Chamberlain Group Pty Ltd v Kids for Life Academy Pty Ltd

[2015] NSWCA 241

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Chamberlain Group Pty Ltd v Kids for Life Academy Pty Ltd [2015] NSWCA 241
Hearing dates:	21 July 2015
Decision date:	20 August 2015
Before:	Emmett JA; Leeming JA; Sackville AJA
Decision:	Appeal dismissed, with costs.
Catchwords:	LANDLORD and TENANT - assignment of lease - whether landlord consented to assignment by tenant - assignee in actual possession of premises to knowledge of landlord - letter signed on behalf of landlord undertaking to register transfer “ASAP” - finding by primary judge that landlord had consented - landlord’s challenge to findings rejected   PRACTICE - expedited final hearing of separate question - where parties chose not to litigate further issue whether assignee’s purported exercise of option valid - parties bound by the way the case was run at first instance - no error in primary judge declining to determine further issue
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 56 Corporations Act 2001 (Cth), s 601AH Real Property Act 1900 (NSW), ss 41, 53 Supreme Court Act 1970 (NSW), s 101
Cases Cited:	Chan v Cresdon (1989) 168 CLR 242 Fox v Percy [2003] HCA 22; 214 CLR 118 Kids for Life v Chamberlain Group [2014] NSWSC 1561 Mackay v Dick (1881) 6 App Cas 251 Masters v Cameron (1954) 91 CLR 353 Stokes (by a tutor) v McCourt [2013] NSWSC 1014 Young v Jackman (1986) 7 NSWLR 97
Category:	Principal judgment
Parties:	Chamberlain Group Pty Limited (1st Appellant) 4 Chamberlain Pty Limited (2nd Appellant) Kids for Life Academy Pty Limited (1st Respondent) Chamberlain Early Learning Centre Pty Limited (2nd Respondent)
Representation:	Counsel: GA Sirtes SC, DP O’Connor (Appellants) JE Sexton SC, D Wilson (Respondents)   Solicitors: Logan Fox Lawyers (Appellants) Norris Somers Maait Lawyers (Respondents)
File Number(s):	2014/357634
Publication restriction:	Nil
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2014] NSWSC 1561 Date of Decision: 07 November 2014 Before: McDougall J File Number(s): 2014/288053

Judgment

1. THE COURT: This appeal concerns the validity of a purported assignment of a lease and a subsequent exercise of an option by the assignee. For the following reasons, the assignment of the lease was effective in equity, and it was not open to the appellants to challenge the assignee’s exercise of the option. Accordingly, the appeal should be dismissed.

Factual background

2. In 2009, Mr George Doro, and his daughter, Ms Jane Doro, sought to purchase and operate a child care centre. In anticipation of this project, on 3 December 2009, Ms Doro registered Kids for Life Academy Pty Ltd, which was intended to be the corporate vehicle that would own and run the child care centre. Mr and Ms Doro were the sole directors and shareholders of Kids for Life Academy.

3. In mid-2009, Mr and Ms Doro were introduced to Mr Khairalla Mourched, who was the sole shareholder and sole director of Chamberlain Group Pty Ltd. This company was the registered proprietor of the property at 4 Chamberlain Road, Guildford (the Property). When Mr and Ms Doro met Mr Mourched, Mr Mourched was in the process of completing the construction of a child care centre at the Property, which was to be run by Chamberlain Early Learning Centre Pty Ltd, a company controlled by Mr Mourched.

4. Mr and Ms Doro expressed an interest in leasing the Property, and purchasing the contents of the child care centre. Following negotiations, a transaction was agreed between the parties in the following terms. Chamberlain Group (the Landlord) granted a five year lease over the property to Kids for Life Academy (the Tenant) commencing on 1 January 2010, with four options to renew for further terms of five years each. Ms Doro became the owner of all of the shares in Chamberlain Early Learning Centre (the Operator), and Mr and Ms Doro became directors of that company on 11 January 2010. (Mr Mourched remained a director until October 2011, at which time he resigned.) The rationale behind Mr and Ms Doro’s purchase of the Operator from Mr Mourched seems to have been the fact that it already held the necessary government licences to run a child care centre, which would take time for the Tenant to acquire. On 1 February 2010, the child care centre was opened.

5. In around August 2010, the prospect of the Tenant assigning its leasehold interest to the Operator arose. Whether or not such an assignment ultimately occurred was the central issue in these proceedings. The relevant circumstances relied upon by the appellants and respondents in support of, and as telling against, such an assignment are set out later in these reasons. For present purposes, it suffices to note that no transfer of the lease was ever registered. Thus the assignment was, at best, an assignment in equity, as the combined effect of ss 41(1) and 53 of the Real Property Act1900 (NSW) is to require leases of land exceeding three years to be registered in order to create a legal lease.

