Randi Wixs Pty Limited v Kennedy

[2009] NSWSC 933

CITATION:	Randi Wixs Pty Limited v Kennedy [2009] NSWSC 933
HEARING DATE(S):	20 & 21 April 2009
JUDGMENT DATE :	9 September 2009
JUDGMENT OF:	Smart AJ
DECISION:	Claim for rectification dismissed.
CATCHWORDS:	Lease prepared which did not reflect determination of Administrative Decision Tribunal as to its principal terms - rent erroneously stated in lease - transfer of property to third party - lease supplied to purchaser of property signed by landlord-vendor and by managing director of plaintiff-tenant - attestation clause by plaintiff as tenant not correctly completed - lease rejected for registration but capable of being treated as agreement for lease and specifically performed - plaintiff has no personal equity against defendant third party and any personal equity plaintiff may have is not one capable of being enforced against him as registered proprietor
LEGISLATION CITED:	Real Property Act 1900
CATEGORY:	Principal judgment
CASES CITED:	APA Association Ltd v Rogers (1943) 43 SR (NSW) 202 ASL Developments Limited v Sargent & Anor (1974) 131 CLR 634 Bahr & Anor v Nicolay & Ors (No 2) (1987 – 1988) 164 CLR 604 Barnhart v Greenshields 14 ER 204 Carberry v Gardiner (1936) 36 SR (NSW) 559 Farah Constructions Pty Ltd and Others v Say-Dee Pty Limited (2007) 230 CLR 89 Harris v Smith & Ors [2008] NSWSC 545 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd (1998) 3 VR 133 Ong & Anor v Luong & Anor NSWSC, McLelland J, 30 August 1991, 1991 NSW Conv R 55,597 Robinson v Young [2005] NSWSC 777 Smith v Jones 1954 2 All ER 823
PARTIES:	Randi Wixs Pty Limited (Plaintiff) Cain Neville Kennedy (Defendant)
FILE NUMBER(S):	SC 5972/05
COUNSEL:	J Clifton (Plaintiff) S Jacobs (Defendant)
SOLICITORS:	- (Plaintiff) Alexanders Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Smart AJ

Wednesday 9 September 2009

5972/05 Randi Wixs Pty Limited v Cain Neville Kennedy

JUDGMENT

1 For reasons that appear from the transcript of 17 April 2009 this action was not in a position to proceed on all issues on 20 and 21 April 2009, being the dates fixed for hearing. Rather than waste the time set aside for the hearing it was agreed by the parties that this order should be made:

“Order, pursuant to UCPR 28.2 that there be a separate hearing of the claim by the plaintiff for rectification of the unregistered lease lodged with Land and Property NSW for registration and numbered 9776708U and purporting to be between Pokana Pty Ltd as lessor (the property being transferred subsequently to Cain Neville Kennedy) and the plaintiff as lessee in respect of premises at 123 Avoca Street, Randwick.”

2 That order was made at the start of the hearing on 20 April 2009. That appeared to be a prudent course on the pleadings as they then stood and still stand. The plaintiff’s pleadings comprised an Amended Summons in which it specified the relief claimed and a Further Amended Statement of Claim in which it set out the facts and assertions on which it relied and sought the relief specified in its Amended Summons. Both documents sought rectification of an unregistered lease and relief for derogation from the grant of the lease. The latter aspect does not presently arise for consideration. The matter has been complicated by the landlord, Pokana Pty Ltd, transferring 123 Avoca Street to the defendant. The rectification relief sought was:

“1. A declaration that the unregistered lease, lodged with Land and Property Information NSW for registration and numbered 9776708U, in particular, item 4(a) thereof, does not express the true agreement of the parties and was executed under a mistake of fact.
2. An order that the said lease terms be rectified so as to express the true agreement between the parties by replacing the words and numerals ‘fifty eight thousand [eight hundred] and fifty seven dollars and sixty cents ($58,857.60)’ contained in item 4(a) with the words and numerals ‘Fifty three thousand, five hundred and six dollars and eighty cents ($53,506.80).
3. An order that the Defendant forthwith perform and carry into effect the terms of the said lease so rectified.”

3 Item 4(a) is in the Second Schedule of the “unregistered lease” which was described as the lease document by the plaintiff. The “unregistered lease” purported to be between Pokana Pty Ltd as landlord and the plaintiff as tenant.

4 The lower figure of $53,506.80 was said by the plaintiff to be the correct annual rent and the higher figure was said by the plaintiff to include the rent and GST. Clause 23.2(b) of Annexure A headed First Schedule to the unregistered lease provides “the amount of Rental and other payments specified in this lease do not include GST.” There was no dispute that GST was payable. Clause 23.2(c) provided for the tenant to reimburse the landlord for any GST which was payable and operated to increase the amount payable by the tenant.

5 On 10 January 2003 the Administrative Decisions Tribunal (“ADT”) handed down its reasons for decision in a dispute between Randi Wixs Pty Ltd and Pokana Pty Ltd. It appeared that the plaintiff (the applicant before the ADT) was the occupier of premises 123 – 135 Avoca Street, Randwick. The premises were operated as a restaurant as far back as 1985, and probably as far back as 1972. The ADT held that the premises were a “retail shop” within the Retail Leases Act. The principal issue in the ADT proceedings was whether a lease had been granted. There does not seem to have been an issue as to the amount or amounts payable by the plaintiff.

6 The Tribunal found (paragraph 34 of its reasons) that, as at 14 December 2001, the parties had agreed to enter into a new lease upon the same terms as the Second Lease subject to certain alterations, one of which was:

“…
(iii) Basic rent and review dates: In accordance with this Judgment and varied consistent with the date of commencement being 14 December 2001” (para 34)

7 Essentially, the ADT determined the principal terms of the lease that had been agreed. The Tribunal in paragraph 32 had previously held that the terms of the letters of 28 October 2001, 5 and 14 December 2001 coupled with the payment of rent at the increased rate commencing January 2002 constituted a commercial agreement between the parties to enter into a formal lease in the terms of the Second Lease subject to the variations as negotiated and specified in those three letters.

