Guilfoyle Pty Ltd v The National Mutual Association of Australasia Ltd
[2000] VSCA 25
•24 February 2000
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted
No. 6529 of 1998
| GUILFOYLE PTY. LTD. (FORMERLY GUILFOYLE APARTMENTS PTY. LTD.) |
| Appellant (Defendant) |
| v |
| THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD. |
| Respondent (Plaintiff) |
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JUDGES: | BROOKING, ORMISTON and BUCHANAN, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATES OF HEARING: | 23 and 24 February 2000 | |
DATE OF JUDGMENT: | 24 February 2000 | |
MEDIUM NEUTRAL CITATION: | [2000] VSCA 25 | |
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LANDLORD AND TENANT - Intention to create binding agreement for sub-lease - Application of objective test - Evidence of communications and conduct - Defendant moved in but refused to execute sub-lease or pay rent.
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr W.J. Martin, Q.C. and | Rivers Dickinson Stirling & Munz |
| For the Respondent | Mr P.R. Best | Nicholas O’Donohue & Co. |
BROOKING, J.A.:
There is an old joke in the building industry about the builder and proprietor who meet in the lift going up to sign the contract for the erection of the building in which the lift is travelling. That joke has a happy ending: at least the building agreement is signed in the end. Businessmen are often in a hurry, so it is commonplace for costly building works to be carried out before the contract has been signed. And it is commonplace for a would-be tenant to be let into possession before the lease has been signed. The cases without happy endings are those where the contract or lease is never signed and the parties then argue about the terms on which the work was done or the premises were occupied. A good deal of litigation or other dispute resolution is the result.
This case is yet another example. It concerns half a floor in the Rialto building in Collins Street and occupied the County Court for no less than 14 sitting days between November 1997 and March 1998. The plaintiff, National Mutual Life Association of Australasia Ltd., the lessee of Level 49 of the Rialto South Tower, claimed to have made an agreement with the defendant for the grant to it of a twelve-month sub-lease of a defined part of Level 49 for a term of twelve months commencing on 1 August 1994 at a monthly rent of $11,041.66. No sub-lease had ever been executed. The plaintiff filed its writ on 27 June 1995. The defendant was then known as Central Park Towers Pty Ltd. It wanted to use the half floor to construct display apartments and an associated sales office. Level 49 had the advantage that it overlooked the site of Prince Henry's Hospital in St Kilda Road, where the defendant was contemplating the erection of a building, containing many apartments, of a height twice that allowed by the planning scheme. It was the height of the proposed building which ultimately brought it down, in the sense that the necessary permit for the development was not obtained. But in July 1994 that difficulty had not been encountered and the defendant was keen to begin construction of the simulacra as soon as possible. It was allowed to move in before a sub-lease had been prepared. Having been allowed in, it gutted the premises, which had already been partitioned and had been in use as offices. A good deal later, and at a time when difficulties had arisen about the residential development to which the display apartments were to be ancillary, it refused to execute a sub-lease or pay any rent.
The judge found there was a concluded and enforceable agreement for a sub-lease and gave judgment for the plaintiff for rent down to the date of the filing of the writ and a small additional sum for damages. In all, judgment was recovered by the plaintiff for about $132,000, together with interest. A counterclaim was dismissed; that was for about $48,000 as the cost of work (including reinstatement work) done by the defendant on the premises.
The judge's decision that a binding agreement had been made meant that she did not have to consider the plaintiff's alternative claim, based on Walton's Stores (Interstate) Ltd. v. Maher[1], that the defendant was estopped from denying the existence of an agreement by reason of representations made by it which had induced the plaintiff to act to its detriment.
[1](1988) 164 C.L.R.387.
The notice of appeal challenges only the judge's determination that there was a concluded agreement for a lease. It does not impugn the judgment given on the claim on any independent ground, and so it is unnecessary to say anything about the relief which the plaintiff obtained. In addition, the notice of appeal is directed only to the judgment given on the claim: it does not complain of the dismissal of the counterclaim.
