Fush v Collie & Tierney (Mildura) P/L & Anor
[2003] VSCA 88
•1 July 2003
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 7158 of 1999
| FRANK FUSH and MAUREEN FRANCES FUSH | |
| First and Second Appellants | |
| and | |
| COLLIE & TIERNEY (MILDURA) PTY. LTD. | Third Appellant |
| v. McKENDRICK & CO. PTY. LTD. (ACN 004 198 663) | |
| Respondent |
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JUDGES: | ORMISTON, CHARLES and BUCHANAN, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 17-18 March 2003 | |
DATE OF JUDGMENT: | 1 July 2003 | |
MEDIUM NEUTRAL CITATION: | [2003] VSCA 88 | |
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Estoppel in pais - Whether the plaintiff established an assumption that an enforceable lease had been created - Misleading and deceptive conduct - Negligence - Misstatements of landlord's ability to give possession of premises - Damages assessed on tortious basis.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Ms S. Crennan, Q.C. | Connery & Partners |
| For the Respondent | Mr P.N. Vickery, Q.C. Mr N.P. Jones | McKean & Park |
ORMISTON, J.A.:
I have had the benefit of reading the judgment of Buchanan, J.A. in draft form and, for the reasons he expresses, I consider that this appeal should be allowed in part and orders substituted in the form he proposes.
CHARLES, J.A.:
I agree with Buchanan, J.A. that this appeal should be allowed in part, and orders substituted as proposed by his Honour, for the reasons given.
BUCHANAN, J.A.:
The respondent was a timber and hardware merchant carrying on business in Mildura. In early 1999, the respondent conducted a retail hardware outlet in premises at Langtree Avenue which it owned, and used premises at Ninth Street to store and sell timber and builders' hardware.
The respondent occupied the Ninth Street premises pursuant to a licence, which was to terminate on 30 July 1999. The respondent contemplated consolidating its businesses at one location. It entered into negotiations with developers who proposed to purchase land, construct buildings suitable for the respondent and lease the land to the respondent. In the meantime, the respondent required a short-term lease of premises to which its Ninth Street business could be transferred. In June 1999, it began the search for such premises.
On 9 July 1999, David McKendrick, the managing director of the respondent, inspected premises in Etiwanda Avenue owned by the first and second-named appellants and entered into negotiations to rent the premises with the third-named appellant, the agent acting for the first and second-named appellants.
The Etiwanda Avenue premises, comprising offices, warehouse and open yard, were occupied by Telstra Corporation Ltd. ("Telstra") pursuant to a lease for a
term of one year which had commenced on 1 April 1999. Soon after entering into the lease, Telstra changed its mind. On 7 June 1999, its agent wrote to the first-named appellant stating:
"Further to our telephone discussions 28 May 1999, we wish to confirm on behalf of our client, Telstra Corporation, that due to the recent restructuring of some operations, the abovementioned premises will become surplus to Telstra's accommodation requirements as at 1 July 1999.
As the site will be vacated, Telstra now seeks the opportunity to surrender the current lease which expires 31 March 2000, on the 30 June 1999."
On 15 June 1999, the solicitors for the first and second-named appellants replied by letter, which said:
"We advise that our client is prepared to allow the Tenant to surrender as at the 30th of June 1999 provided that rental continues until the expiration date or alternatively until such time as our client installs a new Tenant."
In the light of that correspondence, the appellants believed that the Etiwanda Avenue premises would be available for the respondent when its licence to occupy the Ninth Street premises expired.
By 19 July 1999, McKendrick and Murphy, an employee of the third-named appellant, had arranged for the respondent to lease the Etiwanda Avenue premises for a period of one year commencing on 1 August 1999 at an agreed rent. It was agreed that on payment of $5,000 towards the rent, the respondent would be given the keys to the land to enable it to commence moving timber to the yard. On 9 July 1999, Murphy wrote to the solicitors of the first and second-named appellants stating that "We have negotiated a new lease on the subject premises and request you prepare documentation on the following terms and conditions …" The letter identified the lessor and lessee, the term of the lease, the rent, outgoings and other details. On 19 July, McKendrick gave Murphy a cheque for $5,000 and received the keys to the land. Murphy gave McKendrick a copy of the letter he had written to the solicitors on 9 July and sent a further copy of the letter to the solicitors. On the following day, the respondent began to move timber racks and some timber from Ninth Street to Etiwanda Avenue.
In the week from 20 to 27 July 1999, McKendrick observed that Telstra did not appear to be making any effort to vacate the premises, and he was told by Telstra staff that they knew nothing of a move. One Telstra manager told McKendrick that Telstra had no intention of moving. On the other hand, Murphy assured him that Telstra would vacate the land by 1 August 1999. McKendrick doubted that Telstra would vacate the premises and slowed the transfer of stock from Ninth Street.
