Kids for Life v Chamberlain Group
[2014] NSWSC 1561
•07 November 2014
Supreme Court
New South Wales
Medium Neutral Citation: Kids for Life v Chamberlain Group [2014] NSWSC 1561 Hearing dates: 28/10/2014 and 29/10/2014 Decision date: 07 November 2014 Jurisdiction: Equity Division Before: McDougall J Decision: See at [165]
Catchwords: LANDLORD AND TENANT - assignment, severance and sublease - assignment of lease - whether there was an agreement for assignment of lease in equity - where duly executed and stamped Transfer of Lease provided to landlord for registration - where landlord agreed to attend to registration of transfer "ASAP" - where no provision for landlord's consent to be signified on transfer of lease form - whether executed and stamped transfer of lease sufficient evidence in writing for s 54 of the Conveyancing Act 1919 (NSW)
LANDLORD AND TENANT - assignment, severance and sublease - assignment of lease - consent - whether the landlord consented to the assignment of lease - where landlord would have had no objection to the assignment of lease - where landlord knew that it was the operator who was in actual occupation of the premises - where landlord prepared to attend to registration of lease - is the consent to assignment of lease required to be evidenced in writing - was the agreement for assignment of the lease evidenced in writing
CONTRACT - whether consensus intended to constitute a binding contract -where agreement to procure registration of transfer of lease reached - whether intention, as it appears from the terms of the document, was that the agreement would not be binding until formal documents were prepared, signed and exchanged - where parties saw agreement as achieving resolution of their disputes - where parties intended that a formal document later be prepared - where landlord was to attend to registration "ASAP" - where some matters left to be determined later by the parties
EQUITY - equitable remedies - estoppel - whether landlord estopped from denying the lease was assigned with its consent - whether evidence that plaintiff relied on the representation to their detrimentLegislation Cited: Civil Procedure Act 2005 (NSW) Conveyancing Act 1919 (NSW)
Real Property Act 1900 (NSW)Cases Cited: Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309
Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481
G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
Godecke v Kirwan (19730 129 CLR 629
Hughes v National Trustees, Executors and Agency Company of Australasia Limited (1979) 143 CLR 134
Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310
Walsh v Lonsdale (1882) 21 Ch D 9Category: Principal judgment Parties: Kids for Life Academy Pty Limited (Plaintiff)
Chamberlain Early Learning Centre Pty Limited (Second Plaintiff)
Chamberlain Group Pty Limited (First Defendant)
4 Chamberlain Pty Limited (Second Defendant)Representation: Counsel:
DP Wilson (Plaintiffs)
DP O'Connor (Defendants)
Solicitors:
Norris Somers Maait Solicitors (Plaintiffs)
Logan Fox Lawyers (Defendants)
File Number(s): 2014/288053
Judgment
HIS HONOUR: The first defendant (the landlord) is the registered proprietor of land at Guildford. There is erected on that land a child day care centre, which was built by the landlord or its principals Mr Kheiralla Mourched (also known as Kheiry or Kerry Mourched) and his brother Mr Rony Mourched. For simplicity, I shall refer to the former as "Mr Mourched". The land (including the improvements) is leased to the first plaintiff (the tenant). The day care centre on the land is operated by the second plaintiff (the operator), which holds the requisite licence to do so.
The tenant and the operator say that the lease has been assigned in equity from the former to the latter, with the consent of the landlord. The operator has exercised (or purported to exercise) an option to renew the lease. The landlord denies that there has been a valid assignment. Specifically, it denies that it has given its consent to any assignment. In those circumstances, the landlord says:
(1) there has been no valid equitable assignment to the operator; and
(2) accordingly, the operator's (purported) exercise of the option for renewal was ineffective.
The landlord has agreed in principle to sell the land to the second defendant. The second defendant has obtained "conditional approval for a loan to purchase the property". However, it seems, that conditional approval will lapse in the near future.
By order made by Pembroke J on 13 October 2014, varied by order made by me on 17 October 2014, the following question was directed to be decided separately from and before the decision of all other questions arising in the proceedings:
Whether the first plaintiff as lessee of 4 Chamberlain Road Guildford assigned, either at law or in equity, lease registered No. AF685631L to the second plaintiff with the consent of the first defendant as lessor, or alternatively that the first defendant is estopped from denying any assignment of the lease with its consent.
The order (as varied) was made because it is important to the parties to have the key issues between them, relating to the validity of the assignment and the exercise of the option, decided as quickly as possible. The particular circumstances of this case justified the making of the order even though, were there to be a separate hearing on the remaining issues, there would be a real risk of evidentiary and other overlap.
The real issues in dispute
As the separate question was argued, (and subject to the point mentioned at [146] below), the essential issues for decision were:
(1) was there an agreement for assignment of the lease from the tenant to the operator?
(2) If there were such an agreement, was it evidenced in writing for the purposes of s 54A of the Conveyancing Act 1919 (NSW)?
(3) Has the landlord given its consent to any assignment that has been agreed as between the tenant and the operator?
(4) Is that consent required to be evidenced in writing (s 54A) and, if it is, is there such evidence?
(5) To the extent that the landlord has agreed to procure registration of a transfer of lease from the tenant to the operator, was that agreement intended to have legally binding effect when (if at all) it was made, or was it intended to become effective only when (and if) a further, formal, agreement in writing was made?
(6) Is the landlord estopped from denying that the lease has been assigned with its consent?
The witnesses in the case
An unfortunate feature of the evidence was that the principal affidavits on each side suffered from significant formal and other deficiencies. The affidavits of Mr George Doro were marked by an argumentative quality, and a disposition to raise issues of fact that were utterly irrelevant to the question for decision. That latter difficulty could have been avoided by not reading the relevant passages; but this was not done.
The affidavits for the defendants were worse. Mr Mourched's affidavit was almost entirely inadmissible. It was marked by irrelevancies, disparagement, argumentative and conclusory assertions, and purported accounts of conversations which gave no real hint as to the words that, according to Mr Mourched, might actually have been uttered.
The parties took the sensible course of providing their objections in writing, but proceeding on the basis that there would be no necessity to rule in detail on them. I provided broad indicative rulings, which the parties accepted would deal with the bulk of the objections. For example, I said that where there was an objection on the ground of relevance, the material would be admitted subject to relevance unless to do so would unnecessarily prolong the hearing, and the question of relevance could be argued in final submissions. I might add that no such argument was put. Again, where objection was taken (properly) on the ground of hearsay evidence, I ruled that the material would be admitted, subject to relevance, to prove communication of the asserted fact but not the truth of the asserted fact.
Further, I indicated to the parties that I proposed to proceed on the basis stated by Gibbs J in Hughes v National Trustees, Executors and Agency Company of Australasia Limited (1979) 143 CLR 134 at 153:
... in general it is the duty of a judge to reach his [sic] decision on evidence that is legally admissible, and to put evidence only to those uses which the law allows.
The parties were content to accept that course. Thus, time that otherwise would have been spent on detailed objections to and rulings on the admissibility of evidence was devoted, instead and more fruitfully, to elucidating the real issues for decision.
In the result (as experience teaches is almost always the case), no injustice was done by this approach, because the disputed evidence did not bear on the resolution of any of those issues.
With those observations out of the way, I turn to the witnesses in the case. Before doing so, I should observe that an assessment of credibility was made difficult, in particular by the factors to which I have referred at [7] and [8] above. That difficulty would not have been improved had the parties persisted in requiring their objections to be dealt with.
