OXS Pty Ltd v Sydney Harbour Foreshore Authority

[2016] NSWCA 120

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	OXS Pty Ltd v Sydney Harbour Foreshore Authority [2016] NSWCA 120
Hearing dates:	9 June 2015
Decision date:	23 May 2016
Before:	Macfarlan JA at [1]; Gleeson JA at [2]; Leeming JA at [279]
Decision:	(1)   Appeal dismissed. (2)   Appellant to pay the respondent’s costs of the appeal.
Catchwords:	CONTRACTS - existence of contract - where respondent leased premises to appellant - where current lease not yet expired - whether concluded agreement for lease for new term of 10 years arose from correspondence between parties - whether intention of parties to be immediately bound – where absence of agreement on initial rent, rent reviews and turnover rent – whether lease on "commercial terms" is sufficiently certain – specificity of terms – Sydney Harbour Foreshore Authority Act s 19 requirements – whether Ministerial consent was given for entry into lease with term exceeding five years – challenge to primary judge’s finding no consent was given – circumstances of alleged consent – application of s 19(3) Sydney Harbour Foreshore Authority Act – construction of word “lease” – whether includes agreement for lease – implied terms of agreement – that parties would do all that was reasonable to obtain consent – that grant of lease subject to Ministerial consent and such conditions as Minister may impose EQUITY - equitable remedies - specific performance - agreement for lease – where appellant asserts agreement for lease and seeks order for specific performance – where lease or licence of “core land” vested in respondent for term exceeding five years – where statutory requirement of Ministerial consent and subject to conditions Minister may impose – whether contingent condition fulfilled and contract emerged from inchoate stage TRADE PRACTICES - misleading or deceptive conduct - whether alleged representations were made by respondent - whether representations were misleading or deceptive or likely to mislead or deceive – where appellant alleged respondent failed to disclose alleged consensus within the respondent of intention to proceed to open tender when current lease expired – whether appellant had reasonable expectation of disclosure where parties in commercial negotiations – whether respondent had concluded view of whether binding agreement had been entered– where both parties had access to legal advice and appellant had no reason to think that it could look to the respondent for advice – whether appellant relied on non-disclosure – challenge to primary judge’s findings as to credit of witnesses – whether consistent with considering inherent probabilities of competing accounts and objective indicators TRADE PRACTICES - misleading or deceptive conduct – loss of opportunity claim by appellant – causation – whether opportunity lost was of some commercial value – whether evidence established respondent would have sold business had it known the true position PRODEDURE - Miscellaneous procedural matters – declarations - where findings of misleading conduct by primary judge – where primary judge made no declaration that respondent engaged in misleading or deceptive conduct – discretion of the Court - where respondent sought declaration in general terms – where declaration would be merely prefatory to an order for damages – whether declaration of no utility
Legislation Cited:	Australian Consumer Law (Competition and Consumer Act 2010 (Cth) Schedule 2) ss 2(2)(c)(i), 18, 20, 22 Closer Settlement Amendment (Conversion) Act 1943 (NSW) Crown Lands Consolidation Act 1913 (NSW) s 272(2) Fair Trading Act 1987 (NSW), s 42 Industrial Arbitration Act 1940 (NSW) s 88B Real Property Act 1900 (NSW), s 53 Retail Leases Act 1994 (NSW) ss 62B, 62D Supreme Court Act 1970 (NSW) s 69 Sydney Harbour Foreshore Authority Act 1988 (NSW) ss 5, 10, 12(2), 19, 28, 29, 30, Sch 5 cl 13 Town Planning and Development Act 1928 (WA) s 20 Trade Practices Act 1974 (Cth) s 52 Uniform Civil Procedure Rules 2005 (NSW) r 42.1
Cases Cited:	Ainsworth v Criminal Justice Commission [1992] HCA 10; 175 CLR 564 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27 ANZ Banking Group Ltd v Ciavarella [2003] NSWCA 304 Attorney -General (NSW); Ex rel Corporate Affairs v Australian Softwood Forests Pty Ltd (1979) 2 NSWLR 73 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australis Media Holdings Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 Banque Commerciale S.A., En Liquidation v Akhil Holdings Ltd [1990] HCA 11;169 CLR 279 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977)180 CLR 266 Brambles v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 Brown v Heffer [1967] HCA 40; 116 CLR 344 Butts v O’Dwyer [1952] HCA 74; 87 CLR 267 Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 Chan v Cresdon Pty Ltd [1989] HCA 63; 168 CLR 242 Clifton v Palumbo [1944] 2 All ER 497 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; 149 CLR 337 Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd [1989] ANZ Conv R 548 Craig v Silverbrook & Ors [2013] NSWSC 1687 Custom Credit Corporation Ltd v Cenepro Pty Ltd (NSWCA, 7 August 1991) Daniels v Anderson (1995) 37 NSWLR 438 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 Fabcot Pty Ltd & Anor v Port Macquarie-Hastings Council [2011] NSWCA 167 Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 Fox v Percy [2003] HCA 22; 214 CLR 118 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452; 127 ALR 543 Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166; 7 BPR 14,551 Glass v Ralph [1966] WAR 91; 13 LGRA 90 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Heenan v Di Sisto & Ors [2008] NSWCA 25 Helmoss Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 Hillas & Co Ltd v Arcos Ltd [1932] All ER 494; 147 LT 503 Hill End Gold Ltd v First Tiffany Resource Corporation [2010] NSWSC 375 House v The King [1936] HCA 40; 55 CLR 499 Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 Krakowski v Eurolynx Pty Ltd [1995] HCA 68; 183 CLR 563 Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1 Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 Masters v Cameron [1954] HCA 72; 91 CLR 353 McGraddie v McGraddie [2013] UKSC 58; 1 WLR 2477 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1174 OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1284 OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1702 Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR 15,145 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 Pyrmont Point Pty Ltd v Westacott [2016] NSWCA 33 Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 Rivers v Bondi Junction-Waverley RSL (1986) 5 NSWLR 362 Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Sinclair, Scott & Co v Naughton [1929] HCA 34; 43 CLR 310 Taluja v Australian International Academy of Education Ltd [2011] NSWCA 416 Tanna v Deutsche Bank (Asia) AG [1997] ANZ Conv R 588 The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) HCA 54; 174 CLR 64 Thorby v Goldberg [1964] HCA 41; 112 CLR 597 Tobacco Institute of Australia Ltd v The Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 Traderight (NSW) Pty Ltd v Bank of Queensland Ltd [2015] NSWCA 94 Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; 129 CLR 1 Westpac Banking Corporation v The Bell Group Ltd (in Liq) (No 3) [2012] WASCA 157; 44 WAR 1 Wilson International Pty Ltd v International House Pty Ltd [1983] WAR 243; (1981) 52 LGRA 216
Texts Cited:	PW Young, C Croft and ML Smith, On Equity (2009, Lawbook Co) NSW Legislative Assembly, Parliamentary Debates (Hansard) 28 October 1998 at 9293
Category:	Principal judgment
Parties:	OXS Pty Ltd (Appellant) Sydney Harbour Foreshore Authority (Respondent)
Representation:	Counsel: G Inatey SC with A Zahra (Appellant) M Cashion SC with R Carruthers (Respondent)   Solicitors: Andrews & Holm Lawyers (Appellant) Ashurst Lawyers (Respondent)
File Number(s):	2014/275323
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2014] NSWSC 1174 (26 August 2014) [2014] NSWSC 1284 (19 September 2014) [2014] NSWSC 1702 (1 December 2014) Date of Decision: 26 August 2014 19 September 2014 1 December 2014 Before: Black J File Number(s): 2014/55365

HEADNOTE

[This headnote is not to be read as part of the judgment]

1   In February 2011, there was an exchange of letters between the appellant, OXS Pty Ltd (OXS), and the respondent, the Sydney Harbour Foreshore Authority (SHFA), regarding an extension of a lease of Premises in The Rocks, which OXS operated as a restaurant known as “Appetito Pizza & Pasta Bar” (the Premises). SHFA is the owner and lessor of the Premises.

2   In 2014, OXS commenced proceedings against SHFA and the Minister for Planning and Infrastructure (responsible for SHFA operations) seeking specific performance of an alleged agreement for lease for 10 years commencing on 1 July 2011, or, in the alternative, claiming that SHFA had engaged in misleading and deceptive conduct, and seeking judicial review of the Minister’s decision to refuse consent to the alleged agreement for lease.

3   The question of liability was determined separately and in advance of the quantification of damages. The primary judge (Black J) rejected OXS’s claims against the Minister and SHFA apart from finding two misrepresentations by SHFA and held that: (1) no binding contract existed; (2) letters sent by SHFA to OXS in August 2011 and August 2012 were misleading or deceptive because, contrary to the terms of the letters, the Minister had not in fact indicated that he would not consent to a new lease; (3) the only head of damage established was wasted expenditure (on a loss of opportunity basis) in reliance on the letters; (4) it would be inappropriate or of no utility to make a declaration about SHFA’s misleading conduct; (5) all claims should be dismissed except for the loss of opportunity claim, in respect of which SHFA should pay $8,000 to OXS as the parties had agreed; and (6) OXS to pay SHFA’s costs.

The factual background

4   SHFA is vested with core land and has authority to dispose of it in limited circumstances. Relevantly, SHFA may only grant a lease or licence of “core land” for a term exceeding five years with the consent of the Minister (Sydney Harbour Foreshore Authority Act 1988 (NSW) s 12(2) (SHFA Act). It was accepted by OXS on appeal that the Premises were situated on “core land”. Ministers Kelly and Hazard consecutively held office at the relevant time. SHFA’s day-to-day management is by its CEO (Mr Warwick Williams then Mr Haddad were CEO at the relevant time). OXS had been the lessee of the Premises since December 1996. SHFA’s previous leases to OXS had been pursuant to formal documentation, for 5 and 10 years with a 5 year option to renew and, from May 2006 onwards, subject to SHFA’s Lease Expiry policy (lease renewal was not an automatic right of tenants and was only considered within 12 months of expiry). SHFA issued a Rocks Lease Renegotiation Policy in 2009, which was expressed to have effect until September 2010 and which set out the principles and key criteria for direct negotiations with existing lessees.

