Centuria Property Funds Ltd v Thorn Australia Pty Ltd

[2022] NSWCA 104

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Centuria Property Funds Ltd v Thorn Australia Pty Ltd [2022] NSWCA 104

Hearing dates:

24 March 2022

Date of orders:

23 June 2022

Decision date:

23 June 2022

Before:

Ward P at [1];
Gleeson JA at [104];
White JA at [105]

Decision:

1.   Appeal dismissed with costs.

Catchwords:

CONTRACTS — Deeds — Whether binding lease or agreement for lease came into existence prior to withdrawal by respondent from proposed lease transaction — Where heads of agreement reserved parties’ right to withdraw from and terminate negotiations at any time prior to execution of lease documents by both parties — Where respondent provided executed lease documents to appellants’ solicitors and obtained early access to premises for limited purposes but appellants did not execute lease documents prior to withdrawal by respondent — Whether primary judge erred in holding that no binding lease or agreement for lease came into existence — Appeal dismissed.

Cases Cited:

400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245

Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70

Beesly v Hallwood Estates Ltd [1961] Ch 105

Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80; [1929] HCA 13

Kingston v Ambrian Investment Co Ltd [1975] 1 All ER 120

NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd (2020) 19 BPR 40,711; [2020] NSWSC 1378

Re Seymour [1913] 1 Ch 475

Realm Resources v Aurora Place Investments Pty Ltd (2019) 135 ACSR 422; [2019] NSWSC 379

Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,325; [2012] NSWCA 253

Thorn Australia Pty Ltd v Centuria Property Funds Ltd [2021] NSWSC 1217

Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609

Xenos v Wickham (1867) LR 2 HL 296

Texts Cited:

N Seddon, Seddon on Deeds (Federation Press, 2015)

Category:

Principal judgment

Parties:

Centuria Property Funds Ltd (First Appellant)
The Trust Company (Australia) Ltd (Second Appellant)
Thorn Australia Pty Ltd (First Respondent)

Representation:

Counsel:
SA Lawrance SC with L Rich (Appellants)
M Ashhurst SC with G Farland (Respondent)

Solicitors:
Arnold Bloch Leibler (Appellants)
Church & Grace Solicitors (Respondent)

File Number(s):

2021/00299083

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity

Citation:

[2021] NSWSC 1217

Date of Decision:

27 September 2021

Before:

Darke J

File Number(s):

2021/238618

HEADNOTE

[This headnote is not to be read as part of the judgment]

In April 2021, the first and second appellants, (Centuria Property Funds Ltd and The Trust Company (Australia) Ltd, respectively) entered into Heads of Agreement with the respondent (Thorn Australia Pty Ltd) for the lease of commercial premises in Eveleigh. The Heads of Agreement (which stated that the information contained therein was not a binding lease and was subject to final board approval) expressly reserved the parties’ right to withdraw from and terminate all negotiations at any time prior to execution of formal lease documents by both parties. The Heads of Agreement also contained provision for early access to the premises on certain conditions.

The parties subsequently negotiated the terms of the proposed lease documents, comprising both a Lease and an Incentive Deed. The respondent duly executed both the Lease (expressed as a Deed) and the Incentive Deed and provided soft copies of both to the appellants and then provided the original executed Lease (in duplicate) and one executed Incentive Deed to the appellants’ solicitors under cover of a letter setting out a procedure for “formalising the arrangements” and which contemplated that there would be a formal exchange of the deeds after execution by the appellants. Due to difficulties associated with the COVID-19 pandemic, the appellants did not execute either the Lease or the Incentive Deed at that time (or at any time prior to the respondent’s notification of withdrawal from the proposed lease transaction on 16 August 2021).

On 5 July 2021, there was a conversation between the parties’ solicitors in which it was apparent that they were at cross-purposes as to whether there was to be an exchange of executed counterparts of the lease documents. A process was then agreed between the solicitors as to the manner in which the documents were to be executed and the lease registered. Following this conversation, the respondent provided a second executed Incentive Deed on 9 July 2021 to the appellants’ solicitors.

Meanwhile, from 6 July 2021 the respondent sought, and from time to time was granted, early access to the premises to arrange internet and telecommunications connections; and access was also sought (but not granted including for reasons due to COVID-19 related restrictions) for the purpose of proposed fitout works.

After further communications regarding the execution of the lease documents, and at a time when the appellants had still not executed the documents, the respondent’s solicitor notified the appellants’ solicitor on 16 August 2021 of the respondent’s withdrawal from the lease transaction. The appellants then purported to execute the lease documents and the respondent was advised that the lease would be registered.

In those circumstances, the respondent commenced proceedings in the Equity Division seeking interlocutory relief to restrain the appellants from taking steps to register the Lease and from calling on the bank guarantee that had been provided; and seeking by way of final relief declaratory relief to confirm its contention that there was no binding lease or agreement for lease (and consequential orders). The status quo was preserved by the proffering by the appellants (without admission and on the usual undertaking as to damages) of undertakings in lieu of interlocutory relief.

At first instance, the primary judge held that the respondent did not “deliver” (in the requisite sense) any of the deeds it had signed and provided to the appellants’ solicitors; and did not, by executing and providing the documents to the appellants’ solicitors, evince an intention immediately to be bound thereby. The primary judge further held that the right to withdraw (at any time prior to execution of the formal lease documents by both parties) contained in the Heads of Agreement had not been abrogated or abandoned. The primary judge granted the orders sought by the respondent and dismissed the appellants’ cross-claim (by which the appellants had sought declaratory relief contrary to that sought by the respondent).

On appeal to this Court, the principal issues were:

1. whether the process agreed by the parties’ solicitors on 5 July 2021 as to the manner in which executed lease documents were to be provided to the appellants’ solicitors was inconsistent with the continued existence of the right to withdraw from the transaction contained in the Heads of Agreement (the “inconsistency argument”);

2. whether the respondent evinced an intention immediately to be bound by the Incentive Deed (and hence the lease documents) by seeking early access to the premises (the “early access argument”); and

3. (by the respondent’s notice of contention), whether the execution of the Lease and Incentive Deed and the requests for early access to the premises were explicable on the basis of the exercise of a binding early access right provided for in the Heads of Agreement.

The Court (per Ward P, Gleeson JA and White JA agreeing) held, dismissing the appeal [104] (Ward P), [105] (Gleeson JA), [106] (White JA):

As to issue (1):

1. The primary judge did not err in finding that there was no inconsistency between the process agreed by the parties’ solicitors on 5 July 2021 and the continuation of the right of withdrawal reserved in the Heads of Agreement. That process concerned the method of delivery of the executed deeds, and not whether there was to be a change in the position agreed between the parties in the Heads of Agreement as to the right of withdrawal. There was nothing to suggest that the parties intended that there be a conditional delivery of the deeds by the respondent: [67]-[68], [72]-[74] (Ward P).

   Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,325; [2012] NSWCA 253, applied.

As to issue (2):

1. The primary judge did not err in finding that the respondent’s requests for access to the premises were of little significance in determining whether the respondent manifested an intention immediately to be bound. The provision of access was consistent with an informal licence arrangement and was not unequivocally referable to any particular obligations under the executed documents: at [100]-[103] (Ward P).

   NTT Australia Digital Pty Ltd v Cover Genius Services Pty Ltd (2020) 19 BPR 40,711; [2020] NSWSC 1378, distinguished.

As to issue (3):

1. The early access right under the Heads of Agreement was not an immediately binding right but, rather, a statement of intent: at [86] (Ward P, in obiter).

