Realm Resources Ltd v Aurora Place Investments Pty Ltd

[2019] NSWSC 379

Supreme Court

New South Wales

Medium Neutral Citation:

Realm Resources Ltd v Aurora Place Investments Pty Ltd [2019] NSWSC 379

Hearing dates:

25 March 2019

Date of orders:

08 April 2019

Decision date:

08 April 2019

Jurisdiction:

Equity

Before:

Darke J

Decision:

Summons is dismissed with costs.

Catchwords:

DEEDS – what amounts to a deed – whether document intended to be a deed – competing indications of intention – sublease negotiated and drafted by solicitors – where a clause stipulated that the sublease is a deed – where execution pages do not use language associated with deeds – sublease held to be intended to operate as a deed

 

DEEDS – execution – execution of deeds by corporations – where a clause stipulated that the sublease is a deed – whether sublease executed as a deed in accordance with Corporations Act 2001 (Cth) s 127(3) – whether sublease expressed to be executed as a deed – sublease held to be executed as a deed in accordance with s 127(3)

 

DEEDS – delivery – intention to deliver – parties entered into non-binding heads of agreement prior to executing sublease – clause in heads of agreement stated that proposed sublease is subject to “satisfactory legal documentation being entered into by the parties” – where the parties decided to use a deed – where sublessee executed deed and provided it to sublessor – where sublessee requested sublessor to execute deed and have it registered – conduct of sublessee evinced an intention to be immediately bound – sublessee held to have delivered deed

 

CONTRACTS – formation – agreement – acceptance of offers – where offer by sublessor prescribed a particular mode of acceptance – where sublessor required the sublessee to provide certain certificates of currency to accept offer – where sublessee did not provide all certificates of currency – no agreement reached between the parties

 

CONTRACTS – formation – agreement – revocation or withdrawal of offers – where sublessee made an offer by sending executed sublease to sublessor – where sublessee subsequently sent letter to sublessor asking sublessor not to execute sublease “at this stage” pending further communication – letter not effective to withdraw or revoke offer – offer accepted by sublessor executing sublease – agreement reached between the parties

  PRINCIPAL AND AGENT – contract by agent – ratification – where the holder of a power of attorney acting for sublessor executed sublease – attorney not shown to have executed in accordance with requirements of power – where acts of attorney subsequently ratified by principal – where the sublessee had in the meantime withdrawn from the sublease – ratification held to relate back to time of execution of sublease

Legislation Cited:

Conveyancing Act 1919 (NSW), s 38
Corporations Act 2001 (Cth), s 127
Real Property Act 1900 (NSW) s 36(11)
Uniform Civil Procedure Rules 2005 (NSW), r 28.2

Cases Cited:

400 George Street (Qld) Pty Ltd v BG International Ltd [2010] 2 Qd R 302; [2010] QCA 245
Bennett v Strauss [2016] NSWCA 324
Bolton Partners v Lambert (1889) 41 Ch D 295
Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35
Davison v Vickery’s Motors Ltd (in liquidation) (1925) 37 CLR 1
Dean v Lloyd (1991) 3 WAR 235
Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80
Financings Ltd v Stimson [1962] 1 WLR 1184
Gibbons v Pozzan (2007) 209 FLR 233; [2007] SASC 99
Hewlett-Packard Australia Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670; [2004] FCA 135
Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109
IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205
Long v Piper (2001) 10 BPR 19,289; [2001] NSWCA 342
Mirzikinian v Tom & Bill Waterhouse Pty Ltd [2009] NSWCA 296
Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,235; [2012] NSWCA 253
Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 97093

Texts Cited:

B Edgeworth, Butt’s Land Law (Lawbook Co, 7th Edition, 2017)

Category:

Principal judgment

Parties:

Realm Resources Ltd (Plaintiff/Cross-Defendant)
Aurora Place Investments Pty Ltd (Defendant/Cross-Claimant)

Representation:

Counsel:
Mr P D Crutchfield QC with Mr C McMeniman (Plaintiff/Cross-Defendant)
Mr S A Lawrance (Defendant/Cross-Claimant)

  Solicitors:
Maddocks Lawyers (Plaintiff/Cross-Defendant)
DLA Piper Australia (Defendant/Cross-Claimant)

File Number(s):

2017/382374

Publication restriction:

None

Judgment

Introduction

1. This a dispute about whether a binding sublease for a term of 5 years was entered into between the plaintiff as sublessee and the defendant as sublessor in respect of part of Level 16 of the Aurora Place building in Phillip Street, Sydney. The plaintiff, Realm Resources Ltd (“Realm”), contends that no binding sub-lease was entered into; the defendant, Aurora Place Investments Pty Ltd (“Aurora”), contends to the contrary.

2. In brief, Aurora contends that in August 2017 Realm became bound by the terms of a sublease, for a 5 year term commencing on 1 September 2017, in any one of three ways. These are:

1. execution of the sublease as a deed and delivery of the sublease to Aurora;

2. acceptance of an offer to enter into the sublease, by executing and returning the sublease and providing a cheque, a bank guarantee and a certificate of currency of insurance; or

3. by making an offer to enter into the sublease, which offer was accepted by Aurora executing and returning the sublease.

3. Realm, on the other hand, disputed that the sublease was intended to operate as a deed. Realm further contended that the parties negotiated on the basis that the sublease would not become binding until either:

1. the sublease had been executed and exchanged by the parties; or

2. the sublease had been executed by Realm, and Aurora had communicated to Realm that all relevant board approvals had been obtained and it considered itself to be bound by the sublease.

Realm contended that before either of those events occurred, it withdrew from the proposed sublease.

4. The nature of the issues raised dictates that the enquiry must focus upon the communications that passed between the parties concerning the proposed sublease. Both parties are sophisticated commercial entities. Both retained solicitors to act for them in the transaction. The salient communications between the parties are all in writing. Whilst a number of affidavits were read, little of the affidavit evidence was of significance in the determination of the matters in issue. None of the deponents were required for cross-examination.

Summary of salient events

5. In May 2017 negotiations took place between Realm and Aurora (through Aurora’s agent Jones Lang LaSalle (“JLL”)), concerning terms for a 5 year lease of about 300m2 of space on Level 16 of the Aurora Place building. In June 2017, Realm and Aurora signed a Lease Proposal which was expressed to be not binding upon the parties except for cl 36 (concerning the payment by Realm of a Lease Deposit) and cl 39 (concerning confidentiality). The Lease Proposal evidently describes the main provisions of a proposed lease. Clause 40 of the Lease Proposal is in the following terms:

40. Special Conditions   The terms and conditions of this proposal are subject to:

i.   availability of the Premises;

ii.   Lessor’s Board approval; and

iii.   satisfactory legal documentation being entered into by the parties.

This offer may be withdrawn in writing by the Lessor at any time.

This offer supersedes all previous correspondence.

The standard Aurora Place Lease agreement applies.

