Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd - [2011] WASCA 49

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: RAY MULLINS & SONS PTY LTD -v- SKYCORP INVESTMENTS PTY LTD [2011] WASCA 49

CORAM: BUSS JA
NEWNES JA
MURPHY JA

HEARD: 4 NOVEMBER 2010

DELIVERED : 24 FEBRUARY 2011

FILE NO/S: CACV 112 of 2009

BETWEEN: RAY MULLINS & SONS PTY LTD
Appellant
AND
SKYCORP INVESTMENTS PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :TEMPLEMAN J
Citation  :RAY MULLINS & SONS PTY LTD -v- SKYCORP INVESTMENTS PTY LTD [2006] WASC 241
File No  :CIV 2288 of 2003

Catchwords:

Commercial lease - Complex of different lessees - Single lessor - Lessees contribute to variable outgoings based on the proportion which each lessee's lettable area bears to the total area of the complex designated by the lessor from time to time as being intended for letting - Whether the term 'letting' included licences for exclusive possession - The distinction between a lease and a licence - The hallmarks of a lease - Whether areas in the complex the subject of licences were, at law, leases or tenancies - The proper construction of the phrase 'designated by the lessor from time to time as being intended for letting' - Whether a common mistake as to the area forming the basis for calculation of contributions to a promotional fund

Legislation:

Nil

Result:

Appeal allowed in part

Category: A

Representation:

Counsel:

Appellant: Mr M J McCusker QC & Mr A Metaxas
Respondent: Mr G R Donaldson SC

Solicitors:

Appellant: Metaxas & Hager
Respondent: Lawton Gillon

Case(s) referred to in judgment(s):

Byrne Bros Pty Ltd v City of Maryborough (1984) 53 LGRA 383
Castor v Brisbane City Council [1955] St R Qd 348
General Discounts Pty Ltd v Crosbie [1968] Qd R 418
KJRR Pty Ltd v Commissioner of State Revenue (Vic) [1999] VSCA 2; [1999] 2 VR 174
Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2006] WASC 241
Street v Mountford [1985] AC 809
The State of Western Australia v Ward [2002] HCA 28; (2002) 213 CLR 1

TABLE OF CONTENTS

Buss JA's reasons..................................................................................................................... 5

The appellant requires no extension of time to appeal
The relevant provisions of the Lease
The trial judge's construction of the relevant provisions of the Lease
The relevant provisions of the Ground Lease
The trial judge's determination in relation to the construction of cl 15.10 of the Ground Lease
The grounds of appeal generally
Ground 1: the trial judge's construction of the Lease: the issues
Ground 1: the trial judge's construction of the Lease: the first issue
Ground 1: the trial judge's construction of the Lease: the second issue
Ground 1: the trial judge's construction of the Lease: the third issue
Ground 1: conclusion
Ground 2: the trial judge's construction of cl 15.10 of the Ground Lease
Ground 3: good faith
Ground 4: stalls in category of their own
Ground 5: alfresco eating area for the Quay Café
Ground 6: alfresco eating areas for Fins Restaurant and Sharky's Café
Ground 7: Fins Restaurant coolroom and the Quay Café storeroom
Ground 8: Core Surf foyer
Ground 9: the appellant's balconies
Ground 10: addition to shop 50
Ground 11: Core Surf - café common areas
Ground 12: Promotional Fund
The result of the appeal

BUSS JA: By a lease undated but stamped 19 June 1997 (Ground Lease), the Minister for Transport granted a lease to the respondent over a piece of land, with an area of about 3,543 sqm, located in Hillarys Boat Harbour and known as Sorrento Quay, for a term of 30 years commencing on 1 July 1997, with options to renew.
By a deed undated but stamped 17 February 1998 (Lease), the respondent granted a sublease to the appellant of that part of the first floor of the building known as the Function Centre, being part of Sorrento Quay and having an area of about 1,393 sqm, for a term of 12 years commencing on 1 December 1997, with an option to renew.
Disputes arose between the appellant and the respondent as to the rent payable by the appellant under the Lease and the extent of the appellant's obligation under the Lease to contribute to variable outgoings and a promotional fund. These disputes were attributable partly to the parties' inability to agree upon the precise area of the building occupied by the appellant or upon the precise area of the lettable parts of Sorrento Quay occupied by other lessees, and partly to differences of view as to the proper construction of some provisions of the Lease.
The appellant commenced proceedings in the Supreme Court against the respondent. It claimed that it had made overpayments to the respondent under the Lease in a total amount of $263,247.69 up to 30 June 2005. The appellant pleaded that the overpayments were made pursuant to mistakes of fact, and that:
•it would be unconscientious for the [respondent] to retain and not repay such moneys; or
•alternatively, the [respondent] holds those moneys as trustee for the [appellant]; or
•alternatively, the moneys so paid are repayable by the [respondent] to the [appellant] as moneys of the [appellant] had and received by the [respondent] (Statement of Claim, par 16) [173].
The respondent accepted at trial that if any overpayments had been made then they should be refunded with interest (ts 340).
The action was tried before Templeman J. The trial was run before his Honour on the following basis:
Although this is, essentially, a money claim, I have not been asked to calculate the amounts which should have been paid by the [appellant] to the [respondent] in respect of rent and contributions to variable outgoings. I have been asked only to make findings as to the areas occupied by the [appellant] and the various tenants referred to above, and the relevant periods of occupation. On the basis of those findings, the financial calculations will be performed by the parties and their representatives [175].
After the trial, the trial judge published reasons for decision 'on an interim basis' and left it to the parties to bring in a minute of orders giving effect to them. See Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2006] WASC 241 [176].
His Honour published his reasons on 31 October 2006. There was then an extraordinary delay. Orders were not made until 9 September 2009. The orders read, relevantly:
1.The area of the [appellant's] premises, since 1 December 1997 in the [respondent's] building at Hillarys Boat Harbour is 1087.7 square metres.
2.The tenancy areas of the [respondent's] building at Hillarys Boat Harbour since 1 December 1997 for the purpose of the apportionment of variable outgoings are the areas set out in the attached schedule marked 'A'.
3.The [respondent] pay the [appellant] $1,930.95 and interest thereon at 6% pa from the date of payment to the date of judgment.
The appellant has appealed to this court against the trial judge's orders.

The appellant requires no extension of time to appeal

The respondent, in its written submissions, asserted that the appellant required an extension of time to appeal. Counsel for the respondent did not persist with this assertion at the hearing.
I am satisfied that the appellant does not require an extension of time. Although the trial judge published his reasons on 31 October 2006, orders were not made until 9 September 2009. The notice of appeal was filed and served on 16 September 2009. The time allowed for commencing an appeal (being 21 days) is calculated from the date on which the orders appealed against were made.

