Evans v Pallas Bride and Fashion Pty Ltd - [2016] WADC 85

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: EVANS -v- PALLAS BRIDE AND FASHION PTY LTD [2016] WADC 85

CORAM: BOWDEN DCJ

HEARD: 26 APRIL 2016

DELIVERED : 3 JUNE 2016

FILE NO/S: CIV 1211 of 2015

BETWEEN: JAMES LEONARD EVANS
BARBARA NICOLA WOLFF
Plaintiffs
AND
PALLAS BRIDE AND FASHION PTY LTD
First defendant
TREVOR GRESHOM MORRIS
Second defendant

Catchwords:

Construction of contract - Rectification - Oral contract - Misleading/deceptive conduct

Legislation:

Australian Consumer Law
Competition and Consumer Act 2010 (Cth)
Statute of Frauds 1677

Result:

Judgment for the plaintiffs in the sum of $72,070

Representation:

Counsel:

Plaintiffs:     Mr H Robinson
First defendant              :     Mr C Graham
Second defendant          :     Mr C Graham

Solicitors:

Plaintiffs:     Haydn Robinson
First defendant              :     Graham & Associates
Second defendant          :     Graham & Associates

Case(s) referred to in judgment(s):

Barclay Mowlen Construction Ltd v Dampier Port Authority & Anor (2006) 33 WAR 82
Boreland v Docker [2007] NSWCA 94
Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444
BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 283; [1997] HCA 40
Brambles Holdings Ltd v Bathurst City Council (2001) 55 NSWLR 153; [2001] NSWCA 61
Civic Video Pty Ltd v Paterson [No 3] [2014] WASC 321(S)
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141
Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193
Godecke v Kirwin [1973] HCA 38; (1973) 129 CLR 629
Hancock Prospecting v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
Hitchcock v Goldspan Investment Pty Ltd [2015] WASC 277
Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 (2008) 35 WAR 520
Marcus Clarke (Vic) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASCA, Library No 980302, 25 March 1998)
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31
Mount Bruce Mining Pty Ltd v Wright Prospecting Ltd [2015] HCA 37
Murchison Zinc Company Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167
NSIF Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740
Nyoni v Patterson [2012] WASCA 171
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76
RCR Tomlinson Ltd V Russell [2015] WASCA 154
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
Taylor v Johnson (1983) 151 CLR 422
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164
Terravision Pty Ltd v Black Box Control Pty Ltd [No 3] [2016] WASC 95
Thermoplastic Foam Industry Pty Ltd v Imthouse Pty Ltd (1990) 5 BPR 11
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21
Vella v Ivanovski (1984) WAR 8

BOWDEN DCJ:

Brief background

During 2004 the plaintiffs, who are husband and wife, leased business premises in Nedlands (the Nedlands premises).
In August 2004 they purchased 201 Railway Road, Subiaco (the Subiaco premises) with the aim of relocating their business to those premises.
At that time the Subiaco premises were leased to the first defendant with the lease expiring on 2 January 2015. The second defendant is a director of the first defendant and was guarantor of its obligations.
The defendants wished to remain in the Subiaco premises for a period of time. The plaintiffs were in a position to extend the lease on the Nedlands premises which they then occupied.
In November 2014 the parties executed an agreement (the November agreement) in respect of the Subiaco premises.
The November agreement provides:
….
Date: 8 November 2014
Dear Mr Morris
Re: Agreement to Hold Over Lease, 201 Railway Road, Subiaco, Western Australia 2008 ('Lease')
We refer to the lease that was assigned to Barbara Wolff and James Evans ('Assignees') on 8 September 2014.
The Second Renewed Term (exercised by the Tenants) is due to expire on 2 January 2015. The Assignees offer to hold over (i.e. continue) the Lease on the same terms and conditions as are contained in the Lease document dated 15 December 2009, with the exception of the Rent, which shall remain at the current rate of five thousand six hundred and sixty-five dollars, including GST ($5665.00), per calendar month. The Assignees reserve the right to increase the Rent on or before 2 January 2016, for rent applicable to any further period of the Lease offered by the Assignees beyond 2 January 2016.
Please sign and date both originals of this Agreement. Please return one original to us in the enclosed stamped self-addressed envelope and keep one original for your records.
The plaintiffs say the effect of the November agreement was that it leased the Subiaco premises to the defendants for a fixed 12-month period from 2 January 2015 until 2 January 2016.
The defendants say the effect of the November agreement was that it provides for a lease of up to 12 months which could be determined by either party giving one month's notice.
In any event, the defendants purported to terminate the lease by giving notice and vacated the Subiaco premises on 16 March 2015 and relocated their business to Claremont.

The plaintiffs' position

The plaintiffs say that the November agreement is unambiguous and, pursuant to its clear terms, the lease was extended for a fixed period of 12 months from 2 January 2015 to 2 January 2016 and the defendant had no right to terminate the lease and, accordingly, seek damages.
In the alternate, the plaintiffs say if the November agreement is ambiguous then, having regard to the extrinsic evidence, on its proper construction the lease was extended for 12 months until 2 January 2016.
Further, in the event that the November agreement is construed as not extending the lease to 2 January 2016, they seek rectification of the November agreement saying that it was a common intention of the parties to extend the lease for 12 months.
Alternatively, the plaintiffs plead that there was an oral lease for the period of 12 months entered into on 27 October 2015 at Vans Café in Cottesloe. They say the Statute of Frauds1677 is satisfied as the November agreement is a note or memorandum of what was agreed and there was part performance of the oral agreement.
The plaintiffs also plead misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law (ACL) saying that the defendants did nothing to inform them of the defendants' belief that the lease was on a month to month basis and the defendants failure to disabuse them of their mistaken belief and understanding that it was a 12‑month fixed lease constituted misleading or deceptive conduct, in effect, by silence.
They claim damages from the defendants. Their claim for aggravated and exemplarily damages was abandoned.

The defendants' case

The defendants' say that the clear and unambiguous meaning of the November agreement is that the first defendant occupied the premises on a month to month basis.
They say that the November agreement is clearly and incontrovertibly an agreement to hold over the lease, not to extend it for a fixed term of 12 months and the clear wording of the agreement permits no other construction.
They say that the plaintiffs' claim for rectification must fail because there was no clear and convincing proof that the common intent of the parties at the time of the signing of the extension agreement was that the agreement would extend the lease for a fixed period of 12 months and because the plaintiffs have failed to adduce evidence as to the reasons for the mistake in the wording of the November agreement which they seek to rectify.
They say the alternative claims based on an oral lease and misleading or deceptive conduct are red herrings and superfluous.