6. On 2 May 2014, more than three years later, after events discussed further below, Mr Mourched emailed Mr and Ms Doro, letting them know that a Mr Joe Nasr had agreed to purchase the Property from the Landlord, with settlement to occur “in approximately 6 weeks”. Some five days later, the Operator lodged a caveat on the title of the Property, which described the particulars of the Operator’s interest as follows:

“An equitable interest as the new lessee under the unregistered transfer of lease from the former lessee to the caveator.”

7. Under cover of a letter dated 13 May 2014, Mr and Ms Doro sent a signed “Notice of Exercise of Option” to the Landlord, in which the Operator purported to give formal “notice of exercise of its option of renewal of the Lease”. On 23 May 2014, the Operator lodged a further caveat on the title of the Property, which described its claimed interest as:

“An equitable interest pursuant to the Exercise of Option to Renew/the first option term as the Transferee under the unregistered Transfer of Lease from the Lessee as the Transferor to the Caveator as Transferee.”

8. Mr Mourched, by his solicitor, requested the removal of the caveats, so that the sale of the Property could proceed. Following correspondence between the parties’ solicitors, on 17 September 2014, Mr Mourched’s solicitors served Proposed Lapsing Notices for both caveats on Mr and Ms Doro’s solicitors. In response, the Tenant and the Operator commenced the proceedings from which the present appeal has been brought.

History of proceedings

9. In order to answer grounds 1 - 3 of the notice of appeal, it is necessary to outline the procedural history of the litigation.

10. On 1 October 2014, the Tenant and the Operator commenced proceedings by summons filed in the Equity Division of this court against the Landlord and 4 Chamberlain Pty Limited (the proposed purchaser of the Property) seeking, relevantly for present purposes, (a) a declaration that the Tenant validly assigned its leasehold interest to the Operator with the consent of the Landlord, (b) alternatively, a declaration that the defendants or either of them were estopped from denying that the Operator was the assignee of the lease, (c) a declaration that the option to renew was validly exercised, (d) an order that the caveats be extended, and (e) an order that the defendants or either of them do all things and sign all documents to facilitate the registration of the transfer of the lease.

11. On Monday 13 October 2014, the Duty Judge made an order for separate hearing of the issues raised by prayers 1 and 4 of the summons. His Honour stood the proceedings over to come before Sackar J, the Expedition Judge, that afternoon, with a view to allocating a hearing date. His Honour also extended the caveats until further order.

12. Later that day, Sackar J granted expedition and stood the matter over for further directions in the Expedition List on Friday 17 October 2014. On that day, McDougall J reformulated the separate question, ordering that the following question be decided separately from and before the determination of all other questions arising in the proceedings:

“Whether the first plaintiff as lessee of 4 Chamberlain Road Guildford assigned, either at law or in equity, lease registered No. AF685631L to the second plaintiff with the consent of the first defendant as lessor, or alternatively that the first defendant is estopped from denying any assignment of the lease with its consent.”

13. McDougall J heard the matter over two days on 28 and 29 October 2014, and handed down judgment, promptly, on 7 November 2014: Kids for Life v Chamberlain Group [2014] NSWSC 1561. His Honour held that the Landlord did consent to the assignment of the lease from the Tenant to the Operator, which consent was recorded in an annotated letter at a meeting between Mr Mourched and Mr Doro at the Emporium Café in Merrylands (at [118]). Accordingly, his Honour answered the separate question as follows (at [165]):

“[T]he first plaintiff as lessee of those premises did assign that lease to the second plaintiff with the consent of the first defendant as lessor.”

Although not strictly necessary to decide, his Honour held that the plaintiffs’ estoppel argument was not made out (at [142]).

14. Final orders were made on 8 December 2014, including:

“3. Order that within 21 days of the date of these orders the defendants or either of them do all things and sign all documents to allow the registration of the transfer of lease on the Register kept by the Registrar-General under the Real Property Act 1900.

4. If the Defendants or either of them fails to do all things and sign all documents to allow the registration of the transfer of lease in the Register within the time in order 3 the Registrar of the Court is directed to do those acts and to sign those documents, pursuant to Rule 40.8 of the UCPR.

5. Order that the defendants or either of them give the second plaintiff a further lease options [sic] to renew the lease for the Further Term as defined commencing on in accordance with the terms of 2.2.1 of the lease.”

These orders finally disposed of the proceedings.

15. On 16 March 2015, following the grant of an extension of time, the defendants filed a notice of appeal. Given that the orders from which the appeal was brought, being the orders of 8 December 2014, finally disposed of the proceedings, leave to appeal was not required under s 101 of the Supreme Court Act 1970 (NSW).

Preliminary matter

16. When the matter was heard by this Court, none of the primary judge’s orders had been complied with by the appellants. The appellants’ failure to comply with the orders dated 8 December 2014 is entirely unsatisfactory. The appellants explained in oral submissions that “in circumstances where it appeared that the respondents were not going to bring contempt proceedings and the appeal was on foot a decision was made simply to allow things to remain until such time as the appeal was heard”. One party’s acquiescence in another party’s failure to comply with court orders, for example by not bringing contempt proceedings, does not excuse the breach. Such a failure is particularly unsatisfactory in circumstances, as here, where an application for a stay had been sought and refused.

