Soussa v Thomas - [2021] WASC 172

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   SOUSSA -v- THOMAS [2021] WASC 172
CORAM:   SMITH J
HEARD:   8 & 9 FEBRUARY 2021
DELIVERED          :   1 JUNE 2021
PUBLISHED           :   1 JUNE 2021
FILE NO/S:   CIV 1879 of 2020
BETWEEN:   ROBERT HENRY SOUSSA
Plaintiff
AND
LAURENCE MEIRION THOMAS
LUBA THOMAS
Defendants
LAURENCE MEIRION THOMAS
LUBA THOMAS
Plaintiffs by counterclaim
AND
ROBERT HENRY SOUSSA
Defendant by counterclaim

Catchwords:

Contract - Sterling New Life Lease scheme - Offer to enter into a lease - Exclusive Management Authority for Residential Premises agreement - Residential Tenancy Agreement - Payment Direction Deed and Options to Renew lease incorporated expressly into the terms of the lease

Contract - Options validly exercised to create a lease for 40 years

Contract - Payment Direction Deed - Effect of tripartite agreement between the plaintiff, the defendants and manager of a Sterling New Life Lease scheme income trust - Sterling Income Trust

Residential Tenancies Act 1987 (WA) - Effect of s 27A and s 82 and reg 10AA(a) of the Residential Tenancies Regulations 1989 (WA) requiring prescribed form of lease in Form of Part A, Part B (standard terms) and Part C - Effect of standard term cl 3 prevails over the terms of the Payment Direction Deed

Estoppel by conduct or representation - Promissory estoppel - Common principles considered - Not satisfied defendants entered into Sterling New Life Lease in reliance on representations made or assumptions induced for or on behalf of the plaintiff

Legislation:

Interpretation Act 1984 (WA), s 47
Residential Tenancies Act 1987 (WA), s 27A, s 75, s 82
Residential Tenancies Regulations 1987 (WA), reg 10AA

Result:

Judgment for the plaintiff
Counterclaim dismissed

Category: B

Representation:

Original Action

Counsel:

Plaintiff	:	Mr J M Healy & Ms S Beri
Defendants	:	Mr I Neil SC & Ms L D Coci

Solicitors:

Plaintiff	:	Tang Law
Defendants	:	King & Wood Mallesons

Counterclaim

Counsel:

Plaintiffs by counterclaim	:	Mr I Neil SC & Ms L D Coci
Defendant by counterclaim	:	Mr J M Healy & Ms S Beri

Solicitors:

Plaintiffs by counterclaim	:	King & Wood Mallesons
Defendant by counterclaim	:	Tang Law

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

Amalgamated Investment & Property Co Ltd (In liq) v Texas Commerce International Bank Ltd [1982] QB 84
Bell Group Ltd (In liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2
Crown Melbourne Ltd v Metropolitan Hotel (Vic) Pty Ltd [2016] HCA 26; (2016) 260 CLR 1
De Bussche v Alt (1878) 8 Ch D 286
George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287
Gourmania Holdings Pty Ltd v Schlegel [2021] WASCA 28
Health Partners Incorporated v Gonos (1996) 67 SASR 338
Phillips Fox (A Firm) v Westgold Resources NL [2000] WASCA 85
Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505
Steria Ltd v Hutchison [2007] ICR 445 at 465
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Wilson v Arwon Finance Pty Ltd [2020] WASCA 137