8 At paragraph 17 of the Tribunal’s reasons it is recorded that as at 7 December 2001 the lessee (Randi Wixs) was paying rent at the rate of $4,333 per month and that the rent for January 2002 was increased to $4,904.80 and that the lessee paid the increased rate to the lessor’s agent. See also paragraph 22 where there is reference to “the effect of the obvious agreement between the parties to pay increased rent commencing January 2002”. There is a reference to “the commercial rent actually paid from January 2002 is $4,904.90” Mr A Ostrovsky, the sole director of the plaintiff, said that he, his barrister and solicitor were present on 10 January 2003 when the ADT member gave judgment and that at the conclusion of his judgment the ADT member said, “I will give the parties time to prepare a lease in accordance with these reasons and then re-list the matter.” The ADT member invited the parties to bring forward consent Short Minutes so he could make orders and declarations consistent with its reasons. The ADT member thought it appropriate for the parties to actually draft and enter into a formal lease in accordance with the ADT’s reasons.

9 Under the ADT’s decision the lease was to commence from 14 December 2001 but the rent had to be adjusted from 1 January 2002 under the lease. A series of rent statements or receipts issued by LJ Hooker Mascot on behalf of the landlord, Pokana Pty Limited, as owner in respect of 123 Avoca Street, Randwick addressed to the plaintiff from 22 January 2003 to 20 May 2003 and covering the period to 30 June 2003 showed the Commercial Rent as “$4,904.90” and as “INC-GST 445.90”.

10 Mr Ostrovsky detailed what he said occurred on 10 January 2003 at the ADT. Many of the events probably occurred at the later Tribunal hearing on 11 March 2003. He has probably telescoped the two hearings. Shortly after 10 January 2003 Mr S Healy of Gadens, the solicitors for Pokana Pty Limited, prepared a new lease. Pages 1 – 6 set out the key parts. It incorporated the provisions set out in Memorandum 0493206 filed with Land and Property Information, NSW. A copy of that Memorandum was made available at some stage, possibly at the Tribunal.

11 Leaving aside the question of date, Mr Ostrovsky said that his barrister told him to go to the table in the ADT room and sign the lease there, having remarked that the new lease was the old lease. He said that he assumed the lease he was told to sign was in accordance with the old lease but with the new dates.

12 Mr Ostrovsky said that he then walked over to the Exhibits table and that Mr Robert Riddell, the lawyer for Pokana Pty Ltd (and a litigation partner of Gadens), gave him the document (a copy of) which is annexure A to Mr Healy’s affidavit of 23 October 2006. Mr Ostrovsky said that the document made available to him looked like his old lease and that it was open at the back page. Mr Ostrovsky said that he then signed the open back page.

13 Mr Ostrovsky said that after he signed the document Mr Riddell took the document and said “You’ve signed it in the wrong spot”. Mr Ostrovsky asked, “How do I fix it?” Mr Riddell replied: “Just sign it there.”

14 Mr Ostrovsky said that he signed the back page of the document again, still in the ADT room, and returned it to Mr Riddell. They left the ADT hearing room. Mr Ostrovsky said this further conversation occurred:

“Riddell: We better get this right. It’s a bit messy.

Ostrovsky: Yes, it does look a bit messy. Will it be all right?

Riddell: Oh, Just to be sure, you better just sign it here again.”

15 Mr Ostrovsky said that Mr Riddell then gave the back page back to him and he signed it against the wall. Mr Riddell remarked, “If it’s not all right, we can always fix it up later”. Mr Ostrovsky said that he did not look at the lease document closely as he thought he would have the opportunity of looking through it later. He only signed the Lease document on the back page. He did not initial the lease document in any other place, nor did he date it.

16 In his response to the Notice to Admit Facts, Mr Ostrovsky stated “The initials appearing on pages 1 through 3 inclusive are not mine. I recognise the initials as similar to those of Neil O’Connor, solicitor”. Mr Ostrovsky was referring to the lease a copy of which was attached to Mr Healey’s affidavit. Mr O’Connor was the plaintiff’s solicitor.

17 Mr Ostrovsky thought the company seal was affixed on the date he originally signed the lease. He was handed the seal when he signed the lease documents up against the back wall. He said that his barrister had all his documents and the company seal. They included all the old leases. His documents and the company seal were all in the one box. Mr Ostrovsky said, and I accept, that he could not say whether his barrister and his solicitor had read the lease document. Mr Ostrovsky said that he did not get the chance to read each and every page of the lease document. Mr Ostrovsky insisted that he was rushed into signing the lease document. He insisted that he was only given the back page to sign.

18 An examination of the copy document reveals that initially Mr Ostrovsky signed in the wrong place. He signed in the place where someone authorised on behalf of Pokana Pty Ltd was supposed to sign. His signature was crossed out.

19 He also signed as Guarantor in the place where he was supposed to sign. That signature was witnessed by Robert Riddell, the landlord’s solicitor, and he has signed as the witness. It is unusual for the guarantor’s signature to be witnessed by the landlord’s solicitor.

20 In the middle of the back page the following appears:

“THE COMMON SEAL OF
SIGNED ON BEHALF of RANDI WIXS
PTY LIMITED ACN 003 123 117 was
STET hereunto affixed by authority of the Board
of Directors and in the presence of : Alex Ostrovsky
by the authorised person whose signature sole Director/Secretary
appears pursuant to section 127 of the (Alex Ostrovsky)
Corporations Act 2001.”

(This bears the signature of Alex Ostrovsky and his name is printed in handwriting underneath.)

21 There is one further unusual feature. The Common Seal is not placed in or about or where the words “the Common Seal” appear. Instead, the Common Seal is affixed above all the attestation or signature clauses, including that relating to Pokana Pty Ltd. The Common Seal has been affixed in an upside down position. Of itself, this is probably not significant.

22 A copy of the back page of the lease is set out in the Schedule hereto. What appears on the back page is capable of supporting what Mr Ostrovsky states.

23 There are some further matters to be noted. The copy lease bears date 17 June 2003. The stamp duty of $1,203.30 was paid on 26 June 2003.

24 Clause 23.2 in the First Schedule reads:

“23.2 GST LEASE CLAUSE

(a) GST means any tax, levy, charge or impost implemented under the A New Tax System (Goods and Services Tax) Act (GST Act) or an Act of the Parliament of the Commonwealth of Australia substantially in the form of, or which has a similar effect to, the GST Act.

(b) The amount of Rental and other payments specified in this lease do not include GST.

(c) If the Landlord is or becomes liable to pay GST in respect of a supply for which payment is to be made by the Tenant under this lease, the amount payable by the Tenant will be increased so that the net amount retained by the Landlord after payment of that GST is the same as if the Landlord was not liable to pay any GST in respect of that supply.

In calculating the amount payable by the Tenant under clause (c), any input tax credit that the Landlord is able to claim in respect of the acquisition of that supply must be taken into account.”

