Daher v Gembane Pty Ltd - [2012] SADC 68

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DAHER v GEMBANE PTY LTD & ANOR
[2012] SADC 68
Judgment of His Honour Judge Tilmouth
23 May 2012
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
The parties executed an agreement to lease over a property intending to establish a cafe/restaurant business. The agreement required the lessee to obtain the prior written approval of the lessor before making any alterations or modifications, to contribute $100,000 towards 'capital works' and that the lessor agree 'to sell the premises within the first two years to the lessee at an agreed 'market value'.
Held 1: The requirement to contribute the $100,000 was understood by the parties as relating to the structure of the building and not to alterations for the purpose of converting the building into a cafe/restaurant.
Held 2. The primary responsibility for the carriage and cost thereof falls on the lessee, who may then call upon the lessor to contribute up to $100,000 for 'capital works' of the structural kind.
Held 3. The words of the special condition 'agrees to sell the premises' was understood by the parties to confer a right to purchase. As so construed the obligation may be fulfilled by the defendants at any time within the two year period.
Retail and Commercial Leases Act 1995 (SA) ss 11 & 12; Landlord and Tenant Act 1936 (SA) s 10; Radford v De Frobervill [1977] 1 WLR 1262; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Real Property Act 1886 (SA) s 191(ii); Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530; Watson v Phipps (1985) 63 ALR 321, referred to.
Western Export Services Inc and Ors v Jireh International Pty Ltd (2011) 287 ALR 604, [2011] HCA 45; Toll (FGCT Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Codelfa Constructions Pty Ltd v State Railway Authority of New South Wales (1982) 149 CLR 337; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, applied.
Viscount Chelsea v Muscat [1990] 2 EGLR 48, distinguished.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - TERMS ESSENTIAL TO ENABLE PERFORMANCE
Held 4: It is appropriate to imply terms that the lessor could not decline to contribute towards capital works or decline to agree market value or refuse to provide written approval to alterations or modifications in bad faith, unreasonably or on extraneous grounds.
Held 5: A breach of the terms of building approval imposed by the Council did not constitute a breach of the agreement to lease because the lease specifically provides 'this Agreement is not subject to such approvals'.
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234; Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR 1 at 36-37; Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236; Tredegar v Harwood [1929] AC 72; Downward Bricklaying Pty Ltd v Goulburn-Murray Rural Water Authority (2003) 8VR 61; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Burger King Corporation v Hungry Jacks Pty Ltd (2001) 69 NSWLR 558; Secured Income Real Estate (Aust) v St Martins Investments Pty Ltd (1979) 144 CLR 596; Biotechnology Australia Pty Ltd v Pace (1988) NSWLR 130; Marker v Kenrick (1853) 13 CB 188; North Central PLC v Butterworth [1987] 1 QB 527; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Biotechnology Australia Pty Ltd v Pace (1988) NSWLR 130; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272; Duncan v Mell (1914) 14 SR (NSW) 333, referred to.
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, applied.

EQUITY - GENERAL PRINCIPLES - MISTAKE - EQUITABLE REMEDIES - RECTIFICATION
Held 6: The evidence does not support the conclusion that the parties reached a common intention to submit disputes over the 'agreed market value' for independent resolution, so it was not appropriate to make an order for rectification.
Held 7: The contra proferentum principle did not apply in the circumstances.
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; Bush v National Australia Bank Ltd (1992) 35 NSWLR 390; Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, referred to.
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; Pukallus v Cameron (1982) 180 CLR 447; Codelfa Constructions Pty Ltd v State Railway Authority (NSW) (1982) 149 CLR 337, applied.

ESTOPPEL - ESTOPPEL IN PAIS - THE REPRESENTATION - BY CONDUCT - WAIVER
Held 8: Given the findings that the defendants were aware of the proposed alterations and had given approval thereto, they were estopped from insisting on giving further approval thereto.
Held 9: Further the defendants had by the actions affirmed the agreement inconsistently with their rights to insist on written approval which they had thereby waived.
The Commonwealth of Australia v Verwayen (1990) 170 CLR 394; Duncan v Mell (1914) 14 SR (NSW) 333; (1914) 31 WN (NSW) 113; Butts v O'Dwyer (1952) 87 CLR 267; Kennedy v Vercoe (1960) 105 CLR 521; Alcatel Australia v Scarcella (1998) 44 NSWLR 349; Development Act 1993 (SA) s 48(1)(a); Development Regulations 2008 R 48(2); Francis v Francis [2009] SASC 363; Craine v Colonial Mutual Fire Insurance (1920) 28 CLR 305, referred to.
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, applied.

EQUITY - EQUITABLE REMEDIES - SPECIFIC PERFORMANCE - PARTICULAR CONTRACTS - OTHER CONTRACTS
Held 10: It was in the circumstances appropriate to make an order for the specific performance of the agreement to lease.
Doe & Bloomfield v Smith (1805) 102 ER 1390; Development Act 1993 (SA) s 46(a); Walsh v Lonsdale (1882) 21 Ch D9; Chan v Cresdon Pty Ltd (1989) 168 CLR 242; Eastern Garden Pty Ltd v Stone (2005) 239 LSJS 344, [2005] SASC 157; Butts v O'Dwyer (1952) 87 CLR 267; Kennedy v Vercoe (1960) 105 CLR 521; Portline (No 2) Pty Ltd (in liq) v Whittle [2009] SASC 229; Bicknall v Hood (1839) 151 ER 45; Hoyts Pty Ltd v Spencer (1919) 27 CLR 133; Craine v Colonial Mutual Fire Insurance (1920) 28 CLR 305; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64, referred to.
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, applied.

DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT
Discussion of the appropriate level of damages to 'make good' the premises for lost rental and for the plaintiff's lost contractual opportunities.
Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, applied.

DAHER v GEMBANE PTY LTD & ANOR
[2012] SADC 68
Context
Pre-contractual negotiations
The agreement to lease
The several development plans
Negotiations with the Council
Building work commences
A dispute arises
The legal proceedings
The building alterations
Primary findings of fact
Conclusions of fact
The Agreement to lease – proper construction
Breach of Council approvals
Rectification
Implied terms
Valuation evidence
Specific performance
Estoppel
Waiver
Damages claimed by defendants – restoration or make good costs
Damages claimed by defendants – foregone rent
Damages – The plaintiff’s claim
Conclusion and orders
Context

The once small country township of Mount Barker in the Adelaide Hills is now a populous, expanding metropolis situated along the South Eastern Freeway more or less half way between Adelaide and Murray Bridge. Such expansion brings with it community expectations for better shopping and lifestyle amenities, such as cafes and restaurants. The plaintiff Mr Daher desires to establish a restaurant in the town in premises owned by the defendants. They have fallen into an intractable dispute over their respective obligations pursuant to an agreement to lease, which the court is now invited to resolve.
The defendants through their principal Scott Thomas are the owners of the house and land positioned to the western end of the central business district of Mount Barker at the intersection of Gawler and Adelaide Roads.[1] The building situated at 2 Gawler Street, comprises a 1930s bungalow not without its historical interest and structural integrity. In the years leading up to mid 2008 it was used for offices and consulting rooms. There is some inconclusive evidence as to exactly what renovations were undertaken, yet it is tolerably clear some works followed the purchase in May 2000 and again in mid 2007. The property was advertised for sale or lease through Remax, a Mount Barker real estate agency in December 2008.
[1] Certificate of Title Exhibit P4 p 1, originally purchased in April 2002 and transferred to the defendants on 1 May 2007
The plaintiff is a man of energy and drive, not without abilities and achievements in the hospitality industry.[2] Having earlier sold a restaurant business in Adelaide, he began looking for a fresh café/restaurant venture in the Adelaide Hills, for which he commenced inquiries in the Stirling through to Hahndorf areas in late 2008 or early 2009. On one particular Sunday whilst in Hahndorf his attention was drawn to the subject property. Soon after he contacted a Mr Foster of L J Hooker real estate agents of Mount Barker, who suggested the property to him, amongst others.
[2] T202.4-206.38
Mr Thomas, an accomplished computer scientist and business man, had at some point in time which is not precisely clear, appointed Mr Foster as his agent for the purpose of securing a tenant for the property at an annual rental of $42,000.[3] Foster met Mr Daher on site in January 2009 when the property was inspected externally. Daher expressed interest, either for lease or purchase as a potential café/restaurant venture. There was a second internal inspection a week or so later. Foster had the keys and an alarm code to enable him to gain entry at the time.
[3] Exhibit P4, p 8
It became obvious to Mr Daher that the property was in need of significant renovation, at least for his intended purposes. He contemplated site clearance landscaping, and repair of the roof and gutters which were ‘all blocked’.[4] This state of affairs was consistent with the evidence that the building was vacated several months earlier. Mr Daher noticed the interior was ‘very dusty’ and that some old office furniture remained along with a few dead birds and spiders.[5] Nevertheless he considered the character of the house itself and the position was such that it might prove viable for such a business, albeit with ‘a lot of work’.[6]
[4]    T209.23
[5]    T246.1-248.29
[6]    T210.2 - 210.19
Pre-contractual negotiations
By February 2009 a further inspection was arranged for the first time with Mr Thomas. They discussed the removal of ‘the eastern side of the brick wall plus the front sandstone and all the walls in between’.[7] According to Mr Daher, Mr Thomas ‘seemed fine with it’.[8] Mr Daher engaged an architect, the witness Spiros Paraskevopoulos, to develop plans giving effect to his proposals. The three men met on site during the first half of 2009. According to Mr Daher, Mr Thomas:[9]
… was mainly asking about the structural work, removal of walls, would it damage the building, would it cause a problem for the house, and Spiros said to him ‘No, obviously with the right engineering and supports it wouldn’t be a problem’ and he was, you know, at the end of it he was – everything seemed ok.
[7]    T212.34-.38
[8]    T213.12
[9]    T215.14-215.19
That this meeting took place is denied by Mr Thomas. For reasons detailed later he must be mistaken about this. On this occasion Mr Paraskevopoulos was shown drawings given to him by Mr Thomas dated April 2009 with respect to an earlier renovation proposal. Two contain measurements in Mr Paraskevopoulos’ own handwriting.[10] There were also discussions about the potential cost of the alterations which Mr Daher estimated to be somewhere between $250,000 and $300,000. Other conversations included the sufficiency of car parking in the vicinity for customers. Mr Paraskevopoulos made further site visits on 17 August and 10 September 2009 when Mr Thomas was not present.
[10] Being plans in Exhibit P4, pp 27-29
He subsequently drew plans for the proposed restaurant and outdoor dining dated 20 August 2009.[11] These were different from the initial plans in that they added further openings, removed more walls, and moved the proposed bar, kitchen and toilets.[12] There followed a series of meetings with Mr Daher culminating in an on-site visit on 10 September 2009. He then developed another set of plans dated 17 September 2009.[13]
[11] T439.26-440.23, Exhibit P4, pp 30-32
[12] T442.37-443.2
[13] T445.16-.20, Exhibit P4, pp 33-36
These September plans effected significant changes, principally by moving the outdoor area from the north-east to the north-west of the building, accompanied by a corresponding opening to the western wall of the building itself. There was yet another site inspection with Mr Daher on 23 September, producing further plans bearing that date but involving the same revised concept as those of 17 September.[14] The proposal was further refined in plans dated 7 October 2009.[15] The final plans drawn by Mr Paraskevopoulos were dated 24 November 2009,[16] as we shall see being those ultimately approved by the Council on 22 January 2010.[17]
[14] Exhibit P4, pp 37-38, T446.27-.31
[15] Exhibit P4, pp 39-40, T446.27-.28
[16] Exhibit P4, pp 41-43, T446.38-447.5
[17] Exhibit P4, p 55-57
Mr Daher engaged a builder, initially Mr Kaissi of TK Design, whom he also met on site. The firm provided a preliminary quotation dated 8 December 2009 of $108,372 for the project.[18] As events transpired TK was unable to proceed with the work as early as mid January 2010,[19] and so Mr Daher engaged another builder Mr Vlachos. Mr Daher met Mr Vlachos and Mr Thomas as well as Mr Foster on the property ‘about a week or two weeks’ after the meeting with the architect. Once again Mr Thomas denies that such a meeting occurred and once again he must be mistaken about that. There were discussions as to ‘the detail of the walls, the roof, the façade and the outside’.[20] Mr Daher then engaged a council planner Mr Burgess to handle negotiations with the Council with respect to the proposed improvements.
[18] Exhibit P4, p 59
[19] T560.4-.6
[20] T217.14-217.27
As of the end of February or early March 2009, Mr Thomas was asking $810,000 to $820,000 for the property. Mr Daher considered this ‘was higher than what the property was worth’, since he had the advice of a valuer. He made an offer of ‘around $650,000’ accordingly.[21] Mr Foster also considered the asking price to be high, at least so far as his experience as a property consultant and land agent was concerned.[22] Subsequent discussions centred upon the terms of a lease with an option to purchase within two years, rights of extension, as well as the prospect of Mr Thomas contributing to the cost of capital works, subject always to council approvals for the proposed use.
[21] T218.25-218.26
[22] T121.30
In an email of 27 May Mr Daher put the following proposal forward through Mr Foster:[23]
[23] Exhibit P5, formal portions omitted
Re: 2 Gawler Street Mount Barker
Hi Scott
Further to our last phone conversation and as requested, I herewith provide details of the purchasers proposal as follows-
. Purchase Price $810,000 (plus GST if applicable).
.Subject to the purchaser conducting due diligence for a period of two (2) months (my planning consultant will be handling the application who has already been briefed).
.Non-refundable deposit of $50,000 paid to you on Council Approval to change of use (end of 2 months).
.You allowing access at this time for a period of three (3) months for the purchaser to carry out refurbishment and conversion to café/restaurant use in compliance with Council’s provisions.
.Settlement at end of this three (3) months term with payment of $500,000 provided by way of first mortgage security by his lending institution (I think the CBA?) with the balance at settlement to be carried by you for a max period of six (6) months by way of second mortgage at an agreed or nominated interest rate by you.
Reasons for above proposal as follows-
.The Purchaser has had a licensed valuer provide a value that he considered the bank would accept as fair & reasonable in the property’s current condition as a property with Residential use (albeit in a Commercial zone).
.I think the valuer assessed around or up to $650,000 or thereabouts. (A figure that I would have to accept as well at this stage).
.The Purchaser has intimated that their own funds would be used to pay for building works and the factored in Council parking levy ($13,500 per park) – possibly total of several hundred thousand /- this Purchaser’s equity would enable refinancing at the end of the abovmentioned six(6) months term having the improved value of the property then being a converted commercial use with full refurbishment completed.
.As discussed, Vendor safeguards would need to be in place (ie a Commercial Lease Agreement between Vendor & Purchaser for the term of the Purchaser’s occupation (ie the three (3) months in lieu of a licence to occupy)
.The work is to be carried out by a licensed builder to your satisfaction – another condition and any other conditions you may require.
.The purchaser is happy to have a meeting with you/us prior to making any decision on your side.
.Should you consider this at all a favourable proposal, then the Purchaser is anxious for a relatively quick decision.
The prospect of vendor finance contained therein was rejected by Mr Thomas on the advice of Mr Foster.[24]
[24] T164.19-166.11 (Mr Foster), T672.31-673.14 (Mr Thomas)
A response came in the form of an email from Mr Thomas forwarded to Mr Daher via Mr Foster on 11 August 2009. This read:[25]
[25] Exhibit P5, formal sections omitted
1.The lease would be for a minimum period of two years, with an option for a further two years.
2.For the first two years, the lease would be at the rate of:
a. $5,000 per month, if I am required to invest up to $100,000 in capital improvements, or
b.$3,000 per month, if I am not required to make capital improvements
c.Lease price is exclusive of outgoings and GST
d. Rent would subject to an annual CPI increase and a review at the end of the initial 2 year lease
3.The lease would include a first option to buy during the lease period at market value.
4.Both parties would enter into a leasing agreement.
5.There would be normal make good provisions in the terms of the lease agreement.
Just to also make you aware that I have recently had another offer for lease/purchase which I am also considering. This offer is slightly less complex as it does not involve conversion to a restaurant – but each has its own foibles.
Regards,
Scott Thomas
The agreement to lease
Eventually an agreement to lease was executed on 24 August 2009, for an annual rental of $60,000 plus GST which, as will appear later, was above market rates. This was in a standard form produced by Mr Foster.[26] The lease was expressed to commence 90 days ‘from council approval for intended use’ (clause 9), extend over a period of two years together with two rights of renewal of three years and five years respectively (clause 11).[27] The intended use of the premises was expressed as ‘café/restaurant’ (Clause 15.1).
[26] T178.19-.21
[27] Exhibit P4, pp 13-18

