Secure Parking (WA) Pty Ltd v Wilson
[2008] WASCA 268
•19 DECEMBER 2008
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SECURE PARKING (WA) PTY LTD -v- WILSON [2008] WASCA 268
CORAM: MARTIN CJ
BUSS JA
MURRAY AJA
HEARD: 21 AUGUST 2008
DELIVERED : 19 DECEMBER 2008
FILE NO/S: CACV 141 of 2005
BETWEEN: SECURE PARKING (WA) PTY LTD (ACN 073 500 160)
Appellant
AND
ALFRED KARL WILSON
First RespondentNULLAGINE INVESTMENTS PTY LTD (ACN 008 729 717)
Second RespondentPARKING ASSET MANAGEMENT (WA) PTY LTD (ACN 092 214 278)
Third Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :LE MIERE J
Citation :SECURE PARKING (WA) PTY LTD -v- WILSON & ANOR [2005] WASC 264
File No :CIV 1074 of 2003
Catchwords:
Lease - Assignment - Where lessee sold its business to proposed assignee of lease - Where lessee also granted to proposed assignee all rights to receive all income and revenue from the operation of the business - Where lessee agreed with proposed assignee, pending obtaining the lessor's consent to the assignment, to comply with proposed assignee's directions - Lessor's consent sought but never obtained - Construction of contract - Whether contract included obligation by lessee to exercise options to renew the lease at proposed assignee's request - Implied terms - Duty of parties to cooperate - Doctrine of non derogation from grant - Successful appellant's right to restitution - Whether damages adequate remedy
Legislation:
Nil
Result:
Appeal allowed
Action remitted for assessment of damages
Category: A
Representation:
Counsel:
Appellant: Mr B W Rayment QC & Mr G R Hancy
First Respondent : Mr M H Zilko SC & Ms M Chaar
Second Respondent : Mr N D C Dillon
Third Respondent : No appearance
Solicitors:
Appellant: Talbot Olivier
First Respondent : Tottle Partners
Second Respondent : Su & Co
Third Respondent : Clayton Utz
Case(s) referred to in judgment(s):
Adelaide City Corporation v Jennings Industries Ltd (1985) 156 CLR 274
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Bank of US v Bank of Washington (1832) 31 US 8
Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295
Bowesco Pty Ltd (receiver and manager appointed) v Zohar [2007] FCAFC 1; (2007) 156 FCR 129
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153
Breen v Williams (1996) 186 CLR 71
British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577
Butt v M'Donald (1896) 7 QLJ 68
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Comptroller of Stamps (Victoria) v Howard‑Smith (1936) 54 CLR 614
Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Cox v Hakes (1890) 15 App Cas 506
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510
Don King Productions Inc v Warren [2000] Ch 291
Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215
Harmer v Armstrong [1934] Ch 65
Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200
Hawkins v Clayton (1988) 164 CLR 539
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 82 ALJR 419
Johnston & Sons Ltd v Holland [1988] 1 EGLR 264
Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757
Keech v Sandford (1726) Sel Cas Ch 61
Lloyd's v Harper (1880) 16 Ch D 290
Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108
Mackay v Dick (1881) 6 App Cas 251
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Maitland Main Collieries Pty Ltd v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235
Myers v Catterson (1889) 43 Ch D 470
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386
Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317
Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126
Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25
Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127; [2000] ANZ ConvR 628
Ray v Davies (1909) 9 CLR 160
Reliance Developments (NSW) Pty Ltd v Lumley General Insurance Ltd [2008] NSWSC 172; (2008) NSW ConvR 56‑213
Robertson v Miller (1904) 3 NB Eq 78
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Smith v Chadwick (1882) 20 Ch D 27
Smith v Chadwick (1884) 9 App Cas 187
Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537
Southwark London Borough Council v Mills [2001] 1 AC 1
The Commonwealth of Australia v McCormack (1984) 155 CLR 273
The Union-Fidelity Trustee Company of Australia Ltd v The Commissioner of Taxation (Cth) (1969) 119 CLR 177
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
White v Tomasel [2004] QCA 89; [2004] 2 Qd R 438
MARTIN CJ: I agree with Buss JA.
BUSS JA: At all material times since June 1996, the appellant (Secure Parking) has carried on business in Western Australia as a manager and operator of car parks.
In June 1996, the first respondent (Mr Wilson):
(a)carried on business under the registered business name, 'Panda Parking'; and
(b)was the lessee, under a lease (the Lease) created by a deed of lease dated 19 October 1995, of part of a building in the Perth central business district known as the 'Esplanade Car Park'.
The management and operation of the Esplanade Car Park was the only business activity carried on by Mr Wilson under the name 'Panda Parking'.
The second respondent (Nullagine) was, at all material times before 13 October 2006, the registered proprietor of the fee simple estate in the land on which the building containing the Esplanade Car Park is constructed, and was the lessor under the Lease. Nullagine operated a hotel business in other parts of the building.
The Lease was for an initial term of five years, commencing on 19 October 1995 and expiring on 18 October 2000. The deed of lease contained two options of renewal for five years each, commencing on 19 October 2000 and 19 October 2005.
The third respondent (Parking Asset Management), is a corporation associated with Mr Wilson's mother, Joan Wilson. On 18 December 2006, the solicitors for Parking Asset Management filed a notice to the effect that it did not intend to take part in the appeal, and would abide by the decision of this court other than any order that it pay costs.
Secure Parking's case in the Supreme Court proceedings
In 2003, Secure Parking, as plaintiff, commenced proceedings in the Supreme Court (CIV 1074 of 2003) against Mr Wilson as first defendant and Nullagine as second defendant. Parking Asset Management was not a party to the proceedings. Secure Parking alleged that in or about June 1996, Mr Wilson orally agreed with Secure Parking to assign the Lease to it in consideration of the sum of $150,000 paid to Mr Wilson by the 'Secure Parking Group' (being the name given to a group of shareholders in Secure Parking) on behalf of Secure Parking. It was alleged by Secure Parking that the terms of the oral agreement were confirmed in a letter
dated 21 June 1996 from Mr Wilson addressed to the 'Secure Parking Group'.
In the final version of its statement of claim, Secure Parking pleaded, relevantly:
(a)By the oral agreement made in or about June 1996, Mr Wilson agreed to assign the Lease to Secure Parking and 'pending formal arrangement' of the assignment, to grant to Secure Parking all rights to the Lease as if the Lease had been formally assigned (par 5).
(b)By letter dated 20 June 1996 and by a handwritten notation of a director of Nullagine dated 21 June 1996, Nullagine consented to the assignment of the Lease upon certain conditions, including 'the give and take usage of bays by Hotel Guests/Invitees continued' (par 6). It was alleged that the relevant conditions were fulfilled in or about July 1996 and, in any event, no later than the end of September 1996, and at that time a deed assigning the Lease (the Deed of Assignment) was executed by Secure Parking and Mr Wilson (pars 6 and 7).
(c)Nullagine has failed or refused to execute the Deed of Assignment and has refused to acknowledge to Secure Parking that it has consented to the assignment of the Lease or that Secure Parking has any rights under the Lease or in respect of the Esplanade Car Park (par 8).
(d)Further or alternatively, Nullagine is estopped by its conduct from denying that it has consented to the assignment (par 9).
(e)If, which Secure Parking denies, Nullagine did not expressly consent to the assignment, Nullagine, by its conduct, has given its implied consent to the assignment, alternatively has waived any requirement that its consent to the assignment be obtained (par 10).
(f)Alternatively, by the letter dated 21 June 1996, Mr Wilson granted to Secure Parking all rights to receive all income and revenue from the operation of the Esplanade Car Park as if the Lease had been formally assigned to Secure Parking, Mr Wilson agreed that Secure Parking would be entitled to direct him to manage the car park according to its desires and best interests, and Mr Wilson agreed to comply with such directions. Further, it was an express (alternatively, an implied) term of the agreement embodied in the letter dated 21 June 1996 that Secure Parking would be entitled to direct Mr Wilson (as part of the management of the car park according to the desires and best interests of Secure Parking) to exercise the options to renew the Lease which were available to Mr Wilson and which would have been available to Secure Parking if the Lease had been assigned to it. The term was said to be implied on an ad hoc basis in accordance with the principles enunciated in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. Further, by notice dated 28 July 2005, Secure Parking directed Mr Wilson to exercise the option to renew the Lease for a further period of five years from 18 [sic: 19] October 2005. In breach of his obligations, Mr Wilson refused to exercise the option, as directed by Secure Parking (par 11).
Secure Parking, in its prayer for relief, claimed:
(a)A declaration that:
(i)the Lease has been assigned by [Mr Wilson] to [Secure Parking];
(ii)[Nullagine] has consented to the assignment;
(iii)[Secure Parking] is entitled without any further consent on the part of [Nullagine] to occupy the Esplanade Car Park for the Term of the Lease (including the second option to renew …).
(aa)Alternatively, if the declaration referred to in paragraph (a) hereof is refused and pursuant to the plea in paragraph 11 hereof, an order that [Mr Wilson] do execute a document of exercise of the option of renewal of the lease due to be renewed on 18 [sic: 19] October 2005 and upon such terms as the Court may direct and deliver such exercise of the option to [Nullagine], so as to effect the exercise of such option.
(b)Consequential orders that [Mr Wilson and Nullagine] do all things that may be necessary to give effect to the assignment.
(c)Such further or other relief as the Court considers just.
The decision of Le Miere J after the trial of the Supreme Court proceedings
The Supreme Court proceedings were tried before Le Miere J. On 14 October 2005, his Honour delivered judgment and on 7 December 2005, he published his reasons. Secure Parking's action was dismissed.
In summary, the learned trial judge found:
(a)Nullagine did not consent to an assignment of the Lease to Secure Parking [88].
(b)The condition in Nullagine's letter dated 20 June 1996 to the effect that 'the give and take usage of bays by Hotel Guests/Invitees continued' was not satisfied [90].
(c)Having regard to the terms of the Deed of Assignment, Mr Wilson did not objectively intend to assign the Lease to Secure Parking unless and until the deed was executed by Nullagine [98].
(d)Mr Wilson did not assign the Lease to Secure Parking [99].
