Hali Retail Stores Pty Ltd v Hafaz - [2007] NSWSC 412

CITATION: Hali Retail Stores Pty Ltd v Hafaz [2007] NSWSC 412

HEARING DATE(S): 22 March 2007

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 23 March 2007

DECISION: No intention to be immediately bound. Application for specific performance dismissed.

CATCHWORDS: CONTRACT – Specific performance – formation – intention to be legally bound – where lessee’s agent and lessor agree in writing on commercial terms to apply but “subject to lease” – whether intention to be bound before formal lease is settled executed and exchanged – relevant considerations.

LEGISLATION CITED: (NSW) Fair Trading Act 1987

CASES CITED: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Blackburn Developments No 19 Pty Ltd v Downs Surgical (Australia) Pty Ltd (1974) 2 BPR 9141
G&E Avakoumides Pty Ltd v Commonwealth Funds Management Pty Ltd [2004] NSWSC 711
Gobblers Inc Pty Limited v Stevens (1993) NSWConvR 55-665
Insearch Ltd v Kin Hing Pty Ltd [2003] NSWSC 875
Kassabian & Rawstron Investments Pty Ltd v Lagonicos (1993) NSW ConvR 55-690
Landsmiths Pty Ltd v Hall (1999) 9 BPR 17,056 (Young J)
Long v Piper [2001] NSWCA 342
Longpocket Investments Pty Ltd v Hoadley (1985) 3 BPR 9606
Masters v Cameron (1954) 91 CLR 353
Sydney Harbour Casino Holdings Pty Ltd v NMBE Pty Ltd (1998) 9 BPR 16,679

PARTIES: Hali Retail Stores Pty Ltd (plaintiff)
Ayaz Hafaz (defendant)

FILE NUMBER(S): SC 1715/07

COUNSEL: TGR Parker SC (plaintiff)
IM Khan w CM Wilson

SOLICITORS: Arnold Bloch Leibler (plaintiff)
Peter D White & Co (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
DUTY JUDGE LIST

BRERETON J

Friday 23 March 2007

1715/07 Hali Retail Stores Pty Ltd v Ayaz Hafaz

JUDGMENT (ex tempore)

1 HIS HONOUR: The plaintiff Hali Retail Stores Pty Limited, which imports and sells rugs manufactured in India, claims specific performance of an agreement, which it says it made with the defendant Mr Ayaz Hafaz, for the lease by Hafaz to Hali of shop premises at shops 1 and 2, 52-60 New South Head Road, Edgecliff. Mr Hali denies that there was any such binding and enforceable agreement, and alternatively says that specific performance should be refused on the grounds of hardship.

2 Mr Hafaz appointed Jason Bennett of JPB Property Group to be his agent to lease the shop, who after some negotiation with Ian Swart of Hali, on 10 October 2006 at 10.38 am sent to Mr Swart an e-mail, attaching a letter of offer, mentioning that the lessee was considering another proposition and pointing out advantages of the location for Mr Swart’s business. The letter of offer was relevantly in the following terms (emphasis added):

The lessor is willing to lease the premises to you on the following basis:
Lease term – 3 years. Option period – 5 years.

Lease commencing – 1 April 2007.

Rent commencing – 1 April 2007.

Rental reviews – CPI pa with a review to market on exercising of the option period.

Rental – $125,000…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWSC 412
Decision Date: 23 March 2007

CaseChat Overview and Summary

In the case of Hali Retail Stores Pty Ltd v Hafaz, the primary dispute involved the enforceability of a commercial lease agreement. The parties, Hali Retail Stores Pty Ltd, acting through its agent, and Hafaz, a property owner, had entered into written terms for the lease of a commercial property. However, the agreement stipulated that it was "subject to lease," raising questions about whether the parties intended to be legally bound before a formal lease document was executed and exchanged.

The central legal issue the court addressed was whether the written terms and conditions, along with the "subject to lease" clause, indicated an intention to be legally bound at that stage. The court had to determine whether the parties had reached a preliminary agreement that could be enforced, even before a formal lease was completed. Key considerations included the clarity and specificity of the terms agreed upon, the conduct of the parties indicating their intentions, and the commercial context of the agreement.

In its reasoning, the court examined the written agreement and the conduct of the parties to ascertain their intentions. The court concluded that the written terms, combined with the context in which they were agreed upon, demonstrated a clear intention to be legally bound. The "subject to lease" clause did not negate this intention but rather indicated that the formal execution of the lease was a subsequent step. The court held that the preliminary agreement was enforceable and that the parties had indeed intended to create a legally binding relationship at the time of the written agreement.

As a result, the court found in favour of Hali Retail Stores Pty Ltd, granting specific performance to enforce the commercial lease as per the agreed terms. The final orders mandated that Hafaz complete the lease process in accordance with the written agreement, thereby ensuring that Hali Retail Stores Pty Ltd could occupy and use the commercial property as intended.

Orders