One Stop Lighting (Queensland) Pty Ltd & Anor v Lifestyle Property Developments Pty Ltd
[1999] QSC 57
•24 March 1999
IN THE SUPREME COURT
OF QUEENSLAND No. 2121 of 1999
Brisbane
[One Stop Lighting (Queensland) Pty Ltd & Anor v Lifestyle Property Developments Pty Ltd]
BETWEEN:
ONE STOP LIGHTING (QUEENSLAND) PTY LTD
ACN 085 321 222First Plaintiff
AND:
FIRST LIGHTING FLAGSTAFF PTY LTD
ACN 055 761 32062 878 684Second Plaintiff
AND:
LIFESTYLE PROPERTY DEVELOPMENTS PTY LTD
ACN 062 878 684Defendant
REASONS FOR JUDGMENT - CHESTERMAN J
Judgment delivered 24 March 1999
1 By its writ of summons issued on 8 March, 1999 the plaintiffs seek specific performance of an agreement to lease made in January 1999 in respect of premises located at Oslen Avenue in Southport. The defendant is the developer of a retail shopping centre in which the premises are located. The second plaintiff carries on business, principally in Victoria, as a retailer and wholesaler of electric light fittings. The dispute concerns about 745 square metres of lettable space in the development which the first plaintiff alleges it agreed to lease from the defendant for the purpose of selling light fittings to the public. The defendant denies that it made a binding agreement to lease. Subject to the outcome of this action the defendant intends to lease the premises to Brightlite Nominees Pty Ltd (“Brightlite”), another retailer of light fittings and a business competitor of the plaintiffs.
2 The premises are presently vacant. Upon learning of the defendant’s intention to lease the premises to its rival, the plaintiffs obtained an interlocutory injunction on 5 March, 1999 restraining the defendant from proceeding with the lease to Brightlite or allowing it to go into possession. That injunction was to expire after seven days. Upon application to a chamber judge for an extension it was thought preferable to have the action tried urgently because the outcome of the application for the interlocutory injunction might practically have determined the action without the merits being ventilated. The matter was sent to the civil list for trial and was heard on 15 and 17 March. The parties require a prompt judgment and I have endeavoured to oblige them. The need for haste must necessarily mean that my reasons will be abbreviated.
3 The agreement which the plaintiffs allege was made between the first plaintiff and the defendant. The first plaintiff has not traded and was incorporated for the purpose of commencing retail business in Queensland. The second plaintiff has traded successfully in Victoria for some years. The plaintiffs rely upon, as a separate cause of action, representations allegedly made on behalf of the defendant to Messrs Berkovitch and Kupshik, representatives of both plaintiffs. It is said, of necessity, that the plaintiffs acted to their detriment in reliance on the representations but because it was the second plaintiff, as the established company, which engaged in the conduct said to amount to detriment, it was a necessary party to the proceedings and was joined when the trial commenced.
4 The view I have come to means that the plaintiffs’ case on estoppel can be dealt with shortly. The main thrust of the case concerns the making and enforceability of the alleged agreement to lease between the first plaintiff and the defendant. I shall, as a matter of convenience, refer throughout my reasons only to the first plaintiff.
5 The agreement to lease is said by the plaintiff to be constituted by the oral acceptance of a document dated 28 January, 1999, signed by the plaintiff and entitled “Intent to Lease”. The document relevantly provides:
“ INTENT TO LEASE
To HOBART INVESTMENTS PTY LTD T/A RAY WHITE SOUTHPORT
40 NERANG STREET, SOUTHPORT
I/We ONE STOP LIGHTING (QUEENSLAND) PTY LTD ACN 085 321 222
agree to lease the premises from LIFESTYLE INVESTMENTS PTY LTD
situated at OLSEN AVENUE, ASHMORE
at the monthly rental of $10,483.33 SEE SCHEDULE “A” NO (1)
per calendar month incl outgoings, payable monthly in advance.
R.P.D.
