One Stop Smash Repairs Pty Ltd v Alvarez Holdings Pty Ltd

[2023] NSWSC 444

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

One Stop Smash Repairs Pty Ltd v Alvarez Holdings Pty Ltd [2023] NSWSC 444

Hearing dates:

24 April 2023

Date of orders:

28 April 2023

Decision date:

28 April 2023

Jurisdiction:

Equity

Before:

Darke J

Decision:

Plaintiff’s claim that the parties concluded an agreement for a new lease not established.

Catchwords:

CONTRACTS – formation of contracts – agreement – intention to make concluded bargain – lessee sought to obtain a new five-year lease with lessor following expiry of the former lease – whether the conduct of the parties exhibits an intention to be immediately bound by the terms of a new lease – consideration of the written communications between the lessee and the lessor’s managing agent – consideration of the conduct of the parties following the alleged formation of the agreement – held that the overall conduct of the parties does not reveal an intention to be immediately bound by the terms of a new lease – existence of agreement for a new lease not established

Legislation Cited:

Conveyancing Act 1919 (NSW), s 54A

Cases Cited:

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61

Masters v Cameron (1954) 91 CLR 353

Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313

Category:

Principal judgment

Parties:

One Stop Smash Repairs Pty Ltd (Plaintiff)
Alvarez Holdings Pty Ltd (Defendant)

Representation:

Counsel:
Mr L T Fermanis (Plaintiff)
Mr P Folino-Gallo (Defendant)

Solicitors:
Conomos & Spinak Lawyers (Plaintiff)
S.A.S Lawyers (Defendant)

File Number(s):

2022/269746

Publication restriction:

None

Judgment

Introduction

1. This case concerns a property known as 29 Park Road, Rydalmere. The land, which comprises Lots 649 and 650 in Deposited Plan 15160, is for title purposes contained within Auto Consol 8421-138. The plaintiff carries on a smash repair business at the premises. The land has been the subject of two registered leases granted by the defendant lessor to the plaintiff lessee since 2007.

2. The second lease (AG874670) was initially for a 5 year term ending on 14 March 2017, with an option to renew for a further period of 3 years. However, by a Variation of Lease effected in April 2017 (AM293150), the term was extended so that it ended on 14 March 2022, and the option to renew became an option for a further period of five years. In addition, any exercise of the option had to occur in the period from 14 September 2021 to 14 December 2021.

3. The plaintiff did not exercise the option to renew, but claims that in May 2022 it made an agreement with the defendant for a new lease of the premises for a 5 year term commencing on 1 June 2022, with an option to renew for a further term of 3 years. The agreement is said to arise from the written communications between the parties, in particular certain emails sent on 11 May 2022 and 12 May 2022. In closing submissions, the plaintiff disavowed any case based on any oral agreement.

4. By its Summons filed on 9 September 2022, the plaintiff seeks a declaration to the effect that a valid and enforceable agreement was made, together with an order that the agreement be specifically performed. The defendant denies that any agreement for a new lease was made as alleged. It says that the plaintiff, which has remained in possession since the end of the lease term, is doing so pursuant to a monthly tenancy.

5. The issue for determination is a narrow one, namely, whether the parties entered into a binding agreement for a new lease on about 12 May 2022. That question is to be determined objectively, based upon the relevant communications between the parties. In essence, the question is whether the conduct of the parties, viewed objectively and in its commercial context, exhibits an intention to be immediately bound by the terms of a contract (see, generally, Masters v Cameron (1954) 91 CLR 353 at 360-2; Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [15], [64]-[65], [69] and [118]). The plaintiff’s case in this regard is focused upon a number of emails that passed between Mr Steven Manganas, the sole director of the plaintiff, and Ms Lauren Meredith, of Raine & Horne Commercial of Parramatta, the defendant’s managing agent in respect of the Rydalmere property.

Summary of salient evidence

6. The evidence was largely documentary, although both Mr Manganas and Mr Alvarez (a director of the defendant) were briefly cross-examined. Mr Manganas and Mr Alvarez were the only deponents of affidavits that were read.

