Kellow-Falkiners Motors Pty Ltd v Nimorakiotakis
[2000] VSCA 1
•11 February 2000
SUPREME COURT OF VICTORIA
COURT OF APPEAL Not Restricted
No. 4440 of 1997
| KELLOW-FALKINER MOTORS PTY. LTD. |
| Appellant |
| v |
| CHRISTOFOROS NIMORAKIOTAKIS & ORS |
| Respondents |
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JUDGES: | ORMISTON, CHARLES and BUCHANAN, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 9 September 1999 | |
DATE OF JUDGMENT: | 11 February 2000 | |
MEDIUM NEUTRAL CITATION: | [2000] VSCA 1 | (1st Revision – 25 February 2000) |
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LANDLORD AND TENANT – Tenancy at will – Negotiations for lease – Tenant going into occupation and making periodic payments in interim – Parties failing to agree terms of lease – Whether lease in existence – Whether landlord entitled to possession of premises – Javad v. Aqil [1991] 1 W.L.R. 1007 considered.
ESTOPPEL – Equity – Negotiations for lease – Terms not agreed – Whether owner's conduct induced proposed tenant to believe lease in existence – Whether owner knew or intended proposed tenant to believe lease in existence – Whether owner estopped from denying lease – Walton Stores (1988) 164 C.L.R. 387 considered.
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr G. Nash, Q.C. and Mr J. Tsalanidis | Harding Solicitors |
| For the Respondent | Mr C. Porter | Pearce, Webster Dugdales |
ORMISTON, J. A.:
I have had the benefit of reading the judgment in this appeal of Charles, J.A. in draft form and, for the reasons he has stated, I agree that the appeal should be dismissed.
CHARLES, J. A.:
The respondents, four brothers, are the registered proprietors of the land known as 9 Morton Avenue, Carnegie. They purchased the land on 7 June 1995, and became registered proprietors of it on 1 September in the same year. The land comprises No.9A, which includes a small factory or warehouse, and a larger factory or warehouse which incorporates various offices (I shall call No.9A “the premises”); No.9B, which was at all relevant times occupied by Nucleus Computer Services as a tenant of the respondents; No.9C, known as the caretakers’ building, which was at all relevant times occupied and used as a pottery by the respondents’ father; and certain areas used in common by all the occupiers. The whole of the premises was let to Pardoo Australia Pty. Ltd. (“Pardoo”) from 7 August 1995 to 18 August 1996.
The appellant, which carries on business as a motor repairer and seller of automotive spare parts, initially occupied the small factory, part of the premises, from May 1996 pursuant to an arrangement with Pardoo, although there was no evidence of any consent given to Pardoo to sublet. On 11 August 1996 the appellant’s managing director, Mr. P.W. Shellard, wrote to Mr. K.L. Swinnerton, a director of L.J. Hooker, the respondents’ real estate agent, saying that the appellant was prepared to remain in occupation of the small factory “at $6,700 P.A. payable monthly in advance from 17 August 1996 with one month’s notice on either side”, and by letter dated 13 August, Swinnerton notified Shellard that his clients agreed to the appellant’s continuing in occupation “at $559 per calendar month payable from 17 August 1996, with one month’s notice on either side as caretaker tenants”. It has never been in issue that the sum of $559 was thereafter paid monthly by the appellant to Swinnerton’s office, the last such payment being receipted on 18 November and expressed to be in respect of the period until 18 December 1996.
Negotiations commenced in August 1996 between the appellant and the respondents for a formal lease of the whole of the premises. I shall return to these negotiations in more detail shortly, but it is sufficient for the moment to say that in late November 1996 Swinnerton forwarded a lease in the form approved by the Real Estate Institute of Victoria Ltd. (REIV) with a schedule of particulars acceptable to the respondents, for execution by the appellant, if acceptable to it. Shellard made some amendments to the lease and then returned it to Swinnerton. Thereafter the appellant paid rent at the rate specified in the lease and occupied the whole of the premises. The respondents however did not execute the lease in its amended form, nor did they communicate to the appellant their acceptance of the amendments.
The appellant, probably in December 1996 (as found by the trial judge) commenced work on alterations to the warehouse and office accommodation in areas in the premises beyond the small factory initially occupied by it. Disagreements, however, arose between the parties as to the appellant’s right to make such alterations and on 6 January 1997 the solicitors for the respondents wrote to the appellant purporting to terminate the monthly tenancy under which they asserted the appellant was occupying the premises.