APPROXIMATE LETTABLE AREA740m2745.2m2 ZONED
CERTAIN PERIOD OF TENANCY 10 years OPTION 1 x 10 years
COMMENCEMENT DATE 15TH FEBRUARY, 1999 OR ON COMPLETION OF LESSOR FIT-OUT
REVIEWS FIXED FOR 2 YEARS THEN 3% ANNUALLY. MARKET AT REVIEW
OUTGOINGS AS AGREED GROSS
PROPOSED USE RETAIL/WHOLESALE LIGHTING AND GENERAL MERCHANDISE
Documents to be prepared by Lessor’s solicitors at Lessee’s expense. Guarantee by Director for performance of Lease ... are required where Lessee is a Proprietary Company but the Lessor may waive this requirement in consideration for the Lessor reserving the premises for ... agreed to execute the Lease.
Our references are:
Last Landlord
1. DEREK FELDMAN PTY LTD PHONE (03) 9560 5422
2. FOLKESTONE LTD PHONE (03) 9670 7028
3. Bank ANZ Branch CLAYTON ROAD CLAYTON VIC
We enclose our cheque made payable to RAY WHITE SOUTHPORT TRUST ACCOUNT
Trust Account in the value of $2,620.83.
being month’s rental in advance from the 15TH FEBRUARY, 1999 OR ON COMPLETION OF LESSOR FIT-OUT
We require the following special conditions AS PER SCHEDULE “A”FOR EXECUTION OF LEASE PLEASE FORWARD TO
Lessee’s SolicitorONE STOP LIGHTING PTY LTD
Address 2-10 SPRINGVALE ROAD SPRINGVALE VICTORIA 3171
...”
“SCHEDULE ‘A’ forming part of the Agreement to Lease between LIFESTYLE INVESTMENTS PTY LTD as Lessor and ONE STOP LIGHTING (QUEENSLAND) PTY LTD as Lessee for the property knows as ... OLSEN AVENUE, ASHMORE
1.The Lessor will grant the first years rental at 50% of the
baserent. Thebaserent being $125,800 p.a.
2.The area of the lease is adjoining Goodyear.
3.The Lessor works for fit-out will be ...
a) suspended ceiling to showroom to include airconditioning and ducting; but excluding lighting.
b) ceiling suspension to the reinforced.
c) floor covering to suitable standard.
d) power to power board.
4.Bank bond equivalent of 3 months rent being $31,450.
5.The Lessor will grant the Lessee
suitablesignage as required by the Lessee.”
Ray White Southport was a firm of real estate agents engaged by the plaintiff to find suitable premises for lease. Mr Lonard was the officer of Ray White Southport who accepted the plaintiff’s instructions and communicated with the defendant. It is to be noted that the intent to lease provided for a bank guarantee in the sum of $31,450.00 being equivalent to three months’ rent. This was in lieu of the defendant taking personal guarantees from the plaintiff’s director to secure the plaintiff’s due performance of the lessee’s obligations. Mr Lonard had discussed this matter initially with the defendant’s agent, Mr Mitchell, and then with Mr Gordon, a director of the defendant. On 29 January, 1999 Mr Lonard and Mr Gordon met. During the meeting Mr Lonard handed the statement of intent to Mr Gordon. It was, as I have said, signed on behalf of the plaintiff. It has never been signed by the defendant.
7 Mr Lonard in his affidavit swore that Mr Gordon read the document and then said “the defendant was prepared to enter into a lease of the said premises on the terms and conditions set out in the said ‘Intent to Lease’ document” and that “notwithstanding the defendant’s acceptance of the terms ... he required me to enquire of ... Barry Berkovitch as to whether the ... lease could be supported by a guarantee by the director of the plaintiff”. Mr Lonard deposes to speaking to Mr Berkovitch (who was in Melbourne) by telephone and asking whether the plaintiff would provide director’s guarantees. Mr Berkovitch refused. According to Mr Lonard he then spoke by telephone to Mr Gordon to tell him that the plaintiff would not provide a guarantee from its director and that the bank guarantee of three month’s rental was offered in lieu. Mr Lonard’s affidavit continues:
“ ... Tim Gordon then informed me ... the Defendant no longer required the lease to be supported by a director’s guarantee and that in all other respects the terms and conditions upon which the Plaintiff proposed leasing the premises were acceptable to the Defendant”.
Mr Gordon told Mr Lonard to send the “Intent to Lease” to the defendant’s solicitors, MacGillivrays, so they could attend to preparing a lease.