The evidence

Much of the evidence is not in dispute.
The second defendant, Mr Morris, was the sole director and sole secretary of the first defendant. The first defendant's business is to design, manufacture, fit and sell bridal gowns. It requires premises suitable for all of those purposes.
Mr Morris was aware that the second defendant's lease of the Subiaco premises was due to expire on 2 January 2015, and from about June 2014 discussed with the then owners of the premises what would be happening when the lease expired.
On about 4 September 2014 Mr Evans said he telephoned Mr Morris and informed him that the plaintiffs had purchased the Subiaco premises. According to Mr Evans, Mr Morris said he would be interested in extending the Subiaco lease, whereupon Mr Evans replied that the plaintiffs could agree to extend the Subiaco lease for 12 months and they would discuss the matter further after settlement of the Subiaco property.
Mr Morris agreed that he spoke to Mr Evans on or about that date, and may have had the discussion referred to by Mr Evans, but had no recollection of that discussion.
The Subiaco premises settled on 8 September 2014 and the plaintiffs became the registered proprietors on 11 September 2014.
On 9 September 2014 Mr Evans informed Mr Morris that settlement had occurred (exhibit 3.42).
On 10 September 2014 Mr Morris emailed Mr Evans asking to 'catch up … to discuss the extension of lease for next year' and stating 'We appreciate your kind offer of allowing us to stay on for a further 12 months' (exhibit 3.42). Mr Morris said that the contents of this email led him to conclude that he discussed with Mr Evans, on 4 September 2014, staying at the Subiaco premises for a further 12 months (ts 132), although he had no recollection of the discussion.
Mr Morris said he was a businessman with decades of experience dealing with commercial matters and was careful to pay attention to details when striking a deal. He said that when he used the words' extension of the lease' in this email he did not mean anything other than 'to go longer'.
Subsequent emails from Mr Evans advised Mr Morris that the plaintiffs wished to have some works performed on the Subiaco premises which would require access to those premises by their architects and required council planning approval (exhibit 3.46).
Eventually the parties agreed to meet at Vans Café in Napoleon Street on 27 October 2014.

27 October 2014 meeting at Vans Café

There were three persons present at the meeting; the two plaintiffs and the second defendant. The parties gave different accounts of what occurred.
Mr Evans' evidence was that Mr Morris explained that he needed more time to relocate his business and said that an extension of 12 months from 2 January 2015 would be appreciated. Mr Evans replied that the plaintiffs could extend the lease on the Nedlands premises they then occupied for 12 months and were happy to extend the Subiaco lease for 12 months at the current rent.
Mr Evans said that Mr Morris thanked him for the offer and accepted it and Mr Evans then said he would send the papers to confirm the extension.
Mr Evans said he told Mr Morris that the plaintiffs would like to perform some minor external repairs to the Subiaco premises which would not interrupt Mr Morris' business and Mr Morris was happy with that arrangement.
Mr Evans said that in total the meeting lasted around about 40 minutes, however the discussions about the lease was short, lasting only a few minutes.
Ms Wolff's evidence was in similar, if not identical, terms to her husband's. Indeed, pars 10 to 16 of her evidence-in-chief (exhibit 2) are virtually identical to pars 16 to 22 of her husband's evidence-in-chief (exhibit 1). She said the Vans Café meeting was short, simple and easy to remember. It consisted of the plaintiffs saying they were prepared to extend the lease for 12 months at the same rent, Mr Morris agreeing and Mr Evans saying that the agreement would be recorded in writing and signed by the parties. She said a monthly tenancy was never discussed. She said Mr Morris wanted 12 months, and they agreed not to increase the rent.
Mr Morris said he attended the meeting at Vans Café to get a general understanding of the plaintiffs' position regarding the lease.
Mr Morris said he told the plaintiffs that he did not know how much time it would take to relocate his business and that he had not, at that stage, been able to relocate his business. He said the defendants would need up to 12 months to relocate and Mr Evans said that he was happy for the current rent to continue for however long it took for the defendants to relocate, however if they were still in the premises in early 2016 the rent would need to be reviewed (ts 133).
Mr Morris said the plaintiffs indicated that they were happy for them to stay on for up to12 months. Mr Morris said he explained that he needed flexibility to find new premises and needing to be able to move decisively if new premises became available. Mr Morris said that Mr Evans told him that he would get something drawn up and send it to him for signing.
He said that Mr Evans mentioned that the plaintiffs would require vacant possession of the Subiaco premises so they could move their business into it but before that occurred, he needed to get plans drawn up, council approval and carry out certain works on the premises. Mr Morris said he told the plaintiffs that he would be happy for the work to go ahead while the second defendant was in the premises, so long as it did not affect the operation of the business.
Mr Morris' evidence was that he understood that the letter he was to receive from Mr Evans, once agreed and signed, would settle the terms which were not discussed at the Vans Café meeting. He said that the meeting only dealt with three issues, namely that the plaintiffs were happy for the defendants to stay on past January 2015 at the existing rent for up to 12 months, and he was happy for the plaintiffs' works to go ahead so long as it did not affect the defendants' business.
Mr Morris said there was no mention of a fixed term. He could not recall Mr Evans saying the plaintiffs' Nedlands lease could be extended for 12 months.

Events occurring after the Vans Café meeting

Mr Evans said that after the Vans meeting the plaintiffs prepared the November agreement, which was typed by Ms Wolff.
He said the agreement was prepared to reflect and accord that the common intent was for a fixed term of 12 months with no rental increase and his understanding that this was the common intent was based on the telephonic discussions with Mr Morris of 4 September 2014, the meeting at Vans Café and Mr Morris' email of 10 September 2014.
On 7 November 2014 Ms Wolff sent an email to Mr Morris in the following terms:
Hi Trevor, I am ready to mail you the agreement to hold over the lease until January 2016 and want to ensure I have your correct mailing address. (exhibit 3.50)
Mr Morris responded by asking for the agreement to be sent to him in New South Wales (exhibit 3.50).
Mr Morris said that when he received the email he noted it referred to 'the agreement to hold over' the lease until January 2016. Mr Morris said that when he received the agreement he knew the parties were agreeing formal terms and that the language used in the document would have a legal and commercial effect. He said that he knew the phrase 'holding over' meant that the lease would continue month by month, possibly until 2016, with either party having the right to terminate by providing written notice.
Mr Morris maintained that at the time he received the November agreement for signing, there had been no formally concluded agreement because he wanted to see what the plaintiffs put in writing before he accepted the offer.
Mr Morris maintained that if the agreement referred to a fixed term extension he would not have signed it. He said the second defendant had to have the ability to move into new premises and terminate the existing lease otherwise they would be paying rent on two premises simultaneously for a period of up to 12 months and this was not a viable option for his business.
Mr Morris said he was not concerned about the plaintiffs terminating the monthly lease by one month's notice because he had been told by the previous owner, his real estate agent and by Mr Evans, that the plaintiffs were going to make certain alterations to the premises before they moved in and that would require plans, council approvals, and time for the works to be performed. He said he was told by the agent it would take about 12 months before that could happen. Mr Morris' assessment of the situation was that the plaintiffs would not terminate his monthly lease before he was able to obtain new premises and he was prepared to run the risk that they would.
The plaintiffs executed the November agreement on 8 November 2014 and the first and second defendant on 14 November 2014.
On 27 November 2014 Mr Evans extended the lease for the plaintiffs' business premises at Nedlands from 4 January 2015 to 3 May 2016 (exhibit 3.59) on the basis, he said, that the plaintiffs' Subiaco premises was leased to the first defendant until 4 January 2016 and a further four months was required, on his estimate, after the first defendant vacated the Subiaco premises to enable the plaintiffs to make the necessary alterations to those premises before they moved in.
The plaintiffs are still carrying on their business from the Nedlands premises. Mr Evans' evidence was that at no time did Mr Morris say anything to him about the lease agreement being for less than 12 months or being only a monthly extension. He maintained that if he was told this he would not have extended the plaintiffs' lease on the Nedlands premises.
Mr Morris said that in about November or December 2014 he contacted a real estate agent with instructions to find new premises for the defendants' business. He told the agent that the lease expired in January 2015 but he had signed a 'letter agreement with the landlord allowing Pallas to stay on until January 2016'. He said he also told the agent that they urgently needed new premises and the second defendant would be ready to move as soon as something suitable was found (exhibit 4, pars 68 ‑ 69).
Mr Morris said he did not expect the second defendant's relocation was likely to be a quick process because he thought it would be very hard to find the right premises for the business as it was a very special business with very special requirements (ts 135, 149).
Mr Morris said the defendants were very lucky (ts 135,155) that the agent was able to locate suitable premises in Claremont in such a short time and in January 2015, the defendants entered into a lease for the Claremont premises.
Mr Evans asserted that on or about 14 January 2015 Mr Morris telephoned him to advise that he had made an offer to lease a property in Claremont and would like to get out of the Subiaco lease. Mr Evans said he responded that he did not think they could alter the situation because they were locked in with the lease on the Nedlands premises and were relying on the rent from the first defendant to pay the mortgage on the Subiaco premises.
Mr Morris' evidence in relation to these conversations was that when he rang Mr Evans, out of courtesy, to advise that the defendants had obtained new premises the defendants had already made the offer for the Claremont premises and he needed the plaintiffs' goodwill to remain at the Subiaco premises for another month or two. He agreed that Mr Evans told him he thought that they were locked in on the lease until January 2016.
Both Mr Evans and Mr Morris agree that Mr Evans telephoned Mr Morris on 15 January 2015 and told him the situation had to remain as it was and could not be changed and Mr Morris responded that was not his understanding of the agreement.
It is not disputed that Mr Morris advised Mr Evans on 3 March 2015 that the second defendant intended to vacate the Subiaco premises and sent a notice of termination on 4 March 2015 claiming that there was a monthly tenancy pursuant to cl 9.2.2 of the lease agreement and in effect giving one month's notice (exhibit 3. 60 - 3. 61).