For the plaintiffs, Mr Doro and his daughter Ms Jane Doro gave evidence. Each of them is a director of each of the plaintiffs. Mr Doro was cross-examined at some length. Ms Doro was cross-examined briefly.
I had concerns at some aspects of Mr Doro's evidence. To the extent necessary, I shall set out those concerns later in these reasons. There are aspects of his evidence that I do not accept.
I had no concerns with Ms Doro's evidence.
Mr Mourched gave evidence for the defendants. There were some aspects of his evidence too at which I have concerns. Further, in my view, it was clear that parts of his testimony relied not on any recollection but on a process of reconstruction from what, looking back, he now thinks would or would not have been likely to happen. Again, I shall refer to those aspects of his evidence to the extent that it is necessary.
On the view to which I have come, most of the factual disputes, in particular between Mr Doro and Mr Mourched, have no particular dispositive significance.
Background
In 2009, Mr Doro and his daughter were looking to buy a child day care centre for Ms Doro to operate. They were introduced to Mr Mourched. They learnt that Mr Mourched, through the operator (which was then controlled by him and members of his family), was in the process of setting up a child care centre at the Guildford land.
The parties negotiated an "in principle" agreement under which the land would be leased to Mr and Ms Doro or a company nominated by them at a rental of $150,000.00, and the furniture and fittings would be sold to them or their company for $120,000.00. Ultimately, the lease to which I have referred was made and registered. It commenced on 1 January 2010 and expired on 31 December 2014. There were four options for renewal, each for a further term of five years.
As a result of further discussions between Mr Mourched and Mr Doro, the precise content of which need not be decided, Mr Mourched agreed that control of and shares in the operator would pass to the Doro family.
During 2010 and 2011, there were disputes between the tenant and the landlord as to a number of matters, including the condition of the premises and the furniture and fittings that had been sold.
Mr Doro says that in August 2010, he arranged to meet Mr Mourched at the child care centre. According to him, he said to Mr Mourched that he wanted the operator to become the lessee, and Mr Mourched agreed. Mr Doro then said that he made some changes to "the first few pages of the lease document" (striking through the name of the tenant where it appeared, and writing in the name and ACN of the operator) and that he and Mr Mourched initialled those changes.
Mr Mourched denied that there was any such conversation, or that he initialled any changes made by hand on a copy of the lease agreement.
I do not accept this aspect of Mr Doro's evidence. I have no doubt that, had Mr Mourched then been asked to agree to a transfer of the lease from the tenant to the operator, he would have done so. Mr Mourched agreed that "we possibly met in August 2010" (T67.39), as one of relatively numerous meetings at the centre. He agreed that, as at August 2010, he would have had no objection to the operator's becoming the lessee in the place of the tenant (T69.4-.13). However: I do not accept that he was then asked to indicate his consent; that he did so; or that he then initialled any changes to the lease whereby, in various places, the name of the tenant was struck through and the name of the operator was written in.
Mr Mourched denied that the relevant initials were his. He was cross-examined at length about other, undoubtedly genuine, specimens of his handwriting, including his signature and his initials.
When Mr Mourched has written his initials "KM", the letter "M" consistently starts with a downstroke. Sometimes, the upstroke overlaps the downstroke. Sometimes, it does not. However, the disputed initials do not start with a downstroke. Clearly, even in the photocopy attached to Mr Doro's principal affidavit, the letter "M" starts with an upstroke.
Mr Mourched said of his way of writing the letter "M" that "it... started at the top, drawn down, and straight back over and then across" (T58.28-.29). My observations of the specimens of his genuine initials confirm that this is so. That is the feature missing from the disputed initials.
It was not put to Mr Doro that he, or someone at his direction, had inserted what purported to be Mr Mourched's initials in the disputed places. Accordingly, I am not prepared to find that Mr Doro forged, or procured the forging of, Mr Mourched's initials. Nonetheless, taking into account what I regard as the critical difference between the way in which Mr Mourched writes the letter "M" and the way that letter was written in the disputed initials, I find, as I have said, that Mr Mourched did not write them. It was not put to him that, for whatever purpose, he deliberately sought, during the meeting in question, to make his initials appear as though they had been written by someone else.
To the extent that it is necessary, I accept the submission put by Mr DP O'Connor of Counsel, for the defendants, that the conclusion that I have just expressed is consistent with the tenor of the correspondence that passed between the solicitors thereafter. It is not necessary to set out the detail of that correspondence.
The Emporium Café meeting
One of the letters written by the plaintiffs' then solicitors (Herro Solicitors) to the landlord's solicitors was dated 18 November 2011. That letter raised some 45 issues relating to the state of the premises and the furniture and fittings. It contained a further series of demands.
Mr Doro and Mr Mourched agreed to meet to discuss the letter. The meeting took place at the Emporium Café at Merrylands. There is a dispute as to what was said (and by whom) to initiate the meeting. I deal with that at [103] below.
There is no doubt that, as Mr Doro said, he and Mr Mourched discussed at the meeting "all the issues detailed in" the letter, or that Mr Mourched annotated a copy of the letter to record the outcome of those discussions. I shall refer to this as "the annotated letter".
The outcome of the meeting, as recorded in the annotations, was that many of the items or demands were compromised. In some cases, Mr Mourched agreed to attend to defects. In other cases, they agreed that there was no immediate problem. In other cases again, they agreed to defer action. Mr Doro agreed to "waive", without seeking compensation, a group of demands relating to a photocopier.
Items 44 and 45 of the letter, with their preceding heading, read as follows:
44. We enclose the following:
(a) Duly executed and stamped Transfer of Lease; and
(b) Cheque in favour of Land and Property Information for registration fees.
45. Please confirm that your client agrees to attend to the registration of the Transfer of Lease so that the Certificate of Title will correctly reflect the Assignment of Lease, which we reiterate was at the request of your client.
Mr Mourched wrote, in the margin against those two numbered paragraphs:
KHEIRY TO ATTEND TO ASAP
Item 46 contained some nine paragraphs, lettered "a" to "j". They summarised the various complaints and set out the agreed outcome. The last read:
Attend to the registration of the Transfer of Lease
Mr Mourched wrote against that paragraph, and partly over the letter "j", his initials "KM".
On the last page of the annotated letter, the following appears in Mr Mourched's handwriting. Mr Mourched agreed that the material indicated below in bold print was written by him before the meeting, and the other material was written at the end of the meeting:
GEORGE TO ATTEND TO
*GEORGE TO SIGN A DEED OF RELEASE RELEASING US FROM THE CLAIMS
*CPI INCREASE-
TO BE DISCUSSED.
*VARIATION OF LEASE IN RELATIONS TO OUTGOINGS ONLY.
ATTEND TO POSSIBLY AT 5YR RENEWAL OF LEASE.
BOTH PARTIES AGREE TO THIS DOCUMENT IN TERMS OF AGREED OUTCOMES.
KHEIRY MOURCHED GEORGE DORO
Mr Mourched signed beneath his name and wrote the date. Mr Doro likewise signed beneath his name and wrote the date.
Later that same day, Mr Mourched appears to have sent a scanned copy of the annotated letter to Mr Doro by email, commenting among other things:
Please find documents attached outlining all that was agreed to
Mr Doro replied, saying among other things:
I will inform Mr Herro of the outcome and check how I should prepare the release of claims.
Meanwhile I would appreciate if you could finalise the pending issues to the centre and:
1.- NAB discharge
2.- Assignment of Lease
Further emails passed between Mr Doro and Mr Mourched over the following fortnight. Mr Doro was particularly anxious to "finalise" the two matters specified in his earlier email, namely the discharge of the NAB mortgage and the assignment of the lease.