17. Failure to comply with orders of the court amounts to contempt of court. There is a general principle that, until any contempt is purged, a party guilty of contempt should not be heard on any application for relief beyond an application to set aside or vary an order (or undertaking to the court) in respect of which he, she or it is in contempt or an appeal designed to set aside or vary that order or undertaking: Young v Jackman (1986) 7 NSWLR 97 at 101; for a helpful discussion of the history of this principle, and relevant authorities, see Stokes (by a tutor) v McCourt [2013] NSWSC 1014 at [18]-[52]. Such a course would have been inappropriate here, given that the matter was relatively urgent and ready to proceed. It would not have served the purposes of the “just, quick and cheap” resolution of the real issues in dispute, as required by s 56 of the Civil Procedure Act 2005 (NSW), to delay the appeal until the orders had been complied with. However, it should not be thought that this Court has tacitly condoned the appellants’ conduct.

Grounds of appeal

18. The five grounds of appeal relate to two broad issues. The first three grounds relate to the Operator’s purported exercise of the option to renew the lease, and the final two grounds relate to the purported assignment of the Tenant’s leasehold interest to the Operator. Given that the question of assignment is anterior to that of the exercise of the option (as without an assignment to the Operator, there would be no basis for the Operator exercising the option), grounds four and five relating to assignment will be dealt with first.

Assignment

(a) The real issue in dispute

19. The fourth ground of appeal contends that the primary judge erred in finding that the Landlord and the Tenant entered into a binding agreement for the assignment of the lease to the Operator at the Emporium Café. The fifth ground is that the primary judge “ought to have found that no agreement to assign the lease arose at the meeting (or at any time thereafter) because no binding agreement was concluded”. So framed, both grounds misstate the pre-condition to assignment under the lease. The terms of the lease do not require a binding agreement between the Landlord and the Tenant to be in place in order for the Tenant to assign their leasehold interest. The only pre-condition to such an assignment is the consent of the Landlord. This appears from the relevant terms of the lease:

“11. DEALINGS WITH LEASE AND PREMISES

11.1 Assignment and subletting

11.1.1 The Tenant must not assign this lease or sublet the Premises without the consent of the Landlord.

11.1.2 The Tenant must make a written request for the Landlord’s consent to an assignment or sublease and must provide the Landlord with whatever information the Landlord may reasonably require concerning the financial standing and business experience of the proposed tenant.

11.1.3 The Landlord may withhold consent in its discretion if:

(a) the proposed tenant proposes to change the use of the Premises;

(b) the proposed tenant has financial resources inferior to those of the Tenant; or

(c) the Tenant proposes to sublet only part of the Premises.

11.1.4 As a condition of giving its consent, the Landlord may require:

(a) if the proposed tenant has financial resources inferior to those of the Tenant, that he or she provide security for the performance of obligations under this lease;

(b) that the proposed tenant execute a deed of consent in a form reasonably required by the Landlord; and

(c) that the Tenant or the proposed tenant pay the Landlord’s reasonable costs and expenses in relation to giving its consent.”

20. Applying ordinary principles of construction to cl 11 of the lease, it is immediately clear that the only pre-condition to assignment of the Tenant’s leasehold interest is that the Landlord “consent” to the assignment, as set out in cl 11.1.1, which consent may be conditional in accordance with cl 11.1.4. Indeed, the prohibition on assignment under the lease is less stringent than is often found in commercial leases; there is no requirement, for example, that consent be given in writing.

21. The tendency to overstate the threshold requirement to assignment in terms of agreement as opposed to consent appeared throughout the appellants’ submissions, and coloured the appellants’ analysis of the primary judge’s reasoning. Perhaps the clearest example of this characterisation of the issue in dispute appeared in [30]-[31] of the appellants’ written submissions on appeal:

“The central question concerning the assignment of the lease was whether the Appellant had agreed to consent to the assignment. The high point of the Respondents’ case was the written notation by Mr Mourched of the Appellant on the ‘annotated letter’ … to the effect that Mourched would see to the assignment of the lease ‘as soon as possible’.

Of and by itself, these words do not disclose that any concluded agreement had been reached between the [Appellant] and the Respondents on the issue of consent” (emphasis in original).

22. The lease does not require the Landlord and the Tenant to agree to an assignment, or even for the Landlord to agree to consent to the assignment. It merely requires the Landlord to consent to the assignment. The difference is real. The “central question” as characterised by the appellants would require an investigation into the existence of a concluded and immediately enforceable agreement between the parties, in at least one of the senses described in Masters v Cameron (1954) 91 CLR 353. This is borne out in the appellants’ description of the primary judge’s findings at [27] of their written submissions in the following terms: “The approach taken by the Trial Judge at [99] appears to apply the first or second class in Masters v Cameron.”

