Chiquita Foods Pty Ltd v Adelaide Produce Markets Limited No. DCCIV-01-974

CHIQUITA FOODS PTY LTD - v - ADELAIDE PRODUCE MARKETS LIMITED
[2002] SADC 174
Judge Bright
Civil

The defendant (APML) is the proprietor of the Adelaide Produce Market at Pooraka. At the market, it leases buildings, or parts of buildings to various tenants, for use as wholesale selling areas and for warehousing. Various facilities are provided for the convenience of buyers of produce. Buildings are of various depths. The rate per square metre to lease selling space is higher than that for warehouse space. Prior to the events the subject of this action, some tenants leased an area for selling and a separate area for warehousing. Others conducted both operations from one building – but paid the higher rate for the whole building.
In 1998, leases in the market came up for renewal. Different parts of a building known as Building C were leased to five separate entities. Unsurprisingly, each wished to negotiate the best deal it could for future tenancy. The plaintiff (CBA) was one of them. CBA was one of the largest tenants at the market. It operated both from its space at the market and from other space at Cavan.
It appears that, although some were shallower, a common depth for wholesale tenancies was 35 metres. Building C was 60 metres deep. CBA and the others in that building decided to argue for a new rent rate to reflect a wholesale rate for the first 35 metres and a warehouse rate for the rear 25 metres. The warehouse rate was, at that time, $55 per square metre. However, at least for some years, it had been the practice of APML to pay a rebate at the end of the financial year of $15 per square metre in respect of warehouse space. The occupants of Building C wanted to negotiate the benefits of both the lower warehouse rate and of the rebate.
CBA was a tenant by assignment from prior tenants of three of the seven leased areas, known as stores, in Building C. As a term of the assignments, it had had to provide to APML a bank guarantee in respect of payment of rent and also to lodge with APML the scrip for shares it held in APML. Many of the tenants were also shareholders in APML – indeed some were on the board of APML. CBA wished to obtain new leases in its own name, rather than renewals of the old leases. It hoped that this would lead to the release of the rental guarantee and the return of its share certificates in APML.
In these circumstances, it is easy to see that APML must have felt the need to deal with tenants on a basis of equality, without any preference of one over another. That was its expressed policy.
To cut a long story short, there were protracted negotiations. At one stage CBA considered leaving the market and consolidating its activities at Cavan. In the end, it signed leases for space in the market and consolidated all its activities there. The cost of moving its Cavan activities to the market and of altering its premises there was of the order of $500,000. The bank guarantee was released and the share certificates returned. The rental rate agreed allowed for the rear 25 metres of its space to be at warehouse rate. One rate for all space was fixed, but that rate was the result of applying wholesale rate to the front 35 metres and warehouse rate to the rear 25 metres.
The dispute between the parties is as to CBA’s entitlement to be paid a rebate in respect of the warehouse space. For some unexplained reason, the board of APML requested recipients of the rebate to keep its existence confidential. Inevitably, its existence was widely known. I heard no evidence about how the rebate had been decided on or calculated in earlier years. Perhaps for this reason, APML was not prepared to include in any lease a reference to, or the terms on which it would pay the rebate.
In particular, it refused to do so for CBA. After negotiating, it provided to CBA the following letter (the letter of comfort) dated 26.5.99 (P1.281) purporting to set out terms.
“Dear Mr Haselgrove,
Re: Adelaide Produce Markets – Proposed Leases of Stores 26 & 27
APML hereby confirms to you that, in relation to Stores 26 and 27, Chiquita Brands Adelaide Pty Ltd is entitled to a rent rebate (which rent rebate is currently $15 per annum per square metre of lettable area) from APML in the same manner as APML grants rent rebates to other tenants of warehouse areas where the warehouse tenant is also a merchant tenant of Adelaide Produce Markets. Therefore, if the rent rebate granted by APML for Stores 26 and 27 is withdrawn by APML, that will only be because the rent rebate is withdrawn by APML for all of the other warehouse tenants who are also a merchant tenant, ie it is withdrawn in relation to the relevant other warehouse leases also.
APML further confirms that if the rent rebate is withdrawn by APML for Stores 26 and 27, then APML will negotiate with Chiquita Brands Adelaide Pty Ltd in a genuine and bona fide manner with a view to providing to Chiquita Brands Adelaide Pty Ltd alternative warehouse space at a location mutually satisfactory to both parties, such that Chiquita Brands Adelaide Pty Ltd then surrenders the Leases for Stores 26 and 27 when it moves to the new warehouse space.
APML further confirms to you that it is the current intention of APML that the rent rebate for Stores 26 and 27 will not be withdrawn solely as a consequence of the land comprising Adelaide Produce Markets being the subject of “community titles” under the Community Titles Act 1996.
Yours faithfully,
Heng Chan
Managing Director”
I have underlined some parts which are important.
CBA signed leases for the three stores on 10.1.2000 for 10 years from 1.10.98 (with one right of renewal for 10 years).
On 24.2.2000 (only a few weeks after the leases were signed) APML wrote to CBA (P1.447) purporting to “withdraw and discontinue” the rebate and maintaining that it had no liability for rebate “accrued” before that date or for periods after it. I set it out:-
“Dear John,
Re: Warehouse rebate at Adelaide Produce Markets
As you are aware, in the past the Board of Adelaide Produce Markets Limited (“APML”), has determined, when it deemed appropriate, to provide a rent rebate to tenants of warehouse premises which are also merchant tenants of APML.
The board wishes to advise that it has resolved that the rebate will not be paid in respect of the 1998/1999 and 1999/2000 years. The decision applies equally to all warehouse tenants.
In light of the non-payment of the rebate, please do not hesitate to contact Adelaide Produce Markets Limited if you wish to discuss the terms on which alternative warehouse premises at a mutually satisfactory location, could be made available to you and the existing leases of Stores 26 and 27 surrendered.
Yours sincerely,
Des Lilley
Chairman”
In briefest terms, APML says that the rebate was entirely at its discretion, both prospectively and retrospectively, provided it treated APML in the same way as it treated its other tenants, with the proviso that, in the case of APML, it also offered to build the alternative accommodation about which it offered to negotiate.
CBA contends that, as a result of representations made by representatives of APML in the course of negotiations, it was led to believe, and acted to its detriment in the belief that, in addition to being treated equally, and getting new accommodation, if the rebate was to be withdrawn and discontinued, that could only occur after APML had given reasonable notice of its intention to do so and then only in respect of periods after the expiry of that notice – not in respect of periods before either the giving or the expiring of notice. CBA recognises that the letter of comfort did not create any contractual obligation on the part of APML, but says that it and other documents corroborate its allegations that representations were made. CBA asserts that APML is estopped from relying on the strict terms of the leases insofar as they conflict with those representations.