TABLE OF CONTENTS

1.0          Introduction
2.0          The action and the parties
3.0          Background ‑ evidence relevant to the construction of the lease documents and the estoppel defence
3.1          The Sterling New Life Lease ‑ the corporate identities of the Sterling Group whose dealings are relevant to the action and counterclaim
3.2          The Sterling New Life Lease scheme
3.3          Entering into the Sterling New Life Lease agreements
4.0          The construction of the express terms of the Sterling New Life Lease agreements made between the parties
4.1          Construction of contracts - General principles
4.2          The material terms of the Residential Tenancy Agreement
4.3The construction of the terms of the lease as construed by the legislative effect of s 27A and s 82 of the Residential Tenancies Act
4.4          Was the execution of the options by the parties on 26 July 2017 effective to extend the term of the lease from 5 years to 40 years?
4.5          Does the fact that Mr Soussa has received no payments of rent for the Harrisdale property since 23 March 2019 entitle him to issue an effective notice to terminate the lease?
5.0          The defendants' defence and counterclaim of estoppel by conduct or representation
5.1          The defendants' pleaded case of estoppel by conduct or representation
5.2          Principles ‑ Estoppel by conduct and promissory estoppel
5.2.1        Estoppel by conduct (representation)
5.2.2        Promissory estoppel
5.2.3        Common and distinguishing features of estoppel by conduct and promissory estoppel

5.3          Objections to the admissibility of evidence relevant to the amended defence and counterclaim that relies upon estoppel by conduct or promissory estoppel
5.4          The evidence of the oral representations is admissible, and the defendants' evidence about the oral representations, and the ASIC Extract should be admitted into evidence
5.5          Is Mr Soussa estopped from acting on the notice to terminate the lease?
5.6          Disposition ‑ Estoppel claim
5.7          Orders

SMITH J:

1.0 Introduction

These proceedings concern three individuals, the plaintiff, Mr Soussa, and the defendants, Mr and Mrs Thomas, who were each misled and drawn into a scheme which ultimately failed, known as a Sterling New Life Lease, by the promises and assurances of third parties.
The failed Sterling New Life Lease scheme has left:
(a)Mr Soussa without payments of rent for the last two years for a property leased to the defendants; and
(b)the defendants without their life savings.
The outcome of this matter turns on, first, the express terms of the lease entered into by the parties, and, second, whether Mr Soussa by any conduct (including oral and written representations of agents acting for and on his behalf) is estopped from insisting on a contractual right to terminate the lease.

2.0 The action and the parties

Mr Soussa is the registered proprietor of a property located at 18 Monument Street, Harrisdale, being Lot 3018 on Deposited Plan 400616, Volume 2840, Folio 822 (Harrisdale property).
On 26 July 2017, the defendants entered into a Residential Tenancy Agreement to lease the Harrisdale property.
The parties entered into a scheme, known as a Sterling New Life Lease, in good faith whereby:
(a)the defendants entered into a lease of a property owned by Mr Soussa (for a term of 40 years or for five years with seven options to renew the term of the lease, each being of five years' duration) and paid an upfront sum of $230,000 to the Sterling Income Trust ARSN 158 828 105 to produce income distributions to be used to pay rent to Mr Soussa for the term of the lease; and
(b)the Sterling Group companies and the scheme, known as the Sterling New Life Lease, failed in 2019, and it appears that the Sterling Income Trust ran out of funds. On 10 June 2019, joint liquidators were appointed to the Sterling Group companies.
As a result of the failure of the scheme from on or about 23 March 2019, no payments of rent were made to Mr Soussa, and the defendants have not recovered the sum invested by them into the Sterling Income Trust.
This action concerns whether the non-payment of rent to Mr Soussa is a breach of the terms of the lease, entitling Mr Soussa to terminate the lease, and, if so, whether the defendants are liable to pay any outstanding amounts of rent to Mr Soussa.
The action was commenced by proceedings brought by Mr Soussa in the Magistrates Court in Armadale, by an application under the Residential Tenancies Act 1987 (WA), seeking orders for compensation for rent owed, termination of the Residential Tenancy Agreement for breach by the lessees pursuant to s 75 of the Residential Tenancies Act,[1] and possession of the premises.
[1] It is noted that Mr Soussa's writ of summons, dated 4 November 2019, and s 75 of the Residential Tenancies Act 1987 (WA) both relate to breach by a lessor, not a lessee. Nothing turns on this.
On 17 August 2020, the proceedings in the Magistrates Court were remitted to the Supreme Court by an order made by Master Sanderson.[2] The reason why the proceedings were remitted is that the defendants raised a matter that could only be determined by this court. The matter raised that is within the exclusive jurisdiction of this court is the plea in the amended defence to substituted statement of claim and counterclaim (amended defence and counterclaim) that Mr Soussa is estopped by oral and written representations, made for and on behalf of Mr Soussa, that if the defendants paid the sum of $230,000 to Sterling Corporate Services Pty Ltd they were not required to make any further payments of rent, fees, or any other cash contributions in respect of the property for a period of 40 years if the options to renew were so exercised.[3]