23. To the contrary, the real issue between the parties on the assignment question is whether the Landlord consented to the assignment, which may occur in circumstances falling short of agreement. Consent is a unilateral act, unlike an agreement, which involves two or more parties. Thus while an agreement between the parties as to assignment would necessarily encompass consent to the assignment on the part of both of the parties to the agreement, a party may of its own accord consent to an assignment, without reaching any agreement. Enquiry into whether a concluded agreement was reached between the parties may therefore be a distraction from the real issue in dispute, which is the question of consent.

24. In clarifying the real issue in dispute, it should also be noted that two separate processes must take place for a legal assignment of the Tenant’s leasehold interest to take place. There is a need for the Tenant to obtain the Landlord’s consent to the assignment, as a pre-condition to assignment under the terms of the lease, and, separately, there is a practical need for the Landlord to procure (necessarily, with the consent of its registered mortgagee) the registration of the dealing reflecting the assignment, in order for the assignment to be valid in law under the Real Property Act. The two matters are interrelated, as after the Landlord consents to the assignment (and the Tenant agrees to assign the lease to the assignee), an obligation upon the Landlord arises to do all that is necessary in order to give both assignor and assignee the benefit of a legal assignment, in accordance with Mackay v Dick (1881) 6 App Cas 251. Until registration, the assignment is merely equitable. While there was (understandably) a tendency to conflate these two processes in submissions, it should be borne in mind that in the circumstances of this case, it is not in dispute that the second process – the practical process of registration of the transfer – never took place. It is therefore only the first process, being the satisfaction of the pre-condition to assignment, that is in question.

(b) Consent to assignment

25. The relevant question then is not whether the primary judge erred in finding that the parties reached a concluded agreement as to the assignment at the Emporium Café. Rather, the question is whether appellable error is shown in the primary judge’s finding (for example at [75] and [82]), that Mr Mourched, on behalf of the Landlord, had consented to the assignment of the lease. The answer to that question is no, for the following reasons.

26. It should be observed at the outset that that finding was based in part upon his Honour’s observation of both Mr Mourched and Mr Doro in the witness box (see, for example, at [80] and, at least arguably, at [91] with respect to Mr Mourched). This Court would be slow to interfere with the findings of a trial judge where demeanour may have played a part in making the findings: Fox v Percy [2003] HCA 22; 214 CLR 118 at [23]. No real attempt was made by the appellants to point to reasons why the primary judge’s findings were “glaringly improbable” or “contrary to compelling inferences” such that his Honour’s findings should be rejected: Fox v Percy at [29].

25. Mr Mourched’s conduct throughout 2011, as revealed by the documentary evidence, overwhelmingly supports the primary judge’s finding in respect of the Landlord’s consent. More specifically, Mr Mourched’s conduct is inconsistent with the Landlord not consenting to the assignment of the lease, as he plainly acquiesced in the Operator exercising the Tenant’s rights, and performing the Tenant’s obligations, under the lease throughout 2011. First, the Landlord accepted rent from the Operator – as much is revealed from the Operator’s bank statements in evidence. Secondly, Mr Mourched must have known that the Operator, not the Tenant, was conducting the child care business from the Property, as he knew that the Operator was the entity authorised to conduct the child care business. Indeed, this was the very reason he had sold the Operator to Mr and Ms Doro. As the primary judge found at [78]:

“[F]rom the time that transfer of control happened … the operator was in effect occupying the leased premises for the purpose of conducting its business thereon. There was no other business conducted on or from the lease[d] premises. Kids for Life had nothing to do with the operation of the business. Mr Mourched must have known all this.”

28. The conclusion that the Operator was occupying the Property, with Mr Mourched’s and thus the Landlord’s knowledge, is reflected in the documentary evidence. For example, on 9 November 2011, the Operator’s solicitors wrote to Mr Mourched’s solicitors stating “[o]ur client agrees to grant access to the Premises to your client on Saturday 12 November 2011”. Mr Mourched raised no concerns with the Tenant as to the Operator’s possession of the Property, or its conducting business from the Property, despite these being rights granted to the Tenant, not the Operator, under the terms of the lease.

29. Further, throughout 2011 the Operator exercised the Tenant’s rights to make certain claims under the lease. For example, Herro Solicitors repeatedly wrote to Mr Mourched on behalf of the Operator and Mr and Ms Doro, rather than the Tenant, seeking to enforce to the Landlord’s obligations to provide an operating lift and a hydraulic ramp, and to repair certain hazards under the lease. The Landlord took action to respond to those claims, despite their being raised by the Operator rather than the Tenant.