The judge, as I have said, having found for the plaintiff on the claim based on an agreement for a sub-lease, did not consider the alternative case of estoppel. The plaintiff has not given any notice of contention under r.64.17(5) seeking to support the judgment below on the ground of estoppel, but no point has been made of this. The estoppel point has been briefly argued before us. The view I take on the contract question means that I need not reach a decision on the estoppel point, although I may say that my tentative view is that the plaintiff's case on estoppel is an appealing one. I shall continue to call the parties the plaintiff and defendant.
The question in this appeal is whether a binding agreement for a lease resulted from negotiations and other acts in the three-month period which began in about the middle of July 1994. It is not a matter of considering whether one or two documents constitute or evidence a binding agreement: there are a number of written communications passing between the parties or their agents, a number of conversations and a number of pieces of conduct which require to be considered in order to determine whether, at some point in July, August, September or October 1994, a concluded agreement for a lease was reached between the parties. In a case like the present, where a collection of written and oral communications and other acts over a considerable period of time have to be considered, it may not be possible to determine with precision the point at which a concluded contract is made. It will be enough if the court is able to determine that by a particular point of time, at the latest, a concluded agreement was reached.
In considering what intention is evinced by written and oral communications and conduct we are to apply the "objective" approach: Australian Broadcasting Commission v. XIVth Commonwealth Games Ltd.[2]
[2][1988] 18 N.S.W.L.R.540 at 548-9 per Gleeson, C.J.
In this case the documents are not particularly short and the number of documents, conversations and other acts is quite considerable. Many of the facts are relevant to the claim based on estoppel. Apart from a brief passage dealing with the law, fourteen pages of her Honour's judgment (pp.D3-D17 of the Appeal Book) make findings of primary fact. None of these has been challenged. These findings are, if I may say so, a most helpful chronological statement of what took place. They give us useful summaries of and extracts from relevant documents. It would be a waste of time to essay again the task of marshalling the facts, as her Honour has done, and I shall proceed on the basis that those listening to or reading this judgment are familiar with her Honour's reasons. I refer also to the agreed summary of facts prepared for the purposes of the appeal. I would add, by way of supplementing what appears at p.D13 of the judge's reasons, that the letter of 8 September 1994, which enclosed the sub-lease for execution, concluded with the words, "If you have any queries in relation to the above please contact the writer." Also there was a telephone conversation on 27 September 1994 not mentioned in her Honour's summary. In that conversation Larsen asked Munz to return the sub-lease executed "within the week" and Munz did not tell him that the defendant had vacated the premises (which, according to Munz's evidence, it had done on 10 August) or that it would not execute the sub-lease. It is also worth noting that on or shortly after 22 July 1994 the plaintiff's agent took the property off the market and, as regards the postscript added by Munz to the letter of indemnity ("I am quite clear that a concluded enforceable sub-lease agreement does exist"), that Larsen swore that he was surprised at the postscript, but only because he thought it was unnecessary, since he was in no doubt at the time that a concluded sub-lease did exist.
The judge found that the essential terms of the sub-lease had been agreed upon, and this finding is not challenged. The finding that there was a concluded and enforceable agreement for a sub-lease is attacked, in the notice of appeal and in argument, only on the ground that (as ground 2 in the notice of appeal puts it):
"(a)acceptance of any offer by the proposed sub-lessee, the Appellant, was conditional upon execution by both parties of a formal sub-lease, and remained so,
(b)the intention of the parties was not to make a concluded agreement until final board approval by the Respondent, St. Martins Victoria Pty.Ltd. and Grollo Australia Pty.Ltd. (Rialto Joint Venture) of the terms and conditions of the proposed sub-lease, which condition precedent remained operative and unfulfilled."