It is agreed that the headnote to Waltons Stores (Interstate) Ltd v Maher (1987-1988) 164 CLR, 387 correctly and succinctly sets out the matters which a plaintiff must prove to establish a promissory estoppel. I set out the relevant parts:
“Per Mason C.J. and Wilson J. The doctrine of promissory estoppel extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable. Because a failure to fulfil a promise does not itself amount to unconscionable conduct, mere reliance on an executory promise to do something, resulting in the promisee’s changing his position or suffering detriment, does not bring promissory estoppel into play. Something more is required. This may be found in the creation or encouragement by the party estopped in the other party of an assumption that a contract will come into existence or a promise will be performed when the other party has relied on that assumption to his detriment to the knowledge of the first party.
Per Brennan J. To establish an equitable estoppel it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between him and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, he fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
Per Deane J. Estoppel is a doctrine of substantive law and equity. There is accordingly no reason why it cannot be applied as effectively in relation to a representation or assumption of a future state of affairs as to one of an existing state of affairs.
Per Gaudron J. Common law or evidentiary estoppel compels adherence to an assumption of fact by denying the person estopped the right to assert a contrary matter of fact. By so doing, it may operate to fashion a set of facts by reference to which is imposed a liability which otherwise does not exist. Equitable estoppel operates to compel adherence to an assumption as to rights. Sometimes that adherence can only be compelled by the recognition of an equitable entitlement to a positive right in the person claiming the benefit of the estoppel and the enforcement of correlative duties on the part of the person against whom the estoppel is successfully raised. Where equity compels adherence to an assumption in this manner, the resulting estoppel is generally referred to as ‘proprietary estoppel’. On other occasions, adherence to an assumption as to rights may be compelled by precluding the person estopped from asserting existing rights. It is in this manner that ‘promissory estoppel’ has generally operated.”
I set out the terms of the rebate alleged by CBA to have been represented to it, as particularised in the Particulars of Claim:
“6.In order to induce the plaintiff to remain a tenant of the defendant at the Market Premises after 30 September 1998 and to enter into the Stall 25 Lease, the Stall 26 Lease and the Stall 27 Lease (hereinafter collectively referred to as (“the Leases”) the defendant represented to the plaintiff and in consideration of it so doing warranted that the plaintiff was entitled to a rental rebate (“rebate”) in respect of each of the Stall 25 Lease, the Stall 26 Lease and the Stall 27 Lease from the date of commencement thereof on the following terms:
6.1As to the Stall 25 Lease:
6.1.1.         the rebate was to be an amount equal to $15.00 per annum per square metre of that portion of Stall 25 defined as warehouse space;
6.1.2.         the rebate could be revoked upon appropriate notice being given to the plaintiff;
6.1.3.         the rebate would only be revoked or amended if it was revoked or amended in a like manner for other lessees receiving rebates from the defendant;
6.2    As to the Stall 26 and Stall 27 Leases:
6.2.1.         the rebate was to be an amount equal to $15.00 per annum per square metre of warehouse space;
6.2.2.         the rebate would only be revoked by the defendant if the rental rebates being paid by the defendant to other lessees were also revoked in a like manner;
6.2.3.         in the event that the defendant determined to revoke the rebate, then:
(a)     the defendant would give reasonable notice to the plaintiff;
(b)     the defendant would at its own expense construct an alternative warehouse not smaller in size than 2,700 square metres or such other area as might be agreed between the plaintiff and the defendant;
(c)     the defendant would enter into a new lease with the plaintiff whereby the plaintiff could rent the alternative warehouse at a rental not greater than the rental charged by the defendant for warehouse space to other lessees of warehouse space;
(d)     the defendant would pay the costs of moving the plaintiff into the alternative warehouse;
(e)     the plaintiff would no longer be required to contribute to the outgoings of the market.”
The relevant part of the Defence pleads:
“In answer to paragraph 6 of the Claim, APML:
6.1    denies that it represented to the plaintiff that the plaintiff was entitled to a rent rebate in respect of Stall 25 and says that the parties defined Stall 25 as retail space;
6.2    admits that the meetings referred to in paragraphs (a) to (c) of the Particulars to paragraph 6 (“the Particulars”) took place;
6.3    admits each of the letters referred to in sub-paragraphs (a) to (h) of the Particulars and will refer to those letters at the trial of this action for their full terms and effect;
6.4    admits that at the time it granted the plaintiff the Stall 26 and 27 Leases APML agreed to permit the plaintiff to participate with respect to those Stalls only in the rent rebate arrangements applicable to other tenants of warehouse facilities on the Land on the same terms and conditions as applied to those other warehouse tenants and on the basis that those stalls were warehouse space;
6.5    admits that the terms of rent rebate arrangement applicable to other warehouse tenants and which therefore also applied to the plaintiff included those set out in paragraphs 6.2.1 and 6.2.2 of the Claim and says further that it was also a term of the rent rebate arrangement that whether a rent rebate was to be paid in respect of a particular rent year would be determined by APML retrospectively and at its absolute discretion;
6.6    denies that it represented that the terms of the rent rebate arrangement would include (and denies that those terms did include) the terms set out in paragraphs 6.2.3 of the Claim (or any terms to that effect) and says in further answer thereto that:
6.6.1          in the event the rebate was withdrawn by the defendant, the defendant would negotiate with the plaintiff in a genuine and bona fide manner with a view to providing the plaintiff with alternative warehouse space at a location on the Land mutually satisfactory to the plaintiff and the defendant, as affirmed by the plaintiff in paragraph 6.4 of its Statement of Claim dated 6 July 2001 and the Amended Statement of Claim dated 15 March 2002, respectively;
6.6.2          the plaintiff expressly attempted to introduce a term to the effect of that set out in paragraphs 6.1 and 6.2 of the Claim into the Leases for Stalls 25, 26 and Stall 27;
6.6.3APML expressly rejected such a term; and
6.6.4         the plaintiff accepted that rejection.”
I turn to a more detailed examination of the facts. CBA leased a substantial property at Cavan. It also leased three stores (25, 26, 27) at Pooraka. The Pooraka leases were due to expire on 30.9.98. APML wrote to its tenants, including CBA, (P1.92) on 20.2.98 drawing attention to this and advising that it had appointed a Mr Musolino to represent it in relation to negotiating new or renewed leases. It offered two options, which I need not set out. It was signed by a Mr Chan, who was the Managing Director of APML.
CBA is the wholly owned subsidiary of a public company, the head office of which is in Melbourne. Mr John Evans was the CEO and a director of the Adelaide operations. Mr Haselgrove was its local financial manager (and was a qualified accountant). These two were responsible for negotiations. They were assisted by two outside consultants, a Mr Ashton and a Mr Aschberger. They approached the negotiation in a professional way – they were not amateurs.
As I noted earlier, all occupants of Building C initially banded together and, at that stage, Mr Ashton represented them all.
On 27.2.98 (P1.94) Mr Musolino wrote to Mr Evans, confirming his appointment and offering terms. CBA sought and received financial advice about the options offered from Mr Aschberger. CBA also began to consider whether to seek to alter the configuration of the area it leased, or to reduce it.
There was a meeting with Mr Musolino on 27.3.98, confirmed by a fax from Mr Haselgrove to Mr Musolino on 31.3.98 (P1.100). In particular, an extension to the time within which any option to renew could be exercised was sought and granted. CBA was obviously concerned that the existing requirement to pay a share of “outgoings” of the market on top of the base rental was onerous and wished to explore how it was calculated. It was around 33% of rental.
