Bowen v Alsanto Nominees Pty Ltd

[2011] WASCA 39

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   BOWEN -v- ALSANTO NOMINEES PTY LTD [2011] WASCA 39

CORAM:   McLURE P

NEWNES JA
MURPHY JA

HEARD:   7 SEPTEMBER 2010

DELIVERED          :   23 FEBRUARY 2011

FILE NO/S:   CACV 116 of 2009

BETWEEN:   NIELS BOWEN

JAYNE ELIZABETH CANNON
Appellants

AND

ALSANTO NOMINEES PTY LTD
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :COMMISSIONER STAUDE

Citation  :ALSANTO NOMINEES PTY LTD -v- BOWEN & ANOR [2009] WADC 130

File No  :CIV 1461 of 2007

Catchwords:

Real property - Appellants intended to set up pharmacy to operate as franchisee of appellants - Agreement to lease respondent's premises - Agreement subject to condition that appellants obtain approval to relocate another pharmacy to the premises - Intention of parties that owner of that pharmacy would be lessee of premises - Appellants commenced fit­out of premises - Appellants unable to obtain approval to relocate another pharmacy - Whether agreement to lease binding on appellants - Masters v Cameron - Whether trial judge erred in finding appellants waived benefit of condition of approval by commencing fit­out of premises

Legislation:

Nil

Result:

Appeal allowed

Category:    B

Representation:

Counsel:

Appellants:     Mr S K Shepherd

Respondent:     Mr S Owen-Conway QC & Mr P A Monaco

Solicitors:

Appellants:     Tottle Partners

Respondent:     GV Lawyers

Case(s) referred to in judgment(s):

Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 283 CLR 570

Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101

Badat v DTZ Australia (WA) Pty Ltd [2008] WASCA 83

Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622

Donaldson v Bexton [2006] QCA 559; [2007] 1 Qd R 525

Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418

George v Roach [1942] HCA 22; (1942) 67 CLR 253

Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629

GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631

Hawksley v Outram [1892] 3 Ch 359

Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26

Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1984) 165 CLR 622

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Motor Oil Hellas (Corinth) Refineries v Shipping Corp of India (The Kanchenjunga) [1990] 1 Lloyd's Rep 391

Mulcahy v Hoyne [1925] HCA 17; (1925) 36 CLR 41

Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537

Sandra Investments Pty Ltd v Booth [1983] HCA 46; (1983) 153 CLR 153

Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

Shakibaee v Chan [2001] WASC 60; (2001) 24 WAR 97

Sheehan v Zaszlos [1995] 2 Qd R 210

Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310

Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41

Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290

1. McLURE P:  I have had the advantage of reading the reasons for judgment of Newnes JA.  I agree with the orders he proposes for the reasons he gives.  However, I wish to make some additional observations largely directed at the appellants' claim that the trial judge erred in finding that the appellants had waived the benefit of condition 19 of the agreement to lease between the appellants and the respondent in respect of commercial premises in Fremantle (the premises).

2. Clause 19 of the agreement to lease relevantly provided:

   This offer to lease is agreed between the parties, Subject to Lessee at [L]essee cost and best endeavours gaining medicare and Pharmaceutical Council of WA approval to purchase & relocate any required licences & gaining local council approval.

   (In line with this, if the lessor receives another alternative offer to lease while the preceding condition is current, it is agreed that the Lessee will be given a first right of refusal to proceed with this offer by removing the foregoing condition and becoming unconditional within 48 hrs of date of such formal notice).

3. At the time of entering into the agreement to lease, the appellants contemplated that a pharmacist with an existing pharmacy business in Fremantle (Mr Warren Conway) would relocate to the premises and be the lessee under the proposed lease.  At the same time the respondent, by its agent, knew that a licensed pharmacist would be nominated as lessee and that there were stringent guidelines regarding the relocation of a pharmacy [31], [34].

4. A detailed understanding of the legislative framework affecting the carrying on of a pharmacy business in Western Australia is unnecessary. It is sufficient for present purposes to note the following. Section 89 of the National Health Act 1953 (Cth) (the National Health Act) provides that a person is not entitled to receive a pharmaceutical benefit unless it is supplied by an approved pharmacist, at or from premises in respect of which the pharmacist is approved. Under s 90, the Secretary to the Department of Health may approve a pharmacist to supply pharmaceutical benefits at or from particular premises. Pharmaceutical benefits are drugs or medicinal preparations for which benefits will be paid by the Commonwealth.

5. The Secretary can generally only approve a pharmacist if the Australian Community Pharmacy Authority (ACPA) has recommended that approval, and the pharmacist is permitted under relevant State or Territory law to carry on business as a pharmacist. 

6. The function of ACPA is to consider applications by pharmacists for approval to supply pharmaceutical benefits at or from particular premises and to make recommendations to the Secretary as to whether or not a pharmacist should be approved. In making its recommendations, ACPA must comply with the rules determined by the Minister under s 99L of the National Health Act. The relevant rules set out location‑based criteria which must be met in order for the ACPA to recommend approval. The rules provide for the relocation of an existing approval or the establishment of a new approval.

7. Since 1 July 2006, approvals to provide pharmaceutical benefits at or from specific premises and applications for relocation of such approvals have been governed by the National Health (Australian Community Pharmacy Authority Rules) Determination 2006.  Schedule 2 of the Determination provides that to approve a relocation, ACPA must be satisfied of various matters including that the applicant has a legal right to occupy the premises.

8. Prior to 28 March 2007, the approval in relation to supply of pharmaceutical benefits by Mr Conway at his pharmacy complied with the location‑based criteria which had to be met for ACPA to recommend relocation to the premises.  That changed as a result of the National Health (Australian Community Pharmacy Authority Rules) Amendment Determination 2007 (No 1) (Amended Determination) which came into effect on 27 March 2007.  Under the Amended Determination, Mr Conway's pharmacy did not satisfy the location‑based criteria for relocation to the premises.

9. The evidence established that the Secretary had delegated his approval power under s 90 of the National Health Act to the Chief Executive Officer of Medicare Australia.

10. Under the Pharmacy Act 1964 (WA) (the Pharmacy Act) it is an offence to practice or carry on business as a pharmacist in Western Australia without a licence (s 26). A licence cannot be obtained unless the pharmacist is domiciled in Western Australia s 26(1). The appellants are both pharmacists domiciled in New South Wales. Further, no pharmacist is permitted to carry on practice as such in any pharmacy unless that pharmacy is registered under the Pharmacy Act.

11. The trial judge made the unchallenged finding that the condition in cl 19 of the agreement to lease (the approval condition) meant that the parties would not be bound by the agreement to lease if, prior to the lease commencement date of 1 May 2007, the appellants, using their best endeavours, had not been able to get Medicare, Pharmaceutical Council of Western Australia and City of Fremantle approval to relocate an existing pharmacy to the premises [117]. He found that the approval condition would not have been capable of being fulfilled if it had not been waived [123] and rejected the respondent's claim that the appellants had not used their best endeavours to obtain the relevant approvals [124]. The respondent did not file a notice of contention or cross‑appeal.

12. The trial and the appeal were conducted by all parties on the basis that the approval condition was for the benefit of the appellants and that they were entitled to unilaterally (and irrevocably) waive it before the expiry of the stipulated time within which it had to be satisfied.  It is appropriate to proceed on the assumption that that proposition is correct.  Indeed, this court has accepted the existence of a doctrine of waiver that is separate and distinct from the doctrines of election and estoppel:  Badat v DTZ Australia (WA) Pty Ltd [2008] WASCA 83; Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd (2005) 30 WAR 290. The issue was considered but not determined by the High Court in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 283 CLR 570.

13. The approval condition is a contingent condition where no party has undertaken or promised to be liable for the occurrence of the contingency.  Counter‑intuitively, if such a condition has not been waived or satisfied before the expiration of the time expressly or impliedly stipulated in the agreement for the fulfilment of the condition, the agreement does not automatically come to an end.  In the absence of a contractual term to the contrary, non‑fulfilment of the condition within the stipulated time renders the contract voidable (albeit it can be avoided without notice) at the instance of any party, provided they are not in breach:  Gange v Sullivan (1966) 116 CLR 418; Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537. The appeal was conducted on the basis that if the appellants had not waived the approval condition, they had lawfully terminated the agreement to lease.

14. The objectively determined purpose of the approval condition was to ensure that all necessary approvals for the conduct of a pharmacy business from the premises by a pharmacist entitled to supply pharmaceutical benefits under the National Health Act at those premises, were obtained before the obligation to lease the premises became absolute.

15. However, it is the case that both parties had contractual obligations to perform in the period before the approval condition had to be satisfied.  For example, the appellants were expressly required to use their best endeavours to obtain the relevant approvals.  Further, cl 18(d) required all parties to use reasonable endeavours to expedite and agree the final form of the lease.  Thus, on its proper construction, the conditions of the offer to lease are not precedent to the formation of any contract.  They are conditions precedent to performance of the obligation to lease the premises (alternatively, conditions subsequent to the performance of the whole of the agreement to lease).