7. The relevant events occurred in 2022. As already mentioned, the term of the plaintiff’s existing lease ended on 14 March 2022. It is common ground that the plaintiff did not exercise the option to renew. The plaintiff’s continued possession of the property after 14 March 2022 apparently occurred with the concurrence of the defendant. In those circumstances, cl 12.4 of the lease would operate so that the plaintiff became a tenant under a monthly tenancy as described in the clause and on the same terms (subject to specified exceptions) as the expired lease.

8. On 5 April 2022, Mr Manganas sent an email to Ms Meredith in which he referred to the option to renew and stated:

I Would Like to Keep The Lease Going Till 2027 as Per The Option.

As the time for the exercise of the option had expired without its exercise, this communication is best regarded as a statement of the plaintiff’s desire to enter into a new lease for a 5 year term.

9. On 7 April 2022, Ms Meredith sent an email in response that included the following:

As discussed we confirm the lease option was not exercised in accordance with the terms of the lease.

We will obtain instructions from the Lessor and come back to you as soon as we can.

10. Mr Manganas deposed that on 9 April 2022 he had a conversation with Mr Alvarez to the following effect:

Mr Manganas:      I would like a new lease.

Mr Alvarez:   I can’t come and see you because I have an eye infection. I will get Lauren to get in contact with you either this week or after Easter.

Mr Alvarez deposed that the conversation did not occur in that manner, and was rather to the following effect:

Mr Manganas:      I would like a new lease.

Mr Alvarez:   Please discuss this with Lauren, the property manager. I do not want to discuss this with you directly.

11. On 13 April 2022, Mr Manganas sent an email to Ms Meredith which included the following:

I Spoken With Joseph Alvarez Last Saturday 9^th and Monday 10^th

Poor Joseph Said, He Has a Infected/Black Eye and he Cannot Drive

We Discussed the Lease and He Said Some time This Week or After Easter

He Will Contact You.

12. Mr Manganas deposed that on 20 April 2022 he had another conversation with Mr Alvarez. He deposed that words to the following effect were said:

Mr Manganas:   I haven’t heard from Lauren. What’s happening with the new lease?

Mr Alvarez:   I’m talking to my children about it. Don’t worry, we have an agreement.

Mr Alvarez deposed that such a conversation did not occur in the manner alleged or at all. He denied that he ever said to Mr Manganas “Don’t worry, we have an agreement”. Mr Alvarez deposed that he always told Mr Manganas that he would have to talk directly to Lauren [Meredith], the property manager.

13. In any case, it is clear that, by 11 May 2022, Mr Manganas and Ms Meredith were in email communication about the “bond” that had been paid by the plaintiff. The reference in the emails to a “bond” was evidently intended to refer to the security deposit that was required to be paid under the terms of the expired lease. The lease originally provided for a security deposit of $3,666.66, but as part of the variation effected in 2017, the security deposit amount increased to $4,817.73. It seems, however, that there was some uncertainty as to whether the plaintiff had paid the amount to “top up” the deposit to $4,817.73. By her email sent to Mr Manganas at 12:53pm on 11 May 2022, Ms Meredith enquired as to whether the “top up” had been paid. Mr Manganas responded by email at 1:29pm on 11 May 2022, stating that the additional $1,151.07 had in fact been paid in April 2017.

14. At 2:45pm on 11 May 2022, Ms Meredith sent an email to Mr Manganas in the following terms:

Thanks Steve, will advise the Lessor about the current payment.

But the proposed term is still 3 months for the new lease. As mentioned this is a commercial term and can be paid off over an agreed period – 2 months top up.

15. Pausing here, it seems that by that time the communications were also concerned with the terms of a proposed new lease. In particular, it seems that the defendant, through Ms Meredith, was proposing that there be a security deposit equivalent to 3 months rent (rather than the 1 month provided for under the expired lease), but that the additional amount (referred to as “2 months top up”) “can be paid off over an agreed period”.

16. At 4:01pm on 11 May 2022, Mr Manganas sent an email in response which indicated that he did not understand what was meant by “Top Up 2 Months”. Mr Manganas asked for advice as to the figure sought, and his email concluded with the following:

…and Then I will Contact You, and Let You Know, How I Will be Paying,

Method And Over How Long.

