Clone Pty Ltd v Players Pty Ltd & Ors

[2005] SASC 281

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

CLONE PTY LTD v PLAYERS PTY LTD & ORS

Judgment of The Honourable Justice Vanstone

22 July 2005

LANDLORD AND TENANT - LEASES AND TENANCY AGREEMENTS - CONSTRUCTION AND INTERPRETATION

LANDLORD AND TENANT - TERMINATION OF THE TENANCY - FORFEITURE - NOTICE AND DEMAND BEFORE RE-ENTRY

LANDLORD AND TENANT - COVENANTS - AS TO REPAIR

TORTS - MISCELLANEOUS TORTS - INTERFERENCE WITH CONTRACTUAL RELATIONS

Dispute arising out of lease of premises to which tenant brought liquor and gaming licenses - whether lessor gave consent to lessee to remove licenses during currency of lease - whether consideration payable to lessor for licenses at end of lease term - whether lease to be read together with agreement to lease - form and content of agreement to lease upon execution - counterclaim by lessee for rectification of lease - lessor further claiming against second, third and fourth defendants for interference with contractual relations - counterclaim of same nature - whether lease was forfeited prior to expiry by reason of breach of maintenance convenants - parties seeking declaratory judgment pursuant to s 30B Supreme Court Act 1935.

Supreme Court Act 1935 s 30B; Liquor Licensing Act 1985 ss 65-72; Liquor Licensing Act 1997 ss 60-65; Gaming Machines Act 1992 s 15(i), s 14, s 19, s 28, s 34; Landlord and Tenant Act 1936 s 10, referred to.
Neill v Hewens (1953) 89 CLR 1; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Leggott v Barrett (18880) 15 ChD 306; Palmer v Johnson (1884) 13 QB 351; Ladbroke Group PLC & Anor v Bristol City Council [1988] 23 EG 125-128, discussed.
Briginshaw v Briginshaw (1938) 60 CLR 336; Kennedy v Verco (1960) 105 CLR 521; Australian Safeway Stores Pty Ltd v Toorak Development Village Pty Ltd [1947] VR 268, considered.

CLONE PTY LTD v PLAYERS PTY LTD & ORS
[2005] SASC 281

Civil

VANSTONE J: 

Introduction

1. This dispute arises out of the lease of premises at 73-79 Pirie Street, Adelaide (“the property”).  The lease was for a term of ten years.  The permitted use of the property was as hotel, restaurant, gaming venue and nightclub.  Towards the end of the term the Lessee sought permission from the Lessor to remove the hotel and gaming licences from the property, which course would be accommodated by provisions of the Memorandum of Lease.  The Lessee claims that it received such permission and took steps to remove the licences.  The Lessor claims that no such permission was given.  Determination of that issue depends primarily upon the construction of letters passing between those parties.   Each side seeks certain declarations in its favour, and other relief.

2. A further issue concerns the rights of the Lessor and Lessee respectively in relation to the ownership of the licences upon the (recent) expiration of the lease.  That matter involves a dispute as to the terms of an Agreement to Lease (“the Agreement”) which was struck between the parties some months before possession of the property was given.  In its defence the Lessee asserts that the Agreement and the Memorandum of Lease (“the Lease”) later entered into should be read together and construed in such a way as to avoid inconsistency.  In the alternative it pleads by counterclaim that the asserted inconsistency between them in relation to the provision dealing with the licences, and other provisions, should be resolved by rectifying the Lease document to make it conform to what it says are the terms of the Agreement.  I refer to an asserted inconsistency between the documents, because the original Agreement was not produced at trial and, for reasons which will appear, I allowed secondary evidence of it in the form of photocopies produced on both sides.  There is a dispute as to whether what could be interpreted as a significant deletion on the face of both the photocopies was made prior to or after its execution.

3. Furthermore, the Lessor seeks determination as to whether it is entitled to an order that the Lease was forfeited prior to the expiry of its term by reason of certain alleged breaches of its provisions, which were the subject of Notices to Remedy served on the Lessee in the middle of 2004.

4. The plaintiff, Clone Pty Ltd (“Clone”), is the registered proprietor of the property the subject of the Lease.  Clone Pty Ltd is the trustee of a trust, the beneficiaries of which are three companies which form part of what was called at trial “the Roche Group”, and David Jerome Roche.  At all relevant times the directors of the plaintiff company were Mr John Roche, his daughter Ms Fiona Roche and Mr Richard England, who represented certain branches of the family.  Another company in the Roche Group, being Estates Development Company (1948) Pty Ltd (“EDC”) provided management and administrative services to the companies in the Group including the plaintiff company.  In 1993 Ms Roche was the managing director of the Western Australian operations of EDC and in 1994 Ms Roche assumed that role in relation to the Group’s South Australian interests, becoming the chief executive of EDC.  EDC effectively took over the business of the Adelaide Development Company Pty Ltd (“ADC”) which had performed a comparable role in South Australia to that of EDC in 1994.  It is unnecessary to determine exactly when that happened because there is no doubt that Ms Roche fulfilled an executive role in respect of the leasing of the property by Clone throughout the relevant period and that she did so under direction of what was called an “executive committee” which drew its authority from the directors of the plaintiff company.  The business continued to trade as Adelaide Development Company.  Mr P A McNamara QC and Mr A L Dal Cin appeared for Clone. 

5. The first defendant and Lessee is Players Pty Ltd (“Players”), the directors of which were Mr Gregory Griffin, a solicitor, Mr Timothy May, a professional cricketer and chartered accountant, Mr Christopher McDermott, a professional sportsman and bar manager and Mr Darren Cahill, a professional tennis player.  Messrs Griffin, Cahill, May and McDermott became guarantors to the performance of the Lease and they are the seventh, eighth, ninth and tenth defendants to this action in that capacity.  During the period spanning negotiations as to the tenancy and the execution of the Agreement and the Lease Mr Griffin acted for Players and for all the guarantors.  Players and Messrs Griffin, Cahill and McDermott were represented at trial by Mr R J Whitington QC and Mr K G Nicholson instructed by Messrs Griffin Hilditch, solicitors.  For convenience I shall refer to these parties as “the defendants”.  Mr May took no part in the trial.  I was informed by Mr M Durrant, who appeared briefly at the commencement of the trial for Mr May that Mr May’s position was wholly dependent on the outcome of the case against the first defendant.  He did not seek to play a role in the trial.  It is not clear to me when Mr Griffin ceased to act for Mr May, but it is not a matter of importance.

6. The fourth defendant is Fairtown Holdings Pty Ltd (“Fairtown”), the directors and shareholders of which are the second defendant, Mr Alexander Falconer and the third defendant, Mr Brenton Scott Rooney.  On 4 November 2003 the first defendant entered into an agreement  (P5/129) with Mr Falconer and/or nominee to sell to him the hotel and gaming machine licences associated with the property, the gaming machines and certain equipment.  The agreement was conditional upon Players obtaining the consent of the plaintiff to the making of the applications to the licensing authority for removal of the licences and to the grant of permission to remove them and to another condition.  Players and the fourth defendant, Fairtown, ultimately applied for removal of the hotel licence to premises at 201 Victoria Square, Adelaide, which Fairtown had conditionally agreed to lease from another company.  In late 2003 and 2004, Mr Griffin represented Fairtown, Mr Falconer and Mr Rooney. 

7. By counterclaim Fairtown raises causes of action against the plaintiff.  These rely on proof that consent to Players’ removal of the licences was given by the plaintiff.

8. Mr S Walsh QC, instructed by Edgley Lawyers, for the second, third and fourth defendants,  appeared at the beginning of the trial to advise me that whilst he might be instructed to call evidence later in the trial (which he was not) he was not instructed to be present continuously.  In the event he appeared only briefly later in the trial and made no substantive submissions.  I shall refer to the second, third and fourth defendants as “the Fairtown defendants”.

9. The fifth defendant is the Liquor and Gambling Commissioner and the sixth defendant is the Licensing Court of South Australia.  The plaintiff’s Statement of Claim sought an order in the nature of prohibition against those two defendants restraining them from dealing further with the applications for removal and transfer made by the first and fourth defendants.  There was no appearance for the fifth and sixth defendants.

10. The relief sought by the plaintiff in the Statement of Claim included declaratory relief, injunctive relief and damages. However upon the trial I was informed that what was sought in the first instance on all sides was a determination of the essential factual issues as referred to above, and appropriate declarations pursuant to s 30B(1) Supreme Court Act 1935 and that the matter of injunctive relief and damages should await a further hearing.  That is the way in which I have approached the matter. 

    Events leading to the execution of the Agreement to Lease

11. The plaintiff became the registered proprietor of the property in 1993.  These events are of relevance to the question of whether there was any deletion to the Agreement post to execution.  They are relevant to that issue principally in terms of Mr Griffin’s credibility.  They are also instructive to the parties’ intention as to the terms of the lease, which is an issue because of the first defendant’s claim for rectification.  The improvements to the property comprised to the west, a building formerly used by a firm of solicitors and to the east, a building referred to in evidence as “the Oaks Tavern building”.  The latter had previously suffered fire damage and there had been vandalism in both buildings.  The Roche Group owned the building to the immediate east of the property and its interest in acquiring the property was to control a large area that in future years might be redeveloped to accommodate a multi-storey office building.  However, in 1993 and the ensuing years the commercial property market in Adelaide was depressed and the general feeling among those who were instrumental in the running of the Roche Group was that such a redevelopment might be at least ten years away.  Accordingly it was determined that the property would be leased, preferably without committing any monies for capital improvement.  The proposed rent was calculated as a “ground rent”.  The agents, Colliers Jardine (“Colliers”), were appointed to obtain a Lessee. 

12. There were quite advanced negotiations with at least one other prospective Lessee, namely the “Hokie Pokies Group”.  In May 1994 Mr Alistair Mackie, the Colliers representative, wrote to the manager of that group setting out various proposed terms and conditions.  Subsequently a copy of that letter (D1) was given to Mr Griffin as providing a convenient starting point for negotiations with Players.  Many of the terms mentioned therein were replicated in later drafts of the agreement between the plaintiff and Players.  To this point these matters of history are not in dispute.

13. At the time when Players expressed an interest in leasing the property it already ran a bar in Grenfell Street.  Mr Griffin and Mr McDermott had heard of the possibility that the Oaks Tavern building would be utilised as an hotel by an interstate group and were concerned at the unwelcome competition that might generate to “Players Bar”.  Mr Griffin and Mr McDermott inspected the property on about 19 July 1994.  On 21 July 1994 the two men met with Mr Mackie and the general manager of ADC, Mr Ross Mallett.  Both Mr Griffin and Mr McDermott gave evidence as to certain representations allegedly made by Mr Mallett as to Clone’s ultimate plans for the property and how, at the end of the lease, the plant and equipment and licences provided by the Lessee might be disposed of.  They recounted that Mr Mallett had informed them that ADC’s long-term plan for the property was to demolish the buildings, along with those of the adjacent ADC offices, and erect a high-rise office tower.  Mr Griffin said that he recalled being informed by Mr Mallet that “ADC was not in the business of running licensed premises” and that “if they demolished the buildings, Players was at liberty to take with it the licence and such of the plant and equipment that it wished.”  Mr Griffin said he was told by Mr Mallett, that in the event of such a demolition, Players’ only redress would be to take what it brought with them.  Mr McDermott said that he remembered Mr Mallett telling him that Players could take fixtures, fittings and licences with them at the conclusion of the term.  However, he later added that his understanding from the discussion with Mr Mallett was that ADC was going to “put a licensed premises on the ground floor” of the re-development.

14. Mr Mackie had no recollection of these representations.  Mr Mallett did not give evidence.  This evidence could only be relevant in my view as going to the state of mind of Mr Griffin and Mr McDermott at the time when they were considering the execution of documents effecting a tenancy.  I do not consider that the statements are any evidence of the position of Clone.

15. On 27 July Mr Griffin wrote to Mr Mackie (P3/3).  He expressed the interest of his “client” in taking a tenancy of the property.  He used the “Hokie Pokies” letter as a basis for the terms proposed.  Although Mr Griffin advised that he was now in the process of acquiring an hotel licence from the Grenfell Tavern, he said nothing about what would happen to the licence at the end of the lease.  It seems that both sides were keen to enter into a contract.  On 3 August 1994 Messrs Grope Hamilton Budini were instructed to act for Clone in respect of the matter.  Mr Peter Grope played a role in refining and settling the draft Agreement to Lease, which was originally compiled by Mr Mackie.  What exactly occurred in this regard is largely a matter of reconstruction from the only records of Messrs Grope Hamilton Budini which have survived destruction in the ensuing years, together with what appear to be the second and third drafts of the Agreement and Mr Grope’s limited recollections of the matter, which I accept are accurate. 

