the first floor at a time when there was no binding lease and that he knew “the paperwork” had yet to be completed and the terms on which Aqualounge was occupying the premises had yet to be settled (T 35; 36).

67 By letter dated 3 October 2003 (p 132 Exhibit O), at a time when Aqualounge had already been given possession of the first floor and was apparently getting the area ready for opening as a nightclub, Cara Marasco (the solicitors acting for Barecall) wrote to Stewart Green Mijovich (the solicitors who had acted at some earlier stage for Aqualounge) and noted:

We refer to previous correspondence in this matter and are instructed by our client that your client has now negotiated to take over the lease in relation to the first floor premises …
Rather than prepare a fresh lease in relation to the first floor, we took the view it would be more cost effective to provide a deed of variation to your client’s existing lease.

68 The letter refers to an enclosed variation of lease in duplicate and a tax invoice. It concludes:

The lessor will not be bound by the terms of the enclosed document until the documents are signed by the lessee “and its Guarantors” and returned to us, together with a cheque in payment of our tax invoice.

69 It appears that, around this time, Aqualounge had instructed another solicitor to act for it on the variation of lease, since it was Mr Tocchini who responded to the 3 October 2003 letter (p 134 Exhibit O) on Aqualounge’s behalf. By facsimile transmission on 31 October 2003, he stated:

I am acting for the Aqualounge Manly and I have to hand your letter of 3 October 2003 addressed to Stewart Green Mijovich regarding the variation of lease. I don’t have a copy of the original lease and I would be obliged if you would let me have a copy as it does not appear that it has been registered. I also wish to advise that Mr Ian Hardy has sold his shares in the company and that the persons who will guarantee the lease are, in addition to David Hoban, they are Jason Lussick, Anthony Rossi, Radislav Spadina and Deon Russell Harvey . If you could let me have those details at your earliest convenience we will attend to getting these documents as I understand there is some immediacy in having this executed. (my emphasis)

70 The “immediacy” in having the document executed, to which Mr Tocchini referred to in that letter, was not explained.

71 Mr Tocchini, who gave evidence in the proceedings, recalled that he had been approached by Mr Hoban who said that he and a group of friends had formed a company and were going to lease a bar or lounge (T 70). He could not recall the time he was approached. (It would seem that Mr Tocchini had earlier given some advice in about 2001 to one or more of the individuals associated with Aqualounge - see for example Exhibit D, a file note of a meeting apparently relating to some proposed venture between Messrs Hoban, Hardy, Harvey, Rossi and Lussick or their respective companies. I do not consider this of any relevance since it is not clear what the then proposed arrangement was or whether, in any shape or form, it eventuated. However, if he had some previous knowledge of the background of one or more of the individuals, it might explain why Mr Tocchini apparently did not see the need to confirm the factual instructions he was given as to who were the directors/secretary of the company when he was given instructions in relation to the variation of lease arrangements in 2003.)

72 Mr Tocchini’s evidence was that at this stage (31 October 2003) he had not carried out a company search of Aqualounge (T 77.10); that he understood he was acting on behalf of Aqualounge and the five defendants “in their capacity as directors of the company” (T 76); that he was not acting for the individuals named in his letter as guarantors (T 85.30; T 88.4; T 94.3); that he had not seen a copy of the 2001 Lease (which was only forwarded to him by letter of 31 October) (T 78.30); that he was dealing mainly in correspondence with Mr Harvey since he was the one who had an email address (T 93.14; T 110.28); that most of his instructions came from Mr Hoban and Mr Rossi (T 77); and that he was not sure who he had been told was to guarantee the lease.

73 Mr Tocchini’s recollection (which I have no reason to doubt) was that he wrote the 31 October 2003 letter on the basis of instructions from either Mr Hoban or Mr Rossi as to the persons who would guarantee the lease and that he had not provided a copy of that letter to any of the defendants (thus none of the others would have necessarily been aware of or had any opportunity to correct any misapprehension by Mr Tocchini in that regard).

74 A copy of the 2001 Lease appears to have been provided by Cara Marasco to Mr Tocchini by letter dated 31 October 2003, presumably received after Mr Tocchini had sent his own 31 October communication.