(e)Secure Parking's estoppel case was not made out [115].
(f)Nullagine did not impliedly consent to Mr Wilson assigning the Lease to Secure Parking, and Nullagine did not waive its right to object to an assignment [121].
(g)Secure Parking's right under the letter dated 21 June 1996 to direct Mr Wilson to manage the car park according to its desires and best interests did not include, either as an express or an implied term, the right to direct Mr Wilson to exercise the options of renewal under the Lease [125], [128] ‑ [132].
(h)The rights granted by Mr Wilson under the letter dated 21 June 1996 were confined to rights to receive the income and revenue from the car park's operation [126].
Also, the learned trial judge dealt with three other issues raised by Secure Parking. Two of them were pleaded in its reply. His Honour found that Secure Parking's case, based on these issues, was without merit. It is unnecessary to recount the issues or his Honour's reasoning. None of the issues is the subject of a ground of appeal.
Relevant facts and events before 21 June 1996
In about late 1995, Auspark Holdings Pty Ltd (Auspark) decided to commence carrying on parking station businesses in Perth. Auspark or its directors (Brett Mathews and Garth Mathews) caused Secure Parking to be incorporated in Western Australia on 1 April 1996. Auspark and Brett and Garth Mathews intended that any parking station businesses in Perth would be operated by Secure Parking. Brett and Garth Mathews had discussions with Mr Wilson in about early 1996.
In March or April 1996, Mr Wilson had a telephone discussion with Garth Mathews during which Mr Mathews said words to the following effect. First, Secure Parking would purchase a 50% interest in Panda Parking's business from Mr Wilson for $150,000. Secondly, Secure Parking would employ Mr Wilson on mutually acceptable terms as Secure Parking's general manager in Western Australia. Thirdly, Auspark would grant Mr Wilson an option to purchase 50% of Secure Parking's issued share capital for $75,000. See the learned trial judge's reasons at [11].
Mr Wilson then had conversations with Brett Mathews. During one of these conversations Mr Mathews asked Mr Wilson to approach Nullagine about obtaining its consent to an assignment of the Lease from Mr Wilson to Secure Parking. See the learned trial judge's reasons at [11].
At all material times, Mr R A Michel was a director and the company secretary of Nullagine. In early April 1996, Mr Wilson met with Mr Michel and discussed proposals involving Secure Parking acquiring an interest in the Esplanade Car Park or its operation. On 11 April 1996, Mr Michel wrote to Mr Wilson. The letter referred to the proposed assignment of the Lease to a company to be created. It recorded that the shareholding in the new company would change to permit 'Secure Parking' to acquire a 50% interest in 'Mr Wilson's company'. Also, the letter stated that Nullagine 'saw no problem in the arrangement', subject to two conditions. First, that guarantees would be granted and there was to be no further breach of the Lease. Secondly:
That the give and take usage of bays by Hotel Guests and Invitees continues, ie, 'there is no charge/adjustment where Hotel Guests and Invitees Exceed or do not Exceed 10 Car Parking Bays'.
See the learned trial judge's reasons at [13].
At a meeting on 17 April 1996 between Mr Michel, Mr Wilson and Mr Wilson's father, Lawrence Wilson, Mr Wilson informed Mr Michel that he proposed to assign the Lease to Secure Parking. At the meeting it was agreed that Mr Wilson would arrange for the preparation of an assignment of lease document. See the learned trial judge's reasons at [12].
By letter dated 19 April 1996, Mr Wilson's solicitors (Dwyer Durack) wrote to the solicitor for Auspark, Brett and Garth Mathews and Secure Parking (Mr S F Raward) relevantly, as follows:
We confirm that we act for Mr Alf Wilson. Our client has instructed us that the lessor of the car park premises, Nullagine Investments Pty Ltd, has agreed to the assignment of the lease to Secure Parking (WA) Pty Ltd, conditional upon the directors of that company guaranteeing the Lease obligations.
…
Our client has further instructed us that the lessor is happy for us to prepare the assignment documentation. We therefore enclose, as requested, a draft of the assignment document for your comments. As yet, the draft has not been submitted to the lessor.
The draft assignment document enclosed with the letter dated 19 April 1996 was a deed of assignment between Mr Wilson (as assignor), Secure Parking (as assignee), Nullagine (as lessor) and Brett Mathews and Garth Mathews (as guarantors).
By letter dated 26 April 1996, Mr Rayward wrote to Dwyer Durack in connection with the draft assignment document. He said that Brett and Garth Mathews would provide personal guarantees limited to 3 months' rent or the 'corporate guarantee of Secure Parking', whichever Nullagine preferred. Mr Rayward also said that Mr Wilson should remain liable for the performance of the assignee and that Mr Wilson would be managing Secure Parking's business in Western Australia and would ultimately own half of that business. See the learned trial judge's reasons at [16].
On 21 May 1996, Mr Michel wrote to Mr Wilson. The learned trial judge summarised the letter, as follows:
Mr Michel said that as [Mr Wilson] was unable to obtain personal guarantees from the directors of [Secure Parking], the proposed assignee, [Nullagine] proposed certain 'variations' to enable the assignment to take place. One 'variation' was that there be a corporate guarantee by [Secure Parking] together with a continuing personal guarantee of [Mr Wilson]. Another 'variation' was that the provision of free bays to hotel guests and invitees be on a give and take basis 'whereas the hotel may have more or less than 10 bays at any one time but not more than 20, determined by [Nullagine]'. A further proposed variation was that any variation from the current 148 car bays be the lessee's responsibility. There were other proposed variations. Mr Michel said: 'The drafting of these variations will be left to our solicitors subject to your prior agreement' [18].
On 27 May 1996, Mr Wilson wrote to Mr Michel. In the letter Mr Wilson referred to 'the present agreed method of charging a flat rate of $20 for each bay exceeding the 10 bay limit'. Mr Wilson said he was prepared to waive the March account and proposed a new method of charging for hotel guest parking. See the learned trial judge's reasons at [19] ‑ [20].
By letter dated 20 June 1996 from Mr Michel to Mr Rayward, Mr Michel said:
Following our discussions this morning, [Nullagine] is prepared to forego [sic] its entitlement under the lease CL 8.1(c) providing that,
(a)Secure Parking Pty Ltd ACN 002 041 581 provides a corporate guarantee, Brett and Garth Matthews [sic] provide personal guarantees for a three month period and Alf Wilson [sic] guarantee is ongoing.
(b)A give and take usage of bays by Hotel Guests/Invitees continues, ie 'there is no charge/adjustment where the Level Exceeds 10 or is less than 10'.
(c)There is no variation sought to the 148 Bays Leased.
See the learned trial judge's reasons at [21].
Relevant provisions of the Lease
By cl 2.2 of the Lease, Mr Wilson's right to an extension of lease pursuant to each option to renew was conditional upon:
(a)Mr Wilson giving written notice to Nullagine to that effect not less than 3 calendar months but not more than 6 calendar months before the expiry of the then existing term; and
(b)Mr Wilson, up until the date of exercise of the option and up until the expiration of the then existing term, having paid the rent reserved and having strictly performed the lessee's covenants under the Lease (but disregarding any breach or non‑performance which has been remedied to Nullagine's satisfaction or waived in writing).
Clause 8 of the Lease included a covenant by Mr Wilson not to assign or part with possession of the whole or any part of the leased premises without the prior written consent of Nullagine. It also provided that Nullagine would not unreasonably withhold its consent to an assignment, subject to certain conditions. Clause 8.1 reads:
The Lessee shall not, without the prior consent in writing of the Lessor, assign, sub‑let, under‑let, or part with possession of the Leased Premises or any part thereof and the Lessor shall not unreasonably withhold its consent to an assignment or sub‑letting:
(a)if the Lessee proves to the satisfaction of the Lessor that the proposed assignee or sub‑lessee is a respectable, responsible and financially acceptable solvent person capable of performing the obligations of the Lessee under this Lease and adequately carrying on the Permitted Business;
(b)if the Lessee has executed and procured the execution of an assignment of this lease by the proposed assignee or a sub‑lease by the proposed sub‑lessee and by such guarantors as are required pursuant to paragraph (c) of this clause and to which the Lessor is a party and which is in a form prepared by the Lessor's solicitors;
(c)where the proposed assignee or sub‑lessee is a corporation then the Lessor shall be entitled to require a personal guarantee by all or any of the directors or principal shareholders of the corporation or of its parent corporation (if any) of that corporation's due performance of this Lease;
(d)if all rent and other moneys payable under the Lease then owing shall have been paid and there shall not then be any subsisting breach of the covenants, terms and conditions contained in this Lease; and
(e)the Lessee pays to the Lessor all costs and expenses incurred by the Lessor of and incidental to any enquiries which may be made by or on behalf of the Lessor as to the responsibility, solvency, fitness and suitability of any proposed assignee or sub‑lessee and of and incidental to the preparation, execution and stamping of the assignment or sub‑lease.
By cl 8.3, ss 80 and 82 of the Property Law Act1969 (WA), which provide for a statutory right to assign, were excluded.
The letter dated 21 June 1996 and the learned trial judge's reasoning in relation to it
A critical issue in this appeal is the proper construction of the letter dated 21 June 1996 from Mr Wilson addressed to the 'Secure Parking Group'. The letter reads:
RE : 18 THE ESPLANADE CAR PARK PERTH
I hereby confirm and agree that until as [sic] the transfer of lease of the above mentioned car park is formally consented to by the lessor, Nullagine Investments Pty Ltd, I hereby grant to your Company all rights to receive all income and revenue from the Car Park's Operation as if the Lease had been formally assigned to your Company provided that the agreed sum of One Hundred and Fifty Thousand Dollars ($150,000) is paid into the trust account of Barry Chester and Hick Pty Ltd on or before 25 June 1996.
Upon receipt of the aforesaid income and revenue as agreed, your Company will be entitled to direct me manage [sic] the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions.
The above agreement is to come into effect on or before the 25th June 1996 or such other date prior to the 30th June 1996 that the parties agreed to in writing.
The learned trial judge found that the agreement embodied in the letter dated 21 June 1996 was between Mr Wilson, on the one hand, and Secure Parking, on the other. See his Honour's reasons at [123], [125] ‑ [127].