30. Further, and perhaps most importantly, Mr Mourched knew, no later than 31 October 2011, that the Tenant had ceased to exist. On 14 March 2010, the Tenant was deregistered, apparently (according to Mr and Ms Doro’s solicitors) because as at that date, Mr and Ms Doro considered that the lease had been assigned. Upon discovering that the Tenant had been deregistered, Mr Mourched’s solicitors wrote to Mr and Ms Doro’s solicitors in the following terms:

“According to the Lease and the enclosed title search a Transfer of Lease has not been registered transferring the Lease from the current tenant being Kids for Life Academy Pty Limited (A.C.N. 140 913 113) which has been voluntarily deregistered by your client, enclosed herewith is a recent ASIC current and historical company extract confirming this position, can you please clarify your client[’]s instructions in this regard?”

31. No issue arises as to the competency of any assignment of the lease from the Tenant to the Operator as a result of this deregistration – the Tenant was ultimately re-registered (the record does not disclose when), and the effect of s 601AH of the Corporations Act 2001 (Cth) is that the Tenant is taken never to have ceased to exist. However, importantly for present purposes, even after Mr Mourched was told by his solicitors that the Tenant had been deregistered, Mr Mourched, and thus the Landlord, continued to acquiesce in the Operator exercising the Tenant’s rights under the lease. For example, as late as 8 November 2011, Mr Mourched’s solicitors wrote to the Operator’s solicitors, as follows:

“[W]e are instructed to advise that our client will conduct the following works:

1. Upgrade the pebble drainage system with a custom made metal grate tray that has already been manufactured;

2. Re-level the perimeter around the sand pit.”

32. The Landlord’s agreement to conduct these works was in response to claims made by the Operator on 19 October 2011, exercising the Tenant’s rights under the lease, at a time when the Landlord was aware that the Tenant had been deregistered. Indeed, the subject of the letter of 8 November 2011 refers to the Tenant as “voluntarily deregistered”. As such, in continuing to accept rent from the Operator, with knowledge that the Operator was in possession of, and conducting a business from, the Property, and in responding to claims made by the Operator in exercise of the Tenant’s rights under the lease, in circumstances where the Landlord knew the Tenant was deregistered, Mr Mourched should be taken to have, by his conduct, consented to an assignment of the lease from the Tenant to the Operator.

33. Further, prior to the Emporium Café meeting, Mr and Ms Doro’s solicitors repeatedly noted that the assignment of lease was initially requested by Mr Mourched. For example, on 31 October 2011, Herro Solicitors wrote to Mr Mourched’s solicitors:

“We are instructed that the Lease (Registered No AF685631) between Chamberlain Group Pty Limited (ACN 131 405 822) and Kids for Life Academy Pty Limited (ACN 140 913 113) … was assigned to the Tenant at the request of your client” (emphasis in original).

34. This was reiterated in a further letter from Herro Solicitors on 9 November 2011 to Mr Mourched’s solicitors, which stated:

“[W]e have prepared and our client will execute and stamp Transfer of Lease and provide you with the same and a cheque in favour of Land and [P]roperty Information for $99.50 so that your client can attend to lodge the Transfer of Lease with Land and Property Information so that the Certificate of Title will correctly reflect the Assignment of Lease from Kids for Life Academy Pty Ltd to Chamberlain Early Learning Centre Pty Ltd which was at the request of your client and the intention of the parties.”

35. The same was noted in a further letter dated 18 November 2011, which stated at [45]: “Please confirm that your client agrees to attend to the registration of the Transfer of Lease so that the Certificate of Title will correctly reflect the Assignment of Lease, which we reiterate was at the request of your client”. At no stage in the correspondence did Mr Mourched or his solicitor cavil with any of those statements. Indeed, they made evident sense in circumstances where, as noted above, the Operator was in possession of the Property, was paying rent, and the Tenant had ceased to exist such that, to use the language of Mr Mourched’s own solicitors in mid-2011 “there [was] no more enforceable registered lease over the premises”. In this context, it was undoubtedly in Mr Mourched’s interests to ensure that the Operator became the lessee of the Property, so that an enforceable lease remained in place. If Mr Mourched himself requested that the lease be assigned by the Tenant to the Operator, it necessarily follows that he (on behalf of the Landlord) consented to such an assignment.

36. The Landlord’s consent to the assignment is further evidenced in a letter from Mr Mourched’s solicitors to Mr and Ms Doro’s solicitors on 7 November 2011, which states:

“As you are aware in order to transfer a registered Lease your client is required to execute a Transfer of Lease document to be lodged with the LPMA as the Lease is already registered. Please provide a copy of the purported Transfer of Lease documents that your client says has been executed”.

A landlord’s request for an executed transfer of lease is inconsistent with an absence of consent by the landlord to that assignment.

37. In any event, even if the documentary evidence described above were not to prove that the Landlord consented to the assignment of the lease, a concluded agreement between the Landlord and Tenant as to the assignment can be found in the signed letter between the parties, as the primary judge identified at [95]-[98]. Though no agreement was required between the parties as a pre-condition to the assignment under the terms of the lease, the existence of such agreement necessarily encompasses consent on behalf of the Landlord.