On 19 February 1997 the respondents as plaintiffs commenced this action in the Supreme Court claiming possession of the premises. The appellant in its defence (as expanded at trial), claimed to be occupying the premises pursuant to a lease, alternatively an agreement for a lease, alternatively a tenancy arising by estoppel, or alternatively a yearly tenancy.
The action came on for trial on 30 April 1998 when the parties by agreement sought the determination, independent of the pleadings, of three preliminary questions. I need only mention questions 1 and 2(a) which were in the following form –
“1.On or shortly prior to 6 January 1997, was the defendant occupying the premises pursuant to any and what tenancy, lease or agreement to lease entered into or made between the plaintiffs and the defendant?
2. If yes to 1:
· On 6 January 1997 or thereabouts;
· On some other and what date thereabouts;
was the said tenancy, lease or agreement to lease terminated by reason of:
(a) the terms of the letter dated 6 January 1997 from the plaintiffs’ solicitors to the defendant?”
Before the judge, evidence was directed only to the first question because it was agreed that if the judge were to find that the defendant was in occupation pursuant to a lease, agreement for a lease, tenancy by estoppel or yearly tenancy, other questions would arise concerning compliance with the Property Law Act 1958 and both parties would want an adjournment of the hearing to prepare lengthy evidence and argument. But it was agreed that if the judge were to find that the appellant was in occupation pursuant to a monthly tenancy or tenancy at will, the answer to question 2(a) would be Yes.
After a trial lasting five days, in which evidence was given by a number of witnesses, but principally by Messrs. Swinnerton, Shellard, and the first plaintiff Christoforos Nimorakiotakis, the judge held in reasons delivered on 4 June 1998 that the appellant was in occupation of the premises pursuant to a tenancy at will. By judgment given on 17 June 1998, her Honour ordered the appellant forthwith to deliver up possession of the premises to the respondents. Upon the appellant giving undertakings to file and serve a notice of appeal within 14 days and continue paying out to the respondents the sum of $2,000 a month, her Honour stayed the judgment until the hearing and determination of the appeal.
The appellant accordingly gave notice of appeal and on the hearing of the appeal challenged the judge’s finding that it occupied the premises pursuant to a tenancy at will. Three issues were raised by the appellant, which contended that on 6 June 1997 it was in occupation of the premises, first, pursuant to a lease or secondly, an agreement for a lease, for a term of one year commencing on 18 June 1996 at a rental of $24,000 per annum payable monthly in advance with two options to renew of three years each, the first of which options had already been exercised by the appellant. The third issue raised by the appellant was that it was entitled to occupy the premises pursuant to a tenancy by estoppel, the tenancy being on the same terms as the lease or agreement for a lease previously mentioned.
The first two issues may be dealt with together. It is necessary to state the facts, which are substantially not in dispute, in some detail because they are relevant also to the third issue, which was the argument upon which Mr. Nash, who appeared in this Court for the appellant, placed most reliance. The following statement of the facts is taken from the summary prepared by the appellant’s solicitors, the judge’s reasons for judgment, and the documentary evidence, all of which was admitted by consent.
After the negotiations in August 1996 to which I have already referred, the appellant forwarded to L.J. Hooker on 16 August 1996 a cheque in the amount of $599 “for rental on the above premises from 17 August to 17 September 1996”. It was common ground that this was a reference to the smaller warehouse. The appellant’s letter accompanying the cheque confirmed “our verbal agreement of 1st right of refusal on Leasing the entire premises at rental agreeable to the owner”.
On or about 21 August a meeting was held between Shellard and Swinnerton in which the question of the appellant occupying the premises on a long-term lease was canvassed. In a letter to Swinnerton dated 21 August signed by Shellard, the appellant referred to –
“Our recent meeting at the property which we are occupying as caretakers until a long term lease with ourselves and others or others excluding ourselves is concluded. I confirm we have been given a first right of refusal of the entire property prior to a lease being entered into with others.”
In mid-November there were negotiations between Shellard on behalf of the appellant and Swinnerton, and also discussions between Shellard and the respondents. These negotiations and discussions focussed on the grant of a long-term lease to the appellant. An annual rental of $24,000 for the whole of the premises was agreed but there was a dispute as to the commencement date and then further difficulties arose when one of the respondents suggested that the front offices (in the larger building) should be excluded from the area leased to the appellant. The principal dispute in relation to the lease was that the respondents were not willing to grant a lease which did not commence on 18 November 1996, whereas the appellant wanted a commencement date of 1 January 1997. Shellard told Chris Nimorakiotakis (the first respondent and an accountant who generally had the handling of the negotiations on behalf of the respondents) that he was no longer interested in pursuing the premises and would vacate them. Accordingly Swinnerton wrote to Shellard on 14 November confirming “that you will be vacating as of one month from 13 November 1996”.