The learned trial judge also found that after receiving the letter dated 21 June 1996, Secure Parking paid $150,000 'for the credit of [Mr Wilson]'. See his Honour's reasons at [30]. It was not in contest between the parties that Secure Parking paid the $150,000 on or before 25 June 1996, as required by the letter.
The learned trial judge's reasoning in relation to the proper construction of the letter dated 21 June 1996 was, relevantly, as follows:
I am not satisfied that the right of [Secure Parking] to direct [Mr Wilson] to manage the car park according to its desires and best interests includes the right to direct [Mr Wilson] to exercise the option of renewal under the lease.
The letter of 21 June 1996 does not say that [Mr Wilson] granted to [Secure Parking] all rights under the lease as if the lease had been formally assigned to [Secure Parking]. The rights granted by [Mr Wilson] are confined to the rights to receive the income and revenue from the car park's operation. That is consistent with [Mr Wilson] remaining lessee of the car park. The statement in the letter that [Secure Parking] would be entitled to direct [Mr Wilson] to manage the car park according to [Secure Parking's] desires and best interests must be considered in that context.
…
[Secure Parking] pleads that if there is not an express term that [Secure Parking] be entitled to direct [Mr Wilson], as part of the management of the Esplanade car park according to the desires and best interests of [Secure Parking], to exercise the option to renew the lease then a term should be implied to that effect. …
…
I am not satisfied that the term sought to be implied is necessary for the reasonable or effective operation of an agreement of the nature entered into between [Secure Parking] and [Mr Wilson] in the circumstances of the case. The consideration for [Secure Parking] acquiring the relevant rights under the agreement of June 1996 was the payment of $150,000 to [Mr Wilson]. That is a significant capital investment. However, the lease had four years and four months still to run. The circumstances of the case do not establish that commercial necessity required the term sought to be implied.
If such a term was to be implied it would allow [Secure Parking] to unilaterally extend [Mr Wilson's] legal obligations as lessee, including the obligation to pay rent, for a further five years or perhaps a further 10 years. [Secure Parking] submits that part of the implied term, or a further implied term, is that [Secure Parking] indemnify [Mr Wilson] against any claims or losses arising out of or resulting from the failure of [Secure Parking] to pay the rent or from any other breach by [Secure Parking] of the lessee's covenants under the lease. Such an indemnity would offer some comfort to [Mr Wilson]. However, [Mr Wilson] would remain under the legal obligations to [Nullagine] created by the renewed lease. The indemnity would not, of course, be of any value to [Mr Wilson] if [Secure Parking] was to become insolvent. Furthermore, if [Secure Parking] refused or failed to meet its obligations under the indemnity [Mr Wilson] would have to bear the expense and inconvenience of enforcing the indemnity and be exposed to liability to [Nullagine] pending the enforcement of the indemnity. In short, the implication of such a term would expose [Mr Wilson] to financial risk. That is a further reason for finding that it is not commercially necessary to imply a term or terms as argued by [Secure Parking].
For the reasons stated, I find that [Secure Parking] is not entitled to direct [Mr Wilson] to exercise the option to renew the lease [125] ‑ [126], [128], [130] ‑ [132].
Relevant facts and events between 21 June 1996 and 29 August 2002
The Deed of Assignment (that is, the document executed by Secure Parking and Mr Wilson) and the draft assignment document enclosed with Dwyer Durack's letter dated 19 April 1996 contained, relevantly, provisions as follows:
(a)By cl 2.1, relevantly, Mr Wilson assigned to Secure Parking all of Mr Wilson's estate, right and interest in the Lease and the leased premises 'for the residue unexpired of the Term together with the option to renew … contained in the Lease'. The word 'Term' was defined in cl 1 to mean the term of the Lease and any renewal or extension of that term.
(b)By cl 5.1, Secure Parking covenanted with Mr Wilson that Secure Parking would, as and from the date of assignment, indemnify Mr Wilson 'from and against all claims, demands, proceedings, judgments, damages, costs and losses of any kind whatsoever' arising out of or resulting from the failure of Secure Parking to pay the rent or any other breach by Secure Parking of the lessee's covenants under the Lease.
(c)By cl 7.1, Nullagine consented to the assignment, but so that nothing in the deed would, relevantly, discharge or release Mr Wilson from the obligations to pay the rent and observe and perform the lessee's covenants under the Lease whether before or after the date of assignment.
(d)By cl 9, Brett and Garth Mathews, relevantly, guaranteed to Nullagine the due performance and observance by Secure Parking of the lessee's covenants under the Lease including the due payment of all rentals and other moneys reserved or otherwise payable from time to time by or under the Lease.
The Deed of Assignment was different from the draft assignment document enclosed with Dwyer Durack's letter dated 19 April 1996 in one important respect. Clause 10.1 of the Deed of Assignment provided:
Notwithstanding any other provision of this deed, the liability of Garth Richard Mathews and Brett Ronald Mathews under clause 9 shall be limited to an amount equal to the aggregate of all Rent and other monies payable under the Lease for a maximum period of three months.
This limitation on the liability of the guarantors was not contained in the draft assignment document.
As I have mentioned, the Deed of Assignment was executed by Secure Parking and Mr Wilson. Mr Wilson executed it on 25 June 1996. See the learned trial judge's reasons at [30]. The Deed of Assignment was not executed by Nullagine. As I have mentioned, his Honour found that Nullagine never consented to the assignment.
From 25 June 1996, Secure Parking took over the day‑to‑day management and operation of the Esplanade Car Park and from that date Secure Parking received all income and revenue and paid all outgoings of the car park business. See the learned trial judge's reasons at [31]. The business was conducted under the name 'Secure Parking' instead of 'Panda Parking'.
On 26 June 1996, Mr Wilson signed a written service agreement (the Service Agreement) with Secure Parking. The agreement, which is dated 26 June 1996, was prepared by Secure Parking's solicitor, Mr Raward, and signed by Garth Mathews on its behalf.
Clause 2.1(a) of the Service Agreement provided for Mr Wilson's employment to commence on 26 June 1996. However, the 'Expiration Date' (being the date of termination of his employment) was not completed by the parties. The apparent effect of the non‑completion of the date of termination is that the Service Agreement was for an indefinite term, and was therefore determinable by either party on reasonable notice to the other. By cl 3.1, Secure Parking employed Mr Wilson, and Mr Wilson agreed to serve Secure Parking, as general manager of Secure Parking's business operations (including the management and operation of the Esplanade Car Park) on the terms and conditions of the agreement. Clause 5.1 provided for Secure Parking to pay Mr Wilson, as remuneration for his services, a gross salary package at the rate of $30,000 per annum, during the continuance of the agreement, commencing on 26 June 1996.
Also on 26 June 1996, Auspark granted to Mr Wilson a written option to purchase 50% of Secure Parking's issued share capital for the sum of $75,000. See the learned trial judge's reasons at [32]. The document containing the option to purchase was not tendered at the trial. Mr Wilson described the provisions of the option to purchase document in par 30 of his witness statement. The witness statement was tendered as exhibit G.
On 19 March 1999, Mr Wilson exercised the option to purchase, and about two weeks later he paid Auspark the sum of $75,000. On 14 September 1999, Mr Wilson became a director of Secure Parking. See the learned trial judge's reasons at [53].
Mr Wilson said in evidence at the trial that on 10 February 1997, Brett Mathews telephoned him and said words to the effect:
The assignment to Secure is obviously not going ahead. Can you please send me a letter confirming that Secure has been granted management rights over the car park and granted the rights to receive all income and revenue from the car park (ts 556, exhibit H).
According to Mr Wilson, he (Mr Wilson) said words to the effect: 'I have already provided a letter' and Brett Mathews responded with words to the effect: 'It doesn't matter, I need another letter'. Mr Wilson gave evidence that Mr Mathews then dictated to him the letter he wanted and Mr Wilson wrote down the words dictated. After the telephone call, Mr Wilson typed the letter dictated by Mr Mathews, signed it and sent it to him. The letter is dated 10 February 1997 and addressed to Secure Parking. It reads:
18 THE ESPLANADE PERTH – 144 BAY CAR PARK
I hereby confirm and agree that until such time as the transfer of lease of the abovementioned car park is formally consented to by the lessor, Nullagine Investments Pty Ltd, I hereby grant to your company all rights to receive all income and revenue from the car park's operation as if the lease had been formally assigned to your company.
Upon receipt of the aforesaid income and revenue as agreed, your company will be entitled to direct me to manage the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions.
The learned trial judge's findings in relation to the letter dated 10 February 1997, and the telephone conversation which preceded it, were these:
I find that there was a telephone discussion between Brett and [Mr Wilson] on or about 10 February 1997. I find that Brett did request that [Mr Wilson] send him a letter broadly in the terms of the letter [Mr Wilson] subsequently sent. I do not place any reliance on [Mr Wilson's] description of the words spoken by Brett, particularly words to the effect 'the assignment to Secure is obviously not going ahead' [47].
By letter dated 5 May 2000, Mr Raward gave notice of exercise of the option to renew the Lease for five years commencing on 19 October 2000. Pursuant to that notice, Nullagine and Mr Wilson executed a deed of extension of lease undated, but bearing the date 28 September 2000 on a stamp duty indorsement. The deed provided for the extended term to commence on 19 October 2000 and expire on 18 October 2005. Mr Wilson paid Mr Raward's fee for preparing and sending the letter giving notice of exercise of the option to renew by a cheque drawn on Secure Parking's bank account (ts 571).
By memorandum dated 11 May 2001, faxed from Mr Raward to Mr Michel, Secure Parking requested 'a formal assignment' of the Lease from Mr Wilson to it. The memorandum provided:
We refer to our telephone conversation with you on 8 May 2001 and now confirm that we are instructed by Secure Parking W.A. Pty Limited to seek a formal assignment of the Leasehold Estate to that Company.
We are further instructed that Mr Brett Mathews and Mr Garth Mathews are willing to personally guarantee the performance of the assignee Secure Parking W.A. Pty Limited, provided such Guarantee is limited to 3 months rental. Given that car parks by their very nature can be easily re‑let by Owners, our clients [sic] believe that their offer of Guarantee should be acceptable to your Board.
