Perpetual Ltd v Myer Pty Ltd

Perpetual Ltd sought to have the court rectify a long-term commercial lease in which they were the anchor tenant at a shopping centre owned by Myer Pty Ltd. The dispute centred on a formula used to calculate the tenant’s contribution to increases in variable outgoings, which Perpetual argued contained a mistake. They contended that the common intention of the parties was evident from an earlier draft of the heads of agreement. The case was heard in the Supreme Court of New South Wales.

The legal issues the court had to address were whether the common intention of the parties could be established to rectify the lease and whether the formula for calculating the tenant’s contribution contained a mistake. The court needed to determine if there was convincing evidence of the alleged common intention, and whether the formula was absurd or mistaken. The applicants had to demonstrate that the true intention of the parties was reflected in an alternative formulation, rather than merely pointing to an alleged mistake.

The court held that the applicants could not provide convincing proof of the alleged common intention. The draft heads of agreement were merely one step in the continuing negotiation process, and the applicants were unable to present an alternative formulation that reflected their claimed common intention. The court emphasised that it was necessary to prove the true intention, not just that a mistake had been made. The applicants had not demonstrated that the formula was absurd or mistaken, and it was capable of sensible operation. The court found that the peculiar result of the formula did not render it absurd or mistaken, particularly given the strong bargaining position of the tenant and the long period over which the lease was negotiated by well-represented parties.

The court dismissed the application for rectification, affirming the lease as it stood. The applicants were not satisfied that the formula contained a mistake, and the court found no convincing proof of the alleged common intention. The peculiar result of the formula did not render it absurd or mistaken, and the lease was enforceable as written.