On 15 November the appellant wrote to L.J. Hooker (the letter being signed by Shellard) referring to the numerous discussions which had taken place between the appellant and L.J. Hooker. The letter included the following paragraphs –
“We are in an endeavour to compromise prepared to pay the increase in rent from 18/12/96 or 30 days from the receipt of a signed and legally binding lease in terms as agreed in your office which ever is the longest.
It is imperative that we move over Christmas from our current premises and so we are seeking to buy or lease a premise. Advertisements have been placed in for tomorrow and we would appreciate your advice as to anything else you may have that would be suitable.
Agreement at this stage has been reached with the owners that we will vacate on 1/1/1997 or at another time by agreement.”
Then, by letter dated 15 November, Swinnerton informed Shellard that the respondents were “not willing to negotiate on the commencement date of 18 November 1996”. On about 18 November Swinnerton forwarded to Shellard an REIV schedule and a set of special conditions relating to the terms of a long-term lease of the whole of the premises with a commencement date of 18 November, an initial term of three years, two options each for a further three years, and a rental expressed to be $2,000 per month. After further discussions between Shellard and Swinnerton, Swinnerton sent Shellard another version of the schedule showing a commencement date of 18 December 1996.
On 20 November Shellard wrote to Swinnerton sending back a copy of the latest version of the schedule marked with suggested alterations which included a change to an initial term of one year, with three three-year options. Swinnerton, after obtaining instructions from the respondents, then faxed to Shellard on 22 November a further version of the schedule incorporating most of the amendments including the change to the initial term and options.
Swinnerton told Shellard on 22 November that he was anxious to have the lease executed because it was required by the respondents for the purpose of a valuation. Accordingly, Shellard and his father (a director of the appellant) on 23 November went to Swinnerton’s office bringing the appellant’s seal with a view to executing the lease. Swinnerton then produced for the first time the standard printed REIV form of commercial lease to which the schedule was to be added. Shellard wanted time to examine the lease before the appellant executed it, and it was agreed that he could take it away for inspection. Later that day Shellard rang Swinnerton and told him that certain of the printed terms did not accord with the agreed terms of the schedule. Swinnerton said “make the alterations and return it”. Shellard made hand-written alterations to the printed terms of the lease (some of which were intended to remove inconsistencies between the printed terms and the agreed terms of the schedule and some of which were unrelated to the schedule). The lease in this altered form was then sealed by the appellant and Shellard delivered it to Swinnerton’s office on 23 or 26 November.
The trial judge said of Swinnerton’s request[1] that she did “not perceive it as an acceptance by Mr. Swinnerton, sight unseen, and without reference to his clients, of any alterations which might appear on the lease ... It was rather an indication of a willingness to continue negotiations ...”. Mr. Nash did not challenge this conclusion. Her Honour then said[2] as to the alterations to the printed terms made by Shellard –
“Some of those alterations were intended to remove inconsistencies between the printed terms and the agreed terms of the schedule, and some of them were unrelated to the schedule. I accept the submission of Mr. Porter [counsel for the respondents] that some at least of those unrelated alterations concerned matters of substance. The lessees obligation in clause 1(f) to make good any damage caused to the premises was amended so as to exclude damage from fire or other cause attributable to the negligence of the lessee. The words ‘which will not be unreasonably withheld’ were added to clause 1(g) which provided for the approval of the lessor to repairs, structural alterations and the like. The acknowledgment that no representations had been made as to the suitability of the premises had been deleted from clause 1(o). The requirement for the provision of references for a proposed sub-lessee was deleted from clause 1(t)(i)(C). Clause 1(t)(i)(E), requiring that the lessee pay the costs of matters relating to consent to a sub-lease was deleted. Clause 1(t)(v) requiring a new director of a corporate lessee to execute a guarantee was deleted. While Mr. Shellard was reluctant to concede in evidence that those alterations concern matters of substance, they were apparently important enough to him for him to wish to make them.”
[1]Reasons, at [9].
[2]Reasons, at [10].