Mr Haselgrove prepared an internal memorandum (P1.105) dated 19.4.98 for submission to his head office in Melbourne. In it he reported on the comparative merits of the options offered by APML. He set out his aim to improve CBA’s position in various ways. He discussed possible changes to the leased areas, including moving the operations presently conducted in Stores 26 and 27 to Cavan. He prepared quite detailed costings for various options.
CBA retained solicitors, O’Loughlins, to represent it in relation to the leases. Mr Last of that firm wrote to APML requesting confirmation of the extension of time.
I mentioned that it had been APML’s decision in the past to grant warehouse lessees a $15 per square metre rebate. Evidently its decisions whether to do so had been made in respect of a period of one financial year, and some time after the end of that financial year. P1.131 is a letter from APML dated 30.4.98 to a tenant sending a cheque for the year ended 30.6.97. It includes the caveat: “Please be reminded that APML reserves the absolute discretion and right to vary the terms of the rebate proposal without notice.”
An APML board minute of 14.7.98 (P1.134) noted that Mr Musolino was in negotiations with CBA “with confirmation” that CBA would not be keeping at least one store. A letter from Mr Musolino of 22.7.98 confirmed that discussions had taken place and APML was prepared to lease 1½ stores to CBA. By letter of 27.7.98 (P1.140) that offer was accepted by CBA, provided certain details were agreed. It wanted the bank guarantee released, the share certificate returned and, in particular, stated that it “expects to benefit from any rent concessions offered by APML to lessees in Building D …” and foreshadowed a meeting between the occupants of the building (which should be “C”) and APML.

At this time all occupants were acting together. Following that meeting, CBA wrote, on behalf of all occupants, requesting a rate per square metre of $61.15, which was expressed to be based on a rate of $102.82 per square metre for a depth of 22.5 metres said to be used only for selling and $36.15 per square metre for the remaining 37.5 metre depth, said to be used for warehousing. On 11.8.98 the Board of APML met and refused this offer (P1.146). Mr Musolino was asked to report further.
During August, Mr Ashton and Mr Haselgrove prepared an internal report (P1.510, 148, 157) completed on 24.9.98, the conclusion of which is a recommendation to retain only Store 25 and to remove other operations to Cavan. It was estimated that annual savings could be made of $324,114 and that capital costs of around $516,000 would be incurred, which would be paid back in 28.5 months.
Meanwhile, on 24.8.98 (P1.151) Mr Musolino replied to CBA’s letter of 27.7.98, noting acceptance of 1½ stores and stating:- “In reference to the combined letter from Building C tenants dated 4^th August 1998 I have been informed by APML that all tenants in this building will be treated on the same basis and more particularly the rental to apply.” The rent was still to be “finalised”.
On 4.9.98, following a meeting with Building C tenants, the Chairman of APML wrote to CBA (P1.153) offering a rental reduction to reflect different rates at three different depths.
At a board meeting of APML on 22.9.98 (P1.154) it was recorded that the board would not accept a reduction in rent, but would:
“1)    Charge $85 for first 35 metres
2)    The remaining 25 metres will be partitioned for Warehouse Use at $55 per square metre with a rebate as applicable to other warehouses
3)    No rebate for 25 metres if partition is not erected.”
This reflected a two (rather than three) step rental and set the boundary a little more favourably to APML. The partition requirement apparently related to a belief that Building C tenants would otherwise get an advantage over other tenants with remote warehouses. It was the first written reference to a rebate being given to Building C tenants. I note, in passing, that this was the meeting which approved rebates to other tenants for 1997/98.
P1.168 is a memorandum from Mr Perugini, Chairman of APML confirming a meeting on 23.9.98 and rejecting CBA’s proposal. It re-offered the rebate, if a partition were erected.
It seems that, by this time, APML may have been becoming rather frustrated at the slow pace of negotiations – after all, the leases were due to expire on 30.9.98. At least some of the tenants were not happy with Mr Musolino. A meeting was arranged direct between the tenants of Building C and some board members of APML. It was on about 23 or 25.9.98 (there is no doubt it took place, but there is some doubt as to the exact date). This must have been the meeting referred to by Mr Perugini in P.168. In the course of the meeting, Mr Ashton asked Mr Chan how the parties could be assured the rebate would be paid throughout the five year period of the lease (that being the period then being considered). He said in evidence that Mr Chan replied that the rebate could only be withdrawn by the giving of notice one year in advance and that, if that were done, it would have to be done to all tenants in the market who were in receipt of a rebate. He said that Mr Perugini did not dissent. At least one of the tenants expressed dissatisfaction at a mere oral assurance. Clearly, they did not think they could rely on it. They all pushed for a condition to be included in the lease, but APML would not do that. Mr Chan said that APML would not agree to a base rent of $40, being $55 minus $15 rebate. He said that this would have complicated calculation of tenants’ contributions to outgoings, and would lead to inequality between tenants. I assume this was because outgoings were paid as a percentage of base rent. It is not explained.
There was a further meeting on 2.10.98 between a number of directors of APML, including Mr Chan, Mr Perugini, a Mr Minicozzi (who is also a solicitor) and the occupants of Building C. Mr Minicozzi led discussion. He expressed APML’s frustration at the lack of finality to negotiations. The subject of the rebate was again raised. Mr Chan again said that the rebate would only be removed by the giving of one year’s notice to the tenants and then only if it was removed for all of the tenants in the market. There were demands that the obligation be reduced to writing, preferably in the lease.
One of the APML directors asked what CBA’s intentions were. He had heard rumours that it was considering leaving the market. Other occupants said they had heard the same. Mr Ashton confirmed that CBA was indeed considering that. Mr Minicozzi asked the other occupants to leave, so he could discuss with CBA its plans. They withdrew. Mr Ashton recalled that the confirmation of the rumour was a bit of a bombshell and that people were shocked. The meeting sticks in his mind as having been dramatic. He believed that APML’s tone changed. Mr Minicozzi asked: “What do we need to do to keep [CBA] in the market?”
Mr Hazelgrove, in his evidence, also recalled words to this effect. Mr Ashton’s reply was that CBA would respond in due course. Mr Perugini raised the question of CBA bringing all its operations into the market. He, and probably everyone else, knew that CBA was also operating from Cavan.
Mr Chan did not give evidence. It appears he left the employment of APML in acrimonious circumstances. I do not draw any adverse inference from his absence.
From this stage CBA (assisted by Mr Ashton) and the other tenants negotiated separately. One of the other tenants prepared P1.169, a letter of 8.10.98 in which the other tenants set out their position. They went on to reach separate agreement and to sign leases. Their proposal, so far as relevant, was that the rebate not be withdrawn unless withdrawn for all tenants. It did not further detail the rebate. I infer that the rebate was not referred to in their leases.
CBA seems to have moved quickly. On 20.10.98, Mr Evans of CBA wrote to Mr Perugini in the following terms (P1.176-178):
“Dear Sir
Re:    New Market Leases
I write to confirm my verbal acceptance of the leasing proposals made to Chiquita Brands Adelaide Pty Ltd by Mr Perugini in his capacity as Chairman of Adelaide Produce Markets Limited on 15 October 1998.