17. At 4:28pm on 11 May 2022, Ms Meredith sent an email to Mr Manganas in the following terms:

The proposed lease terms are:

Lease term: 5 years – commencing 1 June 2022

Option: 3 years

Rent: $60,945.57 + GST per annum

Outgoings: 100% council rates + water rates as per current lease

Security Deposit: 3 months rent + GST – (Initially $16,760.04 incl GST – subject to Lessor confirming current amount being held is $4,817.73, the top up required will be $11,942.31)

Lease Preparation cost: Lessee must pay the reasonable costs for lease preparation (as per current lease)

All other terms are as per the current lease.

Please confirm acceptance of the above and we will have the Lessor solicitor prepare the necessary documentation.

18. Mr Manganas sent an email in response at 7:55am on 12 May 2022 in the following terms:

Security deposit TOP UP as You Put It, is $11,942.31. I will Brake it Down to 12 Payments Of $995.19 per Month on top Of the Rent.

You Tell Joseph That is the Best I Can Do.

Then You Go Ahead and Prepare the LEASE.

19. On 16 May 2022, Ms Meredith replied by email in the following terms:

Thanks Steve will update the Lessor and come back to you.

Do you have a solicitor you would like the lease send [sic] to?

20. Later on 16 May 2022, Mr Manganas sent an email in response in the following terms:

No Lauren, I Don’t Have a Solicitor

Just Forward the Lease to Me, and I will Check It And Sign It.

21. Subsequently, there were further email communications between Mr Manganas and Ms Meredith. It seems that on 17 June 2022 Mr Manganas was trying to find out what was happening in relation to the new lease. On that day, Ms Meredith sent an email to Mr Manganas in the following terms:

Apologies delay in reply

We are waiting instructions from Lessor. Come back to you shortly.

22. On 27 June 2022, Mr Manganas sent an email in response in the following terms:

Can You Please Let Me Know As to Where Are we? With The New Lease

23. Shortly thereafter, Ms Meredith responded by email in the following terms:

We are still awaiting final instructions from the Lessor.

Once we know we will advise.

24. On 29 June 2022, Mr Manganas sent an email to Ms Meredith stating, in effect, that unless a new lease was forwarded by 15 July 2022, he would take the matter to a firm of solicitors.

25. However, on 13 July 2022, Ms Meredith sent an email to Mr Manganas in the following terms:

We have received instructions from the Lessor and unfortunately, at this stage no new lease is to be offered.

26. That was effectively the end of the matter, although I note that it appears from an email sent by Mr Manganas to Mr Alvarez on 3 August 2022 that the pair may have met the day before to discuss the situation. Mr Manganas’ email includes the following:

So Joe, I Need time At Least 5-6 Years to Pay Back Loans and Recover.

I can Not Run The Business, on a Month to Month Lease.

Please!! Joe, Send New Lease for Me to Sign.

27. I should also note that on 19 August 2022, the defendant, through Raine & Horne Commercial, sent a one month notice of termination to the plaintiff in respect of the tenancy. By letter dated 22 August 2022, the plaintiff’s solicitors asserted that an agreement for a new lease had been reached on about 11 May 2022, and demanded that the notice of termination be withdrawn. On 26 August 2022, solicitors acting for the defendant advised the plaintiff’s solicitors that the defendant agreed to withdraw the notice whilst reserving its right to issue a further notice.

28. The plaintiff commenced these proceedings on 9 September 2022. It seems that no further notice of termination has been issued.

Summary of principal submissions

29. There was no dispute between the parties as to the principles that apply in determining whether the parties entered into a binding agreement for a new lease. Those principles are briefly summarised above at [5]. Further, both parties accepted that conduct after the alleged formation of the agreement may be relevant in considering whether the parties should be held to have had the intention, at that earlier time, to enter into a binding agreement (see, for example, Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [25]; Pavlovic v Universal Music Australia Pty Ltd (supra) at [118]).

30. The plaintiff submitted that, applying these principles, the Court should find that the parties entered into a binding agreement for a new lease on 12 May 2022. (That is contrary to the date specified in the Summons, but no point was taken about that, and the argument is plainly open on the largely documentary evidence.)

31. The plaintiff submitted that the email sent by Ms Meredith at 4:28pm on 11 May 2022 amounted to an offer made on behalf of the defendant to enter into a lease on the terms there set out. The plaintiff then submitted that the email sent by Mr Manganas to Ms Meredith at 7:55am on 12 May 2022 amounted to an acceptance of the offer, and that upon such acceptance a binding agreement came into existence.