The relevant provisions of the Lease

By cl 3.2 of the Lease, the appellant was obliged to pay to the respondent a 'Proportion of Variable Outgoings'.
The expression 'Proportion of Variable Outgoings' is defined in cl 1.1 to mean:
[T]he proportion calculated as a percentage of the Variable Outgoings which the Floor Area of the Premises bears to the Floor Area of the Building.
Each of the expressions 'Variable Outgoings', 'Floor Area of the Premises' and 'Floor Area of the Building', appearing in the definition of 'Proportion of Variable Outgoings', is separately defined in cl 1.1.
'Variable Outgoings' means 'the aggregate of every outgoing, cost, and expense, of the Lessor properly or reasonably assessed, assessable, charged, chargeable, paid, payable, or otherwise incurred, in respect of the Land or the Building' including, without limitation to the generality of that language, the cost of various matters then specifically enumerated in the definition.
The term 'Land' is defined in cl 1.1 to mean the land described in item 1 of the Schedule to the Lease, namely:
An area of approximately THREE THOUSAND FIVE HUNDRED AND FORTY THREE SQUARE METRES (3,543m²) located in Hillarys Boat Harbour and known as Sorrento Quay as shown for the purposes of identification only as the area outlined in red on the plan attached to the Ground Lease and marked 'A'.
The term 'Building' is defined in cl 1.1 to mean the improvements erected on the Land and being part of the complex known as Sorrento Quay.
The term 'Premises' is defined in cl 1.1 to mean:
[T]hat part of the Building specified in item 2 of the Schedule including:
(a)the internal finished surface of the permanent walls;
(b)where exterior windows are double glazed, the interior glazing and the area between the interior and exterior glazing;
(c)the internal finished surface of interior walls or partitions except in the case of inter‑tenancy walls or partitions when the facing part of those walls to the centre line is included;
(d)the surface of the floor slabs, whether or not there is a raised floor; and
(e)if there is a suspended ceiling, the upper surface of the suspended ceiling, or if there is no suspended ceiling, the lower surface of the ceiling slab or roof;
but excluding:
(f)if the exterior windows are double glazed, the exterior glazing; and
(g)if the exterior windows are not double glazed, the exterior windows.
Item 2 of the Schedule to the Lease reads:
That part of the 1st Floor of the Building known as at the date of this Deed as the Function Centre shown for identification purposes only as the area outlined in red on the plan annexed to this Deed and having an area of approximately ONE THOUSAND THREE HUNDRED AND NINETY THREE SQUARE METRE (1,393m²).
The definitions of 'Floor Area of the Building' and 'Floor Area of the Premises' in cl 1.1 read:
'Floor Area of the Building' means the aggregate floor area of the Lettable Parts of the Building as certified by the Lessor from time to time using the latest method of measurement published by the Property Council of Australia Limited for commercial retail premises;
'Floor Area of the Premises' means the floor area of the Premises as certified by a licensed surveyor using the latest method of measurement published by the Property Council of Australia Limited for commercial retail premises which for the avoidance of any doubt does not include the area of the North and South balconies adjoining the Premises.
The expression 'Lettable Parts', referred to in the definition of 'Floor Area of the Building', is defined in cl 1.1 to mean:
[T]hose parts of the Building designated by the Lessor from time to time as being intended for letting.
The definition of 'Common Parts' in cl 1.1 reads:
'Common Parts' means those parts of the Building and the Land from time to time set aside by the Lessor:
(a)as areas open to the public;
(b)for common use by occupiers of the Building; or
(c)for common amenity or convenience.
Clause 6.2 is concerned with contributions to a 'Promotional Fund'. It provides:
The Lessee shall pay to the Lessor to be credited to the Promotional Fund for the first Lease Year the sum of FIVE THOUSAND FOUR HUNDRED AND THIRTY TWO DOLLARS SEVENTY CENTS ($5,432.70) per annum or THREE DOLLARS NINETY CENTS ($3.90) per square metre of the Floor Area of the Premises, whichever is the greater amount, and for each subsequent Lease Year thereafter an amount equal to the contribution for the immediately preceding Lease Year or the annual rate thereof (if less than TWELVE (12) months) increased by a percentage thereof at the sole discretion of the Lessor. The Lessee shall pay its contribution to the Promotional Fund for each Lease Year by equal monthly payments as advised from time to time to the Lessee by the Lessor's managing agent with the first payment to be made on the Date of Commencement.
Clause 10.5, which confers on the appellant a licence to use the north and south balconies adjoining the Premises (see the definition of Floor Area of the Premises set out at [20] above), provides:
The Lessee shall during the Term have a licence to use the North and South balconies adjoining the Premises on the same terms and conditions as applicable to the Lessee's lease of the Premises except that no Rent will be payable by the Lessee during the Term in respect of the Lessee's use of the North and South balconies.

The trial judge's construction of the relevant provisions of the Lease

The trial judge said, in relation to the definition of 'Lettable Parts', that the respondent was obliged under the Lease 'to designate those improvements erected on the Sorrento Quay complex which it intends to let, and to certify the total area involved, having applied the latest [Property Council of Australia] method of measurement' [44].
The evidence at trial was to the effect that there had never been any 'formal designation by the [respondent] of the lettable areas', nor had there been any 'formal certification of the relevant floor areas' [45].
His Honour held that the respondent's obligation to designate areas intended for letting required it to act 'fairly and reasonably: in other words, in good faith' [46]. He added, however, that this obligation did not require the respondent to do any more than 'designate the areas it actually intended to let, once it had formed that intention, based on commercial considerations' [47].
The trial judge set out the stance adopted by each party to the litigation, as follows:
The [appellant's] position, in essence, is that the [respondent] should have designated, as areas it intended to let, all the areas actually occupied by its various tenants, on whatever basis. Thus, where a café proprietor has a lease of a building but is permitted by the [respondent] to occupy an additional outdoor area beyond the leased premises, that area should be regarded as capable of being let. The [respondent] should therefore be regarded as having an intention to let it and should designate.
The [respondent's] position is quite different. The [respondent] contends that if it chooses to allow a tenant to occupy an area beyond its lease (in effect, as a licensee), and takes no rent for the privilege, then it has not formed an intention to lease the additional area and is not required to designate [48] ‑ [49].
His Honour decided that, 'as a general principle', the respondent could not be said to be acting 'in bad faith' if it 'does not designate as intended for letting, areas which are occupied by tenants pursuant to some licence arrangement, either formal or informal' [61].

The relevant provisions of the Ground Lease

A remarkable feature of the trial is that although the proper construction of cl 15.10 of the Ground Lease was a relevant issue in the litigation, the parties merely tendered cl 15.10 and pages 1, 52 and 53 of the document.
Counsel for the appellant informed this court that the respondent had refused to tender the whole of the Ground Lease because it was 'commercially confidential'.
Clause 15.10 reads:
The Lessee must not on or before 30 September 2003 redevelop or permit to be redeveloped in any way whatsoever any part of the café common areas forming part of the Land and shown for the purpose of identification only as the areas coloured in green on the plan attached to this Document and marked 'A'.

The trial judge's determination in relation to the construction of cl 15.10 of the Ground Lease

The trial judge said he understood that the 'café common areas' referred to in cl 15.10 of the Ground Lease included 'those areas outside the building which have been occupied by various cafés for alfresco eating' [52].
His Honour referred to evidence given at the trial by Gregory Poland, a director of the respondent, who appeared to have been responsible for its policy decisions. His Honour said:
I think Mr Poland is right ‑ or at least arguably right ‑ in his contention that the [respondent] cannot lease the café common areas, thereby granting exclusive possession [58].
The trial judge then said, however, that it was not possible to form a concluded view on this issue because cl 15.10 was the only relevant provision of the Ground Lease that was in evidence [58].

The grounds of appeal generally

The appellant relies on 12 grounds of appeal. It is convenient to deal with each of them in turn.

Ground 1: the trial judge's construction of the Lease: the issues

Ground 1 alleges that the trial judge erred in law in finding that the Lease required the respondent to designate only the areas it actually intended to let, once the respondent had formed that intention [47].
Counsel for the appellant submitted that:
(a)the Lease required the respondent to designate areas the subject of licences for exclusive possession because such licences were, at law, tenancies;
(b)the determination of areas to be designated should have been on the basis of the right of possession, occupation or use granted, without regard to the respondent's subjective intention to 'let'; and
(c)further or alternatively, the respondent was required to designate areas the subject of licences for exclusive possession, occupation or use 'analogous to a tenancy' because this was consistent with the proper construction of the Lease.
Ground 1 of the appeal, and the submissions on behalf of the appellant, raise three issues.
First, does the term 'letting' within the definition of 'Lettable Parts' in cl 1.1 of the Lease include:
(a)licences for exclusive possession; or
(b)licences for exclusive possession, occupation or use 'analogous to a lease or tenancy'?
Secondly, were the areas in the Building, the subject of licences, at law, leases or tenancies?
Thirdly, what is the meaning of the phrase 'designated by the [respondent] from time to time as being intended for letting' within the definition of 'Lettable Parts' in cl 1.1?