3.0 Background ‑ evidence relevant to the construction of the lease documents and the estoppel defence

3.1 The Sterling New Life Lease ‑ the corporate identities of the Sterling Group whose dealings are relevant to the action and counterclaim

[2] The relevant matter is civil matter 1572 of 2020.

[3] Amended defence to substituted statement of claim and counterclaim, filed 24 December 2020, [18] ‑ [27] and the relief claimed in [3] - [4] of the prayer for relief.

The Sterling Group companies who entered into contractual agreements with the parties to the proceedings are as follows:
(a)Rental Management Australia Pty Ltd; engaged by Mr Soussa as his agent to rent out and manage the Harrisdale property and to execute a Residential Tenancy Agreement for the Harrisdale property on behalf of Mr Soussa with Mr and Mrs Thomas;
(b)Acquest Property Pty Ltd; Mr Soussa (after entering into an Exclusive Management Authority with Rental Management Australia for a Sterling New Life Lease) entered into an agreement with Acquest to sell the Harrisdale property after three years from the commencement of a Sterling New Life Lease, should he wish to do so;
(c)Sterling First Projects Pty Ltd; being a party to an offer to enter into a Sterling New Life Lease (the Offer) as 'the Manager' (entered into by the defendants as tenant, Mr Soussa and Sterling First Projects as manager) and a sub‑agent of Rental Management Australia (being a term of the Exclusive Management Authority for Residential Premises entered into by Mr Soussa and Rental Management Australia); and
(d)Sterling Corporate Services Pty Ltd; the duly authorised investment manager for the Sterling Income Trust. The defendants invested their Sterling New Life Lease investment amount of $230,000 into the Sterling Income Trust and the defendants entered into a Rental Subsidy Agreement with Sterling Corporate Services for $26 a week until a capital shortfall of $11,500 had been paid in full (being an investment amount of $241,500 that the defendants agreed to pay to enter into a Sterling New Life Lease).
For the reasons that follow, the evidence establishes that Mr Ryan Kentore Jones was, at the material time when the relevant documents were executed by the parties to the proceedings, a sole director of Acquest and a director of Sterling First Projects. It also appears that he may have been at the material time an alternate director of Sterling Corporate Services.
The evidence also establishes that Sterling First (Aust) Ltd is the sole owner and the ultimate holding company of Sterling First Projects Pty Ltd.[4]

3.2 The Sterling New Life Lease scheme

[4] Exhibit A, Tab 65, 777 ‑ 778 and 783.