(c) The letter signed at the Emporium Café

38. The background to the signed letter is as follows. In early December 2011, Mr Doro and Mr Mourched agreed to meet, with a view to resolving the issues between them (which extended beyond the question of the assignment of the lease). They met at the Emporium Café in Merrylands on 6 December 2011, and discussed issues set out in a letter dated 18 November 2011 from Mr and Ms Doro’s solicitors to Mr Mourched’s solicitors, which formed a de facto agenda for the meeting. Mr Mourched made handwritten notes on the letter of various actions to be taken by either Mr Mourched or Mr Doro in respect of each issue described. Paragraphs 44 - 46 of that document, as annotated, are as follows:

…

39. The final page of the letter contained the following:

40. To borrow the language of the primary judge at [95], the agreement reached as to items 44 and 45 of the letter form “[t]he clearest evidence of consent in fact” by the Landlord to the assignment of the lease. The letter was self-evidently a formal statement of matters to which the parties agreed. It was signed by the parties’ principals. Mr Mourched’s notation next to [44] and [45] of the letter “Kheiry to attend to ASAP” is powerful evidence that Mr Mourched consented to the assignment as it confirms Mr Mourched’s willingness (and indeed agreement) to take the practical step of registering the transfer. As the primary judge states at [96], the notation is “consistent only with consent in fact”. This is supported by Mr Mourched’s initialling next to the phrase “Attend to the registration of the Transfer of Lease” in [46](j) of the letter. (There was some debate in oral submissions as to whether Mr Mourched should be taken to have committed to register the transfer within the week following the meeting, as a result of the chapeau to the phrase “[a]ttend to the registration of the Transfer of Lease”, which reads “[w]ithin seven (7) days of the date of this letter your client must attend to the following”. Given that the issue in dispute is Mr Mourched’s consent to the assignment on behalf of the Landlord, the possible time restriction upon Mr Mourched’s obligation to register the transfer is immaterial for present purposes. There is no dispute that Mr Mourched never registered the transfer.) It necessarily follows from Mr Mourched’s commitment to attend to the practical steps of registration of the transfer of lease that he at the very least consented to the assignment.

41. Indeed, the letter goes further than mere consent. It amounts to a binding agreement between the parties to bring about the transfer of the lease in law, that is, through registering the transfer, as soon as possible. As much is clear from Mr Mourched’s handwritten commitments to attend to the registration of the transfer, combined with both Mr Mourched and Mr Doro’s signatures, appearing below the text: “both parties agree to this document in terms of agreed outcomes”.

42. While the appellants correctly identify that it was within the Landlord’s rights to merely give conditional consent in accordance with cl 11.1.4 of the lease, the Landlord’s conduct, by its principal Mr Mourched, both prior to the meeting at the Emporium Café, and in signing the letter at the meeting, is inconsistent with its consent to the assignment being conditional only.

43. The appellants submitted that the letter:

“did not disclose that any concluded agreement had been reached between the Plaintiff and the Respondents on the issue of consent. It did not establish that there was any discussions or agreement reached at the Emporium Café meeting concerning the question of consent to the assignment. Indeed, there was no evidence that the terms of any such consent was discussed at all during that meeting. Those words signified nothing more than an intention to address the assignment issue with expedition.”

Those submissions must be rejected. Three points should be made. First, the lack of explicit reference to consent on the face of the letter (and thus the absence of evidence that there were discussions as to consent at the Emporium Café meeting) is consistent with the prior documentary evidence, which revealed that the Landlord had already consented (at the very least through Mr Mourched’s conduct) to the assignment of the lease, such that the preliminary issue of consent had already been satisfied by the time of the Emporium Café meeting. No discussion of consent would have been required.

44. Secondly, on a natural reading of the letter, the “intention to address the assignment issue with expedition” as revealed in Mr Mourched’s notations should be construed as an undertaking to ensure that the practical steps required to create a valid assignment in law, namely registration of the transfer, would be taken as soon as possible. This confirms the fact that as at the time of the meeting, the parties had moved beyond the preliminary issue of consent, and were moving to discuss the separate, and necessarily subsequent, process of registration. Agreement to take the practical step of registering the transfer confirms that the logically prior issue of the Landlord’s consent to the assignment had already been resolved.

45. Thirdly, and in any event, the appellants’ submission again overstates the pre-condition to assignment in referring to a “concluded agreement”. Even if a concluded agreement were not reached in the sense that additional issues relating to the assignment were still to be negotiated, the letter nonetheless establishes that, by the time of the meeting the Landlord had consented to the assignment.

46. Criticism was made of the failure by the primary judge to have regard to events following the meeting of 6 December 2011. Nothing turns on this. Once it is appreciated that the question of consent being given is quite different from the question of whether there was a binding agreement recorded in the letter annotated and executed at the café, the need for a Masters v Cameron style analysis of the nature of the agreement between the parties (including by reference to later conduct) falls away.