16. As with the doctrine of election between inconsistent rights, a waiver must be in clear and unequivocal terms and must be communicated to the other party:  Sargent v ASL Developments Ltd (1974) 131 CLR 634, 646; Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622, 633. That is so because, even though the approval condition was for the benefit of the appellants and thus capable of being unilaterally waived, the respondent had an interest in knowing for how long its liability was to remain unresolved: Gange (443) (Windeyer J): Perri (565) (Brennan J).  Further, unilateral waiver has similarities with the doctrine of election between inconsistent rights:  the irrevocable abandonment of a contingent condition is inconsistent with the continuation of that condition.

17. I turn now to the question whether the approval condition had been waived by the appellants with the consequence that cl 19 of the agreement to lease ceased to apply.  If the approval condition was waived, the appellants would be liable for any failure to secure a third party as lessee of the premises under the proposed lease on the terms and conditions contained in the agreement to lease.  The trial judge concluded that the appellants' entry into possession of the premises to commence the fit out was inconsistent with the continuing application of the approval condition with the consequence that it had been waived.

18. It was contended in oral submissions on behalf of the respondent that the evidence established that the appellants were in exclusive possession of the premises; the respondent could not physically access the premises without the consent of the appellants; and it was not open to the respondent to re‑take possession of the premises from the appellants.  The respondent's submissions go beyond the trial judge's findings and are not the subject of a notice of contention.  The respondent also claimed it had lost the benefit of the 48‑hour provision in cl 19.  That claim is circular.  The benefit of the 48‑hour provision would only be lost if the approval condition had been waived.

19. It is necessary to have regard to the terms of the agreement to lease and all the surrounding circumstances in order to objectively determine whether, to the respondent's knowledge, the appellants had waived the approval condition.  In my view, no reliance can be placed upon the statement in the email of 1 February 2007 (exhibit 1.33) from the respondent's agent to the appellants that 'they can get you handover ASAP, and you can commence the licensing approvals and fit out process ASAP'.  That was overtaken by cl 3 of the agreement to lease which provided that 'Occupation for fit out purposes will be granted subject to the execution and return of the Lease'.

20. In the absence of findings to support the respondent's submissions as to the nature and effect of the appellant's possession, I propose to refer to the evidence.  After the City of Fremantle granted planning approval for the premises on 10 April 2007, the second‑named appellant (as agent for the appellants) commenced making arrangements for the fit out.  She asked the respondent's agent to arrange for access to the premises in order for the vinyl flooring to be laid.  Mr Alessandro (Sandro) Monaco and Mr Antonio Monaco gave evidence on this matter on behalf of the respondent.  The evidence of Mr Sandro Monaco was as follows.  Prior to 19 April 2007 the respondent's agent contacted him and asked whether the respondent would agree or allow the appellants to have possession of the premises in order for them to commence their fit out.  The first thing they wanted to do was the flooring.  He was told that the contractor would be Arrix.  He agreed and arranged for the keys to the premises to be given to Mr Peter Smith of Arrix.  Mr Antonio Monaco said he delivered the keys to Mr Smith to enable Arrix to carry out the fit out; the keys he delivered to Mr Smith were the respondent's only keys to the premises; and that Mr Smith asked him if he could have new keys cut to which he agreed. 

21. There is no evidence of any discussion between the parties or their agents about whether and if so what impact any of this conduct was intended to have on the provisions of the agreement to lease.  It clearly involved a departure from the express terms of cl 3.  In particular, the respondent agreed to occupation of the premises for the purposes of fit out notwithstanding that, to the knowledge of all parties, the terms of the proposed Lease had not been agreed between the parties. 

22. The terms and conditions of the agreement to lease fall into three relevant categories.  Some relate solely to the agreement (including cls 11, 12, 17, 18(d) and 19).  Others are the terms and conditions of the proposed Lease (cls 2, 4, 5, 7, 8, 9, 13, 14 and 16).  These are the terms and conditions that are intended to apply from the commencement of, and govern, the relationship of landlord and tenant.  Still other clauses relate to obligations which may or must be performed prior to the commencement of the Lease but which will also be terms of the Lease.  The lessor's works in cl 19 and the appellants' rights under cl 3 fall within that category.  Under cl 3, the appellants were entitled to fit out the premises before the Lease commencement date provided the Lease had been executed and returned.

23. If the actions taken by the appellants, with the knowledge and consent of the respondent, could properly be regarded as part performance of the terms and conditions of the proposed Lease, that must result in the waiver of the approval condition, the purpose of which was to render any obligation to lease the premises conditional rather than absolute.  If the appellants had obtained exclusive possession of the premises with the respondent having no right of re‑entry, that would constitute part performance.  However, there being no findings to that effect and no contention that such findings should have been made, that is the end of the matter.

24. The trial judge's findings go no further than establishing that the appellants (with the respondent's consent) sought and obtained access to the premises prior to the execution and return of the Lease for the limited purpose of undertaking the fit out.  Accepting that the appellants were in possession of the premises for that limited purpose, it was not exclusive possession.  There is no finding that the appellants were aware that the respondent had provided its only set of keys to Mr Smith or that Mr Smith, in seeking and obtaining the respondent's permission to change the keys, was acting with the knowledge and authority of the appellants.  After 19 April 2007, the respondent accessed the premises in order to undertake works thereon.  For example, when the vinyl floor covering was being laid, the respondent replaced the front doors of the premises with new automatic doors, which was part of the lessor's works referred to in cl 19 of the agreement for lease.

25. The parties had entered into the agreement to lease on the basis that the intended lessee was not to be the appellants but a third party.  At all material times they knew (1) that the respondent agreed to the commencement of the fit out by the appellants when the terms of the Lease had not been finalised; (2) the intended and permitted use of the premises under the Lease was for 'pharmacy and food items'; (3) the

lessee was to be a third party who was a pharmacist entitled to carry on a pharmacy business from the premises and be entitled to receive pharmaceutical benefits; (4) the approvals essential for the premises to be used for the nominated purpose had not been granted.

1. In my view the appellants' conduct in entering into occupation of the premises with the respondent's consent for the purpose of commencing the fit out is consistent with seeking to ensure that the pharmacy would be ready to operate when the expected approvals were obtained and the Lease executed.  It does not satisfy the requirement for an effective waiver.

2. I agree with Newnes JA that the statements made by the appellants at the meeting on 2 May 2007 do not assist in answering the question whether, viewed objectively, the appellants had by their conduct in commencing the fit out waived the approval condition.  Moreover, what they said was not inconsistent with a belief that the appellants had a liability to compensate the respondent for restoring the premises to their original state.

3. NEWNES JA:  This is an appeal from a decision of Commissioner Staude (as his Honour then was) in the District Court in which his Honour found that the appellants had breached an agreement to take a lease of the respondent's premises and awarded damages to the respondent in the sum of $456,970:  Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130. The appellants contend that his Honour erred in finding that they were in breach and say he should have found that the agreement was lawfully terminated by the appellants by reason of the failure of conditions to which the agreement was subject.

Background

1. The respondent is the registered proprietor of premises in William Street, Fremantle (the premises).  The appellants are both pharmacists domiciled in New South Wales.  Each owns several pharmacies located in other States of Australia and the Australian Capital Territory, but none in Western Australia.  Those pharmacies trade under the name 'Chemist Outlet' followed by the name of the place in which it is located.  In addition, the appellants are the directors and shareholders of Chemist Outlet Pty Ltd which has licensed a number of pharmacies in other parts of Australia to trade under the 'Chemist Outlet' name.  The owners of those pharmacies have entered into franchise agreements with Chemist Outlet Pty Ltd under which they pay a yearly franchise fee.

1. The appellants wished to set up a Chemist Outlet pharmacy in Western Australia.  The effect of the Pharmacy Act 1964 (WA) (subsequently repealed by the Health Practitioner Regulation National Law (WA) Act 2010 (WA)) was that a pharmacy must be registered under the Act and in order to be registered the business must be under the immediate supervision of a pharmacist licensed under the Act. Under s 26 of the Pharmacy Act, a pharmacist was not entitled to practice as such unless he or she was domiciled in this State.  Neither of the appellants was domiciled in the State and accordingly neither was able to operate a pharmacy here in their own name.

2. The intention of the appellants was to locate a site which was suitable for a pharmacy and then to find a pharmacist domiciled in Western Australia who was carrying on a pharmacy in the same area to relocate their pharmacy to that site.  It was proposed that the pharmacist would become a member of the Chemist Outlet group.  Ms Cannon, the second‑named appellant, was aware that under the National Health (Australian Community Pharmacy Rules) Determination 2006 (the Determination), made under the National Health Act 1953 (Cth), the transfer of pharmacies was restricted. She was also aware that approval for a transfer had to be obtained from, among others, Medicare and the Pharmaceutical Council of Western Australia. Ms Cannon understood that any application for approval of the transfer of a pharmacy to the new location would have to be made by the pharmacist concerned and that when the application was made the pharmacist would have to have a signed offer to lease, or lease, of the new location in his or her name (exhibit J1, pars 44, 51 ‑ 55).