This conduct was accepted by the plaintiffs as repudiation of what they say was the 12-month lease expiring on 2 January 2016 constituted by either the November agreement or the oral agreement made on 27 October 2014 at Vans Café.
On 6 March 2015 the first defendant vacated the Subiaco premises and relocated its business.
Mr Evans said that after the Subiaco premises were vacated the plaintiffs tried to re‑let the premises, advertised it on the internet, and put a 'For Lease' sign in the window but have been unable to attract a tenant.
Mr Evans maintained that he was not familiar with the holding over clause in the lease agreement. He said he examined the lease before he purchased the Subiaco property but was not aware that 'holding over' was a term used in the lease or had a special meaning insofar as leases are concerned. He said he had never previously been a landlord. His only previous experience was as a tenant and he had not previously been a party to a lease with a holding over clause.
Ms Wolff agreed that she had read the lease previously but did not recall if she read it shortly before the plaintiffs entered into the November agreement.
She said that the term 'hold over' used by her in the November agreement was not a reference to the words 'holding over' in the lease. She said she had never heard the term holding over before. She said she asked one of her patients to look over the document she had prepared and the patient told her that 'holding over' were the words used to cover the situation being referred to. Ms Wolff did not know whether that patient had any legal training, although she believed she did.
She said that the words in the November agreement 'the assignees reserve the right to increase the rent on or about 2 January 2016 for rent applicable to any further period of the lease offered by the assignors beyond 2 January 2016' were intended to reflect the fact that the rent would remain fixed for the period from 2 January 2015 to 2 January 2016 and any increase in rent would only relate to any further period beyond 2 January 2016. She said the use of those words was intended to reflect the fact that it was a fixed leased for the period from 2 January 2015 to 2 January 2016.

The lease

As we know, when the plaintiffs purchased the Subiaco premises it was already leased to the second defendant pursuant to a lease of 15 December 2009. That lease provided (exhibits 3.1 - 3.41):
Clause 5.4
5.4Landlord's Costs
The Tenant must pay all costs, charges and expenses (including solicitor's costs on a full indemnity basis) incurred by the landlord,
5.4.1…
5.4.2Arising from any breach of this lease by the tenant.
Clause 5.5
5.5Interest
If any payments due by the tenant under this lease are not paid on the due date, that indebtedness will bear interest at the rate of fifteen per centum (15%) per annum computed from the date that it was payable to the date it is paid, that interest to accrue from day to day and is payable on demand.
Clause 9:
9.2Holding Over
9.2.1If the Tenant, with the consent express or implied of the landlord remains in occupation of the Leased Premises after the expiration of the Term, then the Tenant will do so as a monthly tenant at a rental equal to one-twelfth (1/12) of the aggregate of the Rent, the Tenant's proportion of variable outgoings and rates and taxes payable by the Tenant during the period immediately preceding the date of expiration of the Term increased by ten per cent (10%).
9.2.2The monthly tenancy referred to in sub-clause 9.2.1 can be determined by one (1) months' written notice given by either party to the other.
9.2.3The Tenant will be entitled to remain in possession of the Leased Premises subject to the rights and obligations contained in this lease.

The pleading point

The defendant's primary argument relate to pleading issues (ts 160).
The defendants point to pars 16, 17 and 18 of the Statement of Claim (SoC) which read:
16.On a proper construction of the Extension Agreement (referred to in this judgement as the November agreement):
(a)the lease continued until 2/1/16 on the same terms and conditions as the lease with the exception of the rent remaining at $5,665 GST inclusive per calendar month;
…
17.Further and alternatively if the extension agreement is ambiguous about whether the lease is to continue until 2/1/16 or to continue on a month to month holding over basis … the ambiguity is to be resolved by the proper construction of the extension agreement being the lease continued until 2/1/16.
18.Further and alternatively:
(a)the common intention of the plaintiffs and the defendants was for the lease to continue until 2/1/16.
…
Mr Graham says there is disconformity between the plaintiffs' pleaded case and the case at trial because the pleaded case is that the lease continued until 2 January 2016 in the same terms and conditions with the exception of the rent which remains the same (SoC par 16(a)). He argues that at SoC par 17 (ambiguity plea) and SoC par 18 (rectification plea) the phrase 'lease to continue' is used in the same sense. He says the plaintiffs have not pleaded that cl 9.2.2 did not operate or was excluded by the November agreement and therefore the plaintiffs cannot succeed (ts 171 ‑ 173).
The pleadings' basic function is to identify the issues, disclose an arguable cause of action, and state the case sufficiently clearly to allow the other party a fair opportunity to meet that case at trial: Murchison Zinc Company Pty Ltd v Thiess Contractors Pty Ltd [2000] WASCA 167 [38]; Barclay Mowlen Construction Ltd v Dampier Port Authority & Anor (2006) 33 WAR 82 [7]; Hitchcock v Goldspan Investment Pty Ltd [2015] WASC 277 [13] ‑ [16].
However, pleadings must be considered in the context of case management techniques, including the pre-trial exchange of witness statements and to some extent pleading issues have become more relaxed because of case management techniques which can often provide details of a claim: Barclay Mowlem, Hitchcock v Goldspan Investment Pty Ltd.
This approach does not deny the need for a statement of claim to state the material facts to support the claim and for the pleadings to define with clarity and precision the issues or questions in dispute between the parties which are to be determined by the court and which set the limits of the action: Nyoni v Patterson [2012] WASCA 171 [36] ‑ [38]; Hitchcock v Goldspan Investment Pty Ltd.
In this case witness statements were exchanged pre-trial. It cannot be said that the pleadings did not state the case sufficiently clearly to allow the other party a fair opportunity to meet it at trial.
The plaintiffs' pleaded case is that the lease continued until 2 January 2016 and the other terms and conditions of the lease apply with the exception that the rent is as specified in the November agreement. It does not mean the lease continued until 2 January 2016 unless determined by one months' written notice or the lease could continue until 2 January 2016. Clause 9.2 only applies if after the expiry of the term of the lease the defendants remained in possession with the plaintiffs' consent. The plaintiffs plead effectively that the term of the lease has been continued until 2 January 2016. Clause 9.2 does not need to be modified on the plaintiffs' pleaded case as it only applies if the defendants continued to occupy the Subiaco premises after the expiration of the 2 January 2016 term.
It is always possible to plead any given matter in a different way. It seems to me that it cannot be said that the defendants did not have a fair opportunity to meet the case at trial or that the material facts to support the claim were not pleaded and that the issues were not defined with sufficient clarity and precision.