A critical provision in the agreement was clause 16.1. This provided:
Any internal partitioning, alterations and/or modifications to the premises will be made by the lessee at tis (sic “his”) expense and will be subject to the prior written approval of the lessor.
Clause 16.2 contained a ‘make good’ obligation with respect to ‘damage or alteration made to the interior or exterior’. A deposit of $5,500 became payable ‘upon execution of this Agreement by the Lessee’ under Clause 18.1, a deposit liable to forfeiture upon breach (Clause 18.2). The deposit was eventually paid by the plaintiff on 4 February 2010.[28]
[28] Exhibit P4, pp 79-80
In addition there were a number of important special conditions under cover of clause 26. One rendered the lessee ‘responsible for obtaining council approval for land use’. This covenant served to reinforce that already acknowledged in clause 15.2 which read:
15.2The Lessor does not warrant that the premises that you are about to Lease will be for the duration of your Lease be suitable (structurally or otherwise) or able to be used for the Lessee’s intended use of the premises. The Lessee acknowledges that it is the Lessee’s responsibility to ascertain from relevant authorities that the intended use is permitted by those authorities and to obtain all necessary approvals from those authorities to use the premises for the Lessee’s intended use and that this Agreement is not subject to such approvals.
Further special conditions written in the hand of Mr Foster, became the focus of much attention during the trial. These were:[29]
The Lessor hereby agrees to contribute $100,000 towards capital works.
The Lessor further agrees to ~~grant~~ sell the premises within the first two (2) years to the lessee at ~~the~~ agreed market value.
[29] Exhibit P4, p 18, T128.27-.35 (Mr Foster), T696.27-697.15 (Mr Thomas)
Although the evident changes are at first sight suggestive of some discussion over the precise wording, the only evidence on the subject of drafting was Mr Thomas’ admission that the word ‘grant’ was changed to ‘sell’ because Mr Daher ‘wanted some level of certainty that he would have an option to buy the building’.[30]
[30] T697.1-.8
The evidence was that discussions on 24 August otherwise focussed upon the purchase price of $810,000 or $820,000 (as opposed to ‘market value’) and the lessor’s contribution of $100,000 towards ‘capital works’.[31] The expression ‘capital works’ was suggested by Mr Foster.[32] According to Mr Thomas, Mr Foster ran ‘fairly quickly through the document’ with the parties before they ascribed to it.[33]
[31] T128.9-.35, T177.15-178.12 (Mr Foster), T226.5-.31, T337.13-338.1 (Mr Daher), T696.27-697.15
[32] T128.34-.35
[33] T128.9-.35, T826.14-1.8
It is obvious enough that there are shortcomings in the draftsmanship of the handwritten special conditions. For example when and how did the lessor become liable to contribute $100,000 and what precisely were the capital works referred to? Was the agreement to sell exercisable at the instance of purchaser or vendor, and when precisely during the period of two years would the obligation to sell arise? And more critically what was to happen in the event of disagreement over market value? As will appear later it will become necessary to resolve some but not all of these questions.
Incidentally, the parties purported to acknowledge in clause 25 receiving a copy of the proposed lease in compliance with s 11 of the Retail and Commercial Leases Act 1995 (SA) and that a disclosure statement was provided to the Lessee in compliance with s 12 thereof. There was however no substantial compliance with either provision. All that was done in those respects was that on 27 January 2010 an ‘estimation of commercial outgoings was compiled by Mr Thomas,[34] and a ‘pro-forma’ draft of a formal lease was prepared by the conveyancers Psassos and Allen on 25 January 2010 at his request.[35] Negotiations between the parties later broke down so no formal lease was ever executed. However neither party sought to make anything of the non-compliance.
[34] Exhibit P4, p 60
[35] Exhibit P4, p 111-140
The several development plans
Mr Daher proceeded apace to engage tradesmen and to obtain quotes. He frequently went to the property to facilitate trades access for these purposes. The informal arrangement was that he would collect keys from the office of L J Hooker in Mount Barker or be let in by Mr Foster. He said that eventually he was permitted to retain a set of keys for himself.[36] The precise date at which this occurred is controversial. Much was made of this issue during the course of the trial.
[36] T230.9-230.13
Certainly Mr Thomas handed over his own set of keys on 3 November 2009.[37] By the same token there is no doubt that Mr Daher regularly collected keys from Mr Foster and as time went on and greater access became necessary, he kept that set for several days at a time, maybe even longer.[38] On this basis the distinct probabilities are just that. Mr Foster must have passed the security alarm code onto Mr Daher for internal access purposes.
[37] Exhibit P4, p49
[38] T103.34-104.9, T130.12-.22, T163.5-.11, T187.15
At all events Mr Daher remained in continuous negotiations with the Mount Barker Council over planning and building issues, through Mr Burgess. On both accounts concept drawings were prepared and shown to Mr Thomas around late August 2009.[39] Mr Foster gave evidence that Mr Daher showed him various plans for the site in LJ Hooker’s office before January 2010.[40]
[39] Exhibit P4, p32 and p32A
[40] T138.1-.6
According to the evidence of Mr Daher, copies of the revised plans dated 17 September, 23 September, 7 October and 24 November 2009 were discussed and A3 copies left with Mr Thomas at his Glen Osmond Road office.[41] According to Mr Daher as the concept developed and changed Mr Thomas accepted them, expressing the view they were ‘a much better idea and …it was an improvement’.[42] In contrast Mr Thomas was adamant that the only plans he saw up to late January 2010 were those of 20 August 2009.
[41] T235.8-236.4, T239.3-.31, T336.37-33.5
[42] T238.6-238.7
A great deal depends on the resolution of this stark disagreement since the later plans reveal a markedly different proposal from that Mr Thomas claims to have been appraised of.[43] As noted earlier in this judgment, the later plans moved the seating area from the north-east to the north-west corner and involved the removal of sandstone from a substantial wall to the front west of the house itself and from the two dwarf verandah walls in that vicinity. It is this revised concept that Mr Thomas completely denies having any knowledge of or of giving his assent thereto. This factual dispute is considered in more detail later.
[43] Exhibit P4 from p33 – 34 inclusive
Negotiations with the Council
Mr Burgess, whose primary business was ‘managing land development … and land use applications through the councils’,[44] had by coincidence leased a room in the subject property in the early 2000’s. He was engaged by Mr Daher in April 2009. At no time did he meet Mr Thomas face to face. An issue with the Mount Barker Council was the number of car parks that might be available for the proposed café. He described the car park issue in these terms:[45]
[44] T384.36
[45] T395.2-.25
AThe site has limited car parking available on it, and a café, according to the development plan, Mount Barker development plan, has quite specific car parking numbers required. The viability of the project is going to rest on providing those car parks, or compensating council financially for not providing those car parks.
QCan you expand on what you mean by ‘compensating council financial’.
ACouncil, at that time, had a quite strong policy in a land use application, if sufficient car parks couldn’t be provided on site, that a financial payment had to be made to council in lieu of that.
QWas there a formula pursuant to which council operated in establishing the number of required car parks for a given change of use.
AEach change of use, depending on what it is, has a specific number of car parks. A café is one car park per three seats, or one for 15 sq m, whatever is larger. In our case, that required, I think, 36 car parks, from memory.
QWhat was the levy per car park.
A13 and a half thousand per car park.
QAt that time.
AAt that time.
Other issues concerning the Council mentioned by Mr Burgess were:[46]
… a disabled toilet for disabled people, disabled access, sufficient storage, area layouts, toilets for general usage, and, of course, the number of tables to determine whether it was viable in terms of car parking, and, importantly, because it was a contributory item from heritage, how that addresses the street façade …
[46] T396.7-.12
These were discussed with Mr Daher in mid-September. Thereafter Burgess proceeded to ‘get the plans to a point where I was happy … to form the lodgement’ with the Council.[47] He identified the plans initially forwarded to the Council as those dated 17 September 2009.[48] The receipt of these was acknowledged by Council in its letter of 12 October 2009.[49] Mr Burgess continued in negotiation with the Council over the issues mentioned earlier and the additional issues of: [50]
the fact that it is a heritage building and they were looking to improve it from what it is today … the fact that the roof will be reroofed in Colorbond … .
[47] T399.5-.8
[48] T401.6-402.34
[49] T403.26-.30
[50] T404.18-.22
By this time those exchanges centred upon the 7 October 2009 plans which of course involved the revised concept.[51] Mr Burgess said that within a few days after 9 December 2009, planning staff in the Mount Barker District Council gave a favourable indication as to the likelihood of planning approval. He also managed to satisfy the Council there would be ‘no requirement for car parking, or no requirement for financial payment for the lower car parking numbers’.[52]
[51] Exhibit P4 at pp 39-40
[52] T408.13-15
Thereafter the topics of discussion with the Council focussed more on building rather than planning approvals. This necessitated the procuration of structural calculations by an engineer. Mr Daher was clearly keen to commence work once the requisite approvals were forthcoming. An application for development approval was lodged with the District Council of Mount Barker on 8 October 2009.[53] Development consent was granted on 22 January, notified by letter of 25 January 2010.[54] An internal Council note read: ‘this application appears to be changing form with each passing day, the dwarf walls have been earmarked for removal around the perimeter verandahs’.[55] As mentioned earlier the plans formally approved were those dated 24 November 2009.[56]
[53] Exhibit P4 at p44
[54] Exhibit P4 at p 50-54
[55] Exhibit P4 at p48C
[56] Exhibit P4 at pp41-43, and 55-57
In the meantime Mr Daher claims to have kept Mr Thomas fully informed so far as the developments, change in concept and his intentions were concerned. For instance, he says he relayed the favourable intimation communicated by Burgess:[57]
… straight away … by telephone … a week afterwards … “I said to him that I’d be starting work in the New Year, towards the end of January” … he said …“I’m more than happy with everything, go ahead and start the work.” Basically, he gave me a full Okay.
He further claims to have rung Thomas again in early January ‘just to reconfirm that we were starting work on the building, and again he said ‘Fine, go ahead.’[58]
[57] T243.1-.15, T360.25-.29
[58] T244.14-.18
Mr Thomas’ account is completely at odds with that of Mr Daher on this topic. He deposed that the discussions went only so far as to furnish his consent to external work that did not necessitate prior Council approval:[59]
A… The reason I suggested that is because neither of that work would require council approval and the re-roofing had to be done in any case. Also there was tanks stored at the back of the building which were old and were slightly leaking. So I thought it would be of benefit to actually have all that work done. So it’s work that I had to do anyway.
QYou said you could do the roof. Was that what you regarded a part of your capital contribution, replacing the roof.
AYes, similarly with the work to the rear of the building. I was talking about the external to the building and the rear. I specifically said after I talked about that that there was no other work that we could actually do until we got council approval and I was very specific about that.
He specifically denied having agreed to any other work taking place.[60]
[59] T706.8-.23
[60] T715.38-716.1
Building work commences
Before the formal documents of approval were received from the Council, the builder Mr Vlachos expressed his reluctance to proceed in the absence of Council approval. This led Mr Daher to ring the Council offices in his presence. Both Daher and Vlachos say verbal approval to ‘go ahead’ was obtained during this telephone call, which more than likely took place shortly before 21 January.[61] This is consistent with the earlier intimation given to Mr Burgess. That verbal ‘approval’ might have occurred in this manner was conceded by Mr Gaetan the Mount Barker Council’s development officer, but then again only at a point in time after ‘it’s been signed from our perspective, even prior to it going to typing, that will give a building (sic “builder”) licence to make a start …’.[62] Based on his evidence, that could not have occurred any earlier than 15 January 2010.[63]
[61] T250.15-.28 (Mr Daher), T482.10-483.16 (Mr Vlachos)
[62] T1032.23-.29
[63] T1031.3-.6
Mr Vlachos and Mr Daher commenced work on site in January 2010, almost certainly on the 20^th, a Wednesday. They attended first to site clearance inside and out. On the following day they began cutting internal walls, erecting safety props, removing bricks and the like.
A dispute arises
On what was probably the second day of work on-site, Mr Daher received a telephone call from Mr Thomas, in which he expressed concern that work had started. Thomas enquired why they had not first begun on the roof and paving. On Mr Thomas’ evidence he told Mr Daher ‘this is not what we’ve agreed’.[64] Mr Daher invited him to attend the property and inspect matters for himself.[65]
[64] T718.23-.24
[65] T253.3-253.27
He did so between mid-morning and lunch time on 22 January when according to Mr Daher, the following exchange took place at a time when Mr Vlachos was about:[66]
He said to me everything we discussed previously, and all he seemed concerned about we had spoken about. He goes ‘Why didn’t you start on the roof and the paving?’ I said ‘Whether I started on the outside or inside we are doing it the best way that I know to do’ and also that ‘I have discussed with the builder and architects and engineers, before we start doing the outside and the roof we need to structurally secure the building and also if we start on the outside then we start on the inside afterwards, any damages, because there would be traffic going over the new paving, if we are putting beams in, we would put a supporting beam in the ceiling when we cut the walls, just say the beam went through, I said ‘What happens if the beam goes through the roof?’ I said ‘Are you going to pay for that mistake?’ He goes ‘No’. I said ‘Let’s do it the way it’s supposed to be done’. Then he went back to the roof and the paving. I said ‘I can’t see the problem. We have discussed this before. You knew I was starting work.’ And he goes then, after a period we went and stood outside because we discussed part of this conversation inside the building and he walked through and saw the walls had been cut, taken down, and then I said ‘Lets just go outside.’ We stood in front of the building and I said ‘I can’t see the problem with getting on with the job. We are getting on with the job just like you said.’ He goes ‘I want you to stop work.’ I said I couldn’t understand why at this stage of everything why he said that to me. I said ‘Why?’ He goes ‘Because I need to get my head around what is going on, I want to get a bit more information then you will be fine to go back on next week.’ I said ‘If we stop the work right now, we have got the props up where we cut the walls, but we need to put the lintels in place, that is the engineering, just to secure the building’. He goes ‘I will give you to tomorrow to finish whatever you can. Again I want you to leave the building.’ I said ‘If that is what you wish I will do it.’
It was suggested to Mr Daher under cross-examination that Mr Thomas inquired why the wall around the verandah was removed and that he had not seen plans indicating that they were to be so removed, suggestions denied by Daher.[67]
[66] T254.10-255.9
[67] T364.2-364.16
Mr Vlachos gave evidence of overhearing parts of the conversation of 22 January along these lines:[68]
QAre you able to tell the court the nature of the discussions that you heard between Scott and Jack.
AWell I was outside at the time and I think Scott came and basically went up to Jack and they said that ‘I thought you were going to start on the roof? And I think some paving and some other works. Why haven’t you started on the roof?
QWhat was Jack’s response, if you recall.
AJack said ‘Where does it matter where we start, we’re going to do the whole lot anyway.’
QAnything else that was said that you recall.
AScott repeated ‘I thought you were going to start with the roof’, a couple of times and Jack basically said ‘Well we start on the roof we’ve got to create openings for exhaust fans and flues for the kitchen and breathing pipes for the plumbing and it would have ruined the new roof.’ And basically in general said ‘Does it matter where we start? We’re going to do all right of it anyway.’
[68] T486.20-486.38
No particular alternative version was put to Vlachos by counsel for the defendants Mr Dart under cross-examination, no doubt because of the concession he received that Mr Vlachos ‘didn’t hear the balance of the conversation because they were inside’.[69] Mr Vlachos conceded Mr Thomas was angry on this occasion, as did Mr Thomas himself.[70] Mr Dart directly put to Mr Vlachos that Mr Thomas said ‘this is not what we’d agreed’. He responded ‘his words were exact “I thought you weren’t (sic ‘were’) going to start with the roof”’.[71]
[69] T500.1-500.7
[70] T499.27-.29, T718.18-.20
[71] T499.30-.33
It is common ground that by the end of this encounter Mr Thomas required all work to stop by the end of the day, subject to securing the site for safety reasons. He and Daher arranged another meeting at which Mr Daher was to produce the approved plans. For this purpose they met again at a Grange Kiosk on the Australia Day holiday, 26 January 2010. The plans were not produced, according to Mr Daher because they were not asked for.[72] A finance broker Ms Gaertner was present, however the meeting was cut short because she commenced to take notes to which Mr Daher objected. Afterwards Mr Thomas made it clear all further work had to cease immediately.[73]
[72] T366.27-366.29
[73] T898.33-.34
The following day he wrote to Mr Daher alleging a breach of clause 16.1 of the agreement to lease and demanding return of the keys.[74] He wrote in all but identical terms to TK builders.[75] Mr Daher’s then lawyer responded on 1 February 2010 denying any such breach, maintaining Mr Thomas was ‘fully aware of and have agreed to all work undertaken …’.[76]
[74] Exhibit P4 at p 73
[75] Exhibit P4, pp 61
[76] Exhibit P4 at p 74
There was another meeting the following day at Mr Thomas’ office, when Mr Daher claims to have handed over copies of the Council approved documents which he indentified as those comprised in Exhibit P4 at p50-57.[77] He also purported to deliver an account from TK Designs for the payment of $15,565.[78] It became clear this ‘account’ was legally ineffective. It was prepared by Mr Kaissi at Daher’s request and then produced by Mr Daher for some purpose remaining unclear.[79] The defendants gave written notice of an intention to terminate the agreement to lease on 4 March 2010,[80] and notice of termination on 1 July 2010.[81] According to Mr Dart the former was served as a hedge against the contingency that the agreement to lease might be construed as a lease within the meaning of s 10 of the Landlord and Tenant Act 1936 (SA). If that were the case re-entry could not be effected unless the tenant was given ‘reasonable time’ to remedy specified breaches. Nothing however turns on this course of events.
[77] T369.2-369.17
[78] Exhibit P4, p58
[79] T557.5-.38 (Mr Thomas)
[80] Exhibit P4 at pp89-90
[81] Exhibit P4 at pp107-108