Judgment

1. WARD P: This appeal relates to a dispute as to whether a binding lease or agreement for lease came into existence in respect of commercial premises in Eveleigh prior to the time at which the proposed lessee (the respondent, Thorn Australia Pty Ltd), purported to withdraw from the lease transaction. The dispute turns on whether the respondent had “delivered” the executed Lease and an Incentive Deed so as to become bound by those deeds in advance of execution by the proposed lessor, the first and second appellants (Centuria Property Funds Ltd and The Trust Company (Australia) Ltd, respectively) of the documents.

2. The respondent (the plaintiff in the proceeding below) sought and obtained declaratory relief to the effect that it had not entered into a binding lease or agreement for lease with the appellants. The appellants had cross-claimed for declaratory relief to the opposite effect.

3. The primary judge held (see Thorn Australia Pty Ltd v Centuria Property Funds Ltd [2021] NSWSC 1217) that the respondent did not “deliver” (in the requisite sense) any of the deeds it had signed and provided to the appellants’ solicitors; and did not, by executing and providing the documents to the appellants’ solicitors, evince an intention immediately to be bound thereby. Thus, in circumstances where it was not disputed that at the time the respondent notified its withdrawal from the transaction the appellants had not yet executed the documents, the primary judge held that the respondent was entitled to withdraw from the transaction and to recall the deeds as it had purported to do (see at [87] of the primary judgment). The appellants appeal from that decision.

4. The respondent has filed a notice of contention seeking that the primary judge’s decision be affirmed on grounds other than those relied upon by the primary judge, contending that his Honour should have found that the Heads of Agreement dated on or about 23 April 2021 (to which reference is made in due course) gave rise to an immediately binding right of access (exercisable on the execution and return of the lease documents and provision of a bank guarantee to the appellants) and that, as a consequence of that early access right, the provision of the lease documents and bank guarantee and any request for access by the respondent to the appellants did not evince an intention by the respondent to be bound to the lease documents (including the Incentive Deed) provided to the appellants. The primary judge had found it unnecessary to decide whether the Heads of Agreement gave rise to an immediately binding right, on the taking of the requisite steps by the respondent, of access to the premises by the respondent. The significance of this was that the appellants had contended in effect that the steps taken in relation to access amounted to an acceptance on the part of the respondent of the obligations attaching to that access and hence to evince an intention to treat the lease documents as having been delivered (in the sense of thereby being binding on the respondent).

Chronology

5. There was no challenge to any of his Honour’s factual findings other than the question of fact as to whether the respondent by its acts or words evinced an intention to be immediately bound by the deed (that fact to be determined objectively). The appellants accepted that, in determining that question of fact, regard could be had to the surrounding circumstances and subsequent conduct of the parties. In summary, the relevant chronology of events (which is set out in the primary reasons (see from [7])) is as follows.

6. On 23 April 2021, the parties entered into Heads of Agreement, which contained the statement that the information contained in “this proposal” was not a binding lease between the prospective lessee and lessor; and was subject to final lessor and lessee board approval. The Heads of Agreement expressly reserved the parties’ right to withdraw from and terminate negotiations at any time prior to execution of formal lease documents by both the lessee and the lessor . The appellants here point out that the primary judge found that this provision did not have contractual effect (see at [51]) but was a statement of principle that would apply to the negotiations towards the Lease that was contemplated by the Heads of Agreement. The Heads of Agreement also made provision for early access to the premises from 1 June 2021 for the lessee to commence any tenancy fitout changes (the proposed date of the Lease and the rent commencement being 1 March 2022).

7. His Honour found that there were two provisions of the Heads of Agreement that had immediately binding contractual effect (those being an exclusivity provision and a clause dealing with the lease deposit) (see at [53] and [56] of the primary judgment).

8. On 4 May 2021, the appellants’ solicitors (Makinson d’Apice) sent a draft Lease and draft Incentive Deed to the respondent’s solicitors (Church & Grace), noting that the documents were subject to their clients’ approval. Clause 5 of the draft Incentive Deed dealt with early access to the premises, providing for the grant of a non-exclusive licence for access to the premises as soon as practicable after the later of certain specified dates. The draft Incentive Deed also made provision for an incentive of $2 million (against a total rent payable over the period of the lease of around $5 million). Enclosed with the documents sent to the respondent’s solicitors was a Document Return Checklist, listing items that the respondent was required to return when the documentation was finalised (including the executed Lease and executed Incentive Deed, both in duplicate).

9. Revised and marked-up versions of the documents were sent by the respondent’s solicitors to the appellants’ solicitors on 13 May 2021 (which amendments were the subject of negotiations between the respective parties until about 16 June 2021).

10. On 16 June 2021, the appellants’ solicitor (Ms Virginija Jalozaite) sent to the respondent’s solicitor (Mr Brendan Aubusson) execution versions of the documents, requesting that they be executed in duplicate and for the originals to be returned to her office to arrange for execution by the appellants.

11. On 23 June 2021, Mr Aubusson sent an email to Ms Jalozaite suggesting some amendments to the documents (which were largely accepted) and, on 25 June 2021, Ms Jalozaite sent amended versions of the documents stating that she looked forward to receiving the “Tenant executed documents”.

12. On 28 June 2021, Mr Aubusson sent an email to Ms Jalozaite, advising that the execution documents were being signed and returned to him; and asking that Ms Jalozaite let him know when the appellants had signed “so we can exchange the Incentive Deed and we can hand over the signed lease, bank guarantee, etc”. (Mr Aubusson was clearly here contemplating a formal exchange of the relevant documents.) Ms Jalozaite’s response on the same day was to request that, once the lessee signed the documents, they be sent to her office so that they could be certified before the lessor signed them, Ms Jalozaite advising that the lawyers had to certify the originals of the “tenant executed documents” before the lessor could sign.

13. The following day, the Lease and Incentive Deed were signed by a director and secretary of the respondent. Soft copies of the executed documents were forwarded by email sent on 29 June 2021 at 2.44pm to, among others, the national leasing manager of the first appellant. The respondent’s agent communicated later that day to the appellants the hope that there would be access to the premises in the morning in order to obtain quotes for works to be done “for a cosmetic upgrade”.

14. On 30 June 2021, Mr Aubusson wrote to Ms Jalozaite enclosing, among other documents, duplicate executed copies of the Lease and one executed Incentive Deed; and setting out a proposal for the procedure “for formalising the arrangements between our clients”. That proposed procedure included: a request that when the signed documents were received by the lessor’s solicitors they be scanned for his perusal; that, if satisfied with the documentation as executed by the lessor, the lessee’s solicitors would authorise the exchange and dating of the Incentive Deed and the dating of the Lease; that after the exchange, the original Incentive Deed signed by the lessor be forwarded to him; and for the lessor’s solicitor to proceed with the registration of the Lease and to provide him with the registered Lease after registration had been effected. Relevantly, the letter stated (at (f)) that “[y]ou are not authorised to exchange the Incentive Deed nor deal with the Lease until we give you our written authorisation to do so”. (Mr Aubusson was here still contemplating that there be a formal process of exchange, albeit one by way of authorisation from him that the lessor’s solicitor could proceed to “exchange” and date the Incentive Deed and Lease.)

15. On 2 July 2021, Ms Jalozaite queried the fact that only one counterpart of the “[t]enant executed incentive deed” had been received and asked whether the lessee was delivering the other counterpart or would instead accept a certified copy of the duly executed and dated deed. Also on that day, the respondent’s agent again requested access to the premises, from time-to-time, for NBN installation.