3. In late 2006 or early 2007, Ms Cannon learned that the premises were available and that it appeared they would be suitable for a pharmacy.  Ms Cannon contacted a Greg Simpson, an employee of Symbion Health, with whom she was acquainted, and asked him if he knew of a pharmacist who might be interested in relocating their pharmacy.  Mr Simpson subsequently told her that Mr Warren Conway, a pharmacist who had a pharmacy in the Woolstores Shopping Centre in Fremantle, might be interested in joining the Chemist Outlet group.  Mr Simpson said he would speak to Mr Conway.  Some time later he told Ms Cannon that Mr Conway was interested in relocating his pharmacy.

4. On 29 January 2006, Ms Cannon telephoned a real estate and property management company, Knight Frank Australia Pty Ltd, and spoke to a representative of that company, Mr Mark Guttridge.  Mr Guttridge was aware of the premises and later obtained an exclusive agency agreement with the respondent to act as its agent to lease the premises.  In the course of the telephone discussion, Ms Cannon told Mr Guttridge that a licensed pharmacist would be nominated as the lessee of the site selected for the pharmacy and that any arrangement in respect of the premises would have to be conditional on a pharmacy licence being transferred to it.

5. Ms Cannon was aware that under the Determination it was necessary in order to transfer a pharmacy to the premises that the pharmacy be located within 1 km of the premises.  Ms Cannon obtained a map from the internet and calculated that the premises were less than 1 km from Mr Conway's pharmacy (exhibit J2, par 38).  She then telephoned the Australian Pharmacy Relocation Authority (the Authority) and spoke to a person there who told her that the relocation of Mr Conway's pharmacy to the premises appeared to be within the Authority's rules.

6. On 30 January 2007, Mr Guttridge sent Ms Cannon an email confirming a number of details of the premises, including rental of $30,000 per month, and inviting her to make an offer to lease.  In the email, Mr Guttridge offered to draw up an offer to lease to:

   [T]ry to buy 14, 21 [or] 30 days by putting it under offer subject to pharmacy licence, and a first right 48 hr clause for you to go unconditional if another offer is received.

   That would be a way to secure the site, while still give (sic) you a few weeks to get the licence sorted.

7. Later that day, Ms Cannon accepted that suggestion, saying that she needed the offer to be subject, amongst other things, to the relocation of a pharmacy licence.

8. Shortly afterwards, Mr Guttridge sent her an offer to lease in respect of the premises which he had prepared on a standard form.  The name and address of the tenant had been left blank but against the entry 'tenant's trade name' was inserted 'Bowen Health Services/Chemist Outlet'.  The offer to lease included cl 18(d) which was in the following terms:

   Notwithstanding that any one or more of the parties has not executed the Lease in accordance with the provisions of this agreement, the Landlord, the Tenant and the Guarantor (if any) will from the date of execution of this agreement by the Landlord be bound by the terms, conditions, covenants and provisions contained in the Lease as if it were both duly executed and delivered.

9. Clause 19, headed 'special conditions', was in the following terms:

   This offer to lease is agreed between the parties, subject to lessee at lessee cost and best endeavours gaining Medicare approval to purchase & relocate any required licences & gaining local council approval.

   (In line with this, if the lessor receives another alternative offer to lease while the preceding condition is current, it is agreed that the lessee will be given a first right of refusal to proceed with this offer by removing the foregoing condition and becoming unconditional within 48 hrs of date of such formal notice).

10. Ms Cannon responded by email of 1 February 2007.  In that email, Ms Cannon requested a number of changes to the offer to lease.  They included changing the entry under 'tenant's trade name' to 'Chemist Outlet Freemantle [sic]', amending cl 19 to include 'and Pharmaceutical Council of WA' after 'Medicare', and capping annual rent increases at 3% and market rent reviews at the end of the first and second terms at 4%.  Ms Cannon said she also wanted cl 18(d) removed as the appellants had not seen the terms of the lease.  Ms Cannon concluded by saying:

    Mark, thank you for giving me the opportunity to lease this tenancy.  I look forward to being able to negotiate a mutually beneficial & long term lease for both the landlord & our company.

11. Later that day, Mr Guttridge sent a 'final offer' to Ms Cannon.  It included a number of the changes.  Among those changes, the rent increases in the first term of the lease, and the rent reviews at the end of the first and second terms, were fixed at 4%.  A new cl 18(d) in the following terms had been added under the existing cl 18(d):

    Standard form of lease to be issued by independent lawyers Godfrey Virtue, and all parties to use reasonable endeavours to expedite and agree final form of lease and executed (sic) in line with intent of this agreement.

12. Special condition 19 had also been altered to insert the words 'and Pharmaceutical Council of WA' after 'Medicare'.  It now read:

    This offer to lease is agreed between the parties, subject to lessee at lessee cost and best endeavours gaining Medicare and Pharmaceutical Council of WA approval to purchase & relocate any required licences & gaining local council approval.

    (In line with this, if the lessor receives another alternative offer to lease while the preceding condition is current, it is agreed that the lessee will be given a first right of refusal to proceed with this offer by removing the foregoing condition and becoming unconditional within 48 hrs of date of such formal notice.)

    (I will refer to the first paragraph of cl 19 as the 'approval condition'.)

13. At the same time, Mr Guttridge also sent to Ms Cannon a formal lease document which had been prepared by the respondent's solicitors.

14. Ms Cannon made some further alterations to the offer to lease.  Relevantly, Ms Cannon changed the words on the cover from 'Prepared for Jayne Cannon, on behalf of 'Chemist Outlet' to 'Prepared for Chemist Outlet'.  Ms Cannon also amended the rent‑free provision to state that it was for four months from the lease commencement date of 1 May 2007 and added 'rent free months:  May, June, July and August 2007'.  She changed the annual rent increases to be capped at 3.5% and the market rent reviews at the end of the first and second terms fixed at 4%.  Ms Cannon crossed out the original cl 18(d), leaving the new cl 18(d).

15. The offer to lease contained an 'acceptance' clause for execution by both the lessee and the lessor.  The clause for execution by the lessee was in a somewhat unusual form.  It commenced with a statement:

    I/We 'the Lessee'/'Tenant' hereby declare the above information to be true and accurate in all respects.

16. There was then provision for the insertion of the 'company or trust for which the lessee acts', against which Ms Cannon had put the words 'Chemist Outlet' and under that an address in New South Wales.  Beneath that were the printed words:

    In accordance with section 127 of the Corporations Act 2001,

    Signed for and on behalf of the Lessee with authority.

    Below that Ms Cannon placed her signature, followed by the words 'Jayne Cannon ‑ Proprietor.  Chemist Outlet 2/2/07'.

17. Ms Cannon returned the signed offer to lease to Mr Guttridge on 2 February 2007.

18. Mr Antonio (Tony) Monaco, a director of the respondent, subsequently made several further alterations to the offer to lease, including deleting August as a rent‑free month, and, on 6 February 2007, he signed it.  He erroneously dated it 7 February 2007.  Mr Guttridge then sent the document to Ms Cannon by email.  Mr Guttridge's covering email was in the following terms:

    I have good news, the owners have reviewed the final offer for 13 William Street Fremantle and I can advise they have given conditional signed

acceptances as attached.  Final signed counter attached.

They have conceded the CPI (8 capital cities capped at 3.5%) rent review, and market at option capped at 4%.

They have conceded May 1^st commencement, and final counter offered additional May, June, July rent free.  (6 months from today).  Happy to hand over early once leases finalised.

They have clarified that the 8 brand new commercial Toshiba reverse cycle a/c units have cassettes rather than duct. 

I think this is a great result for both parties.

Really now comes down to you using best endeavours to get the pharmacy licence asap.

1. Ms Cannon responded by email on 7 February 2007, as follows:

   Thank you for the attached lease offer.

   Would you please be able to amend the market review on the lease to offer document to reflect market review is capped at 4% (not fixed 4% increases) as in your email below stating the owner has agreed to market review being capped at 4%.

   Thank you, I will let you know how I go on the 15^th when I am meeting with the pharmacist re purchasing the pharmacy.

2. The primary judge found that Ms Cannon first spoke to Mr Conway about the matter on 14 February 2007.  Ms Cannon gave evidence that at a meeting with Mr Conway on 15 February 2007 she provided him with a number of documents prepared by her New South Wales solicitors for the purpose of enabling the appellants to acquire his pharmacy business.  Those documents were never executed and there was no evidence that Mr Conway finally agreed to become a member of the Chemist Outlet group.

3. It is evident, however, that the appellants proceeded on the basis that agreement would be reached with Mr Conway.  From about 19 February 2007, steps were taken in preparation for the fitting out of the premises.  Mrs Riggs, the retail manager for the Chemist Outlet group, was instructed by Ms Cannon to arrange the fit‑out, merchandise, equipment, signage and computer installations.  Stock was ordered and an electricity account established.

4. In early March 2007, Ms Cannon asked Mr Guttridge to provide her with a lease or offer to lease in the name of Mr Conway so that Mr Conway could make an application to transfer his pharmacy licence to the premises.  On 9 March, Mr Guttridge sent her an agreement to lease in Mr Conway's name as lessee.  It was not executed by the respondent.