The Sterling New Life Lease scheme was promoted by the Sterling Group as an 'affordable option' for seniors to rent quality homes in established suburbs at a price that was well below the cost of purchasing an equivalent property. The Sterling Group ran information seminars and advertised properties for rent for a one-off sum, in exchange for a lease of 40 years (being the initial period of five years, with options to extend up to seven times). The specified sum was invested in the Sterling Income Trust to generate income to pay the rent to the owner of the property. In the information seminars, seniors were informed that after payment of the initial sum, no further fees, charges or rent would be payable by a Sterling New Life lessee.[5]
[5] Exhibit 2 [20] ‑ [31]; exhibit 3 [13] ‑ [25].
In this matter, the parties, or their agents, entered into a Sterling New Life Lease by executing the following documents:
(1)On 17 July 2017, Mr Soussa appointed Rental Management Australia, to be the property manager for the Harrisdale property by entering into an 'Exclusive Management Authority for Residential Premises' agreement.[6]
[6] Exhibit A, Tab 20, 220 ‑ 232.
(2)On 26 July 2017, Mr Soussa executed a Deed of Covenant, dated 17 July 2017, which deed was also executed by Mr Ryan Jones, who was the sole director/secretary of one of the Sterling Group companies, Acquest Property Pty Ltd. The deed contained a put option between Mr Soussa and Acquest, whereby Acquest agreed to purchase the Harrisdale property at an agreed price based on the average of two independent licensed valuers' valuations, to be exercised after three years from the commencement of the first Sterling New Life Lease, subject to a Sterling New Life Lease tenant still residing in the property.[7]
[7] Exhibit A, Tab 21, 233 - 252, especially 251.
(3)On 18 July 2017, the defendants executed the Offer. By cl 2(a), the defendants as tenant offered to take a five year lease, with seven options of a further five years each, totalling 40 years, of the Harrisdale property on the terms of the Residential Tenancy Agreement and the Payment Direction Deed (collectively defined as the Sterling New Life Lease in cl 2 of the Offer).[8] On 19 July 2017, the Offer was executed on behalf of Mr Soussa, as lessor, and Sterling First Projects Pty Ltd, by Mr Ryan Jones as the director of Sterling First Projects, and as agent of Mr Soussa.[9]
(4)On 26 July 2017, the defendants, after having paid $230,000 on 20 July 2017,[10] met with Mr Ryan Jones at his office and:
(a)executed a Residential Tenancy Agreement for the Harrisdale property as lessees.[11] On the same day, Ms Aimee Hope, an employee of Rental Management Australia,[12] executed the lease on behalf of Mr Soussa;
(b)executed seven Option to Renew (Special Condition) Part C Residential Property Lease documents for additional terms of five years (being from 26 July 2022 to 25 July 2027, 26 July 2027 to 25 July 2032, 26 July 2032 to 25 July 2037, 26 July 2037 to 25 July 2042, 26 July 2042 to 25 July 2047, 26 July 2047 to 25 July 2052, and 26 July 2052 to 25 July 2057), and seven Notice of Exercise of Option to Renew documents to exercise each of the options for the seven five-year terms; [13]
(c)executed the Payment Direction Deed dated 26 July 2017. On the same day, Ms Hope executed the Payment Direction Deed on behalf of Mr Soussa. Sterling Corporate Services was also a party to the Payment Direction Deed, and the deed contained an execution clause with Mr Ryan Jones' name on it as an alternate director of Sterling Corporate Services.[14] It is not clear in these proceedings whether this deed was executed on behalf of Sterling Corporate Services by Mr Ryan Jones or any other officer of Sterling Corporate Services because the copy of the deed tendered into evidence in the proceedings has not been executed on behalf of Sterling Corporate Services;[15]
(d)executed a Sterling Income Trust application to invest $82,821 in income units and $124,232 in growth units, being a total of $207,053 in the trust;[16] and
(e)executed a Rental Subsidy Agreement requiring the defendants to pay $26 a week to Sterling Corporate Services to assist Sterling Corporate Services as the assistor to pay the full cost of the weekly rent of $390 until a capital shortfall of $11,500 had been paid in full to Sterling Corporate Services.[17]

3.3 Entering into the Sterling New Life Lease agreements

[8] Exhibit A, Tab 23, 265 ‑ 280, especially 267.

[9] Exhibit A, Tab 23, 275, 277 - 278.

[10] Exhibit A, Tab 60, 533 ‑ 537 $207,053 was paid to Theta Asset Management Ltd, as trustee for the Sterling Income Trust and two amounts were paid to Sterling Corporate Services, one amount being $21,252 and the other $1,695.

[11] Exhibit A, Tab 28; in the form prescribed by the Residential Tenancies Act 1987 (WA).