Late in July 1999, McKendrick met Fush. Fush said: "There is a problem. It is not my doing." He showed McKendrick a letter dated 27 July 1999 from the solicitors for Telstra asserting that Telstra was entitled to one month's notice to vacate the premises and stating that no such notice had been given. The letter confirmed that on receipt of a valid notice, Telstra would vacate the premises at the expiration of the notice period, but said that in the meantime Telstra was prepared to negotiate with the owner to provide storage space on the site. McKendrick told Fush that the respondent would not proceed with the lease. The respondent immediately turned to premises in Byrne Court which had been earlier offered to it by the third-named appellant but which the respondent had then rejected in favour of Etiwanda Avenue. The respondent quickly agreed upon the terms of a lease and on 30 July 1999 began to move its business to Byrne Court.
Before the end of July, Murphy was aware that Telstra was not minded to vacate the premises by 1 August. On 19 July, Telstra's agent sent Murphy a facsimile advising him that "Telstra will not be in a position to vacate the Etiwanda Avenue property until 31 August." Murphy spoke to Telstra's agent on 20 July and was told that an arrangement was being made to enable both parties to use the premises, and the matter was in the hands of the parties' solicitors.
In this proceeding, the respondent claimed damages from the appellants pursuant to various causes of action. The respondent claimed that the first and second-named appellants were liable to it for damages for breach of a lease or agreement for lease or alternatively that the first and second-named appellants were estopped from denying the existence of an enforceable lease. Against all the appellants, the respondent claimed damages for misleading or deceptive conduct pursuant to the provisions of the Trade Practices Act 1974 of the Commonwealth and the Victorian Fair Trading Act 1985. It was alleged that the appellants misrepresented the capacity of the first and second-named appellants to provide vacant possession of the Etiwanda Avenue premises by 1 August 1999. The respondent also alleged that the representations were made negligently.
The trial judge found that an agreement for a lease was concluded on 19 July 1999. The lease was to commence on 1 August 1999, although the respondent was given access to the premises on 19 July to ready itself for the commencement of the lease. The lease or agreement did not comply with the Statute of Frauds. The lease did not take effect in possession so as to bring the respondent within the provisions of s.54(2) of the Property Law Act 1958 and the acts performed by the respondent were not acts of part performance but acts done in anticipation of an agreement to commence at a later time.[1]
[1]See Cooney v. Burns (1922) 30 C.L.R. 216 at 240 per Higgins, J.
His Honour held that the first and second-named appellants were estopped from denying the existence of an enforceable lease by reason of the respondent's reliance upon Murphy's representations made between 19 and 27 July 1999 that the respondent would be given vacant possession of the land on 1 August 1999. The assumption made by the respondent, induced by Murphy, was not that the first and second-named appellants would grant a formal lease to the respondent in the future, but an assumption that an enforceable lease had been granted notwithstanding the absence of a formal lease. The assumption was as to an existing state of affairs, not as to the future conduct of the first and second-named appellants. The respondent had established an estoppel in pais, not a promissory or equitable estoppel.[2] Accordingly, the appellants could not contend that the lease was not enforceable for want of formality. The appellants had repudiated the contract by informing the respondent that they could not give vacant possession of the land on the due date. In the result, the respondent was entitled to damages for breach of contract.
[2]Cf. Waltons Stores (Interstate) Ltd. v. Maher (1988) 164 C.L.R. 387 at 413 per Brennan, J.
The trial judge found that the appellants were also liable for falsely representing to the respondent that the first and second-named appellants would give it vacant possession of the premises on 1 August 1999. The appellants were liable pursuant to the provisions of the Trade Practices Act and the Fair Trading Act and in negligence at common law.
His Honour held that Murphy's statement that the respondent would be given vacant possession of the land on 1 August 1999 was a representation relating to the future, but it contained an implied representation that the first and second-named appellants had the capacity to deliver possession to the respondent on 1 August. The trial judge allowed the respondent to rely upon s.51A(1) of the Trade Practices Act and s.10A(1) of the Fair Trading Act, which provide that where a person makes a representation as to a future matter without reasonable grounds for doing so, the representation shall be taken to be misleading. His Honour required the respondent to show lack of reasonable grounds, a burden which he found had been discharged, for he concluded that in the period from 20 to 27 July 1999 Murphy did not have reasonable grounds for his assurances that Telstra would vacate the Etiwanda Avenue premises by 1 August. Until he received the facsimile from Telstra's agent dated 19 July 1999 and spoke to the agent on the following day, Murphy had reasonable grounds to suppose that Telstra would vacate the Etiwanda Avenue premises by 1 August, but not thereafter. His Honour held that the appellants were liable in negligence for the same misrepresentation that rendered them liable for breaching the statutes. He said that in making the representation in the face of Telstra's clear indication that it would not vacate the premises by 1 August, Murphy was negligent.