The parties have remained at odds ever since. The building remains vacant, the alterations uncompleted. The situation is plainly a disaster from a business point of view judged from any perspective, whatever the merits, as neither rent was received by the defendants nor income produced by the plaintiff in the intervening period.
The legal proceedings
On 1 February 2010 Mr Daher lodged a caveat with the Lands Titles Office over the subject property, claiming the agreement to lease as a sufficient caveatable interest.[82] The caveat remains in place to the present day. In mid-June 2010 he lodged proceedings out of this court seeking an extension of the caveat. Then in October 2010 he filed a Statement of Claim in which he seeks declarations that the notice of termination was invalid, orders for specific performance, together with a declaration of an entitlement to resume possession in order to complete the capital works, as well as a claim for damages based on lost commercial opportunities.
[82] Exhibit P4 at p62
In a Reply filed in December 2010, Mr Daher admits he did not obtain written consent from the defendants for the building works to proceed in accordance with clause 16.1. He confesses and avoids by pleading estoppel and waiver. The particular pleading in question appears at paragraph 2ii of the Reply:
… he was provided with verbal approval from [Mr Thomas] to commence and undertake the building work.
Paragraph 2iii of the reply continues:
iii.Further or in the alternative says that if written consent was required, the Defendants, by virtue of the conduct of the Director and the Real Estate Agent, are estopped or have otherwise waived any requirement for written consent to be obtained prior to the Plaintiff carrying out the building works;
The particulars upon which the pleaded ‘defences’ are said to be founded are spelled out in more detail in a Defence filed on behalf of the plaintiff to the counter-claim of the defendants in paragraph 7.6-7.10 thereof.[83] To summarise, it claims Mr Thomas was informed verbally of developments in the building work; was provided copies of plans prepared and submitted to the Council ‘containing variations to the building alterations’;[84] that Mr Daher maintained regular contact with Mr Thomas by telephone and through meetings; that in early December 2009 Mr Daher informed Mr Thomas he had obtained Council approval and would commence and organise tradespeople to carry out the building work and would provide a quote for that work to Mr Thomas. It is further pleaded that in about mid-December 2009 Mr Daher informed Mr Thomas by telephone of the verbal approval obtained from the Council and that he proposed to carry out building work at the earliest opportunity in January 2010.
[83] Third Trial Book pp 31-32
[84] Para 7.6.2
For their part the defendants by their Defence and Counterclaim, seek a declaration that the agreement to lease was validly terminated by the notice of 1 June 2010, on the basis that the plaintiff commenced work without the requisite written approval and on account of the failure to have secured development approval in writing from the Council. They further claim the work actually undertaken did not comply with the plan approved by the Council. There is a claim to make good the premises at a cost of $113,727.
The building alterations
By a letter dated 17 May 2010 Mr Gaetan detailed the alterations undertaken in January that were not in his opinion in accordance with Council approvals.[85] The departures were tabulated in some detail by the engineer Mr Kokkinakis in his report of 27 October 2010:[86]
[85] Exhibit P4, pp 100-103
[86] Exhibit P13, pp 3-4

Plan & Photo Reference As Approved As Observed

(a)
A 150 x 150 x 12 mild steel angle was specified to support some brickwork and roof & ceiling after the creation of an opening to front office southern wall.
The wall was removed to full height and a 240 x 45 timber LVL strutting beam has been adopted to support the roof and ceiling.