The executed lease having been delivered to Swinnerton’s office on 23 or 26 November, Swinnerton sent it to the respondents on or about 4 December and took no further action with regard to it. Chris Nimorakiotakis said he was “pretty concerned with all the alterations on the lease”. He sent it on to a valuer, Mr. R.J. Fellows of Marketline Property Valuations, who was preparing a valuation of the property and needed it for that purpose, and asked Fellows to “look over the lease to make sure its OK.” There was no evidence to suggest that that lease or any in like form was ever executed by the respondents. After sending it to the valuer, Nimorakiotakis went to Eden in New South Wales on holidays for a fortnight.
Shellard deposed in an affidavit sworn on 4 March 1997 and used in evidence at the trial that the appellant entered into possession of the whole of the premises at the time when he received the first version of the schedule (i.e. about 18 November). His oral evidence differed, in that he said “I don’t know now how I took possession because I always had the keys and always had the sole access to the premises”. The judge said[3] that “in view of the [appellant’s] occupation of No.9A, it seems probable that he [Shellard] obtained [the keys] from Pardoo.”
[3]Reasons at [12].
On 5 December 1996 the appellant paid Swinnerton the sum of $4,000, described in the receipt as being a bond of $2,000 and rent of $2,000. The total amount was paid into the agent’s “bond trust account”, and on 13 December $2,000 was paid into the agent’s rental trust account. This sum was later paid across to the respondents.
Shellard also described a business of his, conducted under the name Colours Bath Oils, of bottling bath oils, which was carried out in part of the larger factory prior to Christmas 1996. He agreed in oral evidence that he considered that the appellant was entitled to possession of the whole of the premises after he paid the rent of $2,000 on 5 December. But the judge concluded,[4] after hearing Shellard’s evidence, that he began moving vehicles into the whole of the area of the premises at least as early as after returning the lease on 23 or 26 November and possibly earlier. Mr. Nash did not challenge these conclusions in his submissions.
[4]Reasons at [14].
During December 1996, the appellant carried out certain works at the premises, which included the removal of some sheds from the yard, the removal of internal partitions and the removal of the ceiling in the small warehouse. The appellant contended at trial that these works were necessary, and were carried out with the agreement of the respondents, a matter which was denied by the respondents. Chris Nimorakiotakis returned from his two weeks’ holiday on 28 December. He visited 9 Morton Avenue on 29 December, when he observed the alterations. The judge found[5] that there was no evidence which could satisfy her that the respondents were aware of the alterations at any earlier date. Nimorakiotakis asked Shellard to stop the alterations and Shellard declined to do so. On 3 January 1997, Shellard wrote to Swinnerton setting out the basis upon which the works had been carried out, and on 6 January paid Swinnerton’s office a further $2,000 by way of rent.
[5]Reasons at [17].
On 6 January, the respondents’ solicitors wrote to the appellant a letter which stated that the appellant was currently occupying the premises as a monthly tenant, and continued “although negotiations have been entered into for the lease of the premises, there is at present no current lease”. The letter asserted that the appellant had made substantial unauthorised alterations to the premises and had broken into and trespassed into adjoining premises. The letter contained a demand that the appellant vacate the premises on 18 February 1997 and make good the damage.
The appellant has since continued in possession of the premises and paid rent of $2,000 per month into the trust account of the respondents’ solicitors.
The judge said[6] that the respondents could not be said to have delayed unduly in causing a letter to be written on 6 January after first becoming aware of the alterations on 29 December.
[6]Reasons at [18].
The appellant’s first submission at trial was that there was a binding lease of the premises on the terms of the schedule executed by the appellant and delivered to Swinnerton’s office on 23 or 26 November. This document became Exhibit A at the trial. The appellant relied on four matters as constituting part performance of this agreement, principally the entry into possession and the payment by the appellant of rent at $2,000 per month thereafter. Her Honour found[7] that the evidence of Shellard did not enable a finding that the entry into possession of the balance of the premises was referable to a long-term lease rather than to a tenancy at will. The appellant had, her Honour found, clearly taken possession of the large factory well before the date (18 December) upon which the lease was shown as commencing. To the extent that the appellant had been “allowed” to remain in possession of the large factory (rather than induced by the respondents to enter into possession) there was no inconsistency[8] with a tenancy at will. To the extent that the appellant had also, by executing Exhibit A, bound itself to install two toilets in the larger factory, that was a matter of importance to it, since in December 1996 some 40 people were engaged in the production of bath oils in part of the large factory.
[7]Reasons at [24].
[8]Reasons at [25].