16. Ms Jalozaite’s email led to a (on the appellants’ case, critical) telephone conversation between Ms Jalozaite and Mr Aubusson on 5 July 2021, in which Ms Jalozaite said that she explained to Mr Aubusson that they were not exchanging executed counterparts; rather, that they (i.e., the appellants’ solicitors) would normally have the tenant execute copies in duplicate; would certify the duplicates for the landlord and send them to the landlord for execution; and then would distribute a copy to the tenant after the landlord returned the executed documents for registration. This brought into focus the apparent misunderstanding between the respective lawyers as to how the transaction was to be effected (the primary judge observing at [60] that the solicitors at this point appeared to be somewhat at cross-purposes in relation to how the executed documents would be dealt with; i.e., whether or not there was to be an exchange of executed documents).

17. The primary judge accepted that a telephone conversation occurred on 5 July 2021 to the effect of that to which Ms Jalozaite had deposed (see at [71]) (and see further the affidavit of Virginija Jalozaite affirmed 3 September 2021 at [18]-[23]), his Honour noting that, although there was no file note of that conversation, Ms Jalozaite’s version was consistent with her earlier communications with Mr Aubusson and consistent with her usual practice as described in her affidavit evidence.

18. The appellants say that the critical point to be drawn from this conversation is that the process agreed on 5 July 2021 was that, once the respondent provided the executed deeds, the parties would proceed on the basis that the appellants would register the Lease with no further involvement by the respondent. Thus, it is said by the appellants that, on this process, there was nothing further to be done on the part of the respondent for the transaction to be binding on it. Hence it is contended that, when the respondent sent the second executed Incentive Deed to the appellants on 9 July 2021, the respondent immediately became conditionally bound (the condition being the subsequent execution of the documents by the lessor) and was no longer able unilaterally to withdraw from the arrangements under the Lease and Incentive Deed.

5. Following the conversation on 5 July 2021, Mr Aubusson sent an email to Ms Jalozaite confirming oral advice apparently given by him to the effect that there was currently a takeover bid for the tenant’s holding company and that there was a possibility that the tenant’s holding company would be delisted. Mr Aubusson suggested some modification to one of the clauses of the Lease; and stated and that his client would be executing a further copy of the Incentive Deed.

6. On 7 July 2021, the respondent paid the lease registration fee to the appellants’ solicitors. The previous day, the respondent’s agent had requested access to the premises to arrange for the building to be connected to the internet and telecommunications network; and a further request was made on 7 July 2021 for access to test the fibre connection to the premises. Access was given to the premises for the fibre testing to be done on 8 July 2021.

7. On 8 July 2021, Ms Jalozaite advised Mr Aubusson that his proposed amendment to the Lease was agreed and stated that she looked forward to receiving the second counterpart of the “Tenant executed incentive deed”.

8. By this stage, therefore access to the premises had been permitted to enable the respondent’s contractor to start IT-related works as noted above (see the primary judgment at [29]); and on 8 July 2021, the respondent’s agent sent an email to the appellants (the text being set out in his Honour’s reasons at [29]) asking for the respondent’s builder to have access to the premises over the weekend, in order to start fitout works the following week, beginning 12 July 2021.

9. A further email was sent by the respondent’s agent on 9 July 2021, attaching a proposed works schedule, subject to the appellants’ approval of site access (see at [31] of the primary judgment). The respondent’s representatives continued to press for access to the premises to undertake works after 9 July 2021 (see the email of 12 July 2021), but further access was not granted due to COVID-19 related restrictions (see at [32] of the primary judgment). The appellants point out that the communications included an email from the respondent’s agent that referred to the “Agreement” between the parties and an email from the appellants on 15 July 2021 that acknowledged an obligation to provide access “[p]er the Lease recently signed” (noting that neither of these assertions was corrected by the respondent). (The early access provisions were, however, contained in the Incentive Deed; not the Lease.)

10. On 9 July 2021, Mr Aubusson sent a letter by courier to Ms Jalozaite enclosing a further copy of the Incentive Deed signed by the respondent.

11. On 16 July 2021, the appellants received the executed original Bank Guarantee required under the Lease (see at [33] of the primary judgment).

12. On 20 July 2021 at 2.53pm, Mr Aubusson sent an email to Ms Jalozaite, referring to the letter dated 30 June 2021 (and, in particular, paragraph (b) of that letter), and seeking advice as to whether the appellants had executed the Lease and the Incentive Deed (requesting that, if so, scanned copies be provided for perusal and checking). (This is of some significance since there would arguably be no point to the request to check scanned copies of the documents once executed by the landlord if the tenant was already bound by its execution and delivery of the documents.) Ms Jalozaite’s response at 3.25pm that same day was to the effect that the second counterpart of the Incentive Deed had been received from Mr Aubusson but that her instructions were to keep the originals in the office as the landlord was not able to accept documents at its office during the lockdown. Ms Jalozaite said that she would let Mr Aubusson know as soon as the documents were executed by the landlord and the Lease was registered. Mr Aubusson responded later that same day to the effect that it was not satisfactory that the lessee had signed and the lessor had not; and suggested a procedure for scanned signatures. Ms Jalozaite did not accede to that suggestion.

13. Meanwhile, the respondent continued to seek access to the premises for the purpose of having works undertaken (see the email of 22 July 2021) but that access was not provided.

14. On 30 July 2021, the executive assistant to the national leasing manager of the first appellant sent an email to the respondent, referring to the then worsening COVID situation and advising that the lease document had not been “landlord executed” but stating that she had been given assurance (by “David” of the appellants) that landlord execution of the Lease is “merely a formality” and that the Lease “will certainly be landlord executed as soon as it is safe to do so”. The email stated that “the tenant gaining access to the site to commence works will not be hindered by this”. (In earlier communications it was noted that an indemnity would be required in relation to early access.)

15. Things came to a head on 16 August 2021. On that date, Mr Aubusson wrote to Ms Jalozaite, referring to the Heads of Agreement and to his letter of 30 June 2021. In his 16 August 2021 letter, Mr Aubusson stated that there was no binding agreement between the parties and that the lessor had not signed the documents “so the occasion for the provision of any authority to exchange and date the documents has not arisen”; and advised that the lessee withdrew and terminated the negotiations (and withdrew any offer to enter a lease constituted by the submission of documents). A similar communication was sent from the respondent to the appellants. As adverted to above, the primary judge noted that it was common ground that the appellants had not yet signed the documents when the respondent withdrew from the negotiations on 16 August 2021 (see at [42]).

16. On 19 August 2021, the appellants’ solicitors forwarded to the respondent’s solicitors the Lease and Incentive Deed executed by the appellants; and stated that the Lease would now be registered.

17. The respondent then commenced the proceeding in this Court, seeking interlocutory relief to restrain the appellants from taking steps to register the Lease and from calling on the bank guarantee; and seeking, by way of final relief, declaratory relief to confirm its contention that there was no binding Lease or agreement with respect to the Lease and orders to restrain the registration of the Lease and for the return of the bank guarantee that had been provided.

18. Without admission and on the usual undertaking as to damages, the appellants provided undertakings (in lieu of any interlocutory relief); and on 1 September 2021, the appellants filed a cross-summons, seeking declaratory relief to the effect that the Lease and Incentive Deed were binding.