5   On 28 January 2011, OXS requested an extension of its existing lease (which expired in 2014) for an additional 7 years. Following that request, Mr Watkins said he met with Minister Kelly and raised the proposal with him, and that the Minister said “yes, proceed”. SHFA’s legal advisors recommended against granting a new lease to OXS.

6   On 23 February 2011, Mr Watkins sent a letter to OXS stating SHFA “is prepared to offer you a new ten year lease commencing 1 July 2011 on commercial terms at the prevailing market rate, provided that” OXS lodged a development application (DA), entered an outdoor seating licence and surrendered its current lease. On 28 February, OXS responded, accepting and stating “please advise when the new lease will be made available for review”.

7 Mr Haddad replaced Mr Watkins as CEO of SHFA in March 2011. In August 2011, SHFA received advice from its solicitors that Mr Watkins’ letter was a proposal, not a binding agreement. SHFA gave the Minister a briefing note marked “for your information” advising that SHFA proposed to withdraw its offer to OXS and that it would tell the Kazals. The Minister commented “I have noted the legal advice. SHFA is not to offer any compensation unless first approved by me”. SHFA withdrew its offer by letter dated 23 August 2011, stating that the Minister had indicated he would not consent to the proposed lease. The primary judge found this was imprecise and therefore misleading because the Minister had in fact only noted SHFA’s intention to withdraw the ‘offer’ of the lease.

8   In correspondence in September 2011, OXS asserted that it had an agreement for lease, that it had acted to its detriment, and was astonished that SHFA purported to walk away. The primary judge found this evinced the sole director of OXS, Mr Kazal’s understanding that SHFA had changed its position. In August 2012, SHFA sent OXS a letter referring to the Lease Expiry Policy and refusing to enter any negotiations for a new lease until OXS had resolved the DA and outdoor seating licence matters. The primary judge found that this did not cause Mr Kazal to believe SHFA supported a new lease. By November 2013, OXS had addressed the DA and outdoor seating licence matters and entered a new deed of licence for the outdoor seating in the courtyard. In December 2013, SHFA advised OXS that the current lease would not be renewed and that it would expire 30 June 2014.

9   Three issues arose on appeal:

1. Whether there was a concluded agreement for lease, its terms and what remedies were available;

2. the nature of ministerial consent requirements and their effect on any agreement for lease; and

3. misleading or deceptive conduct claims and causation of loss, including challenges to the primary judge’s factual findings.

The Court dismissed the appeal and held the following:

Issue 1:

Held, per Gleeson JA (Macfarlan and Leeming JJA agreeing at [1] and [279], respectively):

1   Agreement for Lease: As the primary judge found, there was no intention by the parties to be immediately bound. Various factors supported this, including (at [74] – [83]):

1. the commercial context of the words “prepared to offer” and the formality of the parties’ prior practice whereby they entered into contracts by way of formal leases in registrable form;

2. the statuses of the parties, in particular, SHFA (as a statutory authority), and the disadvantage to both parties inherent in informality;

3. the lack of specificity in critical terms;

4. OXS’s reservation of the right to negotiate terms; and

5. SHFA’s invitation for OXS to telephone SHFA (which suggested further discussion would occur).

ABC Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Masters v Cameron (1954) 91 CLR 353; Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622; ANZ v Ciavarella [2003] NSWCA 304; Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR [14,551]

2   Contractual certainty: Courts seek to uphold contracts but the Court cannot go outside the words the parties have used except in so far as there are appropriate implications of law. Here, there was no agreement on an essential term (price). Other critical terms (turnover rent and rent reviews) were reserved for future determination and the generality and lack of precision in the expression “commercial terms” could not be overcome by the Court: at [91] – [97].

3 There was therefore no concluded contract between the parties: at [99].

Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130; Custom Credit Corporation Ltd v Cenepro Pty Ltd (NSWCA, 7 August 1991); Thorby v Goldberg (1964) 112 CLR 597

Issue 2:

Held, per Gleeson JA (Leeming JA agreeing at [279], Macfarlan JA not deciding)

4 Ministerial consent: The appeal grounds relating to this issue did not strictly arise since OXS had failed to establish that it had a concluded agreement for lease. Nonetheless, these grounds should be dealt with since the matters have been argued and were of importance to both parties: [106].

Kuru v State of New South Wales [2008] HCA 26; 236 CLR 1

Held, per Gleeson JA (Macfarlan and Leeming JJA agreeing at [1] and [279], respectively):

5 There was no error in the primary judge’s factual finding that it was highly unlikely that the Minister would have understood that he was being asked to grant consent to a lease for the purposes of s 19 of the SHFA Act. This was based on the circumstances, including Mr Watkins’ failure to either advise the Minister of the proposed content of the lease or indicate that he sought oral approval to grant it on unknown terms, and the departure from past practice, in which requests for ministerial consent contained key terms and details of the proposed lease: [115] – [118].

Held, per Gleeson JA (Macfarlan JA not deciding)

6 The prohibition in s 19(3) of the SHFA Act upon the grant of a lease for a term exceeding five years without Ministerial consent only applies to legal leases. There is no intention in the text of s 19 of the SHFA Act to displace the ordinary meaning of “lease” in s 19(3) as a leasehold estate at law. In the absence of express terms, it would be an implied term of an agreement for lease that it would be subject to Ministerial consent, including such conditions as the Minister may impose. Further, it would be implied that the parties would do all that was reasonable to obtain Ministerial consent. Without consent, a court of equity would not enforce an agreement for lease for a term exceeding five years by way of an order for specific performance or injunction or otherwise because the contract would not emerge from its inchoate stage, the contingent condition being unfulfilled. As 19(3) applies to a lease at law, it is unnecessary to deal with the argument that ministerial consent could be given after the grant of a legal lease: [130] – [146].

Chan v Cresdon Pty Ltd (1989) 168 CLR 242; Pyrmont Point Pty Ltd v Westacott [2016] NSWCA 33; Taluja v Australian International Academy of Education Ltd [2011] NSWCA 416; Brown v Heffer (1967) 116 CLR 344; Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; Glass v Ralph (1966) WAR 91; Wilson International Pty Ltd v International House Pty Ltd (1981) 52 LGRA 216

7 Implied term: Following the conclusion that s 19(3) only applies to a legal lease and not to an agreement for lease, the (assumed) agreement for lease would contain an implied term that SHFA would do all that was reasonable to obtain ministerial consent, and that a formal lease would be subject to consent being granted and to such conditions as the Minister may impose: [156] – [157].

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977)180 CLR 266; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] 149 CLR 337; Australis Media Holdings Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; Byrne v Australian Airlines Ltd [1995] HCA 24; 185 CLR 410

Held, per Leeming JA (Macfarlan JA not deciding):

8 In addition to its application to legal leases for a term exceeding five years, the prohibition in s 19(3) of the SHFA Act applies to agreements to grant a lease for a term exceeding five years. The prohibition is upon long term leases and licences in their generality, which is apt to include a prohibition upon long term equitable leases. There is no reason why the provisions conferring powers of direction and control upon the Minister need be read as excluding general directions and consents by the Minister given to SHFA in advance of the final negotiations of any particular lease: [280], [284], [287].

Issue 3

Held, per Gleeson JA (Macfarlan and Leeming JJA agreeing at [1] and [279], respectively):

9 Misleading and deceptive conduct: The question of whether silence is misleading is normally answered by asking whether the person alleged to be misled or deceived had a reasonable expectation of disclosure. Non-disclosure by SHFA of its alleged decision to proceed to open tender on expiry of the lease in 2014 was not established as no error was demonstrated in the primary judge’s finding that SHFA had not reached a concluded view in 2011 as to whether it would test the market on expiry of OXS’s lease in 2014. Nor was it misleading or deceptive for SHFA not to express any view as to the legal character of the February correspondence given that each party had access to legal advisors and OXS did not have any reason to think that it could look to SHFA for advice: [177]-[216].

Campbell v Backoffice Investments Pty Ltd [2009] 238 CLR 304; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Fabcot Pty Ltd & Anor v Port Macquarie-Hastings Council [2011] NSWCA 167; Traderight (NSW) Pty Ltd v Bank of Queensland [2015] NSWCA 94; Krakowski v Eurolynx Pty Ltd (1995) 183 CLR 563; Westpac Banking Corporation v The Bell Group Ltd (in Liq) (No 3) [2012] WASCA 157

10 As a general proposition, s 52 of the Trade Practices Act 1974 (Cth) and s 18 of the Australian Consumer Law do not require a party to commercial negotiations to volunteer information which will be of assistance to the decision–making of the other party. The parties were at arms-length, experienced in their respective fields and had legal advice: [212].

11 A contravention of s 52 (and likewise s18 of the Australian Consumer Law) may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care. The knowledge of the person whose failure to disclose is alleged to be misleading will be relevant, but not necessarily decisive: [216].

Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054; Traderight (NSW) Pty Ltd v Bank of Queensland [2015] NSWCA 94; Fraser v NRMA Holdings Ltd (1995) 127 ALR 543; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357

12 In the assessment of the credit of witnesses in cases where a judge is faced with a stark choice between irreconcilable accounts, the Court considers what is consistent with the probabilities as they emerged from the objective evidence: [225]-[227].

McGraddie v McGraddie & Anor [2013] UKSC 58; [2013] 1 WLR 2477; Craig v Silverbrook & Ors [2013] NSWSC 1687; Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789

13 Failure to make a declaration: The power to grant declaratory relief is discretionary and a plaintiff does not have an automatic right to a declaration because he can point to a failure by the defendant to comply with some requirement: [242].

14 There was no error shown in the primary judge’s refusal to make declarations and consideration that they were merely prefatory to consequential orders such as damages: [245].

Ainsworth v Criminal Justice Commission [1992] HCA 10; 175 CLR 564; Rivers v Bondi Junction Waverley RSL (1986) 5 NSWLR 362

15 Causation – loss of opportunity: To establish causation in its loss of opportunity claim, it was necessary for OXS to demonstrate that OXS would have sold the business and that the loss of that commercial opportunity had some value (not being a negligible value). Evidence of what OXS would have done had it known the true position may be far from conclusive, even if from a completely honest witness, because it may be the result of unconscious reconstruction affected by the wisdom of hindsight. Nonetheless, such evidence would, if given, have been admissible: [261]-[266].