This document is not binding on the parties other than the sections relating to Confidentiality and the Lease Deposit.

6. I note in passing that Realm places considerable reliance upon the references to “Lessor’s Board approval” and “satisfactory legal documentation being entered into by the parties”.

7. Both parties retained solicitors to act for them in respect of the proposed lease. Aurora retained DLA Piper, solicitors; Realm retain Maddocks, solicitors.

8. On 27 June 2017 DLA Piper sent a form of sublease to Maddocks. The covering email was in the following terms:

We act for the Landlord in this matter and understand that you represent the Tenant.

ATTACHMENTS

1.      We attach:

1.1         Lease comprising of LPI Form 07 and Annexure A

2.      There is no legal obligation on our client’s part in relation to these documents until:

2.1.      the Landlord has obtained all relevant board approvals; and

2.2.      the Tenant has duly executed and returned the attached documents to us, together with all other required items as set out in this email.

3.      We also attach Heads of Agreement for your easy reference.

NEXT STEPS

4.      Please review the documents and let us know whether the Tenant would like to make any changes or whether we should send you execution versions. To the extent that the Tenant would like to request changes to the documents, please ensure that the proposed amendments are drafted directly in the body of the relevant documents and shown in track changes.

REQUIREMENTS

5.      In due course, we will require the following:

5.1.         Executed Lease (in duplicate).

5.2.         A cheque made out to ‘Land and Property Information NSW’ for $138.80, in respect of registration fees for the Lease.

5.3.         Certificates of currency in respect of the insurance policies required to be maintained by the Tenant under the Lease which:

•   Note Aurora Place Investments Pty Limited ACN 141 121 637 as an interested party.

•   Note the Premises as the situation of risk.

•   Include public liability cover for at least $20 million.

•   Include cover for all external and internal glass (including plate glass) in the Premises.

5.4.         Bank guarantee that:

•   Is for the amount which will be confirmed by the Landlord shortly.

•   Names the beneficiary as Aurora Place Investments Pty Limited ACN 141 121 637.

•   Is unconditional.

•   Does not contain expiry date.

•   States that it is in relation to all of the Tenant’s obligations under the Lease of Suite 16.02, Level 16, 88 Phillip Street, Sydney

9. The reference to the attached Heads of Agreement is a reference to the Lease Proposal referred to above. The form of sublease contained detailed provisions extending over more than 50 pages. It provided for a 5 year term commencing on 1 September 2017. Provision was also made for Realm to have access to the premises under a licence prior to the Commencement Date of the lease (1 September 2017) in order to undertake fitout works.

10. On 5 July 2017 Maddocks sent a marked up version of the proposed lease provisions to DLA Piper showing various changes, and including various comments. The covering email stated that the attached lease was “subject to any further comments my client may have”. A response from DLA Piper was sought.

11. Maddocks sent a further email to DLA Piper on 12 July 2017, attaching a version of the proposed lease that showed further suggested changes. The covering email stated that the lease “remains subject to any further comments Realm Resources may have”. Maddocks again sought a response from DLA Piper.

12. On 16 July 2017 Maddocks sent a further email to DLA Piper seeking a response. It was stated in the email that Realm was “keen to finalise this matter as soon as possible”.

13. DLA Piper responded by email on 20 July 2017. The email included the following:

We now attach marked-up Lease with the Landlord’s comments to the Tenant’s proposed amendments.

Please note that any agreed changes have been incorporated into the document and no longer show in mark-up.

Please confirm the Lease is now agreed and we will issue execution versions to you.

14. Maddocks sent an email in response on 27 July 2017. The email included the following:

We agree with the form of lease attached to your email below.

…However, please could you add the following wording at the end of clause 6.15 to clarify the position: “Notwithstanding anything in this clause 6.15, the Landlord must comply with all of the Proprietor’s obligations under the Strata Management Statement.”

I look forward to receiving execution copies of the lease as soon as possible.

15. On 28 July 2017 DLA Piper sent an email to Maddocks in the following terms:

We are instructed that the proposed amendment is not agreed.

In any event, we do not believe that this poses a risk to your client. Our client is the lessee under the Head Lease and therefore the definition of Registered Proprietor would only apply to our client.

ATTACHMENTS

We attach the Lease, comprising of LPI Form 07 and Annexure A, containing all agreement amendments for execution by the Tenant.

There is no legal obligation on our client’s part in relation to these documents until:

the Landlord has obtained all relevant board approvals; and

the Tenant has duly executed and returned the attached documents to us, together with all other required items as set out in this email.

EXECUTION

Please arrange for all copies of the documents to be executed in duplicate by two directors or a director and a secretary of the Tenant company.

Please ensure the Lease is printed in black and white, on single sided A4 paper, and signed as follows:

At the right hand foot of each of pages 1 to 9 (inclusive).

At the execution clause at page 57.

At the right hand foot of each of pages 58 to 60 (inclusive).

At the execution pages of each of Exhibits 1, 2 and 3, where indicated.

REQUIREMENTS

Please provide to us:

Executed Lease (in duplicate).

A cheque made out to ‘Land and Property Information NSW’ for $138.80 in respect of registration fees for the Lease.

Certificates of currency in respect of the insurance policies required to be maintained by the Tenant under the Lease which comply with clause 5 of the Lease and which:

Note Aurora Place Investments Pty Ltd ACN 141 121 637 as an interested party.

Note the Premises as the situation of risk.

Include public liability cover for at least $20 million.

Include cover for all external and internal glass (including plate glass) in the Premises.

Bank guarantee that:

Is for an amount to be confirmed by the Landlord shortly.

Names the beneficiary as Aurora Place Investments Pty Ltd ACN 141 121 637.

Is unconditional.

Does not contain expiry date.

States that it is in relation to all of the Tenant’s obligations under the Lease of Suite 16.02, Level 16, 88 Phillip Street, Sydney.

We look forward to receiving the executed lease documentation from you.

16. I note, in relation to the bank guarantee, that on 1 August 2017 DLA Piper informed Maddocks that the amount of the guarantee was $280,506.

17. On 14 August 2017 Maddocks sent an email to DLA Piper that attached the form of sublease as signed by a director of, and the secretary of, Realm. However, the form of sublease had not been signed in the manner set out in the DLA Piper email of 28 July 2017 in that pages 58 to 60 had not been signed. The email from Maddocks was in the following terms:

We attach the lease which has been signed by two directors of Realm Resources Limited. We have returned the original leases to our client to sign pages 58-60, however one of the directors will only be able to do so on Wednesday. We will courier the original leases to you as soon as they have been fully executed.

A cheque in respect of the lease registration fees and the bank guarantee will be couriered to you this afternoon.

Please could you also confirm your client’s legal fees (in accordance with clause 12.2.8 of the lease) so that Realm can obtain access to the premises as soon as possible.

18. Clause 12.2 of the form of sublease was concerned with the licence to be granted to Realm to enable it to carry out the fitout works.