Mr Perugini has indicated that your solicitors will draft new leases encompassing the agreed arrangements.
Since this will take some time and because I need to brief our parent company I have set out my understanding of your offer in the attachment to this letter.
I would appreciate your prompt written confirmation so you can move on to drafting the leases.
Yours faithfully
John Evans”
He attached a document in the following terms:
“Preamble
Adelaide Produce Markets Limited (the lessor) offers to lease spaces, known as Store 25, Store 26 and Store 27, to Chiquita Brands Adelaide Pty Ltd (the lessee).
This document comprises a heads of agreement between the lessee and lessor.
The Lessee
Chiquita Brands Adelaide Pty Ltd will be the lessee.
The lessee will not be required to provide a bank guarantee or other like security to the lessor.
The lessor will release share certificates in Adelaide Produce Markets Limited owned by the lessee, and associated documents, to the lessee.
The Lease
The lessor will arrange the preparation of the lease documentation at its own expense. The lessee will pay its own legal costs in relation to the lease.
Store 25
The lessor offers the lessee a ten year lease with a right for the lessee to cancel the lease after 5 years.
Rent will be at the rate of $85.00 per square metre for the area defined as selling floor and $55.00 per square metre for the area defined as warehouse.
The lessor will provide a rebate of $15.00 per square metre for that portion defined as warehouse and may revoke or cancel the rebate by giving appropriate notice to the lessee.
The rebate of rent on the warehouse can only be revoked or amended if the $15.00 per square metre rebate is revoked or amended in like manner for other lessees receiving rebates from the lessor.
The rental rates will apply from 1 November 1998 until 31 October 2003.
Rent from 1 November 2003 will be at commercial market rates (to be defined in the new lease).
Store 26 and Store 27
The lessor offers the lessee a ten year lease with a right for the lessee to cancel the lease after 5 years.
Rent will be at the rate of $55.00 per square metre.
The lessor will provide a rebate of $15.00 per square metre.
The rebate of rent on the warehouse can only be revoked or amended if the $15.00 per square metre rebate is revoked or amended in a like manner for other lessees receiving rebates from the lessor.
In the event the lessee determines to revoke or amend the rebate to the lessee then:
-       the lessor must give reasonable notice to the lessee, and
-       the lessor must at its own expense construct an alternative warehouse not smaller in size than 2,700 square metres or such other area as may be agreed by the parties, and
-       the lessor must enter into a new lease with the lessee whereby the lessee can rent the new warehouse at a rate per square metre not greater than the rate charged for warehouse space by the lessor to other lessees of warehouse space and
-       the costs of moving the lessee will be borne by the lessor, and
-       the lessee will be entitled to contract or otherwise organise services for which it will pay directly to the providers of those services, and
-       the lessee will no longer be required to contribute to the lessor for outgoings of the ‘market’.
The rental rates will apply from 1 November 1998 until 31 October 2003.
The rent from 1 November 2003 will be at commercial market rates (to be defined in the new lease).
Definition
Store 26 and Store 27 will be defined as warehouse space for the purpose of this lease.
In determining the commercial market rate of rent the valuer will be required to classify Store 26 and Store 27 as warehouse space notwithstanding the fact that Store 26 and Store 27 adjoin selling floor leases.
Partition
The lessee will erect a wall, barrier or partition to delineate the boundary between Store 25 and Store 26 at the selling floor end of Store 25.
The lessor and lessee agree that such wall, barrier or partition is to delineate Store 25 from Store 26 and is not intended to interfere with the efficient warehousing facilities accepted by the lessee.
Doors
The lessor at its expense may:
-       remove the doors in Store 26 and Store 27 facing the market square and replace with metal cladding, or
-       weld or otherwise secure the existing doors in a closed position,
provided such action does not cause the lessee to breach any occupational, health, safety or like regulations.
Number of Leases
The lessee will allow a lease for Store 25.
The lessee is prepared to enter into a single lease over Store 26 and Store 27.
Conclusion
This document sets out the elements agreed by the lessee with the lessor. It is not a lease and does not cover the whole of the contents of the lease document.”
In my view, although Mr Evans purported to confirm arrangements already made, he went well beyond any discussion I heard about. I think his letter was a negotiating ploy. He purported to set out what APML offered to CBA and accepted by it. He noted that it was subject to lease documentation. He knew that APML had not agreed to any documentation of the rebate, let alone that it should be dealt with in the leases.
On the same day, probably before receiving Mr Evans’ letter, the APML board met and approved agreement with the other occupants of Building C. The minute (P1.179) included a table setting out a calculation (probably by Mr Musolino) of the exact cost to APML of allowing reduced rentals to the occupants of Building C, and of the cost of the rebate to each. The calculation set out the cost, store by store, of Stores 25 to 31. The impact of lower base rentals on the recovery of outgoings was also calculated.
It was noted that, as a condition of transferring its activities to the market, CBA required out-of-hours access to the market to enable it to make deliveries to. certain large customers. This would be contrary to market rules and there was discussion about it. Somewhat grudging consent was given at a further meeting on 29.10.98 (P1.182). A condition of the consent is that CBA confine its activities to the market, in default of which it could be ejected and required to repay any rebates granted (with interest).
On 9.11.98 Mr Haselgrove (P1.183) submitted a suggested wording for the consent to out of hours access, which was accepted by APML on 10.11.98 (P1.185). APML wrote to CBA on 11.11.98 (P1.188) confirming consent, in a letter signed by Mr Perugini. It included the sentence: “Other terms and conditions as agreed in our previous meeting. Attached is a copy of the general terms for your easy reference.” I set out those terms:
“1.     Store 25 Extension of Lease
1.1    The lease is extended for a further term of ten years commencing on 1 October 1998. There is no further right of renewal.
1.2    The lessee has the right to terminate the Lease as at and with effect from midnight on 30 September 2003, provided that the Lessee gives at least six calendar months’ prior written notice of its intention to do so.
1.3    The rent payable as at 1 October 1998 is $97,875 per annum (calculated as 1,350 square metres @ $72.50 per square metre). There is no rent review until 1 October 2003, at which date (and subsequently) the rent is able to be reviewed in accordance with clause 4.4 of the original Lease.
1.4    The Extension does not include any clause regarding any rent rebate which is applicable to the store.
1.5    There is no further right of renewal in relation to the Lease of Store 25.
2.     Store 26 Extension of Lease
2.1    The Lease is extended for a further term of ten years commencing on 1 October 1998.
2.2    The Lessee does not have any right to terminate the Lease during the extended term of ten years.
2.3    The Lessee is granted a further right to renew the Lease, namely for a further term of ten years commencing on 1 October 2008.
2.4    The new permitted use of the Leased Premises is ‘Warehouse for the storage of fruit, vegetables, nuts and allied packaging materials but excluding, without limitation, the sales (whether by retail or wholesale) of any fruit, vegetables or nuts from the Leased Premises’.