(b) & (c)
A full length opening was specified to be created in the southern rear office wall (between the office and the store). The wall is a double wall and a 150 x 150 x 10 mild steel angle and a 150 x 100 x 10 mild steel angle was specified to support the external and internal leafs of wall above and roof and ceiling.
Instead of one large opening 2 smaller openings were created (one either side of the existing chimney) The wall above and the roof and ceiling are supported by, in one case a 100 x 100 x 6 GALINTEL and a 100 x 100 x 8 mild steel angle and in the other case 2 x 100 x 100 x 6 GALINTELS.

(d)
A full length opening was shown to be created to the eastern wall of the rear store.
No support beam was shown.
A 1m opening was created in this wall with the brickwork above supported by a 75 x 10 mild steel flat bar.

(e)
2 x 100 x 100 x 10 Mild steel angles were specified to support the brickwork above and the roof and ceiling loads above the newly created opening to the southern double wall of the kitchen.
2 x 150 x 90 x 10 mild steel angles have been used.

(f) A solid wall is shown between the rear office and kitchen.
A opening has been created in this wall (possibly to create a servery). The wall above the opening has been supported by a 100 x 100 x 6 GALINTEL.

(g)
A 2.195m wide external opening has been specified to be created in the western external wall to the front office with a 150 x 150 x 10 Mild steel lintel shown to support the external leaf of brickwork (and roof and ceiling) and a 150 x 100 x 10 Mild steel lintel to support the internal leaf of brickwork.
Saw cuts have been provided to create the opening in the wall; however the wall has not been removed although a 150 x 100 x 10 Mild steel lintel has been installed to the external leaf. The opening width is approximately 1.8m wide.

(h)
An opening has been shown to be created at door head height in the front wall to the rear office area (separating the small store area) A 150 x 100 x 10 Mild steel angle is specified to support the brickwork above and roof and ceiling load.
An opening has been created but all the brickwork has been removed. A strutting beam has not been provided to support the roof and ceiling above.

(i) The architectural plans show the low masonry verandah wall between the verandah piers to be removed with café-style bi-fold doors to be installed between the piers. No details of the support were provided. The low wall between the piers has been removed.

In his report Mr Kokkinakis expressed the following opinions about these departures:[87]
[87] Exhibit P13, p5
I do not consider the alterations to the building to be a major departure from the council approved documents as all proposed use areas within the building are essentially the same it is the size of openings within walls and the type of support lintels/beams used that has varied.
…
I consider the following items need to be addressed, as a minimum, so that the building work is amenable to the council approval.
.Install new timber LVL strutting beam and strengthen existing timber LVL strutting and make good struts in the vicinity of previously existing small store area (near building’s entry)
.Replace or strengthen existing 75 x 10 mild steel flat bar in old store to laundry opening at rear of building.
.Complete construction of the opening in the western external wall of the building and install internal leaf lintel.
.Install any lintels that may be required and new bifold doors to previous verandah columns.
. Installation of approved ramps etc.
.Installation of plumbing suitable for café/restaurant use, (i.e. Grease arrestor, hand washing basins etc)
.The installation of appropriate fire protection devices (i.e. fire extinguisher, smoke alarms, fire exit doors.)
To determine an accurate timing and costing for the above work reference should be made to a suitably qualified Quantity Surveyor or Cost Consultant.
My best estimate would be a construction phase of the order of 2 to 3 months and costs of the order of some $80,000.00 to complete the works that have already commenced. This is based on the premise that re-plastering painting and other such non-critical, fit-out items are excluded.
Mr Gaeten had no issue in substance or form with this analysis. He was in fact ‘satisfied that's all true and correct’ … ‘it can all be fixed, absolutely’.[88]
[88] T1038.29-1039.2
The considered opinion of Mr Kokkinakis was that such are the departures from the approvals that they ‘are of no real structural significance’. He estimated it would take in the order of 2-3 months to rectify to compliance standard.[89] He recommended a qualified architect be engaged to redesign the alterations accordingly. More-or-less the same departures were identified by the defendants building surveyor and planner Mr Meline.[90] He readily acknowledged the opinions of Mr Kokkinakis appeared ‘consistent with my observations’.[91] Like Mr Gaeten he took ‘no issue’ with the table.[92]
[89] Exhibit P13, pp 4-5
[90] Exhibit D27
[91] T988.31
[92] T989.16
Primary findings of fact
It can be seen that the predominant issue in contention in the case is the extent to which Mr Thomas was shown plans, what stages of development were revealed by those he did see and what his response(s) were. Mr Daher was quite specific as to the plans of 7 October containing the revised concept being shown to Mr Thomas in the latter’s boardroom when Mr Foster was present, ‘round the end of October, beginning of November’.[93] He identified the occasion as one at which he introduced his family to Mr Foster.[94] According to Mr Daher, Thomas specifically indicated the change in concept was ‘a good idea’ and ‘it is a better idea, it’s more exposure’.[95]
[93] T236.20-237.35
[94] T237.2-238.4
[95] T237.29-238.4
The evidence of Mr Daher in this respect is supported by that given by Mr Foster, in as much as the latter recalled a meeting at the Glen Osmond Road office ‘within a couple of months’ of 24 August, at which Mr Daher produced and went through changes by reference to large A3 size plans. Mr Foster identified these because of ‘an alteration from the eastern to the western side, with the dining area – external dining area’, and because there was ‘one with four parking spaces because … it’s an issue with the planning consultant’ and because ‘exposure of the dining area on the western side was a draw card for the restaurant’.[96] It might be noticed that car parking spaces first appeared on the plans of 17 September.[97] Mr Foster identified the plans as those of 7 October 2009, however he did not recall seeing those of 24 November on this occasion.[98] According to Mr Foster, Thomas ‘considered it was a worthwhile alteration’, he ‘seemed to be fine with everything’ and ‘everyone seemed to be happy’.[99]
[96] T138.18-.22, T139.34-140.2, T141.26-.36, T143.1-.14
[97] Exhibit P4, p 35
[98] T143.20-144.29
[99] T143.7-145.13
Mr Daher further claims to have shown the critical plans of 24 November to Mr Thomas in December. The place and date of this meeting are in contention but there is no doubt that a meeting took place somewhere between 9 and 16 December at either Café Milano or Parkside, because both men agree Mr Daher produced the quote from TK Building of 8 December 2009 for the building capital works.[100] No other persons were present.
[100] T238.33-239.9, 351.9-.38 (Mr Daher), T878.25-879.8
As noted already Mr Thomas emphatically denies seeing other than the preliminary plans containing the unrevised proposal. There is some support for this view of matters in the evidence of his friend and co-tenant in the Parkside offices, Ms Gaertner. She was able to recall by reference to her diary that just before lunch-time on 21 August an A3 plan was delivered to Mr Thomas. This she identified as Exhibit P4, p 32A, the plan of 20 August.[101] She went on to say – so far as it goes – that Mr Thomas produced no other plans at any other time to her other than this one.[102] Her evidence dovetails with that of Mr Thomas as to the events of 21 August.[103]
[101] T923.27-.31, 928.4-.18
[102] T924.5-.63
[103] T686.22-689.32
Just exactly what Mr Thomas saw and assented to is not an easy or straightforward issue to resolve. There are considerations supporting both points of view. On the one hand there is an abundance of evidence that Mr Daher was keen to move the project forward. He exerted a considerable degree of pressure in a number of directions through his various agents to bring about approvals and commence refurbishment. That is understandable enough given the commitment to pay the high levels of rent and to purchase the property at market value.
On the other hand if Mr Thomas is to be believed, he was sensitive from the outset as to interference with the heritage status of the building, especially disturbance to the sandstone. On that assumption it is equally understandable that he would have been upset and surprised to find more sandstone was removed than was originally proposed. It is difficult to appreciate why he permitted matters to drag on for so long before insisting on production of the material submitted to the Council, given that he was a person inclined to pay close attention to detail and was concerned to preserve the heritage aspects of the building. It is also perplexing that upon returning from Queensland and observing what was done, it took him two days before he went on-site to apprise himself of the precise situation, particularly if he was so indignant about it.
This evidence on the defence side is difficult to reconcile with several objective facts. It conflicts with the defendants’ own pleaded position that the plan was provided to him on 20 August.[104] Pinpointing the occasion by reference to a rendezvous between Thomas and Gaertner the following day is of little significance given that this was one of several meetings with Thomas at her Victor Harbour office.[105] It was the evidence of Mr Paraskevopoulos that the very plan in question did not come into existence in that form until at the earliest 11.29 am on 21 August.[106] This accords with Mr Daher’s account that he did not receive the plan until the week after the 24^th.[107] And it dovetails with the evidence of Mr Burgess to the effect that during an on-site meeting with Mr Daher on 24 August, Burgess requested of him ‘a set of plans that set out the internal layout of the café’. Mr Daher responded that ‘he had an architect working on the plans and that he had to collect a set and provide them to me’, which in fact he did on the 26^th.[108] The analysis of the evidence to this point suggests that the precision as to critical events professed by Mr Thomas is not necessarily as reliable or accurate as would at first sight appear and it demonstrates that it is unlikely he received those early plans on either 20 or 21 August.
[104] Para 11 Counter-claim, Third Trial Book p 71, compare para 4.2 of the defence, Third Trial Book p 19
[105] T938.26-939.10
[106] T443.3-444.14, T457.20-458.7
[107] T232.12-.23
[108] T391.28-393.14
Further defects in the recollection of Mr Thomas emerge from other sources. He was repeatedly insistent that his first meeting with Mr Daher was on 9 June 2009 in his Glen Osmond Road office.[109] His recollection in that respect is contradicted by four witnesses affirming his presence at three site meetings before 9 June, namely:
·Mr Foster and Mr Daher who spoke of an internal inspection sometime between February and April in order to determine what needed to be done to convert to a restaurant;[110]
·Evidence of a second on site meeting in the presence of Foster, Paraskevopoulos and Daher;[111]
·Evidence of a subsequent onsite meeting in the presence of Messrs Foster, Vlachos and Daher.[112]
In addition Mr Meline’s evidence was that he received directly from Mr Thomas more than the initial plans of 20 August 2009, including those of 7 October 2009.[113] The latter Mr Thomas claims to have never received as of that time.
[109] T674.33-675.13, 758.9-760.26
[110] T110.23-111.4 (Mr Foster), T210.27-.37, T213.27-.29, T216.17-217.7 (Mr Daher)
[111] T118.3-.33 (Mr Foster), T216.2-217.7 (Mr Daher), T435.30-436.7 (Mr Paraskevopoulos)
[112] T118.22-.30 (Mr Foster), T217.11-.19 (Mr Daher), T474.4-.22 (Mr Vlachos)
[113] T992.36-994.9
Given this evidence and the self-professed interest in the progress of the conversion proposal, the evidence of Mr Foster that Mr Thomas told him he ‘wanted to be there - … when those people were - when those trades were – just to confirm what sort of work would be done …’ makes eminent sense, and is therefore more likely to reflect the true course of events.[114] The combined force of the evidence of the witnesses just summarised leads inevitably to the conclusion that Mr Thomas was mistaken as to the occurrence of important meetings that took place prior to execution and more to the point, as to his level of involvement and the extent to which he was kept appraised of developments.
[114] T129.26-.37
It is also true that Mr Thomas overstated the condition of the premises as they were when Mr Daher first inspected them, although this is not of great significance in itself. It is evident from the photographs[115] and various other material, that the offices were in serviceable although dated condition and by late 2009 in a somewhat neglected state.[116] The wet areas were particularly dated. They had been unoccupied since mid to late 2008 and in want of cleaning and refreshment.[117] In his pleadings Mr Thomas claimed they were used as working offices throughout to the end of 2008,[118] however it is clear they were vacated earlier than that and thereafter used for storage over several months during the latter part of 2008.[119]
[115] Exhibits P1 and P30
[116] T246.1-248.39 (Mr Daher), T473.37-474.3, T475.22-.27 (Mr Vlachos)
[117] T105.5-.17, T107.12-.18, T110.4-.17 (Mr Foster)
[118] Defence para 4.1, Third Trial Book p 20
[119] T660.23-661.18, T756.21-757.30
The next topic to consider is the content of the meeting on 9 June at the office of Mr Thomas’ company Surity Pty Ltd. It began with an informal offer to involve Ms Gaertner in providing finance. This Mr Daher declined because he already had financial resources in place through the services of Mr Edwards. Mr Thomas claims to have made it perfectly clear at this meeting that he wanted to:[120]
… retain the character of the building and I wouldn’t, you know, approve any plans that involved removing the sandstone portions of the building and I indicated where the, if you like, the verandah part of the building was.
Ms Gaertner says that Mr Thomas pressed the need ‘to preserve the character of the building because it fitted into the historical aspects …’ and ‘… the fact that he didn’t really want the front of the building, which was sandstone, changed, and that the character of the building had to be maintained’.[121]
[120] T676.7-.11
[121] T920.25-921.4
Viewed objectively this evidence is surprising. In the first place it is to be recalled there were no plans in existence as yet, other than those handed by Mr Thomas to the architect and hence there was no ‘concrete proposal to interfere with the sandstone around the verandah’. In any case the removal of sandstone below the front eastern window indicated in the concept plans of 20 August were acceptable to him on his own admission, as they were:[122]
… obviously maintaining the sandstone areas of the building and I didn’t see any problems with those plans and I’d be happy to proceed on that basis.
[122] T689.5-.9
That concession necessarily involved an acceptance of some interference with some of the sandstone structure of the building itself at the front, so this position is inconsistent with the position said to be taken during the meeting of 9 June. Moreover it is difficult to come to terms with the degree of inflexibility on the sandstone issue taken by Mr Thomas during the course of his evidence. The quantity of sandstone destined for removal from the fabric of the building on either proposal was not that much different. It was more obvious from a streetscape perspective on the earlier than it was on the later proposal. The main difference was the additional removal of stone from two dwarf verandah walls at the north-west corner, however that did not interfere with the fabric of the building as such.