Principals of construction

In Mount Bruce Mining Pty Ltd v Wright Prospecting Ltd [2015] HCA 37, French CJ, Nettle and Gordon JJ said [46] – [52]:
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.
Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption 'that the parties ... intended to produce a commercial result'. Put another way, a commercial contract should be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
These observations are not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales and Electricity Generation Corporation v Woodside Energy Ltd. We agree with the observations of Kiefel and Keane JJ with respect to Western Export Services Inc v Jireh International Pty Ltd.
The observations of Kiefel and Keane JJ, with respect to which their Honours agreed, were [108] – [113]:
That regard may be had to the mutual knowledge of the parties to an agreement in the process of construing it is evident from Codelfa Construction Pty Ltd v State Rail Authority of New South Wales. Mason J, with whom Stephen and Wilson JJ agreed, accepted that there may be a need to have regard to the circumstances surrounding a commercial contract in order to construe its terms or to imply a further term. In the passages preceding what his Honour described as the 'true rule' of construction, his Honour identified 'mutually known facts' which may assist in understanding the meaning of a descriptive term or the 'genesis' or 'aim' of the transaction. His Honour had earlier referred to the judgment of Lord Wilberforce in Prenn v Simmonds, where it was said that:
'[t]he time has long passed when agreements … were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations.'
In a passage from DTR Nominees Pty Ltd v Mona Homes Pty Ltd, to which Mason J referred, it was said that the object of the exercise was to show that 'the attribution of a strict legal meaning would "make the transaction futile" '. In Electricity Generation Corporation v Woodside Energy Ltd, French CJ, Hayne, Crennan and Kiefel JJ explained that a commercial contract should be construed by reference to the surrounding circumstances known to the parties and the commercial purpose or objects to be secured by the contract in order to avoid a result that could not have been intended.
The 'ambiguity' which Mason J said may need to be resolved arises when the words are 'susceptible of more than one meaning.' His Honour did not say how such an ambiguity might be identified. His Honour's reasons in Codelfa are directed to how an ambiguity might be resolved.
Where a term is defined by the parties, the court should attempt to construe the contract by reading the words of the definition in the operative text of the contract: Terravision Pty Ltd v Black Box Control Pty Ltd [No 3] [2016] WASC 95, [42] (Le Miere J).
In Terravision Pty Ltd Le Miere J [42] ‑ [44] summarised other principals of construction as follows:
In Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216, 253 [103] McHugh J said that the proper course is to 'read the words of the definition into the substantive enactment and then construe the substantive enactment - in its extended or confined sense - in its context and bearing in mind its purpose and the mischief that it was designed to overcome'. However, where the definition does not fit comfortably into the text, the exercise of construction will need to address any logical or grammatical infelicities that arise and further analysis will be necessary to ascertain its legal meaning: Commissioner of Police v Kennedy [2007] NSWCA 328 [44]; Tovir Investments Pty Ltd v Waverley Council [2014] NSWCA 379 [13]; Alqudsi v Commonwealth [2015] NSWCA 351 [58].
There are a number of other principles of construction which facilitate ascertaining the meaning of a written contract. One principle is that in construing a contract all parts of it must be given effect where possible and no part of it should be treated as inoperative or surplus. Another general principle is that the court should not consider any word or sentence as superfluous or insignificant. All words must prima facie be given some meaning and effect. Another principle is that words are assumed to be used consistently. That assumption involves a two-fold approach. First, where a word is used consistently in a contract it should be given the same meaning consistently. Secondly, where the draftsperson could have used the same word but chose to use a different word, it is assumed the intention was to change the meaning.
All of these cannons or principles of construction are aids to ascertaining the meaning of a written contract. However, they are not rules of law. They are not to be slavishly applied. They are little more than guides to the interpretation of the English language.
It is also necessary to ascertain '… the implications contained in the express words of the contract': Brambles Holdings Ltd v Bathurst City Council (2001) 55 NSWLR 153; [2001] NSWCA 61 Boreland v Docker [2007] NSWCA 94[109] ‑ [111]. In doing so the court is engaged in a process of construction and is not concerned with the requirements of whether a term is to be implied to give business efficacy to the contract in accordance with the requirements particularised in BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 283; [1997] HCA 40; Brambles Holdings [28] ‑ [30] (Heydon JA).
Express words used are given their full implications but there is to be no implications beyond the express words used. A court must be mindful of the 'clear' difference between the meaning of the words used and drawing an inference of some agreement not directly within the meaning of the actual words: Marcus Clarke (Vic) Ltd v Brown [1928] HCA 12; (1928) 40 CLR 540, 553 – 554 (Higgins J).
For the purpose of the gateway requirement, 'ambiguity' means any situation in which the scope or applicability of a contract is, for whatever reason, doubtful: Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444, 456 ‑ 457. It is not confined to lexical, grammatical or syntactical ambiguity: Hancock Prospecting v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 [77].
The fact that adversaries can formulate and advance materially different constructions of the language of a contract does not itself satisfy the gateway requirement. Having regard to the language of the contract as a whole and what can be gleaned from that source as to the contractual purpose, competing constructions must be reasonably arguable. Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [74] (McLure P); Terravision Pty Ltd v Black Box Control Pty Ltd [No 3] [2016] WASC 95 [38] (Le Miere J).

Construction of the November agreement

The plaintiffs' construction

The plaintiffs contend that there is no ambiguity in the November agreement when read with the lease agreement. They say:
•The use of the word 'hold over' in the November agreement is not a reference to the holding over clause (cl 9.2) in the lease. They argue that the words 'hold over' should be given their normal natural meaning which according to Black's Legal Dictionary is 'to continue in possession of property for some period'. They say this construction is aided by the parties defining 'hold over' as continue.
•The sentence 'The assignees reserves the right to increase the rent on or before 2 January 2016 for rent applicable to any further period of a lease offered by the assignees beyond 2 January 2016' (third sentence in par 2, hereinafter referred to as the third sentence) expressly contemplates a 'further period of the lease'; that further period being beyond 2 January 2016.
•The words' any further period' implies the existence of a current period being from the date of the expiration of the lease, 2 January 2015, to the date of the commencement of any further period, being 2 January 2016.
•The November agreement extends the term of the lease for 12 months so cl 9.2 is not engaged or alternatively the meaning of the words used varied both cl 9.2.1 of the lease by fixing the rent as specified in the agreement whereas it would otherwise increase by a minimum of 10%, and cl 9.2.2 in that the lease continued for a fixed term of 12 months from 2 January 2015 to 2 January 2016 whereas it would otherwise continue on a monthly basis (ts 201).