16. The conclusions I draw from these sources as to Mr Grope’s involvement are as follows.  What I shall call “the first draft” of the Agreement was provided to him by Mr Mackie.  He made handwritten alterations to it and returned it to Mr Mackie.  Neither that document nor any copy of it has been located.  Mr Mackie had it re-engrossed and sent a copy to Mr Griffin under cover of letter of 5 August 1994 (P3/8).  A copy of the document is Exhibit P3/9, “the second draft”.  A copy also went to Mr Grope, who made some alterations and additions to it.  Once they were engrossed, Mr Mackie highlighted the changes with a fluorescent pen for Mr Griffin’s attention.  I accept Mr Griffin’s evidence that Mr Mackie delivered it to him at his then offices at the firm of solicitors, Messrs Phillips Fox, and that he drew the changes to Mr Griffin’s attention and asked that they be initialled.  I refer to this document as “the third draft” and “the Agreement”.  In his earlier letter enclosing the second draft Mr Mackie had requested that the document be signed and returned to him together with a deposit of $9,583.33, representing one month’s rental.  He had also enclosed a duplicate copy of the document for Mr Griffin’s records.  Mr Griffin’s copy of that letter is Exhibit P3/21 and I shall return to it as it contains a note in Mr Griffin’s hand addressed to Mr May and Mr McDermott.  There are two versions of the third draft in evidence, neither of which is original.  It is not possible to say whether they are copies of the original or of a copy of the original, or even whether the one is a copy of the other.  Exhibit D9 is a version produced from the files of ADC and P9 is a version produced from Mr Griffin’s papers. 

17. Certain clauses of the third draft, Exhibits P9 and D9, are set out in Appendix A to this judgment.  The twin asterisks inserted into cl 11(i) in Appendix A by me show the position where the word “NIL” was, on the defendant’s case, scored out by Mr Griffin in the presence of Mr May and Mr McDermott.

18. It is important to notice that special condition 11(i) (so far as it was printed) did not alter as between the second and third drafts.  Nor indeed did special condition 11(j). 

19. Mr Griffin said in evidence that the Agreement was signed by Mr McDermott and himself as guarantors, and by Mr May on behalf of Players and as a guarantor, either on 10, 11 or 12 August 1994.  The copies in evidence are not dated and that evidence was given by reference to other, dated documents.  For example, the Landlord and Tenant (Commercial Tenancies) Regulation 1986 Form 5 document which had been provided to Mr Griffin by Mr Mackie, along with the second draft, was signed by Mr May against a date in Mr Griffin’s hand of 10/8/94.  In the same period Mr Griffin was negotiating to purchase an hotel licence from the liquidator of a company which had run premises in Grenfell Street known as the Grenfell Tavern.  A deed effecting that sale and purchase was signed on behalf of Players by Mr May and Mr McDermott on 12 August.  In any event the exact date of execution of the Agreement to Lease by Players and the guarantors is not material.  The letter P3/37 of Mr Mackie to Mr Mallett dated 15 August 1994 which enclosed the Agreement demonstrates that it had been executed, as I have outlined, by that date.  Mr Darren Cahill, who was also to be a guarantor, had not executed it, apparently because he was overseas. 

20. I am satisfied that the Agreement then was passed to Mr Grope who sent it back to Mr Mallett under cover of a “With Compliments” slip (P3/41) referring to a handwritten deletion and addition he had made on page 7 and advising that, taking into account those changes, the document was “in order for execution”.  Those changes appear on Exhibits P9 and D9 as follows:

    SIGNED by the LESSOR/  SUBJECT HOWEVER IN ALL THINGS TO

    LESSOR’S AUTHORISED AGENT     THE EXECUTION OF DARREN JOHN CAHILL BELOW

    By reference to the Seal Register of the plaintiff company, it appears that the Agreement was executed on behalf of the Lessor on 23 August 1994.  The document shows the signature and handwriting of Mr John Roche and Mr England.  Ms Roche gave evidence, which I accept, that she was present at the time of execution on behalf of the plaintiff.  Ms Roche said she went through the transaction with her father and Mr England and explained its import.  She was with the two men and dealing with this matter for about 15 to 20 minutes on that occasion.  The impact of execution by Clone against the handwritten qualification by Mr Grope is an issue in the trial to which I shall return.

    Admission of secondary evidence of the Agreement

21. Evidence at the trial called by both the plaintiff and the defendant was that the original Agreement could not be located.  On the plaintiff’s side that evidence came in the first instance from Ms Roche, who described searches she had made and searches she had instructed be carried out at both the Adelaide and Perth offices of ADC.  There is no suggestion that the original Agreement would have found its way to the Perth office of EDC.  There is some possibility that it would have been retained in Adelaide by ADC and I am satisfied that if that occurred, it has now been destroyed as part of a regular culling of old files.  The evidence of Mr Mark Hamilton of Messrs Grope Hamilton Budini, who was familiar with his firm’s policies as to destruction of files, satisfied me that had the original Agreement been retained on the firm’s file, it would have been destroyed along with the balance of the file some two and a half or three years ago.  Mr Mackie of Colliers similarly spoke of his firm’s policy in relation to destruction of files.  I accept that it was the practice of Colliers to make photocopies of the originals of such Agreements, once executed, and to send those to the relevant parties.  Indeed there is evidence that Mr Mackie did as much in this case.  A letter dated 30 August 1994 (P3/50) addressed to Mr Griffin at Players Bar, 110 Grenfell Street, appears to enclose a copy.  Mr McDermott, who ran the bar, told me that a letter addressed in that way would have been passed on to Mr Griffin.  Mr Griffin denies receiving it.   Further I am satisfied that in the normal course of events Mr Mackie would have retained the original on the Colliers file and that file would have been destroyed some years ago.  However, because of two events which I shall shortly mention, the usual practice might not have been followed. 

1. On the defendant’s side there was Mr Griffin’s evidence, which was to the effect that after the original Agreement was executed by Mr May, Mr McDermott and himself, he handed it to Mr McDermott and instructed him to take it, along with a cheque for the first month’s rental, to Mr Mackie’s office.  For his part, Mr McDermott recalled having taken the original Agreement and the cheque to an office in Pirie Street which I accept must have been either that of ADC or of Colliers.  Mr Griffin’s evidence was to the effect that he did not see the original Agreement again.

2. By letter dated 13 September 1994 to Mr Mackie (P3/59) Mr Griffin requested the “executed lease” from Colliers for the purposes of the application to the Licensing Court for transfer and removal of the Grenfell Tavern licence.  Mr Griffin’s evidence was that the Licensing Court did not require the original.  Mr Mackie said that he understood the request to refer to the Agreement to Lease rather than to the Lease itself.  Of course the Lease document was not then in existence.  By that time Mr Mackie had already (at least in his mind) forwarded to Mr Griffin and to the plaintiff a copy of the executed Agreement.  Certainly it appears that he complied with Mr Griffin’s request in some manner, but whether he sent the original Agreement or merely another photocopy remains unclear.  Mr Griffin said that it was not the practice of the Court to return documents provided in these circumstances. 

3. It is also unclear what, if anything, was done to obtain Mr Cahill’s signature on the Agreement.  Much later – in fact in March 1995 - Mr Brown sought to follow up that matter.  But one would have expected that something would have been done earlier – and at the time when Mr Mackie received back the original Agreement from Clone – to obtain that signature.  No document has been produced to indicate that steps were taken to that end and nor has any oral evidence been given on that topic.  That the original Agreement might have been lost in the course of attempting to obtain Mr Cahill’s signature is a possibility which I cannot discount.

4. The whole of the evidence on this topic leaves me satisfied that the original Agreement is not in the possession of the plaintiff or any firm which acted in its interests.  Having regard to the fact that in the normal course it would be expected that the plaintiff or its solicitor or leasing agent would have retained the original Agreement and measuring that fact against the evidence of Mr Griffin that he could not produce the document, I considered it appropriate to allow secondary evidence of it.  Ultimately it was in the interests of the defendants to have secondary evidence admitted because it was their application to rectify the Lease by reason of the asserted deletion in the Agreement.  However it was the plaintiff’s counsel who tendered, in the first instance, a copy of the Agreement.  At the time it was received there was no objection to its tender.

   Events leading to the execution of the Memorandum of Lease

5. I move then to consider the events preceding the execution of the Lease.  These events are of relevance to the question of whether there was any deletion to the Agreement prior to execution.  They are relevant to that issue principally in terms of Mr Griffin’s credibility.  They are also instructive as to the parties’ intention regarding the terms of the Lease, which is an issue because of the first defendant’s claim for rectification. 

6. In early February 1995, Mr Grope took annual leave.  Before doing so he handed his file to Mr Andrew Brown of the same firm, so that he might have conduct of it.  By that time Mr Grope had substantially drafted the Memorandum of Lease.  Mr Brown considered that draft against the Agreement, which, he said, did not have the word “NIL” crossed out.  He made some, unspecified, changes to the draft.  Early the following month Mr Brown forwarded the first draft of the Lease to ADC and to Mr Griffin for their consideration.  It is plain that Mr Griffin read the document fairly closely, as he wrote to Mr Brown on 15 March 1995 (P3/110) raising some eight matters in relation to which he either sought clarification or an alteration to the draft.  (The entirety of the letter is set out as Appendix C at the end of this judgment.)  The only one of those which concerned what would occur at the end of the Lease term was cl 4.16, which appeared in the same form in the Lease ultimately executed.  That clause related to long service leave and holiday pay and provided in effect that if for any reason the Lessor resumed possession of the property and continued the employment of persons formerly employed by the Lessee, then holiday and long service leave liabilities accrued to that point would be payable by the Lessee.  Mr Griffin’s concern was raised in the following terms:

   7.We do not believe that clause 4.16 is appropriate as would ordinarily apply in a hotel style lease due to the nature of the agreement reached. (sic) The same point is applicable to clause 7.9.

   Clause 7.9 required the Lessee during the term of the Lease and any extension to conduct the business under the same name and sign by which it was to be known.  Neither clause was ultimately changed.  (These and other relevant clauses are reproduced as Appendix B to this judgment.)  By letter of 22 March, P3/122,  Mr Brown responded to some of Mr Griffin’s concerns and advised that he was awaiting instructions on others.  It was in that letter that he raised the issue of Mr Cahill not having signed the guarantee to the Agreement.  Mr Brown enclosed a copy of the executed Agreement and asked that Mr Griffin arrange its execution and return.  In later correspondence Mr Griffin advised Mr Brown that he had asked Mr Cahill to attend at Mr Brown’s office to execute the guarantee.  There is no evidence that Mr Cahill ever did so.

7. On 30 March 1995 Mr Brown wrote to Mr Griffin enclosing the second draft Memorandum of Lease and further responding to Mr Griffin’s earlier expressed concerns.  It appears that Mr Griffin expressed no additional objection to the terms of the document.  Then on 3 April 1995 Mr Brown sent a further version of the document to Mr Griffin, in triplicate, for execution.  In his letter he drew attention to two amendments made to the document since Mr Griffin had last seen it, one dealing with the definition of the “demised premises” and the other strengthening the Lessor’s rights in relation to having the premises painted.  It appears that the Lease and the associated Deed of guarantee and indemnity were executed by Players and by Messrs Griffin, McDermott and Cahill and on behalf of Mr May prior to 7 April 1995.

8. On about 13 April, at a time before the plaintiff had executed the document, I find Ms Roche read it and isolated in it two provisions which she recognised departed from the terms of the Agreement and were contrary to the Lessor’s interests.  One of those related to the absence in the draft Lease of an option granted to the Lessor to purchase plant and equipment of the Lessee at the determination of the Lease and the second was that the draft Lease gave the Lessee an option to purchase the real estate at the end of the Lease term.  She took immediate steps to have Mr Brown correct those matters.  That was done by Mr Brown obtaining Mr Griffin’s consent to replacing certain pages of the Lease and having those pages initialled by the Lessee and guarantors.