19. Also on 14 August 2017, Maddocks sent a letter by courier to DLA Piper enclosing the bank guarantee and a cheque for lease registration fees. The letter stated that the original leases signed by Realm would be sent by courier “as soon as they have been fully executed”.

20. On 15 August 2017 Maddocks sent a letter by courier to DLA Piper in the following terms:

We refer to the above matter. We enclose:

two original copies of the lease signed by Realm Resources Limited; and

a copy of the ASIC search for Realm Resources Limited.

Would you please arrange for:

the landlord to sign the leases;

the lease to be registered with LPI; and

a fully executed registered version of the lease to be returned to us for safekeeping.

21. I infer that the copies of the leases sent on 15 August 2017 had been “fully executed” by Realm as foreshadowed in the email from Maddocks dated 14 August 2017. The Court Book copy of the sublease that sits behind the 15 August 2017 letter is not signed on pages 58 to 60, but there is another version of the sublease in the Court Book that is so signed. It is likely that this latter version (although not at that stage signed by Aurora) was sent by Maddocks on 15 August 2017.

22. On 16 August 2017 DLA Piper sent an email to Maddocks in the following terms:

I confirm we have now received the original Lease in duplicate, bank guarantee and cheque for registration fees.

Can you please send us the certificates of currency evidencing the insurances required under the Lease. Apologies if you have already sent this to us, and I have overlooked it.

23. The reference to certificates of currency would seem to be to the Tenant’s obligation under cl 5.3 of the sublease to provide written evidence of the currency of certain insurance policies before the earlier of the Access Date (the date from the which the Tenant can have access for fitout works) and the Commencement Date (1 September 2017).

24. Later on 16 August 2017 Maddocks responded by email. The email was in the following terms:

I will send you the certificates of insurance as soon as I receive them from my client.

The tenant is due to make a progress payment on its fitout but is reluctant to release the funds until it is certain that the lease is in effect. The heads of agreement indicate that the parties are only bound once documentation has been entered into and the landlord has obtained board approval. Please could you ask the landlord to sign the lease as soon as possible or otherwise provide us with confirmation that it considers that the lease is in effect so that the tenant can make the relevant progress payment?

Please let me know if you have any queries in relation to the above.

25. Maddocks sent a further email to DLA Piper on 18 August 2017 in the following terms:

The tenant’s progress payment is due to be paid early next week. Please could you let me know as soon as possible when the landlord will sign the lease?

26. Shortly thereafter, DLA Piper responded in the following terms:

Our client requires the certificates of currency for insurance, as provided for under clause 12.2 of the lease, before it will execute the Lease. Can you please forward these to us as soon as possible.

In terms of timing for Landlord execution, this is relatively quick process and can be executed within a day.

I look forward to hearing from you.

27. DLA Piper then sent a further email on 18 August 2017 in the following terms:

Further to my email below, I understand that my client in good faith has already had discussions with your client’s builder for the purposes of commencing the Landlord’s works in the Premises.

I look forward to receiving the certificates of currency.

28. On 23 August 2017 Maddocks sent an email to DLA Piper which attached a certificate of currency of insurance. This appears to be a certificate in respect of Business and Public Liability insurance dated 23 August 2017.

29. On 24 August 2017 Maddocks sent an email to DLA Piper that attached a letter in the following terms:

We refer to previous correspondence in this matter.

We are instructed that our client has not yet provided the fitout guarantee, paid any amounts to the landlord (other than the holding deposit under the heads of terms and the bank guarantee) or taken possession of the premises.

We are instructed to request that you do not arrange for the landlord to sign the lease at this stage, and that you hold the lease signed by the tenant in escrow pending further communication from us.

The heads of terms clearly states that the terms of the proposal are subject to satisfactory legal documentation being entered into by both parties. In these circumstances neither party is bound unless and until a formal lease has been executed by both the landlord and the tenant.

30. The reference to “heads of terms” was plainly intended as a reference to the Lease Proposal that was at other times referred to as the Heads of Agreement.

31. DLA Piper responded by email sent late in the evening of 24 August 2017. This email is in the following terms:

I refer to your letter of this afternoon. We confirm the Lease has already been signed by the landlord and we will be arranging registration soon.

Also note that, as indicated in our email of 18 August, the Landlord has commenced Landlord’s works.

Our client considers the Lease to be binding on both parties.

32. In fact, the sublease had not yet been signed by or on behalf of Aurora. That did not occur until some time during the morning of 25 August 2017. The sublease was signed on behalf of Aurora by Ms Astrid Beemster, a partner of DLA Piper, pursuant to a Power of Attorney. It further seems that the Landlord’s works had not started by 24 August 2017, although there is evidence that a contractor (Valmont Group Ltd) had been engaged, and had been permitted to put some gear in the premises pending the provision of a required bank guarantee and a complying development certificate.

33. Early on 25 August 2017, Maddocks sent an email to DLA Piper requesting that scanned copies of “the fully executed lease” be provided as soon as possible, and that confirmation be given as to exactly when the lease was signed by Aurora. As noted above, the signing occurred at some time during the morning of 25 August 2017. At 12:11pm on that day, Ms Riley of JLL sent an email to Maddocks that attached scanned copies of various documents including the executed sublease. Ms Riley stated that the sublease was in the process of being registered.

34. Later on 25 August 2017, Maddocks sent another email to DLA Piper (copied to Ms Riley) seeking confirmation as to exactly when the lease was signed by Aurora and when it was lodged for registration. Ms Riley then responded by email to Maddocks in the following terms:

I believe this was executed immediately after Landlord authorisation to execute the lease under power of attorney, which was given Wednesday.

I do not see what the relevance is for the date/time of sending for registration.

There is a fully executed and binding lease on foot, which you were sent a copy of earlier today.

Your client’s builder is demanding access to start works on site tomorrow.

35. Maddocks sent a further email to DLA Piper on 25 August 2017 in the following terms:

We consider that, as the signed heads of agreement clearly stated that the lease was “subject to contract”, the lease was not binding on the tenant prior to being signed by the landlord. In light of our email of 4.08pm yesterday confirming that the lease was to be held in escrow, it was not possible for the lease to be validly signed on behalf of the landlord after that time. As previously requested, please could you confirm exactly what date and time the lease was signed by Astrid Beemster as attorney for the landlord so that we can ascertain whether or not it has been validly signed.

In the meantime we are instructed that Realm has asked its builder not to obtain access to the premises to commence works until Realm instructs them to do so.

36. By that time the parties were clearly in dispute as to whether Realm was bound by the sublease. The solicitors for the parties thereafter engaged in debate about the situation that had arisen. DLA Piper sent a letter by email on 1 September 2017 to which Maddocks replied on 12 September 2017. DLA Piper sent a further letter on 19 September 2017. That letter raised the argument, now at the forefront of Aurora’s case, that Realm was bound because the sublease was a deed and Realm had executed it and delivered it to Aurora on 15 August 2017. Maddocks replied to that letter on 22 September 2017.