Ground 1: the trial judge's construction of the Lease: the first issue

I will now address the first issue, that is, does the term 'letting' within the definition of 'Lettable Parts' in cl 1.1 of the Lease include:
(a)licences for exclusive possession; or
(b)licences for exclusive possession, occupation or use 'analogous to a lease or tenancy'?
By cl 3.2 of the Lease, the appellant is obliged to pay to the respondent the 'Proportion of Variable Outgoings'.
In general, cl 3.2 reflects the common practice in leases of commercial premises of stipulating expressly and in detail the types of outgoings, costs and expenses of the lessor and, if the leased premises are part of a building or complex, the proportion of those outgoings, costs and expenses payable by the particular lessee as a percentage of the entire area of the building or complex that is leased or available for lease. See Duncan WD, Commercial Leases in Australia (5th ed) [5.30].
The term 'Variable Outgoings' is, in essence, defined in cl 1.1 as the aggregate of all outgoings, costs and expenses properly or reasonably incurred by the respondent in respect of the Land or the Building.
The 'Proportion of Variable Outgoings' payable by the appellant to the respondent under cl 3.2 is defined in cl 1.1 by reference to other defined terms. When all of the relevant defined terms (being 'Proportion of Variable Outgoings', 'Floor Area of the Premises', 'Floor Area of the Building', 'Premises', 'Building' and 'Lettable Parts') are read together, it is apparent that the proportion of the relevant outgoings, costs and expenses payable by the appellant is equal to the proportion which the floor area of the Premises (but not including the area of the north and south balconies adjoining the Premises) bears to the aggregate floor area of 'those parts of the Building designated by the [respondent] from time to time as being intended for letting', within the definition of 'Lettable Parts'.

The term 'letting' is not defined in the Lease. Its ordinary meaning is, relevantly, the granting of the possession and use of land, a building, a room or movable property to another in consideration of the payment of rent. See the Shorter Oxford English Dictionary (5th ed) pp 1577 ‑ 1578; the Macquarie Dictionary (revised 3rd ed) p 1094.
However, the precise meaning of 'letting' in a particular case will depend upon the context in which the word is used. See Castor v Brisbane City Council [1955] St R Qd 348, 360 ‑ 361 (Townley J); General Discounts Pty Ltd v Crosbie [1968] Qd R 418, 422‑ 423 (Matthews J); Byrne Bros Pty Ltd v City of Maryborough (1984) 53 LGRA 383, 390 ‑ 391 (GN Williams J).
'Letting' may, in a particular case, be coextensive with the granting of a lease or tenancy. But it is not necessarily coextensive. 'Letting' may sometimes include the grant of a licence.
In my opinion, the term 'letting' within the definition of 'Lettable Parts' in cl 1.1 is confined to the granting of leases or tenancies in the strict sense. It does not extend to licences, including licences for exclusive possession, unless the licence in question is, as a matter of law, a lease or tenancy. It does not include licences for exclusive possession, occupation or use 'analogous to a lease or tenancy'. My reasons for these opinions are as follows.
First, the ambit of the term 'letting' within the definition of 'Lettable Parts' must be determined, as a matter of construction, as at the date on which the Lease was executed. The Lease is undated but stamped 19 June 1997. The initial term commenced on 1 December 1997.
As I have mentioned, the respondent holds its interest in the Land and the Building pursuant to the Ground Lease. Before the respondent acquired this interest, the Minister for Transport, as lessor, had granted leases of parts of the Land and the Building. The respondent acquired its interest subject to the existing leases. See pars 3 and 4 of Mr Poland's first witness statement which was received in evidence at the trial as exhibit 11.
There was no suggestion at the trial that, as at the date on which the Lease was executed, any other parts of the Land or the Building were occupied except pursuant to leases previously granted by the Minister for Transport.
The nature of the Land and the Building as a commercial complex (containing retail shops, restaurants and cafés, and premises for service providers), the existing leases previously granted by the Minister for Transport which bound the respondent, and the absence of any suggestion at the trial that as at the date of execution of the Lease any other parts of the Land or the Building were occupied except pursuant to leases, indicate that, as at the date of execution of the Lease, the respondent intended to grant leases or tenancies in the strict sense over any parts of the Land or the Building which were not from time to time occupied by a lessor or tenant, or common areas, or required by the respondent for its own use.
Secondly, the word 'letting' and other grammatical forms of that word in the Lease are used in contexts which indicate that they refer to leases or tenancies in the strict sense.
The definition of 'Lettable Parts' expressly contemplates that from time to time parts of the Building will not, in fact, be let. It refers to 'Lettable Parts' as being those parts of the Building which are designated by the respondent from time to time as being intended for letting.
Apart from the definition of 'Lettable Parts', the Lease refers to grammatical forms of the word 'letting' in two other provisions, namely cl 3.25 and cl 3.34.
In cl 3.25, the appellant agrees to permit the respondent or its agents 'to affix and maintain re‑letting signs or notices to the Premises during the last THREE (3) months of the Term'. Further, in cl 3.26 the appellant agrees to permit the respondent or its agents, relevantly, at any reasonable time during the last three months of the term 'to bring upon the Premises prospective tenants and other persons for the purpose of viewing the Premises'.
It is apparent from these provisions that the term 're‑letting' refers to the re‑letting of the premises by the obtaining of another lessee or tenant. 'Re‑letting' in this context is coextensive with the obtaining of a new lessee or tenant. It does not connote something broader than a lease or tenancy in the strict sense.
In cl 3.34, the appellant agrees with the respondent, relevantly, 'not to assign, sub‑let, mortgage, charge, part with possession of, or dispose of, any part of the Premises nor assign, sub‑let, mortgage, charge, part with possession of, or dispose of, the whole of the Premises', without the prior written consent of the respondent.
As Matthews J noted in General Discounts, '[W]hen one is considering a covenant in a lease against subletting and the term 'let' is used, it will ordinarily carry the implication of a demise of the estate of the lessee [sic]' (423).
It is apparent that the word 'sub‑let' is used in cl 3.34 in the strict sense of granting a sub‑lease or sub‑tenancy, in that:
(a)'sub‑let' appears in association with specific kinds of transactions or interests, namely, assignments, mortgages and charges; and
(b)other arrangements which are sometimes within the broader notion of a 'letting', for example, licences, are within the more general description of parting with possession or disposing of the whole or part of the Premises.
Thirdly, there is 'no right of occupation' which can ordinarily be described as a licence for exclusive possession, occupation or use 'analogous to a lease or tenancy'. The 'right' under which the occupant is entitled to exclusive possession, occupation or use will ordinarily be characterised as creating either a leasehold interest or a licence of a particular nature or kind.