   Provisions of Lease which contemplate Lessor taking over the business

9. There are a number of clauses in the Lease which, as a group, provide for the Lessor to be put in a position whereby it can take over and run the business of the Lessee, either upon expiration of the Lease term or upon earlier termination.  These include cl 2.14, which provides for such partitions and other installations as have been installed or altered by the Lessee to become the property of the Lessor upon termination.  No provision for the payment of consideration is made.  That clause is complemented by cl 2.26 which entitles the Lessor to request that the Lessee remove any alterations or additions made by the Lessee.  Then, as seen, cl 4.16 deals with long service leave and holiday liabilities in respect of employees of the Lessee at the end of the Lease.

10. Clause 7 requires the Lessee to maintain (cl 7.1) and not to jeopardise the liquor licence (cl 7.2) during the term of the Lease.  Clause 7.3 provides that the Lessee must renew the licence as required (seemingly under legislation, then current, an anachronism).  It further provides for the licence to be transferred to the Lessor at the Lessor’s request upon the expiration or sooner determination of the Lease.

11. Clause 7.4 prohibits the Lessee from transferring the licence without the prior consent in writing of the Lessor.  Clause 7.5 provides in similar terms a prohibition upon removal of the licence to other premises without such consent.  Clause 7.9 (as seen) requires the name, sign and effigy of the Lessee’s business to be “kept up” during the Lease period. 

12. Broadly speaking, cl 8 imposes parallel conditions upon the Lessee in respect of the gaming machine licence.  In particular, cl 8.8 requires the Lessee to transfer the gaming licences to the Lessor at the end of the Lease term (or sooner determination) upon the Lessor’s request.  There is no mention of the payment of any consideration. 

13. Clause 9 gives to the Lessor at the end of the Lease an option to purchase the Lessee’s plant, fittings, fixtures and utensils at a price to be agreed between the parties, and failing agreement, provides a mechanism for the appointment of a valuer to fix a price.

14. None of the clauses I have mentioned dealing with the liquor or gaming licences was the subject of any amendment from the time when the first draft Memorandum of Lease was provided to Mr Griffin and, leaving aside clauses 4.16 and 7.9 which Mr Griffin questioned, no other such clause was queried by him despite his having been provided with two drafts containing them, and being alerted to the possibility of error by Mr Brown’s request to amend the document by replacing certain pages.

    Relationship of Agreement and Lease

15. Mr Whitington QC put that the Agreement and the Lease were to be read together.  That would have the result, he suggested, that cl 7.3 of the Lease, providing for transfer of the licences to the Lessor upon termination, would be read in conjunction with cl 11(i) of the Agreement (with the word “NIL” struck out) so that a consideration was to be payable.  Only if I rejected that submission would I need to consider the counterclaim for rectification.  The basis of the submission was that cl 15 of the Agreement required the “formal” Lease to include those terms contained within the Agreement and that the Lease itself provided no “merger clause”.  Therefore, it was said, that in the absence of any express indication to the contrary, the two should be read together. 

16. Reliance for that proposition was placed on Palmer v Johnson (1884) 13 QB 351. There the defendant sold a property by public auction. One of the conditions of sale was to the effect that if there were an error or misdescription in relation to the property, that would not avoid the contract, but would rather give rise to a right to compensation. The plaintiff was the purchaser. Subsequently a conveyance of the property was executed. Some months later it was discovered that the rental payable on the property had been overstated. The question was whether the deed of conveyance had supplanted the preliminary contract and, the deed - being silent on the question of compensation for misdescription - extinguished the right to compensation. Bowen LJ, at 357, referred to the conventional wisdom to the effect that where a preliminary contract for sale leads to a formal deed of execution, it is generally the deed which is considered to contain the terms of the contract. But, he said, ultimately it was a question of fact as to what the parties’ true intention was. In that regard an important factor was whether the later agreement “covers the whole ground of the preliminary contract” and whether “it was intended to go on to any, and what, extent after the formal deed”. His Lordship found that the right to compensation survived execution of the deed. Fry LJ reached the same conclusion. He found nothing in the auction conditions to imply that the right to compensation was for a finite period only.

17. I do not think that this authority assists the defendants.  That is because the terms of the auction sale and the deed of conveyance, though directed to the same end, were designed for two different purposes;  whereas in the factual situation under consideration, there was almost an entire overlapping of the purpose and terms of the Agreement and Lease.  As Mr McNamara put it, when the parties executed the Lease they ceased to retain any intention embodied in the Agreement and formed instead an intention to be bound by the precise terms of the Lease.  Looked at slightly differently, the execution of the Lease was the performance of the Agreement to Lease.  Upon execution and registration of the Lease each party discharged their obligations under the Agreement.  Therefore the parties’ intention was that the Lease was to be an exhaustive embodiment of the parties’ rights.

18. The principle was adverted to in the following terms by James LJ in Leggott v Barrett (1880) 15 ChD 306, 309 in the context of parol evidence:

    … I think it is very important, according to my view of the law of contracts, both at Common Law and in Equity, that if parties have made an executory contract which is to be carried out by a deed afterwards executed, the real completed contract between the parties is to be found in the deed, and that you have no right whatever to look at the contract, although it is recited in the deed, except for the purpose of construing the deed itself.  You have no right to look at the contract either for the purpose of enlarging or diminishing or modifying the contract which is to be found in the deed itself.

    In his text Interpretation of Contracts (Sweet & Maxwell, 1989) at para 2.05, Kim Lewison refers to this as a rule of construction rather than a rule of law, therefore yielding to any contrary intention of the parties.  But, if there is such an intention, it is to be found in the antecedent agreement.  I consider that there is nothing in the Agreement which suggests a common intention that its terms should live on beyond execution and registration of the Lease.

19. The other case relied upon in this context was Ladbroke Group PLC & Anor v Bristol City Council [1988] 23 EG 125-128.  There the agreement to lease annexed a copy of the agreed form of the Lease.  The Court held it was entitled to look at the draft Lease to explain a provision in the Lease proper which was otherwise “quite inexplicable”.  There is no suggestion that reference to the earlier document would endure in these circumstances to entitle the Court to enlarge or modify the terms of the later one.

20. On the basis of this principle, and my findings based on the documents, and having regard to the time lapse between the Agreement and Lease execution and the changes in the arrangements between the parties in the meantime, I should have found, irrespective of the condition upon execution of cl 11(i) of the Agreement, that after its execution and registration (on 22 May 1995) the Lease became the sole embodiment of the terms of the parties’ agreement.

    The asserted deletion to clause 11(i) of the Agreement

21. I turn to the question of whether or not the word “NIL” was struck out from the Agreement by Mr Griffin at the time of execution by Players and the three guarantors, that execution occurring before execution by the plaintiff.

22. For the reasons which follow I find that there was no deletion to cl 11(i) at the time when the Agreement was executed by the plaintiff.  I reject the evidence of Mr Griffin and Mr McDermott that the word “NIL” was struck out at the time of their earlier execution of the document.  In making this finding I have not lightly disregarded the fact that Mr Griffin is a practitioner of this Court of some years’ standing, nor that it might be thought to be unlikely that Mr Griffin and Mr McDermott could each be mistaken about the matter.  Furthermore, I have reached the conclusion notwithstanding the quite striking fact, already alluded to, that the photocopies in the possession of both the plaintiff and Mr Griffin bore the same mark over the word “NIL”, suggesting that however the mark or erasure came to be there, it came to be there at a time before dissemination of these two copies, or, at least dissemination of one of them.  In view of the nature of this finding, I have thought it appropriate to require a quality of evidence beyond that usually called for when deciding matters on the basis of the civil standard of proof (see Briginshaw v Briginshaw (1938) 60 CLR 336). Indeed, in this matter the onus in relation to this particular issue would normally be cast on the defendants, and does lie there. However I have considered that I should not make such a finding without being positively satisfied as to it. My reasons for the finding follow.

23. As I have already indicated, cl 11(i) was in the same printed form in the second draft and in the third draft.  Mr Griffin received the second draft under cover of a letter of Mr Mackie dated 5 August 1994.  Mr Griffin sent the letter and the enclosed document (or one copy of it) to Mr May and Mr McDermott at Players Bar.  He wrote on the Colliers’ letter these words:

    Tim, Chris,
    - We need to discuss this.
    - I believe it is in order.
    (signed)

    Greg

    (See Exhibit P3/21)

    In evidence Mr Griffin denied that he had read the document closely.  In my view his endorsement indicates otherwise.  Unlike the Lease, the Agreement was a relatively short document and easy to read.  Clause 11(i) is fairly prominent as it appears under the heading “Special Conditions”.  Moreover, in my view it is unlikely that Mr Griffin would have convened a meeting with Mr May and Mr McDermott to consider and execute the Agreement had he not satisfied himself that it was indeed in order for execution.

24. I find critical parts of Mr Griffin’s account of the occasion on which the Agreement was executed, and his actions, to be inherently improbable.  As mentioned, Mr Mackie had delivered the third draft to Mr Griffin personally.  He had drawn Mr Griffin’s attention to the recent amendments, which were highlighted, and had asked him to initial those and indeed to initial each page of the Agreement.  In evidence Mr Griffin described how he sat at a table in a room at the Phillips Fox offices.  He had with him a file which contained the “Hokie Pokies” letter, his own letter to Mr Mackie of 27 July 1994 responding to the terms of that letter and the third draft.  He said he compared the “Hokie Pokies” letter with the terms of the third draft, reading out aloud the essential items.  He proceeded chronologically through the third draft in that way.  He drew attention to the highlighted amendments.  He said when he reached cl 11(i) that he recognised “one major discrepancy”.  He said there, introduced “for the first time”, was the concept of transference of the licences at the end of the Lease to Clone for nil consideration.  He commented to Mr McDermott and Mr May “they have tried to … pull a swifty here, this is not the deal” (t/s 1841).  He told the two men that “We should not agree to it”.  Mr May was in accord.  When the word “consideration” was explained to Mr McDermott he expressed his dismay.  Mr Griffin said “that we needed to correct that position” (t/s 1842) and put a line through the word “NIL”, using a pen having blue ink.  He said the three men proceeded to execute the document initialling each page, initialling the highlighted changes - but not initialling the deletion of “NIL” - and signing as guarantors and Mr May also on behalf of Players.

1. I find it curious that on Mr Griffin’s version, he leaped to the conclusion that the inclusion of the “new” provision was other than a mistake.  On his account of negotiations to that point, there was no reason to think that it was deliberate.  And if it were a mistake, then it was one which could be easily rectified.

2. Mr Griffin did not contact Mr Mackie or Mr Mallett in relation to the change he made, nor Clone’s solicitor, Mr Grope.  He denied knowledge of Mr Grope’s involvement.  That was despite the fact that on the face of Exhibit P3/21 Mr Grope’s name was plainly mentioned.  He did not instruct Mr McDermott to bring the deletion to the attention of Mr Mackie or anyone else.  He instructed Mr McDermott to forward a cheque with the document.  All those steps were taken (or not taken) despite the fact that Mr Griffin considered that disagreement over the subject matter of cl 11(i) could bring the deal undone (t/s 2132).  Notwithstanding that many people would have been available to witness the document at the premises of Messrs Phillips Fox, Mr McDermott procured the signature as witness of a Mr Birkinshaw, an employee of Players.  Mr McDermott told me that he did that of his own initiative, despite the fact that he deferred in all things legal to Mr Griffin. 

3. I find Mr Griffin’s account of these events untenable when the effect upon the document of what he did is examined.  The deletion would leave cl 11(i) providing that the licences would be transferred “for consideration”.  It is hard to imagine a commercial solicitor being satisfied with such a provision.  It is not really to the point in my view that a court might strive to give some meaning to such a term.  Plainly the time to make the clause viable was before execution.  Moreover, two other clauses in the Agreement, namely cl 7 and cl 11(j) provided a mechanism for resolving future disputes.  The latter of those was one of the highlighted amendments.  Plainly the Lessor would have required a similar provision in the event that it agreed to the amendment to cl 11(i).  Furthermore, the claimed deletion did not bring the clause into conformity with what Mr Griffin claimed were the terms agreed between himself and Mr Mallett.  According to Mr Griffin, nothing had been said about an option being afforded Clone to buy the licences.

4. As mentioned, according to Mr Griffin, Mr Mallett had indicated that “such plant and equipment as we put in remained our property” (t/s 1842).  That was not consistent with cl 11(j) and (k) of the Agreement which gave the Lessor an option to purchase the Lessee’s “Plant, Equipment and Fittings” upon the expiration of the Lease and provided that all other property forming part of the structure of the premises and placed on the premises by the Lessee would become the property of the Lessor for no consideration.  Yet no alteration was made to those terms to bring them into conformity with what it was claimed Mr Mallett had outlined. 