Accordingly would you please put our clients proposal to your Board as soon as possible and let us know the outcome.
On 16 May 2001, Mr Michel sent a copy of Mr Raward's memorandum of 11 May 2001 to Mr Wilson, and requested his confirmation that the proposed arrangements in the memorandum were acceptable to him as the lessee under the Lease. Mr Michel added that the board of Nullagine had no objection to an assignment, 'providing the assignment mirrors the existing lease particularly with regards to personal guarantees for the term of the Lease'. Also, he said that he was 'somewhat sceptical' that the directors of Nullagine would be willing to accept personal guarantees limited to 3 months' rental.
By letter dated 28 May 2001, Mr Wilson informed Mr Michel, relevantly, that:
the proposed arrangement is not acceptable as I wish the current arrangements to remain as they are and I wish to protect my interests.
Mr Wilson then confirmed that his 'current relationship with Secure Parking Group' was as follows:
I own personally 50% of Secure Parking (WA) Pty Ltd and the other 50% is owned by Auspark Holdings Pty Ltd a company owned by Brett & Garth Mathews. Secure Parking (WA) Pty Ltd has been appointed to perform the day to day operations of the New Esplanade Hotel car park.
On 17 July 2002, Mr Wilson wrote to Mr Michel in connection with discussions which had occurred between them on the previous day in relation to a new lease of the Esplanade Car Park. The letter proposed, relevantly, that:
(a)The lessee under the proposed new lease be Parking Asset Management. (As I have mentioned, Mr Wilson's mother, Joan Wilson, was the sole director of that company.)
(b)The obligations of Parking Asset Management under the proposed new lease would be guaranteed by Mr Wilson and his father, Lawrence Wilson.
(c)The proposed new lease would be for an initial term of 10 years with three options for renewal of five years each.
(d)The date of commencement of the proposed new lease would be 1 September 2002 'or mutually agreed date between both parties should the parties wish an earlier commencement date'.
When Mr Wilson wrote and sent the letter dated 17 July 2002, he was still the general manager under the Service Agreement and a director of Secure Parking. The letter and its contents were not disclosed by Mr Wilson to the other directors of Secure Parking before the letter was sent.
On 16 August 2002, Mr Wilson resigned as general manager under the Service Agreement and as a director of Secure Parking.
The next day, 17 August 2002, Mr Wilson and his family attempted to take possession of the Esplanade Car Park. On the application of Secure Parking, the Supreme Court granted injunctions against Mr Wilson, Joan Wilson, Lawrence Wilson and Parking Asset Management. I refer to the interlocutory injunctive relief in detail at [52] ‑ [58] below.
By letter dated 28 August 2002, Mr Wilson wrote to Nullagine, as follows:
I refer to the lease for the Car Park dated 19 October 1995 ('Lease') and to correspondence concerning the proposed assignment of the Lease to Secure Parking (WA) Pty Ltd ('Secure').
As you know, in June 1996 Secure paid the sum of $150,000 to me for an equal share in my business known as 'Panda Parking'. The only business of Panda Parking was the operation of the Car Park.
Following the payment of the purchase price, I granted Secure the right to receive all income and revenue from the Car Park until such time as Nullagine Investments had given its consent to an assignment of the Lease.
Clause 8 of the Lease provides that Nullagine cannot unreasonably withhold its consent to such an assignment provided I prove to Nullagine's satisfaction that Secure is a 'respectable, responsible and financially acceptable solvent person capable of performing the lessee's obligations under the lease'.
By the same clause, where the proposed assignee is a corporation, as here, Nullagine is entitled to require a personal guarantee from all or any of the directors or the principal shareholder of Secure.
Nullagine requested guarantees from the two directors of Secure, however, they were only prepared to provide them if they were limited in duration to three months. The negotiations for an assignment then stalled.
In May 2001, Secure's solicitor, Mr Raward, wrote to you again concerning an assignment of the Lease, and you sought my views. I advised you that I preferred to leave the current arrangements, i.e. the Lease in my name and the management of the Car Park with Secure, in place.
A dispute has now arisen between Secure and me concerning the management of the Car Park.
I would be grateful if you could let me know as a matter of urgency whether or not Nullagine is satisfied that Secure fulfils the criteria set out in clause 8 of the Lease. If not, please let me know what further information you require in order to make a decision. If you are satisfied, please advise whether Nullagine will require personal guarantees from both of the directors of Secure and. [sic] if so, whether you require them for the balance of the term of the Lease or for some other period.
By letter dated 29 August 2002, Nullagine informed Mr Wilson that Nullagine's consent to an assignment of the Lease would be 'strictly in accordance with the provisions of the lease'. Those requirements included unlimited personal guarantees of the assignee's obligations.
After Mr Wilson resigned as the general manager under the Service Agreement and as a director of Secure Parking, other employees of Secure Parking became responsible for the ongoing operation of the Esplanade Car Park.
The interlocutory injunctive relief granted in related Supreme Court proceedings CIV 2192 of 2002
On 22 August 2002, in related Supreme Court proceedings CIV 2192 of 2002 between Secure Parking as plaintiff, Mr Wilson as first defendant, Parking Asset Management as second defendant, Joan Wilson as third defendant and Lawrence Wilson as fourth defendant, Hasluck J, upon the ex parte application of Secure Parking, granted an injunction until 4 pm on 30 August 2002, or further order, restraining Mr Wilson, Parking Asset Management, Joan Wilson and Lawrence Wilson from, relevantly, entering into any agreement, arrangement or understanding for the lease, licence or other right to acquire the use of the Esplanade Car Park for business purposes (for themselves or any other party) with the proprietors or other controllers of the car park premises.
On 23 August 2002, Hasluck J granted further injunctions ex parte. His Honour ordered, relevantly, that until 4 pm on 30 August 2002, Mr Wilson, Parking Asset Management, Joan Wilson and Lawrence Wilson be restrained from:
(a)attempting to take physical possession of the premises of the Esplanade Car Park; and
(b)actually receiving any money from any person in relation to the operation by any person or any company of, relevantly, the Esplanade Car Park.
On 30 August 2002, Pullin J, after hearing counsel for each of the parties, ordered, relevantly, that the injunctions granted by Hasluck J on 22 and 23 August 2002, be extended until trial or further order.
By letter dated 14 October 2005, solicitors acting for Mr Wilson and his parents informed Secure Parking's solicitors that they had been instructed to make an urgent application to discharge the interlocutory injunctions in relation to the Esplanade Car Park, and inquired whether Secure Parking would consent to the discharge.
By letter dated 17 October 2005, Secure Parking's solicitors offered to consent to a partial variation of the injunctions on terms set out in their letter. By letter dated 17 October 2005, the solicitors for Mr Wilson and his parents rejected Secure Parking's offer. They added that, in any event, Mr Wilson did not intend to exercise the option to renew the Lease for five years from 19 October 2005.
By letter dated 17 October 2005, Secure Parking's solicitors wrote to the solicitors for Mr Wilson and his parents, in these terms:
Given your advice, in your letter of 17 October 2005, that your client, Mr Alfred Wilson, does not intend to exercise the option to renew, and without derogating from our client's position on any matter in relation to any of the Defendants, our instructions are that our client will agree to vary the interlocutory injunctions by releasing therefrom the Second, Third and Fourth Defendants in CIV 2192 of 2002.
On 20 October 2005, being six days after the learned trial judge delivered judgment in the Supreme Court proceedings (CIV 1074 of 2003) that are the subject of this appeal, Acting Principal Registrar Dixon, pursuant to O 43 r 16 of the Rules of the Supreme Court 1971 (WA) and by consent, ordered that the injunctions granted by Hasluck J on 22 and 23 August 2002, and extended by Pullin J on 30 October 2002, be varied by releasing Parking Asset Management, Joan Wilson and Lawrence Wilson from the operation of those injunctions, as from 18 October 2005, insofar as they related to the Esplanade Car Park.
The second option to renew the Lease
By notice dated 28 July 2005, Secure Parking, by its solicitors, directed Mr Wilson to exercise the second option to renew the Lease for a further term of five years commencing on 19 October 2005.
By agreement between Secure Parking, Mr Wilson and Nullagine, the time specified in cl 2.2 of the Lease for giving notice of exercise of the second option to renew was extended, in view of the pending Supreme Court proceedings, to 18 October 2005.
Mr Wilson did not exercise that option to renew and, as a result, the Lease expired on 18 October 2005.
The new lease between Nullagine, Parking Asset Management and Lawrence Wilson
By a deed of lease dated 30 January 2006, Nullagine granted a lease of the Esplanade Car Park to Parking Asset Management for an initial term of six years commencing on 26 October 2005, together with an option for renewal of six years commencing on 26 October 2011. Lawrence Wilson guaranteed the obligations of Parking Asset Management. The terms of the deed of lease are similar to, but not identical with, the discussions between Mr Wilson and Mr Michel on 16 July 2002 which culminated in the letter of 17 July 2002.
The deed of lease included a 'break clause' in item 16.4 of the First Schedule to the deed, as follows:
(a)If, at any time during the Term, as a consequence of any Court action between the Lessor and a previous lessee of the Leased Premises, the Lessor is required by the Court to grant a lease of the Leased Premises (or any part) to that lessee or grant that lessee occupation or management rights with respect to the Leased Premises (or any part), the Lessor may give the Lessee not less than 1 months' [sic] written notice ('Termination Notice') of its intention to terminate this Lease and the following will apply:
(iii)this Lease will end and the Lessee's right to occupy the Leased Premises will cease on the termination date stated in the Termination Notice; and
(iv)the Lessee must vacate and make‑good and reinstate the Leased Premises by the termination date stated in the Termination Notice.
(b)Subject to item 16.4(c), the Lessee will not have any right to make a claim against the Lessor nor will the Lessor be liable to the Lessee or any other person for any loss (including consequential loss), damage, cost, interest, expense, fee, demand, action, suit, claim, proceeding, cause of action or liability for damages suffered or incurred by the Lessee or any person arising from this Lease and or its termination pursuant to this item.