5. An application for planning approval to use the premises as a pharmacy was made to the local authority on 14 March 2007 and Ms Cannon instructed her staff to prepare an application to register a business name 'Chemist Outlet' in the name of Mr Conway.  In about mid‑March 2007, Ms Cannon prepared a draft application to Medicare Australia for approval of the relocation of Mr Conway's pharmacy.  The application was in Mr Conway's name.  Ms Cannon also prepared an application in his name to the Pharmaceutical Council of Western Australia for registration of the premises as a pharmacy.

6. On 21 March 2007, Mr Guttridge sent Ms Cannon a draft lease prepared by solicitors, Godfrey Virtue.  Ms Cannon responded by email on 22 March 2007, attaching comments by her solicitors on the lease.  Mr Guttridge referred that correspondence to Godfrey Virtue and, on 27 March 2007, he sent a revised draft lease to Ms Cannon.  Following some further email correspondence, another version of the lease document was prepared by Godfrey Virtue and, on 3 April 2007, Ms Cannon sent an email to Mr Guttridge requesting that it be sent to Mr Conway's accountant.

7. The local authority advised by letter of 10 April 2007 that development approval had been granted.  Ms Cannon then made arrangements to commence the fit‑out of the premises.  She gave evidence that she telephoned Mr Guttridge and asked if she could have access for vinyl flooring to be laid (exhibit J1, par 209).  At some time prior to 19 April 2007, Mr Guttridge spoke to Mr Sandro Monaco who agreed that the appellants could have access to the premises for fit‑out purposes.  Mr Monaco arranged for the keys to be delivered to Mr Peter Smith of Arrix Constructions (Arrix), which had been engaged by the appellants to carry out the fit‑out.  The keys were the only set of keys the respondent had to the premises.  It is not apparent that the appellants were aware of that.

8. Arrix then commenced the fit‑out.  The evidence as to precisely what work was carried out is unclear, but it appears that the principal work was the laying of vinyl floor‑covering in the premises.  On 19 April 2007, Mr Sandro Monaco inspected the premises and observed 'a large volume of vinyl floor rolls, various tradesmen, tools and vehicles inside the premises'.  He saw that about half of the floor covering had been laid.  The padlocks to the entry doors had been removed and there was a new padlock on the roller door.  The front doors had also been replaced with new automatic doors by the respondent as agreed in the offer to lease.

9. Arrix ultimately invoiced Ms Cannon for $76,071.60, mainly for the laying and then the taking up of the vinyl flooring.  It also invoiced Ms Cannon for replacing lock barrels and keys.

10. On 20 April 2007, Ms Cannon saw on the internet that the Determination had been amended on 27 March 2007 to restrict the short distance (up to 1 km) relocation of pharmacies which were situated in private hospitals and 'large shopping centres'.  Upon further enquiries being made it became apparent that Mr Conway's pharmacy was located in a 'large shopping centre' and the effect of the amendment was that it could not be relocated to the premises.  On 23 April 2007, Ms Cannon told Arrix to stop work.

11. Shortly before 2 May 2007, Ms Cannon telephoned Mr Guttridge and told him there was a problem with the lease.  A meeting was arranged for 2 May 2007 at the premises.

12. In the meantime, on the instructions of Mr Sandro Monaco, Mr Guttridge sent a facsimile to Ms Cannon on 30 April 2007 (exhibit 1.27).  Mr Guttridge's recollection at trial was that Mr Sandro Monaco had instructed him to send the facsimile after he had informed Mr Monaco that Ms Cannon had said there were issues with the lease and she wanted a meeting to discuss them (ts 330).  In the facsimile, Mr Guttridge referred to the appellants finalising the 'licensing and approval arrangements with [their] nominee Warren Conway' and observed that the licensing and approvals process had faced delays.  He noted that early access had been given to enable the appellants' contractors to commence flooring work.  Mr Guttridge requested the payment of a deposit, provision of a security deposit or bank guarantee, and the return of the signed lease document.  The deposit requested was two months rent 'in consideration of early access to the subject property and in consideration of delays in returning leases'.

13. The meeting of 2 May 2007 was attended by Mr Sandro Monaco, Mr Tony Monaco, Mr Guttridge and the appellants.  In his evidence about the meeting, Mr Sandro Monaco said (exhibit 2, pars 58 ‑ 62):

    [Ms Cannon] was very apologetic and said; 'we (indicating herself and [Mr] Bowen) cannot proceed with the lease.

    …

    [Mr] Bowen said that 'we know that we are liable for compensation to you, which can be sorted out between our respective solicitors and I am immediately going to go and find another pharmacy and negotiate to purchase even if I have to pay above market rates to have it transferred here.'

    [Ms] Cannon asked:  'How much is it going to cost to remove the flooring because we know we are liable for it?'  Tony [Monaco] said 'we've spent over $10,000.00 on replacing the doors which you've requested and remember that you've got a five year lease here'.

    [Mr] Bowen enquired about other pharmacies in close vicinity to the premises that he would approach to purchase.

14. According to Mr Sandro Monaco, he suggested a couple of local pharmacies to the appellants.  Mr Tony Monaco's evidence was, mutatis mutandis, in identical terms.  Mr Guttridge also gave evidence that the appellants were going to seek another pharmacy business to transfer to the premises (exhibit 4, par 67).

15. The appellants subsequently approached several other pharmacists in the area without success.  On or about 9 May 2007, Ms Cannon informed Mr Guttridge that the appellants would not be proceeding with the lease and the premises could be relet (exhibit 4, par 74).

16. A notice of default was served on the appellants on 14 May 2007.  The appellants' solicitors responded by a letter dated 22 May 2007.  In that letter the solicitors stated that the approval condition in the offer to lease could not be satisfied because Medicare approval could not be obtained due to the change in the rules on 27 March 2007.  They denied the appellants were in breach and said that the offer to lease had been frustrated and was incapable of performance.  The solicitors went on to say that if the respondent did not accept that the appellants would submit an application to Medicare, knowing it would be refused.

17. On 29 May 2009, the respondent's solicitors replied saying that the appellants had waived the benefit of the approval condition and that the offer to lease had been rendered unconditional by reason of the appellants having taken possession of the premises.  They said that the letter from the appellants' solicitors of 22 May 2007 constituted a repudiation of the offer to lease.  The respondent's solicitors subsequently informed the appellants' solicitors that the respondent accepted the appellants' repudiation of the offer to lease.

18. The premises were ultimately let to another party, a business known as Best & Less.  That lease commenced on 22 October 2007 at a lower annual rental.  The respondent subsequently commenced proceedings in the District Court against the appellants, claiming damages for breach of the offer to lease.

The findings of the primary judge

1. The primary judge found that an agreement between the parties had been reached upon the transmission of Ms Cannon's email of 7 February 2007. His Honour found, in effect, that the offer to lease signed by Mr Tony Monaco on 6 February 2007 constituted a counter‑offer by the respondent to the offer to lease signed by Ms Cannon on 2 February 2007, Mr Monaco having increased the lease term and deleted August from the rent‑free months. The email from Ms Cannon on 7 February 2007 was an acceptance of the counter‑offer [100].

2. The primary judge found, in the alternative, that the appellants had accepted the respondent's counter‑offer by conduct. By continuing to deal with the respondent's directors, Mr Sandro Monaco and Mr Tony Monaco, and their agent Mr Guttridge, and by subsequently entering into correspondence regarding the terms of the formal lease, the appellants clearly evinced their acceptance of the counter‑offer. His Honour concluded that the conduct of the parties from 6 February 2007 was consistent only with the existence of a concluded agreement [101].

3. His Honour then turned to cl 18(d) of the offer to lease, by which the parties had agreed to use reasonable endeavours to expedite and agree 'a final form of lease [to be] executed in line with intent of [the] agreement'. He found that the essential terms of the proposed lease were included in the offer to lease, which was sufficiently certain and complete to constitute an enforceable agreement [103]. The primary judge rejected the appellants' contention that the execution of a formal lease was a condition precedent to the formation of a binding agreement [104]. He also rejected the appellants' contention that the offer to lease was not intended to have binding effect because it was always intended that a nominee of the appellants, rather than the appellants, would be the lessee of the premises. The primary judge considered it was clear that the offer to lease was intended to be binding [106]. He found that the appellants' intention was to secure the premises and enable fit‑out to occur in anticipation of an agreement being reached with Mr Conway or some other local pharmacist. The securing of premises was a necessary pre‑requisite to any invitation to a pharmacist to join the Chemist Outlet group [108]. It was intended that the formal lease would be a novation of the agreement, with the appellants' nominee, be it Mr Conway or another pharmacist, being substituted for the appellants [110].

4. The primary judge considered that the effect of the approval condition was that the parties would not be bound if, prior to the commencement date of 1 May 2007, using their best endeavours the appellants had been unable to obtain the approval of (relevantly) Medicare or the Pharmaceutical Council of Western Australia to the relocation of an existing pharmacy to the premises, unless the appellants elected to forgo that right [117].