As Mr Thomas had agreed to sell the property at Mr Daher’s request within two years, and as the Council was and remains untroubled by the removal of sandstone in the revised proposal, it is impossible to understand why Mr Thomas remains adamant about it or what interest he could possibly have in retaining it. The removed sandstone remains on the property and so is available for reinstatement under the make-good provision on surrender of the lease, if it comes to that. Reinstatement would be completely unnecessary on the contingency of sale.
On both accounts Mr Daher is supposed to have made no response to the stance taken by Mr Thomas, which is equally surprising given that his proposals always involved some sandstone removal. Had it been raised to the extent claimed by Mr Thomas and Ms Gaertner, it is intrinsically likely to have provoked a response from Mr Daher. It also conflicts with the evidence of both Mr Foster and Mr Daher who maintained that no such topic arose on 9 June.[123]
[123] T173.36-174.10 (Mr Foster), T333.14-334.11 (Mr Daher)
Even more surprising is that there was no mention of the sandstone issue – still less to its central importance - in any of the contemporary documents or other meetings leading up to execution of the subject agreement. More specifically when Mr Thomas was prompted to put his proposal in writing to Mr Daher following the latter’s threat to withdraw, quite detailed proposals were outlined, none of them containing any reference to preservation of the sandstone structure.[124]
[124] Exhibit P5, 27 May 2009
Still further when matters came to a head on 22 January 2009 after building work commenced, on his own account Mr Thomas confronted Daher in these terms:[125]
… I also said I'd noticed that the works he was undertaking was not anything that we'd agreed. Mr Daher said to me 'I know I've jumped the gun a bit', was he [sic] words, but he thought that, you know, it should be okay and he basically just wanted to progress things and he suggested that we meet to discuss it.
[125] T717.9-.15
His evidence of what was mentioned thereafter detailed a number of issues, none referable to sandstone structures at all.[126] According to Messrs Daher and Vlachos, (Mr Thomas effectively admitted Mr Vlachos was present through the description he gave which coincides with Mr Vlachos’ appearance),[127] he did not raise the subject either, instead preferring to preoccupy himself with the fact that work had not commenced on the roof and the paving.[128] It is remarkable to say the least that had preservation of the sandstone been of such pre-eminent importance to him, that his anger was not directed to that rather than other lesser issues.
[126] T717.36-718.7
[127] T717.36-718.7
[128] T253.37-264.22 (Mr Daher), T486.20-.38, T502.19-.34 (Mr Vlachos)
In that context the fact that Mr Thomas delayed in ascertaining precisely what work was done, appears remarkably indolent for one so focussed on preserving the heritage aspects of the building. His explanation for the delay that he first telephoned Mr Foster, Mr Burgess and then Mr Daher when an on-site inspection was set for 22 January,[129] is understandable enough so far as that takes matters. As against that it is puzzling that he did not avail himself of a simple and effective site visit after returning from the appointment with the therapist in Murray Bridge, when he was supposedly shocked that work had commenced, whatever its nature.
[129] T716.3-717.15
Quite apart from these multiple and therefore compounding considerations, Mr Thomas proceeded to undertake a course of events suggestive of affirmation. These included instructing conveyancers on 25 January to put ‘together the lease’, in addition to supplying a sample lease and a statement of outgoings as contemplated by clause 25 of the subject agreement.[130] Furthermore he requested Mr Daher to connect the electricity in Mr Daher’s own name, which he in fact did and which Daher subsequently paid.[131]
[130] T729.5-.21, draft lease dated 25 January 2010 Exhibit P4, p111-140, ‘Estimation of Commercial Outgoings Schedules’, 27 January 2010 Exhibit P4, p 60
[131] T287.14-.28, T288.7-.36, Exhibit P4, pp 146 & 147
Mr Sallis contended the request to Mr Foster to pursue the $5,500 deposit was also an act of affirmation. Since this was plainly due on execution and since disputation was in sight, there was every reason for Mr Thomas to call up that obligation, so that particular consideration bears no weight in this context. Likewise the submission that Mr Thomas indicated he would permit work to continue upon the provision of certain documentation simply begs the question and is therefore of no assistance in reaching this conclusion. The same applies to subsequent negotiations. These took place in the context of an alleged breach, so the several posturings of the parties in a renegotiation context have no bearing on the current question either.
Another indication of the truth of the matter lies in the number of meetings held post contract. There is no doubt that face to face discussions took place on 16 October, 2 and 18 or 19 November, and 9 December 2009. Mr Thomas could not recall an additional meeting on either 15 or 16 December,[132] but that difference in recollection can be put to one side for the purposes of the present discussion. The incomplete telephone records confirm the conclusion that there were not insubstantial telephone communications between Mr Daher and Mr Thomas in this period as well.[133]
[132] T883.26-.37
[133] Exhibit P9
On Mr Thomas’ account the primary subject was simply the supply of plans submitted to the Council. If this were so, it is impossible to appreciate just why there were at least four meetings and other exchanges in this period or just why they took so long – a half hour or more on his own account.[134] On the other hand if, as Mr Daher contends, meetings were convened for the express purpose of updating and appraising Mr Thomas of the progress of the application through the Council, and to outline his proposals in detail, his evidence makes more sense given the number and length of the meetings.
[134] T701.35, T704.19-.20, T861.21-.22, T873.29-.31
By the same token the evidence of Mr Daher is not without its blemishes. He was shown to be mistaken when he claimed each of the builders ‘knew each other’s work and ability … and reputations.[135] The presentation of the ‘bogus’ quote on 8 December 2009 demonstrates a willingness to cut corners when it suited his ends. He proceeded in ‘hands on’ haste in planning and in proceeding with the alterations, when to his knowledge they were unauthorised by the Council.[136] However justifiable in the interests of safety or maintaining the structural integrity of the building they might otherwise have been, he took the risk without first notifying the Council or Mr Thomas.
[135] T351.3-.5 (Mr Daher), T493.29-.34 (Mr Vlachos), T596.22-25 (Mr Kaissi)
[136] T355.15-.19, T406.27, T411.33
During the course of cross-examination it was put to him that meetings with Mr Thomas were convened at Café Milano in Hutt Street Adelaide. Mr Daher expressed obvious surprise in the witness box at this - ‘at where’ - and he professed not to know the name of the café.[137] He went on to state that he never met Mr Thomas there at anytime and he expressed a lack of desire to drink coffee, still less at Café Milano.[138]
[137] T342.19-.26
[138] T357.16-.22
The evidence discloses that there were a number of meetings at Café Milano or at the Glen Osmond Road office, the first on 16 October 2009 at lunchtime,[139] a second on 2 November, a third between 17 and 20 November 2009,[140] a fourth on 9 December and possibly a fifth on either 15 or 16 December 2009.[141] Mr Thomas reiterated under cross-examination that those meetings occurred at Café Milano rather than at his office.[142] He confirmed by reference to an entry in his diary for Friday 16 October 2009 ‘Jack, Channel 10 cnr Wakefield and Hutt’.[143] He concedes there were no equivalent diary notes for meetings in October through to November of 2009.[144]
[139] T699.1-700.18
[140] T705.3-.20
[141] Refer combined chronology
[142] T839.23-.27
[143] T845.29
[144] T845.38-846.7, Exhibit P23
Mr Daher’s professed ignorance of Café Milano was exposed by the evidence of Mr Edwards, his Finance Broker. Edwards was called by the plaintiff to establish his financial capacity to proceed with the transaction should there be an order for specific performance. His evidence establishes that Mr Daher is a man of financial substance and that Edwards was prepared to supply the necessary finance to proceed with the project in Gawler Street, Mount Barker, should that otherwise prove possible.[145] In the course of this evidence he had cause to mention meetings with Mr Daher at Café Milano on a number of occasions.[146] This rather implies it was a place well known and frequented by Mr Daher.
[145] T587.22-590.17
[146] T587.7-.9
Conclusions of fact
In the result the recollection of Mr Thomas as to the number of on-site visits preceding the subject agreement are flawed. This reflects on his reliability when it comes to the number and content of the post contractual discussions. The only sensible purpose of any substance for attending meetings with architects, builders and with Mr Daher, could only have been to discuss the details of plans for the proposed redevelopment. For these reasons as well as those articulated earlier, the distinct probabilities are that Mr Daher must have presented the plans, including the critical plans of 24 November 2009 when they were made available to him to Mr Thomas for his perusal and as a focus for discussion during the course of the meetings in August, October, November and December 2009.
If the sandstone issue arose at all during the meeting of 9 June, it could only have been in passing and certainly not in such a way as to have implanted in the mind of either Mr Daher (or Mr Foster for that matter) that any particular sensitivity was involved. It follows from these findings that Mr Thomas must have been aware of the change in orientation from the east to the west side of the building and all that entailed, including the removal of sandstone from a wall of the home and the two adjacent dwarf verandahs.
The affront that sprang from the events of 22 January 2010 seems to have arisen from surprise as to just how far the alterations had developed during his absence in Queensland, and the degree of prevarication and defensiveness exhibited by Mr Daher thereafter in justifying alterations made outside the building approvals, rather than from a sense of grievance over the removal of sandstone. The question now becomes what legal consequences follow from these conclusions under the agreement to lease, as properly construed according to law.
The Agreement to lease – proper construction
As noted earlier, multiple issues arise as to the proper construction of the subject agreement. Such questions produced a great deal of debate between counsel during their closing submissions. These focus upon the meaning to be attributed to the Special Conditions, clause 26 in particular. The contract is not to be interpreted in a vacuum but in light of the surrounding circumstances: Zhu v Treasurer of the State of New South Wales:[147]
It was necessary to construe the [contract] so as to avoid it making commercial nonsense or working commercial inconvenience. Its commercial purpose – the purpose of reasonable persons in the position of [the parties] – was relevant. That, in turn, required attention to “the genesis of the transaction, the background, the context, the market” in which the parties were operating, as known to both parties.
The primary task is to proceed no further than to construe the actual words used by the parties, whilst at the same time avoiding absurdity and inconsistency: Watson v Phipps.[148]
[147] (2004) 218 CLR 530 at 559
[148] (1985) 63 ALR 321 at 324
The clauses of the contract in question stand to be construed as understood by a reasonable person in the position of the parties with knowledge of the surrounding circumstances and the objectives of the transaction: Western Export Services Inc and Ors v Jireh International Pty Ltd[149] affirming Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,[150] and Codelfa Constructions Pty Ltd v State Railway Authority of New South Wales.[151]
[149] (2011) 287 ALR 604; [2011] HCA 45 at [3]
[150] (2004) 219 CLR 165 at [40].
[151] (1982) 149 CLR 337 at 352
The first clause in question relates to the undertaking by the defendants to contribute $100,000 towards capital costs. Just precisely what ‘capital costs’ was intended to cover turns out to be uncontroversial. It is evident from the course of negotiations that Mr Thomas was not accepting any responsibility on behalf of the defendants for café specific alterations made for the sole purpose of converting the offices into a café or restaurant. His evidence therefore that it was intended the extent of the defendant’s contribution would apply to the structure or ‘fabric’ of the building accords with the surrounding circumstances and the objectives of the agreement.[152] There is no disagreement between the parties about this much.[153]
[152] T680.14-.26, T694.17-.23, T804.19-.32
[153] Plaintiff’s written submission para 43, T69.11-.15
Just how this was to be implemented and enforced as the work progressed is another matter. This aspect of the agreement places the primary carriage and the cost of all alterations in the hands of the plaintiff. This conclusion is reinforced by the separate covenants rendering him responsible for repairs and maintenance and obtaining all necessary authorisations and consents (clause 15.2 and Special Condition 1).
The special condition ‘the lessor hereby agrees to contribute $100,000 towards capital works’ is sufficiently clear to enable the lessee to call upon the lessor to contribute up to $100,000 towards the cost of ‘capital works’, according to the description accorded to that expression by the parties. Any disagreement as to what those works encompass is a matter justifiable by a court of appropriate civil jurisdiction.
The last special condition ‘the lessor further agrees to ‘sell’ the premises within the first two (2) years to the lessee at ‘agreed market value’ is more problematic. Even less happily worded, it is nonetheless capable of practical implementation. It is clear enough that the parties were in mutual accord that the plaintiff should be granted an option or a right to purchase the property. Mr Thomas unqualifiedly accepted this proposition under cross examination.[154]
[154] T906.14-.26
QMr Daher all along had been insisting he wanted an option to purchase the property.
AYes, he made that clear, yes.
QAnd you were prepared to give him the option to purchase that property.
AYes
HIS HONOUR
Q'Option' was the word used, was it.
AI can't recall. I don't believe that was the exact word used but he certainly wanted –
QA right to purchase or what was the word –
AYes, a right to purchase, or something like that. I can't recall the direct words.
And again:[155]
‘… there would be a mechanism for him to purchase it’.
The contemporary documentation marches in the same direction in this respect.[156]
[155] T910.31-.32
[156] Exhibit P4 at pp 77, 81 and 86, Exhibit P5 (emails of 9 and 15 July, 4 & 11 August 2009)
Ultimately then, whether characterised as an option or as a right to purchase is beside the point. The fact is that the defendants accepted the obligation to sell the premises to the plaintiff and expressed this assent in the wording of the special condition which is perfectly enforceable in terms.
The second area of potential ambiguity lies in the requirement for sale to occur within two years. This period of time coincides with the first term of the lease before the first right of renewal accrues. It is not difficult to appreciate why it might prove beneficial to both parties for the condition to be expressed in this way. Allowing up to two years before becoming obliged to sell enables the defendants to recoup some monies from its contribution to the capital works by way of not inconsiderable rental income and the passage of time may serve to increase the value of the property, thus realising a better market value should the right to purchase be exercised.
At the same time, the condition can be seen to work to the advantage of the plaintiff. He may wish to test the market and trial the location before determining whether to purchase the property in the first place, or alternatively exercise rights of renewal in the second. There are always commercial risks in ventures of this kind. As so construed the obligation to sell thus arises at anytime within the first two years after the agreement commences pursuant to clause 9. That is to say the obligation to sell does not arise at the time the plaintiff indicates his willingness to purchase. It arises once he has done so but may be fulfilled by the defendants at any time thereafter providing sale takes place within the two year period.
The third aspect of the special condition under discussion relates to the requirement to agree market value. It is easy to accept this particular form of words might cause problems in the event of disagreement between the parties as to what the agreed market value is. There was no provision as is commonly the case, providing for breaking a deadlock on that contingency. All the same (putting aside for the moment issues of rectification), this is precisely what the parties agreed upon in their discussions of 24 August. It may well have been that when a final lease was produced, they might have added a mechanism for resolving such disagreements. These commonly entail the appointment of an arbitrator, mediator or the appointment of a valuer at the nomination of some person or persons or institution such as the Real Estate Institute.[157] This step they did not take and as a matter of fact there was no consensus about this.
[157] See for example Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600
There is one final observation on the topic of the special conditions at large. It was accepted by counsel for the defendant that those conditions are subject to limited implied terms, to the effect that the lessor could not decline to contribute towards capital works or decline to agree market value, or for that matter refuse to give written approval for alterations or modifications, capriciously or unreasonably.[158] That concession was correctly made.
[158] T1275.27-.33
A relational commercial contract such as a lease, is susceptible to the importation of implied terms in the circumstances of a particular individual class of contracts as a matter of necessity and reasonableness, to act and negotiate in good faith and fair dealing in its performance: Renard Constructions (ME) Pty Ltd v Minister for Public Works[159] (to give reasonable consideration and dealing in good faith), Hughes Aircraft Systems International v Air Services Australia[160] (good faith and fair dealing), Aiton Australia Pty Ltd v Transfield Pty Ltd[161] (negotiate in good faith), Downward Bricklaying Pty Ltd v Goulburn–Murray Rural Water Authority[162] (to act in good faith and to do all things necessary to enable the lessee to have the benefit of a lease), Alcatel Australia Ltd v Scarcella[163] (a duty of good faith in performing obligations and exercising rights under a lease), Burger King Corporation v Hungry Jacks Pty Ltd[164] (good faith and reasonableness). Further in the case of refusing a consent, the reasons ‘must be something affecting the subject-matter of the contract which forms the relationship between the landlord and the tenant, and not something extraneous and disassociated …’, Secured Income Real Estate (Aust) v St Martins Investments Pty Ltd.[165]
[159] (1992) 26 NSWLR 234 at 256-257 & 267-268
[160] (1997) 146 ALR 1 at 36-42
[161] (1999) 153 FLR 236 at 268
[162] (2003) 8VR 61 at [126]-[129]
[163] (1998) 44 NSWLR 349 at 369-370
[164] (2001) 69 NSWLR 558 at [141]-[168]
[165] (1979) 144 CLR 596 at 609-60
Breach of Council approvals