There is nothing in Mr Mourched's correspondence to suggest that either of these matters should await, or were conditional upon or required, the preparation of some further documents. However, in an email of 14 December 2011, Mr Mourched said, among other things:
I have been pushing ontop [sic] of both solicitor and accountant.
Solicitor I am still waiting for a reply from.
Preparation of formal documents
Nothing much appears to have happened thereafter until February 2012, with the possible exception that apparently Ms Doro and her husband were offered the opportunity to buy the Guildford land, but decided that they could not do so. It seems that Mr Mourched and his family had decided to sell the land, and to offer it to the Doro family first.
Mr Doro said that on 20 February 2012, he and Ms Doro attended at the office of the landlord's then solicitors, Paramonte Legal. Mr Robert Bounassif of that firm was acting for the landlord. According to Mr Mourched, Mr Bounassif handed over two sets of documents, describing one as an "assignment of lease" and the other as a "deed of settlement and release". Mr Bounassif asked Mr Doro and Ms Doro to sign the documents. They said that they had to read the documents before doing so. According to them, this caused Mr Mourched some consternation. Mr Mourched denies this. Mr Doro's version is substantially corroborated by Ms Doro's evidence. Mr Bounassif was not called to give evidence. To the extent that it matters, I prefer their evidence on this point to that of Mr Mourched.
In the result, the documents were not signed. Mr Doro and his daughter decided to seek legal advice. They went to another solicitor, Mr Sid Hawach, for this purpose.
Mr Hawach wrote to Paramonte Legal on 21 February 2012. He requested some 13 changes to the draft deed of consent to assignment of lease. Someone commented on this letter by making handwritten annotations, against each of the numbered requests, of the extent to which it was (or was not) acceptable. The evidence is less than clear as to who did this. It may have been Mr Mourched. Regardless, it is clear that the handwritten comments reflected the landlord's attitude to the requested changes. Many of the changes were apparently agreeable. Some significant ones were not.
For reasons that are unexplained, it seems that Mr Hawach went overseas. He has not been heard of since.
On 12 April 2012, Mr Bounassif sent an email to Mr Mourched attaching four documents:
(1) an amended deed of consent;
(2) a copy of the letter of 21 February 2012 from Mr Hawach, with the handwritten notations as to the landlord's position;
(3) a form of transfer of lease; and
(4) a deed of settlement.
On 17 April 2012, Mr Mourched forwarded that email to Mr Doro, together with its attachments. He said:
Please find documents attached sent to me from rob for your review
I wasn't [sic] aware rob [Bounassif] didn't CC you on this, I over looked it
My apologies for the delay because it was sent to me about a week ago
Please have a look at them so we can go through them at some stage today
Call me when you get the chance so we can meet up if you have time
According to Mr Doro (affidavit sworn 1 October 2014, para 39) his and his daughter's attitude at this time was:
39. By this time, I had become overwhelmed by the amounts Jane and I were paying for repairs that I considered were the Lessor's responsibility and by the legal fees we were paying to try and enforce our rights under the lease. Jane and I agreed the situation was not being advanced by continuing what had become an endless and extremely expensive exercise for us. We stopped seeing solicitors and stopped all communications regarding the assignment of the lease. We continued to experience far too many problems which we considered to be the responsibility of the Lessor but which Mourched refused to do anything about.
Evidence as to exercise of option of renewal
Nothing appears to have happened thereafter until about April 2014, when Mr Doro and Ms Doro discussed the option for renewal. They prepared a letter, on the letterhead of the operator, addressed to the landlord. The letter advised, in clear although informal terms, of the operator's intention to exercise the first of the options for renewal.
A week or so later, Mr Mourched advised by email that the landlord intended to sell the property.
On 7 May 2014, the operator lodged a caveat (the first caveat). The first caveat claimed:
An equitable interest as the new lessee under the unregistered transfer of lease from the former lessee to the caveator.
On 14 May 2014, lawyers then engaged by the plaintiffs caused a formal notice of exercise of option to be given, again by the operator. The notice was addressed to the landlord and executed by the operator. By it, the operator "as lessee from [the landlord] as lessor pursuant to the Lease... for the premises... hereby gives notice of exercise of its option of renewal of the lease..."
Thereafter, the operator lodged a further caveat (the second caveat). The second caveat claimed:
An equitable interest pursuant to the Exercise of the Option to Renew / the first option term as to the Transferee under the unregistered Transfer of Lease from the Lessee as the Transferor to the Caveator as Transferee.
First issue: agreement for assignment of lease
In my view, the evidence is clear. There was an agreement for assignment of the lease.
The tenant and the operator were each controlled by the Doro family. The Doro family, speaking for each of them, decided that the lease should be transferred from the former to the latter. That decision is demonstrated throughout the evidence. Of particular significance, it is referred at para 44 of the Herro Solicitors letter of 18 November 2011. As I have set out, that letter stated that there was enclosed with it, among other things, "Duly executed and stamped Transfer of Lease". There was no evidence contradicting the assertion that such a document had been sent, as the letter said. Mr Mourched, who I think was prepared to dispute anything that was remotely disputable in the plaintiffs' evidence, did not do so. Nor did the landlord's solicitors at the time dispute it.
It is a matter of some mystery as to why, nonetheless, the landlord's solicitors should have prepared a further transfer of lease, as undoubtedly they did. The explanation may simply be that the document enclosed with the letter of 18 November 2011 had been lost.
Further, as is clear from the following paragraph of the letter (para 45), the plaintiffs were calling on the landlord "to attend to the registration of the Transfer of Lease...". That request could hardly have been made if no registrable form of transfer of lease had been enclosed with the letter (or otherwise given to the landlord; and there is no evidence that it was).
Finally, Mr Mourched's handwritten annotation shows that he agreed "to attend to ASAP". It is unlikely in the extreme that Mr Mourched would have agreed to do so were it beyond his power: for example, because no such document had been provided.
I am comfortably satisfied that a form of transfer of lease, executed on behalf of the parties thereto (that is to say, the tenant as transferor and the operator as transferee) was prepared and stamped, and enclosed with the letter.
Mr DP Wilson of Counsel, who appeared for the plaintiffs, submitted, correctly by reference to a form of transfer of lease that was in evidence, that there was neither provision nor need for the landlord's consent to be signified on that form.
Second issue: section 54A
Section 54A of the Conveyancing Act provides as follows:
54A Contracts for sale etc of land to be in writing
(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged.
(2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court.
(3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900.
I have some doubt that the dispute with which I am dealing is within subs (1). I do not think that the present is an action or proceeding brought upon a contract for the disposition of an interest in land.
However, it is not necessary to express a concluded view. If there were a requirement for writing (that is to say, for writing evidencing the agreement to assign) I am satisfied, for the reasons just given, that there was written evidence in the form of the executed and stamped transfer of lease enclosed with the letter of 18 November.
Third and fourth issues: consent; writing
Relevant provisions of the lease
The reference schedule (annexure "A" to the lease) identified the "Landlord" and the "Tenant" as, respectively the first defendant and the first plaintiff.
Clause 2.2 of the lease gave the tenant an option to renew. The tenant was required to give not less than six months' notice before the termination date (defined in the reference schedule as 31 December 2014). If, such notice having been given, the tenant was not in default, the landlord was required to give a further lease.