Ground 1: the trial judge's construction of the Lease: the second issue

I will now address the second issue, that is, were the areas of the Building, the subject of licences, at law, leases or tenancies?
The determination of whether an agreement conferring a right to occupy premises creates a lease or a licence depends on whether a right to exclusive possession was granted in respect of the premises. See Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209, 214 (McTiernan J), 217 ‑ 218 (Taylor J), 220 (Menzies J), 222 ‑ 223 (Windeyer J).
The proper characterisation of the right conferred by an agreement to occupy depends on the nature of the right which the parties intended to confer on the occupant in relation to the premises. See KJRR Pty Ltd v Commissioner of State Revenue (Vic) [1999] VSCA 2; [1999] 2 VR 174 [5] (Tadgell JA).
In The State of Western Australia v Ward [2002] HCA 28; (2002) 213 CLR 1, McHugh J said that exclusive possession in the context of a lease refers to legal possession [502]. His Honour elaborated:
It is the right to legal possession that constitutes a lease. Indeed, it is a pity that the term 'exclusive possession' was ever used, although its use dates back to about 1830. As Mr D W McMorland has pointed out (McMorland, 'Lease or Licence?', in Hinde (ed), Studies in the Law of Landlord and Tenant (1975) 11, at p 14): 'Between 1830 and 1950 a number of cases used the phrase "exclusive possession" to indicate the distinguishing feature of a tenancy, but it is always quite clear that it is used in the sense of the legal right to sue in trespass' [502].
McHugh J then said that the adjective 'exclusive' adds nothing to the concept of possession. What is decisive is the legal right to possession, and not the physical fact of exclusive 'possession' or occupation [503]. His Honour explained:
That is why a lessee can bring an action for ejectment although driven from the premises and why at common law the lessee could bring an action for ejectment although he or she had not yet entered upon the land. The legal right to possession before entry gave rise to an interesse termini that enabled the lessee to bring an action of ejectment and, after entry, an action for trespass to the land as well as ejectment.
In contrast, a licence to use land ordinarily confers only a personal right that is enforceable in contract but not by an action in trespass or ejectment. The right of the occupant to bring an action of ejectment and after entry an action in trespass for wrongful entry on the land has always been the mark of the lessee (Radaich v Smith (1959) 101 CLR 209 at 222 per Windeyer J). The lessee may bring such an action against a third party and even the lessor (Radaich v Smith (1959) 101 CLR 209 at 222 per Windeyer J). In contrast to the lessee, a licensee, whose occupation is wrongly terminated or interfered with, must sue in contract or for some tort other than trespass to the land. If wrongly ejected from the land, the licensee cannot maintain an action in ejectment. If ejected by the grantor, the licensee may be able to obtain an injunction restraining the grantor from breaching the personal contract. If ejected by a stranger, the licensee may have an action in trespass to the person or some other tort. But in neither case is the action of ejectment or trespass to land available to the licensee [503] ‑ [504].
Distinguishing between exclusive possession on the one hand, and occupation or sole occupation on the other, is important in determining whether a legal right to exclusive possession has been given. See Ward [518] (McHugh J). A person may retain legal possession (that is, exclusive possession) even though another person has sole physical occupation of the premises. McHugh J noted:
Possession and occupation ‑ even sole occupation ‑ are different concepts (Peakin v Peakin [1895] 2 IR 359; Chrystall v Ehrhorn [1917] NZLR 773 at 780, per Edwards J). As Windeyer J pointed out in Radaich v Smith ((1959) 101 CLR 209 at 223), 'persons who are allowed to enjoy sole occupation in fact are not necessarily to be taken to have been given a right of exclusive possession in law' [518].
In KJRR, Tadgell JA said that the hallmarks of a lease are 'exclusive possession at a rent for a term' [12]. See also Street v Mountford [1985] AC 809, where Lord Templeman observed:
There can be no tenancy unless the occupier enjoys exclusive possession; but an occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier. To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. The grant may be express, or may be inferred where the owner accepts weekly or other periodic payments from the occupier (818). (emphasis added).
In the present case, on the trial judge's findings, the respondent created licences in relation to parts of the Land or the Building, as follows:
(a)the Quay Café, which is the subject of grounds 5 and 7 of the appeal;
(b)Fins Restaurant, which is the subject of grounds 6 and 7 of the appeal;
(c)Sharky's Café, which is the subject of ground 6 of the appeal;
(d)Core Surf, which is the subject of grounds 8 and 11 of the appeal;
(e)the appellant's balconies, which are the subject of ground 9 of the appeal; and
(f)shop 50, which is the subject of ground 10 of the appeal.
It is convenient to deal with the appellant's submission that the areas the subject of these licences were, at law, leases or tenancies, and therefore within the definition of 'Lettable Parts', in the course of examining grounds 5 to 11 of the appeal. This examination will be made against the background of the principles of law I have set out in addressing the second issue raised by ground 1.

Ground 1: the trial judge's construction of the Lease: the third issue

I will now address the third issue, that is, what is the meaning of the phrase 'designated by the [respondent] from time to time as being intended for letting' within the definition of 'Lettable Parts' in cl 1.1?
The word 'designate' is not defined in the Lease. Its ordinary meaning is, relevantly, to point out, indicate or specify. See the Shorter Oxford English Dictionary (5th ed) p 653; the Macquarie Dictionary (revised 3rd ed) p 518.
The word 'intended' in the phrase 'intended for letting' in the definition of 'Lettable Parts' refers to the intention of the respondent as lessor.
The words 'intended for' in the phrase 'intended for letting' connote that the parts of the Building in question are available for leasing, or have been set aside with the object or purpose of being leased.
It is apparent, however, when the definition of 'Floor Area of the Building' is read together with the definition of 'Lettable Parts', and in the context of the scheme for the apportionment of Variable Outgoings embodied in cl 3.2 of the Lease, that 'Lettable Parts' includes parts of the Building that are the subject of existing leases or tenancies as well as parts of the Building that are available for leasing, or have been set aside with the object or purpose of being leased (but are not yet the subject of an existing lease or tenancy).
In my opinion, the reference in the definition of 'Lettable Parts' to parts of the Building being 'designated' by the respondent contemplates that the respondent has overtly manifested its intention that the parts of the Building in question are available for leasing, or have been set aside with the object or purpose of being leased. Designation, for the purposes of the definition of 'Lettable Parts', is not confined to an express designation. It includes an implied designation, in particular, a designation by conduct.
The respondent may make a designation in respect of a particular part of the Building by, for example, engaging an agent to find a lessee or tenant for the relevant part or advertising the relevant part as being available for leasing.
A part of the building which has been reserved by the respondent for its own use or which is a 'Common Part' (as defined in cl 1.1 of the Lease) would not be within the definition of 'Lettable Parts' unless the respondent had overtly manifested an intention that the part in question had, instead of its current use, become available for leasing, or had been set aside with the object or purpose of being leased.
On its proper construction, the definition of 'Lettable Parts' is not concerned with the subjective intention of the respondent. Rather, it is concerned with the inferences to be made or the conclusions to be drawn, on an objective basis, from the relevant facts and circumstances.
It is a question of fact whether a particular part of the Building is within the definition of 'Lettable Parts'; that is, it is a question of fact whether a particular part has been designated by the respondent as available for leasing, or as set aside with the object or purpose of being leased. The test is objective.

Ground 1: conclusion

The appellant has made out ground 1 to the extent that it has established that the trial judge's construction of the definition of 'Lettable Parts' in cl 1.1 of the Lease was in error.
However, the appellant's alternative construction of the definition has been made out only to a limited extent.
I will determine the consequences in relation to the result of the appeal of my opinions as to the first, second and third issues raised by ground 1 in the course of considering the later grounds of appeal.

Ground 2: the trial judge's construction of cl 15.10 of the Ground Lease

Ground 2 alleges that the trial judge erred in law as follows:
(a)his Honour found [58] that cl 15.10 of the Ground Lease was relevant to the determination of the appellant's claim, when the claim should have been determined on the basis of:
(i)the rights granted or allowed for the contentious areas dealt with in the later grounds of appeal; and
(ii)the Lease;
(b)his Honour found [58] that it was arguably correct that the effect of cl 15.10 was to prevent the respondent from leasing and thereby granting exclusive possession of the café common areas, when he should have found that cl 15.10, properly construed, merely prohibited redevelopment of the café common areas; and
(c)his Honour found [58] that it was not possible to form a concluded view of the effect of cl 15.10 because it was the only part of the Ground Lease in evidence, when he should have determined the issue by reference to the evidence adduced.
In my opinion, although it was, on any view, extraordinary for cl 15.10 to be tendered at trial without the other provisions of the Ground Lease, the trial judge was bound to construe and give effect to it if an intelligible construction was able to be given to the clause, and the clause, properly construed, was relevant to any issue in the proceedings.
Clause 15.10 contained a promise by the respondent not to 'redevelop or permit to be redeveloped in any way whatsoever', on or before 30 September 2003, any part of the 'café common areas' forming part of the Land.
The trial judge found that the 'café common areas' referred to in cl 15.10 included those areas outside the Building which have been 'occupied by various cafés for alfresco eating' [52].
The word 'redevelop' means, relevantly, to develop (something) again. See the Shorter Oxford English Dictionary (5th ed) p 2500; the Macquarie Dictionary (revised 3rd ed) p 1585. The word 'develop', in the context of land or buildings, connotes the material physical alteration of the state or structure of the land or buildings, including by the construction of new or additional buildings or improvements or by the material physical alteration of existing buildings or improvements. See the Shorter Oxford English Dictionary (5th ed) p 662; the Macquarie Dictionary (revised 3rd ed) p 522.
In my opinion, cl 15.10, properly construed, prohibited the respondent from making a material physical alteration to, or permitting the material physical alteration of, the state or structure of any existing buildings or improvements on any part of the café common areas on or before 30 September 2003.
Clause 15.10 does not refer to, and it does not prohibit, the respondent from leasing or subleasing the whole or any part of the café common areas.
The proper construction of cl 15.10 was, in my opinion, relevant to the proceedings, but only to the extent that the respondent asserted cl 15.10 prohibited it from granting leases or subleases of the whole or any part of the café common areas.
Ground 2 has been made out.