2.5    The commencing rent as at 1 October 1998 is $99,000 per annum (calculated at the rate of 1,800 square metres @ $55 per square metre). The rent is not reviewed until 1 October 2003, at which date (and subsequently) the rent is reviewed in accordance with clause 4.4 of the Lease.
2.6    Pursuant to clause 8 of the Extension (which inserts a new clause 15 into the Lease), the lessee must ensure that the front door of the Leased Premises is closed and locked at all times in such manner and as is required or directed by APML and, in default of the Lessee doing so, it is lawful for APML to undertake such works at the Lessee’s cost (including without limitation to undertake cladding works in relation to the front door).
2.7    Pursuant to clause 9 of the Extension, APML acknowledges that the Lessee is entitled to the same rebate of rent (calculated to be $15 per square metre of area, as at 1 October 1998) as is granted by APML to other tenants of merchant stores at the Market Land, provided always that APML shall be entitled to withdraw and discontinue such rebate where it constructs a new warehouse facility for the use by the Lessee.
The Extension of Lease for Stall 27 will contain the same terms and conditions as the Extension of Lease for Stall 26, save and except that the commencing rent will be $49,450 per annum (calculated at the rate of 900 square metres @ $55 per square metre per annum).”
This statement of the terms appears to have been drafted by Mr Liebich, a solicitor advising APML. It will be noted that this version of the “agreement” is different from that by Mr Evans. The differences between these terms and those which Mr Evans had claimed were already agreed must have put CBA on notice that Mr Evans’ version of the agreement was not admitted by APML.
I infer that other tenants at the market were taking an interest in CBA’s negotiations. APML wrote to the body which collectively represented them, the S.A. Chamber of Fruit and Vegetable Industries on 16.11.98 (P1.190), enclosing a copy of Mr Liebich’s statement of the terms (which had been prepared principally on the instructions of Mr Chan). The covering letter detailed the cost to APML of granting lower rent and a rebate and noted that it was about the same as the cost of building CBA a new facility. If a new facility were built and CBA moved to it, APML would then have empty stores (25, 26, 27) on its hands. APML was not keen either to increase the number of its tenants or to have empty stores.
The whole proposition that, if the rebate were to be withdrawn, new facilities would be built and CBA installed therein at no cost to CBA is a curious one. It appears to offer no advantage to APML. It favours CBA in that it provides a serious deterrent to APML against discontinuing the rebate. It also provides (on Mr Evans’ version) that, on such a move, CBA would no longer be required to contribute to outgoings. If they were to save outgoings of 30-33%, that would equate to a 25% discount to CBA..
At about this time a new issue arose. APML was considering whether a scheme to create community titles for each of the leased areas at the market was worthwhile. It was referred to in Board Minutes of 8.12.98 (P1.193) and was first publicly announced in a letter to shareholders (of which CBA was one) on 16.12.98 (P1.197).
This at once raised a problem for CBA (and the other tenants) which was that, while the terms of registered leases would bind future owners of the sites at the market, terms not included in leases would not. APML had not been prepared to include the terms of the rebate in any lease. Eventually the community titles scheme was dropped, but it exercised minds for a while.
It will be recalled that CBA’s lease had expired on 30.9.98. CBA was now merely holding over, presumably as a monthly tenant – in any event, on a rather insecure basis.
On 13.1.99 (P1.198) Mr Haselgrove completed a review (in an internal memorandum) of CBA’s options – whether to stay at two places or whether to move wholly to either Cavan or Pooraka. In this review, in the cost of being at Pooraka, he allowed for the rebate of $15 per square metre. He calculated that the cost of such a move could be recovered by savings made over about 2 years. After considering costs and other considerations, he recommended consolidation at Pooraka. His recommendation was accepted and, over the next few months, about $500,000 was spent making the move – despite no leases having been signed and despite there being no document which set out all of the terms of the rebate now contended for.
By 25.2.99 (P1.220) Mr Last, solicitor for CBA, had received draft leases and was advising Mr Haselgrove about them in detail. By this time, the plan was for Store 25 to be used for selling and for Stores 26 and 27 to be for warehousing. I set out his comments about rebates, first for Store 25 and then for 26 and 27:
“7.I understand that a rebate applies in relation to the payment of rent. Clause 1.4 of APM’s solicitor’s undated note (outlining the commercial terms of the new Lease documents) indicates that ‘the Extension does not include any clause regarding any rent rebate which is applicable to the store’. I believe such a clause should be included within the Lease document to ensure that the agreed commercial provisions relating to the rebate are properly understood by both parties and may be enforced accordingly. In such a Clause, the rebate should be expressed as a percentage rather than a fixed amount so that it reflects the changing value of rental from time to time.
18.I understand that if the rebate for the Warehouse is removed at any time during the term of the Lease or any extended term of the Lease, the landlord is required to offer new warehouse premises of similar area on the APM site and upon similar terms and conditions to those outlined in this Lease. The location of the new Warehouse must be first approved by your company and the rent must be no higher than the current rental at the time of the termination, including the benefit of whatever rebate applies at that time.”

A copy of this letter was then provided to APML who passed it to their solicitor. From this time negotiations proceeded between solicitors. By letter of 11.3.99, Mr Liebich refused to allow any variation to his client’s standard form of lease. It made no provision for rebates. He wrote:
“The rent rebate which currently applies for all of the merchant leases has not, and will not, be included as a clause in any of those leases.
The rent rebate does not apply to any lease of warehouse space outside of the Market Square.”
In response to Mr Last’s point 7, he replied, “Not agreed”. In reply to point 18, he replied:
“We are instructed by our client that, notwithstanding the absence of a rent rebate for any warehouse space outside of the Market Square, as the Leases for Stores 26 and 27 fall within the Market Square, then your clients as Lessees obtain the benefit of that rent rebate. We are further instructed that if the rent rebate applicable for Stores 26 and 27 is withdrawn, that will only be because the rent rebate is withdrawn for all of the other stores within the Market Square, ie it is withdrawn in relation to the merchant or ‘retail’ leases.
We are further instructed that if the rent rebate for Stores 26 and 27 is withdrawn, then our client will negotiate with your client in a genuine and bona fide manner with a view to providing to your client alternative warehouse space at a location mutually satisfactory to both parties, such that your client then surrenders the Leases for Stores 26 and 27 when it moves to the new warehouse space.
However, as we say, our client does not agree to any clause being set out in the Leases regarding this arrangement.”
By letter of 3.5.99 (P1.259) Mr Last wrote to Mr Liebich. He protested that there was no need for uniform leases – particularly in the case of a large tenant. He referred to the rent rebate and wrote:
“Rent Rebate
Our client’s acceptance of the commercial terms that apply with respect of the Warehouse Leases has been based upon express representations by the Lessor regarding the rebate of rental. In particular, it has been stated that the Lessee will be entitled to the rebate of rent unless and until APML withdraws and discontinues such rebate which will only occur ‘where it constructs a new Warehouse facility for the use by the Lessee.’
Our client is prepared to accept that the terms and conditions of the rebate do not need to be included in the Lease documents themselves. However, our client will require formal confirmation of the terms applying to the rebate. In particular, our client requires written confirmation that the rebate will be retained throughout the Lease term, unless comparable Warehouse facilities are provided within the market.