Another troubling aspect of this litigation relates to the consequences of the undoubted breach of the building approval occasioned over the two days or so when building work actually proceeded before it was stopped by Mr Thomas. This has been described above. The position of the defendants is that a breach of the building approvals necessarily entails a breach of the agreement to lease itself.
For this purpose defence counsel relied on the decision of the Court of Appeal in Viscount Chelsea v Muscat.[166] However in that case there was a specific covenant “that the tenant was not to cut walls and was not to alter the height or elevation of the demised premises.[167] It is not surprising therefore the Court held that removing brickwork was a flagrant ‘almost subversive’ breach of contract.
[166] [1990] 2 EGLR 48
[167] Above at 50J
A close perusal of the agreement reveals there is no express provision governing the consequences of the failure to comply with planning or building requirements as such. Reading the agreement to lease as a whole reveals that the failure to obtain third party approvals or consents from ‘relevant authorities’ (clause 15.2) or ‘council’ (special condition 2), or the failure to comply therewith is a matter between the lessee and the authority or Council, not as between lessor and lessee. The special condition is confined to ‘council approval for land use’.
Clause 15.2 is wider for it applies to ‘all necessary approvals’, an expression apt to include planning (or land use) as well as building approvals. The rider to clause 15.2 is critical, ‘… this Agreement is not subject to such approvals’. The effect of these plain words is that the consequences of non-compliance with ‘all necessary approvals from … relevant authorities’ and the failure to obtain ‘approval for land use’ are matters falling outside the four walls of the contract.
There is no doubting that planning approval was obtained so there is no question of breaching the second special condition. Accordingly the admitted departures from the terms of the building approval fall for resolution under clause 15.2 which expressly excludes the agreement being subject to such approval. The admitted breach of the building approval therefore did not as such furnish a right of termination because it could not amount to a breach of the agreement to lease. Accordingly, these are not matters upon which the lessor can act to terminate for breach because the agreement was not expressly subject to such approvals.
The situation is quite the reverse when it comes to breaches of clause 16.1. Since the failure to obtain the written consent of the lessor to the alterations and modifications would found an action in damages for the cost of restoring the premises to their former condition, such breaches necessarily found a proper basis for termination: Marker v Kenrick,[168] North Central PLC v Butterworth,[169] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd.[170]The court in Tabcorp Holdings unanimously approved the following passage taken from the judgment Oliver J in Radford v De Frobervill:[171]
Now, it may be that, viewed objectively, it is not to the plaintiff’s financial advantage to be supplied with the article or service which he has stipulated. It may be that another person might say that what the plaintiff has stipulated for will not serve his commercial interests so well as some other scheme or course of action. And that may be quite right. But that, surely, must be for the plaintiff to judge. Pacta sunt servanda. If he contracts for the supply of that which he thinks serves his interests — be they commercial, aesthetic or merely eccentric — then if that which is contracted for is not supplied by the other contracting party I do not see why, in principle, he should not be compensated by being provided with the cost of supplying it through someone else or in a different way, subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit.
[168] (1853) 13 CB 188; 138 ER 1169
[169] [1987] 1 QB 527 at 535
[170] (2009) 236 CLR 272
[171] [1977] 1 WLR 1262 at 1270, reproduced at 236 CLR 288 [16]
Rectification
Although not specifically pleaded in the Statement of Claim, Mr Sallis made it clear during the course of the trial in sufficient time to afford adequate notice to the defendants, that the plaintiff sought rectification of the agreement in respect of the special condition regarding the option or right to sell. When taxed on the precise order sought, he indicated the word ‘agreed’ should be deleted from the phrase ‘agreed market value’ and the insertion of a mechanism for resolution in the event of disagreement over the appropriate market value at the time of sale was appropriate.
It is trite law that an order for rectification of a contract will be made only in order to bring an instrument into conformity with the true and common intention formed between the parties and when the agreement for some reason fails to express that agreement accurately or fully: Maralinga Pty Ltd v Major Enterprises Pty Ltd[172] and Pukallus v Cameron.[173] The subjective intentions of the parties are not sufficient for this purpose - there must be a mutually shared or common intention to incorporate a term which by mutual mistake was omitted: Codelfa Construction Pty Ltd v State Railway Authority (NSW) Constructions.[174] For that limited purpose parole evidence is admitted to establish what that shared intention actually was: Ryledar Pty Ltd v Euphoric Pty Ltd.[175]
[172] (1973) 128 CLR 336 at 349-351
[173] (1982) 180 CLR 447 at 456
[174] (1982) 149 CLR 337 at 346
[175] (2007) 69 NSWLR 603 at [269]
In this particular instance there is a dearth of evidence with respect to the market value ‘option’. It is clear that some kind of right, usually expressed as an ‘option’ to purchase, was certainly recorded in the negotiations and correspondence and when the agreement was signed on 24 August. Mr Thomas was insistent upon market value as opposed to a fixed price, so much is clear. The reasons lying behind the addition of the words ‘agreed market value’ does not seem from the evidence detailed earlier, to have been discussed at all between the parties. Judging from the precedent communications, the concept of ‘agreed’ market price was first introduced on the 24^th.[176] It was an expression supplied by Mr Foster in his capacity, effectively as scribe ‘basically as he wrote it, sort of dictated it to us’.[177] Whatever his capacity, whether as agent for Mr Thomas or otherwise, the evidence is entirely lacking that there was any discussion, still less any mutual agreement for something other than ‘agreed market value’, or for something more in the nature of a disagreement resolution clause.
[176] T337.6-338.11 (Mr Daher), T691.29-692.14, T694.4-.16, T910.13-912.18 (Mr Thomas)
[177] T696.31 (Mr Thomas)
Mr Daher expressed the sparse view at one point in his evidence that his subjective expectation was ‘I would have got a valuer, and agreed on …’.[178] There was no reciprocal evidence of a meeting of minds about this. Indeed there was no evidence that he ever conveyed this notion to either Foster or Daher. The position was essentially as described by Mr Thomas that ‘the mechanism … beyond that wasn’t discussed … had not been resolved’.[179] This evidence fails to establish an identical corresponding intention anywhere near sufficient to permit rectification by removing the word ‘agreed’ or by adding a term providing for resolution of disputes over the ‘agreed market value’: Bush v National Australia Bank Ltd,[180] Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd.[181]
[178] T226.35-.36
[179] T910.19-911.34
[180] (1992) 35 NSWLR 390 at 405-406
[181] (1930) 45 CLR 54
It may well be that Mr Daher hoped to extract a further concession from Mr Thomas in the subsequent formal lease, but as Mason J expressed it in Maralinga Pty Ltd v Major Enterprise Pty Ltd,[182] Mr Daher ‘signed the contract in the form in which it had been presented’. In those circumstances the unilateral expectation of Mr Daher was not of a kind that grounds an order for rectification.
[182] (1973) 128 CLR 336 at 347
Implied terms
An alternative submission pressed on behalf of the plaintiff was that it was nevertheless appropriate to imply terms in effect providing for resolution in the event of such disagreement. In the first place this was said to arise from the principles governing the implication of implied terms into contractual arrangements, namely to give business efficacy. Lord Simon delivering the advice of the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings said:[183]
Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied in the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.
There is however no justification for disregarding unambiguous language, simply because the contract would have a more commercial or businesslike operation, or that it would make more sense from a commercial point of view to do so: Codelfa Construction Pty Ltd v State Railway Authority (NSW).[184]
[183] (1977) 180 CLR 266 at 282-3
[184] (1982) 149 CLR 337 at 346-347
Here the parties have agreed on detailed provisions governing their contractual relations, so there is no apparent basis to imply such a term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.[185] It can be readily accepted that the clause as presently worded might cause difficulties and in some respects prove impracticable, but this is by no means an unmanageable or unenforceable arrangement. The inescapable conclusion is that the primary source of the rights and responsibilities of the parties remain in the expressions contained in the agreement to lease itself. The circumstances are analogous to the facts in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales,[186] simply because it is impossible to say with any degree of certainty what the term would actually have been - the incomplete negotiations might well have yielded any one of a number of alternative and reasonable solutions.
[185] (1982) 149 CLR 337 at 347 and 404
[186] Above at 356 per Mason J, Stephen & Wilson JJ, and see Aikin J at 375 and Brenann J at 407
As Brenann J said in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales:[187]
The refusal by the courts to go outside the four corners of a contract to find a term implied therein may be productive of hardship in particular cases. But the remedy is not to apply some general and inevitably imprecise notion of what is fair or reasonable in order to alter what the parties have agreed. The court simply gives effect to their agreement, and leaves in their hands the arrangements which must be made for their respective protection. The parties in the present case made no provision to alter the consequences of their agreement if their common understanding …
Likewise in Biotechnology Australia Pty Ltd v Pace,[188] Kirby P observed that:
Judges, by reason of their experience and knowledge, may not have the relevant expertise by which to clarify the ambiguous, elucidate the uncertain or give content to the illusory terms of a contract or suggested contract between the parties. To do so by reference to an imported standard of reasonableness may satisfy the lawyer’s desire for fairness. But the law of contract which underpins the economy, does not, even today, operate uniformly on a principle of fairness.
[187] Above at 406-407
[188] (1988) NSWLR 130 at 132
The second basis upon which it is sought to justify a more favourable interpretation to the plaintiff, was said to arise from the due application of the contra proferentum principle. In its pristine form the principle permits ambiguity in a document to be interpreted unfavourably against the party drafting and putting it forward: Darlington Futures Ltd v Delco Australia Pty Ltd.[189] For this purpose Mr Sallis strove to establish under cross-examination and later in his closing address, that Mr Foster was the agent of Mr Thomas for the purpose, particularly since Foster handwrote the critical words ‘agreed market value’ in the special conditions.
[189] (1986) 161 CLR 500 at 510
Nothing however could be further from the truth. Of course Mr Foster was an agent for the purposes of finding a buyer or purchaser of the property, but the evidence was anything other than that Mr Thomas was his own man throughout when it came to negotiations over this agreement. There is no evidence Mr Foster played an active role in that process or more to the point was authorised by Mr Thomas to adopt a particular form of words when it came to the agreement to lease.
In any case (as pointed our earlier) the words in question are plain enough. As such there is no ambiguity to resolve and it must follow the contra proferentum principle is simply not engaged. An evidentiary foundation for the application of the principle is further said to reside in the enhanced value of the property producing a windfall for the defendant. It is doubtful whether there is such a windfall in the first place. In the second the plaintiff may find his remedy in a discount for betterment of any award for reinstatement damages made in favour of the defendants: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd.[190]
[190] Above at 291
Valuation evidence
Expert evidence was led in the plaintiff’s case through the valuer Mr Adih, placing the market value of the subject property in November 2010 at $487,000 and $430,000[191] as of 24 August 2009. In a second report of 10 May 2011 Mr Adih valued the property at $503,500 exclusive of GST. In this report, unlike the first, he did not deduct the $80,000 to reflect the estimate in Kokkinakis’ report of 27 October 2010 for making good the premises, should that prove necessary. The first report did not question the $80,000 estimate. Mr Adih proceeded to assess value by reference to nearby ‘comparable’ commercial properties. This approach fails to give due weight to the greater potential of the subject property. These valuations must be viewed with these limitations in mind.
[191] Exhibit P14 Valuation Report dated 22 November 2010
The valuer called by the defence Mr C Wakeham, a Director of Mason Gray Strange Real Estate: Exhibit D31, estimated the property to be worth $780,000, on the premise that it actually yielded $60,000 pa as provided for in the subject lease. He had no information as to what the property actually fetched by way of rent beforehand.[192] He took no account of the fact that the poperty was not leased at the asking rental of $42,000. The premise does not reflect the facts. The property presently derives no income and in any case the core premise on which the valuation depends assumes successful and profitable operations over the period of the lease as a viable going concern.
[192] T1094.1-.4
Given the stated deficiencies in the respective valuations it is not possible to make satisfactory findings as to the value of the subject property at relevant times. There are too many unknown contingencies, not the least of which is the unoccupied state of the premises for roughly three and a half years.
Specific performance
The primary remedy sought by the plaintiff is an order for specific performance. As a general proposition an agreement to lease is no more than a contract to enter into a lease in the future: Doe & Bloomfield v Smith.[193] The distinction between the two lies in the fact that the latter as a present demise confers an immediate right to possession, whereas the former does not.[194] The agreement to lease in this particular case falls into something of a hybrid category, in as much as it appears to confer on the plaintiff a right to enter to effect alterations, but not so in the capacity as lessee, at least until a formal lease is duly executed (clause 22.2). All the same it is settled law that relief by way of specific performance is capable of being granted under an agreement to lease: Walsh v Lonsdale,[195] Chan v Cresdon Pty Ltd;[196] Eastern Garden Pty Ltd v Stone.[197]
[193] (1805) 102 ER 1390
[194] Bicknell v Hood (1839) 151 ER 5 at 47
[195] (1882) 21 Ch D9 at 14-15
[196] (1989) 168 CLR 242 at 252
[197] (2005) 239 LSJS 344; [2005] SASC 157 at [75]
It was argued by Mr Dart for the defendants that the agreement was simply an agreement to lease and not a lease as such. The submission overlooks the fact that equity would decree specific performance compelling the grant of a formal lease effective at common law in appropriate circumstances: Hoyts Pty Ltd v Spencer,[198] Butts v O’Dwyer,[199] Chan v Cresdon Pty Ltd.[200] Quite apart from that, clause 22.2 provides ‘the failure to execute such a lease shall not in any way affect the binding nature of the agreement’. Still further clause 19 provides:
BINDING AGREEMENT
The Lessor and the Lessee agree that upon the execution of this Agreement by or on behalf of both parties this Agreement shall constitute a tenancy agreement which shall be binding upon both parties and shall be enforceable by each of them including the terms and conditions in the disclosure statement and lease provided.
Although no relevant disclosure statement or proposed lease was produced at the time of execution, the agreement to lease itself contains sufficiently detailed terms to render it enforceable quite independently of a formal lease.
[198] (1919) 27 CLR 133 at 142-143
[199] (1952) 87 CLR 267 at 285
[200] (1989) 168 CLR 242 at 252
Nor is there any insurmountable impediment to an order for specific performance simply because the necessary building alterations require the consent of the local Council authority. The courts recognise that an obligation remains with the parties to take all necessary and reasonable steps to obtain such consents or approvals and once obtained, to perform the contract according to its terms: Duncan v Mell,[201] Butts v O’Dwyer,[202] Kennedy v Vercoe,[203] Alcatel Australia v Scarcella.[204]
[201] (1914) 14 SR(NSW) 333; (1914) 31 WN (NSW) 113
[202] (1952) 87 CLR 267
[203] (1960) 105 CLR 521
[204] (1998) 44 NSWLR 349
Accordingly if principle otherwise dictates, there is no reason to be gathered from any of the particular terms of the contract, why an order for specific performance could not be made. Mr Daher remains ready, willing and able to perform his side of the bargain and he proved through Mr Edwards his financial capacity to achieve it.[205] In that event the court can order the parties to execute a lease on terms and conditions giving effect to the findings herein and in accordance with those contained in the agreement to lease.[206] Whether specific performance is appropriate on the merits depends on a resolution of antecedent questions of central importance to the outcome of this matter, that is whether there was a breach, and if there was are the defendants are estopped from reliance on that breach to terminate or have they otherwise waived any such breach in the manner maintained by the plaintiff?
[205] T312.1-.12
[206] See for example the orders following judgment in Portline (No 2) Pty Ltd (in liq) v Whittle [2009] SASC 229
There is one further consideration in the context of the appropriateness of making an order for specific performance. The first is that under s 48(1)(a) of the Development Act 1993 (SA) any development assessment consent or approval lapses if not commenced at the expiration of 12 months thereafter. That is prima facie the position here. Although s 48(b)(i) has the effect of extending that period for three years where ‘the relevant development has been actually commenced by substantial work off the development within 12 months …’, it is for the Council to determine for itself whether this condition was fulfilled in this instance, as is the question whether the Council as the ‘relevant authority’ may extend the prescribed period pursuant to R 48(2) of the Development Regulations 2008. Accordingly it is for the Mount Barker Council and not for the Court to determine if the current approvals remain on foot, or a fresh or amended application for building approval is necessary. The court cannot make orders that intrude upon the proper exercise of statutory functions and discretions vested in the Council: Francis v Francis.[207]
[207] [2009] SASC 363 at [77]