Primary Judgment

33. The primary judge concluded that the right to withdraw (at any time prior to execution of the formal legal documents by both parties) contained in the Heads of Agreement had not been abrogated or abandoned (see at [82]), distinguishing the decision in Realm Resources v Aurora Place Investments Pty Ltd (2019) 135 ACSR 422; [2019] NSWSC 379 (Darke J) (Realm Resources) on the basis that, there, the principle stated was only that satisfactory legal documentation be entered into by the parties, whereas in the present case the principle stated allowed the right to withdraw until documents were signed by both parties. His Honour considered that the process, which Mr Aubusson at least implicitly accepted on 5 July 2021, was not inconsistent with the continued existence of that right to withdraw and did not indicate that the respondent was giving up that right. Thus, his Honour concluded that the respondent did not evince an intention to be bound by any of the deeds it had signed prior to the appellants signing the deeds (but, rather, that the evident intention was to become bound if and when the appellants signed; his Honour likening the case to that considered in 400 George Street (Qld) Pty Ltd v BG International Ltd [2012] 2 Qd R 302; [2010] QCA 245 (400 George Street).

34. At [87], the primary judge concluded that the respondent did not deliver any of the deeds it signed and did not evince an intention immediately to be bound (again stating that the evident intention was to become bound by the deeds only once they were signed by the appellants); and that, in the meantime, both parties had the right to withdraw from the transaction. His Honour granted the relief that had been sought by the respondent and dismissed the appellants’ cross-claim.

Grounds of Appeal

35. By notice of appeal filed on 21 October 2021, the appellants have raised a number of grounds of appeal (though they did not at the hearing press grounds 3 and 4, which have accordingly not been reproduced below):

1.   The learned trial judge erred in finding that the respondent’s requests for access to the premises were of little significance in determining whether the respondent had manifested an intention to be bound by the Incentive Deed and Lease.

2.   The learned trial judge ought to have found that the respondent’s requests for access were to be understood objectively as requests for access on the terms of the Incentive Deed that the respondent had executed and provided to the appellants, and that by making those requests and accessing the premises the respondent evinced an intention immediately to be bound by the Incentive Deed.

…

5.   The learned trial judge erred in construing the Heads of Agreement as permitting the respondent to withdraw from negotiations after the respondent had executed the lease, provided its executed lease to the appellants and accessed the premises.

6.   The learned trial judge erred in finding that, after 5 July 2021, the parties were not proceeding on a basis that was inconsistent with the existence of a right of withdrawal such as that contained in the Heads of Agreement.

7.   The learned trial judge erred in finding that the respondent did not evince an intention to be immediately bound by the Incentive Deed and the Lease by the following conduct after the conversation between the parties’ solicitors on 5 July 2021:

a.   executing a further original Incentive Deed sometime between 5 and 9 July 2021;

b.   instructing its solicitors to send to the appellants’ solicitors the lease registration fee on 7 July 2021;

c.   instructing its solicitors to send to the appellants’ solicitors the further original Incentive Deed without reservation on 9 July 2021;

d.   instructing its solicitors to send to the appellants’ solicitors the original executed bank guarantee on 16 July 2021; and

e.   seeking and obtaining access to the premises throughout the period from 5 to 30 July 2021.

8.   The learned trial judge ought to have found that the respondent had delivered the Incentive Deed and the Lease and that, upon the appellant’s execution and delivery of those documents on 19 August 2021, the Incentive Deed and Lease were the binding and operative deeds of the respondent.

36. In essence, the appellants put forward the following two arguments, acceptance of either of which they say would lead to the appeal being allowed.

37. First, the so-called “inconsistency” argument involving the appellants’ challenge to the finding at [80] of the primary judgment that the provision of the second Incentive Deed was a procedural step done to facilitate the process that Ms Jalozaite had described and was not inconsistent with the existence of a right to withdraw in the terms set out in the Heads of Agreement (and hence the finding that the parties were not proceeding on a basis that was inconsistent with the existence of a right of withdrawal).

38. Second, and independently of the first, the “early access” argument, namely that, by the respondent seeking access to (and in fact accessing) the premises in July 2021, the respondent evinced an intention immediately to be bound by the Incentive Deed (which contained the agreed obligations that would attach to early access). The appellants say that, insofar as the respondent contends that the early access right in the Heads of Agreement created an immediately binding obligation on the appellants, and a correlative right in the respondent, for access to the premises, this would be pointless unless there was an obligation by the lessor to grant a lease of the premises (and hence the exercise of the early access right evinces an acceptance by the respondent that there was a binding lease or agreement to lease at that time).

Notice of Contention

39. By notice of contention filed on 18 November 2021, the respondent contends that the primary judgment should be affirmed on the following grounds:

1.   The learned primary judge should have found that the heads of agreement dated on or about 23 April 2021 between the Appellants and the Respondent gave rise to an immediately binding right of access to the premises by the Respondent (the Early Access Right), which finding the learned primary judge found it unnecessary to decide [Judgment at 55, 56, 70, 84].

2.   In order to exercise the Early Access Right, the Respondent was required to, and did, execute and return the lease documents and provide a bank guarantee to the Appellants [Judgment at 10, 54, 62-62].

3.   As a consequence of:

a.   the Early Access Right identified in Ground 1,

b.   the provision of the documents identified by Ground 2 and

c.   any request for access by Respondent to the Appellants,

the Respondent did not evince an intention to be bound to the lease documents (including the incentive deed) provided to the Appellants.

The “inconsistency” argument

Appellants’ submissions as to the inconsistency argument

40. The appellants argue that the process agreed (or acquiesced in) by the parties’ solicitors on 5 July 2021 was inconsistent with the continued existence of the right to withdraw from the transaction that was provided for under the Heads of Agreement; and, hence, that, on the provision of the executed deeds to the appellants’ solicitors, the respondent immediately became bound thereby.

41. The perceived inconsistency is said to arise because the process adopted by the parties from 5 July 2021 contemplated the Lease being registered by the appellants with no further act or communication from the respondent after the provision of the documents in duplicate (no little emphasis being placed by the appellants on the fact that the “process” contemplated nothing further from the respondent, after provision of the second counterpart of the Incentive Deed). In other words, it is said that the process was to result in the respondent becoming unconditionally bound by the documents as its deeds without the respondent taking any further step after the provision of the documents in duplicate.

42. The appellants contend that the 5 July 2021 conversation (as referred to in the chronology of events above) made clear to both parties that there was to be no “exchange” of the Incentive Deed and that, after provision to the appellants’ solicitor of the documents signed in duplicate by the respondent, the appellants’ solicitors would attend to registration of the Lease without any further involvement of the respondent. It is noted that the primary judge (at [77]) accepted that, in light of the 5 July 2021 telephone conversation and Mr Aubusson’s email sent later that day, it would be reasonable to have understood that the second signed version of the Incentive Deed was provided to facilitate the process that Ms Jalozaite had described (which the appellants note was a process that envisaged no exchange of counterparts signed by one party only).

43. The appellants point out that both parties intended that the Lease and Incentive Deed were to be deeds (not just simple contracts) and they say that the parties must have intended that the Lease (and therefore also the Incentive Deed) be binding by the time the Lease was registered.

44. The appellants say that the respondent’s delivery was conditional (an escrow), the condition being that the appellants also execute and deliver the documents; and that the documents would not be operative as obligations of the respondent unless and until they were executed and delivered by the appellants (but nevertheless the respondent was bound from the time the documents were so delivered and unable to withdraw from the Lease after that point – albeit that the respondent might be able to seek relief if the appellants did not execute and deliver the documents). It is submitted that the primary judge mistook that “conditional delivery” for no delivery. The appellants contend that the correct analysis is that (when executed and delivered by the appellants) the deeds would be operative and binding on the respondent because the execution and delivery by the appellants would satisfy the condition attached to the respondent’s delivery on 9 July 2021.