32. The plaintiff submitted that Mr Manganas’ email was a clear and unequivocal acceptance of the offer made by Ms Meredith’s email, and should not be construed as a counter-offer. Insofar as Mr Manganas’ email referred to the payment of the security deposit by 12 monthly payments, it was put that the defendant’s offer did not stipulate that the security deposit had to be paid by any particular time, or that time in that regard was of the essence.

33. The plaintiff submitted that the parties were in an existing lessor and lessee relationship, and that their conduct viewed in its entirety revealed an intention that there would be a new lease on the terms accepted by the plaintiff.

34. The defendant submitted that Ms Meredith’s email sent at 4:28pm on 11 May 2022 was not truly an offer, but was rather an invitation to treat. It was put that it was not an offer which, if accepted, would give rise to a binding agreement. The defendant further submitted that the evidence did not show that Ms Meredith had any authority (whether express or ostensible) to bind the defendant to the terms of an agreement as alleged.

35. The defendant submitted that, in any event, Mr Manganas’ response on 12 May 2022 was not an acceptance of the terms contained in Ms Meredith’s email. It was submitted that even if her email was regarded as an offer, Mr Manganas’ response should be regarded as a counter-offer. In this regard, reliance was placed upon what Mr Manganas said in his response concerning the payment of the security deposit.

36. The defendant further submitted that even if a binding agreement was found, it would not be enforceable due to a failure to comply with the requirements of s 54A of the Conveyancing Act 1919 (NSW), and that such failure could not be avoided by recourse to the law relating to part performance (see s 54A(2)).

37. In reply, the plaintiff submitted that the evidence overall (including the failure of the defendant to adduce evidence as to the extent of the authority of its agent) justified a conclusion that Ms Meredith had authority to bind the defendant to the terms of an agreement for a new lease. The plaintiff also took issue with the contention that the writing, in the form of the emails exchanged between the parties, did not satisfy the requirements of s 54A of the Conveyancing Act. It was submitted that Ms Meredith’s email was signed by the defendant’s agent for the purposes of the section.

Determination

38. As submitted by the plaintiff, the conduct of the parties is to be viewed overall, and in its commercial context, which includes the fact that the parties were in an existing lessor and lessee relationship. To be precise, the plaintiff remained in occupation of the leased premises pursuant to a monthly tenancy following the expiry of the term of the former lease on 14 March 2022.

39. It is clear that following the expiry of the former lease, the plaintiff, through Mr Manganas, expressed a desire to enter into a new lease. This desire was expressed to Mr Alvarez, and it seems clear that he told Mr Manganas that he would have to speak to Ms Meredith (of Raine & Horne Commercial) about the matter. It is also clear that Raine & Horne Commercial were at all relevant times the defendant’s managing agents in respect of the Rydalmere property.

40. Despite some reluctance on the part of Mr Alvarez in the witness box to acknowledge that he gave instructions to Ms Meredith to send the email she sent at 4:28pm on 11 May 2022, it seems clear from his evidence that he and Ms Meredith discussed the subject matter of the email, and I infer that Ms Meredith would have obtained the assent of Mr Alvarez before sending it to Mr Manganas. I therefore conclude that Ms Meredith (or, more accurately, Raine & Horne Commercial) had express authority from the defendant to communicate with the plaintiff in the terms contained in the email.

41. The terms of the email are set out above at [17]. The email contains “proposed lease terms”, that are described by reference to six specific matters, with all other terms to be “as per the current lease”. The email concludes with a request to “confirm acceptance of the above”, in which case “we will have the Lessor solicitor prepare the necessary documentation”.

42. One of the six specific matters was the security deposit. This was stated to be:

3 months rent plus GST – (Initially $16,760.04 incl GST – subject to Lessor confirming current amount being held is $4,817.73, the top up required will be $11,942.31)

43. The security deposit matter had been referred to in earlier communications between Ms Meredith and Mr Manganas on 11 May 2022, including the email sent by Ms Meredith at 2:45pm, and Mr Manganas’ response sent at 4:01pm. It is clear from the former email that Ms Meredith held out the prospect that the security deposit could be “paid off over an agreed period”.

44. Mr Manganas’ email sent at 7:55am on 12 May 2022 was in the following terms:

Security deposit TOP UP as You Put It, is $11,942.31. I will Brake it Down to 12 Payments Of $995.19 per Month on top Of the Rent.