25 The Second Lease contained no GST clause. Under the Second Lease the yearly rent was payable by 12 monthly instalments of $4,3333.00 (cents omitted). Under the lease document that was signed at the ADT the yearly rent was $58,857.60 payable by 12 monthly instalments of $4,904.80 ($4,904.90 was being paid).

26 It was easy for a mistake to be made as to the rent. In paragraph 17 the ADT member has written that the applicant (plaintiff) was paying rent to the respondent (Pokana) (or its agent) as at 7 December 2001 at the rate of $4,333.00 per month and later in that paragraph he refers to the agent purorting to increase the rent such that the rent for January 2002 was increased to $4,904.80. In paragraph 22 the ADT member states, “It is not clear to me how the base rental under the proposed Lease ‘IG11’ is referable to the commercial rent actually paid from January 2002 in $4,904.90 (sic)”. The rental statements show this figure includes GST of $445.00.

27 The term of the lease document stated that the term was five years commencing on 14 December 2001 and terminating on 13 December 2006 with an option to renew of five years commencing on 14 December 2006 and ending on 13 December 2011. There was a provision for Market Review and CPI Review.

28 Mr SJ Healy, a solicitor and a partner in the law firm Gadens Lawyers, was not present when the ADT gave its decision. Someone else for Gadens, a litigation partner (Mr Riddell), conducted the case before the ADT. Mr Healy was a commercial and property partner at Gadens and acted upon information relayed by Mr Riddell who is still a partner at Gadens. Without looking at the lease document annexure Mr Healy had no independent recollection now of exactly what the rent agreed between the parties was.

29 This passage appears in Mr Healy’s evidence at T 75 – 76:

“Q. Did you understand when you prepared this lease that it was supposed to conform with the reasons of the Administrative Decisions Tribunal of 10 January 2003?
A. I am not quite sure what you mean.

Q. It was to follow the terms that the member published in his reasons on 10 January 2003 and in particular paragraphs 17 and 34?
A. My recollection of the judgment was that the court said that there was a lease and sent the parties away to negotiate the terms of it.

Q. You understood you had a free kick, did you?
A. Well, I'm not sure I could describe it that way. My understanding was --

Q. Did you appreciate that you had to follow the terms that were formulated by the tribunal member in paragraph 34 of the reasons?
A. I would have to look at the judgment. (Shown) Yes.”

Mr Healy (T 77) said he could not remember what he was thinking when he prepared the lease. This further passage appears in Mr Healy’s evidence (T 78).

“Q. In drafting the lease what room to manoeuvre did you think you had?
A. My recollection is that the tribunal member did not determine all of the terms of the lease and asked the parties to go away and determine that. From that we would simply take instructions as to what the terms of the lease were and incorporate those into the document.

Q. When you say take instructions, that would be instructions from your clients, would it?
A. Yes, or the client's agents, yes.”

30 At T 79 Mr Healy said that he thought from memory the increase in rental was applied to the old lease. It was not necessarily what was to be the rent in the new lease. At this stage there was no intention to grant a new lease. Mr Healy said he was reliant on Mr Riddell to inform him of the Tribunal’s findings in relation to the lease. Mr Healy had no independent knowledge of the ADT’s findings.

31 Mr Healy said in his affidavit that:

(a) it was his intention at all times up to the execution of the lease on 17 June 2003 for the rental payable pursuant to the lease to be exclusive of GST;
(b) he never had any discussions with the tenant or the tenant’s legal representative nor did he make any agreement with them that the rent payable pursuant to the lease would be inclusive of GST; and
(c) with every lease he drafts the rent is exclusive of GST, without exception.

32 On 11 March 2003 the ADT relevantly made the following declarations:

“3A At as 14 December 2001 the applicant as lessee and the respondent as lessor agreed to enter into a lease, the terms of which were identical with the terms of lease between the same parties in the same interests as that which commenced on 7 October 1996 and terminated 6 October 2001, and which is exhibit IG2 in these proceedings, subject to various alterations;

3B The Tribunal notes that the parties have agreed to the terms of the lease, a copy of which is annexed to these orders;

4 As at 14 December 2001 the respondent permitted the applicant to enter into possession of the premises 123 – 125 Avoca Street Randwick, pursuant to the lease specified in paragraphs (3A) and (3B) above”

33 The Tribunal also made this order:

“8 The applicant pay to the Office of State Revenue by way of bank cheque such sum as may be properly assessed on the lease as declared in paragraphs (3A) and (3B) above within 10 days of being notified by the respondent.”

34 Declaration 3A reflects what the ADT proposed in its reasons for decision, namely, that there should be a lease on the terms of the lease identical with that which commenced on 7 October 1996 and terminated on 6 October 2001, subject to the alterations specified in paragraph 34 of its reasons. In paragraph 51 of his reasons, the ADT member said:

“I think it appropriate for the parties to actually draft and enter into a formal lease in accordance with these reasons, such to be stamped and registered in due course.”

35 As to Declaration 3B, Mr Ostrovsky had not in fact agreed but his legal representatives would probably be taken to have agreed on his behalf.

36 Mr Healy in drafting the lease document followed his usual practice and did not follow the Tribunal’s reasons closely. I think that Mr Ostrovsky is correct when he says that he signed the lease document at the ADT’s premises, but he is mistaken as to the date on which he signed it. He did not sign it on 10 January 2003 but on 11 March 2003.

37 The time sequence of events is that the Tribunal delivered its reasons for decision on 10 January 2003, Mr Healy, on the information supplied by Mr Riddell (probably including the rent payable), drafted the lease and he (Healy) drafted it in accordance with his usual practice and included his usual GST clause, that the lease as drafted did not follow the Tribunal’s reasons closely and that Mr Ostrovsky signed the lease as drafted by Mr Healy believing that it was in substance in accordance with the Tribunal’s reasons for decision in the circumstances to which he deposed as occurring on 10 January 2003, but most of which in fact occurred on 11 March 2003. It is improbable that the lease would have been drawn prior to 10 January 2003. It had been drawn by 21 January 2003

38 It is apparent that neither Mr Ostrovsky nor his legal representatives carefully checked the lease before he signed it. Having to pay extra moneys of the order in question is a significant additional obligation.

39 Mr Ostrovsky stated that throughout 2003 Randi Wixs continued to pay $4,904.90 rent per month with no additional amount for GST. He produced a series of rental statements issued by the then managing agent for Pokana, LJ Hooker Mascot, between 22 January 2003 and 18 June 2003. They show the monthly commercial rent of $4,904.90 and that it was inclusive of GST of $445.90.