5. Whilst Mr Griffin and Mr McDermott claim to have privately expressed their anger and dismay at the “swifty” which the Lessor had attempted to “pull”, no communication of those emotions took place until some ten years later when a letter from the Mr Griffin to the plaintiff’s solicitor referred to “sneaking” a rogue term into the Agreement.  (See Exhibit P6/38.)

6. When it came to execution of the Memorandum of Lease, Mr Griffin signed it himself and must have approved it for the execution of his clients, Messrs May, McDermott and Cahill and Players even though it contained a clause, namely cl 7.3, which was essentially similar to special condition 11(i) as it appeared in the second and third drafts of the Agreement.  He apparently approved it, despite having carefully examined the draft Lease and having made a number of criticisms of it in his letter of 15 March 1995 to Mr Brown.  (See Appendix C.)  Mr Griffin’s explanation for that in evidence (t/s 2133-4) was that he did not read the Lease at that time as creating an obligation upon Players to hand over the licences at expiration.  I cannot accept that explanation. 

7. Mr Griffin is an experienced commercial solicitor who appeared to me to have a good memory.  One would have expected him to be extra vigilant about the provision governing the disposition of the licences on termination and as to whether consideration was payable, if his account of events relating to the word NIL were true.  In fact, the scheme of the Lease as a whole was consistent and compatible with the Agreement (with NIL intact).

8. I have concentrated on Mr Griffin’s evidence on this topic, as opposed to Mr McDermott’s, because it is of far greater significance.  He had an understanding superior to Mr McDermott’s of the negotiations, the effect of the documents and the common form of such Agreements.  I was not really assisted by Mr McDermott’s evidence.  I found it unpersuasive.  He claimed a good memory of the occasion when the Agreement was signed, but that was in contrast to his memory of events outside that occasion; although, I noted that he did not attribute to Mr May a single statement or reaction during that occasion.

9. The first time this issue of the striking out of NIL was mentioned was in the course of this litigation.  In its original Defence to this action (Exhibit P36), filed 27 April 2004, Players admitted, in effect, that the Lease contained the various terms and conditions relating to the tenancy.  It was only in the later Amended Defence and Counterclaim that the issue of rectification on the basis of the Agreement was raised and the earliest comparable assertion that the transfer of the licences at the end of the Lease would be accompanied by a payment of “compensation” (rather than “consideration”) was in the letter of 23 April 2004, written by Ms Bell of Messrs Griffin Hilditch, Exhibit P6/7. 

10. Each of Mr Grope, Ms Roche, Mr England and Mr Brown, who had good reason to examine the original Agreement at various times, said in evidence that the word “NIL” had not been scored out when the document was in their hands.  I found the evidence of the first three named witnesses on this point to be compelling.  Mr Grope was examining the document in his professional capacity prior to its execution by his client and I accept that had the deletion been present he would have seen it.  I found Ms Roche to be an impressive witness.  That she examined the Lease in detail during the following year and found important errors in it demonstrates to me the meticulous approach she took to her work and to this transaction.  I found Mr England’s evidence to be impressive as well.  He too was involved in the transaction as representative of branches of the Roche family and I accept that he took his responsibility seriously and applied his mind to the job at hand.  Had the deletion been there to be seen, I am satisfied he would have seen it.  Mr Brown’s evidence I found less persuasive only because he had such limited recollection of any of his attendances in relation to the preparation of the Lease.  However, plainly, he read the Agreement to Lease, a copy of which must have been on his file, and one would have expected him to note any deletion made to it, particularly if it were not initialled. 

11. It was put to me in submissions that the absence of Mr May’s evidence supporting that of Mr Griffin and Mr McDermott as to the deletion was significant.  It was suggested that an adverse inference could be drawn against the defendants by that reason.  Whilst I agree that such an inference is available and that I could have taken the view that Mr May’s absence rather undermined the evidence of Mr Griffin and Mr McDermott, in circumstances where Mr May has not joined in the representation of Players and the other directors and where the evidence is that he previously withdrew from the business of Players, I am not prepared to place any weight on the absence of any account of the execution by him.

12. I mention another matter upon which I have ultimately placed no weight.  During 2003 and 2004 Mr Griffin undertook what might be described as extensive efforts to secure the consent of Clone to a subleasing of the premises to various candidates and the removal of the licences elsewhere.  This was done in the context where Players was losing money at the nightclub.  The two goals towards which Mr Griffin worked were not necessarily linked.  The losses at the nightclub could conceivably have been addressed by new management.  Indeed Mr Griffin put forward various candidates who, he asserted, could turn the business around.  But Mr Griffin himself linked the two issues as a joint proposal.  That he worked so fervently on several fronts to achieve both goals seems to me to be inconsistent with his asserted understanding that at the end of the Lease the licences would simply go to Players.  On the contrary, the steps he took suggest to me that he realised throughout that unless he secured the plaintiff’s consent to removal of the licences during the currency of the Lease, the licences would be lost to Players entirely.  He began working towards his proposal in about May 2003.  It is hard to see why he would have pursued his goal at such cost to his time and energy if he truly believed that the licences would stay with Players at the expiration of the Lease.  Nevertheless, this was not a matter which was taken up with Mr Griffin in cross-examination and recognising that there may be matters bearing on it which have not been addressed in evidence, I have not placed reliance upon it.

13. I have gone into the issue of the content of the Agreement upon execution in some depth because a large proportion of the evidence called during the trial and the submissions made were addressed to that issue.  But there are other difficulties with this part of the Players’ Defence and counterclaim.

    Effect of Mr Grope’s handwritten endorsement

14. As mentioned, after execution by Messrs Griffin, May and McDermott the Agreement found its way back to Mr Grope.  He made his handwritten change on the Lessor’s execution clause and sent the document to the plaintiff, advising that it was appropriate to execute it.  It is clear that execution by the plaintiff was subject to the qualification endorsed by Mr Grope. 

15. Counsel on both sides put quite extensive submissions to me as to the effect of this conditional execution.  Mr McNamara QC put that the plaintiff’s execution and acceptance of the Agreement was subject to what he called a “suspensive condition”, being that Mr Cahill execute the guarantee.  He submitted that since that condition was never satisfied, the Agreement never became operative.  He contrasted such a condition with conditions which are part of the contract itself which might apply to performance of it, for example, a clause making the contract subject to the obtaining of finance. 

16. This dichotomy was referred to by Mason J in Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 551. His Honour was in dissent as to the result in that case but, not as I read it, on any question of principle. He spoke of the:

    … obvious difference between the condition which is precedent to the formation or existence of a contract and a condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment.  In the first category the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled.  In the second category there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non-fulfilment entitles him to terminate.

    See also Davis JLR, Seddon NC and Masel G, “Contract” in The Laws of Australia (Lawbook Co, 2003).

17. In support of his argument that the condition under consideration should be placed into the first category Mr McNamara referred to Pattle v Hornibrook [1897] 1 Ch 25. In Pattle v Hornibrook an Agreement for Lease executed by the plaintiff was presented to the defendant.  He signed the document but upon doing so gave instructions to his solicitors not to complete the transaction until additional names were joined as security.  None were so joined.  It was held by Stirling J that no contract had been entered into and that the true characterisation of what had been done was that the defendant had refused to enter into the Agreement as written, but had made a counter-offer.  Thus the qualification made at the time of execution was held to prevent or suspend the establishment of legal relations, pending fulfilment of the condition.

18. Mr McNamara put that the very form of the Agreement indicated an expectation that all four men would become guarantors.  In Neill v Hewens (1953) 89 CLR 1 the plaintiffs executed a contract to buy land from two executors. The contract made provision for the signature of both executors. One executor, Hewens, refused to sign the contract unless the other executor, Bradford, first signed it. When Bradford’s signature had been obtained Hewens still declined to sign. The High Court held that no contract had been made. It was said that the statutory power of sale conferred upon executors in the case of realty should be exercised by both and that when Bradford executed the contract the presumption was that she intended to bind herself only upon her co-executor also executing the instrument, his signature being regarded by all parties as essential.

19. As I understand it, the plaintiff relies on this case as demonstrating that in circumstances where on both sides it was contemplated that all the named guarantors would sign the Agreement, the failure of one guarantor to sign would call into question the enforceability of the contract, not only against those guarantors who did sign, but also as against the principal parties.  The handwritten qualification written by Mr Grope and against which the plaintiff executed the document, served to reinforce the fact that the plaintiff was only prepared to bind itself to the Agreement (and did so bind itself) on the footing that Mr Cahill did in fact execute it.  And so it was put that this matter went squarely to the intention to create legal relations, as opposed to a condition related to the performance of the contract.

20. Mr Whitington QC argued that Mr Grope’s endorsement should be read only as stipulating a condition precedent to the performance of the contractual obligations which, since the condition protected the plaintiff, could be waived by the plaintiff.  In any event he submitted that the underlying Agreement was in fact performed by the contracting parties and at no stage did Clone purport to terminate the Agreement.  Further, he suggested that even if (against his argument) the provision of Mr Cahill’s signature started as a condition precedent to contractual relations, it ceased to be so and became merely a condition of performance upon the parties commencing to perform the contract.  He cited Kennedy v Vercoe (1960) 105 CLR 521. He pointed to Mr Brown’s letter to Mr Griffin of 22 March 1995 (P3/122) in which Mr Brown sought Mr Griffin’s co-operation in having Mr Cahill sign the Agreement, as demonstrating every intention to embrace the Agreement.

21. As further evidence of the parties’ intentions to be bound by the Agreement, Mr Whitington cited Clone’s agreement and grant of consent to Players to transfer and remove the relevant liquor licence to the property (P3/60), the parties’ decision to amend the Agreement in relation to the agreed commencement dates of the Lease and the obligation to pay rent thereunder (P3/67), Players proceeding with plans for substantial building works on the property with Clone’s consent, and the parties’ entry into the Lease on the basis of their respective understandings of what the Agreement required.  His submission was that the parties clearly conducted their affairs on the basis that pursuant to the Agreement Clone was under an obligation to grant the Lease and Players was under an obligation to accept it.

22. He also pointed to Ms Roche’s later insistence that the draft Lease be amended in several respects to conform to the Agreement as manifesting an intention on the part of the plaintiff to act on the Agreement.

23. As an alternative analysis Mr Whitington suggested that Mr Grope’s endorsement along with execution by the plaintiff, could be seen as a counter-offer, and that Players’ acceptance of it was demonstrated by performance.  A counter-offer might be an apt description.

24. In my view the qualification written into the Agreement by Mr Grope against which his client signed is a matter which goes to the formation of the contract itself.  The very words of the stipulation dictate that interpretation.  I do not see that part performance by the parties says otherwise;  nor that it perfects the agreement.  On the defendants’ side there was always confidence that Mr Cahill would sign and so confidence in proceeding.  On the plaintiff’s side the assurances of the defendants were accepted and in the meantime they were not acting to their detriment.  The important time from the plaintiff’s viewpoint was the time when the Lease was ready for execution.  If Mr Cahill signed, along with the other guarantors, then his failure to sign the Agreement would be of no consequence.  Until that point the plaintiff was, in my view, entitled to claim that no contract existed. 

25. Of course, the execution of the Lease proceeded smoothly, and the failure of Mr Cahill to sign the Agreement receded into the past.  It now becomes important in a way entirely outside any context which the parties could have earlier contemplated.  But it seems to me that if, at a point immediately prior to the execution of the Lease by Players and the guarantors including Mr Cahill, the Agreement was unenforceable against Clone – which I find it was – then it remained so.  Accordingly, on this basis, I find that the state, upon execution, of cl 11(i) of the Agreement is ultimately of no importance, as the Agreement did not take effect.

26. The first defendant’s counterclaim for rectification, by which it is sought to have cl 7.3 of the Lease rectified to conform to what it suggests were the terms of the Agreement, relies for its success on a finding that “NIL” was deleted by Mr Griffin before execution of the Agreement.  (In fact the rectification sought is more extensive than that, but the focus of the case, and the high watermark of the case in rectification was in respect of cl 7.3.)  The first defendant relies on the Agreement as a complete antecedent contract evidencing the parties’ continuing common intention that at the end of the Lease term the licences would go to Players, without any payment of consideration.  In respect of its case in rectification the first defendant takes on a heavy burden.  Players must point to “convincing proof” that the Lease does not embody the final intention of the parties:  Pukallus v Cameron (1982) 180 CLR 447. “The omitted ingredient must be capable of such proof in clear and concise terms”: Wilson J (with whom Gibbs CJ agreed) at 452.