75 By letter dated 11 November 2003, Cara Marasco forwarded to Mr Tocchini the “execution page, as requested by you”, stating that they looked forward to receipt of the variation of lease “duly executed by your client and its guarantor”. At that stage, therefore, (and assuming, which may not necessarily be the case, that weight can be placed on the precision with which such terms are used in the correspondence) it would seem that Barecall’s lawyers understood Mr Tocchini to be acting for Aqualounge (“your client”) not “its guarantor” as such.

76 Exhibit J is a copy of a facsimile transmission dated 6 November 2003 from Mr Tocchini to Mr Harvey, advising the latter that Mr Tocchini had had a long conversation with Mr Bruno Cara on 5 November 2003 concerning the variation of lease. That letter noted there was an issue in relation to a dispute as to rent said to be due from September 2003 and an issue in respect of certain equipment:

As I pointed out to you in our recent meeting the new lease acknowledges that there is a raft of plant and equipment set out in a letter from Gray Eisdell & Timmins [sic]. That document has not been produced. I am told however that the landlord has received from the AquaLounge $70,000 to cover the costs of equipment. If you have paid that money for the equipment then my contention would be that it is yours and not the landlords and, you wouldn’t have to maintain it and you could take it out when you left. That needs to be clarified.

77 The letter also noted that:

Bruno [Cara] is preparing an amendment page for signature with all the names of the guarantors on it and we should be ready to move forward once we can sort out the issues in 2 [the claimed outstanding rent] and 3 [the equipment].
If you could organise a meeting with the other directors and give me precise instructions about what we are doing with those matters then I can go ahead.

78 From this, it would seem that at least Mr Harvey was aware that an ”amended” page for signature was being prepared with guarantors’ names on it. (Had Mr Harvey thereafter signed the subsequent execution page, it would in my view have been hard for him to maintain that it was not being signed by him as guarantor. However, as it is clear that he did not sign the document no relevant inference from the awareness arising from this letter can be drawn.)

79 Clearly, at this stage, Mr Tocchini was under the impression not only that there was to be more than one guarantor of the 2001 Lease as varied (to which he seems to have been referring as the new lease) but also that there were a number of directors of Aqualounge, of whom Mr Harvey was one. This is consistent with his oral evidence, namely that his recollection was that all five of the defendants were directors of the company as at October 2003.

80 Mr Tocchini’s recollection was that he had at least one meeting in his office at which all five of the defendants were present, but he could not place a date on this (T 86). Although at first he did not recall having a meeting with Jason Lussick (T 83) he then said that on the only occasion he met Mr Spadina, Mr Lussick (as was each of Messrs Rossi, Hoban and Harvey) was there (T 86).

81 I have no reason to disbelieve Mr Tocchini’s evidence that he assumed the defendants were shareholders (T 87); that he was told (though he cannot recall by whom) that they were the directors of the company; and that he believed, as directors of the company, that they would be required and/or prepared to guarantee the lease (T 88). However, what is by no means apparent is that he was told that this was going to be the case in the one meeting at which all five were present; the significance of that being that it is by no means apparent that any particular instructions given to Mr Tocchini from one or more of Mr Hoban or Mr Rossi were ever acknowledged or accepted by any one or more of the other defendants.

82 By letter dated 17 November 2003, Cara Marasco wrote to Mr Tocchini enclosing a copy of the letter from Gray Eisdell Timms (this being the letter referred to in paragraph 4 to the annexure to the Variation of Lease), from which I infer that this is the first time Mr Tocchini had been provided with a copy of any equipment list. The letter stated:

We have been instructed by our client that your client has been in occupation of the First Floor for a considerable period of time, well in excess of September this year. [To the extent this suggests that Aqualounge had taken possession prior to September 2003, this is inconsistent with the evidence that possession of the first floor was handed over in September 2003.]
Notwithstanding your client’s occupation of the property, your client has failed to pay the increased rent which was to be effective from 1st September 2003.
We are instructed to advise that your client is to immediately pay to our client, the rent in respect of the First Floor in accordance with the provisions contemplated in the Variation of Lease. If your client fails to make the payment as requested herein, our client has indicated it will change the locks and retake the possession of the First Floor, without further notice. (my emphasis)

The letter closed by again expressing anticipation of receipt of the variation of the lease duly executed by your client.

83 As at that stage, therefore, it would seem not only that Barecall’s solicitors were not asserting that there was a binding lease in terms of the Variation of Lease (referring, as they did, to the provisions “contemplated” in the variation of lease) but also that Barecall had handed over possession well knowing that no variation of lease, let alone any guarantee thereof, had been signed.