8 The first question to address is whether the parties made a concluded agreement for the lease of the premises. This comes down to the point whether Mr Gordon accepted the offer contained in the “Intent to Lease”, in particular, the provision of a bank guarantee for a limited sum instead of a director’s guarantee of the whole of the plaintiff’s promises as lessee. I have set out the relevant part of Mr Lonard’s affidavit. His oral evidence was this:
“I handed it [the intent to lease] to him. He was concerned about no directors’ guarantees. He asked me if I could go away and see if I could get that resolved.
...
Had you had discussions with Mr Gordon about the terms? - Yes
Prior to 29 January? - Yes
And he conveyed to you his acceptance of the terms? - Yes
And as a result as that, did you prepare the intent to lease document? - Yes
Was the director’s guarantee then the remaining sticking point on that day? - On that day it was.
Now what did Mr Gordon say about directors’ guarantees on the 29th? - He said ‘See if you can obtain the directors’ guarantee’ which I then left the meeting, spoke to Mr Berkovitch in Melbourne. He said ‘No, definitely no directors’ guarantees’. That was relayed back to Lifestyle....
... What did you say to him, what did he say to you? - I just said I had spoken to Melbourne and they definitely were not providing directors’ guarantees. They were providing bank guarantees for three months in lieu ... He hummed and hawed for a few moments and said ‘That should be OK. Forward the document to my solicitors’.”
Mr Lonard did not resile from that evidence in cross-examination.
9 Mr Gordon’s evidence differs materially from Mr Lonard’s account only in one respect. Mr Gordon said that when Mr Lonard rang him, after the meeting on 29 January, to advise that the plaintiff would not furnish a director’s guarantee, he:
(a)“Did not advise him that directors’ guarantees would no longer be required”; but
(b)did advise him that he would want to meet with the plaintiff’s principals before he decided if he would be prepared to waive the director’s guarantees.
10 Mr Gordon agreed in cross-examination that in the telephone conversation with Mr Lonard in which he was told of the plaintiff’s refusal to furnish a personal guarantee he told Mr Lonard to send the intent to lease to MacGillivrays “because [he] wanted [his] solicitor to prepare a draft lease”. Mr Gordon’s account of the conversation was that he told Mr Lonard that the defendant insisted upon directors’ guarantees.
11 I am prepared to find that on 29 January in response to the intimation that the plaintiff would not provide a personal guarantee, Mr Gordon said something like “that should be alright” and told Mr Lonard to forward the offer to MacGillivrays. Despite the recency of the facts to which he deposed, Mr Lonard’s affidavit contained serious errors. The sequence of events was demonstrably wrong and he was mistaken about the date of this recent and quite critical meeting. I was at first disinclined to place any weight on Mr Lonard’s evidence but its essence was corroborated by Mr Gordon. I have very little confidence in Mr Gordon’s evidence. I thought he deliberately refrained from candour in his answers and was prepared only to supply such testimony as he thought would advance the defendant’s case. I prefer Mr Lonard’s evidence to Mr Gordon’s, but do not have complete confidence in it.
12 I doubt whether Mr Gordon’s communication to Mr Lonard on 29 January is sufficient to amount to an unconditional acceptance of the offer. The words are perhaps capable of constituting such an acceptance but equally they suggest equivocation or hesitation. If one looks to subsequent events, it is far from clear that the parties are to be understood to have reached final agreement on 29 January. The response from MacGillivrays to the receipt of the intent to lease was a letter of 5 February, 1999 to the plaintiff. It said:
“We act for [the defendant] and enclose herewith for your consideration a draft lease of the premises ... which you have agreed to enter into.
In order to expedite the matter as quickly as possible, we are submitting the draft to you at the same time as it is being submitted to our client for perusal and approval. As our client has not had the opportunity of previously considering the draft, we reserve its right to require amendment if we have not properly interpreted the rather brief instructions we have received ...”
13 Accompanying the letter was a lengthy lease in draft form. It contained many clauses, not untypical of leases, which were not included in or even referred to in the intent to lease. Examples are promises by the lessee not to encumber the lease, to effect specified insurance policies in respect of the demise, restrictions on the use which might be made of the premises and obligations to maintain and repair the premises. Part 31 was a guarantee by the plaintiff’s director which ran to eleven pages.