5. His Honour went on to find that by commencing the fit‑out before the approvals had been obtained, the appellants had waived their right to terminate the offer to lease upon non‑fulfilment of the approval condition. Their conduct in commencing the fit‑out was unequivocal and inconsistent with the offer to lease continuing to be subject to the approval condition [120]. Accordingly, the respondent had lawfully terminated the offer to lease by reason of the appellants' breach, or alternatively repudiation, of it and the appellants were liable in damages [125].

6. The primary judge found that had the appellants not elected to waive the approval condition he would have concluded that it would not have been capable of being fulfilled, there being no pharmacy which fell within the criteria in the Determination which could be relocated to the premises [123].

7. Damages were assessed by the primary judge in the sum of $456,970. Those damages were based on the rental that would have been payable by the appellants' nominee from the end of the rent‑free period of the lease to the time at which Best & Less became liable to pay rent and, from the time Best & Less became liable to pay rent, the difference between the rental payable by the appellants' nominee under the lease and the rental payable by Best & Less [136].

8. In assessing damages, his Honour found that no deduction should be made for the fact that, as no lease was entered into with the appellants, the respondent did not pay commission to Knight Frank. His Honour found that that commission would have been in the sum of $198,000. The primary judge assumed that commission in a similar amount would have been paid by the respondent to the agents who arranged the lease to Best & Less [130].

Grounds of appeal

1. The appellants rely on the following grounds of appeal (omitting the particulars):

   1.The learned Commissioner erred in fact and law in finding that a binding agreement for lease between the respondent and the appellants existed in respect of commercial premises in Fremantle.

   2.The learned Commissioner erred in fact in finding that, even if such a binding agreement for lease existed, the respondents waived the benefit of a condition requiring approvals to be granted in respect of the use of the premises prior to formation of the agreement or performance of it.

   3.The learned Commissioner erred in fact in finding that the loss suffered by the respondent included a sum representing the commission payable to the respondent's agent had a lease been agreed between the appellants and the respondent.

Disposition of the appeal

Ground 1

1. The submissions of counsel for the appellants were not entirely easy to follow but I understood the appellants to contend, in substance, that the primary judge erred in finding:

   (a)that the appellants accepted the respondent's counter‑offer contained in the facsimile of 7 February 2007;

   (b)alternatively, that the counter‑offer was accepted by the appellants by their conduct;

   (c)that the parties did not intend to postpone any binding agreement unless and until a formal lease was executed; and

   (d)that the offer to lease constituted a binding agreement between the appellants and the respondent, although it was the intention of the parties that the lessee would be some person other than the appellants.

2. In relation to the first contention, it was submitted that the email from Ms Cannon of 7 February 2007 was not an acceptance of the respondent's counter‑offer attached to Mr Guttridge's email of 6 February 2007.  Counsel for the appellants submitted that Ms Cannon did not accept the counter‑offer but simply acknowledged receipt of it and asked that the offer to lease document be amended to reflect the agreement as to the rent review cap.  It was also argued that Ms Cannon's statement that she would get back to Mr Guttridge after she had spoken to the prospective pharmacist indicated that her email was not an acceptance of the counter‑offer.

3. In my view, there is no substance in this submission.  When read in the light of Mr Guttridge's email of 6 February 2007, it is quite clear that Ms Cannon's email was an acceptance of the terms of the respondent's counter‑offer.  Ms Cannon's statement that she would get back to Mr Guttridge after she had spoken to the pharmacist simply indicated that the appellants were proceeding with the steps required to obtain the necessary approvals.

4. The appellants also contended that the alternative finding of the primary judge, that the appellants had accepted the respondent's counter‑offer by conduct, was not open on the evidence.  Again, in my view, this is without substance.  The conduct of the appellants, following Ms Cannon's email of 7 February 2007, in engaging in negotiations over the form of the lease and in taking steps to enable the premises to be used for a pharmacy was plainly consistent only with an acceptance of the counter‑offer.  No error has been shown.

5. It is convenient to turn next to the fourth contention.  Counsel for the appellants submitted that the offer to lease could not constitute a binding agreement in circumstances where it was known to the parties that the lessee was to be a person yet to be identified.  Counsel argued that none of the emails and offer to lease documents exchanged between the parties in the period 30 January to 7 February 2007 was intended to be an offer or acceptance having any legal effect.  They were simply non‑binding negotiations conducted on the appellants' part on behalf of a lessee who was to be identified at some point in the future.  That was why the lessee's details had not been completed in the agreement to lease documents which passed between the parties.  It was also why, in early March 2007, an offer to lease was prepared in the name of Mr Conway.

6. In my view, this contention must be rejected.  It is clear that the parties intended the offer to lease to be binding on them.  The appellants' evident object was to secure the premises while they found a pharmacist who was prepared to relocate his or her pharmacy.  In light of the restrictions in the Determination on the transfer of pharmacies, the potential transferees to whom the appellants could look were limited by the requirement that they be located within 1 km of the proposed location of the new pharmacy.  It was obvious that little purpose would be served by negotiations with a potential transferee unless a suitable location for a pharmacy had been secured by an enforceable agreement.  It is evident that the appellants' own liability in relation to the offer to lease was to be protected by the approval condition which enabled them to terminate the offer to lease if a suitable transferee could not be found to take a lease of the premises.

7. Whilst it is the case that against the description of the 'Lessee' at the commencement of the offer to lease 'nominee TBA' had been written, the offer to lease was expressed to be an offer by 'the aforementioned and the undersigned' to lease the premises on the terms set out in the offer to lease.  While the execution clause was not as clear as it might have been in its terms, it is, in my opinion, plain that the offer to lease was executed by Ms Cannon on behalf of the appellants as the lessees.  When the offer to lease is read as a whole I do not think any other conclusion is reasonably open.

8. I do not consider that any significance is to be attached to the fact that an offer to lease and lease were subsequently prepared in Mr Conway's name.  It is evident that they were prepared for the purpose of submitting to the relevant authorities to obtain the necessary approvals for the transfer of his pharmacy to the premises, on the assumption that Mr Conway would be the appellants' nominee.  They were not inconsistent with an intention that the appellants would be bound by the offer to lease in the meantime.

9. Turning to the third contention, the appellants submitted that the offer to lease fell within the third class of cases referred to in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353; that is, the parties intended there would not to be a binding contract unless and until a formal document ‑ in this case a lease ‑ was executed. Counsel for the appellants argued that it was clear from cl 18(d) that the offer to lease was not intended to be binding but rather that a binding agreement would come into effect only upon the execution of a lease of the premises.

10. In Masters v Cameron (360), the High Court identified three classes of case where parties have reached agreement on the terms of their bargain but intend to sign a formal contract at a later date.  The first is where the parties intend to be bound immediately but wish to have the agreement incorporated in a more formal document; the second is where the parties intend to be bound immediately but have made performance of one or more of the terms conditional upon the execution of a formal document; and the third is where the parties do not intend to make a binding agreement unless and until they execute a formal agreement.

11. In Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd(1986) 40 NSWLR 622, 628, a fourth class was identified, namely, where the parties 'were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms'. And see Sinclair, Scott & Co Ltd v Naughton [1929] HCA 34; (1929) 43 CLR 310, 317; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101 [24] ‑ [25].

12. What the parties intended is to be determined objectively having regard to the terms of the document when read in the light of the surrounding circumstances:  Godecke v Kirwan [1973] HCA 38; (1973) 129 CLR 629, 638; GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634; Sheehan v Zaszlos [1995] 2 Qd R 210, 213.

13. I do not accept the appellants' contention that the parties intended to postpone any binding agreement until a lease was executed.  The offer to lease fell squarely, and quite clearly, within the 'fourth class' in Masters v Cameron.  That is apparent both from the circumstances of the transaction and the terms of the document itself.  As I have mentioned, the restrictions on the relocation of pharmacies meant that the pharmacies which the appellants could potentially relocate were limited by the requirement of their proximity to the location of the proposed premises of the new pharmacy.  Accordingly, the appellants' evident intention was to secure suitable premises on appropriate terms and then endeavour to find a pharmacy business in the permitted area to transfer to those premises.  The offer to lease was entered into for that purpose.  Consistent with their commercial objective, the appellants' own position under the offer to lease was protected by the approval condition which they insisted be included in the offer to lease.  In those circumstances, it is inherently improbable that the offer to lease was intended to be other than immediately binding.

14. The terms of the offer to lease were also consistent with a binding agreement.  The offer to lease was a formal and detailed document containing the material provisions ordinarily contained in a lease and was executed by the parties after detailed negotiations as to its terms.  There is nothing to suggest, and it was not contended by counsel for the appellants, that there remained significant terms on which the parties were still to reach agreement.  The offer to lease was expressed in terms of an immediately binding agreement.  The fact that the approval condition was included itself reflects an intention that the offer to lease was to be a binding agreement.

15. I do not accept the submission that cl 18(d) was inconsistent with a binding agreement.  On the contrary, the provision that the lease was to be a 'standard form', prepared by independent lawyers, and agreed 'in line with [the] intent of [the offer to lease]' was quite consistent with an intention that the offer to be lease is to be immediately binding but that a lease was subsequently to be entered into containing, by consent, additional terms.