45. As to his Honour’s conclusion (at [82]) that the evident intention was that the respondent should be bound if and when the appellants executed the deeds (by reference to the similarity of this case with that considered in 400 George Street), the appellants submit that an act of the appellants (the signing by them of the deeds) cannot constitute “delivery” by the respondent; and that the reliance on 400 George Street was misplaced because, in the present case, the consequence of the 5 July 2021 conversation was that something did change after the Heads of Agreement (unlike the position in 400 George Street) namely, the parties adopted a process that was inconsistent with the “right to withdraw” clause of the Heads of Agreement.

46. The appellants say that it was critical to the outcome in 400 George Street that nothing had happened to change the basis of the parties’ negotiations following the relevant letter (referring to [53] and [48] of the judgment of Muir JA, with whom Fraser JA and Mullins J agreed); whereas they maintain that, in the present case what changed after 30 June 2021 was that the 5 July 2021 conversation occurred and they further point to the fact that the respondent proceeded to access the premises after 5 July 2021 (in circumstances where the appellants say the agreed obligations attaching to access were contained in the Incentive Deed) and provided the original bank guarantee (contrasting this with the putative tenant’s inaction post-execution of the documents in 400 George Street at [58]-[60]).

47. The appellants say that the conclusion that the documents were conditionally delivered by the respondent is fortified by the respondent’s conduct in requesting, and obtaining, access to the premises after 5 July 2021, paying the lease registration fee and delivering the original bank guarantee required by the Lease. (It is noted that the bank guarantee was to secure the tenant’s obligations under the lease documents not under the Heads of Agreement.)

48. The appellants contend that the consequence of a finding that the Incentive Deed and Lease were conditionally delivered by the respondent on 9 July 2021 (or in any event before 16 August 2021) is that the respondent was unable to recall those deeds (citing Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80; [1929] HCA 13 (Taylor) at 87-88 per Rich, Starke and Dixon JJ (as his Honour then was); Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70 at 79 per Tadgell J; Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,325; [2012] NSWCA 253 (Segboer) at [72] per Sackville AJA, Allsop P (as the Chief Justice of the Federal Court then was) and Campbell JA agreeing; Kingston v Ambrian Investment Co Ltd [1975] 1 All ER 120 at 125 per Lord Denning MR); and they maintain that in those circumstances the Lease and Incentive Deed became binding and operative on 19 August 2021 when the condition was satisfied by the appellants’ execution and delivery. The appellants say that the same conclusion would follow if only the Incentive Deed (and not the Lease) was conditionally delivered by the respondent, because of the agreement for lease contained in cl 8.1 of the Incentive Deed.

Respondent’s submissions as to the inconsistency argument

49. The respondent maintains that the relevant question is whether the respondent intended to be bound at all before both parties had signed the Incentive Deed or the Lease; and argues that the abandonment of the appellants’ claims that the delivery of the documents on 29 or 30 June 2021 evinced an intention immediately to be bound (i.e., the abandoned Grounds 3 and 4) is significant in that only later conduct of the respondent could convert a lack of intention as at 29 or 30 June 2021 (when the duplicate executed leases and one executed Incentive Deed were sent to the appellant’s solicitor) to an intention to be bound at some future date.

50. The respondent contends that the Heads of Agreement clearly set out the basis or principle on which the parties agreed to treat with each other; and that nothing relevantly changed to abandon that basis or principle. In particular, it is submitted that the 5 July 2021 conversation between the parties’ respective solicitors did not fundamentally alter the basis on which the parties dealt with each other.

51. The respondent makes a number of responses to any suggestion of reliance on the conduct of Mr Aubusson to establish the respondent’s intention in this regard. First, that there is no evidence that Mr Aubusson had any authority to change the position adopted in the Heads of Agreement (a position that it is said was confirmed by his letter of 30 June 2021) (the respondent here referring to the primary judgment at [20]-[21]). Second, that, at law, a solicitor has no authority to contract on behalf of his or her client in the absence of authority expressly given, or by necessary implication. Third, that as to delivery of deeds, authority for an agent to deliver a deed must also be by deed (citing Re Seymour [1913] 1 Ch 475 at 481 per Joyce J). Fourth, that nothing in writing passed between the parties or their respective solicitors to alter the position in the Heads of Agreement (and there was no deed authorising the solicitor to bind the respondent). Fifth, that the conduct of Mr Aubusson (in accepting Ms Jalozaite’s version of the conversation of 5 July 2021) was a recognition of a procedural change to the processing of the documents.

52. The respondent submits that it does not follow (from the fact that the respondent may have had nothing further to do in relation to the transaction) that the respondent no longer retained a right to withdraw after it had physically provided the executed deeds to the appellants’ solicitor. Reference is made in this context to the discussion in N Seddon, Seddon on Deeds (Federation Press, 2015) (at [2.27]) (Seddon on Deeds) as to exchange of counterparts being referable to contract law and as not easily adapted to the question of “delivery” of a deed. The respondent argues that there is a distinction between the question of intention to be immediately bound and the process chosen as to how physically to provide the document(s) in question.

53. The respondent contends that the subject matter of the conversation of 5 July 2021 was as to the procedural question of whether there would be an exchange of executed counterparts, or whether the tenant would first provide duplicate copies of the transaction documents to the landlord (not as to whether the term in the Heads of Agreement, that either party was entitled to withdraw from and terminate negotiations at any time prior to the execution of the formal lease documents by both parties, would be varied). The respondent maintains that, as held by the primary judge (at [80]), the “process” described by Ms Jalozaite was not inconsistent with the continued existence of the respondent’s previous objective intention to be able to withdraw from the transaction at any time prior to the execution of the documents by the appellants; and that nothing relevantly changed after that conversation as to the substantive position between the parties.

54. In this regard, the respondent maintains its submission that the decision in 400 George Street is on all fours with the circumstances of the present case (referring to the primary judge’s reasons at [48] and [82]); and the respondent also relies in this context on the statements made by Sackville JA in Segboer at [72]) (where the delivery of a deed in escrow was distinguished from a case where the grantor’s intention is not to be bound at all until some future event occurs – in which case there is no delivery).

55. The respondent attaches significance to the fact that in the conversation of 5 July 2021 there is no suggestion of any reference to instructions having been obtained regarding the procedure that was there being discussed. The respondent emphasises that a solicitor has no implied authority to vary the terms of an agreement between his or her client and a third party. It is submitted that, if it was the objective intention of the parties to vary their respective expressed intentions in the Heads of Agreement as to when they would become bound to the terms of the transaction documents, then it would have been necessary for the parties’ respective solicitors to obtain instructions to that effect; and that it would be expected that such a matter would be expressly advised in written correspondence.

56. The respondent contends that there was no conditional delivery or escrow (pointing to the explanation by the primary judge on this issue at [47]-[48] and [53]); and says that such a conclusion rests incorrectly on the conduct of Mr Aubusson to the effect that the right to withdraw was abandoned. The respondent says that the decision in Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609 (Vincent v Premo Enterprises) (see the appellants’ submissions) does not assist the appellants (that being a case where it was concluded that delivery of a deed of lease had occurred, albeit subject to an escrow condition which related to determining the date of possession, which condition was fulfilled). The respondent points out that no right of withdrawal was there asserted, as delivery had already occurred (which the respondent maintains is not the case here).