The principal reason given by the judge for rejecting the appellant’s arguments that there was either a binding lease, partly performed, or an agreement for a lease of which equity would grant specific performance, was that the parties had failed to reach agreement on the terms of the lease as appears from the passage in her Honour’s reasons, quoted in [18] above. After Shellard made alterations to Exhibit A before sealing it and returning it to Swinnerton, he spoke to Swinnerton. Swinnerton said in evidence that after this conversation the parties would have to “get on with negotiating”. As her Honour said, there was at that stage no meeting of minds. Swinnerton, her Honour said,[9] “had tendered a standard form of lease with a large number of additional terms, and Mr. Shellard had submitted alterations to a number of those terms (over and above the alterations made simply in order to remove inconsistencies with the agreed terms of the schedule).” In her Honour’s view[10] the appellant “chose to seal Exhibit A, and accept the obligation to install the toilets, after making amendments to that document which indicated that it was still negotiating the terms on which it was to take a lease of the property”. Since her Honour was accordingly not satisfied that the parties had reached agreement, the arguments made by the appellant, whether for a lease or an agreement for a lease, both failed.
[9]Reasons at [30].
[10]Reasons at [30].
In this Court Mr. Nash at the outset put it that the only issues for determination were whether agreement had been reached and, if not, whether the respondents were estopped from denying that such a lease had been granted. His first contention was that the exchange of schedules on 20 and 22 November between Shellard and Swinnerton had led to an acceptance by Swinnerton of Shellard’s counter offer. But when Mr. Nash was faced with questions from the Bench directed to the passage from the trial judge’s reasons dealing with the alterations made by Shellard to Exhibit A on 23 November, he was unable to deny that some of these alterations were matters of substance or that the terms of Exhibit A, after Shellard had altered them, were different from the terms of the lease which Shellard had taken away to consider. At this point in the argument, Mr. Nash told us that the appellant’s case on the first two issues was not strongly pressed.
No serious challenge was made to any of the trial judge’s findings of fact in relation to her Honour’s conclusion that no agreement had been reached, and that the parties were still negotiating the terms for a lease at the time Shellard delivered the altered version of Exhibit A to Swinnerton’s office late in November. Nothing happened thereafter, in my view, to disturb her Honour’s conclusion that as at 6 January 1997, the parties were still negotiating for a long-term written lease, those negotiations not having reached finality. The appellant’s arguments, whether as to a binding lease, or an agreement for a lease, were of course both dependent upon a finding that the parties had reached agreement upon all necessary terms. The judge’s conclusion that the parties had not reached any such agreement was necessarily destructive of both arguments. It follows that the appellant’s first two arguments must fail.
In contrast to the first two issues, Mr. Nash strongly pressed the argument that the appellant had become a tenant by estoppel. For this purpose he relied on the elements required to be satisfied for a party to be estopped, conveniently summarised in the judgment of Brennan, J. in Waltons Stores (Interstate) Ltd. v. Maher[11] as follows-
“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant had induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.”
[11](1988) 164 C.L.R. 387, at 428-429.
Mr. Porter, counsel for the respondents in this Court, did not challenge this statement of the applicable law. There may be a question whether these tests represent the view of a majority of the High Court in Waltons Stores.[12] But these tests have been consistently applied for the purpose of determining whether an estoppel has been established; see, in Victoria, Metropolitan Transit Authority v. Waverley Transit Pty. Ltd.;[13] The Commonwealth v. Clark;[14] in the Court of Appeal of New South Wales in Austotel Pty. Ltd. v. Franklins Self Serve Pty. Ltd.;[15] and in the Full Court of the Federal Court of Australia in S. & E. Promotions Pty. Ltd. & Ors. v. Tobin Bros Pty. Ltd.[16] The passage previously quoted from Brennan, J. in Waltons Stores has also subsequently been applied by McHugh, J. in The Commonwealth v. Verwayen.[17] Compare, also Silovi Pty. Ltd. v. Barbaro.[18] Even if there be reservations that the other members of the High Court in Waltons Stores would not have expressed the tests in precisely the same terms, as Ormiston, J. put it in The Commonwealth v. Clark,[19] Mr. Nash was in any event content to found his argument on the basis of the tests formulated by Brennan, J.
[12]See Austotel Pty. Ltd. v. Franklins Self Serve Pty. Ltd. (1989) 16 N.S.W.L.R. 582 per Priestley, J.A. at 615.
[13][1991] 1 V.R. 181, at 208.
[14][1994] 2 V.R. 333 per Ormiston, J. at 360.
[15]16 N.S.W.L.R. 582 at 615.
[16].(1994) 122 A.L.R. 637, at 652-654.
[17](1990) 170 C.L.R. 394, at 502.
[18](1988) 13 N.S.W.L.R. 466 per Priestley, J.A. at 472, in particular proposition 5.