Clause 6.3 provided for a personal guarantee to be given by the "Guarantor". The reference schedule identified the "Guarantors" as Mr Doro and Ms Doro. They signed the lease in their capacity as guarantors. The form of guarantee was simple: a guarantee of the tenant's performance, and a promise of indemnity against any loss resulting from default by the tenant.
Clause 11.1 dealt with assignment and subletting. It prohibited assigning or subletting without consent, and provided for a written request for consent. There were specified circumstances in which the landlord might withhold consent. There was also provision entitling the landlord to require security, a deed of consent and payment of its reasonable costs.
Clause 12.2 also dealt with the topic of consent. It obliged the landlord to consider promptly any request for consent, and not unreasonably to withhold its consent. In the case of consent to assignment or subletting, that requirement was expressly made subject to cl 11.1.3.
I set out the provisions of the lease to which I have referred:
2.2 Option to Renew
2.2.1 If:
(a) the Tenant gives a notice to the Landlord, not less than six months before the Termination Date, that it requires a further lease; and
(b) at the Termination Date the Tenant is not in default under this lease,
the Landlord must give the Tenant a lease of the Premises for the Further Term, commencing on the day after the Termination Date.
2.2.2 That further lease will be on the same terms as this lease, except that:
(a) if the commencement date of the further lease is a Review Date, the Rent will be calculated in accordance with the method of review specified in Item 10;
(b) Clauses 21 and 22 will be deleted; and
(c) With respect to the Lease for the proposed second Option Term this clause 2.2 will be omitted, and Item 8 will not apply.
6.3 Personal Guarantee
6.3.1 The Guarantor guarantees to the Landlord payment of all moneys, and performance of all other obligations, by the Tenant under this lease.
6.3.2 If the Landlord incurs any loss as the result of a default by the Tenant under this lease, the Guarantor will indemnify the Landlord against that loss.
6.3.3 The Guarantor's liability under clauses 6.3.1 and 6.3.2 will not be affected:
(a) if the Landlord allows any concession to the Tenant;
(b) if the Landlord does not sue the Tenant;
(c) if this lease is varied or assigned;
(d) if the Landlord terminates or exercises any other right under this lease;
(e) if the Tenant dies or becomes incompetent or insolvent;
(f) if there is more than one Guarantor, if any other of them has not signed this lease; or
(g) by the fact that this lease may not be registered at the Land and Property Information as may be required by statute or the fact that the Lease is not effectual to pass any estate or interest in the Premises (whether legal or equitable) or the fact that this Lease may take effect as a common law tenancy at will or equitable lease or other tenancy which may exist or arise between the Landlord and the Tenant in relation to the Premises.
6.3.4 The liability of the Guarantor will continue until the Tenant has paid all moneys, and performed all other obligations, under this lease.
11.1 Assignment and subletting
11.1.1 The Tenant must not assign this lease or sublet the Premises without the consent of the Landlord.
11.1.2 The Tenant must make a written request for the Landlord's consent to an assignment or sublease and must provide the Landlord with whatever information the Landlord may reasonably require concerning the financial standing and business experience of the proposed tenant.
11.1.3 The Landlord may withhold consent in its discretion if:
(a) the proposed tenant proposes to change the use of the Premises;
(b) the proposed tenant has financial resources inferior to those of the Tenant; or
(c) the Tenant proposes to sublet only part of the Premises.
11.1.4 As a condition of giving its consent, the Landlord may require:
(a) if the proposed tenant has financial resources inferior to those of the Tenant, that he or she provide security for the performance of obligations under this lease;
(b) that the proposed tenant execute a deed of consent in a form reasonably required by the Landlord; and
(c) that the Tenant or the proposed tenant pay the Landlord's reasonable costs and expenses in relation to giving its consent.
12.2 Consents
12.2.1 The Landlord will consider promptly any request by the Tenant for its consent or approval. Subject to clause 12.2.2, the Landlord will not unreasonably withhold its consent or approval, or impose any unreasonable conditions on its consent or approval.
12.2.2 The Landlord may refuse to give its consent in its discretion if:
(a) the Tenant wishes to carry out structural building work; and
(b) clause 11.1.3 applies.
Conveyancing Act, s133B
It appeared to be common ground, and in any event is the case, that because of the way in which cl 11.1 was drafted, s 133B(1) of the Conveyancing Act applied. I set out that subsection:
133B Covenants against assigning etc
(1) In all leases whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 containing a covenant, condition, or agreement against assigning, underletting, charging, or parting with the possession of demised premises or any part thereof without licence or consent, such covenant, condition, or agreement shall, notwithstanding any express provision to the contrary, be deemed to be subject:
(a) to a proviso to the effect that such licence or consent is not to be unreasonably withheld, but this proviso does not preclude the right of the lessor to require payment of a reasonable sum in respect of any legal or other expenses incurred in connection with such licence or consent, and
(b) (if the lease is for more than forty years and is made in consideration wholly or partially of the erection, or the substantial improvement, addition, or alteration of buildings) to a proviso to the effect that in the case of any assignment, under-letting, charging, or parting with the possession (whether by the holders of the lease or any under-lessee whether immediate or not) effected more than seven years before the end of the term no consent or licence shall be required, if notice in writing of the transaction is given to the lessor within six months after the transaction is effected.
Consent in fact
Considered purely as a question of fact, the evidence in my view establishes clearly that the landlord did consent to the assignment of the lease from the tenant to the operator. The reasons why this is so can be summarised fairly simply.
First, in my view there was at least one meeting between Mr Doro and Mr Mourched where the question, of the operator becoming the lessee, was discussed. Although I have not accepted Mr Doro's evidence as to a particular meeting in which, the question having been discussed and agreement reached, he changed a copy of the lease and he and Mr Mourched initialled the changes, that does not mean that there was no such meeting and no such agreement.
Mr Mourched accepted that there had been numerous meetings at the centre, virtually from the time the lease commenced, to discuss matters relating to the lease and the premises. He accepted that it was possible that the question of the operator's becoming the lessee was discussed. He knew that the business was being conducted by the operator. That is because the operator had been a Mourched family company, had applied for the licence, and thus, the licence having been granted, was the entity authorised to conduct the business. That was the very reason why, as part of the transaction, Mr Mourched agreed that control of the operator would pass from the Mourched family to the Doro family.
Thus, from the time that transfer of control happened (and it occurred de facto soon after the grant of the lease, although that de facto transfer of control was not formalised until late 2011), the operator was in effect occupying the leased premises for the purpose of conducting its business thereon. There was no other business conducted on or from the lease premises. Kids for Life had nothing to do with the operation of the business. Mr Mourched must have known all this.
In my view, it was clearly a matter of concern to Mr Doro that the lease be transferred into the name of the operator once he and Ms Doro obtained de facto control of the operator. I accept this aspect of Mr Doro's evidence. It seems to me to reflect the probabilities, regarded objectively.
Having observed Mr Doro in the witness box, I have no doubt whatsoever that he would have raised his desire with Mr Mourched once the Doro family became the de facto controllers of the operator. I have no doubt that Mr Doro was anxious to formalise the position, so that the company which operated the business was also the lessee of the premises from which the business was conducted. I have no doubt that this was discussed, from relatively early in the term of the lease, between Mr Doro and Mr Mourched.
It is clear that Mr Mourched had no objection to the operator's becoming in law the lessee. From his perspective, a formal transfer would have done no more than regularise the position as, to his knowledge, it had existed virtually from the commencement of the lease. Mr Mourched confirmed that, in August 2010, he would have had no objection to the operator's becoming the lessee in place of the tenant (T69.4-.12).