27. I remain unsatisfied that there ever was such a common intention.  Indeed, on the plaintiff’s side, from at least the time of Mr Grope’s involvement, I am satisfied that the intention was that the licences would remain with the premises at the termination of the Lease.  Moreover, in light of my finding that there was no deletion from cl 11(i) of the Agreement, the foundation of the rectification claim is absent, and the claim must fail.

28. For all these reasons I find that (subject to any contrary agreement) cl 7.3 of the Lease required Players, upon termination and on demand by the Lessor, to transfer to the Lessor such liquor licences as were then existing and in force in respect of the premises.  Clause 8.8 imposed a similar obligation in relation to gaming machine licences.  In respect of both types of licence, no consideration was payable for such transfer.

1. I find that a demand was sent on 24 February 2005 in respect of both licences: P2/278.  Again, subject to the issue of consent to earlier removal, the obligation was enlivened.  By agreement, though, the licences were suspended pending the outcome of these proceedings.

   Issue of consent to removal of licences

2. The defendants claim that during the currency of the Lease they obtained, in accordance with provisions of the Lease, the Lessor’s “prior consent in writing” to remove the hotel and gaming machine licences from the premises.  On my reading of the Lease, if that is so, then at the end of the Lease term cl 7.3 and 8.8 had no work to do. 

3. Clause 7.5 of the Lease, entitled “Licence Removal”, provides that the Lessee shall not remove the hotel licence to other premises without the Lessor’s prior written consent.  Clause 7.4, entitled “Licence Transfer”, contains a similar provision in respect of transfer.  Removal and transfer of licences are concepts identified in the Liquor Licensing Act 1985 (ss 65-72) and repeated in the Liquor Licensing Act 1997 (ss 60-65).  Clause 8.5 of the Lease contains an equivalent prohibition on the transfer of a gaming machine licence.  But there is no similar provision in relation to removal as there is no equivalent concept of removal in the Gaming Machines Act 1992.

4. Under the Gaming Machines Act a person who holds an hotel licence is eligible to hold a gaming machine licence (s 15(1)).  Under s 19 an applicant must satisfy the Commissioner that he is a fit and proper person to hold the licence and, in the case of a company, that each person who occupies the position of authority is, similarly, fit and proper.  Section 28 provides that where an hotel licence is transferred, any gaming machine licence held by the transferor may, with the consent of the Commissioner, be transferred to the transferee of the hotel licence.  By virtue of s 14, a gaming machine licence authorises the licensee to deploy the gaming machines on the premises designated in the licence and to conduct gaming on those machines.  It follows that upon an order for the removal (as opposed to transfer) of an hotel licence to other premises, any associated gaming machine licence would (usually) lapse:  s 34. 

5. In 2000, a freeze on gaming machines was implemented by the Gaming Machines (Freeze on Gaming Machines) Amendment Act 2000 (No 85 of 2000). There was a further amendment by No 5 of 2002 and an extension of the freeze by No 5 of 2003 and No 15 of 2004. These amendments provided an exception to the freeze such that the holder of a gaming machine licence who surrendered that licence following removal of the associated liquor licence to new premises in the same locality, could apply and would be granted a new gaming licence at the new premises. It was probably this scheme which the defendants planned to utilise in relation to the gaming licence at the Planet nightclub. That exception was available to relevant applicants at least until the end of February 2005.

6. The letter which on the defendants’ case amounts to “prior consent in writing” for the removal of the licences – or at least an agreement to provide such consent - is one which was written by Mr Marker, General Manager, ADC, on 30 October 2003.  The plaintiff asserts in respect of its letter that it was merely an agreement in principle to Mr Griffin’s proposal in respect of removal, and that in any event the conditions or provisos listed were not met.

7. In order to reach a conclusion about the interpretation of the letters, it is helpful to understand the context in which the correspondence passed.

8. Since 1998 there had been an issue, if not a dispute, between the plaintiff and tenant over the condition of a large part of the roof of the premises, and as to the extent of the tenant’s obligations in relation to addressing it.  The issue came into focus more sharply in 2002 in the context of building insurance.  The concern was not only as to the iron sheeting, but also as to the purlins and trusses comprising the roof structure.  By the end of 2002 both the plaintiff and Players were in possession of reports, which both sides treated as creditworthy, specifying work which was required to be done to the roof.  The condition of the iron sheeting was addressed in reports provided by Incospec & Associates and the structural condition of the roof, addressed by Messrs Connell Mott MacDonald (“Connells”).  At the end of November 2002 Mr Griffin met with Mr Mead (representing the plaintiff) and Mr Belperio and Mr Kennedy of Connells.  There was discussion on the topic of work needed to remedy the condition of purlins and trusses in certain parts of the roof.  Mr Griffin said that remedial work would be commissioned by Players using a builder known to him.  As to the roof sheeting, Mr Griffin acknowledged the need for its condition to be addressed, but said he was exploring options in relation to how that might be done. 

9. By March 2003 the work had not been done.  Late in that month Ms Roche and Mr Lawry of ADC met with Mr Griffin to discuss the matter.  Mr Griffin took the position that Players was not liable to fix the roof sheeting because it was unlikely to cause leaking in the next two or three years.  However, by reference to the Lease, Ms Roche argued that an obligation upon Players was clearly established.  In the face of that argument Mr Griffin agreed, in my view, promptly, to address the problem and said he would explore whether that could be done by coating the sheeting rather than replacing it.  I accept that he also acknowledged that he had previously agreed to fix the purlins and trusses and would now follow up that matter.  I find that he agreed to advise the plaintiff of what exactly he would do on both fronts.

10. No specifications of proposed work were provided to the plaintiff.  However, during April or early May 2003 a builder engaged by Players, Mr Michaelidis, installed new purlins in part of the roof referred to as the VIP area.  He did so by fastening the new timbers to the old ones.  He approached the task in that way because the old roof sheeting was too old and corroded to be removed and placed upon the new purlins.  When Mr Kennedy of Connells inspected the work in May 2003, without the benefit of specifications, he was unable to ascertain whether the work was satisfactory.  Later Mr Griffin instructed Mr Michaelidis to undertake the installation of the truss ties specified by Connells.  That work was not commenced until at least mid-November 2003.  Consequently, throughout 2003 the condition of the roof and the need for work to be done on it was a topic of contention and a matter of dissatisfaction to the plaintiff.  It is against that background that the run of correspondence and meetings culminating in the asserted written consent of 30 October 2003 needs to be assessed. 

11. I mention what seem to me to be the significant features of those communications.  On 21 March 2003 Mr Griffin wrote to ADC (P5/15) in respect of the roof.  He put the argument (mentioned a moment ago) that there was no obligation to address the maintenance issues in respect of the roof, especially since the Lease was to expire in September 2006.  (In fact it was to terminate in February 2005.)  He mentioned that if the Lessor were to extend the Lease then the Lessee might take a different attitude.  By this time, then, he was looking to events beyond the term of the Lease.  I have already referred to the meeting between Mr Griffin, Ms Roche and Mr Lawry on 25 March, at which Mr Griffin appeared to relinquish his position that the Lessee was not obliged to complete the work.

12. On 27 May 2003 Ms Roche and Mr Lawry met with Mr Griffin, at the restaurant in the Planet nightclub.  That meeting was convened at Mr Griffin’s request to discuss the possibility of assigning the Lease.  At that meeting Mr Griffin mentioned the names of several persons associated with the Heaven nightclub as possible assignees.  He sought to know the attitude of Clone to such an assignment.  In a file note relating to that meeting made by Mr Lawry (P5/25) is the entry “GG will relocate Gaming and Liquor Licence therefore only transferring Entertainment Venue Licence to ACE”.  ACE meant Adelaide City Entertainment, which was said to be the entity associated with the Heaven nightclub.  Whilst Ms Roche said she had no recollection at that meeting of discussion of removal of the licences, I am satisfied that the topic was raised by Mr Griffin. 

13. Two days later the same three persons met again.  This time the meeting was instigated by Ms Roche who wished to advise Mr Griffin that the persons mentioned were not acceptable to the plaintiff as assignees of the Lease.  At that meeting Mr Griffin handed to Ms Roche his letter of 29 May (P5/29) which gave more information about one of the persons Mr Griffin was proposing as an assignee.  In that letter Mr Griffin referred to obtaining an order from the Licensing Court for the removal of the licences to other premises.  It is clear therefore that what was being proposed by Mr Griffin was, on the one hand, that Players wished to either assign the Lease or grant a sublease and, on the other hand, that it wished to remove the hotel and gaming licences to other premises. 

14. The question arises whether either Ms Roche and Mr Lawrie, or even Mr Griffin at that time appreciated that the licences could not be removed without Clone’s consent.  I am satisfied that Ms Roche did not appreciate that.  Indeed, she gave evidence, which I accept, that at a chance meeting with Mr Griffin in July/August 2003 (“the Chesser Café meeting”) she first became conscious of the fact that something of significance in relation to the licences was being proposed and that she needed to apprise herself of the Lease provisions governing the licences.  However, she did not attend to it immediately.  Indeed, I find that until about 9 December, when, following a request from her,  Mr Marker examined and directed her attention to specific provisions of the Lease, they remained unaware of those provisions.  (In Ms Roche’s case it was a matter of having forgotten them.)  As to Mr Griffin, his reference in the letter of 29 May to removal of the licences does not suggest that he saw the process as being dependent on anyone apart from himself and the Licensing Court.  However, he said in evidence that he was aware that during the currency of the Lease Players needed the Landlord’s consent to remove the licences and that seems likely to have been so.

15. The matter of a sublease dragged on.  On 10 June 2003 Mr Griffin wrote to Ms Roche advising her of a possibility that a Port Pirie person might be interested in taking the Lease.  Mr Griffin discussed that person’s credentials.  He said that person had been acquainted with Players’ intentions in respect of removing the hotel and gaming licences to other premises.  By late July a person called Walsh was now the person proposed to take over the Lease.  Mr Walsh’s candidacy was discussed at the Chesser Café meeting.  Mr Griffin explained that if Mr Walsh were successful he would apply for an entertainment venue licence (“EVL”) for the Planet premises.  Mr Griffin explained to Ms Roche the nature of such a licence.  Mr Griffin said that he would be removing the licences to premises elsewhere in the city mile.  (There is a conflict about exactly where but ultimately it is of no consequence.)  Ms Roche advised Mr Griffin that knowing nothing about licences, she would need to get legal advice.  At that meeting there was also a discussion about the fact that Players was behind in payment of rent and about the on-going roof issue. 

16. On 13 August 2003 Mr Griffin wrote to ADC.  He put his own view as to the viability of financial forecasts provided by Mr Walsh in respect of his taking the Lease.  He confirmed that the current guarantors to the Lease would remain in that position.  He briefly outlined Mr Walsh’s plans for the gaming lounge area after the machines had been removed and some general plans Mr Walsh had for painting the premises.  Further, he asserted that the rectification of the roof structure was “now virtually finished” and that he proposed that over the next four to six months the damaged roof sheets would be either treated or replaced by Players.  Mr Griffin stressed the need to act quickly if Mr Walsh were to establish himself in time to enjoy the end of year trading period.  Against that background he said:

    That being so, I would be very grateful if you would let us have the position of ADC as to whether it will accept [Walsh] as the operator of the venue and thereafter permit Players Pty Ltd to remove the hotel and gaming machine licences to alternative premises.  I have now made a qualified offer to lease much smaller premises in the south-east of the city and as such would be very grateful if you would let us have your response to the matters previously raised at your earliest convenience. 

17. It turned out that the alternative premises were to be leased by Fairtown, to whom the licences were to be sold, and that the premises were in Victoria Square, but, ultimately those matters do no more than bear – adversely in my view – on Mr Griffin’s credibility.

18. Ms Roche gave evidence, which I accept, that subsequent to receiving that letter she telephoned Mr Griffin, advising him that Mr Lawry had left the employment of ADC and that she would need to review the situation relating to the proposed sublease.  She arranged a meeting with Mr Griffin but that was cancelled on her instructions.  Some days after speaking with Mr Griffin, and on 1 September 2003, Ms Roche sent a letter by facsimile to him.  The body of that letter, P5/65, is set out in Appendix E.

19. In essence, Ms Roche asserted that until all rental arrears were made good and until at least the structural work on the roof was carried out there was no point meeting to consider any “proposals regarding any aspect of the future operation” of the premises. 