(c)Nothing in item 16.4(b) of this clause will affect the rights of either the Lessor or the Lessee in respect [of] any antecedent breach of the terms of this Lease up to the date of termination pursuant to this item.
Relevant facts and events after 30 January 2006
On 12 July 2006, Parking Asset Management lodged a caveat against the title to the land on which the Esplanade Car Park is constructed, giving notice of its interests under the deed of lease dated 30 January 2006. Subsequently, Nullagine sold its fee simple estate to Benballey Pty Ltd (Benballey), which became the registered proprietor on 13 October 2006. Benballey granted two mortgages over the land and, on 13 October 2006, the mortgagees registered their securities. Between 13 October 2006 and 3 August 2007, Benballey sold the land to Pakwest Pty Ltd (Pakwest), which became the registered proprietor on 3 August 2007. Pakwest granted a mortgage over the land and, on 3 August 2007, the mortgagee registered its security.
Secure Parking's substituted grounds of appeal
Secure Parking's substituted grounds of appeal are these:
1.The learned Trial Judge erred in law in failing to hold that [Mr Wilson] was obliged to give notice of the exercise of his option to renew the lease of the relevant premises at 18 The Esplanade Perth for a term of 5 years from 19 October 2005.
2.The learned Trial Judge erred in law in failing to hold that [Nullagine] was obliged to give effect to such notice of exercise of option by granting a renewed lease to [Mr Wilson] for a term of 5 years from 19 October 2005.
It will be apparent that Secure Parking's appeal is confined to challenging the learned trial judge's findings and decision in relation to the proper construction of the letter dated 21 June 1996, the alleged obligation of Mr Wilson to give a notice exercising the second option to renew and the alleged obligation of Nullagine to give effect to such a notice. The numerous other issues raised unsuccessfully by Secure Parking at trial have not been pursued.
Secure Parking's submissions on the grounds of appeal
Counsel for Secure Parking submitted that the learned trial judge should have found that Mr Wilson was obliged to act on Secure Parking's direction to exercise the option for renewal of the Lease in order to enable it to receive, in terms of the letter dated 21 June 1996, 'all income and revenue from the Car Park's Operation as if the Lease had been formally assigned to [Secure Parking]'. The income and revenue from the car park was envisaged to continue so long as the Lease was in existence and, subject only to questions of profitability, each option for renewal was envisaged to be exercised. It was necessary, in order to effectuate the grant to Secure Parking of 'all rights to receive all income and revenue from the Car Park's Operations as if the Lease had been formally assigned', for Mr Wilson to exercise each of the options.
Secure Parking's case that Mr Wilson was obliged, at Secure Parking's direction, to exercise each option to renew, and that he breached the obligation, was put on four alternative bases. First, there was a breach by Mr Wilson of the implied duty of each party to a contract to cooperate in the performance of contractual obligations. It was submitted that the obligation to exercise each option to renew arose from the terms of the first paragraph of the letter dated 21 June 1996 in order to enable Secure Parking to obtain the benefit of the agreement embodied in it. Secondly, there was a grant of 'all rights to receive all income and revenue from the Car Park's Operation as if the Lease had been formally assigned to [Secure Parking]', and the refusal to exercise the second option to renew constituted a derogation from the grant. Thirdly, the $150,000 paid by Secure Parking to Mr Wilson pursuant to the letter dated 21 June 1996 was for the purchase of the business carried on by Mr Wilson under the name, 'Panda Parking', and the principal asset of that business was the Lease. It was submitted that Secure Parking was therefore the beneficial owner of the Lease and, as between Mr Wilson and Secure Parking, Mr Wilson held the benefit of the Lease as a bare trustee. Fourthly, there was a breach by Mr Wilson of an implied term to the effect that he would, at Secure Parking's direction, exercise each option to renew, the implication of the term being necessary to give business efficacy to the agreement embodied in the letter dated 21 June 1996.
Before the learned trial judge, Secure Parking relied, in relation to this issue, solely upon the implication of a term pursuant to the principles enunciated in Codelfa. Counsel for Secure Parking submitted to this court that the final version of the statement of claim was adequate to enable its case on appeal to be put on the broader footing I have mentioned, and that the broader footing involved merely the legal characterisation of uncontested facts (or facts no longer in contest) and the proper construction of the letter dated 21 June 1996. Neither counsel for Mr Wilson nor counsel for Nullagine contended to the contrary. Further, it was not suggested that if Secure Parking's case had been put on the broader footing at trial, either Mr Wilson or Nullagine might have conducted the defence differently. In particular, it was not suggested that there was any other evidence which could have been adduced at trial. Also, neither counsel for Mr Wilson nor counsel for Nullagine argued that there was any relevant prejudice which their client would suffer if Secure Parking were to be permitted to put its case on appeal on the broader footing I have described. In the circumstances, I am satisfied it is appropriate to permit Secure Parking to argue the appeal on the four alternative bases relied upon by its counsel.
The learned trial judge delivered judgment on 14 October 2005, which was within time for the exercise of the second option for renewal. His Honour published his reasons on 7 December 2005. Secure Parking contends that if the appeal is allowed, Secure Parking should be restored to the position in which it would have been if, on 14 October 2005, his Honour had ordered Mr Wilson to exercise the option. As at that date, Nullagine would have been obliged to have entered into a renewed lease with Mr Wilson. Secure Parking, which was then in occupation of the car park, could have continued to enjoy the income derived from its operation.
Counsel for Secure Parking acknowledged that 'in a sense' third party rights have intervened in that, by the deed of lease dated 30 January 2006, Nullagine granted a lease of the Esplanade Car Park to Parking Asset Management. However, it was submitted that, consistently with restoring Secure Parking to the position it should have been in on 14 October 2005, this lease could be brought to an end by Nullagine or its successors in title. Counsel referred to item 16.4(a) of the First Schedule to the deed (the 'break clause'), which permits Nullagine or its successors in title to give notice that has the effect of terminating the lease in the event that 'as a consequence of any Court action between the Lessor and any previous lessee of the Leased Premises, the Lessor is required by the Court to grant a lease of the Leased Premises (or any part) to that lessee or grant that lessee occupation or management rights with respect to the Leased Premises (or any part)'.
Secure Parking sought an order for a renewed lease, and orders that acknowledge its rights to manage the car park during the term of the renewed lease. The orders in question should invoke the operation of the 'break clause'.
The related Supreme Court proceedings (CIV 2192 of 2002) between Secure Parking as plaintiff and Parking Asset Management, Mr Wilson, Joan Wilson and Lawrence Wilson as defendants are still pending. In those proceedings, Secure Parking seeks relief for alleged breach of fiduciary duty, and knowing assistance in that breach of fiduciary duty, in relation to the conduct of various car parks including the Esplanade Car Park.
If the appeal is allowed, Secure Parking would seek orders, relevantly, in these terms:
1.Declaration that [Secure Parking] was entitled to direct and did direct [Mr Wilson] to give notice of the exercise of his option to renew the lease of the relevant premises at 18 The Esplanade Perth for a term of 5 years from 19 October 2005.
2.Declaration that [Nullagine] was obliged to give effect to such notice of exercise of such option.
3.Order that the action otherwise be remitted to a Judge of the General Division of the Court for further consideration in the light of the reasons of this Court.
4.Order that [Mr Wilson, Nullagine and Parking Asset Management] do pay [Secure Parking] the costs of the appeal to be taxed.
Mr Wilson's submissions on the grounds of appeal
Counsel for Mr Wilson submitted that the learned trial judge was correct to find that on a proper construction of the letter dated 21 June 1996 there was no express or implied term that Secure Parking was entitled to direct Mr Wilson, as part of the management of the Esplanade Car Park, to exercise the options for renewal of the Lease.
It was submitted that, in considering the learned trial judge's finding against the existence of an express term, regard should be had to the language of the letter, the manner in which the letter came into existence, and his Honour's finding (at [98] of his reasons) that Mr Wilson did not intend, objectively, to assign the Lease to Secure Parking unless and until Nullagine had executed the Deed of Assignment.
Counsel for Mr Wilson said that, in the context of the learned trial judge's finding as to Mr Wilson's intention concerning the assignment of the Lease, 'it is not possible to construe the letter of 21 June 1996 as including an express entitlement on the part of [Secure Parking] to compel [Mr Wilson] to exercise the option in October 2005'. The rights of Secure Parking were confined to the rights to receive the income and revenue from the operation of the car park.
Regarding the alleged implied term, counsel for Mr Wilson submitted that the learned trial judge found, correctly, that the implied term was not necessary for the reasonable and effective operation of the agreement embodied in the letter dated 21 June 1996, bearing in mind that at the date of the letter there was almost four and half years before the initial term of the Lease would expire. It was submitted that his Honour was entitled to take into account, in deciding that no implication could be made as alleged by Secure Parking, that the implication of the term would impose financial hardship or risk on Mr Wilson.
Further, it was argued that the words 'until … the transfer of lease … is formally consented to by the lessor', in the letter dated 21 June 1996, cannot mean that the agreement embodied in the letter continues to subsist past the point where it is no longer contemplated by the parties that there will be an assignment of the Lease. It was said that once reasonable attempts had been made to obtain Nullagine's consent to an assignment of the Lease, and those attempts had been unsuccessful, so the parties knew that Nullagine would not consent to an assignment on the terms sought, the agreement embodied in the letter came to an end. Between 1997 and 2002, efforts were made to procure Nullagine's consent, but those efforts ceased upon receipt of Nullagine's letter dated 29 August 2002 to Mr Wilson. At about that time, Secure Parking commenced the related Supreme Court proceedings (CIV 2192 of 2002) for, amongst other things, declarations that Nullagine had in fact given its consent. Secure Parking's decision to commence those proceedings was said to show that any negotiations for the assignment of the Lease had come to an end.
Counsel for Mr Wilson submitted, in relation to the relief sought by Secure Parking, that:
(a)On 17 October 2005, following the delivery of the primary judgment and the dismissal of Secure Parking's claim, Mr Wilson obtained Secure Parking's written consent to a variation of the interlocutory injunctions. The variation released Parking Asset Management, Joan Wilson and Lawrence Wilson from the operation of those injunctions, as from 18 October 2005, to the extent that they related to the Esplanade Car Park.