At the hearing of the appeal, counsel for the appellants attacked the trial judge's assumption that Telstra could not be compelled to vacate the premises by 1 August 1999. It was submitted that Telstra, having surrendered its lease, was no more than a tenant at will, and had the respondent not announced its intention to lease other premises, the first and second-named appellants could have obtained an injunction evicting Telstra.
The trial judge proceeded upon the basis that the appellants had accepted Telstra's stated position and, in my view, it follows that the first and second-named appellants demonstrated unwillingness, even if not inability, to perform their obligations. The respondent was entitled to accept their professed incapacity to perform their obligations as a repudiation of the lease. In any event, I doubt that there had been an effective surrender of the lease by Telstra. The first and second-named appellants did not accept the proposal contained in Telstra's letter dated 7 June 1999 to surrender the lease. Instead, they made a counter offer to accept a surrender on certain terms. The evidence did not disclose that those terms were ever accepted by Telstra and, accordingly, Telstra remained in possession pursuant to its lease for a term of one year. Telstra was neither a tenant at will as the appellants claimed nor a monthly tenant as the respondent contended at the trial.
The estoppel found by the trial judge depended upon the respondent establishing that the appellants caused the respondent to assume that an enforceable lease, not merely an agreement for a lease, had come into existence. His Honour relied upon McKendrick's statement of his understanding of the position when he gave Murphy a cheque for $5,000 and received the keys to the land on 19 July 1999. McKendrick said:
"My understanding was that at that point we were to proceed and, post haste, to get the shift done from Ninth to Etiwanda. There was never any doubt in my mind; I would not have gone to that extreme if there was the slightest doubt. But I was given every assurance that the lease was proceeding, or else they would not have given me the keys."
The trial judge evidently treated the statement of McKendrick's belief that the lease was "proceeding" as equivalent to a belief that the lease was in existence. McKendrick gave other evidence, however, which supported the interpretation of "proceeding" as descriptive of a process which he expected to yield a lease in the future. The evidence which I have quoted was elicited in re-examination, no doubt in the hope of countering evidence given by Mr McKendrick in cross-examination, when he was asked about his state of mind on 19 July 1999. On that date, McKendrick was given a copy of the letter from Murphy to the solicitors acting for the first and second-named appellants, the point the trial judge identified as the grant of the lease. The following evidence was given:
"Did you read the first sentence?---I would have, yes.
Was it your understanding that documentation had to be prepared?---Yes.
What was the purpose of having that documentation prepared?---Well, a legal, legally-binding lease, I would assume."
The first sentence of the letter was:
"We have negotiated a new Lease on the subject premises and request that you prepare the documentation on the following terms and conditions …."
Shortly prior to giving that evidence, in response to the question, "You believed you had a lease of those premises, didn't you?" McKendrick answered, "Well, at that point of time I would have to be honest enough to say, no." McKendrick did go on to say that the basis of his belief was Telstra's apparent determination not to vacate the premises, but that evidence was succeeded by the following question and answer:
"So you knew that you didn't have a lease?---In my own mind, yes."
I note that McKendrick's reaction to the first-named appellant's revelation in late July of Telstra's refusal to vacate the premises was not to assert the existence of an enforceable lease to Etiwanda Avenue but to immediately look for alternative premises. I do not see this circumstance as decisive. A practical man facing an immediate problem such as that confronting McKendrick may well not think in terms of legal rights and duties. Of more importance is McKendrick's evidence as to his belief based on Murphy's assurances.
In the light of the evidence given by McKendrick in cross-examination, I am of the opinion that the trial judge was mistaken in equating McKendrick's belief that the lease was proceeding with a belief that a lease was in existence, or that at the least his Honour should not have been satisfied that McKendrick was induced by Murphy to believe that the respondent had an enforceable lease. Nor do I think that McKendrick gave evidence of any statement by Murphy which amounted to a representation that there was in existence an enforceable lease as distinct from an agreement for a lease. There was no lease in this sense and Murphy did not say there was. The lack of any doubt in McKendrick's mind reflected his certainty, at least on 19 July, that the respondent had entered into an agreement for a lease and would obtain vacant possession on 1 August, not certainty that the respondent had a legally enforceable lease. The burden of McKendrick's evidence was that in moving racks and timber to Etiwanda Avenue in the week beginning on 20 July 1999 the respondent did not act upon the assumption that on 19 July an enforceable lease had been created, but rather that it would obtain possession of the premises as lessee on 1 August. The conduct of the appellants which induced that belief was Murphy's assurance that Telstra would vacate the premises by 1 August.