You may wish to consider the terms of an appropriate Deed evidencing the agreement of the parties regarding the terms of this rebate. Our client will require that these terms be formally recorded in this manner.”
There are other lengthy, detailed comments.
On 3.5.99 (P1.265) APML paid other warehouse tenants a rebate for the year ended 30.6.98. The letter was similar to that for the previous year. Mr Last and Mr Liebich had discussions. On 6.5.99 (P1.275) Mr Liebich sent further draft leases. Further letters were exchanged. On 26.5.99 the “letter of comfort” (P1.281) was sent to APML. I repeat that letter.
“Dear Mr Haselgrove,
Re: Adelaide Produce Markets – Proposed Leases of Stores 26 & 27
APML hereby confirms to you that, in relation to Stores 26 and 27, Chiquita Brands Adelaide Pty Ltd is entitled to a rent rebate (which rent rebate is currently $15 per annum per square metre of lettable area) from APML in the same manner as APML grants rent rebates to other tenants of warehouse areas where the warehouse tenant is also a merchant tenant of Adelaide Produce Markets. Therefore, if the rent rebate granted by APML for Stores 26 and 27 is withdrawn by APML, that will only be because the rent rebate is withdrawn by APML for all of the other warehouse tenants who are also a merchant tenant, ie it is withdrawn in relation to the relevant other warehouse leases also.
APML further confirms that if the rent rebate is withdrawn by APML for Stores 26 and 27, then APML will negotiate with Chiquita Brands Adelaide Pty Ltd in a genuine and bona fide manner with a view to providing to Chiquita Brands Adelaide Pty Ltd alternative warehouse space at a location mutually satisfactory to both parties, such that Chiquita Brands Adelaide Pty Ltd then surrenders the Leases for Stores 26 and 27 when it moves to the new warehouse space.
APML further confirms to you that it is the current intention of APML that the rent rebate for Stores 26 and 27 will not be withdrawn solely as a consequence of the land comprising Adelaide Produce Markets being the subject of “community titles” under the Community Titles Act 1996.
Yours faithfully,
Heng Chan
Managing Director”
I note that this was the response to Mr Last’s demand that the terms of the rebate be formally recorded. If it was a defective record, it was one closely scrutinised by CBA.
In a memorandum of 18.7.99 (P1.282) Mr Haselgrove reported his views on the rent rebate to his head office.
“Rent Rebate
-       In negotiations we were offered a rebate of $15/sqm.
-       The rebate could only be withdrawn if withdrawn from all other warehouse tenants.
-       Further security was given by APML offering alternative warehouse space if the rebate was withdrawn.
-       These conditions have been summarised in a letter from APML to CBA.
As there is no clause in the lease relating to the rebate it remains an agreement between APML and CBA. This becomes more significant if (when) APML ceases to be our landlord.
If under the community title our warehouse were sold the new landlord would have no commitment to honor the rebate or if it is withdrawn, be able to offer us alternative warehouse premises. The sale of all lots would also mean APML would be restricted in what they could offer us as alternative premises.
All requests to have this included in the lease have been refused. There are few other options to safeguard the rebate into the future.
The commercial aspect is that the warehouse rate ($55 + 33% = $73.15) is not significantly different from an external warehouse ($65 + 10% = $71.50).
There are few options for us to move here. The only option may to (sic) accept the situation.”
More letters were exchanged, but Mr Last could not persuade APML/Mr Liebich to include the rebate in the lease. It was not suggested that the terms were incomplete, the complaint was that they were not in the lease. The APML Board, on 14.9.99 further considered the issue of community titles – apparently it was becoming evident, amidst acrimony, that this scheme probably could not go ahead. Discussion about the CBA (Chiquita) lease was recorded:
“Chiquita Lease
Nic Minicozzi report on recent meeting with Chiquita.
-       Rebate issue main concern of Chiquita (Letter of 21/5/99 tabled)
-       Matter referred to APML solicitor to resolve with Chiquita’s solicitor to incorporate in the lease the representations of APML contained in letter of the 21/5/99.”
On 15.9.99 (P1.300) Mr Last had another go. He drafted a lengthy clause about the rebate for inclusion in the leases. Despite the apparent decision by APML to allow a term in the lease, Mr Liebich prevailed and no term was included. CBA finally accepted and signed the leases. It did so well aware that no rebate was provided for in the lease and well aware of the way it was recorded and of the terms that were recorded. I have earlier set out APML’s subsequent withdrawal of the rebate.
I turn first to the question whether, whatever their effect may have been, the representations applied to Store 25. It is clear that discussion about a rebate arose as a result of rebates paid to others in respect of warehouse, not retail, space. The whole basis of the claim was that only a part (ultimately, de facto, agreed of 25 metres at the rear of the stores) would be treated as warehouse space. The final configuration of CBA’s leases was that Store 25 was to be used, at least principally, for sales. There did not have to be any barrier between sales and any warehouse activities.
Mr Evans’ memorandum of 20.10.98 (P1.176) began with a “Preamble” in which Mr Evans purported to record that APML “offers to lease” to CBA all three stores. It went on to purport to record “heads of agreement”. Mr Evans’ covering letter (P1.175) purported to “accept” “the proposal” and to set out his “understanding of [the] offer”. Clearly it was anticipated that formal leases would have to be prepared.
In relation to Store 25, Mr Evans recorded a rebate “for that portion defined as warehouse”. The only “Definition” recorded by him is that “Stores 26 and 27 will be defined as warehouse space for the purposes of this lease” and that, notwithstanding that they adjoin other retail areas. The latter point may have been intended to remove the original negotiation about the front 35 metres being for sales.
There was then a curious reference to putting up a partition “to delineate the boundary between Store 25 and Store 26 at the selling floor end of Store 25” (my underlining). That appears to suggest that there was to be part of Store 25 which was not “the selling floor end” and which did not need to be partitioned from warehouse space in Store 26. The formula by which rent for Store 25 was calculated was clearly based on 35 metres of retail and 25 metres of warehouse space. But there was no requirement that Store 25 be subdivided in any way. Presumably CBA could use it as it liked – but still pay the agreed rent.
Thereafter, Store 25 was always referred to as “retail” and Stores 26 and 27 as “warehouse”. A separate lease was signed for Store 25. The eventual lease of January 2000 sets out the “Permitted Use” of Store 25 as “warehouse for the conduct of the business of a merchant wholesaling fruit …” By contrast, the lease for Stores 26 and 27 expressly forbade selling. Thus, although described as “warehouses” there is a clear distinction from the use to which Store 25 might be put – it might be used for selling. The lease did not require that it must all be so used. I would imagine that part of the business of a merchant selling, might be areas for storage.
The response by APML (P1.188) to Mr Evans’ memorandum purported to set out its understanding of the agreement (P1.189), and was drafted by its solicitor. That document referred to “Extensions” of leases, whereas CBA wanted, and ultimately got new leases. In relation to Store 25 it recorded that “The Extension does not include any clause regarding any new rebate which is applicable to the store.” That is ambiguous. I think it reflects the refusal to refer to a rebate in the formal lease/extension, rather than admitting that any rebate applied. It refers to “rebate which is applicable”, but it does not say what that rebate might be, or on what terms. That is to be contrasted with the greater precision in relation to Stores 26 and 27. I construe it as meaning that no rebate was applicable.