37. Following some further correspondence, the proceedings were commenced by Realm on 18 December 2017. By its Summons it seeks a declaration to the effect that it did not enter into a binding sublease with Aurora, and an order that Aurora return the bank guarantee in the sum of $280,506.

38. Aurora filed a Cross Summons by which a declaration was sought to the effect that a valid and binding sublease had been entered into. However, that relief is no longer sought in circumstances where Aurora has purported to terminate the sublease due to default on the part of Realm. Aurora therefore now seeks to recover an amount of $735,000 for unpaid rent, and damages.

39. An order was made by consent under Uniform Civil Procedure Rules 2005 (NSW) r 28.2 for all questions arising on Realm’s Summons to be decided separately from, and before, all other questions in the proceeding.

The contentions of the parties

40. The parties made detailed submissions, both in writing and orally. At this point it is only necessary to summarise the essence of each party’s case. The respective cases are dealt with in more detail later in these reasons under the heading Determination.

41. Aurora submitted that Realm became bound by the terms of the sublease it executed, in three ways. The first argument advanced was to the effect that:

1. the sublease was a deed;

2. Realm executed the sublease as a deed and in accordance with s 127(1) of the Corporations Act 2001 (Cth);

3. the sending of the sublease, so executed, to Aurora’s solicitors on 15 August 2017 constituted delivery of the deed;

4. it was henceforth not open to Realm to recall the sublease or withdraw from it; and

5. the sublease became operative when Aurora executed and delivered it to Realm’s solicitors on 25 August 2017.

42. The second argument advanced by Aurora was to the effect that:

1. the email sent by DLA Piper to Maddocks on 28 July 2017 that attached the form of sublease, together with the email sent by DLA Piper on 1 August 2017 concerning the amount of the bank guarantee, constituted an offer by Aurora to Realm;

2. by no later than 23 August 2017 Realm accepted the offer by executing and returning the sublease, and providing a cheque for registration costs, a bank guarantee, and the certificate of currency of insurance; and

3. a binding and enforceable agreement for sublease thereby arose on the terms of the sublease.

43. The third argument advanced by Aurora was to the effect that:

1. the sending by Maddocks of the executed sublease to DLA Piper on 15 August 2017 constituted an offer by Realm to Aurora to enter into the sublease;

2. the letter sent by Maddocks to DLA Piper on 24 August 2017 did not constitute a withdrawal of the offer; and

3. Aurora accepted the offer by executing the sublease and having DLA Piper return it to Maddocks on 25 August 2017.

44. Realm took issue with those contentions. In particular, Realm submitted that the sublease was not a deed. It was put that aside from cl 19.20, all other relevant indicia pointed to an intention that the sublease was to operate as a simple contract rather than a deed.

45. However, the main thrust of Realm’s case that it did not become bound was that cl 40 of the Lease Proposal (or Heads of Agreement) had the effect that the parties thereafter negotiated on the basis that the proposed sublease would not be binding until:

1. the sublease had been executed and exchanged by the parties; or

2. the sublease had been executed by Realm, and Aurora had communicated to Realm that all relevant board approvals had been obtained and it considered itself to be bound by the sublease.

46. Realm submitted that on 24 August 2017, before either of those events had taken place, it withdrew from the sublease (as it was entitled to do) by requesting Aurora to not sign the sublease and to hold the sublease in escrow pending further communication.

Determination

47. I will deal first with the question whether Realm became bound to the sublease as a result of a delivery of the sublease as a deed. This question involves several elements that are not entirely distinct. It is necessary to consider whether it was intended by the parties that the sublease would operate or take effect as a deed. It is necessary to consider whether the formal requirements for a deed are satisfied. It is also necessary to consider whether Realm evinced an intention to be immediately bound by the sublease such that it is taken to have been delivered as a deed.

48. As stated in B Edgeworth, Butt’s Land Law (Lawbook Co, 7th Edition, 2017) at [12.350]:

Although all deeds must comply with the relevant statutory and (to the extent that they survive) common law formalities, not all instruments that comply with those formalities are deeds. Whether an instrument is a deed depends on whether the parties intended it to be a deed. That intention is gleaned from considering the instrument’s form, substance and object as a whole. Important factors include whether the instrument reflects the phraseology and structure commonly found in deeds, and whether it is cast in the most solemn form of documentation appropriate for that particular transaction. Generally, an unregistered Torrens title dealing is not a deed (although nothing prevents the parties from amending its form to make it one), but it becomes one on registration.

49. It has been said that this question of intention “is to be decided principally by reference to the contents of the instrument under consideration” (see 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] 2 Qd R 302; [2010] QCA 245 (“400 George Street”) at [32]). The submissions of the parties accorded with that approach.

50. Aurora pointed to cl 19.20 of the sublease which states:

19.20   This Lease is a deed, even if it is not registered.

51. It was submitted that it can be inferred from cl 19.20 that the parties were aware of s 36(11) of the Real Property Act 1900 (NSW) which provides that, upon registration, a dealing has the effect of a deed duly executed by the parties who signed it. It was further submitted that this showed that the word “deed” in cl 19.20 was being used advisedly and in the technical sense of the word. Aurora pointed to other provisions of the sublease where “deed” is used (see, for example, cll 7.1.5, 7.1.6, 7.3 and 11.10). It was submitted that the subject matter of those provisions again suggests that “deed” was used advisedly and in its technical sense.

52. Aurora submitted that there were good reasons for the parties to want the sublease to be a deed. Reference was made to provisions which conferred powers of attorney upon Aurora, including cll 15.3 and 18.5. Clause 15.3 contains an irrevocable authority and direction by the Tenant to the Landlord to “complete and deliver the Lease and Exhibit 1” once the Premises had been measured (as provided for in cl 15.1 at or about the completion of the Landlord’s Works under cl 12.6). It was put that cl 15.3 envisaged that Exhibit 1 would be completed pursuant to that authority after the sublease had come into existence and then, together with the sublease, would be delivered as a separate deed.

53. Realm submitted that apart from cl 19.20 all other relevant indicia pointed to an intention that the sublease was to operate as a simple contract rather than a deed. It was submitted that:

1. the instrument was titled “Sublease” rather than “Deed”;

2. the instrument was a standard form that incorporated the terms contained in annexure A;

3. the word “deed” appears only in cl 19.20;

4. the terms of the sublease employ the language of agreement rather than words such as “covenant” that are commonly found in deeds;

5. the signing blocks are not drafted on the basis that the instrument is a deed (although s 127 of the Corporations Act, which applies to deeds, is mentioned); and

6. the communications of the parties evinced the objective intention that neither party considered the sublease to be binding when Realm provided signed copies to Aurora.

54. The third point raised by Realm is incorrect as a matter of fact. The last point seems to me to be more directed to the question whether the sublease was delivered as a deed by Realm. In any case, for the reasons which are set out below at [81]-[95], I do not accept that the communications evince an objective intention to the effect of that advanced by Realm.