[12] Statement of Agreed Facts [2] and [3(c)] and [3(d)].

[13] Exhibit A, Tab 29, 329 ‑ 349.

[14] Exhibit A, Tab 27, 297.

[15] The execution clause in the deed was executed on behalf of Mr Soussa and by Mr and Mrs Thomas; exhibit A, Tab 27, 297 ‑ 298. On 297 of exhibit A, Tab 27, immediately under the execution cause for the Landlord/Agent an unsigned execution clause states in type under the words 'Executed by Sterling Corporate Services Pty Ltd ACN 158 361 507 in accordance with section 127 of the Corporations Act 2001 (Cth)' and immediately below in type the words 'Signature of Director (Alternate)' and the name 'Ryan Kentore Jones'.

[16] Exhibit A, Tab 15, 156 ‑ 174.

[17] Exhibit A, Tab 31, 412 ‑ 421; the reason why this agreement was entered into was that the Lump Sum Amount due to be payable to the Sterling Income Trust was $241,500 to enter into the Sterling New Life Lease but Mr and Mrs Thomas only paid an amount of $230,000, leaving a balance of $11,500 owing; exhibit 3 [45] ‑ [48].

Mr Soussa is employed as a field manager for a telecommunications company. On or around 16 October 2013, he purchased a block of land in Harrisdale on which he subsequently arranged for the construction of a three-bedroom, two-bathroom house. The construction of the house was completed in or around the middle of 2015. Mr Soussa purchased the property as an investment and obtained a mortgage from Bankwest, initially as a 100% leveraged interest only loan, which he changed to a principal and interest loan in 2020.
In October 2015, Mr Soussa contacted Rental Management Australia and entered into an arrangement with them to rent out the Harrisdale property.
On 30 October 2015, Rental Management Australia entered into a Residential Tenancy Agreement with a tenant on behalf of Mr Soussa as lessor for a period of 12 months for a rent of $370 a week.[18]
[18] Exhibit A, Tab 12, 66 ‑ 81.
On 6 September 2016, Mr Soussa entered into an 'Exclusive Management Authority for Residential Premises' agreement for a period of two years, commencing on 19 October 2016, appointing Rental Management Australia to negotiate and sign leases on his behalf for rent in a range between $370 and $420 a week, with a minimum term of lease of six months and a maximum term of 12 months.[19] The first tenant subsequently entered into a new tenancy agreement for a period of two years on 29 October 2016 for the same weekly rent.
[19] Exhibit A, Tab 13 82 ‑ 95.
Towards the end of 2016, the defendants were thinking about their retirement. They had been leasing a property in Canning Vale for about 10 years. Mr Thomas was a supermarket manager for IGA and Mrs Thomas also worked for IGA as a deli manager. Mr Thomas was 69, and Mrs Thomas was 64 years of age. After speaking to a bank about obtaining a loan of $100,000 to buy a property, they formed the opinion that they could not afford to repay a loan of that amount once they retired because the bank would require repayment of the entire amount within 10 years.
During 2016, Mrs Thomas heard advertisements for Sterling New Life Leases on the 6PR radio station, and read advertisements on Facebook, in The Sunday Times and The West Australian. Mrs Thomas told Mr Thomas about the advertisements.