(b)Mr Wilson sought the variation of the interlocutory injunctions for the purpose of permitting Parking Asset Management to enter into a new lease of the Esplanade Car Park with Nullagine.
(c)Secure Parking's decision to agree to the variation of the interlocutory injunctions so as to allow Parking Asset Management to enter into the new lease with Nullagine is inconsistent with Secure Parking's grounds of appeal and the submissions advanced in support of those grounds. If the appeal is allowed and the relief sought by Secure Parking is granted, the rights of third parties not represented or heard in this appeal will be affected.
(d)Secure Parking cannot be restored to the position it enjoyed before the variation of the interlocutory injunctions and before the new lease was executed by Parking Asset Management and Nullagine and, in consequence, the declaratory orders sought by Secure Parking should not be made.
Nullagine's submissions on the grounds of appeal
Counsel for Nullagine adopted the submissions of counsel for Mr Wilson, and made some additional submissions. He emphasised that the appeal does not:
(a)assert that Nullagine is a party to the agreement embodied in the letter dated 21 June 1996;
(b)challenge the learned trial judge's finding that Nullagine did not assign the Lease to Secure Parking;
(c)challenge his Honour's finding that Mr Wilson had not agreed to assign the Lease to Secure Parking;
(d)challenge his Honour's finding that Secure Parking had not adopted an assumption that Nullagine had consented to the assignment of the Lease to Secure Parking and, accordingly, Nullagine was not estopped from denying that it did not assign the Lease;
(e)challenge his Honour's finding that Secure Parking was not a party to the Lease (or entitled to enforce the Lease); or
(f)assert that the relevant option to renew was validly exercised.
It was submitted that, in the circumstances, Secure Parking had no claim against Nullagine under the agreement embodied in the letter dated 21 June 1996 or the Lease.
Further, it was submitted on behalf of Nullagine, that even if ground 1 of the appeal is established and Secure Parking is entitled to be restored to the position in which it would have found itself if, on 14 October 2005, the learned trial judge had ordered Mr Wilson to exercise the option, no relief would have been available against Nullagine. In any event, damages or an account of profits against Mr Wilson is an adequate remedy. There will be financial information in relation to the operation of the car park and that information will enable the true quantum of damages or profits to be calculated readily.
Further, counsel for Nullagine submitted that even if Secure Parking makes out ground 2 of its appeal, Mr Wilson did not exercise the option, the time for exercise of the option has passed, the Lease expired on 18 October 2005, the subject premises have been leased to Parking Asset Management, and the fee simple estate has been sold to a third party, Benballey, and on‑sold to another third party, Pakwest, which is now the registered proprietor. The deed of lease with Parking Asset Management was entered into after Secure Parking consented to orders varying the interlocutory injunctions. The orders sought by Secure Parking pursuant to ground 2 are inconsistent with its conduct in consenting to the variation of the interlocutory injunctions. Also, and in any event, there was no restraint (either under the interlocutory injunctions or otherwise) on Nullagine selling the fee simple estate to Benballey or on Benballey re‑selling to Pakwest.
Written contracts: the proper approach to construction
The general principles to be applied in the construction of written contracts are set out in the judgment of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v. Dunlop ((1888) 39 Ch. D. 387, at p. 393), which, although spoken in relation to a will, are applicable to the construction of written instruments generally; see also Bottomley's Case ((1880) 16 Ch. D. 681, at p. 686). Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement of Lord Wright in Hillas & Co. Ltd. v. Arcos Ltd ((1932) 147 L.T. 503, at p. 514), that the court should construe commercial contracts 'fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance (cf. Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd ((1968) 118 C.L.R. 429, at p. 437)) (109 ‑ 110).
The construction of a written contract involves ascertaining what a reasonable person would have understood the parties to mean. Consideration should ordinarily be given not only to the language of the document, but also to the surrounding circumstances known to the parties, and the apparent purpose and object of the transaction. See Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, where Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said:
This Court, in Pacific Carriers Ltd v BNP Paribas ((2004) 218 CLR 451), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 - 462 [22]) [40].
Also see Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [11]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 [22]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 82 ALJR 419 [8], [53]; Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757, 773 - 774.
The preponderance of Australian authority supports the proposition that post‑contractual conduct is not admissible in determining what a contract means, as distinct from determining whether it was formed. See Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 [26] (Heydon JA). Also see County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 [161]; Bowesco Pty Ltd (receiver and manager appointed) v Zohar [2007] FCAFC 1; (2007) 156 FCR 129 [79].
The proper approach to construction where a commercial transaction is implemented by several contracts or documents
Where a commercial transaction is implemented by several contracts or documents, all of the contracts or documents may be read together for the purpose of ascertaining their proper construction and legal effect, at least where the contracts or documents are executed contemporaneously or within a short period. See Smith v Chadwick (1882) 20 Ch D 27, 62 (Jessel MR) and, on appeal, (1884) 9 App Cas 187. Also, see the discussion in Lewison, The Interpretation of Contracts, 3rd ed, par 3.03.
The implied duty of each party to a contract to cooperate in the performance of contractual obligations
The parties to a contract may be under an implied duty to cooperate in the performance of contractual obligations.
In Mackay v Dick (1881) 6 App Cas 251, Lord Blackburn stated the applicable principle, as follows:
I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances (263).
Lord Blackburn's statement was cited with approval by Isaacs J in Ray v Davies (1909) 9 CLR 160, 170.
In Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, the parties were agreed that the contract between them imposed an implied duty on each party to do all that was reasonably necessary to secure performance of the contract. Mason J (Barwick CJ, Gibbs, Stephen and Aickin JJ agreeing), after referring to the statement of Lord Blackburn in Mackay, said:
It is not to be thought that this rule of construction is confined to the imposition of an obligation on one contracting party to cooperate in doing all that is necessary to be done for the performance by the other party of his obligations under the contract (607).
Mason J then referred (607), with approval, to this observation of Griffiths CJ in Butt v M'Donald (1896) 7 QLJ 68:
It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract (70 ‑ 71).
Mason J continued:
It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself (607 ‑ 608).
The general principle of construction, according to which parties are taken to agree to do all that is reasonably necessary to secure performance of their contract, was reiterated more recently in Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317 [38] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ). Also see Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635, 659 (Deane, Dawson and Gaudron JJ); Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, 219 (Dawson and Toohey JJ), 226 (McHugh and Gummow JJ); Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 [36] (Gleeson CJ, Gummow, Kirby and Hayne JJ).
The duty to cooperate does not, however, rise above the promises made by the parties to the contract. In other words, the duty 'cannot over‑ride the express provisions of the contract': Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, 368 (Sheller JA, Powell and Beazley JJA agreeing). Also see Maitland Main Collieries Pty Ltd v Xstrata Mt Owen Pty Ltd [2006] NSWSC 1235 [49] (Bergin J).
The principle that a grantor must not derogate from his or her grant
The principle that a grantor must not derogate from his or her grant is, without doubt, well‑established in the law. Indeed, in Birmingham, Dudley & District Banking Co v Ross (1888) 38 Ch D 295, Bowen LJ said the principle appeared to be 'as old, I will not say as the hills, but as old as the Year Books and a great deal older' (313).
In Harmer v Jumbil (Nigeria) Tin Areas Ltd [1921] 1 Ch 200, Younger LJ said that the principle embodied in the expression 'non‑derogation from grant' describes a principle which embodies a rule of common honesty and was imposed in the interest of fair dealing. His Lordship expounded on the principle, as follows:
Now if these questions are to be answered in a sense favourable to the lessee, it must be on the principle that a grantor shall not derogate from his grant, a principle which merely embodies in a legal maxim a rule of common honesty. 'A grantor having given a thing with one hand,' as Bowen LJ put it in Birmingham, Dudley and District Banking Co v Ross (38 Ch D 295, 313), 'is not to take away the means of enjoying it with the other.' 'If A lets a plot of land to B,' as Lord Loreburn phrases it in Lyttelton Times Co v Warners ([1907] AC 476, 481), 'he may not act so as to frustrate the purpose for which in the contemplation of both parties the land was hired.' The rule is clear but the difficulty is, as always, in its application. For the obligation laid upon the grantor is not unqualified. If it were, that which was imposed in the interest of fair dealing might, in unscrupulous hands, become a justification for oppression, or an instrument of extortion. The obligation therefore must in every case be construed fairly, even strictly, if not narrowly. It must be such as, in view of the surrounding circumstances, was within the reasonable contemplation of the parties at the time when the transaction was entered into, and was at that time within the grantor's power to fulfil. But so limited, the obligation may, I think, be infinitely varied in kind, regard being had to the paramount purpose to serve which it is imposed (225 ‑ 226).
In Johnston & Sons Ltd v Holland [1988] 1 EGLR 264, Nicholls LJ (Lloyd LJ and Sir Roger Ormrod agreeing) reviewed the basis for the principle. His Lordship said that, 'as one would expect', the principle applies to all forms of grants (267). He added:
It was applied recently by the House of Lords to the sale of a car by the manufacturer: see British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577. The principle operates to restrict the future activities of a grantor. One field, and perhaps it was the earliest field, in which the principle finds expression is the grant by implication of easements over land retained by the grantor corresponding to the continuous or apparent quasi‑easements enjoyed at the time of the grant over the property retained (see Parker J in Browne v Flower, at p 225). In such cases there must necessarily be retained land over which the easement being implied is to operate. Booth v Alcock (1873) 8 Ch App 663, is an example of this.
It is also well established that the principle is not confined to cases of the implication of an easement. For instance, in Aldin v Latimer Clark, Muirhead & Co [1894] 2 Ch 437 Stirling J applied the principle to protect the access of air to sheds used for drying timber even though the law does not recognise a right by way, of easement to the access of air except where such right is enjoyed through a definite aperture or channel. Parker J in Browne v Flower (at p 226) regarded the implied obligation in such cases as analogous to that which arises under a restrictive covenant. In Megarry and Wade on the Law of~ Real Property, 5th ed, p 849, the view is expressed that in truth the doctrine is an independent rule of law. This approach was approved by Lord Denning MR in Molton Builders Ltd v City of Westminster (1975) 30 P&CR 182, at p 186. He stated the broad principle thus:
… if one man agrees to confer a particular benefit on another, he must not do anything which substantially deprives the other of the enjoyment of that benefit: because that would be to take away with one hand what is given with the other (267).