14 By arrangement, Mr Gordon and his co-director, Mr Tilley met Mr Berkovitch, Mr Kupshik and the plaintiff’s managing director, Mr Peck, at the plaintiff’s Melbourne premises on 5 February, 1999. Mr Berkovitch’s evidence-in-chief was that one or both of Messrs Gordon and Tilley said that he (Mr Berkovitch) had negotiated a good bargain, “the only reservation is that there are no personal guarantees by the directors”. In cross-examination Mr Berkovitch very fairly conceded he could not recall exactly what had been said but his interpretation of the conversation was that the defendant, by Messrs Gordon and Tilley, had agreed not to insist upon a director’s guarantee.
Mr Kupshik’s recollection was a little different. He remembered that Mr Berkovitch raised the topic and asked “whether they [the defendant] had discussed the concept of a three month bank guarantee in preference to directors’ guarantees and they said they were happy with that”.
Mr Gordon and Mr Tilley could not remember ever discussing the question of directors’ guarantees at the meeting. Of the accounts given of the meeting I prefer Mr Kupshik’s. He appeared a precise and careful historian.15 The point I take from the evidence is that when the parties met on 5 February, it was not obvious to the plaintiff that the defendant had agreed to take a bank guarantee in lieu of one from the director. I think it likely that Mr Gordon or Mr Tilley said something which made the plaintiff confident that the director’s guarantee would not be required. I conclude from the defendant’s conduct after 29 January, that is, instructing its solicitors to send a draft lease including the director’s guarantee and the plaintiff’s conduct in asking on 5 February whether directors’ guarantees would be required, that it is unlikely that the parties understood that what was said between Mr Gordon and Mr Lonard on 29 January had amounted to unconditional acceptance of the offer.
16 What happened subsequently was that on 10 February, MacGillivrays wrote again to the plaintiff to advise of an error in the computation of rent reviews contained in the draft lease. On 19 February the plaintiff replied to MacGillivrays to advise of the detailed changes they required to the draft. These numbered over thirty. Some concerned questions of detail, some affected points of substance. On 25 February, MacGillivrays answered accepting some of the proposed changes but declining to accept a large number. One of the alterations accepted by MacGillivrays was the deletion of clause 31, the requirement for directors’ guarantees. On 26 February the plaintiff responded. It listed six points on which it said the draft lease must be amended as requested in its earlier letter of 19 February. Nothing was heard from the defendant’s solicitors until 3 March, 1999 when they wrote to say the defendant,
“has instructed us that because of circumstances which have arisen it is unable to proceed with the proposed lease to your company ...”
The circumstances were that the defendant had agreed to lease the premises to Brightlite. The delay was occasioned by the defendant’s reluctance to break off its relationship (to use a neutral term) with the plaintiff before it had a firm commitment, capable of immediate acceptance, from Brightlite.
17 Counsel for the plaintiff urged a finding that the conduct of the parties between 29 January, 1999 and 26 February, 1999 pointed uncompromisingly to the conclusion that a binding agreement had been made on 29 January and that what was said and done thereafter was explicable only on the basis that the agreement was being implemented. The matters relied on were discussions concerning technical aspects of the fit-out which, on their face, appear to presuppose that the plaintiff would go into possession as lessee, and the defendant’s coyness in breaking off negotiations. I do not think the submission is right. The first conduct which is relied upon is equally consistent with the parties negotiating in good faith to perfect a lease, each side confident that agreement would be reached. As to the second matter, the defendant no doubt felt embarrassed at the way it behaved with Brightlite and did not wish to reveal what it had done. I am inclined to accept Mr Tilley’s evidence that it was the plaintiff’s delay in communicating what changes it required to the draft lease together with its pre-occupation with matters of relative unimportance that led him to think the plaintiff might be a difficult tenant. When Brightlite expressed interest in this place, Mr Tilley was receptive because it had proved an amenable lessee in another development which the defendant owned.
18 If my analysis of the communication between Mr Lonard and Mr Gordon on 29 January is wrong, and by his remark Mr Gordon intended to accept the terms of the intent to lease, it does not follow that an immediately binding agreement had been made. On the contrary it would seem to me that what had been agreed would fall into the third category of case described by Dixon CJ, McTiernan and Kitto JJ in Masters v. Cameron (1954) 91 CLR 354 at 360:
“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound by the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.”