In or around November 2016, Mrs Thomas asked Mr Thomas to make some enquiries about a Sterling New Life Lease. Mr Thomas spoke to someone in the Sterling Group who told him there was to be a meeting in Gosnells in a few days' time where he could find out more about Sterling New Life Leases.
Sometime in November 2016, the defendants went to a meeting in the city of Gosnells at a community centre. Mr Thomas recalls that the following people were present:[20]
(a)two men who gave a presentation about Sterling;
(b)a TV personality, Gary Carvolth;
(c)a sales representative for Sterling, Annabel Crowther; and
(d)a couple sitting in the audience, whose names Mr Thomas does not recall, who had entered into a Sterling New Life Lease.
[20] Exhibit 3 [15].
Mr Thomas recalls that during a detailed presentation, in which slides with Sterling's name on them could be seen on a screen in the front of the room. Mr Thomas' evidence about that was said by one of the representatives of Sterling is set out in [166] of these reasons.
Both Mrs Thomas and Mr Thomas recall that Mr Carvolth also gave a presentation about the Sterling New Life Lease product. Although Mr Thomas does not recall exactly what Mr Carvolth said at the presentation, it is his evidence that one of the main reasons why he entered into a Sterling New Life Lease was because of Mr Carvolth's positive presentation about the product.
After the presentation finished, the defendants spoke to Ms Crowther. Ms Crowther told Mrs Thomas that she had spoken to consumer protection about the Sterling New Life Lease program before signing her father up to a Sterling New Life Lease house in Rockingham.
Based on what Mr Carvolth and Ms Crowther had said at the Gosnells meeting, both the defendants formed the opinion that the Sterling New Life Lease product was a really good arrangement for (their housing needs in) retirement, and that they should consider entering into a Sterling New Life Lease.
From early 2017, the defendants started looking at houses for rent and actively sought to find a property that could be leased through the Sterling New Life Lease scheme. Sometimes they inspected properties with Ms Crowther. Where a property was not available to be leased through the Sterling New Life Lease scheme, Ms Crowther made enquiries of the landlord to see if the landlord wished to enter into a Sterling New Life Lease. Sometime in early 2017, Ms Crowther resigned and from that time onwards the defendants dealt with another Sterling representative, Mr Phil Lucks, who assisted them to obtain a suitable property for a Sterling New Life Lease.
Despite the fact that in October 2016 Rental Management Australia had relet the Harrisdale property for a period of two years (on behalf of Mr Soussa), the tenant terminated the lease early, and the property became vacant in about March 2017.
The Harrisdale property was vacant from about March 2017 and remained so until the defendants entered into the Sterling New Life Lease in July 2017.[21]
[21] ts, 9 February 2021, 96 ‑ 97.
When the Harrisdale property became vacant, Rental Management Australia sought to obtain a new (short‑term) tenant for the property without much success. Sometime in May 2017, a property manager for Rental Management Australia, Ms Aleisha Vester, spoke to Mr Soussa and told him that not many enquiries had been received for offers to lease the Harrisdale property.
From on or about the end of May 2017 to early June 2017, the business development manager of Rental Management Australia, Ms Tracy Falkingham, telephoned Mr Soussa four or five times, and engaged Mr Soussa in conversation about entering into a Sterling New Life Lease arrangement. In the course of each of those telephone calls, Ms Falkingham spoke to Mr Soussa about the Sterling New Life Lease product. The relevant content of those conversations was as follows:
(a)Ms Falkingham told Mr Soussa that the Sterling New Life Lease product was an investment opportunity for pensioners to receive a long-term lease of about 40 years;
(b)Mr Soussa told Ms Falkingham that:
(i)it was his intention to rent the property for five to seven years, then sell the property once the property market improved and he could get a better price, and, that because he wanted to sell the property, he was not interested in entering into a 40 year lease agreement; and
(ii)he wanted to receive regular offers to lease for shorter time periods;
(c)Ms Falkingham told Mr Soussa she was aware that there was very little interest in the property and that it still had not been leased.
During this period in 2017, Mr Soussa was concerned that the property had not been rented as he was having to pay mortgage payments on the property without the monetary benefit of rent.