40 Mr CN Kennedy, the defendant, about 15 March 2002 entered a contract for the purchase of 123 Avoca Street, Randwick for $765,000 from Pokana. Clause 48.1 disclosed that the tenant of the property remained there on a holding over basis. Clause 48.2 required Pokana to use its reasonable endeavours to obtain vacant possession of the property on or before completion. If Pokana was unable to provide vacant possession of the property by the completion date (122^nd day after 15 March 2002), the purchaser was entitled to rescind the contract at any time after the completion date, but before vacant possession is obtained. By letter of 7 June 2002 Pokana’s lawyers advised Mr Kennedy’s lawyers that the tenant had applied to the ADT claiming a new lease – and that the application was to be heard on 24 June 2002. The hearing of the dispute between Pokana and Randi Wixs continued over a number of days. Mr Kennedy said he was present at the hearing from time to time. He said, while he generally observed what was going on in the ADT proceedings, he was not privy to any of the documentation and did not see the contents of any lease or proposed lease.

41 At the time he entered into the contract of purchase Mr Kennedy said he had not decided whether he would occupy the premises and run the business there himself. He was not sure what he was going to do with the premises. I doubt whether these statements of Mr Kennedy are correct. He wanted to know whether the premises were going to be occupied or whether he would obtain vacant possession.

42 Mr Kennedy said that the first time he was aware that a lease would form part of the purchase was in about late January 2003. His solicitor advised him that Gadens Lawyers had sent a letter of 21 January 2003 enclosing a copy of the lease between Pokana and Randi Wixs and Memorandum 0493206 containing Gaden’s standard terms. That letter asked that Mr Kennedy promptly make the election whether to proceed to acquire the property subject to the lease or rescind the contract. It is not clear from the affidavit but I will assume that what was forwarded was a copy of the lease which was proposed.

43 Mr Kennedy, whose recollection of the precise order of events was a little confused, stated that he was given a copy of the first six pages of the lease and a copy of a letter from Gadens saying his purchase was now subject to this lease. Mr Kennedy said he had to make a decision whether he settled on the property or not. Mr Kennedy said (T 43) “the details that were important to me were the lease amount, whether there was GST, and the actual amounts”. He said that he was interested in the return he was going to receive from the lease. His solicitor explained the terms of the lease to him.

44 It was not clear whether Mr Kennedy made his decision to proceed shortly after receipt of Gaden’s letter of 21 January 2003 or subsequently. Mr Kennedy’s letter to his Mortgagee or Mortgage broker satisfying various requirements bears date 1 May 2003. He had probably made a decision to proceed by that date. Otherwise there would be no point in taking that course.

45 Mr Kennedy said that he recalled being given the lease, probably the first six pages, before he made the decision to proceed with the purchase and settle as he had wanted vacant possession of the property. He said that he would not have settled if he did not know what the property was subject to.

46 Mr Kennedy said that it was his understanding at the time of his decision to proceed with the purchase that the basic rent (yearly) without GST was $58,857 and that he actually read that figure. He said that at the time he was given a copy of the first six pages of the lease he understood that the rent was plus GST (T 45).

47 By letter of 29 May 2003 sent by fax to Mr Kennedy’s lawyers, Gadens enclosed “a copy of the lease executed by the tenant and the guarantor”. That copy has the features earlier mentioned (except the date). Gadens stated that they were attending to having the current owner sign the lease as lessor and the payment of stamp duty.

48 Settlement of the purchase took place about 27 June 2003. According to Mr Kennedy, his solicitors at settlement received a registrable form of the lease, a transfer and these were handed to the solicitors for the incoming mortgagee. It is incorrect to say that the lease was in registrable form. It was rejected for registration. It seems that at settlement the lease document as signed on behalf of Pokana and by Mr Ostrovski as guarantor and as purporting to be on behalf of the plaintiff with the defective corporate attestation clause was handed over by Gadens on behalf of Pokana to Mr Kennedy’s solicitor and accepted by Mr Kennedy’s solicitor.

49 After purchasing the property Mr Kennedy transferred the management of the property from LJ Hooker Mascot to LJ Hooker Maroubra when on 10 July 2003 he entered into a Management Agency Agreement with Goldline Realty Pty Ltd, trading as LJ Hooker Maroubra.

50 Mr Kennedy agreed that the rent statements he received from LJ Hooker Maroubra following the purchase of 123 Avoca Street being settled showed the receipt of $4,904.90 per month, that each time that amount was received, the effect of the statement was to show nothing owing and that the statements continued in that form until September 2004. Mr Kennedy agreed that in the statements there is a CPI rent increase up to $5,003 and that each time that increased amount is paid it is recorded that nothing further is owing. Mr Kennedy agreed he took no steps to query the amount being paid until September 2004. Mr Kennedy agreed that the statements received from LJ Hooker Maroubra made it very clear what was being paid in total by Randi Wixs. For 15 months he took no steps to obtain more moneys from Randi Wixs. He said he imagined that his agents were collecting the right amount, that he did not check the statements showing how much Randi Wixs was paying and that moneys received from the agent went directly into his (bank) account. He checked the funds in his account to see that he had enough to make his mortgage payments. He looked at the amounts being paid into his account and thought that the amounts were about right. His accountant drew to his attention by letter that the GST amounts had not been paid with the rental payments.

51 Mr Kennedy agreed that he had worked at a few different real estate agencies including LJ Hooker Maroubra and had been a real estate agent himself at one point and a partner in LJ Hooker Maroubra. He did not think he was a partner at the time he purchased 123 Avoca Street. He was working at LJ Hooker Maroubra at the time he purchased the property.

52 Mr Kennedy rejected the suggestion that the reason he sought to increase the rent in September 2004 to include further GST was that the tenant was starting to complain about the maintenance or the state of the premises. He relied upon being alerted by his accountant that an amount equivalent to GST was not being paid. He agreed that when he received a copy of the lease before settling the purchase two matters he was interested in were the rental and the GST. Mr Kennedy said that because of his heavy commitments he did not check that GST payments were being made. He rejected the proposition that the reason he accepted the rent payments as received from his agent was that he knew they were inclusive of GST in the amounts being received. Mr Kennedy also disagreed that when he looked at the lease document he simply looked at the amount of $58,857 and thought that was the total amount he would be receiving and that was why he never queried any of his real estate agent’s rent statement.