In those circumstances, I think it is highly likely, and I find, that Mr Doro asked Mr Mourched whether the lease could be assigned to the operator, and that Mr Mourched agreed to this.
When formal transfer of control of the operator occurred (on Mr Doro's evidence, this was in about October 2011), there was correspondence relating to the various disputes over the lease. Herro Solicitors wrote to the landlord. The letter was headed:
Chamberlain Early Learning Centre Pty Limited lease dispute with Chamberlain Group Pty Limited
The letter specified that Herro Solicitors acted for the operator, Mr Doro and Ms Doro. It referred to what it said was the registered lease between the landlord and the operator (stating the operator's full name). It then raised various complaints.
Paramonte Legal, for the landlord, replied by letter dated 7 November 2011. They noted that the lease was to the tenant and that the tenant was "voluntarily deregistered". That was in fact the case. Mr Doro, thinking that the operator was or would become the lessee, had seen no reason for the tenant to continue in existence.
Among other things, the letter from Paramonte Legal stated:
As you are aware in order to transfer a registered Lease your client is required to execute a Transfer of Lease document to be lodged with the LPMA as the Lease is already registered. Please provide a copy of the purported Transfer of Lease documents that your client says has been executed...
It is unnecessary to go to the subsequent correspondence, except to note that Herro Solicitors continued to maintain that it was the operator that had the "lease dispute" with the tenant.
It must have been clear from this correspondence (if the landlord did not otherwise know), coupled with the knowledge that the tenant had been deregistered, that it was the operator that was in actual occupation of the premises, to the exclusion of the tenant.
On 9 November 2011, Herro Solicitors wrote to the operator, for the attention of Mr Doro. Among other things, the letter attached a transfer of lease and statutory declaration. Mr Doro's evidence was that he received the letter and the documents said to be attached, and that he executed the transfer of lease and sent it back to Mr Herro. That evidence was not challenged. It would explain why, as I have found, Herro Solicitors had in their possession as at 18 November 2011 a "duly executed and Stamped Transfer of Lease" which they were able to enclose (as I have found they did) in their letter of that date to Paramonte Legal.
As I have noted, Mr Mourched accepted that he "possibly" spoke to Mr Doro in August 2010, and that, as at that time, he had no reason to object to the operator's becoming the lessee instead of the tenant if that was what Mr Doro wished.
This particular passage of Mr Mourched's evidence was marked, in my view, by evasion. I do not think that his failures to meet and answer the question directly reflected any lack of understanding. On the contrary, I think that Mr Mourched understood all too well where the questions were heading, and sought deliberately to evade them. I take that into account in concluding, as I have done, that there was a discussion on the topic of the operator's becoming the lessee, and that Mr Mourched indicated in substance that he had no objection to this.
It is convenient at this point to deal with another aspect of Mr Mourched's evidence. He said in his affidavit, as a reason for denying certain words attributed to him by Mr Doro, that he would not have said them in effect because he would not make decisions about the property himself, but, rather, would discuss them with his family.
I do not accept that evidence, at least as an absolute and unqualified proposition of fact. I do accept that in relation to major decisions (for example, to sell or to lease the property), Mr Mourched and his family would make the decision jointly. However, in relation to operational matters, I think that Mr Mourched was accustomed to and did make decisions. That is evident from the facts of the Emporium Café meeting, where Mr Doro and Mr Mourched discussed the matters raised in the Herro Solicitors letter of 18 November 2011, and reached agreement (at least in fact) on them. Mr Mourched did not say that he had discussed those matters beforehand with his family. He certainly did not feel inhibited, in the meeting, from agreeing, to the extent that he did, on the matters of dispute. Of course, there were some matters reserved for later consideration. The fundamental point however is that Mr Mourched was able to deal with all the other issues.
In my view, when Mr Mourched sought to suggest that he would never agree to anything about the lease or the premises without discussing it with his family, he was overstating the position quite substantially. As I have said, I do not regard that aspect of his evidence as credible.
I return to the topic of consent. The clearest evidence of consent in fact appears from the outcome of the Emporium Café meeting, in particular the agreement reached as to items 44 and 45 of the Herro solicitor's letter of 18 November 2011. I have set out those paragraphs, and the annotation made by Mr Mourched against them, at [35]-[36] above.
If anything is clear, it is that Mr Mourched was prepared to attend to the registration of the transfer of lease. That is consistent only with consent in fact Having observed Mr Mourched in the witness box, I think it is unlikely in the extreme that he would have agreed "to attend to ASAP" to registration of the transfer of lease if the landlord had any concerns whatsoever at the suitability of the operator as a lessee of the premises.
Further, the email correspondence between Mr Doro and Mr Mourched that followed the Emporium Café meeting makes it clear that Mr Mourched, and through him the landlord, consented in fact to the assignment of the lease from the tenant to the operator.
I am satisfied, and find as a fact, that the landlord did consent to the assignment of the lease from the tenant to the operator. If (a matter on which I express no view) it is necessary for that consent to be in writing, as Mr O'Connor submitted, then the annotated letter, including not only the words written against paras 44 and 45 but also the concluding page, meets that assumed requirement.
Fifth issue: binding agreement for consent?
The real question, it seems to me, is whether the consent was intended to have immediate operative affect, or whether it was given conditionally upon the execution of some further documents. The answer to that question turns on the effect in law of, and the proper construction to be given to, the consensus that undoubtedly was reached at the Emporium Café meeting, as recorded in the annotated letter.
Ascertainment of the construction and effect of the consensus requires attention to be given not only to the structure and terms of the annotated letter, but also to relevant matters of background or "matrix". It requires also, as Mr O'Connor submitted, recognition of the presumption that dealings in real estate are normally effected by the preparation of formal contractual documents appropriate to the nature of the dealing, and the exchange of those documents.
To the extent that authority is required for that presumption, see McHugh JA (with whom Kirby P and Glass JA agreed) in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634. However, as McHugh JA pointed out:
... the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances...
If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.
Relevant matters of background, known to the parties, include the following (and this may not be a comprehensive statement):
(1) the lease had been prepared by solicitors;
(2) the lease had been made between the landlord as lessor and the tenant as lessee;
(3) if all the options were exercised, the effect of the lease was to tie the property up for 25 years;
(4) the rent reserved by the lease was substantial: starting at $150,000.00 per year, and subject to CPI increases;
(5) the commercial purpose of the lease was to enable the lessee to use the premises for the purposes of the business of conducting a children's day care centre;
(6) the tenant did not have a licence to conduct such a business, and the operator did;
(7) soon after the commencement of the lease, the tenant had effectively ceded occupation and use to the operator, and thereafter the tenant had become deregistered;
(8) once the operator commenced to occupy and use the premises, it did so for the purposes of the children's day care centre that it was licensed to operate;
(9) the parties were aware of the matters just stated, and the ceding of use and occupancy occurred with at least the consent de facto of the landlord;
(10) the parties had been in dispute - mostly, acrimonious - about the state of the premises and the furniture and fittings that were sold as part of the overall bargain;
(11) the principals of the (by then deregistered) tenant and the operator wished to regularise the latter's use and occupation of the premises, and the landlord, through Mr Mourched, was aware of this;
(12) the tenant had ceased to exist, so that the only relevant legal entity was the operator;
(13) detailed and frequently acrimonious correspondence between the parties' respective legal advisers had not produced any resolution either as to the disputes dealing with the state of the premises and the furniture and fittings or as to the Doro family's desire to have the operator become the lessee in place of the tenant;
(14) at Mr Mourched's suggestion, the parties decided to meet personally in an attempt to resolve their disputes;
(15) they did have that meeting - what I have called the Emporium Café meeting;
(16) at that meeting, all the matters in dispute, as articulated in the Herro Solicitors letter of 18 November 2011, were discussed; and
(17) most of the matters in dispute were thrashed out, with the parties reaching agreement one way or the other, and two matters of substance (CPI increases and outgoings) were left for later discussion and resolution.