Sometime in about the middle of 2017, Mr Lucks telephoned Mr Thomas and told him that a property was available in the area that they were interested in (near Canning Vale). Mr Lucks arranged for Ms Vester to show him the Harrisdale property. The defendants liked the property and told Ms Vester that they wished to go ahead with a Sterling New Life Lease for the property.
In late June 2017, Ms Falkingham telephoned Mr Soussa again and told him that she wished to discuss the option of leasing the property under a Sterling New Life Lease, and that she had some documents that she could send to him. Ms Falkingham also told Mr Soussa that Mr and Mrs Thomas had viewed the property and they were very interested (in leasing the property on the terms of a Sterling New Life Lease).
On 29 June 2017, Ms Falkingham sent Mr Soussa an email in which she stated that they currently had a tenant interested in Harrisdale and she thought that his property would be suitable. Ms Falkingham attached to the email a document titled 'Property Investment with a Sterling New Life Tenant Summary' and a PowerPoint slide document titled 'Property Investor Information 2017'.[22]
[22] Exhibit A, Tab 32.
The 'Property Investment with a Sterling New Life Tenant Summary' document stated:[23]
[23] Exhibit A, Tab 32, 424.
Sterling New Life provides property investors with a unique opportunity to acquire properties that are leased to seniors with the following benefits:
1.5 year lease term with the tenant having 5 year options to renew.
2.5.5% pa gross rental yield, growing by a fixed 2% pa.
3.The property manager is Rental Management Australia with an all inclusive property management fee of 11.0% including GST of the gross rent.
4.The Sterling New Life tenant invests into the Sterling Income Trust, which generates the income distributions for the tenant to pay the rent.
5.The rent is paid to the landlord monthly in arrears.
6.If for any reason there is a rent shortfall from the Sterling Income Trust distributions, the tenant will not be asked to pay any top up rent directly. Any shortfall will be paid from a redemption of capital from the tenant's investment.
7.The Sterling Income Trust investment amount also acts as a security bond for any potential damages.
8.Where a Sterling New Life tenant is not ready to start the lease in the short term, or may have to sell their existing property before moving in, the landlord may choose to get a short term tenant.
9.The landlord is free to sell a property with a Sterling New Life tenant in place. The lease will move with the property, and a condition of the sale is that Rental Management Australia is engaged by the new landlord as the property manager.
10.While there is a Sterling New Life tenant, the landlord has the opportunity to sell the property to Sterling as follows:
a.first offer to sell the property to Sterling at a price set by the landlord,
b.last offer to sell the property to Sterling at a price equal to an offer being made to purchase the property from the landlord,
c.an option for Sterling to buy the property from the landlord if the landlord does not wish to renew the lease six months prior to the end of each lease term, with the price being determined by a licensed valuation, less sales commission.
11.The Sterling New Life lease can be terminated by the tenant with 180 days notice.
12.When the tenant has given notice to terminate the lease, the landlord can then choose to request Sterling to secure a new Sterling New Life Lease tenant, or just put in place a regular short‑term tenant. If the landlord chooses to secure a short term tenant, they are then free from their obligation to engage Rental Management Australia as the property manager, and will have no further opportunity to sell the property to Sterling.
The 'Property Investor Information 2017' PowerPoint document relevantly stated:[24]
[24] Exhibit A, Tab 32, 426, 431 ‑ 433 and 437.
Who We Are
1.Sterling First - Founded in 2010, Sterling First is a multi-faceted property group operating across Western Australia, Queensland and Victoria. We work across all aspects of property; covering general management, funds management, retirement housing, development, project management and sales.
2.Sterling New Life - addresses the key challenge that retirees and seniors face today, including paying off a mortgage, preparing for an active retirement and making sure something is left for loved ones. Sterling New Life Leases are a unique offering aimed at providing an affordable housing and living solution for seniors.
3.Rental Management Australia ‑ is a specialist Property management company with over 2,000 properties under management in Queensland, Victoria and Western Australia