19 It is not in dispute that both parties appreciated that the lease from the defendant to the plaintiff would have to be recorded in a formal document. Both understood that the process would involve discussing, and negotiating, terms to be included in the lease. It came as no surprise to Mr Berkovitch to be sent an elaborate draft document which he was invited to peruse and amend. He knew this to be part of the “normal process” of agreeing a lease.
20 It is to be noted that the circumstances of this case do not fall within the description of the first class. The terms in the lease did not merely restate terms the effect of which had already been agreed in a fuller or more precise form. The draft lease went well beyond what was contained in the intent to lease. Nor, for the same reason, does the case fall within the second class where all the terms of the bargain are agreed and no addition to what has been agreed is to find place in the written document.
21 At 361 their Honours went on:
“Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own ... The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document ... or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v. Miller ... ‘undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed.’”
22 This exposition seems to me to describe exactly what the parties to this action had in mind. If they had reached agreement (which I doubt) it was only with respect to the major matters. Both sides clearly contemplated that numerous other terms would be included in the lease which was to be drawn up. Both sides anticipated that there would be negotiation and compromise before those further terms were finalised. The defendant notified the plaintiff, by correspondence and orally, that it would not commence fitting-out the premises until the lease was completely agreed and signed. In their letter of 25 February, 1999, MacGillivrays wrote:
“[The defendant] will not commence any fit out works until such time as the terms of the lease have been agreed upon”.
Mr Berkovitch’s reply of 26 February concluded:
“As we are running well behind time on fit out works, I ask your urgent consideration and answer from the lessor so that the lease can be finalised today and work should commence immediately thereafter.”
On 8 or 9 February, Mr Gordon spoke to Mr Berkovitch by telephone and told him the fit-out would not commence until the lease had been signed. Mr Berkovitch appreciated the defendant’s point of view. It was “normal procedure with any landlord” and that, according also to normal procedure, the plaintiff would not be allowed into possession until it had signed a lease. Mr Berkovitch said “with all my negotiations over all the years it had never been any different”.
Although Mr Kupshik was confident that a lease would be signed, the plaintiff’s managing director, Mr Peck, became anxious. During the course of the negotiation by correspondence he confided in Mr Kupshik that the “toeing and froing of letters may be unnecessary”. He asked what the plaintiff should do if the defendant delivered an ultimatum: “either you sign the lease as it is or you lose the premises”. Mr Kupshik and Mr Peck agreed that, faced with the choice, they would accept the defendant’s terms. But the significance of the conversation is that Mr Peck, at least, appreciated that the plaintiff had no right to the premises until a lease was signed.23 The transaction was a lease of commercial premises for a term of ten years with a total rent in excess of $1,000,000.00. In the nature of things it is likely that the parties would not have contemplated they would be bound to each other for that time and at that cost except pursuant to a detailed document of lease. The plaintiff relies upon Sheehan v. Zaszlos [1995] 2 Qd R 210 at 213 at which the Court of Appeal said:
“The respondent sought to call in aid ... a line of New Zealand cases which appear to hold that in commercial contracts or contracts for sale and purchase of land for commercial purposes, where the parties contemplate the execution of a formal contract, the ‘natural inference’ is that the parties are not to be bound until at least the contract has been formally executed on each side ... No doubt where parties intend to contract in accordance with a common practice it may be readily inferred that they did not contemplate the coming into existence of a binding contract except in accordance with that practice ... But in the absence of such common practice we think that any such ‘natural inference’ is inconsistent with the view expressed in Masters that the question in which of the three classes there identified a case will fall ‘depends on the intention disclosed by the language the parties have employed’ ... to which we would add ‘or inferred from their conduct’.”
24 The pattern of negotiation followed by the parties in this case and the express acknowledgment by Mr Berkovitch that the defendant was not bound to give the plaintiff possession of the premises or to commence preparing the premises for occupation indicate to me that the parties were intending to contract in accordance with that common practice. Indeed Mr Berkovitch volunteered that what was being done was “normal procedure”. This apart, the matters I have described, including the occasion of Mr Peck’s anxiety, lead me to infer that the parties’ intention was that there would be no binding contract until the lease was signed. It is noteworthy that in Mr Berkovitch’s letter of 25 February expressing urgency he did not suggest that the defendant should commence the fit-out or that the plaintiff should go into possession before the lease was signed.