55. Where, as here, the Court is confronted with conflicting indications in an instrument, it is appropriate to proceed towards ascertainment of the relevant intention by balancing those indications (see 400 George Street (supra) at [20]).

56. In my view, the matters advanced by Aurora, in particular cl 19.20 itself, strongly point to an intention that the sublease would, as an instrument, operate as a deed rather than a simple contract. Clause 19.20 is a clear statement of what the sublease is. It should not be overlooked that the terms of the sublease were the subject of negotiations carried out through the solicitors for the respective parties. The first draft, submitted by DLA Piper to Maddocks on 27 June 2017, contained cl 19.20 in its present form. Various amendments were thereafter suggested by Maddocks, but not in respect of cl 19.20, which remained unchanged throughout. Clause 19.20 is more than a mere description of the instrument. It is a substantive provision, chosen by the parties, that is directly concerned with the nature and manner of operation of the sublease. Further, I agree with the submission that the word “deed” was there used advisedly and in its technical sense, as it was in other places in the sublease. The terms of the sublease, including cll 15.3 and 18.5 (and also cl 9.11 which contains a power of attorney), suggest that there were sound reasons for the parties to declare that the sublease is a deed. Their choice in that regard cannot be dismissed, or minimised in its significance, on the basis that it seems anomalous.

57. Against that, it is true that the instrument is not described in its title as a deed. This is of little weight in circumstances where the front page is a standard form sublease, suitable for registration, to which the detailed provisions are annexed. So, too, is the tenor of the language employed throughout the sublease. In my opinion it is as apt for parties to a deed to express themselves in terms of agreement rather than covenant, as it is for parties to a simple contract. It is correct that the execution pages make no reference to the instrument being a deed, and do not include language traditionally associated with the execution of deeds such as “signed, sealed and delivered”. However, this is not of great significance in circumstances where the formalities for the execution of deeds have been relaxed by the passing of legislation (see Conveyancing Act 1919 (NSW), s 38; Corporations Act, s 127), and the instrument contains an express statement that it is a deed. This point is discussed further below.

58. Viewing the matter overall, I think that the indications that the parties intended that the sublease would operate or take effect as a deed clearly outweigh the indications to the contrary.

59. I turn now to consider whether the formal requirements for a deed have been satisfied.

60. The controversy here centres upon whether Realm executed the sublease as a deed for the purposes of s 127(3) of the Corporations Act. Section 127(3) provides:

A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

61. There seems to be no doubt that Realm executed copies of the sublease in accordance with s 127(1); that is, without using a common seal, it signed by a director and company secretary. The issue is whether the sublease is expressed to be executed as a deed for the purposes of s 127(3).

62. Counsel for Aurora referred the Court to Gibbons v Pozzan (2007) 209 FLR 233; [2007] SASC 99, a decision of the Full Court of the Supreme Court of South Australia. In that case, an issue arose as to whether a loan agreement, that had been signed for a company by its sole director and secretary in accordance with s 127(1), was expressed to be executed as a deed for the purposes of s 127(3). Duggan J (with whom Gray and White JJ agreed) rejected an argument that s 127(3) required the words “executed as a deed” to be stated in the document. His Honour stated at [30]:

I cannot agree that the precise phrase used in the legislation must be incorporated into the document before s 127(3) can take effect. The section dispenses with certain common law formalities which were required for the execution of a deed. The purpose of s 127 is to move away from these formalities and look to substance and intention.

63. After referring to the decision of the Full Court of the Supreme Court of Western Australia in Dean v Lloyd (1991) 3 WAR 235, concerning s 9 of the Property Law Act 1969 (WA), Duggan J continued at [33]-[34]:

The use of the expression “purporting” in the Western Australian legislation may give the section a wider operation. However, I respectfully agree with the view that “expressed” means “clearly indicated or distinctly stated, rather than implied”.

Although, speaking generally, “a document is not necessarily a deed merely because it is described as such” Meredith Projects Pty Ltd v Fletcher Construction Australia Ltd, s 127 of the Corporations Act attaches significance to the use of the word “deed” in a document. The phrase “expressed to be executed as a deed” is wide enough to refer not only to the title of the document, but to the wording of other parts of the document such as the testatum, the testimonium and the attestation clauses.

64. The loan agreement in Gibbons v Pozzan (supra) was described as a Deed, including at its commencement, in a recital, and in the testatum (see at [35]-[37]), whilst in the body of the document it was described as both a deed and, more commonly, an agreement (see at [40]). The testimonium referred to sealing (see at [38]). However, the attestation clauses themselves contained no indication that the document was a deed (see at [39]).

65. Duggan J stated at [41]:

In my view it is apparent that, when the loan agreement is read as a whole, it supports the trial judge’s conclusion that it was expressed to be executed as a deed. When to this is added the fact that the document was executed in accordance with s 127(1) it can be said that the requirements for a valid execution by the company were fulfilled.

66. An application for special leave to appeal from the decision in Gibbons v Pozzan (supra) was refused: [2007] HCATrans 422.

67. Aurora submitted that as cl 19.20 of the sublease executed by Realm states in terms that the sublease is a deed, it should be held to be expressed to be executed as a deed within the meaning of s 127(3). I agree. It is distinctly stated in cl 19.20 that the sublease is a deed. The statement is not contradicted by any other provision. The sublease, read as a whole, clearly indicates that it is a deed. In those circumstances, and in conformity with the reasoning in Gibbons v Pozzan (supra), which recognises that a purpose of s 127 was to reduce formalities and look to substance and intention, the sublease is expressed to be executed as a deed for the purposes of s 127(3).

68. In my opinion, when Realm executed the copies of the subleases in accordance with s 127(1), it executed the sublease as a deed within the meaning of s 127(3). Realm did not specifically address this issue in its submissions, but I did not understand it to have abandoned the point.

69. The subleases, as executed by Realm, were provided to Maddocks. The subleases were then sent by Maddocks to DLA Piper on 15 August 2017. The next matter to consider is whether in these circumstances there has been a delivery of the deed by Realm.

70. It is not necessary, for delivery of a deed, that there be a physical delivery of the executed instrument. Equally, a physical delivery of an executed deed does not necessarily amount to a delivery. In this context, delivery depends upon the intention of the executing party. As stated by Sackville AJA (with whom Allsop P and Campbell JA agreed) in Segboer v AJ Richardson Properties Pty Ltd (2012) 16 BPR 31,235; [2012] NSWCA 253 at [58]:

The critical question is whether the party executing the deed has evinced an intention to be bound immediately.

71. The intention is to be ascertained objectively, by reference to the words and conduct of the executing party and the circumstances surrounding the execution of the deed (see Segboer v AJ Richardson Properties Pty Ltd (supra) at [59]-[60] and [73]; see also Mirzikinian v Tom & Bill Waterhouse Pty Ltd [2009] NSWCA 296 at [33]-[34]). If such an intention is found to exist, the executing party is taken to have delivered the deed and thereby become bound by it, such that the deed cannot be recalled (see Federal Commissioner of Taxation v Taylor (1929) 42 CLR 80 at 87-8); that is so even if the deed is taken to have been delivered in escrow (see Segboer v AJ Richardson Properties Pty Ltd (supra) at [72]).