[19][1994] 2 V.R. 333 at 360.
The trial judge found that at least the second and fourth of Brennan, J.’s tests had not been met, and that it was not necessary for her to consider the remaining requirements. Her Honour said –
“36.Referring to the six requirements listed by Brennan, J. in Waltons Stores, Mr. Shellard’s evidence was that he believed, after sealing the lease and paying $2,000 rent on 5 December, that the defendant had a lease of the premises. This belief is surprising, from a person with ten years’ experience as a real estate agent, given that he had proposed a number of alterations to the terms of the lease, that he had had no response from the plaintiffs as to those alterations, and that he had not received a lease executed by the plaintiffs.
37.However, if I accept, for present purposes, that Mr. Shellard did hold that belief, I cannot find that the plaintiffs or their agent had induced him to adopt it. The words of Mr. Swinnerton on the telephone on 23 November ... could not justify his forming that belief; nor could Mr. Swinnerton’s indication that it was urgent to have the lease signed, given that the alterations were made to the lease after the conversation in which that was said .... I have found that if Mr. Shellard acted on that belief, by continuing to move into the large factory and by undertaking the alterations to the premises, the plaintiffs did not know that he had done so nor did they intend him to do so. When Mr. Chris Nimorakiotakis discovered that the alterations were under way, he immediately asked Mr. Shellard to stop them, and I have found there was no undue delay before the letter of 6 January was written ....”
Mr. Nash of course challenged these paragraphs of the judgment. He submitted that the judge had erred in rejecting the second and fourth of Brennan, J.’s requirements, and that this Court was entitled to, and should, make its own findings on all six suggested tests. It is convenient therefore that I should begin consideration of this issue with an examination of the appellant’s case on the two requirements on which the judge rejected the appellant’s submissions.
The second requirement obliged the appellant to establish that the respondents induced the appellant to adopt the assumption or expectation that there was or would be a lease between them. The appellant relied on eight matters for this purpose:
(a)Swinnerton had engaged in extensive negotiations with Shellard regarding the schedule and special conditions which were agreed upon as at 22 November;
(b)Swinnerton told Shellard that the lease needed to be signed as soon as possible;
(c)the terms of the agreement between the parties reflected a long-term arrangement (up to 10 years) and the installation of two toilets before the appellant vacated the premises;
(d)Swinnerton told Shellard to make alterations to the lease and return it;
(e)Shellard was given receipts for the bond money and rent referring to the appellant as tenant and the respondents as landlords and stipulating the period covered by the rent;
(f)Swinnerton accepted the rent and gave the appellant such receipts on 5 December 1996 and 6 January 1997;
(g)Swinnerton forwarded the rent to the respondents who accepted it; and
(h)the respondents and Swinnerton did nothing after the lease was returned to Swinnerton on 23 or 26 November until the letter of 6 January to disabuse the appellant of its belief, assumption or expectation that there was a binding lease.
Mr. Nash, in support of his argument on the second requirement, emphasised the giving and the nature of the receipts, and the silence on the part of Swinnerton and the respondents after the feverish exchange of schedules which finished on 23 November. This was a silence which, the argument ran, lasted for six weeks, and nothing was said by the respondents to indicate to the appellant that it did not have a lease, even at the confrontation on 30 December. Mr. Nash submitted that the judge had not considered the effect of the payments of rent which, he said, by themselves did not do anything, or the effect of the silence, or that no contentions had been put by the respondents even when Chris Nimorakiotakis and Shellard were at loggerheads over the alterations. Mr. Nash submitted that one had to look at the whole history, the frantic exchange of schedules, the payment of rent, followed by the long silence. The appellant was, he said, induced by the lengthy silence and the acceptance of the higher rental.