The defendants' construction

The defendants contend that there is no ambiguity either, however they argue:
•The November agreement is titled 'Agreement to hold over' and then incorporates the lease into the agreement itself and it is therefore an inescapable conclusion that the holding over provisions of the lease operate.
•The operative provision of the November agreement is the second sentence in the second paragraph whereby there is an offer to hold over the lease on the same terms and conditions as in the lease document with the exception of the rent increase. Absent that provision, pursuant to cl 9.2.1 of the lease, there would be an automatic 10% rent increase whereas the November agreement fixes the rent at the current rent.
•The third sentence simply qualifies the offer made in the second sentence and does not have an independent operation. That is, having exempted cl 9.2.1 of the lease, which would otherwise result in a 10% rent, the third sentence preserves the right of the plaintiffs to increase the rent for any period beyond 2 January 2016.
•The November agreement affects cl 9.2.1 (rent increase), however the right to terminate the lease by one month's written notice pursuant to cl 9.2.2 continues unaffected.
•The November agreement identifies itself as a holding over agreement, incorporates the terms and conditions of the lease with the exception of the rent increase which is fixed by the agreement and qualifies the duration of the period of the fixed rent.

Conclusions on construction of the November agreement

One reasonable construction of the November agreement is that the parties by defining 'hold over' to mean continue meant that the term of the lease continued and therefore the holding over provision which only apply after the expiration of the term of the lease do not apply to the period contemplated by the November agreement i.e. the 'period' and' further period'.
The use of the phrase 'any further period of the lease offered by the Assignees beyond 2 January 2016' in the third sentence reasonably means there is a 'period' and a 'further period'. The 'further period' occurs, if it is offered, after 2 January 2016 and the 'period' offered by the November agreement is the time between the expiration of the second renewed term (2 January 2015) and the commencement of any further period of the lease (2 January 2016). Thus the term of the lease is a 12-month period expiring on 2 January 2016.
Construing the lease and November agreement together the only way the defendants could obtain a fixed rent for 12 months was if the term was fixed for 12months. This is because if all the November agreement achieved was to fix the rent but left cl 9.2.2 unaffected either party could terminate the lease on one month's notice. The defendants would always be at the mercy of the plaintiffs as to how long they could remain at the Subiaco premises and would have no right to remain for 12 months. The plaintiffs would always be at the mercy of the defendants as to how many of the 12 months the defendants would remain on the fixed rent.
The words of the third sentence can be read to mean the offer contained in the November agreement is to continue the term of the lease for 12 months at a fixed rent.
Ambiguity exists in the use of the word 'hold over'. As it is defined in the November agreement to mean 'continue ' the lease it could reasonably mean to continue the term of the lease. It could also reasonably mean to hold over pursuant to cl 9.2.2 without a new tenancy term having been agreed.
The defendants' submissions as to the construction of the November agreement are clearly reasonable and were well argued by Mr Graham. Either party's interpretation is reasonably arguable. The November agreement is 'reasonably susceptible of more than one meaning'. The fresh hold for the 'ambiguity' test is met.
Making the inquiry of what reasonable business persons would have understood the terms to mean bearing in mind the language used in both the November agreement and the lease, the circumstances addressed by the contract and the commercial purpose or objects secured by the contract leads inevitably to the conclusion that it is a fixed 12-month tenancy.
Only the events, background, circumstances, things external to the agreement mutual known to the parties may be considered. The court must also look at the genesis of the transaction, the market in which the parties are operating and the commercial purpose of the November agreement.
I find that it was known to both parties that the first defendant's lease expired on 2 January 2015 and that they wished to stay on in the Subiaco premises whilst they looked for other premises. It was also known to both parties that this could take some time. Both parties knew the plaintiffs were prepared to allow the defendants to remains for a further 12 months (exhibits 3.42 and 3.50).
Further, I find that at the Vans Café meeting of 27 October 2015 it was discussed and agreed that the parties would extend the lease for a term of 12 months at a fixed rental. I prefer the plaintiffs' version of that meeting.
Mr Evans' evidence was generally satisfactory. However, he appeared on occasions to be too reflective in his responses and appeared to be anxious to try and ascertain how the cross-examiner was going to use his answer as opposed to simply answering the question.
Ms Wolff's evidence, in my opinion, did not suffer such a deficiency. She gave her evidence in a straightforward credible manner.
Mr Morris' evidence also suffered from the same deficiency as Mr Evans and to the same extent.
I base my preference for the plaintiffs' version of the meeting on the following reasons.
The second defendant, on Mr Morris' own admission, required premises with specific requirements for the design, manufacture, display and sale of bridal gowns. Mr Morris believed that it would be 'very hard to find suitable premises' for his business and over the years had found it very hard to find the right premises for his business. He considered it could take up to 12 months to relocate the business and knew from discussions with his agents that the plaintiffs would be unlikely to require the Subiaco premises for 12 months. In circumstances where Mr Morris believed that it could take 12 months to find suitable premises for his business and believed that the plaintiffs were unlikely to require the Subiaco premises for 12 months, I think it more probable that he discussed taking the premises for 12 months rather than for up to 12 months.
Further Mr Morris does not recall the conversation of 4 September 2014. I accept the evidence of Mr Evans in relation to that conversation. I find that there was no suggestion by Mr Evans of extending the lease for up to 12 months rather he said that the plaintiffs could extend the lease for 12 months.
In addition, and of more significance, Mr Morris is an experienced businessman who, in my opinion, carefully uses his words. His email of 10 September 2014 (exhibit 3.42), sent before the Vans Café meeting, refers to catching up to 'discuss the extension of the lease for next year' and acknowledges that the offer being made was 'to stay on for a further 12 months'. Tellingly, it does not use the words 'stay on for up to 12 months'.
In the email of 7 November 2014(exhibit 3.50) sent to Mr Morris the plaintiffs refer to the agreement about to be sent as '… the agreement to hold over the lease until January 2016 ...'. Mr Morris does not dispute receiving this email. In the November agreement sent the next day the words 'hold over' were defined by the parties as 'continue'. The parties are therefore continuing the term of the lease until January 2016. The lease could not continue until January 2016 if either party had the right to terminate on one month's notice. The construction that the plaintiffs were bound to give the defendants 12 months tenancy but the defendants could terminate on one month's notice does not produce a commercial result and was never the position of the defendants.
Also of significance is Mr Morris' own admission that in November or December of 2014, after the Vans Café meeting and after the November agreement was executed, he told his real estate agent that 'he had signed a letter of agreement with the landlord allowing Pallas to stay on until January 2016' (exhibit 4, par 68). This statement could not be true if the defendants' construction of the contract is correct because on the defendants' submissions cl 9.2.2 still applied and the plaintiffs would have the right to evict them on one month's notice. The defendants' current submissions are inconsistent with the contemporaneous correspondence from the defendants that they were being allowed 'to stay on until January 2016'.
Whilst it was suggested that little regard should be had to this conversation, bearing in mind that it was a conversation with a real estate agent, I think the contrary applies. You would expect Mr Morris, who uses his words carefully, to be more precise when dealing with a real estate agent and explaining the defendants' situation in respect to the lease.
The defendants correctly point out that the conversation continued (exhibit 4, par 69) as follows:
Given my concern about how difficult it would be to find the right premises for Pallas' business, I told Rob that we urgently needed new premises. I didn't expect that this was likely to be a quick process and told Rob that Pallas would be ready to move as soon as something suitable was found.
However, these remarks must be considered in light of the evidence from Mr Morris, that he expected it would take about 12 months to find new premises, and his view that it would be 'difficult' or 'hard' or 'very hard' to find the right premises, and he did not expect it was likely that they would quickly find new premises.
Mr Evans' subsequent action in renewing the Nedlands lease for the plaintiffs' business premises for a further 16 months within one month of the November agreement being executed (exhibit C59) is given little weight by me as this conduct is equally consistent with the actions of a person who believed he had a 12-month fixed lease of the Subiaco premises as it is with a person who had in fact a 12-month fixed lease of the Subiaco premises. However, this conduct is not inconsistent with the plaintiffs' position that they had a 12‑month fixed lease of the Subiaco premises. I also note the plaintiffs purchased the Subiaco premises by way of a $1,300,000 loan and I accept Mr Evans' evidence that if the lease on the Subiaco premises was monthly he would not have extended the lease for the Nedlands premises for 12 months.
Mr Morris' evidence (ts 134), written submissions and oral argument contend that the November agreement provided a monthly tenancy pursuant to the holding over clauses. Mr Morris' email of 10 September 2014 (exhibit 3.42) and its reference to 'discuss the extension of lease for next year' and 'stay on for a further 12 months' and his evidence that '… I signed a letter of agreement with the landlord allowing Pallas to stay on until January 2016' (exhibit 4, par 69) are inconsistent with his position that the holding over provision applied and the lease was able to be terminated by either party giving one month's notice.
The defendants could not 'stay on for a further 12 months' or 'stay on until January 2016' if the plaintiffs could terminate the November agreement at any time during the 12-month period by one month's notice. The notion that the defendants could terminate on one month's notice and the plaintiffs were bound for 12 months is not the case being put by Mr Morris (ts 134, 152).
Mr Morris' evidence that the plaintiffs had indicated they were happy for him to stay on for up to 12 months is not accepted by me and is, in my opinion, an attempt to put a gloss on what was agreed. I am satisfied it was agreed that the lease term would continue until 2 January 2016.
The consequences of my findings are that Mr Morris, knowing he had approximately eight months left on the Subiaco lease, moved to new premises thereby exposing the defendants to paying two rents for eight months. Whilst I understand the submissions that it is unlikely that a businessman would do so, I find this is exactly what he did. Whilst Mr Morris is a businessman with decades of experience dealing with commercial matters, he expected that it would take about 12 months to find new premises for his business. On his own evidence he is prepared to take some commercial risks.
I reject Mr Morris' evidence that he referred to an extension for 'up to 12 months'. Mr Evans may have less experience in business, however it is inherently improbable that Ms Wolff and he would not have understood the effect of those words if they were used by Mr Morris.
The contemporaneous written communications between the parties before the November agreement refers to 'extension of the lease for next year', 'stay on for a further 12 months' (exhibit 3.42), 'hold over the lease until January 2016' (exhibit 3.50). There is no mention in the communication of 'up to' 12 months.
I find that it was agreed at the Vans Café meeting that the lease would be extended for 12 months at a fixed rental. Clearly that agreement was an objectively known fact for both parties.
At the end of the day I am persuaded, on the balance of probabilities, that the plaintiffs' version of the Vans Café meeting is inherently more probable. There are no inconsistencies in their statements or conduct. I am satisfied that Mr Morris requested an extension of the lease for 12 months from January 2016 and it was agreed that this extension would be at a fixed rent. It gave the defendants what they wanted, which was the breathing space to find premises which they expected would take about 12 months.
The commercial purpose or objects to be secured by the contract were to extend the lease at a fixed rent for a fixed period. The commercial purpose of the lease means that the 12-month extension requested by the defendants could only be achieved by a fixed term; otherwise they could be evicted on one month's notice.
I consider the proper construction of the November agreement after considering the commercial purpose, mutual known background and context and agreement reached at the Vans Café meeting leads to the conclusion that it is a fixed 12-month tenancy in that it provides for a fixed term of 12 months at the rental therein specified incorporating the terms and conditions of the lease. The November agreement meant the term of the lease continued for another 12 months. The holding over cl 9.2 did not apply until the new term expired or alternatively the meaning of the words in the November agreement must exclude the operation of cl 9.2.1 and cl 9.2.2.