By way of explanation of the 14th point: Mr Doro said that the suggestion, to meet without lawyers, came from Mr Mourched. Mr Mourched denied this. I prefer Mr Doro's evidence on this point. Mr Mourched made it clear that he regarded the attitude taken by Herro Solicitors in correspondence as, to put it neutrally, unhelpful. Objectively, I think, the strong probabilities are that Mr Mourched wanted a face to face meeting, to cut through the legalese and get the disputes resolved.
I turn to the annotated letter. There has been no suggestion that it is in any way inaccurate or incomplete, insofar as it records the outcome, as to the matters in dispute, of the Emporium Café meeting.
The final page of the letter, containing the words that I have set out at [39] above and the signatures of Mr Mourched and Mr Doro, is instructive. The concluding words, before the names and signatures, bear repetition:
Both parties agree to this document in terms of agreed outcomes.
The only indication in the text of the annotated letter that some more formal document was to be prepared comes from the note "George to attend to" written against against the words "George to sign a deed of release releasing us from all the claims".
As a matter of construction, the requirement to "release us from all the claims" might be thought to require a release from all the claims set out in the letter once the various obligations, as agreed, had been performed.
However, in my view, on the proper construction of those words, what was contemplated was that performance of the obligations that the landlord, through Mr Mourched, accepted (as shown by his annotations and signature) was to be in consideration of a release in respect of all claims then existing. As at 18 November 2011 and as at the date of the Emporium Café meeting, the Doro interests had had more than ample opportunity to state all their concerns, or "claims", in relation to the lease (including, although strictly incorrectly, the furniture and fittings).
Thus, objectively, the parties should be taken to have intended that the release would be not only from the claims stated in the letter but from all claims subsisting as at the date of the Emporium Café meeting. The price of that release was either the promise to perform, or performance of, the obligations accepted by the landlord. In the present case, it is not necessary to decide whether it was the executory promise or its performance that should be regarded as the price.
In my view, the language of the document suggests very strongly that the parties intended the consensus recorded in it to be binding upon them. The words immediately preceding signature twice use the language of agreement: the parties "agree" to the document - that is to say, to what is stated in it - as setting out "agreed outcomes".
If one sets aside for the moment the evidentiary disputes between Mr Doro and Mr Mourched, a number of things are very clear. One is that both parties were sick of the long-running battle that they had waged through their respective solicitors. Another is that they wished to achieve some resolution of, or finality to, their disputes. A third is that they saw the Emporium Café meeting as the means of achieving that resolution. The fourth is that, as the annotated letter reveals, they regarded themselves as having in fact achieved a resolution of their disputes.
The question is thus whether, having done that, the parties intended that their resolution of the dispute should have immediate and binding effect, or whether it was to be conditional upon the preparation and exchange of formal documentation. In this respect, of course, the question of intention is to be decided objectively by looking at what the parties said and did in the context in which they said and did it, not by reference to their individual, uncommunicated and subjective intentions.
Clearly, the parties intended that a formal document of some kind would be prepared. Otherwise, there was no reason for "George to attend to" the preparation of "a deed of release". However, there is nothing in the terms of the annotated letter to suggest that the parties had it in mind that any other formal documents needed preparation.
Of course, the landlord had a right under cl 11.1.4(b) to require the operator, as "the proposed tenant" to execute a deed of consent. One can understand why that might be required where the assignee was in real terms a third party. But that is not this case. The operator had been controlled by the principals of the landlord. De facto control had passed to the principals of the tenant (although it would seem that this de facto passing of control was only formalised shortly before the Herro Solicitors letter of 18 November 2011 was written). The operator was well known to the landlord, as was the business it conducted. The people standing behind the operator were the same as those standing behind the tenant. They too were well known to the landlord.
I have no doubt that Mr Mourched and Mr Doro regarded the transfer of the lease to the operator as a matter of formality only. For the reasons I have given, I think that Mr Mourched, far from having any objections to the transfer, in fact agreed to it. Thus, the appropriate form of transfer of lease having been executed and stamped and provided, there was no reason why Mr Mourched would not, as he undertook to do, attend to the formality of registration, and to do so "ASAP" - i.e. forthwith. (There is, no doubt, a question as to the efficacy of a transfer purportedly executed by a deregistered company, but there were no submissions directed to this fascinating point.)
The very fact that Mr Mourched agreed to attend to registration "ASAP" suggests, in my view, that the parties intended at least this aspect of their consensus to have immediate effect. I do not think that Mr Mourched and Mr Doro would have regarded something done "ASAP" if it were dependant on the vagaries of the legal profession in the time taken to prepare formal documents which would do no more than articulate, more verbosely, the consensus already reached.
I have the strong impression, both from the terms of the annotated letter itself and from the circumstances leading up to the meeting in which the agreements recorded in the annotated letter were reached, that both sides wanted an end to dispute. That is why they had chosen to conduct the meeting in person, rather than to continue the war of correspondence. And that, it seems to me, is why they chose to document the consensus that they reached in the form that they did.
In those circumstances, while giving full weight to the presumption arising out of usual conveyancing practice, I conclude that, objectively, the parties intended the consensus reached in the meeting, recorded in the annotated letter and affirmed by them to represent what they had agreed, was intended to have immediate operative legal affect. I think that the parties wished as much as possible to bring their dispute to an end, on the basis of the consensus reached in the meeting. That, I think, is what they sought to effect by acknowledging that they agreed to the "agreed outcomes" stated in the annotated letter.
In Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA at 326 identified three relevant questions:
(1) did the parties arrive at a consensus?
(2) if they did, was it a consensus capable of forming a binding contract?
(3) if it was, did the parties intend that their consensus should constitute a binding contract.
In this case, the answers to the first two questions are obvious: "Yes" in each case.
The consensus is recorded in the annotated outcomes. There is no doubt that the obligations of the parties were defined with sufficient clarity. There is no doubt that each party gave consideration for the promises of the other. The reservation in relation to the deed of consent does not seem to me to alter this analysis. As Walsh J said in Godecke v Kirwan (1973) 129 CLR 629 at 642 - 643, there is no reason in principle for concluding that there can be no binding contract if some matter is left to be determined by one of the contracting parties; that party's determination is subject to implied requirements of consistency with the other terms agreed and of reasonableness.
I referred at [100] to the presumption as to how real estate dealings are effected. Of course, in this case, a formal document had been prepared, stamped and executed. That had been provided to the landlord under cover of the Herro Solicitors letter of 18 November 2011. There was no more required, from the landlord's part, than that it should fulfil the obligation which it undertook, to attend to registration of that transfer. Thus, in this case, the scope for further formalities might be seen to be somewhat more limited than in the usual case.
It is well recognised that parties may make a bargain, intending it to have immediate and legally binding effect, notwithstanding that they contemplate that some further and formal document may be made, either in substitution for or addition to the bargain, containing additional terms. See McHugh JA in GR Securities at 634, noting his Honour's reference to Sinclair, Scott and Co Ltd v Naughton (1929) 43 CLR 310 at 317. In the same case at first instance ((1986) 40 NSWLR 622), McClelland J came to the same conclusion. So, too, did Walsh J (with whom Mason J agreed) and Gibbs J in Godecke.