Either way there is no guarantee the Council will approve them.[208] Even so, one gains the distinct impression from Mr Gaeten’s evidence that it is likely to follow if compliant with Council requirements.[209]
[208] T1012.20-1014.21, T1018.12-1020.23, T1035.24-.38 (Mr Gaeten)
[209] T1015.16-1016.15, T1020.32-1021.15, T1029.6-.31, T1026.1-.17, T1038.9-1039.2, T1039.37-1040.21, T1046.11-.24, T276.16-30, T277.34-278.38, T279.7-281.18, T781.33-782.23
Estoppel
The above findings of fact demonstrate that the defendants through their principal Mr Thomas, were aware in material respects of the proposed works, had obtained a copy of the final and approved proposal of 24 November 2009 and that he on their behalf gave verbal approval thereto. Those findings encompass proof on balance of the following statements or conduct by Mr Thomas:
·the failure to mention the importance and significance of removing sandstone and the subsequent failure to raise it as an issue of concern (at paras [65-69]);
·that the revised proposal was a ‘much better idea … an improvement’ (at para [25]);
·telling Mr Daher it was ‘fine, go ahead …’ that he could ‘start work’ and that he was ‘more than happy’ (at para [32]);
·that the final proposal was a ‘good idea’, a ‘better idea’ a ‘worthwhile alteration’ and provided ‘more exposure’(at paras [51, 52]).
No doubt a party by reason of words or conduct may become disentitled to enforce a right conferred under a contract. An estoppel arises in the circumstances outlined by Brennan J in Waltons Stores (Interstate) Ltd v Maher:[210]
[I]t is necessary for the plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt the assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption of expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
[210] (1988) 164 CLR 387 at 428-429
As Bleby J points out in Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 7),[211] the requirement that the defendant would not be free to withdraw from the expected legal relationship in the first element described by Brennan J ‘has not been embraced in all cases’, but that consideration is of no moment in the present case. Mr Thomas accorded that approval in substance and in form by what he said and what he did over the course of about 6 months between early June 2009 and early to mid December 2009.
[211] [2012] SASC 49 at [1526]
In the result the several statements of Mr Thomas giving oral approval of the revised plans and his encouragement to proceed can only be seen as inducing Mr Daher to rely thereon and to proceed with the applications for Council approvals and then to embark upon the costly process of commencing building works without opposition. Those findings lead to the inevitable conclusion that the defendants are now estopped from insisting upon giving written approval to alterations and that Mr Daher has acted to his detriment as a consequence. In those circumstances it would be unjust and unconscionable to allow him to exercise whatever rights the defendants had in consequence of breaches he was not minded to seek compliance of. The contract should therefore be specifically enforced on its terms, because of the disentitling conduct.
Waiver
The conclusions reached by the court thus far further demonstrate that Mr Thomas continued to take steps in the nature of affirmation after ‘discovering’ that building work had commenced without his approval. These steps were instructing a final lease be prepared, providing a statement of outgoings and placing the electricity accounts in Mr Daher’s name.
A waiver arises where there is an election by a party inconsistent with the exercise of that right: Craine v Colonial Mutual Fire Insurance.[212] That is to say the affirmation of a contract is necessarily a rejection or waiver of the right to terminate: The Commonwealth of Australia v Verwayen.[213] In this case Mr Thomas’ stated words and his conduct were inconsistent with his capacity to enforce the requirement to furnish his prior written approval on behalf of the defendants.
[212] (1920) 28 CLR 305 at 326
[213] (1990) 170 CLR 394
The consequence for practical purposes is to reinstate the parties to their mutually agreed position, as contained within the four walls of the Agreement to Lease itself. In other words, to the extent that specific performance is appropriate, it remains necessary for the parties to adhere to their respective rights and responsibilities under the Agreement to Lease and to implement the procedures contemplated by each of them with respect to giving prior written approval to ‘partitioning, alterations and/or modifications’, for the capital works contribution of $100,000, and as to the agreement to sell within the first two years at an agreed market value. To repeat, it would not be open for the defendants to refuse such written approvals or agreements in bad faith, on extraneous or unreasonable grounds. Otherwise the defendants retain the rights afforded them under the agreement.
Damages claimed by defendants – restoration or make good costs
In their counter-claim, the defendants claim damages representing the sum of money required to restore the building to the condition in which it was but for the plaintiff’s breach. The decision of the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd,[214] is authority for the proposition that the loss sustained by a landlord flowing from a tenant’s failure to perform its contractual obligations is the cost of returning the premises to the condition in which they would have been had there been no breach. Given the above findings it is unnecessary to calculate what such damages might have been, however it is advisable to make some observations about this topic.
[214] (2009) 236 CLR 272 at [13] and [15]
The two expert witnesses in point, Mr Heinrich an experienced quantity surveyor called by the defendants, and Mr Camporeale an experienced building project manager and estimator called for the plaintiff, are at odds in relation to the appropriate cost of restoration. The former estimate was $113,727,[215] whereas the latter was $28,987.52.[216] It is to be recalled that Mr Kokkinakis made an informal estimate of $80,000. They are both equally qualified to express their respective opinions, although it must be said that Mr Camporeale has the better contemporary ‘hands on’ industry experience. The major points of difference between them are these:
1.Mr Heinrich assumed materials, such as doors, door frames, windows and window frames would require replacement, whereas Mr Camporeale considered most could be reused as they remained undamaged on site;
2.Mr Heinrich assumed the necessity for lintels to be removed, whereas Mr Camporeale considered they should be plastered over, in some cases because removal would cause more damage;
3.Mr Heinrich based his labour estimates on a standard hourly rate of $65,[217] whereas Mr Camporeale allowed current market rates for the respective trades.
[215] Exhibits D28 & D29
[216] Exhibit P30
[217] Exhibit D29
As to the question of materials remaining on site capable of reuse, it was not clear from the notes taken at the view and the materials Mr Camporeale did inspect, what was able to be reused and what was not.[218] He conceded that he ‘overlooked’ an item for a lintel removal Mr Heinrich posted at $2,080.[219] Had the matter proceeded further I would have made orders requiring the parties to further inspect and then agree, and if not to call for further evidence identifying which extant materials could be reinstalled. The estimate of Mr Camporeale would increase to the extent that materials are too damaged for repair and reinstalment.
[218] T1101.25-1104.4
[219] T1104.5-.18
Furthermore Mr Camporeale did not allow for electrical wiring or repairing cuts to the sandstone on the western wall under the verandah near the entrance. Just what is precisely involved and the costs thereof is not clear either on the evidence adduced so far. Nor did Mr Camporeale allow for replacing data cabling.[220] Despite the evidence of Mr Thomas that the cables were cut,[221] there was no independent evidence of the necessity for replacement as opposed to splicing in fresh cables. Likewise the evidence of the need for electrical and telephone cabling were inconclusive.[222]
[220] T1115.15-.33
[221] T718.34-720.8
[222] T1109.26-1111.16, T1115.34-1116.27
In the absence of further evidence on these topics and the corresponding costs, the defendants would have failed to prove those parts of the reinstatement costs. The costs of replacing an air conditioner is disallowed as there is no underlying proof of the fact that this occurred.[223] And as mentioned earlier the prospect of betterment on account of increased property value was not addressed by the parties.
[223] T1119.15-.30, T1158.7-.15, T1159.38
So far as the replacement of lintels is concerned, I prefer the evidence of Mr Camporeale, supported as it was by Mr Vlachos and Mr Kokkinakis, that there is no need for removal and that removal would be too dangerous and likely to cause further damage in any event.[224] As to the labour costs involved I prefer the evidence of Mr Camproeale on this point as more realistic, fundamentally because they were based on actual current market rates which therefore better reflect probable costs.[225] Needless-to-say the parties would be entitled to be further heard on the cost of restoration in light of these conclusions had that proved necessary.
[224] T485.12-.486.2 (Mr Vlachos), T516.38-517.17, T520.36-521.21, T522.33-523.3, T525.14-526.17 (Mr Kokkinakis), T1106.4-1107.38 (Mr Camporeale)
[225] T1098.20-1099.17, T1114.13-.19
Damages claimed by defendants – foregone rent
The second head of damage said to be available to the defendants relates to rent foregone, that is income otherwise available to them under the lease had it remained on foot. That the defendants are entitled to such damages in appropriate instances is conclusively established by Tabcorp Holdings Ltd v Bowen Investments Pty Ltd.[226]
[226] Above at [7], [12,13] & [15-24]
It is to be recalled the agreement to lease took effect under clause 9, 90 days after Council approval, which therefore would have been 25 April 2010. The period in question then begins from that date and continues to the date of judgment, say for convenience two years. Assuming rent derived from office or consulting rooms, was as before, the projected income estimated by the defendant’s expert is $26,000 pa.[227] If on the other hand if the appropriate means of assessing foregone rent is to assume the $60,000 pa applies under the agreement (putting aside annual CPI rent reviews provided for in clause 7 – a topic not addressed by the parties), that would at face value entitle the defendant’s to an award of at least $120,000.
[227] Exhibit D3
The first difficulty facing the defendants in this regard is that they moved to terminate the contract, so that if their case is to be consistent they would never have been entitled to the income provided for under the agreement. A second difficulty is that they failed or declined to produce actual figures for income received in the years before mid to late 2008. It was not successfully let for the asking rental of $42,000 pa in the meantime. The fact is that the property was unfit for immediate occupancy for roughly a year before August 2009 and only partially let for an indefinite period of time before then. On any view some refurbishment was required.
There is no evidence of what the costs would be to bring the property to a lettable standard for office/consulting room purposes. That cost would have to be set-off against any entitlement the defendants might otherwise have under this head of damage. And as in the case of the plaintiff’s claim in damages, the adverse contingencies and the impact of tax have not been addressed. In the circumstances it is not possible to proceed to a concluded view on this topic, except to conjecture that something less than the proven yields of the past over the two year period in question would suggest an amount of perhaps $20,000 pa would have been appropriate, given the uncertainties just mentioned.
Damages – The plaintiff’s claim
In contrast to the position taken by the defendants, the plaintiff claims an entitlement to damages for loss of income for the period from late April 2010 to trial. This is founded on the guiding principle that the plaintiff is entitled to be placed in the same situation as if the contract had been performed and is therefore entitled to recover an expectation loss or chance: Commonwealth of Australia v Amann Aviation Pty Ltd.[228] This assumes successful Council approval for the café/restaurant and that it would have operated profitably.
[228] (1991) 174 CLR 64 at 80-81, 104-105, 118-119
Mr Najjar a restaurateur operating a similar business in Mount Barker, was called to give evidence of the potential income Mr Daher might possibly have expected from this venture. Although his café Acqua would to some extent come into competition with Mr Daher’s, his assessment based on sound experience, was that the proposed business on the subject premises of a steady 100-120 customers per day might have realised between $18,000-$22,000 per week gross. These projections were further based on an 80 seat capacity.[229] Based on profit margins of between 18-20 per cent, that averages at $3,600 per week, or $187,000 pa before tax.[230] There would however have been one-off establishment costs, within 10 per cent either way of $154,500 to take into account.[231] No adverse contingencies were built in.
[229] Exhibit P6 p 6, T347.16-.19
[230] T613.9-616.15, Exhibit P16 p 2
[231] Exhibit P16, Table 2
Based on these figures it is unlikely any profit of note would have been made over the first year of operation simply because the establishment costs, together with the process of building up clientele would have completely consumed and if not overtaken the available income. For the second year of operation from 9 April 2011, a broad estimate of about $150,000 seems achievable, however the parties did not address the tax implications applicable or the likelihood of adverse contingencies, so that it is not possible to take this inquiry much further. Had it become necessary the parties would have been invited to make further submissions as to the precise calculations applicable, based on these conclusions.
In light of the primary findings already made, the point has not arrived making it necessary to calculate damages under this head. Before the right to claim damages accrues, Mr Daher must obtain Council approval for the refurbishment. Until that occurs, and for 90 days thereafter, the agreement to lease does not commence, by dint of clause 9. Expressed in another way, there is no proven causal link between the defendants’ actions in waiving compliance with clause 16.1 and any expectation of profit, because there is no extant or chance foregone expectation until the conditions precedent to the lease commencing are fulfilled. The failure to secure Council approval for the work proposed and the breach of Council approval serves as a novus actus interveniens so far as this component of the case is concerned. Accordingly the plaintiff’s claim for damages must be dismissed.
Conclusion and orders
In the result, having found the defendants are estopped and in any case have waived their rights to insist upon giving prior written approval to alterations and/or modifications to the subject premises, there will be an order for specific performance of the Agreement for Lease entered into between the parties on 24 August 2009 according to its terms, as ‘binding upon both parties and enforceable by each of them’.[232] As a consequence insofar as necessary the notice of termination of 1 June 2010 is declared invalid.
[232] Wording taken from clause 19 thereof.
The subject agreement to lease should be construed as obliging the defendants to contribute up to $100,000 for the costs of capital works to the structure of the building, other than those undertaken for the specific purpose of converting the property to a café/restaurant. That part of the special conditions should be so construed to enable the plaintiff to recoup such expenditure from the defendants. The special conditions should be further construed so as to confer a right to purchase the property within two years of the commencement thereof. When it comes to the defendants’ approval of any further alterations and additions and its agreement to market value at the time of purchase, it is sufficient to record that they could not withhold such approval or agreement in bad faith or upon extraneous or unreasonable grounds.
Further causes of action by the plaintiff for rectification, the implication of implied terms are refused, as is his claim for damages. The application on cross-claim for damages by the defendants is similarly dismissed.
For the reasons explained above there is no occasion to consider alternative causes of action under the Misrepresentation Act 1972 (SA), s 191(ii), the Real Property Act 1886 (SA), or the Trade Practices Act 1974 (Cth) because the contractual rights and responsibilities of the parties have fallen into place. Mr Sallis did not suggest any of these alternative statutory causes of action yielded any different result or more favourable outcome from the plaintiff’s point of view. The question whether the caveat should remain in place was not canvassed by counsel, so that will require further consideration.
The parties should be heard on the precise orders necessary to give effect to these reasons, any consequential issues arising therefrom and as to costs.