Rectification

If I be in error in my construction of the November agreement, the plaintiffs plead rectification to extend the lease term until January 2016.
The legal principles applicable to a claim for rectification are well established and were recently re-stated in RCR Tomlinson Ltd V Russell [2015] WASCA 154:
The equitable doctrine of rectification enables a court to rectify an instrument if it does not reflect the intention of the party or parties to it. The parties' intention refers to what the parties intend to be given effect to by the instrument. The object of rectification is to reform the instrument so that it reflects the true agreement of the parties or the intention of the sole party.
A claim for rectification requires proof of disconformity between the common intention of the parties, continuing to the time of execution of the instrument, and the terms of the instrument.
Disconformity between the continuing common intention and the instrument may result from a mistake in recording the parties' common intention, or from a mistake about the meaning or effect of words deliberately chosen. In either case, rectification is available.
Courts begin with the presumption that an instrument reflects the true agreement of the parties to it. A party seeking rectification must displace that presumption by demonstrating that the instrument does not reflect the true agreement of the parties. The need to displace that presumption is often said to require that the party seeking rectification must establish the parties' common intention by clear and convincing proof.
The parties' common intention refers to the actual subjective intention of the parties. However, in order to constitute a common intention the intention of the parties must have been disclosed in some way, although not necessarily by a direct communication that gives rise to an outward expression of accord between them.
The parties' common intention must be clear and well-defined enough to be stated in words that can be incorporated into the instrument.
The common intention is to be the actual subjective intention of the parties. Evidence of that intention may be manifested by objective words and conduct and from the parties' objective state of mind: Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, 641 – 642.
It has been stated that where correspondence and conduct establishes the necessary common intent, assertions by a party opposing rectification of their subjective state of mind which is inconsistent with that party's outward manifestation of his intention, being uncommunicated, is unlikely to trump his expressed intention because the party is unlikely to be believed: Ryledar Pty Ltd v Euphoric Pty Ltd (641 – 642). This is not a statement of law to be slavishly followed but rather a statement based, no doubt, on the court's experience in such cases. In each case the assertions and inconsistent statements or conduct of witnesses must be considered on their merits.
Post-contractual words and conduct may be relevant to the extent that it assists the courts in determining the original concurrent intention of the party or parties: NSIF Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740, 742.
It is not necessary that there be a formal communication of the common intent by each party to the other or outward acts or expressions of accord, although it must be objectively apparent from words or actions of each party that each party held, and continued to hold, an intention on the point in question corresponding with the intention of the other party: Ryledar Pty Ltd v Euphoric Pty Ltd (640) [184].
If a court orders rectification, the order relates back so that the rights of the parties are treated as having always been in accordance with the instrument as rectified: Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21 [168] (Buss JA).
Rectification may also be granted in cases of unilateral mistake. The applicable principles were stated by Sleight DCJ in Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd at [171] ‑ [182]. I do not repeat those principles as, in my opinion, this case does not involve questions of a unilateral mistake.
Clearly the common intent of both parties must exist at the date of the execution of the November agreement. The agreement was executed by the plaintiffs on 8 November (exhibit 3.57) and the second defendant on 14 November 2014 (exhibit 3.58).
I reject the defendants' submissions that the plaintiffs did not have a shared common intent at the time they executed the document because it is not consistent with the evidence of how the agreement was prepared and how the intention of the plaintiffs was formed when preparing it. The suggestion that there is a question of whether Mr Evans and Ms Wolff shared a common intention, because the agreement purports to incorporate all the terms and conditions of the lease and Mr Evans and or Ms Wolff did not know all those terms and conditions, is rejected.
The clear effect of the evidence of Ms Wolff and Mr Evans is that they both intended to extend the lease for a fixed term of 12 months at a fixed rent and incorporate all the other terms of the existing lease even though they both admitted they could not recall some of the terms or indeed understand them. They clearly shared the common intent I referred to.
Similarly, I reject the proposition that it cannot be found that Mr Morris had the same common intent. On the contrary, I consider the evidence establishes that at the time he signed the November agreement Mr Morris' intention was that the second defendant would have a fixed 12‑month lease for the fixed rent.
I base this conclusion on the findings of fact I have already made in relation to the agreement reached at the Vans Café meeting and that Mr Morris wished to remain at the Subiaco premises while the second defendant relocated its business, his belief that it would be hard to find the required premise, his belief that the relocation of his business would take around about 12 months and his belief that the plaintiffs would not be in a position to move into the Subiaco premises for about 12 months in any event. This conclusion is supported by the email of 10 September 2014 (exhibit 3.42 '… allowing us to stay on for a further 12 months'), well before the execution of the November agreement and Mr Morris' admission that in November or December 2014 he instructed his real estate agent that he had signed a letter of agreement with the landlord 'allowing Pallas to stay on until January 2016'.
As previously indicated, Pallas could not be allowed to stay on until January 2016 unless it was a fixed term. If it was not a fixed term the plaintiffs would have the right to terminate on one month's notice. Mr Morris specifically refers to the letter of agreement, not to any verbal undertaking or arrangement with the plaintiffs. The letter of agreement could only be the November agreement and can only allow the defendants to stay until January 2016 if it was a fixed term.