Ground 3: good faith

Ground 3 alleges that the trial judge erred in fact and law in finding that the respondent did not act in bad faith by its failure to designate areas occupied by tenants pursuant to licence arrangements, either formal or informal.
For the reasons I have given in the course of considering the third issue raised by ground 1 of the appeal, the definition of 'Lettable Parts', properly construed, is concerned with whether the inferences to be made or the conclusions to be drawn, on an objective basis, from the relevant facts and circumstances are that the respondent, either expressly or by implication, designated particular areas for 'letting'.
As I have mentioned, the definition of 'Lettable Parts' is not concerned with the subjective intention of the respondent. It follows that issues of good faith and bad faith are irrelevant to whether the respondent has designated or failed to designate a particular part or parts of the Building as being intended for 'letting'.
The trial judge's construction of the definition was, with respect, in error. However, the proposition asserted by the appellant in ground 3 is also erroneous. It is based on the false premise that the respondent's subjective intention (and, therefore, its good faith or bad faith, as the case may be) is relevant to the designation of a particular area or areas as being intended for letting.

Ground 4: stalls in category of their own

Ground 4 alleges that the trial judge erred in fact and law in:
(a)finding that the 'stalls' were in a category of their own because they had a power supply, were located on a common area that the respondent was entitled to lease, and were in a 'protected area';
(b)failing to find that the right of exclusive possession for the stalls was, to all intents and purposes, identical to the rights granted or allowed for all of the contentious areas, so that they should all have been designated.
There were six stalls set up on the ground floor of the Building. Mr Paul McLean, the appellant's manager, described them in evidence as 'shops inside metal containers' [64]. The trial judge found:
[A]lthough the stalls were established in 1999, they were not designated until 2002. [The respondent] now accepts that they should have been designated as from 1999 [64].
The trial judge went on to say, however, that in his view the stalls were 'in a category of their own' [65]. His Honour explained:
I accept Mr Poland's evidence that the stalls were built by him, for the [respondent]: that they have a power supply and that they are in a part of the building which it is open to the [respondent] to lease. They are in a 'protected area', which I take to mean something other than a common area (TS 288).
It was suggested to Mr Poland in cross-examination that the [respondent's] failure to designate outdoor areas used in conjunction with the Fins and Sharky's cafes was for the purpose of advantaging his friend Michael Holtham, who had been a director of the [respondent] and of the companies which operated Fins and Sharky's. Mr Poland denied there was any such intention (TS 331). I accept his evidence [65] ‑ [66].
The stalls were on Common Parts under the roof of the Building. They were not exposed to the weather. This was not a point of differentiation between the stalls and the contentious areas.
Clause 15.10 of the Ground Lease did not prohibit the respondent from granting a lease or tenancy in respect of the café common areas. The entitlement of the respondent to lease the area on which the stalls were located was therefore not a point of differentiation between the stalls and the contentious areas.
The crucial issue in relation to each contentious area was whether that area was within the definition of 'Lettable Parts', properly construed.
Ground 4 has been made out.

Ground 5: alfresco eating area for the Quay Café

Ground 5 alleges that the trial judge erred in fact and law in finding that the respondent was not obliged to designate an outdoor area of 145 sqm used by the Quay Café after 1 August 1998.
The trial judge's findings in relation to the outdoor area in question were these:
The [respondent] entered into an agreement with the Quay Café proprietor on 1 August 1998 whereby an exclusive licence was granted for the use of an Exclusive Common Area of 150m² to the north of the premises, on the basis that no rent would be paid, nor any contribution to variable outgoings made in respect of that area (exhibit 1, page 280).
It was a further term of the licence that the [respondent] could at any time, and at its sole discretion and cost, redevelop the exclusive licence area by erecting a canopy structure to match existing canopies. If such development was carried out, the licence would terminate automatically but the proprietor of the Quay Café would then be obliged to take a lease of the area and pay rent and other charges (exhibit 1, pages 281 ‑ 282).
I accept that in granting an exclusive licence to occupy part of the common area, the [respondent] has acted inconsistently with Mr Poland's assertion that such areas were to remain common. However, for reasons to which I shall refer below, the exclusive licence area seems always to have been bounded by low limestone walls which tend to reduce its common utility.
Whether or not the [respondent] was entitled to grant an exclusive licence of part of a common area, I can see the commercial benefit to the [respondent] in entering into that agreement. A licence is not the same as a lease: and the agreement gave the [respondent] the flexibility it needed in order to carry out the development at a convenient time.
Some development was carried out subsequently, at a cost of approximately $100,000. Then, on or about 21 September 2004, the [respondent] let an area of 145m² to the proprietor of the Quay Café (exhibit 1, page 420) with effect from 1 September 2004 (exhibit 11, par 31). As I understand it, this was the area the subject of the previous licence agreement. The area of 145m²results from a more accurate measurement.
The exclusive licence area was separated from the original premises by a strip of 90m² in area, which seems to have been added to the leased premises when the licence was granted (exhibit 1, pages 284 ‑ 285).
Previously, on 1 November 2000, the [respondent] leased a further 50m²to the proprietor of the Quay Café. This was originally an outdoor common area, but was enclosed so as to create an extension to the kitchen.
The outdoor areas associated with the Quay Café have always been bounded (at least partially) by low limestone walls. I accept Mr Poland's evidence that the [respondent] has made some changes to the walls over the years. It is not possible to be specific because Mr Poland's evidence was somewhat vague. However, as I understand it, various parts of the walls have been increased in height by the addition of another course, some capping has been carried out and some flower beds might have been replaced by walls. Mr Poland accepted that the alignment of the walls had not changed (TS 305 ‑ 306).
This is consistent with Mr McLean's evidence, which I accept, that the area occupied by the Quay Café has not changed. However, that does not alter the fact that the [respondent] did not intend to let the area of 145 ‑ 150m² until it did so in September 2004. In my view, that was a legitimate position for the [respondent] to adopt [70] ‑ [78].
Counsel for the appellant submitted that the licence was granted 'on the same terms and conditions' as the lease of the part of the Building held by the proprietor of the Quay Café as lessee, except for the absence of any obligation to pay rent or variable outgoings. It was submitted that the licence was, at law, a lease. Alternatively, it was submitted that if a lessee of part of the Building had exclusive possession, occupation or use of another area for the conduct of the lessee's business then that area 'should have been designated'.
In my opinion, the licence granted to the proprietor of the Quay Café in respect of the outdoor area in question was not a lease or tenancy. My reasons are as follows. First, the hallmarks of a lease or tenancy are exclusive possession at a rent for a term. See [71] above. The respondent expressly agreed with the proprietor of the Quay Café that no rent would be paid, and no contribution to Variable Outgoings would be made, in respect of that area (GAB 126). Secondly, although the proprietor of the Quay Café had sole physical occupation of the area in question, the agreement with the respondent did not confer on the proprietor the right to legal possession. The respondent was entitled, at any time and at its sole discretion and cost, to redevelop the area in question by erecting a canopy structure to match existing canopies (GAB 126). Thirdly, the intention of the parties, as revealed by the provisions of their agreement, was to create a licence and not a lease or tenancy. They agreed to the creation of an 'exclusive licence'. Also, by their agreement, if the respondent decided to redevelop the area in question by erecting a canopy structure, the licence would terminate automatically and the proprietor of the Quay Café would then be obliged to take a lease of the area and pay rent and other charges (GAB 126).
Also, in my opinion, the legal character of the occupancy by the proprietor of the Quay Café and the features of the agreement between the proprietor and the respondent, as set out at [110] above, preclude the making of an inference or the drawing of a conclusion, on an objective basis, that at any material time the relevant area was available for leasing, or had been set aside with the object or purpose of being leased.
Accordingly, the outdoor area in question was not to be taken into account at any material time in calculating the appellant's Proportion of Variable Outgoings.
Ground 5 fails.