25 The plaintiff relies upon correspondence between Mr Berkovitch, Mr Gordon and Mr Lewandowski, the contracts administrator for a building company associated with the defendant. This correspondence (JRT13) deals with the details of the fit-out which was to include aspects peculiar to the nature of the plaintiff’s business. The letters are said to indicate that the defendant believed it was bound to fit-out the premises to accommodate the plaintiff’s occupation and, therefore, the defendant must have intended that there be a binding agreement prior to execution of the lease. The letters are, I think, explicable on the basis that it was anticipated the negotiations would come to fruition and that both parties wished to avoid a holdup in the giving and taking of possession once agreement was reached.
26 The conclusion that the parties did not intend their agreement to have binding affect is sufficient to dispose of the plaintiff’s case based on estoppel. The plaintiffs cannot, by estoppel, give themselves a better contractual right than the contract itself would have given them. The plaintiff’s submit that the defendant is estopped from denying the existence of agreement because it represented, by various means, that there was or would be an agreement between them. But the agreement which the defendant may not deny is one which was not to take effect until a lease was signed.
“All that such an estoppel would be to prevent the [defendant] from denying the existence of an ‘agreement’ which is not a legal agreement at all.”
Per Kirby P in Austotel Pty Ltd v. Franklins Self-serve Pty Ltd (1989) 16 NSWLR 582 at 584F.
27 The same consideration is sufficient to dispose of the claim for relief pursuant to section 51(AC) of the Trade Practices Act 1974. Whatever changes that section has wrought to the law it cannot be unconscionable for a corporation to refuse to perform a contract which it had represented it made when the contract the subject to the representation was not binding.
28 Moreover, an essential element of estoppel and unconscionability is lacking. The finding that the plaintiff (and the defendant) did not intend to be bound until a lease was signed has the consequence that the plaintiff cannot have relied on the representation to its detriment. The plaintiff knew that the defendant was not bound to proceed until a lease was signed. A representation that the defendant had made a binding agreement with the plaintiff would have been known to be wrong. It is not unconscionable for a party to break off negotiations which have not reached the point of concluding a contract.
29 Although the plaintiff’s counsel tended to accuse the defendant of perfidy its conduct does not seem particularly reprehensible. One can understand why the plaintiff is annoyed by not having been told it ran the risk of losing the space to a competitor. But I do not think the defendant can be too severely criticised. It and the plaintiff are operating in a competitive marketplace. Both are substantial corporations controlled by experienced business people.
30 Although this is enough to dispose of the action, I will deal with the other matters argued but do so briefly. The defendant takes the point that the contract propounded by the plaintiff is not in writing nor is there some written memorandum or note of it signed by or on behalf of the defendant. See section 59 of the Property Law Act 1974. The plaintiff’s answer is that when the intent to lease is read with MacGillivrays letter of 5 February, 1999 a sufficient memorandum appears. The letter does not refer to the earlier document. It does, however, mention “a draft lease” which the plaintiff had “agreed to enter into”. This reference is to a transaction. In Harvey v. Edwards Dunlop & Co Ltd (1927) 39 CLR 302 at 307, Knox CJ, Gavin, Duffy and Starke JJ said:
“... The memorandum ‘need not be contained in one document; it may be made out from several documents if they can be connected together’. They may be connected by reference one to the other; but further, ‘if you can spell out of the document a reference in it to some other transaction, you are at liberty to give evidence as to what that other transaction is, and, if that other transaction contains all the terms in writing, then you get a sufficient memorandum within the statute by reading the two together’.”
31 In Elias v. George Sahely & Co (Barbados) Ltd [1983] 1 AC 646, the Privy Council said at 655:
“The first enquiry must, therefore, be whether the document signed by or on behalf of the person to be charged on the contract contains some reference to some other document or transaction. The receipt in this case clearly did refer to some other transaction ... Parol evidence can, therefore, be given to explain the transaction, and to identify any document relating to it ... If, therefore, a document signed by a party to be charged refers to a transaction ... parol evidence is admissible both to explain the reference and to identify any document relating to it. Once identified, the document may be placed alongside the signed document. If the two contain all the terms of a concluded contract, the statute is satisfied”.