Appellants’ reply submissions as to the inconsistency argument

57. In reply submissions, the appellants disavow any contention that one can never retain a right to withdraw after executing a document as a deed and providing it to the counterparty but saying that the procedure adopted was one that was intended to lead to the respondent being bound with no further act on its part following execution and delivery of the second counterpart of the Incentive Deed, which occurred on 9 July 2021 (referring to the primary judgment at [77]).

58. The appellants say that they do not rely on the respondent’s solicitors having authority to deliver the Incentive Deed and Lease. Rather, they say that, in the absence of evidence to the contrary, it may be inferred that the solicitors sent the Incentive Deed on the instructions of the respondent; that the agent made the requests for access on the instructions of the respondent; and that the contractors accessed the premises on the instructions of the respondent. It is said that those acts of execution and instruction were acts of the respondent personally.

59. The appellants reject the proposition that their case implies that the respondent’s solicitors had authority to make or vary a contract on behalf of their client, noting that the primary judge found that the “right to withdraw” was not contractual (at [51] and [53]) and that this finding is not challenged.

60. As emphasised in oral submissions, the appellants say that the respondent does not (and cannot) identify how or when delivery was to occur on the respondent’s case; and the appellants argue that this suggests that delivery by the respondent occurred when the respondent executed and provided the second counterpart of the Incentive Deed (citing Realm Resources at [90] per Darke J).

Determination of inconsistency argument

61. No issue is taken by the parties as to the articulation by the primary judge of the relevant principles governing delivery of deeds (see at [44]-[47] of the primary judgment), “delivery” being essential to a deed (as explained by Sackville AJA, with whom Allsop P (as his Honour then was) and Campbell JA agreed, in Segboer at [51]-[59]). Nor was it disputed that the documents in the present case were intended to take effect as deeds (not as simple contracts).

62. Relevantly, it is accepted by the appellants that the question whether the respondent evinced an intention immediately to be bound by the deeds on physical delivery of the executed deeds is a question of fact to be determined objectively by reference to the words and conduct of the parties and the circumstances surrounding the execution and physical delivery of the deeds (see Xenos v Wickham (1867) LR 2 HL 296 at 309 per Piggott B; Realm Resources at [78]); and that subsequent conduct may be taken into account (see 400 George Street at [58]-[60]; NTT AustraliaDigital Pty Ltd v Cover Genius Services Pty Ltd (2020) 19 BPR 40,711; [2020] NSWSC 1378 (NTT Australia) at [77]).

63. It is clear that the intention of the parties at the time of entry into the Heads of Agreement was that the parties were not to be bound prior to execution of “formal Lease documents by both the Lessee and the Lessor”, as the right to withdraw from and terminate the negotiations at any time prior thereto was expressly stated in the Heads of Agreement. It was not necessary for such a statement to have contractual force (and the primary judge correctly in my opinion proceeded on the basis that it did not – see at [51] of his Honour’s reasons). Nor, to my mind, is it significant that what was there contemplated was a withdrawal from and termination of the “negotiations” as such. The significance of the statement was that it made clear the objective common intention of the parties at that stage as to the time at which they would no longer be free to withdraw (i.e., when they would be bound) and this was when both parties had executed the “formal Lease documents”. There is no reference in that statement of principle to exchange of the documents (rather, simply, to their execution). As it transpired, the formal documents prepared included both the Lease and the Incentive Deed (both those instruments readily falling within the notion of the “formal Lease documents”).

64. Therefore, had the question whether the respondent (by executing and physically providing the deeds) evinced an intention immediately to be bound thereby, i.e., in advance of execution by the appellants, fallen to be determined solely by reference to the parties’ stated intention at the time of the Heads of Agreement, there would have been an obvious answer (in the negative). Thus, the focus in argument both at trial and on the appeal was as to the significance of the 5 July 2021 conversation between the parties’ solicitors, in which the issue discussed was as to whether there was to be an exchange of deeds; the parties thereafter proceeding on the basis that there would not.

65. The appellants, as noted above, place emphasis on the fact that the process explained by Ms Jalozaite (and at least implicitly accepted by Mr Aubusson) in the 5 July 2021 conversation did not include any further step to be taken by the respondent (after provision of the second executed Incentive Deed) before registration of the Lease; and, hence, it is said that the process adopted after the 5 July 2021 conversation was inconsistent with the continuation of the right to withdraw at any time up until execution of the formal lease documents by both parties.

66. However, that argument is premised on the conversation being understood as addressing a different issue from that which in terms was being discussed. What was discussed was the process by which “delivery” of the executed deeds was to occur (i.e., whether there was to be a formal exchange of counterpart documents of the kind that typically occurs in a conveyancing transaction). What was not there discussed (in terms) was whether there was to be a change in the position that had been agreed between the parties and stated in the Heads of Agreement; namely that either could withdraw prior to execution of the documents by both.

67. I do not accept that there is a necessary inconsistency between adoption of the process explained by Ms Jalozaite in the 5 July 2021 conversation and the continuation of the right of withdrawal expressly reserved in the Heads of Agreement. All that relevantly changed after the 5 July 2021 conversation was that it was now understood that there would be no exchange, as such, of counterpart documents. However, Mr Aubusson’s 20 July 2021 email makes clear that it remained his understanding that the parties would not be bound until both parties had executed the documents.

68. As to when, on the respondent’s case, “delivery” of the deeds (so as to bind the respondent) would have occurred (under the 5 July 2021 process), the respondent in oral submissions argued that this could have been on the act of registration of the Lease itself (i.e., that the deeds would not become operative until registration) (see App T 24.24-31). Consistently with the continuation of the right to withdraw, the 5 July 2021 process can thus be understood to have provided an authorisation by the respondent for the registration of the documents once duly executed by the appellants (which would explain the need for Mr Aubusson to satisfy himself of the execution of those documents by the appellants).

69. As noted, the appellants suggest that what occurred was a conditional delivery of the deeds by the respondent (i.e., binding the respondent from the time that the executed deeds were provided to the appellants’ solicitors but with the deeds only becoming operative on satisfaction of the condition to which delivery was subject, namely, execution by the appellants) akin to a delivery in escrow (see for example as explained in Beesly v Hallwood Estates Ltd [1961] Ch 105 at 118 per Harman LJ (with whom Lord Evershed MR agreed). In Segboer, Sackville AJA noted (at [72]) the distinction to be drawn between delivery of a deed in escrow from a case where the intention is not to be bound at all until some future event occurs (in which latter case there is no delivery). At [73], his Honour said that:

73.   Whether a deed has been delivered unconditionally, delivered in escrow or not delivered at all depends on the executing party’s intention. This question, as I have already indicated, is to be determined on the basis of the words used by and the conduct of the promisor, taking into account the circumstances attending the execution of the deed.

70. There is or may be a distinction in a particular case (as recognised in Seddon on Deeds (at 95)) between the exchange of counterpart deeds and delivery of the deeds, in the sense that there may be an issue in relation to the latter as to whether the requisite intention to be immediately bound has been established.

71. The distinction between delivery of a deed absolutely and the delivery of a deed conditionally was explained in Taylor (at 87), which makes clear that the question is one of intention (and see also Vincent v Premo Enterprises at 619 per Lord Denning MR, and at 623 per Winn LJ). In the present case, there was nothing in the covering letter (with which the second executed Incentive Deed was provided on 19 August 2021) that expressly made reference to the document being delivered in escrow or subject to a condition.

72. There was no clear statement or conduct on the part of the respondent to indicate that the respondent’s position had relevantly changed after 30 June 2021, such that its intention was to be bound by the relevant lease documents (including the Incentive Deed) at a time before the appellants had signed those documents. In those circumstances, the primary judge did not err in finding that the process adopted by the parties after the 5 July 2021 conversation was not inconsistent with the continuation of a right to withdraw (as had been reserved in the Heads of Agreement).