Ground 6: alfresco eating areas for Fins Restaurant and Sharky's Café

Ground 6 alleges that the trial judge erred in fact and law in finding that the respondent was not obliged to designate:
(a)an outdoor area to the north of Fins Restaurant from 1 December 1997;
(b)an outdoor area adjacent to Sharky's Café from 1 October 1998 plus 147.33 sqm from 1 July 2000.
The lease granted by the respondent to the proprietor of Fins Restaurant, Palmland Investments Pty Ltd (Palmland), included an option to lease an alfresco area. The option was not exercised [82] ‑ [84].
The trial judge's findings in relation to the alfresco area occupied by Palmland were as follows:
The Palmland lease contained an option to lease an additional area of approximately 75m² 'for the purpose of alfresco dining'. The actual area is 83.33m², as determined by survey (exhibit 9, appendix 18). Palmland did not exercise the option: and the [respondent] has never received rent for the additional area, which has not been designated as intended for letting.
According to both Mr McLean (exhibit 9, par 47) and Mr Side (exhibit 5, pars 25 ‑ 26 and appendices A and B) Fins has always occupied the additional area.
I accept the evidence of Mr McLean and Mr Side that the additional area was occupied by Fins Restaurant.
As I understood Mr Poland's evidence, he did not deny the fact of occupancy (TS 319). However, he contended that Palmland could not exercise the option because the [respondent] was unable to obtain permission to erect canopies over the additional area and enclose it.
I accept that the lack of approval to which Mr Poland referred was the basis for the commercial decision not to let the additional area. It might be said that it was an area the [respondent] intended to let, because it granted an option for that purpose. However, in my view, there was no intention to let until the option was exercised, which it was not [84] ‑ [88].
In my opinion, the additional area, the subject of the option to lease (which was never exercised), that was occupied by the proprietor of Fins Restaurant under an informal agreement with the respondent, did not constitute a lease or tenancy. No rent was payable for the additional area. The subsistence of the option to lease over the additional area is inconsistent with the parties intending that the occupancy should be under or pursuant to an existing lease or tenancy.
However, in my opinion, the respondent, by granting the option to lease, overtly manifested an intention that the additional area was, during the subsistence of the option, set aside with the object or purpose of being leased. This is the proper inference to be made or conclusion to be drawn, on an objective basis, from the grant of the option. The respondent's subjective intention is irrelevant. Also, the fact that the respondent was unable to obtain permission to erect canopies in the additional area and enclose it, does not preclude the inference or conclusion that the additional area was set aside with the object or purpose of being leased.
It follows that the additional area was required to be taken into account, during the subsistence of the option to lease, in calculating the appellant's Proportion of Variable Outgoings.
The lease granted by the respondent to the proprietor of Sharky's Café, Fairbrook Holdings Pty Ltd (Fairbrook), required Fairbrook to lease, in addition, 75 sqm of the café common areas subject to the respondent 'obtaining all necessary statutory and other approvals, permits and licences to do so'. The trial judge made these findings in relation to the use by Fairbrook of the outside area:
Mr Poland's evidence about the use by Sharky's Café of the outside area is essentially the same as his evidence relating to the Quay Café. He refers to the lease made between the [respondent] and Fairbrook Holdings Pty Ltd ('Fairbrook'), the proprietor of Sharky's (exhibit 1, page 250). This contained a provision, in cl 9.2, requiring Fairbrook to take a lease of additional area of 75m², subject to the [respondent] 'obtaining all necessary statutory and other approvals, permits and licences to do so' (exhibit 1, page 251).
It is not clear from the plan annexed to the lease, precisely where the area of 75m² was located (exhibit 1, page 255). However, Mr Poland's evidence is that the [respondent] does not intend to lease the outdoor area until after the development has been carried out. The reason given by Mr Poland for the [respondent] adopting this position is "the prohibition in [the respondent's] Head Lease [sic, ground lease] on redeveloping the café common areas" (exhibit 11, par 16 and TS 309).
Assuming (without deciding) that Mr Poland's interpretation of cl 15.10 of the ground lease is incorrect, and that it would be open to the [respondent] to lease areas within that prohibition without first developing them, it is nevertheless Mr Poland's evidence that the [respondent] does not want to do so. In my view, that is a reasonable position to adopt.
I accept Mr Poland's evidence to this effect: and his evidence that the [respondent] has never charged rent for the outside areas actually occupied by Sharky's Café.
As I have said previously, in relation to the Quay Café issue, I do not think it unreasonable for the [respondent] to decide not to lease an area until it is redeveloped: such a decision does not amount to bad faith [114] ‑ [118].
By cl 9.2(a) of the lease agreement between the respondent and Fairbrook, subject to satisfaction of the condition in cl 9.2(b), the respondent 'must lease' and Fairbrook 'must take on lease' the additional area of approximately 75 sqm. Clause 9.2(b) provided that the agreement to lease the additional area was subject to the respondent obtaining 'all necessary statutory and other approvals, permits and licences to do so'. The respondent was obliged to use its reasonable endeavours to obtain these approvals, permits and licences.
In my opinion, the proper inference to be made or conclusion to be drawn, on an objective basis, from the respondent having entered into the conditional agreement to lease the additional area, is that the area in question was, during the subsistence of the conditional agreement, set aside with the object or purpose of being leased. The respondent's subjective intention is irrelevant. Also, as I have mentioned, cl 15.10 of the Ground Lease does not refer to, and it does not prohibit, the respondent from leasing or subleasing the whole or any part of the café common areas.
It follows that the additional area was required to be taken into account, during the subsistence of the conditional agreement to lease, in calculating the appellant's Proportion of Variable Outgoings.
Ground 6 has been made out