The proposition may be tested by looking at the converse situation: namely, that the parties did not intend their bargain to have binding effect unless and until formal documents were prepared, executed and exchanged. Recognition of the existing and mutually known and acceptable state of affairs - that the operator was in occupation of the premises de facto as lessee, and using them for the purposes of its business - was a matter of great importance to Mr Doro. Undoubtedly, Mr Mourched understood this. However, legal recognition of that state of affairs could not have been achieved until the formal documents were prepared, agreed, executed and exchanged. As I have said already, it is unlikely that the parties would have contemplated that the time necessary to achieve those steps could be regarded as satisfaction of the promise "to attend to ASAP" registration of the transfer.
Further, on that assumption, the end to disputation which had been recorded in the annotated letter would not become binding on the parties unless and until those formal documents were prepared, approved, executed and exchanged. Thus, it would have been open to either party to resile from one or more of the commitments that it had undertaken. Mr Mourched, for example, could have rethought the wisdom of some of the matters that, he had agreed, the landlord should attend to. Mr Doro could have revisited the wisdom of some of the concessions that, he had agreed, the operator should make. One of those concessions at least - as to the quality and value of the photocopier (paras 40 to 43 of the Herro Solicitors' letter of 18 November 2011) had been a matter of real controversy.
Given the acrimonious nature of the disputes and the correspondence through which the disputes were agitated, and given the substantial expense on legal costs that each party had incurred, it seems unlikely that the parties intended that their resolution of the disputes should be effective only "in principle", and that unless and until formal documents were executed and exchanged, either party might be at liberty to resile, and to agitate the disputes once more.
Further, it seems unlikely that Mr Mourched at least would have been prepared to countenance not only reagitation of the existing disputes but, perhaps, the creation and agitation of yet further disputes.
The disputes had consumed the parties' time and attention for almost two years when the Emporium Café meeting occurred. Each of Mr Mourched and Mr Doro wished to bring the disputes to an end. That, no doubt is why each of them gave ground from the position previously taken.
In my view, those considerations, taken together, favour the conclusion that the parties intended their resolution of the disputes to be effective immediately. That could only be achieved if, notwithstanding the recognition that at least one further document needed to be prepared, the parties mutually intended (as I have said, objectively) that their agreement should have immediate legal effect.
Each of Mr Wilson and Mr O'Connor pointed to matters occurring after the Emporium Café meeting which, he submitted, supported the view that the resolution recorded in the annotated letter was (according to Mr Wilson) or was not (according to Mr O'Connor) intended to have immediate effect.
Mr Wilson laid stress on emails passing between Mr Mourched and Mr Doro. In those emails, the latter inquired about progress and the former in effect said that he would attend to registration of the transfer of lease as quickly as possible. Mr Mourched made no reference to the need for any further document to be prepared.
Mr O'Connor pointed to the fact that, after the meeting, the landlord instructed Paromonte Legal to prepare documents; Paromonte Legal did so; and Mr Hawach on behalf of the tenant (purportedly) and the operator responded to those documents.
If it is legitimate to take conduct occurring after the alleged agreement was made into account on the question of intention (whether the agreement was intended to have immediate and binding effect), it seems to me that the clearer indications come from the emails between Mr Mourched and Mr Doro, and that those emails would support the conclusion that I have reached. However, since counsel did not address on whether it was indeed legitimate to take those matters into account for the purpose identified, I should make it plain that I have not relied on the emails in coming to the conclusion that I have set out.
As I have said, I conclude that the parties did intend the agreement stated in the annotated letter to have immediate legal effect. The consequence is that the consent of the landlord, to the assignment from the tenant to the operator, which consent existed as a matter of fact before the meeting and is clearly implicit (if not expressed) in the annotated letter, was intended to have immediate and unconditional operation.
Sixth issue: estoppel
The plaintiffs argued, in the alternative to their case based on actual consent and actual agreement to register, that the landlord was estopped from denying that the lease had been assigned with its consent.
The estoppel upon which the plaintiffs relied was said to arise from the dealings between the parties from which, it was said, it could be inferred that the landlord had consented to the operators' use and occupation of the premises, purportedly as lessee.
If that were all that were needed to establish an estoppel, I would agree. It is clear in my view, that there can be spelled out of the relevant dealings a representation by the landlord to the effect that it consented to the operator's use and occupation of the premises, and consented to the proposed transfer of the lease to the operator.
However, more than that is needed to establish an estoppel. The operator must show that it acted to its detriment on the basis of the representation, and that it would now be unconscionable to permit the landlord to depart from the represented state of affairs.
There is no evidence that the operator acted in any way in reliance on the express and implied representations of consent. For some months after the agreement recorded in the annotated letter had been negotiated, Mr Doro pressed Mr Mourched repeatedly to attend to registration of the transfer. But the evidence is entirely silent from about February 2012 until, in April 2014, Mr Doro and Ms Doro decided that the lease should be renewed. No witness has sought to explain why, for two years or more, the operator did absolutely nothing to follow up on the question of registration of the transfer of lease. Certainly, no witness has said that this silence reflects some assumption on the part of the operator, induced by the representations as to consent, that it was appropriate to leave matters where they were.
Nor do I think that reliance can be inferred. There are at least two reasons for this. One is that the operator bore the burden of proving reliance. It had the means of doing so, through Mr Doro and Ms Doro. I see no reason why the Court should draw an inference of reliance, in favour of the operator, when it did not address that topic in the affidavit evidence on which it relied.
The second reason is that any inference of reliance would stand in sharp contrast to the repeated requests made by Mr Doro, between 6 December 2011 and late February 2012, for Mr Mourched to attend to registration of the transfer of lease.
I do not think that the plaintiffs have made good their case based on estoppel.
Conclusions to date
It follows from what I have said so far that the requirements for a valid assignment of lease have been made out. The tenant and the operator agreed that the former should assign its leasehold interest to the latter. The consent of the landlord was required. That consent, I find, was given. It was intended to be effective, or operative, from no later than 6 December 2011.
Mr Doro has yet to perform his obligation to "attend to" the preparation of a deed of release that gives effect to the bargain recorded in the annotated letter. There does not seem to me to be any reason why that cannot be done even at this late stage.
Since the question was not argued, I express no view as to whether, having regard to what has happened, it is now open to the landlord to insist on a deed of consent that does not go beyond the terms of the bargain recorded in the annotated letter. It does however follow from what I have said that it is not now open to the landlord to make its consent dependent on the execution and exchange of such a deed; nor has it been open to the landlord to do so since 6 December 2011.
A further possible issue
The question for separate decision did not include reference to the efficacy of the operator's (purported) exercise of the option for renewal. Mr Wilson said that when the matter was before Sackar J on 2:00pm on 13 October 2014, for allocation of a date for hearing of the separate question, Mr M Rose of counsel, then appearing for the defendants, stated that, if the separate question were answered in favour of the plaintiffs, there would be no suggestion that the exercise of the option was otherwise invalid. Mr O'Connor said that, if this had been stated, it was stated without instructions.
I have read the transcript of the directions hearing before Sackar J on 13 October 2014. The following matters appear from page 2 of that transcript:
(1) Mr Wilson noted that it was the operator as assignee, not the tenant, "who purported to and in fact we say did, exercise the option to renew";
(2) his Honour asked whether there was an issue as to valid exercise of the option in any event;
(3) Mr Wilson stated that he understood this was not in issue;
(4) his Honour then asked Mr Rose whether, had there been a valid assignment, it would follow that the option was validly exercised, or would a point as to exercise be taken in any event?