53 Mr Kennedy gave this additional evidence:

(a) he thought that around the time of settlement LJ Hooker Maroubra contacted LJ Hooker, Mascot and ascertained the rental and the terms of the lease (T 60);
(b) he left it to LJ Hooker Maroubra to ascertain the correct rental;
(c) after he exchanged contracts his major concern was whether there was going to be a tenant in the premises;
(d) prior to settlement the only thing he looked at was the amount of the base rental so that he could work out whether to go ahead with the purchase. This was when Gadens provided those six pages (T 60);
(e) he looked very carefully at the lease document prior to settlement as he had to decide whether to go ahead on a $765,000 purchase (T 61); and
(f) he did not always know that the rent was $4,904 inclusive of GST (T 61).

54 There was no specific reference in the ADT’s reasons to GST as it did not arise; the terms previously agreed included terms as to the amount payable by the plaintiff to Pokana for occupation of the premises. There had been a long contested hearing and the ADT member determined that there was a lease and its essential terms. That included the amount payable by the plaintiff. Up to the decision of the ADT member the amount payable by the plaintiff did not include any additional amount for GST.

55 In this unusual rectification case the lease that was to be executed by Pokana and the plaintiff was one that followed the decision of the ADT member as to its existence and its essential terms and the terms of what has variously been described as the old or second lease. Neither Pokana nor its solicitor was at liberty in the lease to be prepared to insert a term having the effect of increasing the amount payable by the plaintiff to Pokana. The foundation common intention was the agreement found by the ADT member. The lease to be prepared and executed was to follow that common intention. That lease was to include the other terms (often described as the subsidiary and incidental terms) often found in a lease. The lease prepared by the solicitor should not be seen as the starting point. It was secondary to the ADT member’s decision. In the circumstances which existed, it is erroneous to treat the lease documents ultimately signed as having an independent existence and as a starting point.

56 The real difficulty in the present case lies in the interposition of Mr Kennedy and whether the lease should be rectified so far as it affects him. I accept that rectification is not available against an innocent third party who acquires rights for value under the contract in its original form.

57 It was not established whether Mr Kennedy was present at the ADT on 10 January 2003 or 11 March 2003.

58 The original contract of sale contained special provisions as to the giving of vacant possession. Once Mr Kennedy knew that there was going to be a lease he had to decide whether to proceed with the purchase of 123 Avoca Street. While he was probably keen to acquire the property, the return he was likely to receive was important, if there was going to be a tenant. On 29 May 2003 a copy of the lease apparently executed by the plaintiff was sent to Mr Kennedy’s solicitors. That contained provisions requiring the lessee to pay the rent specified and an amount by way of GST. The copy lease forwarded on 29 May 2003 appeared to bear the initials of the solicitor for the plaintiff.

59 The plaintiff relied on the letter of 17 November 2003 to the plaintiff from LJ Hooker Maroubra which stated “… we need to have you in our office as a matter of urgency to sign the lease where previously it was not signed” and “If you do not do this by end of business 21 November 2003 the lessor mortgagee will lodge the security documents for registration and the non-lodging of the lease will be your responsibility.” No further details were given on the first point. Mr Ostrovsky said that following receipt of this letter he attended at the office of LJ Hooker Maroubra and was handed a lease document which had not been signed by anyone. Mr Ostrovsky said that this was not the lease document that he executed after the ADT judgment on 10 January 2003 (probably 11 March 2003). Mr Ostrovsky said he took this lease document away to read through it. He said that when he read through it, it was very different to his old lease and therefore he did not sign it.

60 A Real Property Act search discloses that Land and Property Information New South Wales (“LPI NSW”) advised that on 9 December 2003 a lease, given the number 9776708 was rejected. That appears to correspond with the copy lease bearing date 17 June 2003 with the stamp duty details endorsed and which appeared to be irregularly executed. It seems that the lease has never been registered. The search further discloses that on 30 December 2003 the transfer and mortgage were registered. That is the transfer of 123 Avoca Street to Mr Kennedy.

61 I think that the correct position is probably that on 11 March 2003 at the premises of the ADT Mr Ostrovsky signed the back page of the lease documents in the wrong place, that the plaintiff’s seal was affixed to that page in the wrong place, that Mr Ostrovsky signed the back page again as requested by Mr Riddell opposite the corporate attestation clause, that the attestation clause for the plaintiff was not completed, that Mr Ostrovsky again signed the back page as guarantor, and his signature was witnessed by Mr Riddell, the solicitor for Pokana, that Mr Ostrovsky had no practical opportunity to read the document and received no adequate explanation of its terms. Subsequently the document was signed on behalf of Pokana and a copy supplied to Mr Kennedy’s solicitors showing the various signatures. It seems that in early July 2003 attempts were made to remedy the “execution clause” of the plaintiff on the lease but they were unsuccessful. See the faxed letter of 4 July 2003 of Mr Kennedy’s solicitors and subsequent correspondence. This was after settlement. Apparently no proper checks were made at settlement.

62 In November 2003 an attempt was made to remedy the situation. When this failed the deficient lease was lodged with the registration authority and rejected. Thereafter the transfer to Mr Kennedy and the mortgage from him were registered.

63 The plaintiff relied on three Trust Account Receipts issued by Goldline Realty Pty Ltd trading as LJ Hooker Maroubra on 17 July 2003, 19 August 2003 and 15 September 2003 which, after stating having received $4,904.90 for the months 7 July 2003 – 7 August 2003, 7 August 2003 to 7 September 2003 and 7 September 2003 – 7 October 2003 respectively, also stated:

“Inc GST
Arrears
0.00”

64 Reliance was also placed on various monthly Tax Invoices issued from 4 September 2003 onwards seeking rent of $4,904.90 per month and, as from April 2004, rent of $5003.00 per month (CPI increase). As from 29 September 2004 payment of extra moneys, that is amounts equivalent to GST, were sought by Mr Kennedy’s agents backdated to 17 July 2003.

65 In its written submissions handed up on 21 April 2009 the plaintiff submitted that it was clear from the objective contemporaneous evidence that no lease document had been entered into by both parties. The evidence upon which the plaintiff principally relied was the defective corporate attestation clause, the letter of 17 November 2003 from the defendant’s agents and the rejection of the lease for registration by LPI NSW.

66 Most of the problems stem from the lease document as drafted not being in accord with the ADT member’s decision, the departures not being picked up by either Mr Ostrovsky or anyone else from the plaintiff or the legal representatives of the plaintiff in a timely way and the ADT noting that the parties have agreed to the terms of the lease, a copy of which was annexed to the ADT’s Declarations and Order of 11 March 2003. That copy document contained in item 4 of the Second Schedule, basic rent of $58,857.60 per annum and clause 23.2 of the First Schedule. See the Certificate of 8 April 2003 of the Registrar of the ADT (Exhibit D).