When APML purported to withdraw the rebate, further payments of rent were expressed to be under protest, but the protest only referred to Stores 26 and 27. The original Particulars of Claim in this action did not seek rebate in respect of Store 25. That claim was first made by amendment in March this year.
This is a case based on representations. It seems probable to me (and I so find) that CBA never understood that the deal eventually struck with APML was subject to any understanding that a rebate would be paid for Store 25. Nor did APML do anything to induce such a belief. Nor did APML have any understanding that CBA held such a belief.
In relation to Store 25, the claim is dismissed.
The situation is more difficult in relation to Stores 26 and 27. It is admitted that representations were made. There is dispute about the terms thereof. I now wish to look further at the nature of the representations, what CBA understood by them and what APML knew, or ought to have known, CBA understood. It is clear that APML did represent to CBA that a rebate would be granted, that CBA understood that, and that APML knew that CBA understood that.
The original discussion had focussed on the rear 25 metres, or so, of the stores. With the change to use all of the area of the stores for warehousing, all of the area was now to be let at warehouse rate and all of the area was to be subject to a rebate. That is confirmed by Mr Evans’ memorandum in (P1.177), APML’s response (P1.189) and by the letter of comfort (P1.281).
It is clear that the rebate could be revoked or amended (Evans P1.177) if the change applied to all other warehouse lessees. The ultimate purported withdrawal, on the evidence, did apply in like fashion to all other warehouse lessees.
The payments of rebate to other tenants disclosed in the evidence followed specific decisions of the Board of APML, made after the end of the financial year to which they applied – sometimes quite a long time later. It appears that the rebate scheme came into existence in 1994 (P1.63) when the Board of APML considered a request from some tenants. Certain tenants, provided (a) they also leased a retail store and (b) they held not less than 30,000 shares in APML, were to get a rebate. The ultimate leases refer to CBA being liable for certain penalties if it ceased to hold at least 30,000 shares and I infer that it did hold at least that number at all material times, though I do not think there is clear evidence of it. CBA also held a lease of a retail store, Store 25, at all times.
There is no evidence that those requirements changed at any time – but they came into existence before CBA began its negotiations. There is no evidence that they ever came to CBA’s attention. They seem to have been aspects of the rebate which never changed, but which may never have been known by CBA, though applicable to other tenants. They were not referred to in writing between the parties, or in any oral evidence. I have noted that, though supposedly secret, the existence of the rebate was well known. The requirements to hold shares and to lease a retail store may have been known, but, if so, not because of any representations by APML. Nor is there evidence to suggest APML was, or should have been, aware that CBA knew that – if it did.
A letter (P1.65) (as an example, though there is no evidence it ever came to CBA’s attention) following the creation of the rebate, set out to another tenant the terms on which the rebate might be granted. It set out 3 terms. The first is the requirement to hold shares and a retail lease (for the entire 94/5 year). The second is that the rate is yet to be determined, but will not be less than $15 per square metre. The third is that it will be paid after the expiry of the financial year ending 30.6.95 and that payment is conditional on prompt payment of rent, observance of lease conditions and satisfactory maintenance of premises. It states: “However please note that the Company reserves the absolute discretion and right to vary the term (sic) of this proposal in relation to either all leases or individual leases.” Participants are requested to keep the rebate secret.
There is no evidence that these terms varied for other lessees, or that these requirements ever came to CBA’s notice. CBA may well have complied with the requirements but, insofar as negotiations proceeded on the basis that CBA was to be treated in the same way as other lessees, there seems to have been no explanation of, or knowledge of them.
It is apparent that payments of rebate to other lessees were, in fact, made after the end of financial years and in respect of such years. It seems probable to me that CBA heard about payments and of the periods to which they referred. There is no evidence that CBA knew the detailed terms.
Putting the matter at its highest (P1.65) shows an intention in July 94 to offer a rebate for the 94/5 year, payable after 30.6.95, with the proviso that the terms might be varied in the absolute discretion of APML. Were such a variation to have been made, it could only have been in relation to the 94/5 year. It is silent as to any mechanism for variation, as to any notice to be given of a variation and as to whether such a variation could have any “retrospective” effect. There is no evidence that these matters were ever clarified or resolved with other lessees. If the rebate offered to CBA was to be the same as that applying to others, there is no evidence that those matters had been clarified with CBA.
But, of course, representations may have been made to CBA proposing a rebate on terms not the same, or not entirely the same, as those applied to others. Indeed, we know this is so, because it appears that only CBA ever got an offer to build replacement premises if the rebate were to be withdrawn.
The letter of comfort (P1.281) referred to a rebate “currently of $15 per square metre… in the same manner as CPML grants rent rebates to other tenants of a warehouse, where the warehouse tenant is also a merchant tenant …”. It will only be withdrawn if withdrawn for all. It seems that, while there may have been a practice of declaring and paying rebates after a financial year, for that year, that did not deal with notice or retrospectivity. Unless a different representation was made to CBA, the same applied to them.
In P.176, Mr Evans, in setting out his understanding of what had been agreed, in relation to Store 25 (for which I have concluded that no rebate was intended), recorded that APML may “revoke or cancel the rebate by giving appropriate notice to the lessee”. He did not say what was appropriate, nor did he raise retrospectivity.
In dealing with Stores 26 and 27 he stated that “The rebate … may only be revoked or amended … if [it] is revoked or amended in a like manner for other lessees …”; but, if it is, “the lessor must give reasonable notice” and must do certain things in relation to a new warehouse. The use of the word “reasonable” suggests that he and the other CBA representatives (Mr Ashton and Mr Haselgrove prepared the letter) had no understanding that some precise period of notice had been agreed. Given the attention paid to the rebate, I cannot believe that any more precise understanding would have been overlooked.
APML’s response (P1.189) referred only to “the same rebate … as granted … to other tenants … provided always that APML shall be entitled to withdraw and discontinue such rebate where it constructs a new warehouse …”. This appears to assert the original, allegedly unfettered right to vary, as applicable to all tenants, plus a further right to vary, personal to CBA, if a new warehouse be built. The letter of comfort (P1.281) appears to contemplate withdrawal only if the rebate is withdrawn for all, in which case bona fide negotiations about building a new warehouse will be entered into. It does not say that such a warehouse must be built, or, if it is, on what terms.
The points reduced to writing are not, as written, determinative of the questions of notice and retrospectivity. They provide strong evidence that, as admitted, there had been some representations, but are not evidence of the two aspects under consideration. CBA is driven to say that Mr Evans’ memorandum is incomplete and that of the Mr Liebich is wrong, as is the letter of comfort. Mr Evans’ reference to reasonable notice suggests that notice had been referred to. There is nothing to suggest that anyone considered retrospectivity. Again, regardless of whether such terms were to be in the lease, or in a “letter of comfort”, if further terms had been agreed, I am sure CBA would have pursued them.