Malec v JC Hutton Pty Ltd (1990) 169 CLR 638; The Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473; Tanna v Deutsche Bank (Asia) AG [1997] ANZ Conv R 588

16   The primary judge did not err in not drawing an inference that Mr Kazal would have initiated a sale of the restaurant business in August 2011 had he known that SHFA did not support the grant of a new lease given the evidence from OXS was as to what Mr Kazal could, rather than would have done. Such an inference would also be inconsistent with the objective indicators of what OXS would have done had it known that SHFA did not support a new lease, including the past dealings between the parties and, after 2011, OXS’s assertion of its rights to a legally binding agreement, its seeking the Minister’s intervention and its pursuit of its claim through legal proceedings: [268].

17   Costs: There was no error in the House v King sense in the primary judge’s finding that there is no basis to make a Bullock order requiring SHFA to indemnify OXS for the costs it had been ordered to pay to the Minister: [272] – [278].

House v The King (1936) 55 CLR 499

Judgment

1. MACFARLAN JA: I agree with the orders proposed by Gleeson JA and with his Honour’s reasons, save that I do not express a view on the point concerning ministerial consent on which his view differs from that of Leeming JA. The point is a difficult and important one and would better be dealt with definitively in a case in which it was of determinative significance and the subject of fuller argument than has occurred in the present case.

2. GLEESON JA: This appeal concerns a dispute arising from an exchange of letters in February 2011 regarding an extension of an existing lease of premises at 135 George Street, in The Rocks, which the appellant, OXS Pty Ltd (OXS), operated as a restaurant known as “Appetito Pizza & Pasta Bar” (the Premises). The respondent, the Sydney Harbour Foreshore Authority (SHFA), is the owner and lessor of the Premises. SHFA is a statutory corporation established as the successor to the Sydney Cove Redevelopment Authority: Sydney Harbour Foreshore Authority Act 1998 (NSW) (SHFA Act), cl 13 of Sch 5 and s 10.

3. In February 2014, OXS commenced proceedings against SHFA and the Minister for Planning and Infrastructure, who had ministerial responsibility for the operations of SHFA. OXS contended that a binding contract was concluded in February 2011 for an agreement for lease of the Premises for a term of ten years commencing 1 July 2011 and terminating on 30 June 2021, being a contract in respect of which OXS made a claim for specific performance. SHFA denied this, saying that no contract was concluded or that any contract was too uncertain to be binding. Alternatively, OXS relied upon an estoppel to the same effect, which SHFA also denied.

4. Separately to its contract and estoppel cases, OXS contended that SHFA had engaged in misleading and unconscionable conduct in contravention of the provisions of the Australian Consumer Law (Competition and Consumer Act 2010 (Cth) Schedule 2), ss 18, 20 and/or 22, or the Retail Leases Act 1994 (NSW), ss 62D or 62B, and claimed damages against SHFA. These claims were denied by SHFA.

5. As against the Minister, OXS sought judicial review under s 69 of the Supreme Court Act 1970 (NSW) in respect of the alleged decision of the Minister to refuse to consent to the new lease of the Premises, as notified to OXS by SHFA in a letter dated 23 August 2011.

6. Pursuant to directions made by Rothman J on 25 March 2014, the question of liability was separated from that of quantification of damages. The primary judge proceeded upon the basis that the hearing was directed only to the question of liability, including the identification of the basis or heads of damage that might have been suffered by OXS.

The judgments below

7. In a series of three judgments, the primary judge (Black J) rejected all of OXS’s claims against SHFA, except for two misrepresentations. His Honour also rejected OXS’s claim against the Minister for judicial review.

8. In his principal reasons given on 26 August 2014, the primary judge found that there was no contract for an agreement for lease of the Premises and held that the other claims for relief against SHFA failed, with the exception of two representations made by SHFA to OXS in letters dated 23 August 2011 and 2 August 2012. These letters were found to be misleading or deceptive because the Minister had not in fact indicated that he would not consent to a new lease. His Honour found that the only head of damage established by OXS was the possibility of wasted expenditure in reliance upon the misleading conduct of SHFA, at least on a loss of opportunity basis. His Honour invited further submissions as to whether this claim for damages, which was in the order of $14,000, should be referred to a referee. His Honour dismissed the claim against the Minister and ordered OXS to pay the Minister’s costs of the proceedings as agreed or assessed: OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1174 (the principal judgment). (Unless otherwise stated, references below to his Honour’s reasons may be taken to be a reference to the principal judgment.)

9. In a second judgment given on 19 September 2014, the primary judge dealt with the question of relief: OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1284 (the relief judgment). His Honour found that the declarations proposed by OXS with respect to the misleading conduct by SHFA were either inappropriate or of no utility. His Honour made the following order by consent.

All claims of relief within the Statement of Claim are dismissed except for the relief claimed in paragraphs 21, 22, 23 and 25 and damages under paragraphs 11 and 15 (but only under s 62D of the Retail Leases Act 1994 (NSW)) in a sum less than $14,038: at [2] of the relief judgment

(The claims for relief in paragraphs 21, 22, 23 and 25 of the Statement of Claim related to interest and costs.)

10. On 5 November 2014, the primary judge made orders dismissing all remaining claims for relief (being the claims for damages under the Australian Consumer Law and the Retail Leases Act) and reserving the question of costs. His Honour also noted (on a no admissions basis) the agreement between OXS and SHFA that OXS’s damages claim had been compromised on the basis that SHFA pay $8,000 to OXS.

11. In a third judgment given on 1 December 2014, the primary judge dealt with costs, and ordered OXS to pay SHFA’s costs of the proceedings as agreed or assessed: OXS Pty Ltd v Sydney Harbour Foreshore Authority and Minister for Planning and Environment [2014] NSWSC 1702 (the costs judgment).

12. OXS has appealed from his Honour’s decisions so far as they concern SHFA. There is no appeal against the dismissal of the proceedings against the Minister.

Background to the Dispute

13. An outline of the circumstances giving rise to the dispute follows. It will be necessary later to consider certain facts in more detail.

SHFA

14. The land which is vested in SHFA is classified as either the “foreshore area” (being the land described in Schedule 1 to the SHFA Act: s 5), or “core land” (which is that part of the “foreshore area” described in s 6 of the SHFA Act). For the purposes of this appeal, OXS accepted that the Premises were situated on “core land”.

15. The functions of SHFA include to develop and manage “core land”: s 12(2). SHFA has no power to dispose of core land except in limited circumstances and with the authority of the Minister: ss 19(1) and 19(2). Under s 19(3) of the SHFA Act, SHFA may, with the consent of the Minister, and, subject to such conditions as the Minister thinks fit, lease or grant licences in respect of “core land”. The effect of subsection (4) is that ministerial consent is not required for a lease or licence for a term that does not exceed 5 years (including the term of any further lease or licence that may be granted under an option).

16. The management of SHFA is vested in a board (s 29) and a chief executive officer (s 30). The CEO is responsible for the day-to-day management of the affairs of the Authority in accordance with the specific policies and general directions of the Board. Any act, matter or thing done in the name of, or on behalf of, SHFA by the chief executive officer is taken to be done by SHFA: s 30(2). At the time of the February 2011 correspondence, the chief executive officer (the CEO) of SHFA was Mr Warwick Watkins.

17. SHFA is subject to the control and direction of the Minister (s 28). At the periods relevant to this dispute, the Minister for Planning and Infrastructure (the Minister) had ministerial responsibility for the operation of SHFA. The Hon Mr Anthony Kelly was the relevant Minister from December 2009 to March 2011 while the Hon Mr Brad Hazzard was the relevant Minister from April 2011 to April 2014.

Earlier leases of the Premises to OXS

18. OXS took possession of the Premises in December 1996 following an assignment of lease of the Premises pursuant to a deed dated 4 December 1996. Since then, OXS had been the lessee, except for a small period in which it had surrendered the lease following a fire at the Premises in 1997. It is unnecessary to refer to the detail of the earlier leases, which his Honour set out at [5] – [12], other than to note three matters.

19. First, when OXS originally took possession of the premises, it obtained a six-month extension of the term of the existing five-year lease due to expire on 30 September 1997, by a variation of lease dated 4 December 1996 between the Sydney Cove Redevelopment Authority and OXS. The deed of variation was registered. At the same time, pursuant to a deed of licence between OXS and Sydney Cove Redevelopment Authority, OXS was granted a licence to use the courtyard adjoining the restaurant. The permitted use under the licence was specified as “a courtyard forming part of the Restaurant, for the consumption, but not the preparation, of food and liquor to patrons of the Restaurant”.

20. Secondly, after OXS surrendered its lease in July 1997 to allow the Sydney Cove Redevelopment Authority to conduct repairs to the Premises following the fire, it did so on terms that it would be granted a new 10 year lease with a 5 year option conditional on OXS conducting all the works necessary to fit out the Premises again for use as a restaurant and bar. The terms of that agreement were recorded in an agreement for lease dated 14 April 1998, which attached a proposed form of lease as an annexure to that agreement.

21. Thirdly, following the refurbishment works carried out by OXS in 1999, OXS entered into a registered lease with SHFA on 4 February 2001 (the 1999 lease). The 1999 lease provided for a commencement date of 1 July 1999, a terminating date of 30 June 2009 and 5 year option to renew, with alternating CPI and market rent reviews each year and provision for turnover rent. Following the exercise of its option to renew in 1999, OXS entered into a further registered lease with SHFA on 4 March 2010 (the 2009 lease). The 2009 lease provided for a commencement date of 1 July 2009, a terminating date of 30 June 2014, alternating CPI and market rent reviews each year and also made provision for turnover rent.

22. During 2010, OXS undertook substantial maintenance and upgrade works at the Premises at a cost of about $300,000. It was at this time that the name of the restaurant was changed to “Appetito”.

23. It is necessary at this point to refer to certain lease policies which were issued by SHFA in 2008 and 2009, as they provide the context for what occurred later in 2010 and early 2011.

SHFA – lease expiry and renegotiation policies – 2008 and 2009

24. In June 2008, SHFA’s board approved a Lease Expiry Policy, following the issue of certain guidelines by the Independent Commission Against Corruption (ICAC) in May 2006 for managing risks in direct negotiations. That policy emphasised that there was no automatic right for any existing tenant to have their lease renewed and provided that, for retail leases, SHFA would not consider a lease renewal any earlier than 12 months before the existing lease expiry date, or as stipulated by the Retail Leases Act.