Ground 7: Fins Restaurant coolroom and the Quay Café storeroom

Ground 7 alleges that the trial judge erred in fact and law in finding that the respondent was not required to designate 27.38 sqm occupied by the proprietor of Fins Restaurant for its freestanding coolroom from 15 December 1997 and 9 sqm for the Quay Café storeroom from 1 August 1998.
The trial judge's findings in relation to the freestanding coolroom were these:
Mr Poland's evidence was that the place where the cool-room stands (and has stood for some six years) 'is a bin rubbish area … over grease traps and pipes' (TS 322). He said for that reason, he did not regard the area as lettable. He has allowed the cool-room to remain in place simply to assist his tenants. There has been no need to remove the cool-room to gain access to the services beneath it: but if that became necessary he would have it removed.
I accept that evidence. I therefore accept that the [respondent] has never intended the cool-room area for letting. That is, I think, a reasonable position to take, given the nature of the area [109] ‑ [110].
It is apparent that the Fins Restaurant coolroom was not occupied by the proprietor of Fins Restaurant pursuant to a lease or tenancy. No rent was payable. No term was expressly or impliedly agreed upon. The occupation by the proprietor had the legal character of a licence.
Further, the objective facts as found by the trial judge, and the evidence of other objective facts which was not in contest at the trial, do not reveal any objective basis for inferring or concluding that the area of the coolroom was at any material time available for leasing or set aside with the object or purpose of being leased. The granting of a licence (even an exclusive licence) to occupy is insufficient for this purpose.
The trial judge's findings in relation to the Quay Café storeroom were these:
There is a small storage shed at the rear of the café premises, in what appears to be a utility or rubbish bin area adjacent to a loading bay (exhibit 9, pars 89 ‑ 90, appendix 48). The shed, which is used in conjunction with the Quay Café, has been created by erecting a corrugated iron wall and door so as to enclose a corner formed by existing brick walls. The area of the shed is 9m². I accept the evidence of Sergio Anzolin that the shed has been used in conjunction with the Quay Café at least since 1992.
The [appellant] contends that this area should have been designated by the [respondent] as intended for letting.
Mr Poland's evidence, which I accept, is that the [respondent] permits the lessee of the Quay Café to use the shed, but that there is no agreement either written or oral, relating to this arrangement.
This is, therefore, another example of a bare licence having come into existence. That being so, I do not consider the [respondent] was required to designate the shed as intended for letting [147] ‑ [150].
I am satisfied that the Quay Café storeroom was not at any material time occupied by the proprietor of the Quay Café pursuant to a lease or licence and that it was not at any material time available for leasing or set aside with the object or purpose of being leased. My reasons for this decision are, in essence, the same as those I have given in relation to the Fins Restaurant coolroom.
Accordingly, the areas the subject of the Fins Restaurant coolroom and the Quay Café storeroom were not at any material time required to be taken into account in calculating the appellant's Proportion of Variable Outgoings.
Ground 7 fails.

Ground 8: Core Surf foyer

Ground 8 alleges that the trial judge erred in fact and law in finding that the respondent was not required to designate, from 1 July 2000, the entrance foyer to Core Surf of 15.44 sqm.
The trial judge's findings in relation to the entrance foyer to Core Surf were these:
Mr Poland's evidence, which I accept, is that the [respondent] has never received rent or any contribution to variable outgoings in respect of this area (exhibit 11, par 29).
I accept also Mr Poland's evidence about the way the disputed area came to be enclosed. It was formerly an open area. Walls were then erected by the [respondent] at right angles to the shopfront. This was done to 'allow people to funnel in' to the shop, thereby avoiding grease traps and storage or maintenance areas on each side of the entrance (TS 323).
The [respondent] then received complaints from the owner of Core Surf to the effect that children were congregating in the area: and further, because of the proximity to the street, there was a concern about 'ram-raids'. In order to avoid these problems, the Core Surf owner had a bollard installed in the entrance to the foyer and has erected high gates so that the area can be closed.
As appears from Mr McLean's photograph, a display cabinet has been fixed to one of the walls: and a rack of clothes has been placed in the area.
Mr Poland said the [respondent] had not consented to the erection of the gates, but had not required their removal, because he had recognised the problem. He felt the Core Surf owner should be permitted to provide itself with security.
In my view, the inference to be drawn from these circumstances is that the [respondent] has granted a bare licence to Core Surf to occupy the disputed area. Given that the [respondent] has merely acquiesced in the installation of the gates, and the display cabinet, I discern no intention to let the area. The owner of Core Surf could no doubt be required to remove the gates and the display cabinet. However, I do not think it could be compelled to take a lease of the area. That being so, I do not think the [respondent] was under any obligation to designate the area as lettable [127] ‑ [132].

In my opinion, the trial judge's ultimate finding in relation to the Core Surf foyer was, with respect, correct. I agree generally with his reasons for the ultimate finding. The absence of any obligation to pay rent or contribute to variable outgoings, the absence of any actual payment of rent, the absence of any express or implied agreement as to the duration of the occupancy, and the other facts and circumstances referred to by his Honour, in combination, require the conclusion that no lease or tenancy was created. All those facts and circumstances also point decisively against the area in question having been available for leasing, or having been set aside with the object or purpose of being leased, at any material time.
Ground 8 fails.

Ground 9: the appellant's balconies

Ground 9 alleges that the trial judge erred in fact and law in finding that the respondent was not required to designate the north and south balconies adjoining the Premises.
The trial judge's findings in relation to the north and south balconies adjoining the Premises were these:
When the lease was granted, the balconies to the north and south of the premises were open. Consistently with the above intention the 'Floor Area of the Premises' was defined so as:
'not to include the area of the North and South balconies adjoining the Premises' (exhibit 1, page 71).
Thus, not only were the balconies beyond the external walls, they were said to be 'adjoining the Premises'. The implication is, therefore, that the balconies were not part of 'the Premises'.
Further, by cl 10.5 of the lease, the [appellant] was granted a licence for the term of the lease to use the balconies on the same terms and conditions as applicable to 'the Premises', but without any payment of rent.
The balconies have now been enclosed. I accept Mr McLean's evidence that the [appellant] 'uses the balconies as part of its total floor area for the day to day conduct of its business' (exhibit 9, par 80). On that basis, the [appellant] contends that the balconies should have been designated by the [respondent] as being intended for letting.
I do not accept that to be so. As appears from the definitions set out above, the parties did not intend that the balconies would form part of the demised premises. They intended that for the term of the lease, the balconies would be the subject of a licence, not a lease. The [respondent] was therefore under no obligation to designate the balconies as being intended for letting [136] ‑ [140].
In my opinion, the trial judge's ultimate finding in relation to the appellant's balconies was, with respect, correct. I agree generally with his reasons for the ultimate finding. The absence of any obligation to pay rent or contribute to variable outgoings, the absence of any actual payment of rent, the express exclusion of the balconies from the definition of 'Floor Area of the Premises' in cl 1.1 of the Lease, the express agreement that there should be a licence in relation to the balconies, and the other facts and circumstances referred to by his Honour, in combination, require the conclusion that no lease or tenancy was created. All those facts and circumstances also point decisively against the balconies having been available for leasing, or having been set aside with the object or purpose of being leased, at any material time.
Ground 9 fails.

Ground 10: addition to shop 50

Ground 10 alleges that the trial judge erred in fact and law in finding that the respondent was not required to designate an area of 13.55 sqm for shop 50 from 1 November 2000.
The trial judge's findings in relation to this area of 13.55 sqm were these:
The [appellant] contends that the [respondent] has understated the area of shop 50 which it has designated as lettable. The dispute has arisen from the fact that the size of the shop, originally 77m², was increased by the enclosure of a storage area at the rear (exhibit 9, par 86 and appendix 45).
Mr Poland's evidence is that the disputed area was enclosed by the then lessee of shop 51 without the [respondent's] consent, albeit without objection. The lessee, Fairbrook, subsequently assigned its lease to Zenwest. The lease was surrendered with effect from 16 October 2005.
The [respondent] then carried out works to the premises, at a cost of some $4132, which resulted in an increase in area to 90.55m² (exhibit 11, pars 32 ‑ 36 and appendix GDP 4).
The enclosed shop has since been let to Manganot Pty Ltd ('Manganot'), with effect from 16 October 2005 (exhibit 11, appendix GDP 6).
Mr Poland's evidence was that the [respondent] did not receive any rent, nor charge any variable outgoings in respect to the disputed area, and did not designate it as intended for letting until shop 50 was leased to Manganot.
This evidence was not challenged, and I accept it. I therefore find that the area of shop 50 which the [respondent] was obliged to designate as intended for letting was 77m² until 15 October 2005 and 90.55m² from 16 October 2005 [141] ‑ [146].
In my opinion, the trial judge's ultimate finding in relation to the addition to shop 50 was, with respect, correct. The absence of any obligation to pay rent or contribute to variable outgoings and the absence of any actual payment of rent, in combination, require the conclusion that no lease or tenancy was created. The occupation by the proprietor had the legal character of a licence. All of the facts and circumstances which I have mentioned also point decisively against the area in question having been available for leasing, or having been set aside with the object or purpose of being leased, at any material time.
Ground 10 fails.