You Tell Joseph That is the Best I Can Do.

Then You Go Ahead and Prepare the LEASE.

45. This response is largely directed to the security deposit. In short, Mr Manganas stated that the best he could do would be to pay the required amount by 12 monthly payments of $995.19. Ms Meredith was requested to inform Mr Alvarez that this was the best Mr Manganas could do, and then go ahead and prepare the lease.

46. I do not think that Mr Manganas’ response can be construed as a confirmation that all the proposed terms set out in Ms Meredith’s email were accepted. Rather, it seems to me that, in relation to one of the six specific matters, namely, the security deposit, Mr Manganas was advancing a new proposal that was not included within Ms Meredith’s proposed terms.

45. It is true that her email does not expressly stipulate when the required amount for the security deposit was to be paid. However, as all other terms were to be “as per the current lease”, her email should be read as providing that the payment (and the other payments such as rent and outgoings) would be made in accordance with those terms. As cl 17.2 of the expired lease provides for the security deposit to be delivered on or before the commencement date of the lease, the email should be read as providing for the payment to be made on or before 1 June 2022.

46. Mr Manganas’ response, probably encouraged by the prospect held out to him that the security deposit could be “paid off over an agreed period”, suggested a 12 month period. That suggestion is not an acceptance of Ms Meredith’s proposed terms, but is really in the nature of a counter-offer. The concluding words of Mr Manganas’ email, understood in the context of the entire email, should be read as a statement to the effect that if the 12 month period was acceptable to the defendant, a lease, containing all the agreed terms, should be prepared.

47. Ms Meredith’s email of 16 May 2022 is consistent with the notion that Mr Manganas’ response was in the nature of a counter-offer. Ms Meredith refers there to “updating” the defendant and coming back to Mr Manganas. Those statements are indicative of a negotiation as to contractual terms that has not yet culminated in consensus. Ms Meredith’s query, about whether Mr Manganas had a solicitor he wanted the lease sent to, should be read as made in anticipation of consensus being reached. I will add that Ms Meredith’s later email of 27 June 2022 indicates that she was still waiting for final instructions from the defendant.

48. To the extent that the other conduct of the parties after 12 May 2022 sheds any light on the matter, I do not think that it lends any real support for the conclusion that the parties had come to a binding agreement. I have not overlooked that Mr Manganas pressed for the new lease to be forwarded to him. However, to the extent that this might imply that a concluded agreement had been reached, it would merely be a reflection of Mr Manganas’ subjective belief.

49. I should also add, for completeness, that I do not accept the suggestion, made by Mr Manganas in the witness box, that Ms Meredith agreed in a conversation with him that payment of the security deposit by 12 payments was acceptable. The suggestion was not included by Mr Manganas in his affidavit and, when challenged in cross-examination, he said that he could not quite recall such a conversation. In any event, the plaintiff’s case was not based on any oral agreement.

50. In my opinion, the overall conduct of the parties, viewed objectively and in its commercial context, does not reveal an intention on 12 May 2022 (or at any other time) that the parties be immediately bound by the terms of a new lease. In particular, Mr Manganas’ email of 12 May 2022 was not an acceptance of the terms proposed in Ms Meredith’s email sent at 4:28pm on 11 May 2022, but was rather in the nature of a counter-offer. There was no acceptance of that counter-offer, and the defendant thus remained at liberty to decline to proceed further towards a new lease with the plaintiff. The parties remained subject to the monthly tenancy that was provided for in cl 12.4 of the expired lease.

51. The above conclusion is sufficient to determine the proceedings adversely to the plaintiff. It is unnecessary to consider various other questions that would arise if the plaintiff had accepted the proposed terms set out in Ms Meredith’s email sent at 4:28pm on 11 May 2022, including whether a binding agreement for a new lease would then have come into existence, and if so, whether the agreement would be unenforceable due to a failure to comply with the requirements of s 54A of the Conveyancing Act.

52. For the above reasons, the Court will order that the Summons be dismissed. The Court will further order that the plaintiff pay the defendant’s costs of the proceedings.

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Amendments

28 April 2023 - Amendment to name of party referred to in [50].

Decision last updated: 28 April 2023