25. On 9 June 2009 in response to approaches by a number of lessees in The Rocks who sought to renegotiate their existing leases, SHFA issued the Rocks Lease Renegotiation Policy. The Policy, which was expressed to have effect until 30 September 2010, set out the principles and key criteria for direct negotiations with existing lessees. The Policy stated that SHFA retained absolute discretion in determining whether it would renegotiate a lease with an existing lessee. Appendix A to the Policy was a form of Request to Renegotiate an Existing Lease in the Rocks. It seems that on 30 June 2009 SHFA received such a request signed by the solicitor for OXS. SHFA informed OXS by letter dated 7 July 2010 that it had considered the expression of interest by OXS in renegotiating its existing lease in response to the Rocks Lease Renegotiation Policy, but decided not to renegotiate OXS’s existing lease at that time. However, SHFA indicated that it was willing to consider OXS’s existing lease under the Lease Expiry Policy “at the appropriate time”. The “appropriate time” was a reference to the 12 months before the lease expiry date.

26. In late 2010 or early 2011, a meeting took place between Mr Karl Kazal, Mr Charif Kazal and Mr Watkins (Mr Karl Kazal is the sole director of OXS). There was some conflict in the evidence as to the precise terms of the discussion. Ultimately nothing turns upon this. In response to a request by Mr Karl Kazal for a longer term for the lease, Mr Watkins invited Mr Kazal to put a proposal to SHFA.

OXS’s request for an extension of the 2009 lease

27. On 28 January 2011, Mr Karl Kazal wrote to Mr Watkins requesting an extension of the 2009 lease by 10 years with an option to renew for a further 5 years. Mr Watkins raised internally within SHFA a different proposal, namely, extending OXS’s lease for an additional 7 years from the date its current lease expired on 30 June 2014, being equivalent to a further 10 years from 1 July 2011. Mr Watkins suggested this possibility to Ms Garrick (SHFA’s General Manager) and Mr Robert Noble (SHFA’s Manager, Property and Leasing). Ms Garrick was opposed to this course. She sought external legal advice to seek to persuade Mr Watkins not to proceed with such a proposal. Ms Garrick’s view was that it was not appropriate to extend the lease to OXS without going to the market or to open tender.

28. On 15 February 2011, SHFA received advice from its external solicitors recommending against the grant of a new lease to OXS. The advice also recommended that SHFA allow that lease to expire and then test the market. Mr Watkins accepted in his evidence that he was advised of the substance of that advice, although he disputed receiving a copy of it.

29. Mr Watkins gave evidence that following receipt of the letter from OXS on 28 January 2011 requesting a 10-year extension of the lease, he met with Minister Kelly. In this meeting he discussed a number of issues, including that he had met with representatives of OXS and discussed issues of concern in relation to the Premises. Mr Watkins’ affidavit recorded that the following conversation took place:

Watkins: "… I have met with the representatives of OXS and discussed the issues of concern. I also discussed the issues with the executives of SHFA and believe the outstanding matters can be resolved by the offer of a new 10 year lease on commercial terms and subject to resolution of some matters of concern to SHFA. That will give OXS 7 years from the end of its current lease."

Minister Kelly: "Yes, proceed."

30. Mr Watkins did not, however, specify the date of that meeting in his affidavit.

31. Mr Watkins’ evidence was that he told Ms Garrick about this meeting with Minister Kelly and the substance of what was discussed. Ms Garrick conceded in cross-examination that such a conversation may have occurred but she could not remember it happening.

The February 2011 correspondence

32. On 23 February 2011, Mr Watkins wrote to OXS in response to the request for an extension of its lease (the February letter) in the following terms:

Thank you for your letter of 28 January 2011 regarding an extension of your lease at 135 George Street, The Rocks.

Sydney Harbour Foreshore Authority is prepared to offer you a new ten year lease commencing 1 July 2011 on commercial terms at the prevailing market rate, provided that:

●    a development application is lodged with the City of Sydney to formalise the outdoor seating at the rear of the premises

●    an outdoor seating licence for the rear of the premises is entered into with the Authority which provides that turnover from this area will form part of the turnover of the premises

●    the current lease is surrendered in favour of the new ten year lease.

If you wish to proceed with a new lease on this basis please contact the Authority's Acting Group Manager, Property, Robert Noble on 02 9240 8729. [Emphasis added]

33. OXS responded, by letter dated 28 February 2011, accepting the conditions set out in the February 2011 letter and purporting to accept the offer made in that letter, stating:

As we look forward to concluding this matter as soon as possible, please advise when the new lease will be made available for review.

Events subsequent to the February correspondence

34. In late July 2011, SHFA sought advice from its external solicitors concerning Mr Watkins’ dealings with Mr Kazal in relation to the Premises, including the February correspondence between OXS and SHFA in addition to earlier correspondence. This followed Mr Watkins being stood down in March 2011 from his position as CEO of SHFA due to a pending investigation into other matters unrelated to SHFA. Mr Haddad, the Director-General of the relevant Department (then known as the Department of Planning and Infrastructure), took over as the CEO of SHFA.

35. SHFA’s solicitors provided initial advice late on 2 August 2011, which was updated on 3 August 2011. That advice described the February correspondence as “proposals”, advised that no binding agreement had been formed and stated that ministerial consent was required for a binding agreement. The advice also recommended the terms of the communication to be made to OXS should the Minister decide to withhold his consent to a new lease.

36. On 10 August 2011, SHFA prepared a ministerial briefing note for the then Minister, Mr Hazzard. That note attached a copy of the legal advice obtained by SHFA, but did not ask the Minister to decide whether to withhold his consent to a lease over the Premises. The briefing note was marked “for your information” and advised that SHFA proposed to inform OXS that SHFA would withdraw its “offers” in respect of two properties, including the Premises, and stated that SHFA “will advise the Kazals accordingly”. The Minister signed that briefing note, recording his comment as:

I have noted the legal advice. SHFA is not to offer any compensation unless first approved by me.

37. It was ultimately common ground at trial on 16 August 2011 that the Minister did not then make any operative decision.

23 August 2011 SHFA letter

38. On 23 August 2011, SHFA sent a letter to OXS which stated that, following a review of the leasing file for the Premises, the Minister “has indicated he will not consent to the proposed new lease”. The letter continued:

Accordingly the Authority must now withdraw its offer and the current lease will continue until its expiry in June 2014.

39. His Honour did not accept OXS’s characterisation of this letter as part of a “false and misleading charade that the Minister was to blame” for the withdrawal of the “offer” made in the 23 February letter. Rather, his Honour found that the letter was “at best” imprecise, because while the Minister had not been asked to and had not indicated that he would not consent to the proposed lease, he had been asked to note, and had noted, SHFA’s intention to withdraw the “offer” of the lease: at [37].

40. On 15 September 2011, the solicitor for OXS responded to SHFA by letter asserting that the February 2011 correspondence constituted “an Agreement For Lease which is enforceable by my client”. The letter also asserted that OXS “has acted to its detriment in furtherance of the D/A condition attaching to that agreement”.

41. In an email sent on behalf of Mr Karl Kazal to SHFA dated 21 September 2011, Mr Kazal asserted that, on the basis of “the letter extending our tenure for a further period of 10 years, we undertook further expenditure which we cannot expect to recover over the shorter term of our current lease.” The email continued:

We find it astonishing that an agreement can be reached for a further term, we then expend significant sums on the property based on that agreement and now SHFA purports to walk away from that agreed position.

42. His Honour found that OXS had spent approximately $14,000 after the date of SHFA’s February letter, although it had previously spent a much more substantial amount in the order of $300,000 in 2010 before that letter had been received. His Honour observed that the reference in the email to “SHFA purports to walk away” suggested that Mr Kazal understood that SHFA had altered its previous position by that time, and the position taken by Mr Kazal in that email was not wholly consistent with the position he took in evidence (that he understood SHFA continued to support the lease although the Minister did not): at [40].

26 September 2011 SHFA letter

43. SHFA responded to OXS by letter dated 26 September 2011, emailed on 27 September 2011, advising that the Minister “will not consent to the lease arrangement proposed”. The letter noted that the current lease would continue until its expiry on 30 June 2014 and foreshadowed “discussing your options in the normal process prior to lease expiry”.

2 August 2012 SHFA letter

44. In mid-2012, OXS engaged a third party to approach the Minister to ascertain why Ministerial consent had been withdrawn. Following OXS’s approach to the Minister through an intermediary, SHFA sent a letter to OXS dated 2 August 2012 which stated that:

• in mid-2011, the Minister indicated that he would not consent to the proposed new lease;

• the existing lease would continue until its expiry in June 2014;

• a DA for outdoor seating at the rear of the premises in Nurses Walk had not been lodged with the City at Sydney, in spite of this space being operated daily, and requested that OXS advise the Authority in writing within 14 days of how it would address this matter;

• should a DA be approved, OXS would need to enter into discussions with the Authority for an outdoor seating licence; and

• the Authority would not enter into any negotiations for a new lease until the outstanding matter of outdoor seating has had been resolved.

45. His Honour did not accept Mr Kazal’s evidence of his understanding that the 2 August 2012 letter caused him to believe that SHFA supported a new lease: at [42].

46. On 29 August 2012, SHFA sent a letter to OXS advising that any proposed new lease of the Premises would be assessed in accordance with the Lease Expiry Policy which required substantial capital expenditure on premises for extended lease terms of up to 10 years to be considered. A copy of the policy was attached. The letter reiterated that SHFA would not enter into any negotiations for a new lease until the outstanding matter of outdoor seating had been resolved.

47. In August 2012, OXS re-engaged BBC Planners to prepare a development application for the outdoor seating area. It is unnecessary to refer to the detail relating to this application. It is sufficient to note that on 4 October 2012, Mr Kazal delivered the development application to SHFA and requested that SHFA “urgently sign the landowner’s Consent and return the application urgently”. In mid-October 2012, SHFA gave notice of amendments that it required to the outdoor seating plan. Mr Shillito, from BBC Planners, requested a survey plan of the area from OXS. None was provided. The process continued from late November 2012 and into the first half of 2013. On 30 May 2013 the signed development application was lodged with City of Sydney Council and development consent was issued on 23 September 2013.