The remark to the real estate agent on the same occasion that they 'urgently needed a new premise' and he 'did not expect it was likely to be a quick process' and that they would be ready to move as soon as something suitable was found must be considered in light of the undisputed evidence from Mr Morris that he thought it would take about 12 months to find new premises.
The combined weight of the matters referred to above leads me to infer that as at the date the defendants executed the November agreement Mr Morris, despite his assertions to the contrary, had the shared common intent to lease the premises for a fixed 12-month period at the stipulated fixed rent but otherwise subject to the terms and conditions of the lease.
The November agreement reflects a mistake in recording the parties' common intention and does not reflect the true agreement of the parties. The November agreement was drafted by the plaintiffs without legal assistance, there is no evidence that either plaintiff had any legal training Ms Wolff's evidence was that she was mistake about the meaning or effect of words she chose. She thought they meant that the term was fixed for 12 months.
I find Mr Morris changed his mind sometime after signing the November agreement when suitable premises were, somewhat surprisingly to him, found promptly.
I am satisfied that Mr Morris had the shared common intent to lease the Subiaco premises for 12 months at the stipulated fixed rent but otherwise subject to the terms and conditions of the lease when he executed the November agreement.
If I be wrong on the construction issue I would order rectification of the November agreement to provide the term of the lease is to continue until 2 January 2016.
The oral lease
The plaintiffs plead further and, alternatively, that on 27 October 2014 at the Vans Café the plaintiffs and defendants orally agreed to continue the lease till 2 January 2016.
Mr Robinson says that everything that was required to be agreed was orally agreed at the Vans Café meeting. He says it was further orally agreed that the agreement would be reduced to writing and therefore the agreement falls into either category one or category two of the Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 classifications. That is, the parties intended to be immediately bound by their oral agreement regardless of the follow-up written agreement.
Mr Robinson accepts that for the oral agreement to be enforceable there must be evidence in writing by way of a note or memorandum which satisfies the Statute of Frauds. He says that if the November agreement is not construed in the manner the plaintiffs contend in its construction submissions, it provides a sufficient note or memorandum satisfying the requirements of the Statute of Frauds as it sufficiently particularises the agreement and contains sufficient information to show what the contract was about.
In any event, Mr Robinson also says that there was part-performance of the oral agreement because both the land tax and the City of Subiaco rates were paid by the defendants in full to the end of June 2015 (agreed particulars of damage filed on 26 April 2016) and that the defendants would not have paid rates up until the end of 30 June 2015 if they were on a monthly tenancy.
The defendants contended that the factual findings necessarily required to determine the construction and/or rectification issue mean that whichever party is successful on those issues will succeed on the oral agreement issue and therefore the oral agreement arguments are superseded (ts 113, 162). With respect, the defendants' position must be correct.
In dealing with the construction issue I have found that the November agreement provide for a fixed 12-month term of the lease and a fixed rent.
In addition, I found that it was the shared common intention of the parties that the November agreement referred to a fixed term. I have preferred the plaintiffs' version of the Vans Café meeting and need not repeat my findings in that regard.
In these circumstances, as the defendants correctly contend, the oral agreement argument has no independent effect as it is subsumed in the construction and rectification arguments.
I add that I find this is a class one or two Masters v Cameron case in which the parties have completely agreed upon all the terms of their bargain (identified the parties, the property, the lease terms, the rent) and intend to be bound immediately but nevertheless have made performance of one or more of the terms conditionally upon the execution of a formal document: Masters v Cameron.
It is recognised that this class includes cases where contemplated formal documents may contain additional terms: Godecke v Kirwin [1973] HCA 38; (1973) 129 CLR 629; Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21 [92] (Buss JA).
The third class in Masters v Cameron is where the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract. I reject the defendants' submission that this is a Masters v Cameron third class type case. Mr Morris' evidence was that he wanted to see what the plaintiffs put in writing and as an experienced businessman he would not finally commit until he saw the terms of the written offer. In my opinion this is an effort on his part to escape liability.
At the time of the events both parties were respectful and courteous to each other. Both parties cooperated in arranging the meeting at Vans Café. The parties discussed the relocation, the rent, the 12-month period and the non‑interference with the defendants' business. The parties cooperated in executing the November agreement (exhibits 3.46 – 3.47, 3.50 – 3.51).
Mr Morris wished to extend the lease for 12 months; the plaintiffs were prepared to do so at a fixed rent. Mr Morris had achieved his aims as had the plaintiffs. There was nothing else to be discussed (ts 137). Both parties wished the agreement be recorded in writing and it was. They had completely agreed upon all the terms of their bargain and I find they intended they would be bound immediately by the terms that had been agreed at the Vans Café meeting whilst expecting to execute a formal document at a later date.
The November agreement is a note or memorandum evidencing the oral agreement made by the parties at the Vans Café meeting.
In addition, there has been part-performance by the defendants paying the land tax and council rates to the end of June 2015, such acts being unequivocally referrable to the oral agreement and inconsistent with the defendants' contention of a monthly tenancy: Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 (2008) 35 WAR 520.