72. In some cases, the requisite intention is found to be lacking because the parties have conducted themselves on the basis that they would not be bound until all parties are bound. 400 George Street (supra) is an example. Realm submitted that the facts of that case are very similar to those here.

73. 400 George Street (supra) concerned a proposed lease of a number of floors in a building to be constructed in central Brisbane. In April 2008, at an early stage in the negotiations, the proposed lessor issued a Letter of Offer to the proposed lessee, and requested the proposed lessee to sign it and return it. The Letter of Offer included the following:

37 Special Condition:

No legally binding agreement is made by this offer. All documentation is subject to a mutually agreed legal document by both parties.

This offer is made subject to the approval of the Boards of the Joint Venture companies.

74. The proposed lessee made some changes to the Letter of Offer, including to cl 37, such that it read:

37 No legally binding agreement is made by the parties’ execution of this letter. All documentation is subject to a mutually agreed legal document by both parties.

75. The proposed lessee then signed the letter and returned it to the proposed lessor.

76. On 7 October 2008, solicitors for the proposed lessor sent copies of an Agreement for Lease and a Lease to the solicitors for the proposed lessee for execution. The documents were executed by the proposed lessee on 9 October 2008. On 15 October 2008 the solicitors for the proposed lessee sent the executed documents to the proposed lessor under cover of a letter that included statements that the documents were in order for execution by the proposed lessor, and that the solicitors looked forward to receipt of the executed documents in due course.

77. Muir JA (with whom Fraser JA and Mullins J agreed) held that the Agreement for Lease was a deed that had been executed by the proposed lessee. However, Muir JA held that the Agreement for Lease had not been delivered by the proposed lessee so as to become bound by it. After referring to the Letter of Offer, and to the trial Judge’s findings to the effect that nothing had occurred to suggest that the proposed lessee’s position had altered from the amended terms of the Letter of Offer, Muir JA stated at [53]-[57]:

[53]   In my view, cl 37 of the April 2008 letter, when construed with cl 38, signified an understanding that the parties would not be bound until such time as their bargain was recorded in a formal document agreed by all parties. No doubt that was the intention at the date of the letter but the point of the clauses was to state the basis on which the parties would conduct their negotiations. That makes the primary judge’s finding, in effect, that nothing had happened to change this basis, of particular significance. The finding was not shown to be wrong.

[54]   The Instrument [Agreement for Lease] and the Lease were not the “mutually agreed legal document” referred to in cl 37. “Mutually agreed” means just that. The words are not referable to an instrument binding on one party but not on the others. As the primary judge explained, the forwarding of the documents by the appellants’ solicitors to the respondent’s solicitors for execution by the respondent did not constitute an offer by the appellants which was accepted by the return of the documents executed by the respondent. As the primary judge held, there was no evidence that the solicitors for the appellants had authority to contract on the appellants’ behalf.

[55]   Arrangements such as that recorded in the April 2008 letter are commonly referred to as “subject to contract”. Under such an arrangement, the negotiating parties are not bound until their agreement is recorded in an instrument or instruments to which all parties are bound.

[56]   There is no reason on the facts of this case to suppose that the execution of the Instrument by the respondent, intending that it have contractual effect only when all other parties were bound by it, resulted in the respondent being bound by the Instrument because it took the form of a deed. If authority in support of that proposition is needed, it may be found in Longman v Viscount Chelsea; Bolton Metropolitan Borough Council v Torkington; and Woodfall’s Landlord and Tenant.

[57]   It follows, I think, from the conclusion just reached that the Instrument, although executed by the respondent with the intention that it become of contractual force and that it take effect as a deed when the other parties were bound by it, was never delivered. There was no “intention to be legally bound either immediately or subject to the fulfilment of a condition”. No “condition” existed. The basis on which the parties dealt was that no legal obligations would arise under any instruments executed by them until all were bound.

78. In the present case, cl 40 of the Lease Proposal signed by the parties in June 2017 provided:

40. Special Conditions   The terms and conditions of this proposal are subject to:

i.   availability of the Premises;

ii.   Lessor’s Board approval; and

iii.   satisfactory legal documentation being entered into by the parties.

This offer may be withdrawn in writing by the Lessor at any time.

This offer supersedes all previous correspondence.

The standard Aurora Place Lease agreement applies.

This document is not binding on the parties other than the sections relating to Confidentiality and the Lease Deposit.

79. The opening words seem to me to signify that the proposed lease is subject to satisfaction of the three matters identified. The first two matters are solely within the province of Aurora and should be regarded as conditions for its benefit. The third is a matter that involves both Aurora and Realm. It is a condition that the proposed lease is subject to the parties entering into satisfactory legal documentation. I would take that to mean a legal document (or legal documents) that both parties find satisfactory. Whilst cl 40 is in its own terms not binding on the parties, it is a statement to the effect that a lease binding on both parties would come into effect only if the three matters were satisfied.

80. Clause 40 thus sets out some principles that the parties stated would apply to their negotiations towards a binding lease. It should be noted, in relation to the third requirement, that it is not prescriptive as to the manner in which the parties would enter into the satisfactory legal documentation, or the form the documentation may take.

81. The first draft of the sublease was sent by DLA Piper to Maddocks on 27 June 2017. The covering email made it clear that there was no legal obligation on the part of Aurora until it had obtained “all relevant board approvals”, and Realm had duly executed and returned the sublease and met certain specified requirements, including the provision of an unconditional bank guarantee.

82. On 5 and 12 July 2017, Maddocks informed DLA Piper that Realm wanted various changes made to the terms of the sublease. Some of the changes were accepted by Aurora. A revised form of sublease was sent by DLA Piper to Maddocks on 20 July 2017. Subject to one matter, the revised form of sublease was acceptable to Realm. On 28 July 2017, DLA Piper informed Maddocks that the proposed amendment was not agreed by Aurora. The form of sublease which, as previously noted, was at all times stated in terms to be a deed, was submitted by DLA Piper to Maddocks for execution by Realm. It was again stated that there was no legal obligation on the part of Aurora until it had obtained all relevant board approvals, Realm had duly executed and returned the sublease, and Realm had met certain specified requirements.

83. It appears from the communications sent by Maddocks on 14 August 2017 that Realm was then in the process of completing its execution of the sublease, and was proceeding towards satisfaction of the specified requirements. By 15 August 2017 Realm had provided executed copies of the sublease to Maddocks.

84. On 15 August 2017 Maddocks sent two executed copies of the sublease to DLA Piper. The covering letter included requests that arrangements be made for Aurora to sign the subleases, that the sublease be registered, and that a fully executed version of the sublease be returned to Maddocks for safekeeping. It may be presumed that the letter accorded with Realm’s instructions.