48. On 25 November 2013, SHFA and OXS entered into a new deed of licence in respect of the courtyard. This provided by cl 8 that the licence was interdependent with OXS’s occupation of the Premises.

49. On 20 December 2013, the solicitors for SHFA sent a letter to OXS advising that SHFA did not propose to offer a renewal of the lease. The letter stated that the 2009 lease would expire on 30 June 2014 and OXS should vacate the Premises by that date. OXS has been holding over in the Premises since the expiry of the 2009 lease pending the determination of these proceedings.

Issues on appeal

50. The amended notice of appeal filed 9 January 2015 contained 26 grounds of appeal, some of which are connected. The grounds which were pressed may be conveniently grouped into three parts, generally along the lines adopted by Counsel for OXS in oral argument.

51. First, there are questions relating to whether there was a concluded agreement for lease and whether specific performance is available, or alternatively, the measure of damages, if a contract is established (grounds 1 - 4, 9, 11 and 26).

52. Secondly, and related to the first issue of a concluded agreement, there are questions relating to the requirement for ministerial consent for a lease, including the effect of non-compliance if consent is required but not given before any agreement for lease is entered into (grounds 6, 7, 8 and 10). Counsel for OXS accepted that the ministerial consent issues only arose if OXS successfully established on the first issue that there was a concluded contract.

53. Thirdly, there are questions relating to the claims for misleading or deceptive conduct (which failed before the primary judge), and causation of loss. OXS asserted that it lost the opportunity to sell the business at the Premises in 2011 (grounds 13-17). Related to these questions are challenges to a number of factual findings concerning the evidence of Mr Karl Kazal and Mr Noble (grounds 21-25). There is also a challenge to his Honour’s decision not to make a declaration in accordance with his finding that SHFA’s 23 August 2011 letter was misleading or deceptive (ground 12).

54. OXS did not press its grounds of appeal relating to estoppel (ground 20) and unconscionability (grounds 18 and 19) if the appeal failed on the misleading or deceptive conduct grounds (relating to SHFA’s letters of 23 August 2011 and 2 August 2012 - grounds 15 and 16, which were the subject of oral argument). Nor did OXS press ground 5, which asserted that the Premises were not situated on “core land”. That concession was properly made having regard to the way in which OXS had conducted its case at trial.

Issue 1: Was there a concluded agreement for lease?

55. At trial, OXS claimed that there was an agreement for lease constituted by the exchange of letters in February 2011. The primary judge gave two reasons for finding that there was no binding agreement for lease. The first was that the parties did not intend to make a concluded contract because the February letter was not an offer capable of acceptance and was instead merely an indication of a preparedness on the part of SHFA to offer to grant a new lease: at [52] - [57]. Alternatively, his Honour found that there was a lack of certainty as to the terms of the alleged agreement, particularly a lack of precision surrounding the use of the expression ‘commercial terms’ in the February letter: at [59] - [65].

56. OXS challenged these findings and contended that his Honour erred in failing to find that a binding agreement for a lease had been reached between the parties (ground 1); in finding that the February correspondence was not sufficiently certain to have contractual effect (ground 2); in his construction of the exchange of correspondence (ground 3); and in not considering, or inadequately considering, whether the correspondence was an agreement of the type of the so-called fourth class of Masters v Cameron [1954] HCA 72; 91 CLR 353 at 360 (ground 4).

Intention to Contract

The primary judge’s reasons

57. The primary judge recorded (at [52] – [53]) the parties’ competing contentions as to whether the exchange of the February correspondence gave rise to a concluded agreement, as OXS contended, within the first or fourth class of cases in Masters v Cameron, or as SHFA contended, no more than an invitation to treat within the third class of cases in Masters v Cameron (at 360) (see also Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 (McLelland J, as his Honour then was), affirmed in GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634-635).

58. His Honour accepted that there were matters capable of supporting each of the competing positions: at [54]. He noted that the term “offer” was not used in the February letter in isolation but as part of the phrase “prepared to offer”, and in the context of the three identified conditions: at [54]. He referred to Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd [1995] NSWCA 166; 7 BPR 14,551 at [14,570], where Kirby P emphasised that the relevant question is how the words are to be interpreted in their context and, in the light of the correspondence, viewed as a whole. His Honour also referred to ANZ Banking Group Ltd v Ciavarella [2003] NSWCA 304 at [33], where this Court held that the words “prepared to offer” had effect, in their context, as a contractual offer. He distinguished the use of the words “prepared to offer” in the present case, reasoning (at [54]):

Nonetheless, it seems to me that the words ‘prepared to offer’ in the February 2011 letter, in the context of the specified conditions that are to be satisfied in the future and the lack of specificity of the terms of the proposed agreement, are to be distinguished from the word ‘offer’ standing alone and contemplate that an offer, in the contractual sense, would be made at a future date, once the relevant conditions were complied with.

59. At [56] his Honour found that no agreement had been reached between the parties as to the amount of the “prevailing market rent” referred to in the February letter and that no mechanism had been agreed to resolve any dispute about that question. He continued (at [56]):

In my view, the number of issues that had not been addressed between the parties, including matters such as any special terms of the lease; the amount of the initial rent payable or the mechanism by which it was to be determined; the turnover rent provisions and the terms of the rent review provisions is one factor suggesting that the parties did not intend the February 2011 letter to have binding effect, particularly where (as I will note below in respect of the question of certainty) the reference to ‘commercial terms’ was not sufficiently precise to resolve those questions.

60. At [57] his Honour characterised the three conditions in the February letter as also supporting the view that SHFA was indicating what it was “prepared” to do, that is, make an offer after those conditions were satisfied, rather than intend to be immediately bound. He observed that the contrary view would have the result that SHFA was immediately bound to an agreement for lease on the terms of that letter, unless or until a fuller document was executed, even though the February letter did not in terms impose any obligation on OXS to satisfy the stated conditions within any specified time and, even if it had done so, it would have left SHFA to a claim for damages that might be difficult or impossible to establish for any failure to do so. That result, in his Honour’s view, would have been inconsistent with the circumstances then known to both parties, including that SHFA had expressed continuing concerns as to OXS’s use of the outdoor area without a development application or licence.

Submissions

61. OXS’s primary submission is that his Honour did not consider whether the February 2011 correspondence gave rise to an immediately binding agreement of the type described as the fourth category of Masters v Cameron.

62. OXS further submitted that his Honour erred in distinguishing the words “prepared to offer” from the word “offer” standing alone. OXS submitted that those words contemplated an immediate offer. OXS complained that his Honour’s construction of the words “prepared to offer” in the February letter was inconsistent with the interpretation given to similar words in ANZ v Ciavarella.

63. OXS referred to the commercial context of the February correspondence, being a proposed extension of a lease on the same conditions, and submitted that his Honour gave insufficient weight to that context, including the dealings between Mr Kazal and Mr Watkins, the discussions between Mr Watkins and Minister Kelly, the authority of Mr Watkins as CEO of SHFA, and that SHFA had never challenged OXS’s unequivocal acceptance of the February 2011 letter.

64. OXS also submitted that his Honour failed to take into account the subsequent conduct of the parties which evidenced the existence of a binding agreement for lease: Brambles v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 at [25]. Reference was made by OXS to the communications concerning the outdoor seating licence, the steps taken by OXS to obtain that licence, OXS refraining from selling the restaurant business and SHFA’s omission to inform OXS of any issue with the agreement until its asserted repudiation by letter on 23 August 2011. Further, OXS submitted that the terms of SHFA’s letter withdrawing the offer were said to be consistent with SHFA’s view that an offer had been made.

65. OXS submitted that his Honour erred in finding that the term ‘commercial terms’ in the February letter lacked precision and that this was either an indication that the parties did not immediately intend to be bound or, alternatively, a reason why the agreement for lease would fail for lack of certainty.

66. There is no issue as to the relevant principles; the dispute concerns the application of well-established principles to the facts. It is desirable, however, to say something briefly about those principles.

Relevant principles

67. First, it is necessary to bear in mind the distinction between the issues of contractual intention on the one hand and completeness or uncertainty on the other hand. Thus, whether parties intend to make a concluded contract and intend to be bound immediately by their communications, or whether they only intend to be bound once a more formal agreement has been executed, is a separate issue to the question of completeness or uncertainty; that is, whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548. Nonetheless, the two questions are often related because similar evidence is usually looked at when determining each. An intention to be bound will be less likely to be found “the more numerous and significant the areas in respect of which the parties have failed to reach agreement” are: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 548 (Gleeson CJ).

67. Secondly, the High Court in Masters v Cameron at 360 explained that cases of the present type may belong to one of three classes:

1. Where the parties have reached final agreement on the terms of their contract and agree to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document;

2. Where the parties have reached final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract;

3. Where the parties intend there not to be a concluded contract unless and until a formal document is executed.

69. Thirdly, it is well-accepted, as McLelland J explained in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd at 628, that there is a so-called fourth class of case additional to the three mentioned in Masters v Cameron, as recognised by Knox CJ, Rich J and Dixon J in Sinclair, Scott & Co v Naughton [1929] HCA 34; 43 CLR 310 at 317, namely, “one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.”

70. As mentioned above at [57], this Court affirmed McLelland J’s decision in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd. Importantly, McHugh JA said (at 634):

[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 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. Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. [citations omitted]

71. Fourthly, it has been said that where the contract in question is of a commercial nature, the Court should adopt a commercial approach so that everything that can be done is done to give effect to an agreement which business people would assume would be fulfilled: Custom Credit Corporation Ltd v Cenepro Pty Ltd (NSWCA, 7 August 1991) (Kirby P, Mahoney JA agreeing). Nonetheless, “taking a realistic approach does not mean abandoning contractual principles altogether so that the Court will not go to unacceptable lengths to do what, in truth, the parties should have done for themselves”: Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd [1989] ANZ Conv R 548 at 554 (Young J, as his Honour then was).

Application of the principles to the present case

72. The primary judge expressly referred (at [52]) to OXS’s contention that the agreement for lease formed by the exchange of correspondence fell within the first or fourth class of case in Masters v Cameron as explained in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd. Each of those classes involves an intention to be immediately bound. The reasons given by his Honour make clear that his finding that there was no intention to be immediately bound covered both of those classes of case. There is no merit in OXS’s contention that his Honour did not consider the so-called fourth class of case identified by the High Court in Sinclair, Scott & Co v Naughton. Ground 4 should be rejected.