73. Thus, the appellants’ inconsistency argument (and the grounds of appeal which are premised on it) is not in my opinion made good.

Early access argument (and the respondent’s notice of contention)

74. As both the appellants’ second main argument and the respondent’s notice of contention raise issues relating to the provision of early access to the premises at the request of the respondent, they will be considered together.

75. The Heads of Agreement contained the following term in relation to access:

The Lessee will be granted early access from 1 June 2021 on a Gross Rent-Free basis to commence any tenancy fitout changes, IT requirements and occupancy prior to its Lease Commencement Date subject to Lessor receipt of executed lease documents, provision of bank guarantee and appropriate insurances.

Was there an immediately binding right of access under the Heads of Agreement?

76. First, I address the issue that arises (on the respondent’s notice of contention) as to whether this gave rise to an immediately binding right of access to the premises (exercisable on execution and return of the lease documents and provision of a bank guarantee).

77. The respondent contends that the primary judge should have found that the Heads of Agreement gave rise to an immediately binding right of access to the premises by the respondent and says that the existence of the early access right as a term of the Heads of Agreement makes clear that the respondent did not evince an intention to be bound to the lease documents (including the Incentive Deed) provided to the appellants.

78. The respondent points to the fact that the provisions in the Heads of Agreement as to exclusivity, the lease deposit, and the early access right (as well as the right to withdraw prior to execution by both parties of the lease documents) each operates at a time prior to any execution of any lease documentation by the proposed lessor (and says that this, in itself, demonstrates that the promise by the lessor to these terms must be found in the Heads of Agreement and not in the later lease documents).

79. The respondent argues that the access term is worded in the form of a grant that depends on certain preconditions (the receipt of executed documents); and that the reference (at the conclusion of the terms) to the information contained in the proposal not being a binding lease does not speak to the grant of access (as that grant is not “information”, and there is also no suggestion that the grant of access is itself a “binding lease”). The respondent says that what was granted was a conditional right of access, not a lease; the condition being the provision of documents (including the bank guarantee) (and that those documents were in effect an earnest to permit early access before the lease documents became binding).

80. In response, the appellants point to a number of textual matters as indicating that the access clause did not give rise to contractual rights and obligations: that it is not included in the identified exceptions to the general statement that the provisions of the Heads of Agreement are not binding (the exclusivity provision and the lease deposit term); that the language used is in the future tense (“will be granted”); and that the bank guarantee for which provision is made (which is a pre-condition to early access) is one that must “relate to the performance of the Lessee’s obligations under the lease” (not under the Heads of Agreement). (The respondent says that the fact that the bank guarantee is provided as security for lease obligations is immaterial; rather, as noted above, that it is, as with the other documents, an earnest to permit early access, before the lease documents are binding).

81. Other terms in the Heads of Agreement to which the appellants point as relevant to early access (but which the appellants note are not said by the respondent to give rise to binding rights and obligations) are those in relation to Utilities (which provides that the Lessee is responsible for such expenses from the earlier of the date of Lease Commencement or the date on which the Lessee is first given access to the premises) and the terms in relation to Fitout and Make Good.

76. The appellants argue that the conclusion that the term as to access in the Heads of Agreement was not immediately binding is reinforced by considerations of context and commercial purpose, noting that the primary judge observed that the parties are unlikely to have intended that the lessee would have access rights in circumstances where it was not bound to the terms of a lease (see at [55]). Further, the appellants say that on the respondent’s construction the condition in the access clause referring to “receipt of executed lease documents” would then lack content, noting that, at the time of the Heads of Agreement, the lease documents were still to be negotiated and their content required the future agreement of the parties. (The respondent accepts that, as at the date of the Heads of Agreement, the lease documents were still to be negotiated; but the respondent argues that any contention that the grant of access lacks content is incorrect; and that this misunderstands its contention, namely that the grant of access is conditional on the documents being provided.)

77. The appellants contend that their construction (i.e., that the term relating to access was conditional on provision to the appellants of executed lease documents that were immediately binding on the respondent) gives rise to an harmonious and businesslike operation of the Heads of Agreement. (The respondent cavils with the suggestion that the appellants’ construction has an harmonious operation.) Further, the appellants submit that the reasonable bystander would not have thought that early access was to be access at large; rather, that early access was to be subject to obligations; and it is said that those obligations were set out in the Incentive Deed that the respondent executed and provided to the appellants in June and again in July 2021. (In response to the invocation of the reasonable bystander, the respondent emphasises that access was to be available for the three stated purposes in the Heads of Agreement – as extracted above; and that reference to the later Incentive Deed must be irrelevant, as the appellants were not (by the time that document existed) bound to its terms. It is submitted that this reinforces the need to find an independent source of the right of access (which the respondent says the Heads of Agreement provided.)

78. Thus, the appellants maintain that, viewed objectively, by requesting (and availing itself of) access to the premises in July 2021, the respondent was requesting (and availing itself of) access to the premises subject to the obligations contained in the Incentive Deed (and that the respondent thereby evinced an intention to be bound by the Incentive Deed). Whereas the respondent accepts that it wanted early access and says that the means of obtaining that access is found in the Heads of Agreement (which the respondent says makes sense of the whole of the Heads of Agreement, as otherwise there was no point to supplying the documents to ensure early access would be provided).

Determination as to binding nature of term for early access

85. The primary judge, as noted above, did not need to determine the issue as to whether the access term in the Heads of Agreement gave rise to immediately binding rights. Neither do I consider it necessary for the disposition of the appeal (having regard to the conclusion I have reached as to the appellants’ early access argument – see below). Had it been necessary to determine, I would have concluded that the access right was not an immediately binding contractual right (placing weight on the fact that it is expressed in the future tense as something that “will be granted”). I consider it more consistent with the stated intent of the Heads of Agreement that the information in the proposal was not intended to be binding that the term in relation to early access be construed as a statement of intent (to be documented in due course in some appropriate form). It would, for example, be consistent with the proposal contemplated by the Heads of Agreement that such access be granted by way of a licence (informal or otherwise) and on terms that might or might not precede a binding executed lease.

Appellants’ early access argument

86. Turning then to the submissions made as to the early access argument that are raised on the appellants’ notice of appeal (which to some extent overlap with the above) I note as follows.

87. The appellants contend that his Honour erred in finding that the respondent’s requests for access to the premises were of little significance in determining whether the respondent had manifested an intention to be bound by the Incentive Deed and Lease (see at [84]).

88. The appellants contend that the relevance of the respondent’s requests for (and taking advantage of) access to the premises did not depend on this conduct being characterised as “assertions of existing legal rights” (this being a reference to his Honour’s observation that the requests were not in their terms assertions of existing legal rights). Rather, it is said that the early access issue was relevant because it showed an intention on the part of the respondent to be bound by the obligations the respondent had assumed in the Incentive Deed (referring to the indemnity against third party claims arising from the tenant’s fitout works (cl 5.4), the obligation to maintain insurances (cl 5.5), and the reinstatement obligation if the Incentive Deed and Lease were terminated due to the tenant’s default (cl 5.7)). The appellants maintain that the respondent did not have a legal right to access the premises at the time the requests were made and access was granted (since the appellants had not executed the Incentive Deed nor the Lease).