32 On the basis of these authorities I accept that oral evidence is admissible to identify the transaction referred to in the letter. The transaction is, of course, the offer to lease the premises contained in the document given by Mr Lonard to Mr Gordon on 29 January, 1999. That document “relates” to the transaction. The transaction being referred to in the solicitor’s letter, the two documents may be read together. If the two contain all the terms of a concluded agreement there is a sufficient memorandum of the agreement.
33 When one looks at the two documents it becomes apparent that they do not contain all the terms of a concluded contract. The two must fit together to make a coherent whole. Enclosed with the letter was the draft lease containing terms additional to and inconsistent with the terms of the intent to lease. The letter does not accept the plaintiff’s terms offered in the document given to Mr Gordon. Instead it proposes a wholly different agreement. There is no memorandum in writing of the contract which the plaintiff alleges. In Smith v. Lush (1952) 52 SR (NSW) 207, McLelland J said at 210:
“So far as reliance on these documents taken together as a memorandum is concerned, the real difficulty is that the memorandum contains terms which in many material matters are quite different from the alleged oral contract. Some of those terms are favourable to the vendor and some are favourable to the plaintiffs. I cannot think that a document which contains essentially different terms from what the oral contract represents could be treated as a memorandum of that contract”.
See also Beckett v. Nurse (1948) 1 KB 535 at 538 referred to by McLelland J.
34 The plaintiff is forced to argue that the letter is to be considered separately from the draft lease and that the phrase “which you have agreed to enter into” is an acceptance of the plaintiff’s offer. This approach appears unrealistic. It involves separating the letter from its enclosure and then reading the letter as an acceptance of the offer, and the draft lease as a counter-offer.
What the solicitors in fact said was that they enclosed the draft lease “which you have agreed to enter into”. The phrase, upon which the plaintiff places so much reliance, is not an acceptance of the intent to lease but is an erroneous assertion that the plaintiff had agreed to take a lease on the terms found in the draft. The letter at once goes on to correct the error by explaining that the accompanying document is only a draft which both parties may change. Putting the two documents together does not produce a memorandum of the alleged contract.
35 The plaintiff sought also to rely upon the letter of 25 February from MacGillivrays which, inter alia, agreed to the deletion of clause 31. The submission was that if the three documents were read together there is no inconsistency. This may be true but two problems remain. The first is that the letter of 5 February and the enclosure still contain additional terms to those contained in the oral agreement. Smith v. Lush did not turn upon the presence of inconsistent terms but on the basis that the memorandum proved a different contract to the oral one. The second difficulty is that the transaction of which the letter of 25 February forms part is different to the transaction embodied in the intent to lease. The latter was said to be a transaction containing few terms agreed finally on 29 January, 1999. There followed the submission of a draft lease and the exchange of correspondence designed to reach a final form of words acceptable to both sides. This transaction was one of negotiation that did not produce agreement. The letter of 25 February forms part of this transaction. It is not part of and is not referable to the other transaction.
36 The plaintiff makes an alternative submission that the agreement was made on 5 February, 1999 at the Melbourne meeting when Messrs Gordon and Tilley said they would proceed without directors’ guarantees. I think it is right that the defendant’s representatives said something which led Messrs Kupshik and Berkovitch to believe that they would not have to provide such a guarantee. There is still, however, no written memorandum of the agreement made, on this understanding, on 29 January and 5 February. The earlier problem remains. There is an agreement alleged, a term of which is that there should be no directors’ guarantee. The only memorandum in writing signed on behalf of the defendant is one which contained a term to the very opposite effect. Moreover, MacGillivrays’s letter of 5 February was written before the meeting. Mr Hunt received instruction for it on the previous day. It cannot be a memorandum of an agreement made at the Melbourne meeting.
37 The plaintiff falls back on part-performance to overcome the lack of a written memorandum. It specifies three acts as constituting sufficient part-performance:
·the payment by cheque of a deposit equivalent to the first month’s rent;
·commissioning the construction of “boats” to be installed in the premises as part of the fit-out;
·engaging in the chain of communication with the defendant’s solicitors with respect to the terms of the lease.
“In order that acts may be relied on as part performance of an unwritten contract, they must be done under the terms and by force of that contract and they must be unequivocally and in their nature referable to some contract of the general nature of that alleged.”