16. In my opinion, it is clear that the offer to lease was intended to be immediately binding.  I would dismiss this ground of appeal.

Ground 2

1. On this ground, the appellants contended, in substance, that the primary judge had erred in concluding that in obtaining access to the premises for the purpose of fit‑out and commencing the fit‑out the appellants had waived their right to terminate the offer to lease under the approval condition.

2. Relevantly for the purposes of this ground, the primary judge found that possession of the premises to enable the fit‑out to be carried out was given to the appellants when the keys were provided to Mr Smith of Arrix on 19 April 2007 [119]. His Honour continued:

   Ms Cannon's evidence was, as I have mentioned, that she was prepared to take the risk of incurring expense in the fit-out which would be wasted if Mr Conway's relocation were not approved. It was in the [appellants'] commercial interests to get the premises ready for a planned opening in early June. By commencing the fit‑out the [appellants] treated the agreement as unconditional. Their conduct was unequivocal. It was inconsistent with there being no contract. It was also inconsistent, in my opinion, with the continuing operation of an unfulfilled condition. The benefit of the condition to the [appellants] was waived and with it the right to terminate the agreement upon non‑fulfilment [120].

3. The primary judge had earlier expressed the view that for the purposes of his conclusion 'it does not matter whether the approval condition is construed as a condition precedent to formation or performance' [115]. In fact, his Honour does not appear to have distinguished between the two (see [116], [120]). But in concluding that the appellants had elected to waive the benefit of the approval condition, the primary judge appears to have accepted that it was a condition precedent to performance.

4. On the appeal, both parties accepted that the approval condition was a condition precedent to performance (ts 48, 67 ‑ 68).  That, in my view, was plainly correct.  Although each case must turn on the proper construction of the particular clause, generally speaking courts will construe a provision of this nature as a condition precedent to performance rather than a condition precedent to the formation of a contract:  Perri v Coolangatta Investments Pty Ltd (552).  In the present case, I think it is clear that the parties intended it to be a condition precedent to performance.

5. It has long been held that a party to a contract can waive performance of a term which has been inserted solely for that party's benefit:  see, for instance, Hawksley v Outram [1892] 3 Ch 359; Mulcahy v Hoyne [1925] HCA 17; (1925) 36 CLR 41; George v Roach [1942] HCA 22; (1942) 67 CLR 253, 260, 263: Gange v Sullivan; Perri v Coolangatta Investments.  The primary judge proceeded on the basis, and it was common ground on the appeal, that the approval condition was a condition exclusively for the benefit of the appellants.  Again, that seems to me to be clearly correct.  There was no disadvantage to the respondent if the appellants gave up the approval condition.  From the respondent's point of view, the only effect of the elimination of the approval condition would be to make the offer to lease more certain of completion.

6. The term 'waiver', however, is a somewhat protean one.  In Agricultural & Rural Finance Pty Ltd v Gardiner (587), the plurality pointed out that 'waiver' has been used in a variety of senses. It has often been used in senses synonymous with election or estoppel, and it has also been used to refer to the abandonment or renunciation by a party of a term of a contract which has been inserted solely for that party's benefit, or to the modification of a contract without the formalities or consideration necessary for an effective contractual variation. They noted that an intentional act, done with knowledge, whereby a person abandons a right by acting in a manner inconsistent with that right has been described as a 'waiver' of that right, although many of those cases are properly to be regarded as applications of the doctrine of election between inconsistent rights [56].

7. The present case was approached by the parties at trial, and determined by the primary judge, on the basis that by obtaining access and commencing the fit‑out of the premises the appellants had abandoned their right to terminate the agreement if the relevant approvals were not obtained.  That, too, was the approach taken by the parties on the appeal.  Neither party contended that anything turned on the identification of the precise sense in which 'waiver' was used and it was common ground that the question was simply whether by their conduct the appellants had abandoned their rights under the approval condition.  It is therefore unnecessary to consider the conceptual basis of the doctrine that a party can 'waive' the benefit of a term which is solely for its benefit.  That can be left for an occasion when it is necessary to decide the point.

1. It has been held in relation to an election between inconsistent rights that the words or conduct of the appellants said to constitute the election must be in clear and unequivocal terms; the conduct must be capable of one construction only, namely, that the person has chosen to forego their rights:  see Wilken S, The Law of Waiver, Variation and Estoppel (2nd ed, 2002) 48; Motor Oil Hellas (Corinth) Refineries v Shipping Corp of India (The Kanchenjunga) [1990] 1 Lloyd's Rep 391, 398; Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41, 55; Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26, 38 ‑ 39. See also, Sargent v ASL Developments Ltd (646).  That approach seems to me to be equally applicable in the present case:  Waiver, Variation and Estoppel [5.08].  I did not understand that to be in issue on the appeal.

2. I also understood it to be accepted by the parties (correctly in my view) that whether or not the appellants had waived the benefit of the approval condition was to be determined objectively (ts 55, 88):  see Tropical Traders Ltd (55).  Although Tropical Traders was concerned with election, in my view the same principle applies to the waiver relied upon in the present case.

3. The question, then, is whether by their conduct in obtaining access for fit‑out and commencing the fit‑out the appellants clearly and unequivocally abandoned their right to rely on the approval condition.

4. I do not consider that they did.  It was plainly understood by the parties that the premises would have to be fitted out before a pharmacy business could be conducted from them.  Early access for fit‑out was included in the initial offer to lease sent to Ms Cannon prior to 1 February 2007 (exhibit 1.32), it was expressly raised in Mr Guttridge's email of 1 February 2007, and it was included in the signed offer to lease. 

Clause 3 of the offer to lease, entitled 'Handover Date for Fitout', provided:

Occupation for fit out purposes will be granted subject to the execution and return of the Lease.  Tenancy is available now.

1. In fact, the respondent agreed to the appellants commencing the fit‑out before the lease had been executed and did not require that it be executed before the appellants commenced the fit‑out.  The respondent was aware that any lease was to be entered into by the pharmacist who was to conduct the pharmacy business at the premises.  The respondent was also aware that the appellants had entered into the offer to lease simply to secure the premises while they sought to arrange for a local pharmacist to transfer their business and that such a transfer required the approval of Medicare and the Pharmaceutical Council.  The respondent knew that the appellants' whole purpose in entering into the offer to lease would be defeated if they were unable to transfer an existing pharmacy to the premises.  And the respondent was aware that the approvals were yet to be obtained when the appellants commenced the fit‑out (see exhibit 1.27).

2. Contrary to the respondent's submission, I do not consider that the respondent's case is advanced by the statements made by the appellants at the meeting on 2 May 2007.  What the appellants may have thought at that point as to their legal position does not answer the question whether, viewed objectively, they had by their conduct in commencing the fit‑out abandoned their rights under the approval condition.  I might add that, in any event, it does not seem to me that the statements made by the appellants unequivocally showed that the appellants had abandoned their rights under the approval condition.  What the appellants said is not inconsistent with a liability simply to restore the premises to their original state because the approval condition could not be satisfied.

3. In the circumstances, I do not consider that the appellants' conduct in commencing the fit‑out was inconsistent with the continuation of their rights under the approval condition.  It was consistent with the appellants proceeding in the expectation that the relevant approvals would be obtained and making the premises ready for business in that expectation.  But it did not clearly and unequivocally demonstrate that the appellants had abandoned their right to terminate the offer to lease in the event that the necessary approvals for the transfer of a pharmacy licence could not be obtained.

4. In my respectful opinion, the primary judge erred in finding that the appellants had waived their right to the benefit of the approval condition and that they were in breach of the offer to lease in terminating the agreement for non‑fulfilment of the approval condition.  The appellants were entitled to terminate the offer to lease, as they did, by reason of the failure of the approval condition.

5. I would allow this ground of appeal.

Ground 3

1. In light of my conclusion in relation to ground 2 it is unnecessary to deal with this ground.  However, as it was fully argued it is appropriate to say something about it.

2. On the case as found by the primary judge, the respondent was entitled to damages to put it in the position it would have been in had the appellants performed the agreement. As I have said, damages were assessed by the primary judge as being the rental that would have been payable by the appellants' nominee from the end of the rent‑free period under the lease to the time Best & Less became liable to pay rent and, from that point, as the difference between the rental that would have been payable by the appellants' nominee under the lease and the (lesser) rental payable by Best & Less [136].

3. In assessing the loss arising from the difference in rental, the primary judge found that no deduction should be made for the fact that, as no lease was entered into with the appellants, the respondent did not pay to Knight Frank commission of $198,000 which they would otherwise have been liable to pay.  His Honour said:

   No account is taken of the commission which would have been payable to Knight Frank had the lease not been terminated by breach. I calculate this fee to be, at 12 per cent of gross rent for five years, $198,000. Had the contract been performed the plaintiff would have paid the commission certainly, but in mitigating its loss it appointed another agent to relet the premises. It is reasonable to assume that the commission paid upon the Best & Less lease, being for a 10 year term, was no less than the commission payable to Knight Frank. In the end, one commission was paid as would have been the case if the contract had been performed. No adjustment is required [130].