These two sub-paragraphs have their origin in the paragraph numbered 14 of the letter of 14 July 1996 sent by Furniss and summarised at pp.D4-D6 of her Honour's reasons. The only other specific ground of appeal is ground 3:
"3. The Learned Trial Judge ought to have concluded that:-
(a)the Appellant did not enter the relevant premises pursuant to an agreement for lease;
(b)The Appellant occupied the premises pursuant to the 2 letters between the parties dated 29 July 1994;
(c)the occupation by the Appellant of the relevant premises did not affect the applicability of either of the conditions referred to in subparagraphs 2(a) or 2(b) above."
As regards ground 2, the judge correctly directed herself in accordance with the principle that in determining whether the parties intended to make a binding agreement for a sub-lease their intention was to be objectively ascertained.
The outline of submissions from the appellant does not put any separate argument in support of ground 3. Nor was any such argument put orally.
It is not suggested that her Honour did not direct herself in accordance with the "objective" test. What is said is that her Honour erred in the application of the test in that on the facts as found the correct conclusion was, notwithstanding what had been written, said and done - or, indeed, perhaps because of it - that the parties did not intend to be bound until a formal sub-lease was executed by them both and until final approval of the terms and conditions of the sub-lease was given by the boards of the plaintiff, St. Martins Victoria Pty. Ltd. and Grollo Australia Pty. Ltd. Those last two companies were the sub-lessors.
Approval may have been given by the board of St. Martins Victoria Pty. Ltd. but it was not given by the board of the plaintiff or of the Grollo company. Her Honour held that by what the plaintiff and defendant had written, said and done after the initial letter, that of 14 July, they had given the go-by to what was said in it about the need for the execution of a formal sub-lease and the obtaining of board approval before the parties were to be bound. I am not persuaded that the judge was wrong in reaching this conclusion and indeed I think she was right. I am in substantial agreement with her reasons for her conclusion, which I need not set out word for word. I shall make some observations about the facts. It would be possible to say more, especially since the case was complicated by the circumstance that the oral evidence of conversations often raised a doubt about whether the witness was giving evidence of what was said or of what the witness thought at the time or now thought. The judge had to form a view on what the witness was seeking to convey by the evidence given. The sub-lease was to be for only twelve months. The premises were already partitioned and parts were let to two separate tenants. The defendant wished to obtain possession urgently in order to gut the premises and then fit them out in accordance with its needs. The plaintiff gave notice requiring its existing tenants to quit by 31 July. On 26 July the plaintiff told the defendant that it was intended that the sub-lease commence on 1 August. It allowed the defendant into occupation on the latter day. Both parties treated the defendant as entitled to exclusive possession and as obliged to pay rent from 1 August on, although no invoice for rent was sent for some time. An allowance of one day's rent-free possession was agreed upon when it was found that vacant possession of the whole area had not been immediately given, and the plaintiff, at the defendant's firm request, removed the former tenant's furniture which had been a cause of complaint. The defendant at once proceeded to gut the premises, at a cost of about $40,000 to itself. Just before taking possession Munz, himself a lawyer, by handwritten postscript asserted that he was "quite clear that a concluded enforceable sub-lease agreement does exist". This assertion was never challenged by the plaintiff and may be taken to have been tacitly accepted.
What the parties did later reinforces the view that they intended to be bound from the day the defendant went into occupation. Three invoices for rent were sent and not challenged. A sub-lease was sent for execution and not questioned until long after the event. In my opinion, long before the defendant's letter of 18 October alleging "repudiation" it had become apparent that the parties had made an agreement for a sub-lease, that the execution of the formal sub-lease which they contemplated had come to be regarded by them as no more than a formality and that the approval of boards of directors was no longer regarded by them as a prerequisite to the making of an agreement.
It is very unlikely that the plaintiff would have been prepared to act as it did in late July and early August if no binding agreement for a lease had been reached. On the defendant's case, the plaintiff was giving up the benefit of the existing two tenancies and allowing its premises to be gutted and then fitted out for a highly specialised use which would be of interest only to the defendant, in the hope that a sub-lease of only twelve months' duration would be entered into and on the basis that if that sub-lease was not entered into the plaintiff would receive no rent from the defendant and would be left with premises quite unsuited for occupation by any other sub-lessee.