Misleading or deceptive conduct

Further, and alternatively, the plaintiffs plead a case under the ACL.
The plaintiffs say that when the defendants executed the November agreement they knew that the defendants intended to extend the lease for a fixed 12‑month period and thought the agreement did so. They plead at par 34 SoC that having regard to this knowledge the defendants' failure to inform them that they did not intend to extend the lease for a fixed 12 months was an implied representation that the defendants intended to extend the lease for a further 12 months.
The plaintiffs say that this representation was of a future matter, the making of which was misleading or deceptive in breach of s 18(1) of the ACL.
The misleading and deceptive conduct relied upon is the defendants' conduct occurring before the plaintiffs extended the Nedlands lease for their business premises. The plaintiffs contend that if the defendants had informed them of the defendants' intention and belief that the November agreement was a monthly tenancy the plaintiffs would not have extended the lease of their business premises in Nedlands.
The plaintiffs relied on Taylor v Johnson (1983) 151 CLR 422 and Thermoplastic Foam Industry Pty Ltd v Imthouse Pty Ltd (1990) 5 BPR 11, 181, as cases where one party was aware of the mistake of the other party and deliberately chose not to notify the other party of the mistake.
The defendants say that the misleading and deceptive conduct claim can be put to one side as an 'almost red herring' (ts 113).
Mr Graham argues that if the defendants' submission is accepted, that at the Vans Café meeting it was agreed that the defendants could lease the premises for up to 12 months and the agreement is a 'holding over agreement' which leaves cl 9.2.2 intact, all that occurred was that the defendants executed the agreement prepared by the plaintiffs which gave effect to what had been agreed and the misleading or deceptive claim falls away.
Alternatively, the defendants say that if the plaintiffs' argument on the construction or rectification issues were correct the plaintiffs would be victorious on those grounds and the misleading or deceptive claim would be superseded.
Accepting for the moment that the representation was a representation of a future matter, I find as a matter of fact that if the defendants had informed the plaintiffs that they did not intend to extend the Subiaco lease for a fixed 12 months, the plaintiffs would not have extended the Nedlands lease for their business premises. I accept Mr Evans' evidence in this regard.
Pursuant to s 18 of the ACL, 2nd sch of the Competition and Consumer Act 2010 (Cth) (CCA), misleading or deceptive conduct by a person (including a corporation) in trade or commerce is unlawful. Mr Morris' conduct throughout the period under consideration (phone calls, meetings, emails, executing the November agreement) was clearly in trade and commerce for and on behalf of the first defendant.
Conduct is misleading or deceptive if viewed as a whole it has a tendency to lead a person into error and that is a question of fact to be determined objectively in light of all the contextual surrounding facts and circumstances: Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76 [220].
There must be a sufficient causal link between the misleading or deceptive conduct and the plaintiffs' renewing the Nedlands lease of their business premises: Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193, 241.
Non-disclosure can itself satisfy the definition of 'engage in conduct' within s 4(2) of the CCA and s 18(1) of the ACL as the definition includes 'doing or refusing to do an act'.
An omission to do an act cannot itself constitute conduct because for the purposes of the section 'refusing to do' an act involves refraining otherwise than inadvertently from doing the act in question. 'To refrain otherwise than inadvertently' requires a deliberate decision to withhold information, thus the defendants must advert to the question and form an intention not to disclose: Owston Nominees [59].
Silence or non-disclosure has been held to constitute misleading or deceptive conduct where the circumstances are said to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31 [15-19] (French CJ & Keifel J). Thus non‑disclosure can, because of common assumptions or established practices or other relevant surrounding circumstances, give rise to an implied representation that an undisclosed fact did (or did not, as a case may be) exist. The making of such an implied representation is the doing of an act: Owston Nominees [64].
There is however a fundamental problem facing the plaintiffs. The misleading or deceptive conduct relied upon is the defendants' conduct occurring before the plaintiffs extended the Nedlands lease for their business premises, which occurred in December 2014 (exhibit 3.59). The plaintiffs' case is that the defendants were obliged to inform them that the defendants' intent and belief was that the November agreement was a monthly tenancy lease under the holding over provisions contained in cl 9.2.2 and not a fixed lease for 12 months.
It necessarily follows that for the defendants' conduct to be misleading or deceptive by that failure to inform I would need to be persuaded that at the time Mr Morris executed the November agreement and before the plaintiffs extended their Nedlands lease Mr Morris knew or believed the November agreement did not provide for a fixed 12-month tenancy. I accept that is the position Mr Morris currently maintains and has done so since, at least, he communicated that position to Mr Evans on 14 January 2015. Based on the evidence, however, I am not persuaded that was Mr Morris' position at the time he executed the November agreement.
I have found that Mr Morris knew that the plaintiffs intended and believed the November agreement was a fixed 12-month agreement and I have also found Mr Morris shared a common intent that the November agreement be for a fixed 12-month term and executed the November agreement on that basis.
My findings in relation to the telephone conversation of 4 September 2014, the email of 10 September 2014 (exhibit 3.42 '… allowing us to stay on for a further 12 months'), the Vans Café meeting of 27 October 2014, Mr Morris' evidence (exhibit 4, par 69 '... about November/December of 2014 … I signed a letter of agreement with the landlord allowing Pallas to stay on until January 2016') satisfies me on the balance of probabilities that Mr Morris' shared objective intent at the time he executed the November agreement was that it be a fixed 12‑month tenancy.
The evidence establishes that after Mr Morris executed the November agreement he contacted his real estate agent 'Rob' to find new premises. I find Mr Morris was always concerned about the difficulties in finding suitable premises for his business and did not expect those premises to be found quickly. He entered into negotiations for the Claremont premises in early 2015 (ts 153).
The plaintiffs have not satisfied me that Mr Morris held the 'monthly tenancy' belief before or at the time he executed the November agreement as opposed to after the agreement was executed and after his real estate agent had somewhat surprisingly found the defendants suitable business premises within a relatively short period of time. Nor have the plaintiffs satisfied me that Mr Morris held that belief any time before they extended the Nedlands lease, the very basis of their claim and submissions in this regard (SoC par 34(f), ts 228 - 230). Accordingly, the plaintiffs would fail on causation.
Mr Morris' enthusiastic adoption of the monthly tenancy position in January 2015 after suitable premises were found and after the plaintiffs extended the lease for their Nedlands business premises means his silence or failure to inform as alleged by the plaintiffs was not misleading or deceptive conduct.
I am not satisfied that at any the time before the plaintiffs extended their Nedlands lease or at the time he executed the November agreement Mr Morris was aware or believed the November agreement provided a monthly tenancy as opposed to enthusiastically adopting that position some time later and, accordingly, dismiss the misleading or deceptive conduct claim.

Conclusion

Accordingly, for the reasons expressed, I find for the plaintiffs.
I order that the defendants pay the plaintiffs the sum of $72,070, being $67,834.09 agreed damages plus interest at 15% per annum from 3 January 2016 until 3 June 2016 (152 days at an agreed rate of $27.87 per day = $4,236).

Costs

I reject as nonsense the submission that indemnity costs should be awarded against the defendants as the defence was without merit.
However, the lease provides cl 5.4 (exhibit 3.11) that the tenant must pay all costs, charges and expenses (including solicitors costs on a full indemnity basis) incurred by the landlord which arise from any breach of the lease by the tenant.
In those circumstances it is appropriate to allow costs on the contractual basis: Clambake Pty Ltd v Tipperary Projects Pty Ltd[No 5] [2009] WASC 141 [13]. Accordingly, I order that the defendants pay the plaintiffs' costs on an indemnity basis.
The defendants raised the issue of whether costs should be taxed on the Magistrates Court scale in light of the sum awarded bearing in mind the plaintiffs abandoned their claim for aggravated and exemplary damages.
The civil jurisdiction of the Magistrates Court extends to claims up to $75,000.
The test is whether the plaintiffs, when instituting proceedings, might reasonably have expected to recover an amount in excess of the maximum of the jurisdiction of the Magistrates Court: Vella v Ivanovski (1984) WAR 8 (Kennedy J); Michael Kellaway International Pty Ltd v Shark Bay Airport Pty Ltd (Unreported, WASCA, Library No 980302, 25 March 1998) (Kennedy J); Civic Video Pty Ltd v Paterson [No 3] [2014] WASC 321(S) (Chaney J).
Leaving aside the claim for aggravated and exemplary damages, the plaintiffs claimed damages, rectification and compensation and the particulars of damages pursuant to r 45C of 5 October 2015 specified those damages at $71,878.79 plus interest at a slightly higher rate than ultimately agreed but which would have been in the vicinity of $4,460, the total of which exceeds the Magistrates Court's jurisdictional limit. The damages ultimately awarded are below that limit amount, however it was not an unreasonable expectation for the plaintiffs to recover in excess of the Magistrates Court's jurisdiction. Order 66 r 17(1) does not apply.
Costs should be awarded to the plaintiffs on the applicable District Court scale.