(5) Mr Rose said that the key issue was assignment but that there might be an issue as to validity of exercise of the option;
(6) After taking instructions, Mr Rose said that if the assignment were good, the exercise of the option was good; and
(7) Sackar J then stated, with no demur from Counsel, that there was no issue as to exercise and the question was the validity of the assignment.
I set out the relevant passage of the transcript, from lines 1 to 44:
WILSON: The term of the lease is five years and expired in December. There was an option to renew the lease in cl 2.2. That required a notice of six months. That ability to assign has now expired. Prior to the ability to assign expired, the lease was assigned to P2, not the registered lessee and it was P2 who purported to and in fact we say did, exercise the option to renew.
HIS HONOUR: Is that another issue though as to whether the option has been validly exercised?
WILSON: I understood that was not in issue.
HIS HONOUR: It won't arise will it Mr Rose if there has been a valid assignment does it follow that you would accept that the second plaintiff has validly exercised the option to renew or do you take another point as to whether or not even assuming there has been a valid assignment the second plaintiff validly exercised the option to renew.
WILSON [sic: obviously, "ROSE"]: Yes your Honour. The key issue is whether or not there was an assignment. I must confess I only came into this matter very, very recently. Mr O'Connor appeared this morning. He has had to go before Brereton J, I do however understand there is an issue as to whether or not the exercise of the option were valid.
HIS HONOUR: That does raise another issue. You are unable to tell me whether it is going to be Mr Wilson is not aware that is an issue on the table. I suppose he can't, nor can I, stop you from doing it but I really need to know precisely how many issues there are going to be that need determination now.
ROSE: Would you allow me to take very quick instructions?
HIS HONOUR: If you are able to get instructions I would be obliged as no doubt Mr Wilson would be.
WILSON: I can only indicate what was said over the Bar table this morning.
ROSE: It follows if the assignment were good, the exercise of the option would be also good.
HIS HONOUR: There is no issue about the exercise of the option. It turns on whether the assignment validly occurred or not. And if the assignment has been validly exercised that would follow would it Mr Wilson your caveat would be academic?
WILSON: Yes.
I am not sure that the transcript accurately records his Honour when it attributes to him the proposition that "your caveat would be academic". However, nothing turns on this.
It is clear from the transcript that the defendants stated their position as being that the only issue was the validity of the assignment. To paraphrase Mr Rose, if the assignment were good, the exercise of the option would also be good. It is equally clear (contrary to what Mr O'Connor said to me, as noted at [146] above) that Mr Rose had taken "very quick instructions" before stating the defendants' position in the way he did.
In those circumstances, I see no reason to permit the defendants to resile from the position that they took, plainly deliberately, before the matter was fixed for hearing.
Had Sackar J been told (or had I been told) that a resolution of the separate question would not bring to an end the immediate dispute between the parties, because even if it were answered in favour of the plaintiffs, there would remain an issue as to whether the operator as equitable assignee could exercise the option, the decision to order the separate and prior determination of the particular question that was framed would have been revisited.
The purpose of ordering the separate and prior determination of that question was to see whether the caveats - in particular, the second caveat - could be sustained. If (as the operator claimed and I concluded) there were an assignment, effective in equity, from the tenant to the operator, then that part of the interest claimed by the second caveat would be made good. However, but for the concession made, there would remain the question of validity of exercise of the option.
I do not think that the interests of justice, as between the parties, require that the defendants, having made a forensic choice, should be permitted to resile from it because they do not like the outcome. I do not think that it would be consistent with the objectives of s 56 of the Civil Procedure Act 2005 (NSW) to permit the serial litigation of issues: particularly where, as is the case here, the issue as to validity of the assignment could have been included among the issues to be decided under the rubric of an appropriately framed separate question.
Otherwise, the consequence would be that, after a two day hearing and a decision on the question argued, the defendants would still be at liberty to dispute the validity of the second caveat, on a ground that (were it to be pressed) could and should have been made the subject of the separate question.
I should however indicate why it was that Mr O'Connor sought to revive the point that had been conceded.
In the course of submissions, Mr O'Connor said that he thought that there might be a decision which would support the proposition that it was not open to the operator, as an equitable assignee (assuming that to be the case) to exercise the option. By leave, after the conclusion of submissions and whilst judgment was reserved, he referred to the decision of Fox J in Chronopoulos v Caltex Oil (Australia) Pty Ltd (1982) 45 ALR 481.
Chronopoulos concerned a lease of land under the Real Property Act 1900 (NSW). The lease was for a term of three years. It was made by deed. The deed was not registered. There was a covenant against assigning without consent.
The lessees assigned the lease to the applicants, in circumstances which suggested that they did so with the consent of the respondent. The assignment was not made by deed. Hence, as Fox J concluded at 588, the assignment was not effective at law (although undoubtedly, as between assignor and assignee, it was effective in equity).
His Honour considered whether any relationship between the respondent (lessor) and the applicants (assignees) could come into existence by analogy with the principles stated in Walsh v Lonsdale (1882) 21 Ch D 9. He concluded at 489 that those principles were inapplicable. That principle applied, as his Honour said, "where there was a specifically enforceable promise to grant a legal lease". In those circumstances, his Honour said, equity had effect "so that the promisee could be treated as if he was lessee at law".
His Honour then said:
If the intention were that there be an assignment effective at law, the present applicants would probably have a right to specific performance and, on that footing, they would be regarded as having a subsisting equitable interest in the tenancy. There would be no privity between the applicants and the respondent. Equitable doctrine may well operate as between assignors and assignees so as to overcome the lack of formality, but that doctrine does not apply in relation to third parties (here, the lessor). ...
Assuming that there was an equitable assignment, it would run counter to fundamental principle... to treat it as a legal assignment.
The point was not argued before me. If it were open to the defendants to argue it (that is to say, if the hearing of the separate questions had not been fixed on the basis that there was no point taken as to the capacity of the operator, if it were held to be an assignee in equity of the lease, to exercise the option) then it would not be proper to decide the point without giving the plaintiffs an opportunity to be heard. However, since the hearing of the separate question had been fixed on the basis just indicated, then for the reasons I have indicated, I will not permit the defendants now to rely on the point.
On either approach, the point is not one that should now be decided.
I propose to answer the separate question in accordance with the conclusions expressed in these reasons, and to direct (as the Rules require) that the answer be recorded. On the face of things, the plaintiffs should have their costs of the separate hearing, but I will hear submissions on that if necessary. In any event, the parties will need some time to consider these reasons, and decide how best to bring to a conclusion all matters remaining in dispute between them.
Orders
I make the following orders:
(1) Answer the separate question, namely whether the first plaintiff as lessee of 4 Chamberlain Road Guildford assigned, either at law or in equity, lease registered No. AF685631L to the second plaintiff with the consent of the first defendant as lessor, or alternatively that the first defendant is estopped from denying any assignment of the lease with its consent, as follows:
(i) the first plaintiff as lessee of those premises did assign that lease to the second plaintiff in equity with the consent of the first defendant as lessor.
(2) Direct that the answer to the separate question be recorded.
(3) Reserve for further consideration the costs of the separate determination of that question.
(4) Stand the proceedings over to 10:00am on 28 November 2014 before me for directions.
(5) Reserve liberty to apply on one day's notice.
**********
Decision last updated: 07 November 2014
4
4
2