As regards ground 3, which has not been argued, the defendant went into possession pursuant to an agreement for a sub-lease.
The sub-lease actually tendered for execution departed from the agreement already reached in the three respects mentioned by the judge. But her Honour found that this had been done by mistake and that, given an opportunity by the defendant, the plaintiff would have altered the sub-lease so as to make it accord with the agreement for a lease. This finding has not been challenged.
No other point has been taken about the sub-lease tendered for execution. In particular it has not been put, and it was not put below, that it dealt with a considerable number of matters concerning which the agreement for a lease was silent. No doubt the failure to take any such point reflects the fact that the letter of 21 July from Furniss stated that the plaintiff would endeavour to use the standard sub-lease document approved by the St. Martins company. There was evidence from the witnesses Silvo and Larsen that the sub-lease tendered was in the form of a lease drawn by a certain firm of solicitors and that this form was in fact the standard sub-lease document approved by the St. Martins company.
And so I think that the judge was right and that this appeal must fail.
ORMISTON, J.A.:
I regret to say that, notwithstanding the detailed reasons of the trial judge and the contentions supporting her conclusions, I do not believe that there was a concluded agreement between the appellant and the respondent at any relevant time. Conclusions reached about oral negotiations are frequently a matter of impression and it is difficult for witnesses to avoid rationalisation after the event. It is, however, always a question of an objective evaluation of the whole of the facts.
For reasons which will be apparent, it is sufficient for me to say only a few words as to why I am not satisfied as to the existence of the agreement. I should say that I am still of the view that the general approach to disputes of this kind which I set out in Encino Royale Pty. Ltd. v. Wilson International Pty. Ltd.[3] should be adopted: see also Kellow-Falkiner Motors v. Nimorakiotakis[4].
[3](1989) Vic. Conveyancing R. para.54-308.
[4][2000] VSCA 1.
It is sufficient for me to say that, where interests in land, whether by sale, lease or sub-lease, are involved and are being negotiated by persons some of whom have legal training, one should be careful not to assume that the parties would not require the necessary conveyancing documents to be exchanged before they are bound.
In this case the proposed sub-lessor put forward in the course of the negotiations an offer containing a term explicitly requiring execution of a formal sub-lease. It is not said that in the immediately following exchange of correspondence and conversations, that is, those up to 21 July, there was any alteration to that term. The plaintiff-respondent therefore had to show that thereafter the clause no longer applied, but I do not believe that it succeeded. The appellant's entry into possession was, in my view, consistent with both parties' continued agreement to have a formal sub-lease signed and exchanged before being bound, although I would concede that the evidence suggests that the appellant might have been prepared at the time to waive any such requirement. Nothing, however, in the dealings between the appellant and respondent convinces me that the respondent National Mutual Holdings Pty Ltd was willing to abandon the requirements of clause 14. It was prepared to take the commercial risk of letting the appellant into possession upon the basis of its receiving only a strangely drafted indemnity document, no doubt because it hoped and expected that the relevant conveyancing document would be prepared as quickly as it could be and thus the sub-lease exchanged, because of their agreement in principle to the matters which they had already discussed. As I read the evidence it all pointed to the conclusion that the indemnity was being put forward by National Mutual as the temporary, if imperfect, basis of the appellant's "occupation", not as an additional term of what it has subsequently claimed to be a concluded agreement for sub-lease.
However, in short, I am not persuaded that both parties had agreed that clause 14 should no longer apply, whatever the respondent has asserted in the present litigation. It follows that, as that clause still applied, there was no binding enforceable agreement for sub-lease at any relevant time.
I therefore would allow the appeal.
BUCHANAN, J.A.:
In my opinion the trial judge was entitled to find that the parties had an enforceable agreement for a sub-lease. I agree with the reasons stated by Brooking, J.A. I would dismiss the appeal.
BROOKING, J.A.:
The order of the Court is that the appeal is dismissed with costs.
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