73. Contrary to grounds 2 and 3, his Honour did consider whether the use of the words “prepared to offer” in the context of the February letter was inconsistent with a contractual offer. As already mentioned, his Honour distinguished ANZ v Ciavarella, where the words “prepared to offer” were held, in context, to reflect an intention to be bound immediately for the reasons given at [54] (set out in [58] above). There is no error in his Honour’s reasoning.

74. Unlike the context of the use of the words “prepared to offer” in ANZ v Ciavarella, here the context supported the opposite conclusion. The commercial context and prior dealings of the parties strongly pointed to the parties only intending to be bound by the terms of a formal lease in registrable form. A formal written contract offered advantages to both parties as against a less formal exchange of correspondence, having regard to the subject matter of the contract (a lease of land and a licence of the outdoor area) and the character of SHFA as lessor (being a statutory authority which required ministerial consent to lease the land for longer than 5 years). All previous leases of the Premises were recorded in formal documents executed by the parties in registrable form containing a full expression of their contractual intention. In my view, it is inherently unlikely that the parties intended to bind themselves by an informal consensus in the February correspondence.

75. Further, the lack of specificity of the terms of the proposed agreement was a significant factor which supported his Honour’s conclusion that there was no intention to be immediately bound. The matters that had been left for later agreement were significant and included any special terms, the initial rent, turnover rent and rent review provisions. OXS sought to overcome this difficulty by pointing to the commercial background from 1998 onwards in which the parties renewed earlier leases on similar terms.

76. However, the language of the February letter did not refer to the ‘same terms’ – it used the words ‘commercial terms’. It is not to the point that OXS and SHFA were each commercial parties used to negotiating on the terms of earlier leases. The reference to ‘commercial terms’ was significant. These words reserved for SHFA the possibility of proposing terms other than the same terms of the existing lease, particularly in relation to crucial matters such as rent (a market rate), rent reviews and turnover rent.

77. It should be accepted, as the primary judge found, that the words ‘commercial terms’ involved a lack of precision which indicated that the parties were not intending to be immediately bound. That SHFA used such broad language was consistent with SHFA wanting to leave the terms of any future lease to be decided later after further negotiation. Similarly, OXS’s request that it be provided with a draft of the new lease ‘for review’ indicated that it reserved for itself the right to require changes to any draft lease submitted by SHFA.

78. There is a further matter which points to the conclusion that the parties did not intend to be bound by any informal consensus. The February letter concluded by inviting OXS to telephone Mr Noble of SHFA. That points to the prospect that further significant discussion was to take place before the parties intended to be bound by any agreement.

79. Pan American World Airways Inc v Commonwealth of Australia (1977) 7 BPR 15,145 involved an occupier of space at the international terminal at Sydney Kingsford Smith Airport. This Court (Moffitt P, Reynolds and Samuels JJA) found that it was plain that the parties ultimately intended to execute a formal deed of lease and (unlike the present case) that they had come to an agreement on all the terms upon which the owner should grant, and the other party should take, a lease of the premises. The Court held that the case fell within the third class of cases in Masters v Cameron because neither party intended to bind itself save upon execution of a formal lease.

80. The Court referred to aspects of both the subject matter and surrounding circumstances material to this question. These included the status of the parties (a leading international air carrier and a department of the Commonwealth Government) and that they were negotiating a lease of a not inconsiderable area at a substantial rent. The Court accepted that it was legitimate in approaching the construction of the parties’ correspondence which “contained phrases and expressions of doubtful significance” (adopting the language of Lord Greene MR in Clifton v Palumbo [1944] 2 All ER 497 at 449) to bear in mind the probability of the parties contemplating the consummation of a final and enforceable bargain short of the execution of the formal document which they both proposed to sign. Nevertheless, the Court continued by observing (at [97629]):

“The subject matter of a contract or the character of its parties or of a party may be such that a formal written contract offers such advantages as against a less formal agreement that, when it appears that the parties in fact contemplated the execution of a formal contract, it is inherently unlikely that they mutually intended to bind themselves by some earlier informal consensus. The disadvantages of having to depend upon the uncertainties inherent in informality, providing as they do fertile fields for dispute as to the existence of the contract or as to its terms where the rights of the parties have to be spelt out of conversations or correspondence or both, may assume substantial significance in some classes of contract or for some types of parties. This usually will be true of complex transactions such as a major construction project or a leasing transaction, such as the present one, involving provisions for change of areas leased and of conditions as to rent and otherwise during the term. It will also usually be true of a party whose operations are administered by a complex of persons and departments with different levels of authority, as in the case of governments, governmental bodies or large corporations. The practice of such bodies of entering into contracts of any substance by way of a formal contract is itself no formality. While an officer of the body of corporation may have substantial authority, including express authority to negotiate the terms of the contract and, arguably, by reason of his rank, implied authority to contract, the making of the contract by the formality contemplated may repose in more senior officers or a Minister the ultimate control of and the responsibility for the transaction and at the same time give the contract and its terms the certainty and notoriety desirable for its sure implementation. Hence, in such cases, it will not ordinarily be reasonable to infer that the parties, while contemplating a formal contract, intend to bind themselves prior to its execution.”

81. SHFA submitted that the present case is closer to Pan American World Airways Inc v Commonwealth of Australia than ANZ v Ciavarella. I agree. Here, the status of the parties, in particular SHFA as a statutory authority, the practice of the parties entering into earlier contracts by way of formal leases in registrable form, and the disadvantage to both parties inherent in informality, particularly with respect to the critical commercial terms of a new lease which had been left to be negotiated in the future (including the initial rent, turnover rent and rent review provisions, and the unresolved terms of OXS’s use of the outdoor area), all point to the parties not intending to bind themselves before a formal contract.

82. Finally, the reliance by OXS on post-contractual conduct by SHFA as evidence of the fact of an agreement for lease is misplaced. None of the matters identified by OXS are of a character that necessarily leads to the inference of there being a binding agreement. They are equally referable to OXS attempting to put itself in an eligible position to receive an offer of a new lease from SHFA upon satisfaction of the conditions stated in the February 2011 letter.

83. I conclude that OXS has not demonstrated error in his Honour’s finding that the parties did not intend to enter into a binding agreement for lease in terms of the February correspondence.

Contractual certainty

The primary judge’s reasons

84. The primary judge addressed the issue of uncertainty as an additional reason why there was no concluded contract. He recorded OXS’s contention (at [58]) that there was no necessity for the February 2011 correspondence “to descend into levels of detail about esoteric terms and conditions” because the parties were commercial persons who had dealt with each other in respect of the Premises on the same terms for 15 years and that there was no evidence to suggest the existing lease was not on commercial terms.

85. His Honour identified two difficulties with this contention. The first is that the premise of OXS’s case was that a proposal for a lease on ‘commercial terms’ was an offer for a lease on the terms of the 2009 lease, amended to commence in 2014. His Honour rejected this premise, finding that SHFA could have – but did not – offer to grant a lease on the same terms as the 2009 lease, except as to starting date and term, and further that OXS’s purported acceptance, as mentioned above, appeared to reserve a right to comment on the terms of the proposed new lease: at [59].

86. The second and related difficulty is that the range of terms which may properly be described as ‘commercial terms’ is wide, and that even if a proposal to offer a lease on ‘commercial terms’ was intended to have contractual effect, his Honour found that it would not be possible to determine that any lease in particular satisfied that requirement to the exclusion of an equally commercially reasonable but different lease: at [60].

87. His Honour illustrated this second difficulty with three examples. One concerned the provision of the bank guarantee for rent (at [60]), the second concerned the appointment of a head chef (at [61]) and the third concerned turnover rent and rent reviews (at [61]). The significance of these examples, in his Honour’s view, was that a range of possible negotiated outcomes on any of these issues may have been a contract on ‘commercial terms’.

88. His Honour accepted that the Court should construe contracts made by business persons fairly and broadly without being too astute or subtle in finding defects, but should not make a contract for the parties: at [62]. Reference was made to Hillas & Co Ltd v Arcos Ltd [1932] All ER 494; 147 LT 503 at 515. His Honour considered that the reference to ‘commercial terms’ in the February letter had difficulties similar to those in cases where the clause not yet agreed could take many forms, and any change of terms could significantly alter the content of the contract: at [63]. His Honour identified the problem in the present case as being whether it is possible to identify the particular terms of a particular agreement from the range of possible terms that might constitute ‘commercial terms’: at [64].

89. His Honour concluded (at [65]):

It seems to me that the lack of precision in the term ‘commercial terms’ is another indication that the parties did not immediately intend to be bound by the February 2011 letter and its purported acceptance by OXS. If, contrary to my view, that letter would otherwise have had immediately binding effect, it would fail for lack of certainty. [Emphasis added]

Submissions

90. OXS contended that the primary judge had failed to recognise and apply the principle that the court should ordinarily seek to uphold contracts, even if they lack clarity or contain uncertainties. OXS described his Honour’s approach to the lack of precision in the term ‘commercial terms’ as narrow and pedantic, citing the history of the parties’ dealings and arguing the examples of difficulties discussed by his Honour should not be given weight.

Consideration

91. Contrary to OXS’s submissions, the primary judge expressly recognised the principle that courts should ordinarily seek to uphold contracts. As already indicated, his Honour referred (at [62]) to the expression of this principle in Hillas & Co Ltd v Arcos Ltd. Importantly however, his Honour noted the observation in Hillas & Co Ltd v Arcos Ltd that the Court cannot:

… go outside the words [the parties] have used, except in so far as there are appropriate implications of law, as for instance, the implication of what is just and reasonable to be ascertained by the Court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail.

92. The authorities recognise that there are various kinds of uncertainty; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 134-136 (Kirby P). As Mahoney JA explained in Custom Credit Corporation Ltd v Cenepro Pty Ltd, a contract may be uncertain because there has been no agreement at all, that is, there is merely an agreement “to agree”, citing Masters v Cameron. It may be uncertain because the agreement arrived at leaves undetermined one of the terms which the law requires specifically to be agreed in order that the contract is valid and enforceable. It may be that one of the terms of the agreement may contain words so vague as to be relevantly meaningless or one of the terms of the contract may assume something that does not in fact exist.