20. On 25 September a further letter (P5/73) was written on behalf of the plaintiff in relation to rent and sent by facsimile to Players.  A cheque for the outstanding amount was later delivered to the ADC offices.  Mr Griffin wrote again to Ms Roche on 9 October 2003, P5/74.  He advised that the roofing works would commence in the first week of November.  Further, he said “that smaller alternate premises have been located within the locality and that we are now ready to make application for the removal of the hotel and gaming machine licence”.  He said that despite the delay Mr Walsh was committed to the enterprise and Mr Griffin wished to know when Ms Roche might meet Mr Walsh to make her own assessment of him. 

21. On 20 October 2003 Mr Griffin again wrote to Ms Roche.  The body of that letter, P5/107, is set out in Appendix F.  In that letter Mr Griffin essentially gave an update as to Mr Walsh’s position and his own with respect to taking “smaller premises within the locality”.  He said that the whole proposal had now “reached a critical stage” and he sought a speedy response.  On the same day that letter was written, the new General Manager of ADC, Mr Marker, commenced work.  He discussed the Griffin letter with Ms Roche and indeed showed her a draft response, which she settled.  (Ultimately the plaintiff did not seek to argue that the letter was written without Clone’s authority).  That letter of response bears the date 30 October 2003 and it is Exhibit P5/119.  It is set out hereunder.

    (Letterhead of Adelaide Development Company)

    30^th October 2003

    Players Pty Ltd
    C/o Griffins Hilditch Lawyers
    PO Box 2077

    ADELAIDE   SA   5001

    Attention:  Mr Greg Griffin

    Dear Greg

    The Planet Nightclub – 73-79 Pirie Street

    We refer to your letter faxed to our office on 20^th October 2003, requesting approval to sub-lease the above premises.

    Clone Pty Ltd would only consider accepting your proposal on the basis that Players Pty Ltd remains as Lessee and that all conditions of the existing lease remain in force.  We would not object to Players Pty Ltd sub-letting the premises to Mr Walsh and transferring the gaming machine licence to other premises, provided that:-

    1.     All accounts and correspondence continue to be directed to Players Pty Ltd.

    2.Players Pty Ltd remains responsible for the continuing compliance with the conditions of the lease.

    3.The existing personal guarantees remain in place.

    4.Cash security equivalent to 6 months rental is lodged with our office.

    5.All outstanding building works are satisfactory (sic) completed, by the Lessee at the Lessee’s cost.

    6.A schedule of general maintenance and building works for the remainder of the lease period is provided to the Lessor.

    7.A satisfactory proposal is provided for the refurbishment of the gaming room after the gaming machines are removed.

    Yours sincerely

    (signed)

    Ian Marker
    General Manager

    Adelaide Development Company

22. There is no doubt that Mr Marker’s letter lacks clarity.  However I do not consider that on a fair reading of it, particularly against the background of the correspondence and communication leading up to it, it could be considered to be an indication of Clone consenting to removal of the licences, or agreeing to consent on certain conditions.  On its own terms the letter purported to respond to a request for approval to sublease the premises.  The balance of the letter is written in terms suggestive of an attitude likely to be expressed at a future time.  I consider the use of the past tense subjunctive “would” in the two critical sentences preceding the seven stipulations or conditions plainly indicates that what is being expressed is an intimation or a contingent view or an hypothetical attitude which in all probability would be confirmed at a future time if the seven stipulations were addressed. 

23. The Oxford English Dictionary (2^nd edition, Clarendon Press, 1989) includes among its definition of the word “would”:  the feeling or expression of a conditional or undecided desire or intention.  The Australian Concise Oxford Dictionary of Current English (3^rd edition, Moore B (ed) Oxford University Press, 1997) is to similar effect.  “Would” is the subjunctive tense of the word “will” used substantively.  It denotes the conditional mood in the present context.  The expression of an undecided or uncertain future position is one of the common usages of the subjunctive tense.  As such, the use of the word “would” rarely binds a party as the word relates only to a future intention or desire reliant on the outcome of other factors.  Applying the Oxford definition to Mr Marker’s words, they do not give rise to any firm or settled offer.  The use of the word “would” in the first sentence of the second paragraph of the letter expresses such a conditional or undecided desire or intention.  The effect of the sentence is that only in the event that the matters in the latter part of the sentence are fulfilled or occur, would Clone then be disposed to form its final position in relation to considering accepting the proposal.  The second sentence similarly expresses such a conditional or undecided intention.  Where all of the conditions listed in the letter are met, Clone would then be in a position to formulate its final decision, stating in the interim only that “it would not object”.

24. The use of the verb “consider” in the first sentence further confirms that no decision has been made or can be communicated at the time of writing.  The word “consent” is not used in the letter. 

25. The proposal was always a single one with two elements:  the sublease coupled with removal of licences.  My view is that the use of the word “consider” applies to all aspects of what was proposed, and not just to the sublease.  I find that Clone neither consented to the sublease and removal of licences, nor agreed to provide its consent on conditions.

26. Whilst I have set the letter into the context of prior discussions and issues, my view as to interpretation of the letter is primarily based on the words used.  When the letter is placed in the context of the communications leading up to it – as a reader in Mr Griffin’s position would have done – then the meaning is even clearer.  Ms Roche’s facsimile letter of 1 September had advised Mr Griffin in the clearest terms that no consideration of his proposals would be given until the roofing work was completed and the rent brought up to date.  Whilst Mr Griffin’s letter of 20 October had foreshadowed that the completion of the roofing work was close by, there had been many similar intimations and the landlord had not received any inspection reports from either Connells or Incospec to confirm that the work had been satisfactorily completed. 

Certificate of Title The whole of the land comprised in Certificates of Title Register (illegible)  Books Volume 5161 Folios 237 and 238 (hereinafter referred to as   the “Demised Premises”)

  Commissioner of Stamps

  S.A. Stamp Duty Paid             $1150.

  Original Stamped           (Copy 2 of 2)

  ?:05:95  10:31:33                026012/1

  Annual Rental ($115000.00)

  Lease

Estate of Lessor        In Fee Simple

(See Note 3)

Encumbrance(s)         Nil

(See Note 4)

Lessor                  CLONE PTY LTD – 060 208 602 of 83 Pirie Street Adelaide SA 5000

Full Name and Address   (hereinafter referred to as the “Lessor”)

Lessee  PLAYERS PTY LTD ACN 056 340 884 of C/- Phillips Fox, 19-29

Full name and Address     Young Street Adelaide SA 5000 (hereinafter referred to as the
(See Note 5)              “Lessee”)

Term of Lease     FOR A TERM OF 10 YEARS (hereinafter referred to as “the said term”)

(See Note 6)
  COMMENCING ON THE   1^ST     DAY OF     MARCH    1995
  28^th

  EXPIRING ON THE              LAST  DAY OF    FEBRUARY 2005

rent and manner         The annual rent shall be the sum of ONE HUNDRED AND
of Payment               FIFTEEN THOUSAND DOLLARS ($115,000.00) per annum
(or Other                 payable in equal monthly instalments of NINE THOUSAND FIVE Consideration)           HUNDRED AND EIGHTY THREE DOLLARS AND THIRTY THREE   CENTS ($9,583.33) (subject to sub-clause 4.10 hereof) each   always in advance the first such instalment to be paid on the 1^st of   May 1995 and thereafter monthly during the said term and any       extension or renewal thereof (subject in all respects to the   provisions for increase of rental hereinafter contained).

Operative Clause              Not reproduced.

Define the land being     Not reproduced.

leased incorporating
the required easement(s)
etc where appropriate

Consents of              Not reproduced.

mortgagees and
sec 47 planning act
certification

it is covenanted by and between the lessor and the lessee as follows:

COVENANTS OF LEASE

Clauses 1-2.3 not reproduced.

2.4     Assignment & charge

Not to charge mortgage assign transfer demise sublet or part with possession of the demised premises or any part thereof or by any act or deed procure the demised premises or any part thereof to be assigned transferred demised sublet or put into possession of any person or persons and the Lessee shall not assign transfer demise sublet or part with possession of the demised premises or any part thereof without the prior consent in writing of the Lessor which consent shall not be unreasonably withheld PROVIDED THAT the Lessee is not then in default in the performance and observance of any covenant or agreement on the Lessee’s part herein contained AND PROVIDED FURTHER THAT the Lessor shall not be required to consent to an assignment to a limited company (which consent shall not be unreasonably withheld) unless the directors thereof being persons acceptable to the Lessor join in the assignment or transfer as sureties for the company and jointly and severally covenant with the Lessor to pay the rent reserved and other sums of money made payable by this Lease and any damages accruing to the Lessor by reason of the failure of the company to observe and perform the Lessee’s covenant and conditions herein contained AND FURTHER PROVIDED that:

2.4.1Any underlease or sub-letting agreement entered into by the Lessee with the consent of the Lessor shall include similar provisions to those contained herein relating to the premises underleased or sublet;  and

2.4.2Suitable documentation is produced to the Lessor evidencing the nature character and reputation of the person or entity to whom it is proposed to assign transfer demise or sublet and that such person or entity covenant directly with the Lessor (if so required by the Lessor) to observe and perform the covenants conditions obligations and stipulations on the part of the Lessee herein contained;  and

Clauses 2.4.3 and 2.4.4 not reproduced.

2.5Permitted Use

Not to use the demised premises or permit the same to be used otherwise than for the purpose set forth in Item A of the Schedule hereto nor to do or permit to be done anything which may be or become unlawful or immoral or any annoyance or nuisance or damage to the Lessor or to any other person in the neighbourhood and to ensure proper and adequate control of all patrons and invitees of the Lessee to the demised premises and adjacent areas at all times during the operation of the business conducted from the demised premises nor to carry on offensive trades provided that the carrying on of the business set forth in Item A of the Schedule hereto shall not be construed to be an offensive trade and further that it shall be the Lessee’s responsibility to ascertain from the Local Council whether or not the particular use of the demised premises is permitted.

2.6Maintenance and Repair

To keep clean and cleanse those areas immediately adjacent to the demised premises more particularly the entire footpath area on the southern side of Pirie Street between Freemasons Lane and Freeman Lane and also to keep clear and free from any residue from Hotel patrons both Freemasons Lane and Freeman Lane in particular so that all those abovementioned areas are clear and clean from 7.00 am each day.  To maintain replace repair cleanse and keep the whole of the demised premises (structurally and otherwise) including all stucco copings chimneys roofs walls floors and the joists thereof and all electric installations wirings and all fittings (including air conditioning plant) and all gas water and other pipes drains and sewers and all chimney pieces door fastenings water cisterns partitions shutters blinds cupboards shelves balconies porticoes verandahs rails fences yards wells tanks locks and keys and to repair all other fixtures (whether landlord’s or tenant’s fixtures) and things which are now and which hereafter during the said term shall or may be part of or belong to the premises in good and substantial repair order and condition damage by fire, floods, storm, tempest, inevitable accident, act of god, war damage and fair wear and tear (other than where such fair wear and tear has resulted from the use of the demised premises as a hotel) only excepted and keep the premises free from white ants borers dry rot and salt damp and repair as aforesaid the ravages thereof and the Lessee shall in June of each year during the said term or any extension thereof supply to the Lessor a pest control certificate prepared by a reputable licensed pest control contractor certifying that the demised premises are free from white ants borers and dry rot and the Lessee shall and will replace and construct with new materials all and any parts of the premises as shall not be capable of being otherwise repaired and put in good and substantial repair and condition damage by fire (save where insurance moneys are irrecoverable in consequence of the act or default of the Lessee or any servant agent contractor sub-tenant or employee of the Lessee or any person on the demised premises by lawful licence of the Lessee) flood lighting storm tempest inevitable accident Act of God and war damage only excepted and at the expiration or sooner determination of this Lease peaceably to surrender and yield up into the Lessor the demised premises and every part thereof together with the lessor’s partitions fixtures and fittings in good and substantial repair and condition in all respects.

2.7To Paint

Notwithstanding anything to the contrary hereinbefore contained the Lessee will once in every three (3) years during the said term and any extension or renewal and in any event immediately prior to expiration or sooner determination of this Lease and in any event at the request of the Lessor in order to ensure to the Lessor that the standard and appearance of the demised premises does not fall substantially below that as at the commencement of trade by the Lessee in a proper and workmanlike manner paint and varnish or cause to be painted and varnished all such parts of the interior and exterior of the demised premises as are usually painted or varnished and also in the same manner shall plaster stop paint and colour such parts of the inside and outside of the demised premises as are now plastered or coloured or as may be by the Lessor reasonably required so to be.