67 Most of the oddities attending the execution of the lease appeared from the lease document handed over on settlement and also from the copy forwarded with Gaden’s fax of 29 May 2003.

68 If either Pokana or the plaintiff had sought specific performance of the lease document or an order for further assurance, perhaps the plaintiff, its principal officers and its legal representative would have picked up the departure which had occurred from the ADT member’s reasons for decision. It was in the interests of both the plaintiff and Pokana for the lease to be registered. This is usually attended to by the landlord’s solicitors as the landlord or its mortgagee holds the certificate of title. The evidence establishes that the copy lease document as annexed to the Tribunal’s Declarations and Order of 11 March 2003 and that annexed to the facsimile of 29 May 2003 were as to the critical provisions, being item 4 in the Second Schedule and clause 23.2 in the First Schedule, in the same terms.

69 Technically, the solicitor for the purchaser-defendant and the solicitor for the incoming mortgagee could have declined to proceed with the settlement on 27 June 2003 until the defective corporate attestation clause in the lease document was rectified.

70 In its Amended Summon and the Further Amended Statement of Claim the plaintiff did not seek a declaration that the parties had not entered into any lease, nor specific performance of the lease or agreement to lease found to exist by the ADT. Instead, the plaintiff approached the matter a little differently by seeking a declaration that the unregistered lease, in particular item 4(a), does not express the true agreement of the parties, an order that the said lease terms be rectified by replacing $58,857.60 with $53,506.80 in item 4(a) and an order that the defendant carry into effect the terms of the said lease so rectified. In practical terms there is probably no difference of consequence between the two approaches. I propose to proceed in accordance with the pleadings. The real dispute is as to the terms of the lease as identified by the plaintiff.

71 The plaintiff relied heavily on the knowledge and actions of the agents and the defendant raising no queries and taking no action for 15 months to obtain payment of the extra moneys. Reference was made to the documents issued by LJ Hooker Maroubra, from 17 July 2003 to September 2004, described variously as Trust Account Receipt, Tenant Tax Invoice, Tenant Status Report. The defendant received monthly statements from his agents. For 15 months the defendant was content with the moneys he was receiving. The defendant impressed me as financially astute and a man who, despite his many commitments and activities, would keep a close watch on his financial affairs and the moneys to which he was entitled and which he received. I did not accept Mr Kennedy’s evidence so far as it suggested that he did not look closely at the amounts he was receiving and the make up of those amounts. He raised no queries for 15 months because he believed that the plaintiff was paying the correct amounts due to him under the lease document and to which he was entitled, that is, $58,857.60 per annum or $4,904.80 per month and the subsequent CPI increase which yielded a figure of $5,003 per month. If Mr Kennedy had believed that the tenant was not paying him all the moneys to which he was entitled he would have pursued the tenant. When his accountant suggested to him that he was entitled to more money Mr Kennedy welcomed the advice received.

72 The plaintiff submitted that the knowledge of the agents and the actions of the agent in collecting rents including its issue of documents was attributable to the principal, the defendant. The plaintiff relied on ASL Developments Limited v Sargent & Anor (1974) 131 CLR 634 per Stephen J at 649 and Mason J at 658, where the latter said:

“As against a third party the law imputes to a principal knowledge gained by his agent in the course of, and which is material to, a transaction in which the agent is employed on behalf of the principal, under such circumstances that it is the duty fo the agent to communicate it to the principal. In the words of James LJ in Vane v Vane [citation omitted]:
“… the actual knowledge of the agents through whom an estate is acquired … is equivalent to the actual personal knowledge of the principal’.”

73 The defendant submitted that this principle is not applicable in the circumstances of the present case.

74 The defendant left it to his agent, LJ Hooker Maroubra, to collect the total correct amount payable to him and for the period from June 2003 until September 2004. It did so by issuing tax invoices and trust account receipts. The agent sought $4,904.90 inclusive of GST and subsequently $5,003.00 which reflected the CPI increase. The agent accounted to the defendant for the money it had received. I have found that Mr Kennedy kept a close watch on his financial affairs and the moneys to which he was entitled and which he received and how they were calculated and that he raised no queries for 15 months because he believed that the plaintiff was paying the correct amounts due to him under the lease document.

75 The defendant submitted that the plaintiff was making a collateral attack on what was described as a declaration in its decision of 11 March 2003 which was, as previously mentioned, in these terms:

“The Tribunal notes that the parties have agreed to the terms of the lease, a copy of which is annexed to these orders.”

The words “the lease” refer back to the lease specified in Declaration 3A. The remaining declarations (1, 2, 3A, 4 and 5 to 8) embodied the ADT’s findings. Order 9 dealt with the question of a stay pending the outcome of any appeal. Order 10 reflected the Tribunal’s view as to costs.

76 The actions taken by the plaintiff do not amount to a collateral attack on duly entered orders and declarations of the ADT. The plaintiff is seeking to correct a mistake that was made in implementing the ADT’s decision.

77 The defendant contended that the plaintiff, to succeed in its claim of common mistake (see paragraph 13 of the Further Amended Statement of Claim), had to show a continuing common intention of itself and Pokana up to the execution of the instrument, which was not correctly recorded. Mr Healy deliberately drafted the Lease document on behalf of Pokana in accordance with his usual practice relying on the information provided by Mr Riddell. Mr Healy did not closely follow the reasons for decision of the ADT. The drafting of the lease was left to Gadens as the solicitors for the landlord and, it would seem, not adequately checked by the tenant’s legal representatives and the tenant. The ADT’s decision which the landlord’s solicitors were to implement in the new lease to be executed did not envisage the new lease requiring the payment by the plaintiff of further monies to the landlord.

78 Both parties referred to an earlier decision of mine in Robinson v Young [2005] NSWSC 777, but the facts there were different. I did not regard it as of assistance in the resolution of the present case.

79 The remaining issue as to the application of ss 42 and 43 of the Real Property Act 1900 was heavily contested. The plaintiff contended that it enjoyed a personal equity which should prevail. The defendant contended that the operation of those sections precluded any relief being granted to the plaintiff.

80 Counsel for Mr Kennedy placed much reliance upon the decision of Upjohn J in Smith v Jones 1954 2 All ER 823 where he referred to Barnhart v Greenshields 14 ER 204 which cited this passage from an earlier judgment of Lord Eldon LC in Allen v Anthony:

“It is so far settled as not to be disputed, that a person purchasing, when there is a tenant in possession, if he neglects to inquire into the title, must take, subject to such rights as the tenant may have.”