93. In the present case, the attack upon the certainty of the February 2011 correspondence as a contract was primarily directed to the use of the expression ‘commercial terms’. The type of uncertainty alleged to affect the (assumed) agreement for lease was that the agreement was incomplete. Reference has already been made above (at [75] – [77]) to his Honour’s acceptance of the proposition that the February 2011 correspondence was incomplete due to the uncertainty of its terms as affecting an intention to contract. In addition to the matters already referred to, the following observations can be made.

94. Undoubtedly an important contextual circumstance surrounding the February 2011 correspondence is the fact that there was an existing lease in place between the parties and that there had been earlier leases as well. Nonetheless, OXS’s argument that ‘commercial terms’ must have meant “existing terms”, ignored two matters. The first is that it should be accepted, as SHFA contended, that there is a genuine range of possibilities in a leasing transaction that could all be described as “commercial”. The second is, as already mentioned, that the February letter did not refer to the “same terms” which no doubt could have been used if SHFA intended to offer a new lease upon the “existing terms”.

95. Contrary to OXS’s contention at trial, the matters upon which agreement had not been reached in the February 2011 correspondence could not be fairly described as simply a level of detail about esoteric terms and conditions. Here, the matters left for future agreement included an essential term (price), there being neither agreement as to the initial rent, nor agreement on critical terms such as turnover rent and rent reviews. These matters were reserved for future determination by SHFA and OXS: cf Thorby v Goldberg [1964] HCA 41; 112 CLR 597 at 605 (Kitto J).

96. The present case is not one where the parties understood that their correspondence merely provided the possibility of agreement on ‘commercial terms’ but, if no agreement could be reached, that aspect of the agreement for lease simply disappeared. Nor is it a case where the generality and lack of precision in the reference to ‘commercial terms’ can be overcome by resort to either machinery (in the form of some kind of arbitration or valuation) or a formula to resolve the postponed terms. Nor is it possible for a court to simply choose between two equally arguable but mutually exclusive “normal commercial terms”.

97. As his Honour observed (at [64]), the problem in the present case was not whether a particular agreement meets the description of “normal commercial terms”, but whether it is possible in this case to reason in the opposite direction by identifying particular terms of a particular agreement from the range of possible terms that might constitute “commercial terms”. Contrary to OXS’s submission, his Honour’s approach was neither narrow nor pedantic and did not seek to find difficulty when none existed. His Honour correctly recognised the lack of precision in the phrase ‘commercial terms’.

245. OXS claimed that as a result of SHFA’s misleading and deceptive conduct, it lost the opportunity to sell the restaurant business within the three years remaining on its lease, in circumstances where the business will be rendered worthless if OXS fails to obtain specific performance of the alleged agreement for lease. His Honour rejected this claim.

246. At [132], his Honour set out Mr Kazal’s evidence that, if he had known in August 2011 that SHFA were “intent on not granting a new lease” beyond the term of the 2009 lease:

I could have caused OXS in 2011 to sell the business conducted at the Premises, as OXS then still had three years remaining under the [2009 Lease]. OXS has now lost the opportunity to do so by being misled by SHFA as to the basis for refusing to continue with the grant of a new lease. [Emphasis added]

247. His Honour found that the premise of Mr Kazal’s evidence was not established, since SHFA had not taken a position in August 2011 that amounted to a concluded position that it was not “intent on granting a new lease” and would not, for example, negotiate a new lease in the year prior to expiry in accordance with its Lease Expiry Policy: at [132]. In addition, his Honour observed that Mr Kazal’s evidence did not extend to what Mr Kazal would have done, as distinct from asserting that he “could have” initiated by way of a sale process. This was significant because his Honour accepted that there was a substantial inconsistency between Mr Kazal’s evidence as to a sale of the business and his insistence that he believed that he had an enforceable lease and that Minister Kelly had given consent: at [132].

248. His Honour did not accept that OXS would have sought to sell the business had it been informed by SHFA in the 23 August 2011 letter that it did not support the grant of a new lease at the expiry of the 2009 lease: at [134]. His Honour reasoned that the history of OXS’s dealings with SHFA indicated that OXS was ready to assert its position in respect of disputed issues (such as the use of the courtyard and turnover rent payable in respect of the premises). Further, his Honour found that had SHFA advised that it did not support the grant of a new lease at that time, OXS would have done then what it had subsequently done, namely, assert that it had a legally binding lease agreement arising out of the February 2011 correspondence; seek to intervene with the Minister to bring about the grant of a new lease; and then assert its claim by proceedings of the present character. Accordingly, his Honour found that the Ministerial Decision Representation and the Further Ministerial Decision Representation were not causative of any loss that may have been suffered: at [134].

249. OXS did not take issue with his Honour’s approach that the loss of opportunity to sell the business was in the nature of a loss of opportunity claim: at [135]. Nor did OXS challenge his Honour’s summary of the applicable principles by reference to his own decision in Re Colorado Products Pty Ltd.

250. OXS contended, by ground 13, that his Honour erred in finding that OXS had not established it lost an opportunity to sell the restaurant business in 2011 by reason of the misleading and deceptive conduct of SHFA in the 23 August 2011 letter, and the further misleading and deceptive conduct which his Honour ought to have found. The latter conduct may be disregarded in view of the conclusions above (that OXS’s further claims of misleading or deceptive conduct by SHFA have not been established).

251. By ground 14, OXS complained that his Honour erred in taking into account an alleged absence of evidence that the business “could” have been sold in 2011, when that finding involved matters not before the court on a split trial of liability and damages. It should be noted here that the reference in ground 14 to the absence of evidence that the business “could” have been sold in 2011 seems to be an error. Ground 14 should be read as intending to refer to an absence of evidence that the business “would” have been sold in 2011.

Relevant principles – loss of opportunity claims

252. In Malec v JC Hutton Pty Ltd [1990] HCA 20; 169 CLR 638 at 639-640 and 642-643, the High Court drew a distinction, in assessing damages, between proof of historical facts – what has happened – and, proof of future possibilities and past hypothetical situations. The High Court held that the civil standard of proof (on the balance of probabilities) applies to the first category of facts, but not to the second, for the purpose of assessing damages.

253. The context in Malec was the assessment of damages in tort for loss of earning capacity. The same principle applies in the assessment of damages for loss of profits as a consequence of a breach of contract: The Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 88, 104, 116-126; and of contravention of the Trade Practices Act: Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 (Sellars) at 349-355. See FightvisionPty Ltd v Onisforou (1999) 47 NSWLR 473 (Fightvision) at [139].

254. The approach to past hypothetical situations on causation of loss, as distinct from assessment of damages, was considered by this Court in Daniels v Anderson (1995) 37 NSWLR 438 at 527-531. Importantly, as Clarke and Sheller JJA (Powell JA agreeing on this point) explained (at 528-529), the High Court held in Sellars (at 353) that the principles stated in Malec did not apply to the issue of causation where the issue turns on what the plaintiff would have done. In that context, proof on the balance of probabilities applies, notwithstanding that the question is hypothetical: Sellars at 353. On the other hand, damages for the deprivation of a commercial opportunity are to be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued: Sellars at 355.

255. The High Court concluded in Sellars (at 355), on the issue of causation, that ordinarily the plaintiff must prove on the balance of probabilities that he or she has sustained some loss or damage. Where the plaintiff shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value is to be ascertained by reference to the degree of probabilities or possibilities.

256. Applying what the High Court said in Sellars (at 353 and 355), Clarke and Sheller JJA said in Daniels v Anderson (at 530) that:

[The] issue of causation is to be approached upon the basis of proof upon the balance of probabilities with the qualification that an assessment of whether the chance which is said to have been lost had a value is to be made upon the possibilities or probabilities of the case.

257. Daniels v Anderson was an auditor’s negligence case. The issue of causation involved whether the directors would have acted to avert the loss if properly informed by the auditor. The critical questions were identified (at 539A) as whether AWA established that the directors would, if properly informed of the true facts concerning the foreign exchange operation conducted by the manager employed by AWA, have taken the steps set out in their statements and, if so, whether there was a chance that AWA would thereby have avoided or mitigated its losses. This was required to be established on the balance of probabilities. On the other hand, the value of the opportunity (not being negligible) was to be ascertained by reference to the degree of possibilities or probabilities of avoiding the relevant financial detriment.

258. In Fightvision, a breach of contract case, a boxing promoter claimed damages for the loss of opportunity to make profits if Mr Tszyu had boxed professional in bouts promoted or co-promoted by Fightvision for a two-year period. The assessment of damages for loss of the commercial opportunity of promoting or co-promoting fights in which Mr Tszyu participated was assessed according to the degree of possibility or probability of such bouts occurring and bringing earnings as claimed: at [140].

259. In Heenan v Di Sisto and Ors [2008] NSWCA 25, a solicitor’s negligence case, the respondent-clients lost the chance, which would have arisen through advice, to make contracts for the sale of two properties interdependent. In order to establish causation, the clients had to prove on the balance of probabilities that, if properly advised, they would have instructed the appellant-solicitor to do so: at [31]. On the other hand, whether the purchaser would have agreed, and whether it would have completed the contracts, was part of the valuation of the loss of chance to be ascertained by reference to the degree of probabilities or possibilities of obtaining the relevant financial advantage: at [33].

Application of principles to the present case

260. As mentioned, the present case involved a split trial on liability and the assessment of damages. Accordingly, it was incumbent on OXS to establish, on the issue of causation, that had OXS been informed in August 2011 that SHFA did not (at least at that time) support the grant of a new lease (rather than the Minister having indicated he would not consent to it), OXS would have initiated a sale of the business. Sellars also requires that OXS establish, on causation, that the loss of that commercial opportunity had some value (not being a negligible value). His Honour did not need to address that latter question, since the claim by OXS failed because of an absence of evidence of what OXS would have done.

261. On the other hand, the issue of whether a third party would have agreed to buy the business from OXS, and whether a purchaser would have completed that transaction, which would have required obtaining an assignment of the 2009 lease with SHFA’s prior consent as required under cl 2.9 of the 2009 lease, was a matter for the assessment of damage if liability was established. In the present case, that was to occur after the issue of liability had been determined. That assessment, if required to be made, would be approached according to the degree of possibilities and probability rather than on the balance of probabilities.