The respondents’ case, put by Mr. Porter, was that the oral and documentary evidence clearly established that it was always the parties’ intention to have a sealed lease and in particular Shellard’s understanding always was that the negotiations would culminate in the execution of a lease. Mr. Porter argued that until August 1996, the appellant had only occupied a part of Pardoo’s premises. The correspondence, he said, showed that after Pardoo went out, it became necessary to regularise the appellant’s status, to which the respondents had never consented. The appellant at first became a caretaker tenant of part of Pardoo’s premises, the intent of both parties being at first to lease all of the premises to a new tenant. As the matter developed, the respondents were prepared to accept the appellant as tenant of the whole of the premises, and the question arose as to the terms of the tenancy. The appellant’s letter to L.J. Hooker on 15 November showed clearly, Mr. Porter said, that the appellant was then insisting on a signed and legally binding lease, or it intended to vacate the premises on 1 January 1997. Although oral evidence was given by each of Shellard, Swinnerton and Chris Nimorakiotakis, very little had been said in evidence bearing on the question of estoppel, and no evidence-in-chief or cross-examination had been directed to any of the six tests proposed by Brennan, J. in Waltons Stores. The appellant’s case was therefore reduced to such inferences as could be drawn from the exchange of schedules and the nature of the alterations made. In particular, Mr. Porter pointed to the fact that a number of clauses had been altered when Exhibit A was returned to Swinnerton, which had nothing to do with the previously agreed schedule, and no discussions then took place between Shellard and Swinnerton when the altered lease was returned. Furthermore, Shellard’s evidence was that when rent was paid on 6 January, the agent did not want to accept the rent. Mr. Porter’s submission as to the payments of rent was that Shellard made them not at the request of the respondents, but purely to establish his right to continue in possession pending a written lease, and that the payments were in effect unilateral payments made while no consensual relationship existed between the parties. Accordingly the payment of rent was quite consistent with a tenancy at will, rather than the lease for which the appellant contended.
Before turning to the eight matters relied on by Mr. Nash to establish the second of Brennan, J.’s requirements, I should deal briefly with some short preliminary matters. Shellard said in his evidence that he believed after sealing the lease and paying $2,000 in rent on 5 December that the appellant had a lease of the premises. Shellard admitted in his evidence that he had for 10 years been a real estate agent. The trial judge found it surprising that he should have held his stated belief, in the circumstances described in her Honour’s reasons at [36]. Her Honour had preferred the evidence of Chris Nimorakiotakis to that of Shellard on the question whether the respondents were aware that the appellant was occupying the whole of the premises, describing[20] the latter’s evidence on the whole matter of taking possession as “varying between the evasive and the excessively forthcoming”.
[20]Reasons at [25].
In this Court, and also before the trial judge, Mr. Porter placed great reliance upon the decision of the Court of Appeal in Javad v. Aqil.[21] In that case the plaintiff entered into negotiations to lease his premises to the defendant, who had lost his place of business and needed to store stock elsewhere for his leather goods manufacturing business. The plaintiff allowed the defendant to move into possession on payment of £2,500, being one quarter’s rent in advance, even though the terms of the lease had not been agreed. Negotiations continued between the parties on the terms of the proposed lease and the defendant paid a further two quarters’ rent in the interim. The parties were unable to agree on the terms of the lease and the plaintiff gave the defendant two weeks’ notice to quit. The defendant refused to leave, claiming that he had a periodic tenancy arising out of his payment of the rent and the plaintiff’s acceptance of it.
[21][1991] 1 W.L.R. 1007; [1991] 1 All E.R. 243.
The plaintiff brought proceedings claiming possession, which was ordered to be given up by the trial judge. The defendant appealed. Dismissing the defendant’s appeal, Nicholls, L.J. (with whom Mustill and Ralph Gibson, LJJ agreed) made the following observations,[22] all of which bear on the present dispute –
“Where parties are negotiating the terms of a proposed lease, and the prospective tenant is let into possession or permitted to remain in possession in advance of, and in anticipation of, terms being agreed, the fact that the parties have not yet agreed terms will be a factor to be taken into account in ascertaining their intention. It will often be a weighty factor. Frequently in such cases a sum called ‘rent’ is paid at once in accordance with the terms of the proposed lease; for example, quarterly in advance. But, depending on all the circumstances, parties are not to be supposed thereby to have agreed that the prospective tenant shall be a quarterly tenant. They cannot sensibly be taken to have agreed that he shall have a periodic tenancy, with all the consequences flowing from that at a time when they are still not agreed about the terms on which the prospective tenant shall have possession under the proposed lease, and when he has been permitted to go into possession or remain in possession merely as an interim measure in the expectation that all will be regulated and regularised in due course when terms are agreed and a formal lease granted.
Of course, when one party permits another to enter or remain upon his land on payment of a sum of money, and that other has no statutory entitlement to be there, almost inevitably there will be some consensual relationship between them. It may be no more than a licence determinable at any time, or a tenancy at will. But when and so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a limited interest, be it licence or tenancy. Otherwise the court would be in danger of inferring or imputing from conduct, such as payment of rent and the carrying out of repairs, whose explanation lies in the parties’ expectation that they will be able to reach agreement on the larger terms, an intention to grant a lesser interest, such as a periodic tenancy, which the parties never had in contemplation at all.”