Plan & Photo Reference	As Approved	As Observed
(a)	A 150 x 150 x 12 mild steel angle was specified to support some brickwork and roof & ceiling after the creation of an opening to front office southern wall.	The wall was removed to full height and a 240 x 45 timber LVL strutting beam has been adopted to support the roof and ceiling.
(b) & (c)	A full length opening was specified to be created in the southern rear office wall (between the office and the store). The wall is a double wall and a 150 x 150 x 10 mild steel angle and a 150 x 100 x 10 mild steel angle was specified to support the external and internal leafs of wall above and roof and ceiling.	Instead of one large opening 2 smaller openings were created (one either side of the existing chimney) The wall above and the roof and ceiling are supported by, in one case a 100 x 100 x 6 GALINTEL and a 100 x 100 x 8 mild steel angle and in the other case 2 x 100 x 100 x 6 GALINTELS.
(d)	A full length opening was shown to be created to the eastern wall of the rear store. No support beam was shown.	A 1m opening was created in this wall with the brickwork above supported by a 75 x 10 mild steel flat bar.
(e)	2 x 100 x 100 x 10 Mild steel angles were specified to support the brickwork above and the roof and ceiling loads above the newly created opening to the southern double wall of the kitchen.	2 x 150 x 90 x 10 mild steel angles have been used.
(f)	A solid wall is shown between the rear office and kitchen.	A opening has been created in this wall (possibly to create a servery). The wall above the opening has been supported by a 100 x 100 x 6 GALINTEL.
(g)	A 2.195m wide external opening has been specified to be created in the western external wall to the front office with a 150 x 150 x 10 Mild steel lintel shown to support the external leaf of brickwork (and roof and ceiling) and a 150 x 100 x 10 Mild steel lintel to support the internal leaf of brickwork.	Saw cuts have been provided to create the opening in the wall; however the wall has not been removed although a 150 x 100 x 10 Mild steel lintel has been installed to the external leaf. The opening width is approximately 1.8m wide.
(h)	An opening has been shown to be created at door head height in the front wall to the rear office area (separating the small store area) A 150 x 100 x 10 Mild steel angle is specified to support the brickwork above and roof and ceiling load.	An opening has been created but all the brickwork has been removed. A strutting beam has not been provided to support the roof and ceiling above.
(i)	The architectural plans show the low masonry verandah wall between the verandah piers to be removed with café-style bi-fold doors to be installed between the piers. No details of the support were provided.	The low wall between the piers has been removed.