85. In my opinion, the provision by Realm of the executed copies of the sublease to Maddocks, and the sending of those subleases by Maddocks to DLA Piper on 15 August 2017, when viewed objectively in the light of all of the circumstances including the terms of the Lease Proposal, evinces an intention on the part of Realm to be bound immediately. The sublease had been executed as a deed, and provided to the solicitors for the other party to the sublease. It was not stated that Realm was free to withdraw unless and until certain things occurred, or would not be bound unless and until certain things occurred. The tenor of the letter which accompanied the executed subleases was that it was open to Aurora to immediately proceed to execute the sublease and attend to its registration.

86. I agree that the provision of the executed subleases has to be viewed in its context as part of the dealings between the parties, including in the light of cl 40 of the Lease Proposal. Further, it may be accepted that the parties did not, in the course of their dealings, abrogate or abandon cl 40 of the Lease Proposal. Accordingly, if Aurora was not able to make the premises available, or if it did not obtain its Board approval, it would not be bound to proceed to enter into a binding sublease. Further, it was necessary, in order for a sublease binding on both parties to come into effect, that both parties enter into satisfactory legal documentation.

87. As noted earlier, neither the manner in which the parties would enter into satisfactory legal documentation, nor the form the documentation may take, was prescribed. Those matters were left to the parties to work out in the course of their dealings. It is not a case where the parties have dealt with each other in such a way that a particular mode of binding was intended, such as by way of exchange of executed documents (see, for example, Hooker Industrial Developments Pty Ltd v Trustees of the Christian Brothers [1977] 2 NSWLR 109 at 114F-G, 117F, 118C-F and 121A-B). That mode, whether effected physically or electronically, is commonly employed in a conveyancing context, including in relation to leases. However, it does not appear to have been expressly adverted to in the present case. Of course, the exchange of executed documents is only one possible method of binding parties to a lease.

88. From the time the first draft of the sublease was submitted it contained cl 19.20 which states that the sublease is a deed. Realm must be taken to have been aware of the provision. The form of sublease was evidently the subject of detailed consideration by its solicitors. In the communications between the solicitors that followed, DLA Piper made it clear that Aurora would have no legal obligation until certain things occurred. No such reservation was sought to be made by Maddocks for Realm. It appears to have been envisaged that “execution versions” or “execution copies” of the sublease would be submitted for Realm to sign first, and then return to Aurora. No statement was made to the effect that neither party would be bound unless and until both had executed the sublease.

89. The third matter referred to in cl 40 of the Lease Proposal is not a statement expressed in those terms. It refers to satisfactory legal documentation being entered into by the parties. The form of sublease may be regarded as a satisfactory legal document for that purpose. Its terms were negotiated between the parties, and consensus was reached that the terms were acceptable. Both parties found the form of sublease to be satisfactory.

90. Realm executed the sublease as a deed, and its solicitors provided the deed to Aurora’s solicitors on terms that envisaged the parties being bound without any further act on the part of Realm, or indeed any further notice to Realm. All that remained to occur was for Aurora (either having obtained all relevant board approvals or being content to waive the condition) to execute and deliver the sublease. The terms of the sublease (notably cl 19.19.2) made it clear that registration was not required in order for it to be binding on the parties. To my mind, the conduct of Realm objectively evinces an intention to be immediately bound by the sublease as a deed. That is so even if Realm also intended that the sublease not take effect unless and until it was executed and delivered by Aurora. Realm either intended to be immediately bound unconditionally, or (much more likely) intended to be bound subject only to satisfaction of a condition that Aurora execute and deliver the sublease. In either case, the intention is sufficient to constitute delivery of the deed, and Realm thus became unable to recall the deed.

91. This conclusion is not inconsistent with cl 40 of the Lease Proposal, which I interpret as a statement to the effect that a lease binding upon both parties would come into effect only if the three identified matters are satisfied. The sublease as a deed would only become effective and binding upon both parties when the second party executes and delivers it. Pending such execution and delivery, the first party to execute is bound in the sense of not being able to recall the deed. Once the second party (Aurora) executes and delivers, a sublease, binding upon both parties, would come into effect, as envisaged by cl 40 of the Lease Proposal. In those circumstances, satisfactory legal documentation would have been entered into by the parties, and the other two matters referred to in cl 40, which are conditions for the benefit of Aurora, would be taken to have been satisfied. That may be regarded as the “further ceremony” the parties contemplated in order to bring about a sublease binding upon both of them (see Glass JA in Summit Properties Pty Ltd v Comserv (No 784) Pty Ltd (1981) 2 BPR 97093 at 9175-6; see also Long v Piper (2001) 10 BPR 19,289; [2001] NSWCA 342 at [54]-[55] per Giles JA).

92. I agree that the present case bears a similarity to 400 George Street (supra). I note, however, that unlike cl 37 of the Letter of Offer in that case, cl 40 of the Lease Proposal does not use the expression “mutually agreed” which Muir JA evidently regarded as important. His Honour stated that those words are not referable to an instrument binding on one party but not on the others (see at [54]). Moreover, in circumstances where:

1. clause 40 is not prescriptive as to either the manner in which the parties would enter into satisfactory legal documentation, or the form the documentation may take;

2. the parties chose to employ an instrument that was in the form of a deed;

3. it was envisaged that the deed would be executed first by Realm;

4. Realm proceeded to execute the deed and provide it to its solicitors; and

5. Realm’s solicitors provided the deed to Aurora’s solicitors on 15 August 2017 under cover of the letter dated that day,

it cannot be said that nothing had happened to change the position since the signing of the Lease Proposal (compare 400 George Street (supra) at [47]-[48] and [53]). Accepting that cl 40 of the Lease Proposal had not been abrogated or abandoned, the situation evolved and developed in the course of the parties’ dealings, as allowed by cl 40 itself.

93. The decision of the parties to proceed towards execution of the sublease as a deed, the manner in which it was contemplated that the sublease would be executed by the parties, the execution of the sublease as a deed by Realm, the provision of the executed sublease to Maddocks, and the terms of the letter from Maddocks to DLA Piper of 15 August 2017, together support the conclusion that the conduct of Realm evinced an intention to be bound immediately, whether unconditionally or (much more likely) subject only to satisfaction of a condition that Aurora execute and deliver the sublease (compare the conclusion reached in 400 George Street (supra) at [56]).