47. Nevertheless, for what it is worth, the letter appears to have been regarded as a binding agreement immediately afterwards by the parties to it: for example, on the same day as the meeting, Mr Mourched emailed Mr Doro stating “please find documents attached outlining all that was agreed to”, to which Mr Doro responded stating that he was “very pleased with the meeting” and referred to “misunderstandings that can be resolved sensibly”. In that email, Mr Doro requested that Mr Mourched “finalise the pending issues … [including] Assignment of Lease”. That request is consistent with Mr Mourched’s commitment in the letter to undertake the practical steps associated with the registration of the transfer of lease; this commitment evidences that consent to the assignment had already been granted. In later correspondence, Mr Doro’s continued requests for Mr Mourched to attend to the assignment of the lease only go to support the conclusion that Mr Mourched had consented to the assignment prior to the meeting at the Emporium Café, and was moving to undertake the practical steps associated with registration of the transfer.

48. The fact that the parties agreed to sign a further deed of release “releasing us from all the claims” is beside the point. This commitment did not change the nature of the obligations agreed to at the time the letter was executed on 6 December 2011. The fact that the parties may have intended to record their rights and obligations more precisely in a later agreement did not affect the Landlord’s consent to assignment as at the time the letter was signed, and therefore did not detract from the Landlord’s satisfaction of the pre-condition to assignment under the lease.

49. The appellants further submitted that:

“[the] creation of the draft Deed of Assignment and its negotiation between the parties in the months thereafter was conduct inconsistent with a pre-existing agreement. The conduct of the parties, by continuing to negotiate terms, catches the third category of Masters v Cameron … namely, an intention to postpone the creation of contractual relations until a formal contract was drawn up and executed.”

Once it is appreciated that a concluded agreement as to assignment was not required under the terms of the lease, this concern falls away. It was entirely open to the parties to modify their rights and obligations through later entry into a separate deed. However, until such time as a later deed was entered into, the rights and obligations of the parties with respect to assignment of the lease was governed entirely by the terms of the lease. The only pre-condition to assignment was consent on the part of the Landlord, which the documentary evidence reveals had already been given. It was a matter for the Tenant as to whether it was prepared to enter into a further deed which placed additional conditions upon its right to assign the lease. As it happened, such a deed was never entered into. The mere negotiation of such an instrument does not of itself prove that, contrary to all other prior evidence, consent was never given. It simply reveals that the Landlord was not successful in its attempt to require the Tenant to submit to greater restrictions than could be found within the four corners of the lease.

50. For those reasons, there was no error in the primary judge’s finding that the Landlord consented to the assignment of the lease from the Tenant to the Operator. To the extent that the Landlord consented to the assignment of the lease, all that was required for an equitable lease to arise was an agreement to assign the lease between the assignor and the assignee, being the Tenant and the Operator. The primary judge found at [59] that such an agreement was reached, and noted that “Mr Mourched, who I think was prepared to dispute anything that was remotely disputable in the plaintiffs’ evidence, did not do so. Nor did the landlord’s solicitors at the time dispute it”. This finding, which understandably was not contested on appeal, reflects the documentary evidence (which included a letter from Mr and Ms Doro’s solicitors which was said to enclose a “duly executed and stamped Transfer of Lease”).

51. As such, the primary judge was, with respect, correct in finding that Mr Mourched, on behalf of the Landlord, consented to the assignment. Indeed, the Landlord, through Mr Mourched, went further, in entering into a binding agreement to carry out the practical steps required to register the transfer of lease. Accordingly, the primary judge was correct to find that the Operator had the benefit of an equitable lease.

Exercise of the option

52. The primary judge dealt with “the efficacy of the operator’s (purported) exercise of the option for renewal” at [146]-[163]. The appellants contend that there was error in his Honour’s reasoning in grounds 1 - 3 of the notice of appeal. Further, they say that the point is unarguable, such that it is in the interests of justice for it to be determined by this Court on appeal.

53. The primary judge noted that the question for separate determination did not include a reference to the validity of the exercise of the option. This was the result of a conscious decision by the appellants not to put the matter in issue, when the issues were clarified by Sackar J on 13 October 2014. The relevant passages of the transcript, reproduced in the judgment below at [148], are as follows:

“WILSON: The term of the lease is five years and expired in December. There was an option to renew the lease in cl 2.2. That required a notice of six months. That ability to assign has now expired. Prior to the ability to assign expired, the lease was assigned to P2, not the registered lessee and it was P2 who purported to and in fact we say did, exercise the option to renew.

HIS HONOUR: Is that another issue though as to whether the option has been validly exercised?

WILSON: I understood that was not in issue.

HIS HONOUR: It won't arise will it Mr Rose if there has been a valid assignment does it follow that you would accept that the second plaintiff has validly exercised the option to renew or do you take another point as to whether or not even assuming there has been a valid assignment the second plaintiff validly exercised the option to renew.

[ROSE]: Yes your Honour. The key issue is whether or not there was an assignment. I must confess I only came into this matter very, very recently. Mr O'Connor appeared this morning. He has had to go before Brereton J, I do however understand there is an issue as to whether or not the exercise of the option were valid.