262. It follows that the complaint in ground 14 should be rejected. His Honour did not err in taking into account on the issue of causation the absence of evidence that the business “could” (or more accurately “would”) have been sold after August 2011 in the sense that OXS would have initiated a sale of the business.

263. Turning to ground 13, counsel for OXS accepted in oral argument, consistently with Daniels v Anderson, that OXS needed to establish on causation that OXS would have sold the business had it been told in the 23 August 2011 letter that SHFA did not support the grant of a new lease.

264. In its written submissions, OXS contended that Mr Kazal gave evidence that this is what OXS “would” have done. This submission does not accurately reflect Mr Kazal’s evidence (set out at [246] above). As his Honour correctly noted, Mr Kazal’s evidence did not extend to what he would have done had he been told in August 2011 that SHFA did not support the grant of a new lease.

265. It can be accepted that such evidence, if it had been given, may be far from conclusive, even from a completely honest witness, because it may be the result of unconscious reconstruction affected by the wisdom of hindsight. Nonetheless, it would have been admissible: Tanna v Deutsche Bank (Asia) AG [1997] ANZ Conv R 588 (Hodgson J).

266. The failure of Mr Kazal to give evidence of that type means that OXS’s case on causation depended entirely on inferences from his other evidence and the circumstances. His Honour’s approach to the absence of evidence from Mr Kazal was entirely consistent with that of the authorities.

267. In oral submissions, OXS took the position that, as a matter of common sense, an inference should be drawn that Mr Kazal would have initiated a sale of the business in August 2011, had he known that SHFA did not support the grant of a new lease. His Honour was not prepared to draw such an inference from Mr Kazal’s evidence and the objective circumstances. Reference has already been made to his Honour’s reasons (at [134]) for not drawing such an inference. His Honour carefully considered the objective indicators of what OXS would have done in August 2011, had it known that SHFA did not support a new lease. These included the past dealings between OXS and SHFA and what OXS had subsequently done after August 2011 by way of asserting its rights to a legally binding agreement, seeking the intervention of the Minister and asserting its claim in legal proceedings. OXS has not demonstrated that the contrary inference should have been drawn by his Honour.

268. In my view, grounds 13 and 14 have not been made out.

Issue 5: Estoppel and unconscionability (grounds 18, 19 and 20)

269. OXS relied upon estoppel as an alternative basis for seeking an order for specific performance. The primary judge observed that this claim largely depended on the matters dealt with by his earlier findings (with respect to misleading conduct). His Honour held that the only representation established was that the Minister would not grant a lease, and that there had been no departure from that representation: at [144] – [146]. Accordingly, he rejected the estoppel claim. His Honour also rejected the claim in respect of unconscionability: at [136] – [143].

270. In view of the conclusion above that OXS’s misleading conduct claim based on SHFA’s 23 August 2011 and 2 August 2012 letters has not been made out, it is unnecessary to deal with the related appeal grounds concerning estoppel and unconscionability, as counsel for OXS acknowledged (see above at [60]).

Issue 6: Costs

271. The primary judge rejected OXS’s claim for a Bullock order against SHFA in respect of the Minister’s costs for the reasons given at [13] to [18] of the costs judgment. His Honour found, contrary to OXS’s submissions, that the documents filed and served by the Minister made clear, at least by 20 March 2014, that the Minister’s position was that he had made no decision, and that position was very likely to be well founded: at [17] costs judgment.

272. His Honour found that OXS took upon itself the risk of continuing the proceedings against the Minister, when it was not only plain the Minister’s position was that he had made no such decision, but where that was also OXS’s position in the proceedings. Accordingly, his Honour concluded that there was not a proper basis to shift the costs of that risk from OXS to SHFA: at [18] costs judgment.

273. Although none of the grounds of appeal alleged error with respect to his Honour’s decision as to costs, OXS contended in its written submissions that his Honour erred in his costs judgment in failing to make a Bullock order requiring SHFA to indemnify OXS for the costs it had been ordered to pay to the Minister. The basis for the Bullock order claimed by OXS is the contention that it was the misleading or deceptive conduct of SHFA “that falsely led OXS to believe that the Minister had made an adverse decision - a position SHFA did not finally abandon until its closing submissions at first instance”.

274. No oral submissions were directed to this contention on appeal. In written submissions, OXS simply referred to its written submissions at trial, which extended over 9 pages. No attempt was made in this court to identify error in his Honour’s discretionary decision.

275. Unsurprisingly, SHFA objected to OXS raising this point on appeal. SHFA also submitted that, in any event, no error by his Honour had been demonstrated.

276. A discretionary judgment as to costs can only be overturned in limited circumstances. If OXS were permitted to raise this issue on appeal, the question would have been whether his Honour erred in the exercise of his discretion in making the costs order that he did. That would have required OXS to identify an error in the House v The King sense ([1936] HCA 40; 55 CLR 499 at 505).

277. Significantly, OXS did not apply to amend its notice of appeal in the face of SHFA’s objection to OXS seeking to raise this point. Nor did OXS advance any submissions directed to identifying error in the House v The King sense, which was the relevant question on appeal. In my view, OXS should not be permitted to raise this point on appeal, not having done so by way of a relevant appeal ground and written submissions directed to this issue.

Conclusion and orders

278. The appeal by OXS has failed. There is no reason for departing from the general rule that costs should follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. Accordingly, the orders which I would propose are as follows:

1. Appeal dismissed.

2. Appellant to pay the respondent’s costs of the appeal.

279. LEEMING JA: I have had the very considerable advantage of reading Gleeson JA’s judgment in draft. I agree with the orders proposed by his Honour, and, subject to one matter, with his Honour’s reasons.

280. I respectfully disagree with the conclusion Gleeson JA has reached in relation to grounds 6 and 7. Unlike his Honour, I consider that the prohibition in s 19(3) applies to agreements to grant a lease for a term exceeding five years. Since that disagreement can have no bearing on the outcome of the appeal, I will indicate my reasons more briefly than would otherwise be the case.

281. Section 19 is reproduced in full at [103]. I agree with Gleeson JA that the starting point is the statutory text. One thing which emerges clearly from the reasoning in Butts v O’Dwyer is that a close attention to the particular statute is necessary.

282. Although as Gleeson JA observes there is no definition of “lease” in the Act, it is clear from the identical treatment of leases and licences in subs (3) and (4) that what the statute regards as important for present purposes is not so much whether a right of occupation is contractual or proprietary, but its length. Understandably enough, this statute, like many others, puts to one side the distinction between lease and licence and focusses attention on the practical question: in what circumstances can SHFA, acting unilaterally, give long term rights (ie, with a duration exceeding five years) for the occupation of core land.

283. That of itself suggests that the prohibition applies not only to long term legal leases, and long term licences, but also promises to grant a long term lease. If a grant of a legal lease for more than five years requires consent, and the making of a promise to occupy for more than five years requires consent, it would seem natural for the making of a promise to give a legal lease to require consent.

284. I do not regard that construction as amounting to a strained reading of the subsections. The prohibition is upon long term leases and licences in their generality, which is apt to include a prohibition upon long term equitable leases.

285. I also do not regard the authorities to which the Court was taken as being determinative. Those authorities deal with statutes imposing a prohibition upon a dealing by a private party. In contrast, s 19 imposes a prohibition upon a statutory corporation with limited powers, and at least in part is directed to questions of power. Thus subs (1) unequivocally denies to SHFA power to sell, exchange or otherwise dispose of core land, save as is provided by subs (2). Subsection (2) provides that SHFA may, in certain circumstances, mortgage or grant a charge over core land, or exchange land. Subsection (3) provides that SHFA may, in certain circumstances, lease or grant licences in respect of core land, and grant easements or rights-of-way over core land. Although I acknowledge that the position is not free from doubt, because the word “may” is arguably directed to a qualified permission, as opposed to a qualified conferral of power, I prefer the view that subsections (2) and (3) are also directed to the power of SHFA. I reach that conclusion because “may” in subsection (2) is expressed to be an exception to the absence of power in subsection (1), and because it is natural to read subsections (2) and (3) (which follow one another and commence with materially identical words) in the same way.

279. SHFA is a statutory corporation whose powers of dealing with property are limited by the Act and by the general provisions of s 50 of the Interpretation Act 1987 (NSW). Those considerations distinguish s 19 from the more common category of legislative prohibition, where the owner of property has power to deal with it, and statute imposes a qualified prohibition upon the owner so doing. The recurring issue, seen in the authorities on which both parties relied, is the legal consequence of the owner performing an act which is within the owner’s power but contrary to the qualified prohibition in the statute. In my view, quite different considerations apply when the prohibition is addressed to a single person, namely, the body corporate which is created by the statute which plainly possesses more limited powers.

280. Against this construction, it was submitted that such a construction would see the Minister involved in the minutiae of negotiations, as SHFA and a prospective tenant went back and forth on the particular clauses of a draft lease. The appellant submitted that it would be “impractical, uncommercial and unrealistic”, because “every negotiation of every term of every lease requiring consent would have to be consented to by the Minister before the lease could be progressed”. If that were so, that would point to a narrower construction of the prohibition. But I cannot agree with the submission. I see no reason why the Minister could not grant conditional consent in broader terms. For example, the Minister could direct that in relation to any lease of between five and 20 years’ duration in a commercially zoned area of core land, all leases granted by SHFA must contain particular covenants (including, say, minimum rental per square metre), but otherwise leave a deal of discretion in SHFA. That is to say, I see no reason why the provisions conferring powers of direction and control upon the Minister need be read as excluding general directions and consents by the Minister given to SHFA in advance of the final negotiations of any particular lease. Of course, that is not to say that the Minister could not exercise his or her powers more narrowly if he or she so chose.

281. In short, although the Act makes it clear that SHFA is subject to the control and direction of the Minister, there is no reason why the Minister might not choose to exercise that power of control and direction in quite general terms.

282. For those reasons, I consider that the primary judge was correct to proceed on the basis that s 19 applied to agreements to lease.

**********

Amendments

26 May 2016 - Stylistic and typographical errors amended.

24 May 2016 - Stylistic changes to Headnote

Decision last updated: 26 May 2016