94. Insofar as conduct after 15 August 2017 is relevant to this question of intention, it seems to me that the communications sent on behalf of Realm are, until 24 August 2017, consistent with an understanding on the part of Realm that it was bound to the sublease subject only to satisfaction of a condition that Aurora bind itself. For example, on 16 August 2017 Maddocks, after indirectly referring to cl 40 of the Lease Proposal, made a request through DLA Piper for a Aurora to sign the sublease “or otherwise provide us with confirmation that it considers that the lease is in effect”. On 18 August 2017 Maddocks made a request that it be informed as soon as possible when Aurora will sign the sublease. It was not until 24 August 2017 that a statement was made by Maddocks that was inconsistent with the notion that Realm was bound. In the email sent on that day, it was stated that “neither party is bound unless and until a formal lease has been executed by both the landlord and the tenant”. However, it can be inferred from the terms of the email that Realm was by that time having second thoughts about the desirability of the sublease. The parties quickly fell into dispute, and little weight can be given to the communications from that point.

95. For the above reasons I have concluded that Realm delivered the deed, and thereby became bound by it such that it could not be recalled. Insofar as the email sent by Maddocks on 24 August 2017 was an attempt to recall the deed, it was ineffective. The deed, binding upon both parties, came into effect on 25 August 2017 when it was executed on behalf of Aurora and delivered. (Any question about Ms Beemster’s authority to sign on behalf of Aurora is overcome by Aurora’s ratification on 31 October 2018 – see [102]-[104] below.) There was no additional need for sealing of the deed (see s 38(3) of the Conveyancing Act). Further, delivery was effected even though Exhibit 1 had not been completed. The completion of Exhibit 1 was not required in order that the sublease become binding and effective. Clause 15.3 of the sublease makes it clear that Exhibit 1 is to be completed after the premises had been measured, as required by cl 15.1. Aurora has succeeded in making out its first argument that Realm became bound to it on the terms of the sublease.

96. That is sufficient for Aurora to defeat the claims for relief made by Realm in its Summons. It is thus not strictly necessary to deal with the second and third arguments raised by Aurora. Nevertheless, I will briefly summarise my views about those arguments.

97. The second argument was to the effect of that set out at [42] above. Had it been necessary to deal with it, I would not have accepted it. Even if the email sent by DLA Piper on 28 July 2017 was regarded as an offer capable of acceptance by Realm so as to bring a binding contract into existence, I do not think that it was established on the evidence that Realm had accepted the offer by 23 August 2017 as alleged. In particular, I would not have been satisfied that Realm had provided certificates of currency in respect of the insurance policies required to be maintained under cl 5 of the sublease.

93. A certificate of currency was provided by Realm’s solicitors on 23 August 2017. The certificate reveals the existence of cover for Property-Contents ($125,000), General Property ($25,000), Glass (Replacement Value), and Public Liability ($20m). However, cl 5.1.4 of the sublease also requires Industrial Special Risks insurance to be maintained in respect of the tenant’s equipment. At least in that regard it was not shown that Realm had provided a certificate of currency.

94. The third argument was to the effect of that set out at [43] above. Had it been necessary to deal with it, I would have accepted it. If Realm had not executed and delivered the sublease as a deed by 15 August 2017, the letter sent by Maddocks on that day could be regarded as an offer capable of acceptance by Aurora so as to bring a binding contract into existence. In those circumstances, Aurora could have accepted the offer by executing the sublease and communicating its acceptance to Realm. If that occurred, the three matters referred to in cl 40 of the Lease Proposal would have been satisfied or taken to have been satisfied. I do not think that acceptance of the offer would have required either the registration of the sublease or the return of a registered version of the sublease.

95. The email sent by Maddocks on 24 August 2017 would not have been effective to withdraw the offer. The terms of the email fail to clearly convey that the offer was withdrawn, or that Realm no longer wished to proceed (see Financings Ltd v Stimson [1962] 1 WLR 1184 at 1188 and 1190; IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 at [26]). The language of the email is ambivalent in that regard. It contains a request to Aurora’s solicitors to not arrange for Aurora to sign the sublease “at this stage”, and to hold the sublease signed by Realm in escrow pending further communication. The email seems to do no more than request that Aurora pause while Realm further considers its position. It would have been a simple matter to state, in effect, that any offer was withdrawn, but the email failed to do so.

96. Accordingly, it remained open to Aurora to accept the offer by executing the sublease and communicating its acceptance to Realm. Subject to one matter, Aurora did this on 25 August 2017.

97. The qualification is that it was not in my view shown on the evidence that the execution of the sublease on behalf of Aurora by Ms Beemster was authorised. The Power of Attorney she relied upon requires an instruction to the attorney “from a representative of the Manager” pursuant to a certain Asset Management Agreement. Under that agreement the Manager was CIM Global Asia LLC together with its affiliates. There is evidence that in December 2015, pursuant to a Deed of Novation, the Manager became Carlyle Australia Real Estate Advisors Pty Ltd (“Carlyle”). Whilst there is some evidence (in the email sent by Ms Riley of JLL to Maddocks on 25 August 2017) that on about 23 August 2017 Aurora authorised execution of the sublease under power of attorney, there does not seem to be any evidence of an instruction from Carlyle as the Manager to Ms Beemster as the attorney. Neither Mr James Kim (the Managing Director of Carlyle) nor Ms Beemster gave evidence to that effect in their affidavits.

98. On 31 October 2018 Aurora ratified Ms Beemster’s signing of the sublease. However, there is no doubt that in the meantime Realm clearly indicated that it did not wish to proceed (see, for example, the 12 September 2017 letter from Maddocks to DLA Piper). In these circumstances, a question would arise as to whether the ratification would operate so that the sublease is treated as having been executed by Aurora on 25 August 2017.

99. The general rule is that where a principal ratifies the earlier act of a person acting as agent without authority, the ratification relates back to the date of the unauthorised act, and the principal is bound as if the agent had had authority at the earlier time (see Bolton Partners v Lambert (1889) 41 Ch D 295 at 306, cited with apparent approval in Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [20]; see also Hewlett-Packard Australia Pty Ltd v Exeed Pty Ltd (2004) 48 ACSR 670; [2004] FCA 135 at [40]). Nevertheless, a number of authorities were cited by counsel for Aurora which suggest that the law may be unsettled or that the general rule might not operate where the other party to the alleged contract withdraws prior to the ratification (see, for example, Bennett v Strauss [2016] NSWCA 324 at [55], where reference is made to the criticism of Bolton Partners v Lambert (supra) by Isaacs J in Davison v Vickery’s Motors Ltd (in liquidation) (1925) 37 CLR 1 at 14-17). Had it been necessary for me to decide the question, I would have held that the general rule did apply in the present case. Realm did not submit that the ratification did not occur within a reasonable time, or that Realm was in some way prejudiced. Further, no third party rights have intervened. In these circumstances, I can discern no good reason to depart from the general rule, recently described by the High Court as well settled, in a case such as this, involving acts purportedly undertaken by an agent in accepting an offer so as to bring a binding contract into existence. Bolton Partners v Lambert (supra) was itself a case of that kind.

100. For the foregoing reasons, Realm’s Summons must be dismissed. The Court will further order that Realm pay Aurora’s costs of the proceedings to date. The Court will appoint a directions hearing to facilitate the management of the balance of the proceedings.

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Decision last updated: 08 April 2019