No doubt for these reasons, CBA bases its case on oral representations at an early stage. The first is that allegedly made on 25 or 28.9.98 at a meeting of all Building C tenants with APML. On 23.9.98 Mr Perugini offered a differential rate based on warehouse rates for the rear 25 metres of each of the stores (with a partition to be erected) and a rebate of $15 per square metre. He is not alleged to have elaborated on the terms of the rebate. APML representatives left the room, the tenants formulated a counter offer, Mr Chan came back into the room and agreed to put the counter offer to his Board – again, no elaboration on the rebate.

Mr Ashton recalled another meeting, again with all of Building C tenants meeting APML on 28.9.98. He recalled discussing the rebate with Mr Chan, who said that “the rebate could only be withdrawn by the giving of notice one year in advance and that, if that were done, it would have to be done to all tenants in the market who were in receipt of a rebate”. He was quite sure about this in cross-examination. It seems to have followed a demand for a guarantee of rebate for five years.
Mr Haselgrove had a broadly similar memory. He said that Mr Chan said, “If it was withdrawn, it would only be withdrawn because it’s withdrawn from all other people within the market who had a rebate and he said it would be paid at the end of the next year and that they would tell you at or before the start of the next rent year that the rebate would, or would not apply for the coming year”.
That Mr Ashton and Mr Haselgrove should have slightly different memories is not surprising. The detail of the rebate revolving around a rent year is odd. The practice had been to deal in financial years. There is no evidence that (apart from the first year, 94/5) there had been any written communication of intention to pay rebate for the current/next year. The only evidence is of decisions to pay, made after the end of the financial year in respect of financial years. Having heard both Mr Ashton and Mr Haselgrove in the box, where they were both careful and precise, and having regard to the care and precision with which their memoranda, both to CBA and also that used by Mr Evans in writing to APML, I cannot think they would have used the words “appropriate” or “reasonable” to refer to the period of notice to be given, if they believed it was in fact one year’s notice to be given at or before the start of the year, whether financial, or rent. I wonder (but can make no finding) whether those words reflect the fact that each had a slightly different recall of the words used.
No attempt seems to have been made to clarify the point with APML. If it was, as it now claimed, a point on which CBA had a clear understanding, the response by APML as drafted by Mr Liebich confirmed neither Mr Ashton’s recall, nor that of Mr Haselgrove, nor that put forward in the memorandum they prepared and which was used by Mr Evans in writing to APML (P1.176).
It seems to me that CBA were prepared to commit and to move to Pooraka on the faith of Mr Liebich’s memorandum, rather than on the recall of its representatives of an oral representation made some nine months, or so, earlier by Mr Chan. The letter of comfort (P1.281) is much later, long after it was too late for CBA to turn back. At the time CBA received Mr Liebich’s memorandum (P1.189) it was not too late. There is no doubt that, though Mr Last tried to achieve greater clarity, his efforts were not accepted. Mr Liebich was careful not to agree with them.
It seems that no discussion (or exchange of writing) took place specifically directed to the question of retrospectivity. It is implicit in the concept of giving notice of intention to withdraw the rebate. I have already discussed this in the context of whether notice was a pre-requisite – and concluded that that was not proved. As an alternative, do the words used in Mr Evans’ memorandum, put APML on notice that CBA thought itself entitled to notice, so that, if not disabused, it would be unfair for APML to lead it on? In my view, the failure by Mr Liebich to deal with notice, in the context of putting forward APML’s position, could hardly be thought to have given comfort to a belief that there was a period of notice.
Mr Evans’ memorandum contemplates that the rebate may (on notice) be “revoked” or “withdrawn” or “amended”, all words apt to refer to both future and, to so called, accrued entitlements. Mr Liebich (P1.189), in the context of providing a replacement warehouse, refers to “withdraw[ing]” and “discontinu[ing]” a rebate, neither of which connotes to me any intention to preserve accrued entitlements. As I have said, by the time of the letter of comfort, (P1.281) CBA was stuck, it was too late to withdraw, but, for what it may be worth, it refers to a rebate being “withdrawn”.
It is alleged that it was represented that a pre-condition to withdrawing the rebate was the provision of alternative accommodation, as set out by Mr Evans in P.176. That allegedly crucial term was not confirmed in either Mr Liebich’s memorandum or the letter of comfort. Mr Evans’ version seems to me most unlikely to have been as precisely agreed as his memorandum might suggest. It represented a radical departure from what APML had, apparently, agreed with other tenants. It involved the expenditure of some 1.3 million dollars. It is alleged to have involved fit out and transfer costs. The new warehouse was to be erected at a mutually agreed site. In short, it was a project which could not be undertaken without consultation and agreement with CBA. Without that, in theory, APML might have to build, only to find that CBA might choose not to move.
As expressed by Mr Evans, the building of the new shed is not a pre-condition to giving notice of intention to withdraw the rebate. Rather, on giving notice (which he says is to be “reasonable”, and I have dealt with that) following a decision to withdraw the rebate, a shed is to be built and other things are to be done. At best, the failure to build might give rise to a claim for damages (and I do not decide whether or what that might be), but it would not invalidate a decision already taken to withdraw the rebate. In particular, it does not prove the existence of a representation that, only on building a new warehouse, could the rebate be withdrawn.
Mr Liebich’s memorandum (P1.189) first provides for payment of the same rebate as is granted to other lessees (though they do not have entitlement to a new shed). Additionally, APML is said to be entitled to withdraw the rebate where it constructs a new warehouse. Arguably, that is disjunctive. It may suggest two bases for withdrawal: first, where it is withdrawn for all, and, second, where a new warehouse is built. It does not require both.
In the end, it seems to me that CBA were very unhappy that they could not persuade APML to include specific reference to the rebate and to its terms in the lease, but were well aware that that was so. They pushed, through Mr Last, for much clearer definition of the entitlement and its terms, but none of his, or their, suggestions were accepted. The best they could get was the letter of comfort, and they knew it before signing the leases. Mr Liebich’s memorandum (P1.189) preceded the major expenditure incurred by CBA in moving to Pooraka. If clarification was necessary, surely that was the time for it. On receipt of that memorandum, CBA could have decided not to move and not to agree to new leases. The delays and negotiations that eventually occurred in finally settling the terms of and signing the leases did not alter that.
In my view, CBA proceeded in the full knowledge that it could not obtain a legally binding agreement to pay the rebate. It hoped it would get it, but that is all it was, a hope. CBA is too large and experienced an organization and too well advised to have believed that, in the absence of specific agreement, its claim to rent rebate could be enforced. It did get certain representations, which have been admitted. Whether or not they were actionable, to the extent that they were proved, they have not been breached.
If, contrary to that view, CBA did really believe it had enforceable rights, it is not proved either that APML knew, or should have known, that it held that belief. APML could reasonably have thought that any liability it had was limited, initially to what Mr Liebich had put forward, and, later (but still long prior to signature on the leases) to the letter of comfort.
The tenor of these remarks must apply to each of the various causes of action pleaded. In none of them can CBA succeed.
The action is dismissed.

[2002] SADC 174

19 December 2002