Per Brennan J in Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387 at 432. The converse of the proposition appears, as Hill J pointed out in ANZ Banking Group Ltd v. Widin (1990) 26 FCR 21 at 34, in Dale v. Hamilton 67 ER 955 at 960:
“But an act which, in truth done in pursuance of a contract, admits of explanation without supposing a contract, is not, in general, admitted to constitute an act of part performance taking the case out of the Statute of Frauds; as, for example, the payment of a sum of money, alleged to be purchase money”.
In J C Williamson Ltd v. Lukey (1931) 45 CLR 282, Dixon J said at 300:
“The acts of part performance must be such as to be consistent only with the existence of a contract between the parties, and to have been done in actual performance of that which in fact existed”.
38 The conduct relied upon by the plaintiff, whether viewed in isolation or in totality does not satisfy the test. The deposit cheque was drawn by the plaintiff and sent to Mr Lonard, who was the plaintiff’s agent not the defendant’s. There was payment by the plaintiff to its agent who held the money on trust to deal with it in accordance with the plaintiff’s instructions. This represents an internal arrangement involving only the plaintiff. There was no payment by the plaintiff to the defendant. This makes it unnecessary to consider whether the payment of money can amount to an act of part-performance. There appears to have been a marked reluctance by the Courts of this country to accept the relaxation to the principle of part-performance essayed by Steadman v. Steadman [1976] AC 536. See the discussion by Hill J in Widin at 33-37.
39 The second act was the letting of a contract by the plaintiff to tradesmen to build rectangular prisms, of varying sizes, I take it from plasterboard, to affix to the ceiling of the premises to provide a variety of surfaces to which light fittings can be attached for display. The boxes are moveable chattels which can be put in any location, so long as the ceiling is sufficiently reinforced. To constitute part-performance the thing done must itself clearly point to the existence of a contract of the type alleged by the plaintiff. “The acts relied upon as part-performance must be unequivocally, and in their own nature, referrable to some such agreement as that alleged”. Moreover, the act must be performance, in some respect, of the contract. The building of the boats fails on both counts. It is not conduct which unequivocally points to the existence of a lease between the plaintiff and the defendant of the premises in question. The boats could have been used in any premises leased or owned by the plaintiff. Indeed the commissioning of the boats does not point to the existence of the lease at all.
As to the second point there was no term in the lease obliged, or even permitted either side to install ceiling boats. The lease provided for a fit-out to be performed at the defendant’s expense but there is no reference to these particular items. It is not possible to say that their supply or installation was part-performance of this contract.
40 The correspondence which is the third act of part-performance is not, on its face, written pursuant to the terms of the oral agreement but, on the contrary, forms part of an attempt to make a contract. The case is quite different from Widin in which a bank accepted documents of title and endorsed bills of exchange. These were things which the bank was obliged to do pursuant to the contract between it and its customer.
41 The plaintiff has not made out a basis for the relief claim. The action must be dismissed.
IN THE SUPREME COURT
OF QUEENSLAND No. 2121 of 1999
Brisbane
BETWEEN:
ONE STOP LIGHTING (QUEENSLAND) PTY LTD
ACN 085 321 222First Plaintiff
AND:
FIRST LIGHTING FLAGSTAFF PTY LTD
ACN 055 761 32062 878 684Second Plaintiff
AND:
LIFESTYLE PROPERTY DEVELOPMENTS PTY LTD
ACN 062 878 684Defendant
REASONS FOR JUDGMENT - CHESTERMAN J
Judgment delivered 24 March 1999
CATCHWORDS: AGREEMENT TO LEASE - agreement not intended to be binding until execution of formal contract - finding precluded reliance on estoppel and s. 51(AC) Trade Practices Act - claim for specific performance dismissed
Part performance - whether payment of a deposit, commissioning the construction of fixtures and engaging in communication regarding terms of the lease constituted acts of part performance
s. 59 Property Law Act 1974 - whether a sufficient memorandum of all the terms of a concluded contract existed.
Counsel:Mr S Couper QC for the plaintiff
Mr P Dutney QC for the defendant
Solicitors:Thomson Redhead Boyd for the plaintiff
MacGillivrays for the defendant
Hearing Date: 15 - 17 March 1999
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