89. As noted above in relation to the respondent’s notice of contention, the appellants say that, in circumstances where a detailed regime for access had been agreed, and the respondent had executed the Incentive Deed, the respondent’s requests for early access would be understood by a reasonable person in the position of the appellants as being requests for access on the terms of the regime in the Incentive Deed (not a request for access free of the obligations in cl 5 of the Incentive Deed); and that a reasonable person would have understood the respondent to be accepting that, in accessing the premises, it was and would be bound by the obligations in cl 5 of the Incentive Deed. It is argued that, otherwise, the respondent could commence a fitout renovation, leave the existing fitout partly demolished without finishing the renovation, and still remain free to withdraw from the Incentive Deed and Lease without having to pay rent or to reinstate the premises.

90. The appellants contend that the primary judge erred in (implicitly) construing the Heads of Agreement such that the right to withdraw was to continue after the respondent had availed itself of the early access contemplated by the access clause in the Incentive Deed (referring to [56], [80], and [87] of the primary judgment).

91. The appellants note that the Heads of Agreement must be construed as a whole (a proposition with which the respondent does not cavil); and that the right to withdraw is expressed as a right to withdraw from “negotiations”. The appellants contend that the access clause assumes a situation in which negotiations have concluded because a stated precondition to early access is the receipt by the appellants of “executed lease documents”. The appellants say that the evident purpose of that precondition is to provide protection to the appellants by having the respondent deliver the lease documents (so as to be conditionally bound by them) before the respondent obtained access to the premises; and that such a purpose is defeated by construing the “right to withdraw” as continuing to operate in those circumstances.

92. It is submitted that the Heads of Agreement has an harmonious operation if the right to withdraw is construed not to continue in the more specific circumstances where the early access provision operates. In this context, the appellants point to the recognition by the primary judge (at [55]) of the unlikelihood that the parties would have intended the tenant to have access rights in circumstances where the tenant was not bound to the terms of a lease.

93. The appellants say that the present case is analogous to the circumstances considered in NTT Australia (where the tenant was held to be bound having sent to the landlord an executed lease and then having purported to exercise its right of access to the premises) (the appellants referring to the observations at [153]-[158], [165] and [171] in that case). In particular, the appellants maintain that an understanding that the respondent had done what it needed to do to be bound by the deed (reference here being made to what was said in NTT Australia at [154], [156]-[157] and [164]-[165]) is consistent with the circumstances of the present case (referring to the affidavit of the appellants’ national leasing manager, Mr David Schmidt-Lindner, affirmed on 3 September 2021 at [21] and [27]).

94. Further, the appellants say that the works were started in the present case and would have been completed were it not for the intervention of COVID-19. The appellants argue (again likening this case to that considered in NTT Australia) that after 5 July 2021 the parties were proceeding on the basis there would not be an exchange (referring to the affidavit of Ms Jalozaite, affirmed 3 September 2021 at [17], [18]-[23],[28], [30]; and the affidavit of Mr Schmidt-Lindner at [27], [29], [33]). Reference is also made in this context to Vincent v Premo Enterprises (where the conduct of the tenant in signing a deed of lease and taking possession of the premises was held to be conduct evincing an intention to be bound and delivery in escrow, the condition being that the parties agreed on rent payable from the date of possession and not from the date of the lease.)

95. The appellants say that the respondent does not identify how it became subject to any obligations attaching to its access to the premises in July 2021; and that, on the respondent’s case, it was accessing the premises without subjecting itself to the obligations attaching to access that had been negotiated and agreed in the Incentive Deed.

96. In response, the respondent contends that the requests for access should be seen in the same light as the oral conduct of Mr Aubusson on which the appellants rely (referring as I understand it to the submissions summarised above in relation to the appellants’ inconsistency argument). Alternatively, the respondent says that any claim of access is consistent with the right to access which was the subject of the Heads of Agreement. The respondent argues that the facts of NTT Australia are distinguishable from those in the present case, noting that, there, the tenant had completed its fitout (see at [43]) and obtained access for that express purpose (see at [153]); the tenant took possession of the premises under licence; there was no reservation of a right to withdraw; and the tenant sought (although did not ultimately pursue) rental waiver or deferral under the COVID-19 relief provisions applicable to commercial leases (see at [54]).

97. As to the fitout, the respondent says that the assertion by the appellants that the respondent’s fitout had started is not borne out by the evidence; and the respondent points to the conclusion by the primary judge (at [71]) that the request for access was of little significance in determining whether the plaintiff evinced an intention to be immediately bound by the deeds it signed.

98. Thus, the respondent argues that by requesting access to the premises it was not objectively demonstrating an intention to be immediately bound to the terms of the executed lease documents (rather, it was complying with the requirements of the early access right). The respondent points to the express provision in the Heads of Agreement to the effect that the respondent retained a right of withdrawal even after it had executed these documents (though as the appellants point out, there is no challenge to the primary judge’s finding that the right of withdrawal was not an immediately binding contractual obligation).

Determination as to appellants’ early access argument

99. The primary judge did not in my opinion err in finding that the respondent’s requests for access to the premises were of little significance in determining whether the respondent had manifested an intention to be bound by the Incentive Deed and Lease; nor did his Honour err in the manner contended in Appeal Grounds 2 and 5.

100. It is relevant to note that the first request for access was made on 29 April 2021, by the respondent’s agent, at a time when duplicate copies of the Lease had been executed by the respondent but only one copy of the Incentive Deed. The primary judge found (and the appeal from this finding was not pressed) that there was not at that stage an intention on the part of the respondent immediately to be bound by those executed documents (a finding that is readily explicable by reference to the reservation of the right to withdraw in the Heads of Agreement and the 30 June 2021 letter in which Mr Aubusson made very clear that authority to exchange the documents and date the Lease was required from him before this could be attended to by the appellants’ solicitors). Thus, the first request for access is consistent with the construction for which the respondent contends – i.e., that it had simply provided executed documents to the appellants’ solicitors without conveying any indication of an intention immediately to be bound thereby. Moreover, it was not until 16 July 2021 that the original executed bank guarantee was provided (so it was not until then that the preconditions for access to the premises under the term in the Heads of Agreement could be said to have been satisfied in any event).

101. The fact that access was provided during that period (it would seem for the limited purposes of IT installation; not for fitout works per se) is consistent with an informal licence arrangement (and in that context it may be noted that the appellants’ representatives were proffering assurances that the appellants would execute the lease documentation and that the delay in attending to this would not hinder access to the premises). As to the prejudice to which the appellants might be exposed if access were granted and the lease arrangement did not proceed, that can readily be seen to be a commercial risk taken by the appellants (no doubt in the expectation that the lease arrangement would proceed – and it being wholly in the appellants’ hands, by 9 July 2021 if not before, to ensure that this be achieved by the seemingly simple task of themselves executing the documents that the respondent had executed and delivering those to the respondent).

102. The requests for access (albeit at least one being made by the respondent’s agent with reference to the “Agreement” between the parties) were not unequivocally referable to any particular obligations under the executed lease documents; they simply appear to have assumed that access would be provided as had been contemplated under the Heads of Agreement. Thus, whether or not the term providing for access under the Heads of Agreement was contractually binding, I do not consider that the requests for, and taking advantage of, early access evinced an intention by the respondent immediately to be bound by the lease documents in the absence of execution by the appellants (nor did they amount an admission that the documents were then binding or conditionally binding on the respondent).

Conclusion

103. For the above reasons, the order that I propose is as follows:

1. Appeal dismissed with costs.

104. GLEESON JA: : I agree with Ward P.

105. WHITE JA: For the reasons given by Ward P,  the orders and reasons of the primary judge were correct. I agree with the order proposed by the President.

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Decision last updated: 23 June 2022