Upjohn J continued at 827:

“ …it would be extending the doctrine of notice and the obligation to make inquiry far too much if the doctrine was extended to cover an equity of rectification.”

Upjohn J explained that the purchaser was bound by the rights of the tenant in occupation and must look at, and is bound by, the tenancy agreement. Importantly, Upjohn J stated (at 827):

“ … a purchaser is not only entitled but bound to assume, when he is looking at the agreement under which the tenant holds, that that agreement correctly states the relationship between the tenant and the landlord, and he is not bound to ask or to make inquiry whether the tenant has any rights which would entitle him to have the agreement rectified.”

81 This remark must be subject to there being nothing in the agreement relied upon and no facts known to the purchaser which would put the purchaser upon further inquiry. Many of the remarks of Upjohn J were obiter but they appear to have gained general acceptance.

82 In the present case, due to the defective attestation clause in respect of the plaintiff, the lease was not in registrable form and the back page of the lease indicated that there were oddities as to the execution of the lease. Was this the agreement under which the tenant holds? The letters of 21 January 2003 and 29 May 2003 from Gadens to the defendant’s solicitor suggested that the accompanying lease document was the lease under which the tenant held. In his letter of 1 May 2003 to the mortgagee the defendant refers to:

“15. Certified copy of New Lease to Randi Wixs Pty Ltd”.

83 The lease document produced to the defendant and his solicitor by Gadens was the one under which they were led to believe that the tenant held. If it had been rejected on settlement as not being in registrable form, either settlement would have been delayed until a lease in registrable form and correctly executed on behalf of the plaintiff was procured by Pokana or the defendant would have settled but been subject to the consequences of not adequately inquiring into the title, that is, taking subject to such rights as the tenant in possession had.

84 Pokana probably would not have been able to procure a properly executed lease by the plaintiff in the terms it desired as it is probable that before executing any lease the plaintiff, by Mr Ostrovsky, would have insisted on reading it, as he did in response to the agent’s letter of 17 November 2003, and the plaintiff would have refused to execute it. That may well have led to the defendant refusing to settle and rescinding the contract of sale. However, I must deal with the situation which occurred. The lease document was accepted on settlement.

Real Property Act

85 Section 36(1C) of the Act enables the Registrar General to refuse to accept a dealing if it does not comply with any requirement made with respect to the dealing by or under this or any other Act. Under s 36(1E) the Registrar General may require the execution or attestation to be proved. Under s 36(6)(b) a dealing is deemed not to be in registrable form it if requires a material correction, alteration or addition. Under s 36(6)(c) a dealing that is not in registrable form is deemed not to have been lodged with the Registrar General (LPI) until it is in registrable form. Because of s 34(4) and (5) it is important that dealings be lodged in registrable form. The Courts have declined to adopt a literal construction of s 41. They have enforced the rights that arise from the transaction lying behind the dealing and that led to the dealing being executed. The Courts have recognised that unregistered dealings may evidence unregistered interests in land under the Real Property Act.

86 Section 53(1) provides that where any land is intended to be leased for any term exceeding three years the proprietor shall execute a lease in the approved form.

87 In Carberry v Gardiner (1936) 36 SR (NSW) 559 Jordan CJ at 569 dealt with the situation where there is an unregistered lease. He said, amongst other things:

“An informal instrument may, however, be treated as evidencing an agreement for a formal lease of which a Court of Equity may decree specific performance by the execution of a registrable instrument.”

88 In APA Association Ltd v Rogers (1943) 43 SR (NSW) 202 Jordan CJ said of a woman who claimed under an unregistered lease for seven years, that, until she chose to register the lease, it operated merely as an agreement specifically enforceable in equity but not of itself creating a term in the land.

89 In the present case, the “unregistered lease” subject to any question of rectification, operated as an agreement specifically enforceable in equity. It had been signed by the landlord (Pokana) and on behalf of the plaintiff by its managing director. He had authority to do so. There is no good reason why an unregistered lease which operates as an agreement specifically enforceable in equity cannot be rectified as between the original parties. This is especially so where the lease that is sought to be enforced follows a written determination as to its principal terms. Where a third party is involved other consideration arise.

90 In Bahr & Anor v Nicolay & Ors (No 2) (1987 – 1988) 164 CLR 604, Wilson and Toohey JJ, in dealing with the Western Australian counterparts of s 42 of the NSW Real Property Act, said:

“The fraud referred to in ss 68 and 134 is actual fraud, involving some act of dishonesty on the part of the person whose title is sought to be impeached.” (citations omitted)

and

“It is equally clear that to acquire land with notice of an unregistered interest such as a lease, to become the registered proprietor and then to refuse to acknowledge the existence of the interest is not of itself fraud (citation omitted). The point is made by Kitto J in Mills v Stokman (citation omitted), where his Honour said ‘but merely to take a transfer with notice or even actual knowledge that its registration will defeat an existing unregistered interest is not fraud’.”

91 In Farah Constructions Pty Ltd and Others v Say-Dee Pty Limited (2007) 230 CLR 89 the High Court considered the Real Property Act (NSW). It held at [192]:

“ ‘Fraud’ in s 42(1) means ‘actual fraud, moral turpitude’ …
In personam exception. An exception operating outside the language of s 42(1) can exist in relation to certain legal or equitable causes of action against the registered proprietor.”

92 The Court referred with evident approval to the judgment of Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd (1998) 3 VR 133 at [280] and those in LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517.

The judgment of Tadgell JA includes these statements:

“If registration of the mortgagee’s interest is achieved dishonestly then the registration, and with it the interest, are liable to be set aside not because, on registration, the registered holder becomes a constructive trustee, but because s 42(1) recognises that fraud renders the interest defeasible. If, on the other hand, the registration is not achieved by fraud, the Act provides, subject to its terms, for an indefeasible interest. Those terms allow … a claim in personam founded against the holder of a registered interest to be invoked to defeat the interest …”

93 I do not think that fraud has been proven as against the defendant. He and his solicitor were provided with a copy lease document purporting to be signed on behalf of the plaintiff by Mr A Ostrovsky and on settlement a lease document signed on behalf of the plaintiff by Mr Ostrovsky and on behalf of Pokana. Neither Mr Kennedy nor his solicitor were apparently told that it was incorrect and did not represent what the parties had agreed to as determined by the ADT. At the time nobody connected up the payments being sought and made by the plaintiff to the defendant with the terms of the lease. That position continued until September 2004. It was not until shortly after 17 November 2003 that the plaintiff realised that the terms of the lease documents did not represent what had been agreed as determined by the ADT.