2.8Works

The Lessee shall do execute and perform the painting varnishing plastering washing stopping papering and the other works to be done executed and performed by the Lessee under and pursuant to all the covenants on the part of the Lessee herein contained (hereinafter referred to as “the painting and other works”) to the reasonable satisfaction in all things of the Lessor or the Lessor’s architect and shall commence the painting and other works not later than one month prior to the expiration of the periods hereinbefore mentioned and shall diligently and continuously proceed therewith until the same shall have been completed as aforesaid AND that the Lessee shall before commencing the painting and other works give to the Lessor not less than fourteen (14) days notice in writing of his intention to commence such painting and other works stating in such or further notice such particulars as the Lessor may require and the proposed date of commencement and obtain the approval thereto of the Lessor which approval shall not be unreasonably withheld AND it is AGREED that unless the Lessee shall give such notice and obtain the approval in writing of the Lessor to the proposals then any painting or other works done by the Lessee shall not be deemed to be in satisfaction either wholly or in part of the Lessee’s covenants in relation thereto herein contained

2.9General

Without affecting the generality of the foregoing at the Lessee’s expense:

2.9.1To cause the demised premises to be cleaned regularly in a proper and workmanlike manner which approval shall not be unreasonably withheld and kept clean and free from dirt and rubbish.

2.9.2To keep and maintain and clean in good order repair and condition all fittings plant furnishings and equipment of the Lessee to the extent necessary to prevent any hazard to or deterioration in the condition of the demised premises.

2.9.3To make good any breakage defect or damage to the demised premises or any facility or appurtenance thereof occasioned by want of care misuse or on the part of the Lessee or the Lessee’s servants agents contractors sub-tenants or other persons claiming through or under the Lessee or otherwise occasioned by any breach or default of the Lessee hereunder or by the direct use of the demised premises by the Lessee notwithstanding that such use of the demised premises may be within the scope of the Lessee’s permitted use of the demised premises as aforesaid.

2.9.4To comply with all statutes ordinances proclamations orders or regulations present or future affecting or relating to the Lessee’s use of the demised premises and with all requirements which may be made or notices or orders which may be given by an governmental municipal civic or other authority over or in respect of the use of the demised premises and to keep the Lessor indemnified in respect of all such matters as are in this paragraph set forth.

2.9.5Not to cut maim or injure the walls windows or woodwork of the demised premises or make any alteration whatsoever to the demised premises without the consent in writing of the Lessor which consent shall not be unreasonably withheld.

Clauses 2.10-2.13 not reproduced.

2.14Alterations

Not without the prior consent in writing of the Lessor to make any alteration or addition in or to the demised premises or any part thereof nor without the prior consent in writing of the Lessor which consent shall not be unreasonably withheld to install or alter any partitioning work fixed equipment or other fixed installation in or on the demised premises PROVIDED HOWEVER that where such consent is given the materials and design shall first be approved by the Lessor or its architects and such work equipment or installation shall be installed or altered in accordance with the approval so given (if any) and any reasonable fees payable to the Lessor’s architect shall be paid by the Lessee to the Lessor forthwith upon demand AND FURTHER PROVIDED that all such partitioning work and such installations (structural or otherwise) save where the same are Lessor’s fixtures and/or fittings and save where same would by virtue of industry practice normally be regarded as the Lessee’s plant and equipment shall upon installation become the absolute property of the Lessor in consideration of the terms of this lease.

Clauses 2.15-2.18 not reproduced.

2.19Public Risk Insurance

Forthwith to effect and keep effected at all times in respect of the demised premises a Public Risk Policy in a sum of not less than the amount set forth in Item B of the Schedule hereto in the joint names of the Lessor and the Lessee for their respective rights and interests with a company approved by the Lessor which approval shall not be unreasonably or capriciously withheld and to deliver the Policy of such insurance to the Lessor prior to the commencement of the said terms and to produce the receipt or Certificate of Currency of every premium in respect of such insurance prior to the date upon which each such premium falls due.

Clauses 2.20-2.25 not reproduced.

2.26Expiration

That the Lessee shall at the request of the Lessor prior to the expiration of the term of this Lease remove all partitions alterations or additions installed or made by the Lessee and make good damage to the demised premises caused by such removal and where the term of this Lease shall be determined prior to the expiration of the term the Lessee shall effect such removal and making good of damage within a reasonable time after such determination.  If the Lessee shall not have completed such removal and making good on the expiration of the term of this Lease (or in the case of the determination of the term of this Lease within a reasonable time after such determination) then the Lessor may remove and store such partitions alterations or additions as the Lessee shall have failed to remove and the Lessee undertakes to repay on demand all costs and expenses incurred by the Lessor in so doing.

Clauses 3.0-4.8 not reproduced.

4.9Renewal

That on the written request of the Lessee made not less than four nor more than nine months before the expiration of the said term in the first instance and not less than 3 months before the expiration of each renewed term of one year thereafter the Lessor may in its sole and absolute discretion grant to the Lessee a further lease of the demised premises for the further term of one year and while the Lessor determines to offer to the Lessee an additional term of one year the Lessor shall do so no less than 75 days before the expiration of the then current term and the Lessee shall give written acceptance of such offer no less than 2 months before the expiration of the current term PROVIDED THAT:

4.9.1the rental for the first of such renewed terms and in the event of continuing renewals every two years thereafter shall be determined in accordance with Clause 4.10.1;

4.9.2thereafter other than specified in sub-clause 4.9.1 hereof the rental shall be determined in accordance with Clause 4.10.2;

4.9.3the Lessor may otherwise offer each extension of one year on such reasonable terms and conditions as in its absolute discretion it thinks fit,

PROVIDED FURTHER that should the Lessor not offer the Lessee a renewal of the lease as herein provided then the Lessor covenants and agrees not to lease the demised premises to a third party where such third party will conduct substantially the same business upon the demised premises as the Lessee (“the Restriction”) provided that the Restriction shall not apply when the Lessor re-develops the demised premises AND PROVIDED FURTHER that should the Lessee refuse or fail to accept any offer of renewal of the lease then the Lessor shall not be bound by the Restriction.  Any documentation required pursuant to this sub-clause shall be prepared by the Lessor’s solicitors at the cost in all things of the Lessee.

Clauses 4.10-4.15 not reproduced.

4.16   Long Service Leave

Upon the termination of this Lease for any reason whatsoever in the event of the Lessor entering into possession of the demised premises and continuing the employment of any persons employed by the Lessee during the period of this Lease whereby the Lessor shall render itself liable for payment of long service leave and/or holiday pay to such employees then with respect to all employees of the Lessee who shall continue in the employ of the Lessor in the business conducted upon the demised premises by the Lessee then the Lessee shall pay to the Lessor:

4.16.1 a sum equivalent to all holiday pay which shall have accrued to any such employee as at the date of such termination;  and

4.16.2a sum equivalent to the amount which would be paid to each employee on account of long service leave on the basis that such employee was deemed for the purposes of this clause to have a pro rata entitlement to long service leave on the date of such termination of this Lease notwithstanding that such employee or employees is or are not at the date of such termination entitled by law to receive the same PROVIDED HOWEVER that if any sum shall be paid by the Lessee to the Lessor as aforesaid on account of pro rata long service leave and the employee in respect of which such sum has been paid ceases his employment with the Lessor without becoming entitled to be paid any amount on account of long service leave then the Lessor shall upon receiving a demand in writing thereof from the Lessee repay to the Lessee such sum as shall have been paid to the Lessor on account of such employee as aforesaid.

Clauses 5.0-6.2 not reproduced.

7.0TO COMPLY WITH ORDERS OF LICENSING COURT

The Lessor and the Lessee further mutually covenant and agree:

7.1Requirements and Orders

That the Lessee shall at the Lessee’s own cost and expense at all times during the said term and any extension or renewal thereof comply with observe carry out and perform the requirements of the Liquor Licensing Act 1985 as amended for the time being in force in the State of South Australia and each and every order direction and requirement relating to the demised premises of the Licensing Court of South Australia or of any inspector officer or person appointed by the Licensing Court of South Australia and in default thereof it shall be lawful for but not obligatory upon the Lessor to enter into and upon the demised premises and to comply with observe carry out and perform such requirement order or direction and all moneys costs charges and expenses incurred by the Lessor in so doing shall be repaid by the Lessee to the Lessor forthwith upon demand being made therefor and shall be an addition to the rent and other moneys reserved unto the Lessor by virtue of this Lease provided always that any work done by the Lessee pursuant to any such order direction or requirement shall be carried out to the entire satisfaction of and as may be required by the Lessor or the Lessor’s architect; PROVIDED FURTHER that if the cost incurred by the Lessee in the case of or relating to any order or requirement of the Licensing Court or other Court for the time being having jurisdiction or by any Officer of the Licensing Court or other Court or by any official authorised in that behalf for works alterations additions or improvements of a nature for which the Lessee is not financially responsible under the terms covenants and agreements of this Memorandum of Lease then from the time of completion of such works alterations additions or improvements the annual rental otherwise payable by the Lessee hereunder shall be increased by an amount equivalent to the greater of either Fifteen Per Centum (15%) or the percentage determined by adding one per cent (1%) to the percentage interest then charged by AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED to its customers on overdrafts in excess of $100,000.00 of all moneys laid out and expended in making and effecting such works alterations improvements or additions PROVIDED THAT the stipulations herein contained relating to the time method and manner of payment of rental shall be (mutatis mutandis) applied to the annual rental determined in accordance with the provisions of this Clause.

7.2Licence Suspension

That the Lessee shall not do or cause suffer or permit to be done or omit to do any act matter or thing whatsoever whereby or by means or by reason whereof there shall or may arise or be given any just or reasonable ground for the withdrawal suspension or withholding of the Licence described in Item A of the Schedule hereto (hereinafter called “the said Licence”) or any other Licence in respect of the demised premises which shall or may be necessary for the proper carrying on of the business of the same.

7.3Licence Renewal

That the Lessee shall renew the said Licence in respect of the demised premises and or any other Licence in lieu thereof or in addition thereto as and when required from time to time and shall at or if necessary before the expiration or sooner determination of this Lease sign and give notice or notices for renewal or transfer of any such Licence as may be required or desired by the Lessor and allow such notice or notices for renewal or transfer of any Licence in respect of the demised premises as may be required by law to be affixed thereto and remain so affixed during such time or times as shall be necessary or expedient in that behalf and generally will do or cause to be done all such further acts matters and things as shall be necessary to enable the Lessor or any person authorised by the Lessor to obtain the renewal of any such Licence then existing or in force and upon the expiration or sooner determination of this Lease upon demand by the Lessor to transfer and deliver up to the Lessor and/or its nominee or nominees the Licences then existing and in force in respect of the demised premises.

7.4Licence Transfer

That the Lessee shall not transfer the said Licence in respect of the premises or any other licence in respect of the demised premises without the prior consent in writing of the Lessor.

7.5Licence Removal

That the Lessee shall not remove the said Licence in respect of the demised premises to other premises without the prior consent in writing of the Lessor.

Clauses 7.6-7.9 not reproduced.

8.0GAMING MACHINES ACT

8.1The Lessee further covenants and agrees with the Lessor that the Lessee will maintain the Gaming Machine licence issued in respect of the demised premises and will at all times observe and perform the conditions of the Gaming Machine licence and all relevant obligations imposed under the Gamine Machines Act 1992 as amended (hereafter in this clause 8.0 referred to as “the Act”) and where no such licence is issued in respect of the demised premises the Lessee shall not make application for a Gaming Machine licence without obtaining the prior written consent of the Lessor which consent shall not be unreasonably withheld.

8.2The Lessee covenants and agrees that the Lessee shall not do, omit or cause or suffer to be done or omitted any act, matter or thing whatsoever as a result of which act or omission the Gaming Machine licence issued under the Act in respect of the demised premises or any business conducted thereon may be liable to be surrendered, suspended or revoked.

8.3The Lessee covenants and agrees with the Lessor that the Lessee shall not apply to the Liquor Licensing Commissioner or other authority to decrease or restrict the hours that gaming is conducted on the demised premises.