In my view this is not a case in which the trial judge's advantage in seeing and hearing McKendrick give evidence precludes an appellate court from arriving at a different conclusion.[3] The words used by McKendrick in my opinion do not amount to evidence that he was induced to assume the existence of an enforceable lease.
[3]Devries v. Australian National Railways Commission (1993) 177 C.L.R. 472; Rosenberg v. Percival (2001) 205 C.L.R. 434.
The respondent's claims based upon misleading and deceptive conduct and negligence stand in a different position. Although, according to his own evidence, McKendrick did not assume that the respondent had obtained an enforceable lease, there was evidence to support the trial judge's finding that McKendrick believed on the basis of Murphy's representations that the first and second-named appellants would give the respondent vacant possession of the Etiwanda Avenue premises by 1 August, even if he harboured suspicions based upon his own observations and conversations with Telstra employees.
The appellants' attack upon the conclusion that they were in breach of statutory and common law duties was directed to the issue of whether Murphy had reasonable grounds for his repeated representations that the respondent would be given vacant possession of the premises on 1 August. Counsel for the appellants contended that Murphy had reasonable grounds for making that representation, namely, his knowledge that on 21 July 1999 the solicitors acting for the first and second-named appellants had written to Telstra's agent in these terms:
"[A]s you are aware, the tenancy by virtue of your letter of the 7th of June 1999 and our response thereto, terminated on the 30th June 1999. Our client has now secured a replacement tenant with a commencing date of the 1st August 1999. Kindly ensure that the premises (sic) is vacated prior to this date. Should this not occur and our clients suffers (sic) any financial loss we shall seek such loss from your clients."
The trial judge rejected the appellants' tender of the letter through the first-named appellant. He ruled that the letter was inadmissible because the first-named appellant was unable to give evidence that the letter had been sent. Even if it be assumed that the letter was admissible as evidence that Murphy knew the solicitors were prepared to write a letter demanding possession, I would not conclude that the trial judge was bound to find that Murphy's representation was reasonably based. Murphy had no reason to suppose that Telstra would abandon its stated position simply because a solicitor had demanded that it do so.
For the forgoing reasons, I am of the opinion that the first and second-named appellants were under no contractual liability to the respondent, but that the appellants were liable to the respondent in negligence and for misleading and deceptive conduct contrary to the provisions of the Fair Trading Act and the Trade Practices Act.
The trial judge awarded damages under four heads. One of the heads of damage, based upon the difference between the rents for Byrne Court and Etiwanda Avenue, was plainly referable only to the cause of action in contract. The other heads of damage were the value of goods damaged in a storm on 8 August 1999 because they were stored in the open, loss of profits caused by the move to new premises being made in haste and the costs of moving first to Etiwanda Avenue instead of directly moving to Byrne Court.
The appellants submitted that the claim for the value of the goods destroyed by the storm could not be sustained as a consequence of the breach of a duty of care or statutory duty. The appellants contended that even if the respondent had not suffered the delay of eight days as a result of Murphy's misrepresentations, it would not have found covered storage for the timber rendered valueless by the storm. The submission was based on evidence that the other tenants of the covered areas at Byrne Court held monthly tenancies and giving them notice to quit eight days earlier would not have availed the respondent. The trial judge, however, said:
"I am satisfied also that but for the defendant's default the plaintiff would have had sufficient time, and the opportunity, to arrange for the undercover storage of the goods by 8 August; and that this would have been done - not at Byrne Court but at premises close by."
McKendrick did give evidence of obtaining space in nearby premises after moving to Byrne Court, but he did not say when that occurred. The question of the time needed to obtain a covered storage area was critical. In the absence of evidence that covered storage space could have been obtained prior to 8 June 1999 had the respondent's search for it not been delayed for eight days, I am of the opinion that the loss has not been shown to have been caused by the appellant's negligence or breach of statutory duty.
I consider that the remaining two heads of damage represent loss which was the result of the causes of action in tort and breach of statutory duty, save that all but $900 of the sum charged by a crane hire firm was, as the trial judge said, attributable only to the claim for damages for breach of contract. Adopting the trial judge's estimates of damage, the amount of loss which I consider was attributable to the causes of action in tort and breach of statutory duty is $47,646.40. His Honour found that the loss of profits caused by the non-contractual causes of action was "a little in excess of half the amount claimed." The amount claimed was $61,372. I have allowed $33,000.
Accordingly, I am of the opinion that the appeal should be allowed, the judgment for $144,396 in damages and $20,000 for interest should be set aside and in lieu thereof there should be judgment for the respondent in the sum of $47,646.40 for damages. I would propose that an award of damages in the nature of interest and the question of the costs of the trial and of the appeal should await submissions by the parties.
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