HIS HONOUR: That does raise another issue. You are unable to tell me whether it is going to be Mr Wilson is not aware that is an issue on the table. I suppose he can't, nor can I, stop you from doing it but I really need to know precisely how many issues there are going to be that need determination now.

ROSE: Would you allow me to take very quick instructions?

HIS HONOUR: If you are able to get instructions I would be obliged as no doubt Mr Wilson would be.

WILSON: I can only indicate what was said over the Bar table this morning.

ROSE: It follows if the assignment were good, the exercise of the option would be also good.

HIS HONOUR: There is no issue about the exercise of the option. It turns on whether the assignment validly occurred or not. And if the assignment has been validly exercised that would follow would it Mr Wilson your caveat would be academic?

WILSON: Yes.”

54. After considering this exchange, the primary judge stated at [151]: “I see no reason to permit the defendants to resile from the position they took plainly deliberately, before the matter was fixed for hearing.” The appellants say that this finding discloses error.

55. This is not a case where an admission was mistakenly given, or a concession mistakenly made. The only question, when the matter came before the Court on 13 October 2014, a fortnight before it was heard on a final basis, was the extent to which the parties were in issue. In a way that plainly reflected the instructions obtained, after a brief adjournment, the appellants confirmed formally that “if the assignment were good, the exercise of the option would be also good”.

56. In a further directions hearing before the primary judge on 17 October 2014, the parties made further submissions as to the issues to be determined by the primary judge. No mention was made of the question of the validity of the option. The issues were said to be restricted to whether there amounted to an agreement for assignment enforceable in equity, or whether the Landlord was estopped from denying that there was an agreement to assign enforceable in equity. The transcript of 17 October 2014 includes the following exchange:

“HIS HONOUR: I am seriously loath to let the date go now that there is a chance to do something useful in what is undoubtedly an urgent matter. I am also deeply conscious of numerous warnings against separate questions where particularly unresolved questions of fact. I will stand the matter down. When you are ready, just let me know, and we will see if we can do something to help.

MATTER STOOD IN LIST

[The Associate’s Record of Proceedings discloses that the matter was stood in the list between 10.18am and 10.38am.]

HIS HONOUR: Mr Wilson, Mr O’Connor, have you made any progress.

O’CONNOR: Yes your Honour. If I could hand up some handwritten.

HIS HONOUR: Yes, thank you. So does it follow that you are now agreed that the question for separate determination is that posed by the declaration which Mr Wilson will seek leave to amend to include.

WILSON: Yes.

O’CONNOR: Yes, your Honour.”

57. This agreement is reflected in the primary judge’s orders dated 17 October 2014, which relevantly were as follows:

“1. I grant the plaintiffs leave to amend their summons to claim a declaration in the form of the handwritten document initialled by me and dated today’s date:

‘A declaration that the first plaintiff as lessee of 4 Chamberlain Road Guilford assigned, either at law or in equity, lease registered No. AF685631L to the second plaintiff with the consent of the first defendant as lessor, or alternatively that the first defendant is estopped from denying any assignment of the lease with its consent.’

…

3. I order that the question raised by that declaration be determined separately from and before the determination of all other questions in the proceedings” (emphasis added).

The transcript and the orders reveal that the parties had time to consider and agree to the formulation of the separate question, which did not extend to the exercise of the option.

58. There are good reasons why that course may have been taken. One was that, arguably, it was at least as much in the interests of the Landlord to determine the position before the end of 2014 as it was in the interests of the Tenant. The parties had proceeded on the basis that the short question identified by Pembroke J earlier that day could be heard and determined in half a day, and readied for hearing within the next two or three weeks.

59. In those circumstances, the appellants are bound by the way they conducted their case. They sought and obtained a highly expedited final hearing in the month litigation was commenced. That is sufficient. The contention that the exercise of an option was a live issue in the proceedings, despite the appellants’ submissions before Sackar J and McDougall J and the resulting formulation of the separate question, on the basis that the issue was raised in the appellants’ written submissions provided to the primary judge before the commencement of the hearing, and because the primary judge gave leave for further authorities to be sent to him in chambers, takes the matter no further. The issue of the exercise of the option remained outside the scope of the separate question to be decided by the primary judge.

60. In any event, we would not accept the submission by the appellants that their point is unarguable. It is plain from Chan v Cresdon (1989) 168 CLR 242 that, at least arguably, this was a case where back-dated specific performance might be ordered, and where evidence could have been adduced as to (a) why no step was taken on behalf of the Tenant to exercise the option, (b) as to the re-registration of the Tenant, and (c) as to whether an estoppel would lie preventing the Landlord from contesting that the Operator was entitled to the benefit of the option. It is not necessary to analyse the issue in any greater detail.

61. For those reasons, we would dismiss the appeal, with costs.

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Decision last updated: 20 August 2015