84 Mr Tocchini’s evidence, presumably having received and noted the contents of this letter, was that by 17 November 2003 the “guarantee” was no longer “centre stage” (T 80.34), the pressing disputes at that time seemingly being in relation to the alleged outstanding rent and the status of the equipment in the first floor premises.

85 A handwritten facsimile transmission dated 18 November 2003 from Mr Tocchini to Mr Harvey (Exhibit K) raised with him the issue of the equipment to which reference was made in the Variation of Lease document which had been prepared by Cara Marasco. It says:

Opedisano [sic] is apparently claiming that the equipment in the attached list is his. Dave Hoban, say it belongs to the Aqualounge because you have paid Opedisano $100,000 for it.

Mr Tocchini sought urgent confirmation that

1. You [Aqualounge] owns the equipment and 2. you will sign the amended variation and pay the rent from 1 Sept to date by Friday.

86 Mr Harvey’s handwritten response (Exhibit L) was to provide information as to the lease “back rents” which had been paid to John Oppedisano. Nothing was said about the equipment.

87 Mr Tocchini’s response to Cara Marasco, by facsimile transmission on 18 November 2003, was that he was seeking urgent instruction “from my clients” (the use of the plural suggesting that by that time Mr Tocchini may have understood he was acting for more than just the lessee company). Relevantly, Mr Tocchini raised the issue in relation to the list of assets shown in the Gray Eisdell Timms letter. Mr Tocchini advised that he had been told by one of the directors of Aqualounge that those assets “are in fact the property of the AquaLunge [sic] for which they paid your client a sum I am told in excess of $70,000”. (By this stage there was, as noted earlier, only one director.) Mr Tocchini advised that the proposed additional clause in the variation of lease (clause 27) should be removed. He said he had sought urgent instructions in terms of the rent.

88 On 20 November 2003, Mr Tocchini sent a further facsimile transmission to Cara Marasco in which he referred to a conversation with Ms Liliana O’Toole (Mr Oppedisano’s sister and, as I understand it, a principal of or associated with a real estate company through whom payments made to or for Barecall were put forward as evidence of the amounts claimed in these proceedings). Mr Tocchini said that “she indicated to me that unless the documents were executed today and the balance of outstanding moneys were paid tomorrow and all delivered by lunchtime that the new building would not be allowed to open I think on Friday or Thursday evening”. By this stage, therefore, there was clearly some urgency to resolve the situation and Barecall (not unreasonably, since Aqualounge had been in possession of the first floor for nearly three months without any signed agreement) was threatening to rely on its asserted right not to permit the new nightclub area to open.

260 I was not taken to any provision of the 2001 Lease pursuant to which on termination for breach, the lessor may claim as a debt or by way of liquidated damages the balance of the rent payable for the term of the lease. Any such claim must therefore be a claim for damages. However, if the 2001 Lease is no more than a monthly tenancy, it would have been open for the monthly tenancy to be terminated on one month’s notice. Hence, any calculation of damages would surely have to take that into account. Accordingly, any claim for rent beyond the end of July 2005 would be disallowed, a reduction of approximately $227,000. (The rent claimed was through to 9 December 2005, see schedule p 356ff.)

261 Had I found any one or more of the defendants liable under the alleged guarantee it would have been necessary for a careful scrutiny to be made of the material submitted in relation to the claimed amounts in order to rule on whether each item claimed by Barecall has been properly verified. I have not carried out that exercise nor do I think the evidence as tendered would permit a comprehensive exercise of that kind to be carried out.

Conclusion

262 As unpalatable as it is for Barecall, which allowed Aqualounge into occupation of the first floor premises on the assumption that at least its directors (if not all of those associated with the running of the business) would personally guarantee its liabilities, the difficulty as I see it is that it was never contemplated that any one of the defendants should be the sole guarantor of the company’s liabilities. Any guarantee was to be a joint and several guarantee. The consequence of not all co-sureties becoming bound is that none is liable. Even if all five defendants had signed the execution page attached to or provided with the Variation of Lease, the fact that there was no appropriate amendment to the lease itself means that on its proper construction there was still no guarantee provided for under the lease by any of Mr Lussick, Mr Rossi or Mr Spadina of the lease obligations.

Orders

263 I dismiss the plaintiff’s claim against each of the defendants with costs.

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