4. That assumption, however, was contrary to the evidence.  Evidence was given that the respondent's agent in respect of the lease to Best &

Less was CB Richard Ellis.  Mr Sandro Monaco gave the following evidence in cross‑examination:

Mr Monaco, you will be pleased to know that I can now [be] relatively brief in relation to this, but was there ever any commission paid in respect of the premises at 13 William Street, Fremantle, to CB Richard Ellis‑‑‑No (ts 143).

1. As commission of $198,000 would have been paid on a lease to the appellants' nominee, but no commission was paid by the respondent on the letting of the premises to Best & Less, it follows that the primary judge overstated the respondent's loss by the sum of $198,000.

2. I would allow this ground of appeal.

Conclusion

1. I would:

   1.allow the appeal;

   2.set aside the orders of the primary judge; and

   3.order that the respondent's claim against the appellants be dismissed.

2. MURPHY JA:  Newnes JA has set out the relevant background and it is not necessary for me to repeat it.  I am in general agreement with the reasons of Newnes JA in relation to ground 1, subject to two observations.  First, in my view, the agreement was concluded on 7 February 2007 essentially for the reasons given by Newnes JA, and I have found it unnecessary to consider whether there was acceptance by conduct after that date.  Secondly, the appellants had not pleaded, and the learned commissioner (as his Honour then was) did not find, that the respondent was aware as at 7 February 2007 of the specific regulatory requirements governing the approval of a relocation of a pharmacy in Western Australia.  On the commissioner's findings, at that time the respondent, by its agent, only knew of the fact that approval was needed to transfer a pharmacy licence (commissioner's reasons [34], [36]).  Ground 1 of the appeal ought be dismissed.

3. I also agree with Newnes JA's reasons in relation to ground 3 of the appeal.

1. Ground 2 concerns the commissioner's finding that the 'approval condition' had been waived.  I agree with Newnes JA's conclusion in relation to ground 2.  My reasons are as follows.

2. The learned commissioner found at [38] that the 'approval condition' was contained in cl 19 of the agreement to lease.  It was in these terms:

   This offer to lease is agreed between the parties, subject to lessee at lessee cost and best endeavours gaining Medicare approval to purchase and relocate any required licences and gaining local council approval.

   (In line with this, if the lessor receives another alternative offer to lease while the preceding condition is current, it is agreed that the lessee will be given a first right of refusal to proceed with this offer by removing the foregoing condition and becoming unconditional within 48 hours of date of such formal notice.).

3. In relation to the construction and operation of the approval condition, the commissioner made the following findings:

   Because of the conclusions expressed below with respect to waiver it does not matter whether the approval condition is construed as a condition precedent to formation or performance.  The wording of the next paragraph of cl 19 is as follows:

   '(In line with this, if the lessor receives another alternative offer to lease while the preceding condition is current, it is agreed that the lessee will be given a first right of refusal to proceed with this offer by removing the foregoing condition and becoming unconditional within 48 hours of date of such formal notice.)'

   It is clear from these words that the parties intended that the plaintiff [respondent] would not be bound by the agreement pending fulfilment of the condition and could accept another offer provided that the defendants were given the opportunity to go unconditional on 48 hours' notice.

   In the circumstances I construe the approval condition to mean that the parties would not be bound if, prior to the commencement date of 1 May 2007, the defendants [appellants] had not been able to get Medicare, Pharmaceutical Council of Western Australia and City of Fremantle approval to relocate an existing pharmacy to the premises using their best endeavours, unless, in the specified circumstances, the defendants [appellants] elected to proceed unconditionally [115] ‑ [117].

4. The words 'in the specified circumstances' in the finding at [117] refer, as I understand it, to the second paragraph of cl 19.  His Honour thereby found, in effect, that if the respondent received another offer to lease prior to 1 May 2007, the respondent could give notice to the appellants, who would thereupon have 48 hours in which to waive the condition, failing the waiver of which the respondent could then terminate the agreement.

5. Neither party contended that if there were a binding agreement, the commissioner misconstrued its terms.

6. Other terms of the agreement included terms to the effect, relevantly for present purposes, that:

   (a)The term of the lease would commence on 1 May 2007, and be for a period of five years and six months, subject to the exercise of specified options to renew (cl 4, cl 5 and cl 6).

   (b)Rent would commence to be payable on 1 August 2007, with a rent free period for the months of May, June and July 2007 (cl 5).

   (c)The appellants could commence 'occupation' 'for fit out purposes', described as 'handover', prior to 1 May 2007 subject to an instrument of lease being executed and returned to the respondent  (cl 3).

   (d)The respondent's solicitors would prepare the instrument of lease (cl 11 and cl 18(d)).

   (e)The respondent would have the premises cleaned prior to handover (cl 19).

   (f)For the purposes of the fit out, the appellants could lay vinyl flooring (cl 19).

7. The learned commissioner found that the City of Fremantle had granted development approval on 10 April 2007, following which Ms Cannon, on behalf of the appellants, made arrangements to commence the fit out of the premises.  His Honour found:

   The City of Fremantle's development approval was notified by letter dated 10 April 2007.  Ms Cannon then made arrangements to commence the fit‑out.  Sometime prior to 19 April 2007 Mr Sandro Monaco [for the respondent] was asked by Mr Guttridge [agent for the respondent] whether the defendants [the appellants] could have early possession of the premises.  He acceded to this request and arranged for the keys to the premises, the plaintiff's only set, to be delivered by Mr Tony Monaco [for the respondent] to Mr Peter Smith of Arrix Constructions.

   Arrix Constructions then commenced fit-out works. Arrix eventually invoiced Ms Cannon for $76,071.60, mainly for the laying and taking up of vinyl flooring.  Arrix also invoiced Ms Cannon for replacing lock barrels and keys.  Ms Cannon said in her statement that she "was aware that there was a risk that if Warren Conway's pharmacy could not be relocated some of the work in respect of the fit-out might be wasted."  Notably, however, she had no reason at that stage to doubt that the relocation would be approved [68] ‑ [69].

8. The commissioner appears to have drawn on the evidence of Mr Antonio Monaco, a director of the respondent, for the finding in his Honour's reasons at [68]. Mr Antonio Monaco's evidence was:

   41.Prior to 19 April 2007, Guttridge [the respondent's agent] contacted Sandro [a co‑director of the respondent] and asked whether we would agree or allow the Defendants [appellants] to have possession of the premises in order for them to commence their fit‑out.  The first thing they wanted to do was the flooring.

9. Mr Guttridge did not give evidence of his conversation in that regard, and Mr Sandro Monaco gave no evidence about it.  Ms Cannon's evidence was, relevantly:

   208.I contacted Peter Smith of Arrix Constructions and asked him to arrange for vinyl flooring to be laid at the premises.

   209.I telephoned Mark Guttridge [the respondent's agent] and asked if I might arrange access to the premises in order to arrange for the vinyl flooring to be laid.

   210.Arrangements were made with the owner and keys were provided to Peter Smith.  The flooring contractor commenced laying vinyl flooring on 19 April 2007.

10. In relation to waiver of the approval condition, the learned commissioner said:

    In my view possession of the premises was given to the defendants upon the handover of the keys to Mr Smith on 19 April 2007.  Although the plaintiff's [respondent's] contractor was on the premises to fit the automatic doors about this time, the effect of giving Mr Smith the keys was to allow work to be done to fit‑out the premises as a Chemist Outlet pharmacy as Ms Cannon anticipated would occur.  In her email to Mr Guttridge of 2 February 2007 she asked for 'four months gross rent free from the date of handover, that is the day we have access to start our shop fit.'

    Ms Cannon's evidence was, as I have mentioned, that she was prepared to take the risk of incurring expense in the fit-out which would be wasted if Mr Conway's relocation were not approved.  It was in the defendants' [appellants'] commercial interests to get the premises ready for a planned opening in early June.  By commencing the fit‑out the defendants [appellants] treated the agreement as unconditional.  Their conduct was unequivocal.  It was inconsistent with there being no contract.  It was also inconsistent, in my opinion, with the continuing operation of an unfulfilled condition.  The benefit of the condition to the defendants [appellants] was waived and with it the right to terminate the agreement upon non‑fulfilment [119] ‑ [120].  (emphasis added)

11. As to waiver in the sense of a party not insisting on a term which is identified as being for the party's sole benefit, see Agricultural & Rural Finance Pty Ltd v Gardiner  [52] ‑ [55], [88] ‑ [93] (Gummow, Hayne & Kiefel JJ) and [162] (Heydon J).  See also George v Roach (259).  This appeal was conducted on the basis that the approval condition was a contingent condition capable of waiver by the appellants.  There was no issue about whether the condition was capable of waiver by the appellants after 1 May 2007: see Donaldson v Bexton [2006] QCA 559; [2007] 1 Qd R 525, cf Shakibaee v Chan [2001] WASC 60 [53]; (2001) 24 WAR 97, 108. Further, both parties in this appeal argued the issue of waiver on the basis that, in substance, the question was whether the appellants, by their conduct, had unequivocally indicated an intention to relinquish any reliance on the approval condition.