Also see Southwark London Borough Council v Mills [2001] 1 AC 1, 23 (Lord Millett); Elliott, 'Non‑Derogation from Grant' (1964) 80 LQR 244.
In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577, Kirby and Crennan JJ applied the doctrine of non‑derogation from grant in the context of copyright licensing [99] ‑ [100]. By contrast, Gummow ACJ reserved for further consideration any application of that doctrine in the field of copyright licensing and, also, the applicability in Australia of the reasoning in Solar Thomson Engineering Co Ltd v Barton [1977] RPC 537 and British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577. Hayne and Callinan JJ found it unnecessary to deal with the point.
The nature and extent of the grant is fundamental in determining the ambit of the grantor's duty not to derogate from the grant. For example, the grant may, in terms, qualify the grantor's duty not to derogate. See Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127; [2000] ANZ ConvR 628 [11] (Gallop, Mathews and Sundberg JJ); Myers v Catterson (1889) 43 Ch D 470, 483 ‑ 484 (Bowen LJ).
The creation of a trust over a leasehold interest in property
A description of a trust appears in Sir Frederick Jordan's Chapters on Equity in New South Wales, 6th ed:
A trust is an obligation enforceable in a Court of Equity, by which a person in whom the legal or equitable ownership of property is vested is bound to hold or apply the property or some interest in it for the benefit of another person or for some public purpose (17).
A trustee must be under a personal obligation to deal with the trust property for the benefit of the beneficiaries, and the obligation in question must be annexed to the trust property. See Jacobs' Law of Trusts in Australia, 7th ed, where it is stated:
[T]he trustee must be under a personal obligation to deal with the trust property for the benefit of the beneficiaries, an obligation giving rise to correlative rights in the beneficiaries. The obligation must be annexed to the trust property. This is the equitable obligation proper. It arises from the very nature of a trust and from the origin of the trust in the separation of the common law and equitable jurisdiction in English legal history. The obligation attaches to the trustee in personam, but it also is annexed to the property, so that the equitable interest resembles a right in rem. It is not sufficient that the trustee should be under a personal obligation to hold the property for the benefit of another, unless that obligation is annexed to the property. Conversely, it is not sufficient that an obligation should be annexed to the property unless the trustee is under a personal obligation [110].
That passage, as it appeared in the third edition of Jacobs' Law of Trusts, was approved by Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510, 518 - 519.
Contractual rights and other choses in action may be the subject matter of a trust. See Lloyd's v Harper (1880) 16 Ch D 290; Harmer v Armstrong [1934] Ch 65. In Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108, Lord Shaw, delivering the advice of the Privy Council, said:
The scope of the trusts recognized in equity is unlimited. There can be a trust of a chattel or of a chose in action, or of a right or obligation under an ordinary legal contract, just as much as a trust of land (124).
A trust may be created in respect of a contract which is not assignable at law, unless it is prohibited by the terms of the contract. See Don King Productions Inc v Warren [2000] Ch 291, 321, 335 ‑ 336.
A trust may be created in respect of a lease over real property (Keech v Sandford (1726) Sel Cas Ch 61) and, more generally, in respect of an equitable interest in real or personal property (Comptroller of Stamps (Victoria) v Howard‑Smith (1936) 54 CLR 614, 621 ‑ 622).
The implication of terms in a contract on an ad hoc basis
The implication of a contractual term on an ad hoc basis gives effect to the presumed or imputed intention of the parties. An implied term is not supplied to add what some may perceive as a desirable improvement to their agreement. See Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25, 44 (Lee J).
In BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, the majority of the Privy Council said in relation to the implication of a contractual term on an ad hoc basis:
(1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract (283).
These remarks have been approved by the High Court in numerous cases including Codelfa, (347) and Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 66, 117 ‑ 118.
Ultimately, it was conceded for Mr Wilson, in terms which I find difficult to understand, that Secure Parking acquired all of the business of Panda Parking for the price of $150,000. Whether Mr Wilson sold all or half his business is immaterial for present purposes.
During the discussions, Mr Wilson was asked to approach Nullagine to see whether it would consent to an assignment of the lease, not to Mr Wilson and Secure Parking jointly, but by Mr Wilson to Secure Parking solely. Clause 8.1 of the lease was the usual provision preventing assignment by the lessee without the prior written consent of the lessor, which consent was not to be unreasonably withheld. That provision was amplified, where the proposed assignee was a corporation, by a capacity for Nullagine to require a personal guarantee by all or any of the directors or principal shareholders of the corporation, or its parent corporation, of the corporation's due performance of the lease.
The discussions between Mr Wilson and Nullagine appear to have been confused, because to some extent they treated Mr Wilson as if he was a corporation in which Secure Parking might acquire an interest. The question of guarantees was discussed, as well as the obligation to ensure that there were, at any given time, sufficient parking bays available for guests of the hotel. A draft deed of assignment was prepared. No firm conclusion or agreement appears to have been reached.
On 20 June 1996, Nullagine advised that it was prepared to forego strict reliance upon cl 8.1 of the lease and would consent to the assignment if Secure Parking provided a corporate guarantee, the Mathews brothers provided personal guarantees for the three‑month period they had proposed, and Mr Wilson provided an ongoing guarantee of performance. There was also a reference to the continuation of what was described as the 'give and take' usage of bays by hotel guests and external customers of the car park business.
At that time and before the various discussions were concluded, there seems to have been confusion about the position adopted by Secure Parking and Nullagine. On 21 June 1996, Garth Mathews rang Mr Wilson. He referred to Nullagine's letter of 20 June and expressed concern about the fact that there would be no limit to the number of free bays made available to guests of the hotel. Secure Parking appears to have taken the view that Nullagine would not consent to an assignment of the lease by Mr Wilson on reasonable terms. Garth Mathews told Mr Wilson, that being the case, that he needed a letter from Mr Wilson granting Secure Parking 'management rights in relation to the operation of the car park'.
Shortly afterwards, Brett Mathews rang and dictated to Mr Wilson the wording of the letter which Secure Parking required. In addition, he asked that the draft deed of assignment be signed by Mr Wilson and forwarded to Nullagine. It appears that was done.
Mr Wilson drew up the letter requested by Secure Parking and sent it. The letter is dated 21 June 1996. It is addressed to Secure Parking and signed by Mr Wilson as the general manager of Panda Parking. Its terms have been set out by Buss JA, but I should repeat them here, as follows:
RE : 18 THE ESPLANADE CAR PARK PERTH
I hereby confirm and agree that until as [sic] the transfer of lease of the above mentioned car park is formally consented to by the lessor, Nullagine Investments Pty Ltd, I hereby grant to your Company all rights to receive all income and revenue from the Car Park's Operation as if the lease had been formally assigned to your Company provided that the agreed sum of One Hundred and Fifty Thousand Dollars ($150,000) is paid into the trust account of Barry Chester and Hick Pty Ltd on or before 25 June 1996.
Upon receipt of the aforesaid income and revenue as agreed, your Company will be entitled to direct me manage [sic] the car park according to your desires and best interests and I confirm and warrant that I will comply with your directions.
The above agreement is to come into effect on or before the 25th June 1996 or such other date prior to the 30th June 1996 that the parties agreed to in writing.
The trial Judge found that the $150,000 was paid to the credit of Mr Wilson on or before 25 June 1996. He found that the letter constituted a binding contract between Secure Parking and Mr Wilson. Central to his Honour's decision at first instance and the decision of the appeal is the proper construction of this letter agreement, but it is clear that it was put into effect. The trial judge found that on 25 June 1996, when the purchase price was paid, Secure Parking took over the day‑to‑day management and operation of the car park. From that date, all income and revenue from the car park was paid into Secure Parking's bank account, and it paid all outgoings such as rent and electricity.
On 26 June 1996, Secure Parking and Mr Wilson entered into a service agreement by which it was agreed that Mr Wilson was to be employed by the company as 'general manager' responsible to the chairman of Secure Parking, Garth Mathews. He was employed at a salary of $30,000 and there were various fringe benefits. There is no doubt that under that agreement Mr Wilson became an employee of Secure Parking. In addition, the trial judge found that on 26 June 1996 Mr Wilson was granted a written option to purchase 50% of the issued shares in Secure Parking for the sum of $75,000. That option was exercised on 19 March 1999.
It appears that the question of the assignment of the lease was never finally resolved. Mr Wilson remained the lessee. Indeed, Mr Wilson later, by letter dated 28 May 2001, informed Nullagine that he did not wish to proceed with the assignment. He was content with the existing arrangement, which protected his interests. He had exercised the option to renew the lease for the five‑year term commencing on 19 October 2000. The trial judge found that Nullagine did not in fact consent to an assignment or waive its rights under cl 8 of the lease.
I note that Mr Wilson proposed a new lease to Nullagine in July 2002. The lessee would be the third respondent. Ultimately, by a deed dated 30 January 2006, such a lease was granted by Nullagine. It was clear that there was a falling out between Secure Parking and Mr Wilson. He resigned his employment as general manager under the service agreement and as a director of Secure Parking on 16 August 2002.
A few days later, Mr Wilson, other members of his family and the third respondent were sued by Secure Parking. The action is CIV 2192 of 2002. In that action, interlocutory injunctive relief, in terms discussed by Buss JA, was granted. As Buss JA notes, by consent, shortly after the trial judge delivered judgment in this action, the injunction was substantially discharged. I need not discuss those matters here.
The relevant additional fact in relation to the claim by Secure Parking relative to this appeal is that in July 2005 Secure Parking gave notice directing Mr Wilson to exercise the second option to renew the lease for a term of five years, commencing on 19 October 2005. Mr Wilson did not comply, and the lease therefore expired on 18 October 2005, four days after the trial judge gave judgment for Mr Wilson and Nullagine.