Ground 11: Core Surf - café common areas

Ground 11 alleges that the trial judge erred in fact and law in finding that the respondent was not required to designate an additional area of 71.32 sqm of the café common areas used by Core Surf from 1 November 2000.
The trial judge's findings in relation to the area of 71.32 sqm (to which his Honour referred when attempting to reconcile the outdoor areas occupied by Sharky's and Fins) were these:
The [appellant] contends that the area should have been included by the [respondent] in that designated as intended for letting to Swancross; that is, as part of shop 51 occupied by Core Surf (exhibit 9, pars 95 ‑ 96).
As noted above, Swancross sub-leased the re-configured shop 51 to Zenwest. There is a covenant in cl 9(a) of the sub-lease in the following terms:
'The Lessor [Swancross] covenants with the Lessee [Zenwest] not to place any kiosks, seats, tables, chairs or other structures extending 5 metres from any point along the frontage to the main entrance to or shop front of the Sub-Lease Premises or in any position where it obstructs ingress to or egress from the Sub-Lease Premises or it impedes the pedestrian flow but does not include any area directly in front of any adjoining shop.' (exhibit 1, page 361)
It was put to Mr Poland in cross-examination that the purpose of the covenant was to confirm to Zenwest that although Swancross was not permitted to place 'kiosks, seats, tables, chairs (etc)' for a distance of 5 metres in front of shop 51, it could do so beyond that distance.
Mr Poland denied that was so. He said that the [respondent] (which is a party to the sub-lease) consented to the inclusion of the covenant, apparently at the request of Zenwest, on the basis that 'it doesn't hurt to have it in there if it keeps them happy … ' However, he emphasised that it was not a matter for Swancross: the [respondent] had 'not given up the right to clean that area, garden it and control it' (TS 323).
In his evidence-in-chief, Mr Poland said that the [respondent] had never received rent for this area, which he described as an entrance way to Core Surf's premises (exhibit 11, par 29). I accept Mr Poland's evidence.
The fact that the [respondent] wishes to retain control of the area in question is inconsistent with an intention to let it. It has not been demonstrated that the [respondent] has anything other than a commercial reason for maintaining that position.
In all these circumstances, I consider that the [respondent] was not required to designate the area as intended for letting [154] ‑ [160].
In my opinion, the trial judge's ultimate finding in relation to Core Surf and the café common areas was, with respect, correct. I agree generally with his reasons for the ultimate finding. The absence of any obligation to pay rent or contribute to variable outgoings, the absence of any actual payment of rent, and the other facts and circumstances referred to by his Honour, in combination, require the conclusion that no lease or tenancy was created. All those facts and circumstances also point decisively against the area in question having been available for leasing, or having been set aside with the object or purpose of being leased, at any material time.
Ground 11 fails.

Ground 12: Promotional Fund

Ground 12 alleges that the trial judge erred in fact and law in finding that the appellant's claim for rectification of the Lease should be dismissed because there was no concluded agreement that the appellant would pay $3.90 per sqm.
The trial judge's reasons for finding that the appellant's claim for rectification was not made out, were these:
By cl 6.2 of the lease, the [appellant] was required to contribute to a Promotional Fund for the first lease year, the sum of $5,432.70 or $3.90 per square metre of the Floor Area of the Premises 'whichever is the greater amount'. It will be recalled that 'the Premises' was defined to mean that part of the Building specified in item 2 of the Schedule: and item 2 referred to the area as being outlined in red on the annexed plan, and having an area of approximately 1393m².
The product of 1393 and 3.90 is $5,432.70.
In par 20 of its Statement of Claim, the [appellant] contends that the parties entered into the lease under a mutual mistake of fact: namely that the Floor Area of the Premises was not less than 1393m². The [appellant] goes on to allege that the Floor Area of the Premises was not 1393m², but a substantially lesser area.
On this basis, the [appellant] seeks rectification of the lease to reflect the true agreement, which is said to be that its contribution to the Promotional Fund would be $3.90 per square metre in the first lease year.
Mr Side, in his evidence-in-chief, said that in the negotiations between the parties, before the lease was executed, the draft documents specified that the area of the premises was 1393m². However, he said he accepted the accuracy of that area on the basis that 'the lease provided that the landlord would remeasure the area after the tenancy commenced'.
This evidence accords with Mr Poland's recollection. He was asked in cross-examination whether he was aware that the lease referred to the [appellant's] premises having an area of approximately 1393m². He said:
'Now I do because I've read it now, but if you said to me a year ago or two years ago how many square metres I wouldn't have had a clue, because I thought it had to be measured after … '(TS 332)
The need for remeasurement arose from an agreement between the parties before they entered into the lease that the then existing entry would be relocated. It was originally on the eastern side of the building. However, a new entrance and foyer was constructed on the southern side. This, I think, explains why the Floor Area of the Premises was defined as meaning the floor area 'as certified by a licensed surveyor … ': and perhaps, why there was no plan annexed to the lease. At the time, it might not have been possible to produce such a plan.
In cross-examination, Mr Side accepted that Mr Poland had never told him that the area to be leased by the [appellant] was 1393m². Mr Side said, however, 'it was always implied that that was the area' (TS 225). He said he was 'pretty certain' that the figure of 1393m² was mentioned and that 'it would have been Peter Duffield' (TS 225).
Mr Side went on to say that he did not have a specific memory of Mr Duffield making that statement although he said he was 'a hundred percent certain that it was stated but I just can't give you all the details' (TS 226).
Mr Duffield gave evidence. As Mr Side said, Mr Duffield's evidence was that he had conducted the majority of the negotiations between Mr Poland and Mr Side in relation to the relocation of the [appellant's] premises: that is, prior to the grant of the lease (exhibit 20, par 3). However, Mr Duffield did not recall specific discussions about the Promotional Fund which, he said, was 'negligible or a small point' in the scope of the negotiations (TS 361). I took Mr Duffield to mean that the amount of the [appellant's] contribution to the Promotional Fund was small, compared with the rent payable from 1 December 2001 which was at the rate of $139,300 per annum.
I do not doubt Mr Side's evidence that the area of 1393m² was mentioned in the negotiations: it was, after all, the figure which was incorporated into the lease. However, the evidence does not lead to the conclusion that the agreement between the parties was that the [appellant] would contribute an amount of $3.90 per square metre to the Promotional Fund. As I have said, that was not Mr Side's evidence. It may have been an assumption, but the lease referred to the area as being approximate: and neither party knew what the area would be until it had been remeasured and certified by a licensed surveyor [161] ‑ [171].
In my opinion, the trial judge's ultimate finding in relation to the appellant's claim for rectification was, with respect, correct. I agree generally with his reasons for the ultimate finding. In particular:
(a)at best, Mr Side's evidence, on behalf of the appellant, was to the effect that he assumed that the appellant would contribute an amount of $3.90 per square metre to the Promotional Fund;

(b)Mr Duffield's evidence, on behalf of the respondent, was to the effect that he did not recall there being specific discussions about the Promotional Fund, which was in any event a 'negligible or a small point' in the negotiations; and
(c)an assumption on the part of the appellant, and the absence of any evidence that there was any consideration of the point in issue by the respondent, does not justify a conclusion that the agreement between the parties, or their common continuing intention, was other than as set out in cl 6.2 of the Lease.

Ground 12 fails.

The result of the appeal

For the reasons I have given, I would allow the appeal in part, but otherwise dismiss it.
Counsel should be heard as to the precise form of the orders.
NEWNES JA: I agree with Buss JA.
MURPHY JA: I agree with Buss JA.