94 The plaintiff relied heavily on Ong & Anor v Luong & Anor NSWSC, McLelland J, 30 August 1991, 1991 NSW Conv R 55,597. By a lease the owners of the freehold leased, to Ong, a shop in Canley Vale for three years with a three-year option for renewal. The lease of Torrens title land was in registrable form but had not been registered. Ten days later the lessor agreed to sell the property subject to this lease. The Court held that the rear yard was not included as part of the leased property on the correct construction of the lease. McLelland J next dealt with the claim for rectification, stating:

“The defendants as registered proprietors of the subject land have the benefit of the protective provisions of sec 42 and 43 of the Real Property Act 1900. Under sec 42(1) they hold the subject land, except in case of fraud, absolutely free from unregistered estates and interests with certain specified exceptions, none of which are relevant. That section does not however protect them from personal equities arising from transactions entered into by themselves, and the acknowledged obligation to recognise the plaintiff’s rights as lessees on the terms of the lease …. is such a personal equity. The extent of that equity is to require them to give effect to the plaintiff’s lease in the same way as if that lease had been registered prior to the registration of the transfer to the defendants. However sec 42 protects the defendants from any equity, such as an equity to rectification, arising between the plaintiffs and the predecessors in title of the defendants, and even if they were to be held to have had notice of any such equity prior to becoming registered proprietors of the subject land (and this has not in my opinion been established), they are, by the express terms of sec 43(1), except in the case of fraud, not to ‘be affected by notice direct or constructive of any … unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such … unregistered interest is in existence shall not of itself be imputed as fraud’.”

95 The plaintiff further submitted:

(a) This case differs from Ong in that in the present case “there is a difference between the lease and the various lease documents, not between the parties’ (including the defendant’s) intentions and the lease. In Ong the lease and the lease documents recording it stood together apart from the parties, whereas in the present case the lease and the parties (including the defendant) stand together apart from the various lease documents.”

(b) “Thus the plaintiff has an equity to require the defendant to give effect to the same lease in the same way as if it had been registered prior to the transfer (i.e. containing the rent of $4,459 plus GST) and it would be for the defendant to attempt to rectify the lease if it sought to maintain a claim for higher rent on some basis, which basis the plaintiff says does not exist.”

(c) “Each rent statement issued by Goldline Realty Pty Ltd trading as LJ Hooker Maroubra (i.e., the defendant’s new agent) following settlement on 27 June 2003 was a separate transaction entered into between the defendant (indeed at the behest of the defendant who sent the invoices) and the plaintiff who paid them.”

(d) “Each of these transactions created a personal equity in the plaintiff to have the lease document, or any lease document reflecting the erroneous rental, rectified.”

(e) The letter of 17 November 2003 was “evidence that at that point the defendant did not believe that the plaintiff had agreed to a lease document. This position was said to be reinforced by the continuing invoicing of $4,459 plus GST per month.”

(f) “It is the equities arising from the continued issue of invoices for $4,459 plus GST which takes the plaintiff’s claim for rectification of the lease documents from an equity arising between the plaintiffs and the predecessors in title of the defendants which would be protected by s 42 of the Real Property Act to one which arises out of transactions between the plaintiff and the defendant which are not protected by that section (i.e., that section does not however protect them from personal equities arising from transactions entered into by themselves).”

96 In my opinion the plaintiff has attached undue weight to Trust Account Receipts issued by LJ Hooker Maroubra as from July 2003 showing the rent as “$4,904.90 GST Incl $0.00”, each of GST arrears and GST credits as “0.00” and Tenant Tax Invoices the agent issued which described the rent as $4,904.90 and made no reference to GST. This seems to have continued until the Tenant Tax Invoice of 30 March 2004 for the period 7 April 2004 to 7 May 2004, where the rent was shown as $5,003.00 and no reference is made to GST.

97 By letter of 17 November 2003, the agent to the plaintiff stated that if the plaintiff did not sign the lease by 21 November, “the lessor mortgagee will lodge the security documents for registration and the non lodging of the lease will be your responsibility”. By that stage just under five months had elapsed since settlement and the documents had not been lodged for registration. The attempts to rectify the defective attestation clause as to the plaintiff on the lease prepared by Mr Healy had proved ineffectual. While it is known that the plaintiff declined to execute the “lease document” made available to the agent, the evidence does not disclose what other steps, if any, it took to preserve its alleged personal equity. The plaintiff was put on notice of the intended lodging of the transfer and the mortgage.

98 The evidence does not demonstrate any wrongful conduct or sharp practice either by the defendant or his mortgagee prior to registration of the transfer and the mortgage on 30 December 2003. The mortgagee was not a party to these proceedings but it would require registration to protect its interests.

99 In my opinion the plaintiff has no personal equity that prevails against the defendant. Further, any personal equity the plaintiff may have cannot prevail against the defendant as the registered proprietor.

100 The plaintiff submitted that it was entitled to relief based on its unilateral mistake and the knowledge of the defendant of the plaintiff’s mistake and silence on the part of the defendant amounting to sharp practice. See Harris v Smith & Ors [2008] NSWSC 545.

101 The new lease as drafted by the solicitors for Pokana was cast in the terms its solicitors thought desirable and in accordance with the draftsman’s usual practice. It was signed by Mr Ostrovski without reading it and at the instigation of his legal representatives.

102 At no time prior to settlement of the sale was Mr Kennedy or his solicitor on notice that the lease document which had been signed did not represent the intention of Pokana and the plaintiff.

103 The plaintiff submitted that “the defendant’s sudden reliance on the mistake contained in the lease documents he relies on, some 15 months after he purchased the premises, contains an element of sharp practice in itself within the test formulated in Harris v Smith & Ors for rectification for unilateral mistake so as to entitle the plaintiff to rectification on that basis alone”. The plaintiff also relied on the delay in the defendant seeking to rely on the lease documents. In support of these submissions the plaintiff relied on the documents issued by LJ Hooker Maroubra. They utilise the figure of $58,857.60 in Item 4(a) of the lease document.

104 It was not sharp practice for Mr Kennedy to proceed on the basis of the terms of the lease document which had been signed on behalf of both the landlord and the tenant in the circumstances of the present case. The notice on which the plaintiff relies, namely, the documents issued by the agent were, at best, oblique. While the plaintiff has lost the fruits of its success in the ADT, the managing director of the plaintiff substantially contributed to that loss by not insisting on reading the lease document prior to signing it.

105 I dismiss the plaintiff’s claim for rectification. The plaintiff must pay the defendant’s costs of the hearing as to the rectification issue.

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