The relevant claim by Secure Parking
Secure Parking's claim which is material to the appeal was an alternative head of claim added to the original statement of claim by amendment, effectively seeking an order that Mr Wilson exercise the option to renew the lease for a term of five years commencing on 19 October 2005, with the consequence that Nullagine would be obliged to agree to the renewal and grant the renewed lease to Mr Wilson. The claim relied upon what I have described as the letter agreement of 21 June 1996 which, it was asserted, contained an express or implied term permitting Secure Parking to direct Mr Wilson, 'as part of the management of the car park according to the desires and best interests of [Secure Parking]' to exercise the option to renew the lease. It was pleaded that if the term was to be implied, that would be justified because such a term would be reasonable and equitable, necessary to give business efficacy to the contract, so obvious that it would go without saying, capable of clear expression, and would not contradict any express term of the contract.
The principal authorities concerned with such a process of implication of a term in a written contract are referred to by Buss JA. I have nothing to add to his Honour's discussion of the authorities, which I need not repeat here. It is evident that the pleading of the claim relies on the statement of the law by the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283, a statement of the law which has been approved and applied by the High Court in relation to the implication of a term in a written contract in a number of later cases to which I need not refer.
The decision of the trial judge
Le Miere J held that the letter of 21 June 1996 did not expressly confer on Secure Parking the power to direct Mr Wilson to exercise the option to renew the lease for a term of five years from 19 October 2005. His Honour's reasons for that conclusion were set out in his judgment, [2005] WASC 264, at [126]:
The letter of 21 June 1996 does not say that [Mr Wilson] granted to [Secure Parking] all rights under the lease as if the lease had been formally assigned to [Secure Parking]. The rights granted by [Mr Wilson] are confined to the rights to receive the income and revenue from the car park's operation. That is consistent with [Mr Wilson] remaining lessee of the car park. The statement in the letter that [Secure Parking] would be entitled to direct [Mr Wilson] to manage the car park according to [Secure Parking's] desires and best interests must be considered in that context.
As to the implication of a term to the effect pleaded, again the trial judge considered that it was not open to hold that the contract embodied in the letter of 21 June 1996 included the term sought by implication. His Honour's reasons are set out in his judgment at [130] ‑ [131]:
I am not satisfied that the term sought to be implied is necessary for the reasonable or effective operation of an agreement of the nature entered into between [Secure Parking] and [Mr Wilson] in the circumstances of the case. The consideration for [Secure Parking] acquiring the relevant rights under the agreement of June 1996 was the payment of $150,000 to [Mr Wilson]. That is a significant capital investment. However, the lease had four years and four months still to run. The circumstances of the case do not establish that commercial necessity required the term sought to be implied.
If such a term was to be implied it would allow [Secure Parking] to unilaterally extend [Mr Wilson's] legal obligations as lessee, including the obligation to pay rent, for a further five years or perhaps a further 10 years. The plaintiff submits that part of the implied term, or a further implied term, is that [Secure Parking] indemnify [Mr Wilson] against any claims or losses arising out of or resulting from the failure of [Secure Parking] to pay the rent or from any other breach by [Secure Parking] of the lessee's covenants under the lease. Such an indemnity would offer some comfort to [Mr Wilson]. However, [Mr Wilson] would remain under the legal obligations to the second defendant created by the renewed lease. The indemnity would not, of course, be of any value to [Mr Wilson] if [Secure Parking] was to become insolvent. Furthermore, if [Secure Parking] refused or failed to meet its obligations under the indemnity [Mr Wilson] would have to bear the expense and inconvenience of enforcing the indemnity and be exposed to liability to the second defendant pending the enforcement of the indemnity. In short, the implication of such a term would expose [Mr Wilson] to financial risk. That is a further reason for finding that it is not commercially necessary to imply a term or terms as argued by [Secure Parking].
His Honour therefore held that Mr Wilson did not breach the contract embodied in the letter of 21 June 1996 by his failure to seek a renewal of the lease for a term of five years commencing on 19 October 2005.
The argument of the appeal
Buss JA has set out, in summary form, the arguments presented on behalf of the parties on the hearing of the appeal. I need not do that again here, but it is necessary that I say that I respectfully agree with Buss JA that the court should consider all the matters raised by senior counsel for Secure Parking, despite the fact that the challenge to the decision of the trial judge is more broadly based than the arguments presented to Le Miere J.
However, in my view, in the end the matter does indeed turn upon the capacity to imply the term sought by the pleading, in the letter agreement, in accordance with the principles of commercial necessity, because the term implied is something which objectively must be taken to have been agreed and is necessary to secure the efficacy of the contract.
In my view, in the circumstances of this case, it adds nothing to the outcome to call in aid that process whereby the law will imply a term in every contract where the agreement may not be effective without the cooperation of the other side, including cooperation by seeking the assistance of a third party, so that the party entitled to the benefit of the contractual provision may have that benefit secured to it: Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607 per Mason J. Of course, the crucial first step will be to decide what are the benefits secured to the party claiming under the contract by reference to both the express terms of the agreement and, where necessary, terms included in the agreement by necessary implication.
The letter agreement construed
In my view, the evidence established, and the trial judge found, that the agreement between Secure Parking and Mr Wilson to establish a 'joint venture' in relation to the parking business conducted on the premises at 18 The Esplanade was comprised, as at 21 June 1996, of an agreement that Secure Parking would purchase a 50% interest in, or the whole of, Mr Wilson's business conducted under the name of Panda Parking, for the sum of $150,000. Mr Wilson would be appointed its general manager, for which he was to be paid a salary of $30,000 per annum. In addition, he was provided with an option to purchase a 50% interest in Secure Parking for the sum of $75,000.
Aspects of that arrangement were reduced to the written agreements, the letter agreement of 21 June 1996, the service agreement dated 26 June 1996, and the written option for Mr Wilson to purchase 50% of the issued shares in Secure Parking, also dated 26 June 1996.
In my view, the question of the transfer of Mr Wilson's leasehold interest in the car park by assignment to Secure Parking must be taken to have been intended to be dealt with separately, recognising that it would require negotiation to secure the approval of Nullagine to the assignment. The evidence established that the negotiations proved to be difficult, and that those acting for Secure Parking took the view, by June 1996, that they had broken down. The 21 June 1996 letter agreement was required by Secure Parking, in my view, so that the parties might pursue the other aspects of their agreement. Hence it recorded Mr Wilson's commitment to the transaction, subject to payment of the purchase price, and his involvement as manager of the car park, subject to direction by Secure Parking, who would therefore acquire, as part of their interest in the business, the overall capacity to direct its mode of operation.
Objectively, I would impute to the parties the intention that if possible, ultimately, there would be an assignment or transfer of Mr Wilson's interest in the premises as lessee to Secure Parking, but I would construe the 21 June 1996 letter as involving the mutual recognition that the assignment had not and might not occur unless Secure Parking was prepared to offer what Nullagine would regard as reasonable conditions upon which it would be prepared to give its consent to the assignment. The purpose of the June documentation, including the 21 June 1996 letter, was to ensure that, in practical terms, the essential elements of the agreement would go ahead.
I respectfully agree with the trial judge that there was a recognition that Mr Wilson remained the lessee of the premises. Otherwise, however, Secure Parking was to control the financial aspects of the operation of the business and gain the power to direct Mr Wilson, as its general manager, in the day‑to‑day operation of the business.
In the context of the terms of the 21 June 1996 letter and the surrounding facts and circumstances, I would not construe the word 'until', in the first paragraph of the letter, as meaning that the terms of the agreement embodied in the letter would be limited to the point of the formal assignment of the lease. The commitment was open‑ended. The business would be acquired, with the power to direct its operation given to Secure Parking, but the business would be conducted on premises leased by Mr Wilson unless or until his interest in the lease was assigned. In the meantime, as the trial judge observed, it was Mr Wilson who remained at financial risk in respect of the performance of the lessee's obligations under the lease.
Was Mr Wilson obliged to exercise the second option to renew?
In the first place it follows, in my view, that I would take the same view as the trial judge that the second paragraph of the letter of 21 June 1996 was not properly to be construed as expressly providing an obligation imposed upon Mr Wilson to exercise one or both of the options to renew if so directed by Secure Parking, as an exercise of its power to direct Mr Wilson as to the management of the car park.
Neither can I accept that a term to that effect is to be implied in the contract. Certainly there is no evidence that the parties ever turned their minds to the duration of the lease and the exercise of options to renew. Nor, with respect, can I see why an intention should be imputed to the parties, as at June 1996, that the car park business should be conducted on the premises, not only for the original term, but also for the renewed terms, in particular that which would commence in almost 10 years' time, on 19 October 2005, expiring on 18 October 2010. To so conclude would impute views about the viability or profitability of the business as conducted on those premises which would make it desirable to continue to undertake the commitment to the lease. I find myself unable to conclude that the implied term sought is reasonable and equitable in all the circumstances.
Importantly, I cannot see, with respect, why such a term is necessary to give business efficacy to the contract or, which is to put it another way in the circumstances of this case, why the term is so obvious that it goes without saying. Secure Parking paid $150,000 for the business on the basis that Mr Wilson would have the option to invest $75,000 for the half interest in Secure Parking. Secure Parking acquired the services of Mr Wilson as manager, for which he was to be paid $30,000 a year and was to receive other benefits under the service agreement.
There is nothing to indicate that the financial return from the acquisition of the business, which Secure Parking would receive and might anticipate, would require any particular period of operation of the business on the premises in question to make the investment worthwhile, given that Secure Parking would immediately commence to receive the whole of the net income and revenue generated by the business. I am unable to see a clear commercial necessity, and to me it is not so obvious that it goes without saying, that a term should be implied in the agreement that, upon the direction of Secure Parking, Mr Wilson must exercise an option to renew the lease for a term of five years commencing on 19 October 2005.
In those circumstances, as I have said, to imply a term embodying a duty of cooperation as between contracting parties does not advance the position of Secure Parking. It follows also from what I have said that, in my view, Mr Wilson's failure to exercise the second option to renew, but to allow the lease to terminate, could not be said to constitute a derogation from the grant involved in the agreement made in 1996 for the acquisition of the business. Finally, in the circumstances as I have discussed them above, I can, with respect, see no merit in the proposition that the terms of the agreement made in 1996 for the acquisition of the business constituted Secure Parking the beneficial owner of the lessee's interest under the lease.
I would dismiss the appeal.
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