12. The commissioner found, in effect, that the appellants had waived the approval condition by obtaining access to the premises to enable their flooring contractor to start the fit‑out.  This, his Honour considered, was inconsistent with the continued operation of the approval condition. 

13. It seems to me that there are three difficulties with his Honour's reasoning.  First, the occupancy of the premises for fit‑out is not inconsistent with the continued operation of the approval condition if, as I understand his Honour found, the '48 hour' provision continued to operate until 1 May 2007 for the benefit of the respondent. 

14. Secondly, the commissioner did not find (and the respondent did not contend) that the agreement, on its proper construction, provided for the term of the lease to commence from the earlier of 1 May 2007 or the time of handover. 

15. Thirdly, the appellants had not unilaterally taken possession, but had only obtained access to undertake a fit‑out with, and following the consent of, the respondent. The commissioner's findings disclose, in essence, no more than that there had been a consensual occupation of the premises for fit‑out purposes at a time when both parties knew that the proposed tenant, Mr Conway, had not executed and returned to the respondent a formal lease. The grant of access by the respondent was equally consistent with the respondent not insisting on its rights under cl 3 of the agreement, bearing in mind that neither party then foresaw any real commercial risk that the appellants could not procure the relocation of Mr Conway - that was regarded as 'a formality' (reasons [48]).

16. For these reasons, in my view, the commissioner erred in finding that the approval condition had been waived by the appellants.

17. Four other points should be mentioned for completeness.  First, the respondent contended in this appeal that the respondent had, in the provision of keys to the appellants' contractor, surrendered exclusive possession because the keys provided were the only set of keys to the premises.  There was no finding or evidence to that effect, and I would reject that argument.

18. Secondly, both parties sought to advance their respective contentions by reference to pre‑contractual statements in an email dated 1 February 2007.  I agree with McLure P that no reliance can be placed upon the email of 1 February 2007 (exhibit 1.33).  As her Honour observed, that was overtaken by cl 3 of the agreement to lease. 

19. Thirdly, the appellants also contended that the appellants' negotiations with Mr Conway indicated that there was no waiver.  Insofar as the appellants rely upon their negotiations with Mr Conway to indicate that their state of mind was inconsistent with the approval condition having been waived, in my view, the evidence is irrelevant.  The question of whether the appellants waived the condition is to be determined objectively, not subjectively. 

1. Fourthly, each party also relied on certain statements made by the other subsequent to the commencement of the fit‑out to support their respective contentions on waiver.  The appellants say that the respondent's agent's email of 30 April 2007 shows that the respondent subjectively held the view that the approval condition had not been waived.  The respondent seeks to rely on statements made by the appellants at a meeting on 2 May 2007.

2. With respect to each contention, in my view, the subjective state of mind of a party is irrelevant to the question of whether the appellants' conduct on 19 April 2007 objectively communicated an intention to waive the approval condition. 

3. I agree that the appeal should be allowed.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION: BOWEN -v- ALSANTO NOMINEES PTY LTD [2011] WASCA 39 (S)

CORAM:   McLURE P

NEWNES JA
MURPHY JA

HEARD:   ON THE PAPERS

DELIVERED          :   23 FEBRUARY 2011

SUPPLEMENTARY

DECISION              :7 APRIL 2011

FILE NO/S:   CACV 116 of 2009

BETWEEN:   NIELS BOWEN

JAYNE ELIZABETH CANNON
Appellants

AND

ALSANTO NOMINEES PTY LTD
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :COMMISSIONER STAUDE

Citation  :ALSANTO NOMINEES PTY LTD -v- BOWEN & ANOR [2009] WADC 130

File No  :CIV 1461 of 2007

Catchwords:

Costs - Appellants successful but failed on some grounds of appeal - Whether entitled only to a portion of their costs - Relevant principles - Costs at trial - Whether appellants' conduct caused unnecessary costs at trial - Costs of trial remitted to trial judge

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(1)

Result:

Respondent to pay appellants' costs of the appeal
Costs of trial remitted to trial judge for determination

Category:    B

Representation:

Counsel:

Appellants:     No appearance (heard on the papers)

Respondent:     No appearance (heard on the papers)

Solicitors:

Appellants:     Tottle Partners

Respondent:     GV Lawyers

Case(s) referred to in judgment(s):

Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130

Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S)

Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39

Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282

MacKinnon v Petersen (Unreported, NSWSC, 19 April 1989)

Nikolaou v Papasavas, Phillips & Co (No 2) [1989] HCA 11; (1989) 166 CLR 394

NRMA Ltd v Morgan (No 3) [1999] NSWSC 768

Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

1. JUDGMENT OF THE COURT:  On 23 February 2011, this court published its reasons for concluding that the appeal should be allowed, the decision of the primary judge set aside and the respondent's claim against the appellants dismissed:  Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39.  The parties sought an opportunity to consider the reasons for judgment before making submissions as to costs.  Directions were therefore given for the filing of written submissions by each party and it was ordered that the question of costs be determined on the papers.  The written submissions have now been filed.

2. The respondent submits that the appellants should only be entitled to a portion of their costs of the appeal and the trial.  In respect of the appeal, it says that while the appellants succeeded on the first and third of their three grounds of appeal, they failed on the second ground which, together with the first ground, occupied most of the time on the appeal.  In respect of the trial, the respondent submits that the length of the trial was unnecessarily extended by the way in which the appellants conducted their case.  The respondent refers, among other things, to the amendments to the defence made by the appellants on the second day of the trial, which led to the adjournment of the trial for a period of some three weeks and to a chain of fresh pleadings by both sides which widened the field of dispute and caused the trial to be longer than it might otherwise have been:  Alsanto Nominees Pty Ltd v Bowen [2009] WADC 130 [8] ‑ [11].

3. The respondent says it should be required to pay only 20% of the appellants' costs of the trial and 50% of the appellants' costs of the appeal.  Alternatively, it says the question of the costs of the trial should be remitted to the primary judge.

4. The appellants submit that they are entitled to an order that the respondent pay their costs of the trial and the appeal.  They say that there is nothing which would justify a departure from the general principle that costs follow the event.  They argue that the effect of the amendments to the defence at trial did not raise any substantial issues that would not otherwise have had to be canvassed and, in any event, the respondent itself extended the trial by putting in issue matters, such as the effect of the legislation regulating pharmacies, on which it failed.  In relation to the appeal, the appellants submit that while they were unsuccessful on one of the three grounds of appeal, it was not unreasonable to raise the unsuccessful ground and that ground did not raise any discrete factual issues.

5. It is clear that while the court has a broad discretion as to costs, generally costs will follow the event:  Rules of the Supreme Court 1971 (WA), O 66 r 1(1). It is incumbent upon the unsuccessful party to satisfy the court that there are good reasons why it should not pay the other party's costs: Nikolaou v Papasavas, Phillips & Co (No 2) [1989] HCA 11; (1989) 166 CLR 394, 407.

6. The court may, in the exercise of its discretion, order that a successful party recover only a portion of its costs where that party has been unsuccessful in respect of certain discrete issues.  But that should not be done as a matter of course.  To embark as a general practice upon an analysis of which party was successful on each issue, or necessarily to deprive a successful party of some portion of its costs if it has lost on a particular issue, would be likely to add further uncertainty and complexity to the outcome of litigation, derogate from the prospect of settlement, and oblige the court to hear lengthy and frequent arguments in relation to costs as an additional burden on its resources and the costs of the parties:  see MacKinnon v Petersen (Unreported, NSWSC, 19 April 1989) (Cole J); Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [67] ‑ [68] (McHugh J). Litigation is time‑consuming, expensive and burdensome enough already.

7. In addition, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case:  Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 [24].

8. In Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S), the position was put as follows:

   [T]he power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the cost of the proceedings in a significant and readily discernible way [7].

9. In relation to the appeal, we are not satisfied that there should be any departure from the general rule that costs follow the event.  While the first ground of appeal raised a discrete issue, we are not persuaded that it added to the overall costs of the appeal in a significant and readily discernible way.  The point was a relatively short one and depended upon facts which were not in contention.  We do not consider that it substantially expanded the ambit of the appeal and it does not seem to us that the separate costs attributable to it could readily be assessed.  The respondent should pay the appellants' costs of the appeal to be taxed.

10. The costs of the trial raise different considerations.  It would ordinarily follow from the finding of this court on the appeal that the appellants would be entitled to their costs of the trial.  However, it appears from the comments of the primary judge [8] ‑ [11] that the conduct of the appellants in amending their defence during the trial may have caused significant unnecessary costs to be incurred.  In view of his finding that the respondent was entitled to judgment, and therefore to the costs of the action, it was unnecessary for the primary judge to give separate consideration to that question.  Clearly, however, if the appellants caused unnecessary costs to be incurred that would have an important bearing on whether, or to what extent, the appellants' entitlement to the costs of the trial should be reduced.  Regrettably, this court is not in a position to determine whether that was the case and, if it was, the significance of those costs in the overall context of the trial.  It is therefore necessary for the question of the costs of the trial to be remitted to the primary judge.

11. The orders of the court will therefore be:

    1.the respondent pay the appellants' costs of the appeal to be taxed;

    2.the question of the costs of the trial be remitted to the primary judge for determination.