8.4The Lessee covenants and agrees that the Lessee shall and at the own cost and expense of the Lessee at all times during the said term and any extension or renewal thereof comply with, observe, carry out and perform the requirements of the Act and each and every order, direction and requirement relating to the demised premises and the conduct of gaming on the demised premises and in default thereof it shall be lawful for but not obligatory upon the Lessor to enter into and upon the demised premises and to comply with, observe, carry out and perform such requirement order or direction and all moneys, costs, charges and expenses incurred by the Lessor in so doing shall be repaid by the Lessee to the Lessor forthwith upon demand being made therefore and shall be in addition to the rent and other moneys reserved unto the Lessor by virtue of this Lease PROVIDED ALWAYS any work done by the Lessee pursuant to any such order, direction or requirement shall be carried out to the reasonable satisfaction of and as may be required by the Lessor or the architect of the Lessor.

8.5The Lessee covenants and agrees with the Lessor as follows:

8.5.1Not to apply for the suspension of any Gaming Machine licence.

8.5.2Not to apply for the reduction in the number of gaming machines on the demised premises.

8.5.3Not to apply for the transfer of the Gaming Machines licence.

Clauses 8.6-8.7 not reproduced.

8.8That the Lessee shall renew the said Gaming Machines Licence in respect of the demised premises and or any other licence in lieu thereof or in addition thereto as and when required form time to time and shall at or if necessary before the expiration or sooner determination of this Lease sign and give notice or notices for renewal or transfer of any such licence as may be required or desired by the Lessor and allow such notice or notices for renewal or transfer of any such licence in respect of the demised premises as may be required by law to be affixed thereto and remain so affixed during such time or times as shall be necessary or expedient in that behalf and generally will do or cause to be done all such further acts matters and things as shall be necessary to enable the Lessor or any person authorised by the Lessor to obtain the renewal of any such licence then existing or in force and upon the expiration or sooner determination of this Lease upon demand by the Lessor to transfer and deliver up to the Lessor and/or its nominee or nominees the licences then existing and in force in respect of the demised premises.

9.0OPTION TO PURCHASE PLANT

The Lessor and the Lessee hereby mutually covenant and agree that upon the expiration of the within Lease or any sooner determination thereof the Lessor may at its option exerciseable by notice in writing by the Lessor to the Lessee during the period hereafter set out purchase from the Lessee who shall sell to the Lessor free from all encumbrances all the right title and interest of the Lessee in all plant furniture trade utensils fittings and tenant’s fixtures in and about the demised premises at a purchase price to be agreed between the parties but failing agreement to be determined by a Licensed Valuer and Hotel Broker appointed for that purpose by the President for the time being of the Australian Institute of Valuers and Land Economists Inc (South Australian Division) at the request of either party at the joint cost of the Lessor and Lessee which valuer shall be deemed to act as an expert and not as an arbitrator and the Lessee shall furnish all information requested to carry out such valuation.  The value of such items assessed by any Valuer appointed pursuant to this clause shall be the in situ value.  The period within which the Lessor may exercise this option to purchase shall expire fourteen (14) days after the Valuer so appointed notifies the parties of his valuation of the said items or if no such valuation is requested two (2) months after the expiry or sooner determination of the Lease.  Settlement shall be effected at the offices of the Valuer so appointed seven (7) days from the date of the Lessor’s exercise of this option by notice in writing to the Lessee.

Clause 10.0 not produced.

THE SCHEDULE HEREINBEFORE REFERRED TO

ITEM A
Clauses 2.5
and 7.2              Permitted Purpose
  Licensed hotel premises, restaurant, gaming venue, offices and carpark

ITEM B
Clause 2.19        Public Risk Insurance
  TWENTY MILLION DOLLARS

ITEM C
Clause 10           Special Conditions
  Nil

APPENDIX C

(Letterhead of Messrs Phillips Fox)

15 March 1995

Messrs Grope Hamilton
Lawyers
Level 1
83 Pirie Street
ADELAIDE   SA   5000

Attention:  Mr Andrew Brown

Dear Sir

OAKS TAVERN
OUR REF:GMG PLAY2200-001

Thank you for forwarding to us the draft memorandum of lease.  We have now had an opportunity of considering that document together with the draft agreement to the lease which was executed by the parties previously.

In the absence of a specific comment would you proceed on the basis that that clause is acceptable to our client.  We shall deal with the matters we wish to raise in point form for your convenience.

1.Our understanding of the agreement is that the first month’s rent is not due until 1 June 1995.  Would you please take instructions on that point.

2.Clause 2.2 does not accurately reflect the agreement reached as stated in clause 8 of the draft agreement on the question of rates and taxes.  The agreement reached is that the lessee in addition to rental is responsible for increases in council rates and E&WS rates over and above the base 1993/1994 year payable from lease commencement.  As at 18/5/94 those base year outgoings were council rates:  $17,400 pa, E&WS rates:  $9,788.

Would you kindly redraft clause 2.2 to reflect that agreement.

3.In light of the fact that our client is totally refurbishing the existing premises we do not believe it is appropriate to include clause 2.7 which deals with painting.  We would therefore ask that it be removed.

4.Clauses 2.8 and 2.9.5 should be looked at in light of the fact that this extensive refurbishment program is due to commence shortly.  There will obviously be vast structural alterations made to the premises which will result in the improvement as opposed to a deterioration of same.  In light of what is proposed we wonder whether clauses 2.8 and 2.9.5 are appropriate.

5.There is a typographical error in clause 4.9 at line 8 of the first paragraph.  The spelling of less.

6.With respect to clause 4.9.2 we are of the opinion that once the renewal is exercised by both parties then it is appropriate that the first year of the renewal be at market but that a set period linked to CPI should apply thereafter.  This is not to say that our client is seeking to acquire the lessor to grant additional extensions other than what has been provided for but it merely consolidates our client’s position with respect to rental as opposed to facing annual market reviews.  We would ask that on the first review that a CPI term be included for the following two renewal periods without prejudice to your client’s right not to so renew.

7.We do not believe that clause 4.16 is appropriate as would ordinarily apply in a hotel style lease due to the nature of the agreement reached.  The same point is applicable to clause 7.9.

8.Dealing with the schedule we do not believe that item B should remain in light of our earlier comments as to clause 2.7.

Our client is prepared to agree to the terms of the proposed guarantee as is.  Should you have any queries please do not hesitate to contact the writer.

Yours faithfully

(signed) Phillips Fox

Contact:             Greg Griffin
  Partner
Direct Line:        (telephone number)

GMG JKK 15/3/95

APPENDIX D

(Letterhead of Messrs Griffin Hilditch, Lawyers)

OUR REF:  L WRYT.PL031.25.08.03.MW

31 October 2003

Mr Ian Marker
General Manager
Adelaide Development Company
83 Pirie Street
ADELAIDE   SA   5000

BY FACSIMILE:  8223 6338

Dear Ian,

RE:  PLAYERS PTY LTD

Thank you for your letter of 30 October 2003.  The conditions that you list are acceptable.

I shall deal with each of them individually as follows:

1.     Agreed

2.     Agreed

3.     Agreed

4.I suggest that the cash security be paid upon the commencement of the sub-lease to Mr Walsh or his company in a form satisfactory to yourself.

5.Agreed

6.I shall commence the preparation of the schedule.

7.The gaming room will be converted into a lounge with sofas and chairs and used as a small function area.

I trust this is satisfactory.  May I take the opportunity of thanking Adelaide Development Company for the speed of the response and the assistance it has provided for which I am extremely grateful.

Yours sincerely
GRIFFIN HILDITCH

Per:    (signed)

For
GREG GRIFFIN
(email address)

APPENDIX E

(Letterhead of Adelaide Development Company)

TO                   Players Pty Ltd  DATE               01 September 2003

ATTENTION     Greg Griffin  FAX No             (Fax No)

SUBJECT

SENT BY          Fiona Roche  PAGES (inclusive)     1

Dear Greg

Rental Arrears 73-79 Pirie Street

I refer to your telephone conversation yesterday with Natasha Bertram of our office and to my conversation with you last week.

Greg, until
        -      all rental arrears (and interest) is brought up to date;  and

-I have an engineering signoff that you have carried out at least the work on the roof structure that was meant to be done some many months ago;

there is no point in us meeting to consider any proposals regarding any aspect of the future operation and or your proposed sub letting of the premises to Gavan Walsh.

I understood from Tony Lawry that you were close to having the works on the roof support completed.  Please let me know if this is not the case.

I have been told that you are proposing to pay $35,074.75 on Wednesday 3^rd September 2003, which we will be most happy to receive.  However I also expect to receive the balance of the moneys owing and the default interest payable under the lease.  An invoice for this amount will be issued and faxed to you today.  Obviously while these amounts are outstanding and work is not carried out you are in breach of your lease.

In relation to the replacing and repairing the roof sheeting on the property, could you please confirm the scope and program of these works to be undertaken.
I will be back next Monday for a day and then will be overseas for 3 weeks.

Regards

(signed)

Fiona Roche

N:\Adelaide Documents\CLONE\General\FR – Players request of payment 1-9-03.doc

APPENDIX F

(Letterhead of Griffin Hilditch)

OUR REF:  ROCHE.F.PLO

Ms Fiona Roche
Managing Director
Adelaide Development Company
83 Pirie Street
ADELAIDE   SA   5000

Dear Fiona

THE PLANET
OUR REF : PL003

I trust that you had an enjoyable break overseas.  I did try and make an appointment to see you last week as we are now in a position to put into place the arrangement with Gavan Walsh and as such I was hopeful that you could meet with him as we had previously discussed.  There is an element of urgency in that Gavan has the last few months agreed to work at the Planet on the expectation that he was setting up his own business for December and the new year.  It would seem inherently unlikely that any removal of the hotel licence to alternate premises could be achieved by that time so as to facilitate Gavan successfully applying for and being granted an entertainment venue licence at the subject premises.  That would appear to be more likely to occur in February 2004 having regard to the state of the Licensing Court list and all of those matters that need to be attended to in order to achieve the result.

Gavan has done a first rate job over the past few months and October though this (sic) efforts has been a significant improvement upon what was experienced in June, July, August and September.  Gavan has been able to achieve that through his wide range of industry contacts and his ability to put together events and entertainment.  The past two months have given me considerable confidence that assuming Gavan is approved to conduct the premises that he will do so in a professional and successful manner and will be able to trade profitably.

Gavan has over the past month made his position clear to me that as much as he would like to assist he does not intend to remain indefinitely unless he personally (and not us!) is the benefitee of his work and expertise.  I have explained to him that there are a number of reasons that have caused the process to be drawn out longer than I had hoped when negotiations first commenced.

My builder will commence and complete the roof works during the week commencing 27 October 2003.  The structural steel has been manufactured off site and it is now a question of complying with the directions of your engineers.  That being so, I believe that all the matters we discussed some months ago have finally been attended to by us.

I have now received a formal offer to lease smaller premises within the locality.  The location has been specifically chosen so as to seriously reduce the risk of any trade objections.  I have met with the Liquor and Gambling Commissioner who has no problem whatsoever with new premises and will make the orders if we can avoid industry objections.  If there are objections the process will be delayed by some months.  That is just a fact of life.

If however things go to plan then it is conceivable that we can obtain consent before Christmas.  With the relatively easy fit out of the new premises that would enable a February handover to Gavan which he is looking for as he has made a series of bookings for the Fringe which he quite justifiably wants to take the benefit of as they have come through his work and industry sources.  Once I obtain your approval an application can be made forthwith.  Gavan does wish to undertake some internal painting and general aesthetic works.  I have agreed with Gavan that we will contribute to those costs as it is only fair and reasonable.  As it seems likely that Gavan would operate as a subtenant or lessee for only 12 months of the existing lease it is up to him through what he can achieve in that period to convince you that he should be offered an extension of some nature at the expiration of the lease.  He fully understands and appreciates this.  In terms of guaranteeing your rental for that period, I propose to provide a 6 month rent guarantee to you which can be drawn upon in the event that that is required.  I obviously do not want that happen (sic) and quite frankly do not expect it to happen.  I believe however that such an offer is proper in the circumstances.  Naturally, that is not in substitution for or in extinguishment of the existing personal guarantees that will be maintained by the four guarantors to the lease.

I am sorry to burden you so shortly after your return from annual leave but the whole proposal has now reached a critical stage and as such I would be most grateful if you would give the matters referred to herein your early consideration and let me have your response as soon as possible.

Regards
GRIFFIN HILDITCH

Per:     (signed)

GREG GRIFFIN
(email address)

I:\MEGAN\LETTERS03\ROACHE.F.PL003.20.10.03.MJW.