See also Hagee Ltd. v. A.B. Erikson & Larson (A Firm).[23]
[22][1991] 1 W.L.R. 1012-1013
[23][1976] Q.B. 209 at 217.
I agree, with respect, with the observations of Nicholls, L.J. in Javad. In the context of an alleged tenancy by estoppel, this cautious approach is also consistent with the well-established proposition that for a representation to be effective in founding an estoppel it must ordinarily be clear and unambiguous: Low v. Bouverie;[24] Woodhouse A.C. Israel Cocoa Ltd. SA v. Nigerian Produce Marketing Co. Ltd.;[25] Olga Investments v. Citipower Ltd.[26]
[24][1891] 3 Ch.82.
[25][1972] A.C. 741 per Lord Hailsham of St. Marylebone, L.C. at 755-756.
[26][1998] 3 V.R. 485, at 499.
I return to the matters relied on by Mr. Nash to establish the second of Brennan, J.’s requirements. As to para.(a), until Shellard returned Exhibit A to Swinnerton in its altered condition, both parties, I think, clearly contemplated the execution of a binding lease as the culmination of their negotiations. No extensive negotiations took place after 23 November. The fact that Swinnerton asked that the lease be signed as soon as possible (para.(b)) shows only a sense of some urgency. The fact that the parties contemplated a long lease (para.(c)) was no doubt correct, but does not in my view advance the appellant’s argument. I agree with the trial judge that the words of Swinnerton on the telephone (para.(d)) could not justify Shellard forming the belief that he had a binding lease. The facts instanced as (e), (f) and (g) relate to the payment and receipt of rent, which was submitted by Mr. Nash not to have been taken into consideration by the trial judge. I do not agree. Her Honour had previously referred[27] to Javad v. Aqil and had already rejected[28] the payment of rent as the basis for the implication of a lease. The proper construction on the facts found by the judge was, I think, as Mr. Porter submitted, that the appellant paid the rent to establish his right to continue in possession, and in the shared expectation that the parties would be able to reach agreement on the terms of an appropriate long-term lease. Mr. Nash also relied on the long silence or the fact of the respondents “doing nothing for six weeks” (para.(h)), again arguing that the judge had not considered this aspect. But her Honour had found that the appellant began moving his vehicles into the premises at least as early as, or possibly earlier than, his returning Exhibit A to Swinnerton. The appellant commenced work, her Honour found, on alterations to the premises beyond the small factory probably in December. Chris Nimorakiotakis went away on two weeks’ holiday in the middle of December and returned from his two weeks’ holiday on 28 December. The judge did not accept that Nimorakiotakis or the respondents were aware of the alterations by the appellant before 29 December, and the respondents could not be said to have delayed in causing the letter to be written on 6 January.
[27]Reasons at [20].
[28]Reasons at [27].
I can see no ground whatever for disturbing the trial judge’s conclusions in relation to the second of Brennan, J.’s requirements. Her Honour’s factual conclusions were, I think, not seriously challenged and they seem to me impregnable. No error of law has been shown in relation to her Honour’s treatment of this matter.
The fourth of Brennan, J.’s requirements was shortly argued by Mr. Nash. He relied on the fact that
(a)the respondents knew that the appellant had paid the rent and bond totalling $4,000 on 5 December;
(b)the respondents knew that the appellant had executed the lease by 5 December when Swinnerton sent it to them;
(c)the respondents saw Shellard at the premises after receiving the lease in early December and
(d)the respondents remain silent about whether or not the lease was acceptable as altered, notwithstanding Chris Nimorakiotakis’s visit to the premises on 29 December.
There is, I think, nothing in these arguments. As her Honour said,[29] when Nimorakiotakis discovered the alterations were under way, he immediately asked Shellard to stop them, and there was no undue delay before the letter of 6 January was written. I agree with her Honour’s conclusions that none of the matters relied on by the appellant could be said, in all the circumstances, to be other than consistent with a tenancy at will.
[29]Reasons at [37].
Since her Honour’s conclusions as to the second and fourth of Brennan, J.’s requirements cannot be faulted, there is no purpose to be served in considering the appellant’s arguments as to remainder of the six tests. The rejection of the appellant's arguments on those two tests would, in my view, ensure that the appellant could not succeed in establishing a tenancy by estoppel, in whatever form the tests were formulated.
In my opinion this appeal should be dismissed.
BUCHANAN, J.A.:
I agree with Charles, J.A. that the appeal should be dismissed for the reasons he has stated.
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