…
How It Works
1.Tenants choose their Sterling New Life Property
2.They make their initial payment to SIT fund
3.Their investment generates income to cover their rent. Surplus is reinvested.
4.Rent from SIT is transferred monthly to Rental Management Australia then to the landlord
5.Process continues until end of lease; with rent increasing by fixed 2% pa
1.Initial 5 year Lease term with 7 x 5 year options to renew.
2.SNLL price includes a once off application fee and remaining balance amount also acts as a security bond.
3.Tenant invests into the Sterling Income Trust, which generates the income distributions for the tenant to pay the rent.
4.Rent is paid monthly in arrears / Gross rental yields of 10‑20% above market rent growing by a fixed 2% per annum
5.Owner is free to sell the property. The Lease moves with the property. Rental Management Australia must be engaged by the new owner as the property manager.
Deed of Covenant
•Protects the rights of the Tenant
•Requires Rental Management Australia to Manage the Property while there is a Sterling New Life Lease in place
•If Investor sells, New owner must also enter into a DOC and appoint Rental management Australia as Property Managers
•Provides Sterling with the first and last rights to acquire the property
•Provides Sterling with a caveatable right over the property
It's Win/ Win
Benefits to Investors
•Long term leases with mature tenants
•Rental income 10 ‑ 20% above market rate, plus fixed 2% pa growth
•Fixed rental management fees
•No Arrears or missed payments
•Free to sell the property along with the lease/lessee if required
Benefits to Tenants
•Financial security in retirement
•No exit fees
•No weekly facility fees
…
We're Solid
2000 + properties managed
850 million in total assets across all sterling first ventures
100 plus employees Australia wide
When Mr Soussa received the documents he briefly looked through them, and did not read them in their entirety.[25] However, when cross‑examined he agreed he had read pars 1, 2, 4, 6 and 11 of the 'Property Investment with a Sterling New Life Tenant Summary', and pages 431 and 433 of the 'Property Investor Information 2017' PowerPoint.[26]
[25] Exhibit 1 [25].
[26] ts, 9 February 2021, 100 -102, 109 - 111.
After receiving those documents, Mr Soussa formed the view that the contents of the documents did not apply to him as he did not consider himself to be an investor. Notwithstanding his opinion, he decided to enter into a lease under the Sterling New Life Lease scheme. Mr Soussa did not, however, want to retain ownership of the Harrisdale property long-term so he told Ms Falkingham that:
(a)the documents that he signed with Sterling New Life would have to reflect that; and
(b)Sterling New Life would need to purchase the Harrisdale property after three years, rather than (simply) an option to purchase the property.
It is Mr Soussa's evidence that (when he entered into Sterling New Life Lease agreements) although he understood that there was a risk that the tenant who entered into a Sterling New Life Lease product could lose their invested funds,[27] he did not understand that if the scheme went under that the tenant's investment would be his responsibility.[28]
[27] ts, 9 February 2021, 104.
[28] ts, 9 February 2021, 117 ‑ 118.
Mr Soussa conceded when he was cross-examined that the rental value was attractive to him because it was above what he was receiving previously and, when he read what was stated in the win/win slide of the PowerPoint document, the information that there would be no arrears or missed payments was also attractive to him. In particular, it was put to him, and he conceded, that he understood from what was stated in the win/win slide that:
(a)he would be guaranteed to receive rental payments; and
(b)he would be free to sell the Harrisdale property in a few years' time when the property market improved.[29]
[29] ts, 9 February 2021, 110.
On 13 July 2017, Ms Falkingham sent an email to Mr Soussa attaching an email from Mr Ryan Jones and stated that she had 'included the documents that require signing if you do decide to proceed'.[30] The email from Mr Ryan Jones was sent to Ms Falkingham earlier that day and said:[31]
[30] Exhibit A, Tab 20, 217.
[31] Exhibit A, Tab 20, 218.
Dear Tracey,
Further to the discussion you, Ray Jones & I had yesterday with respect to the concerns the Owner of the above‑mentioned property has in relation to the 'Deed of Covenant' agreement as it pertains to leasing the property under the Sterling New Life Lease (SNLL) structure, please note that as we have a very interested potential SNLL Lessee with 'cash' funds wishing to enter into a SNLL & very much liked this property, that Acquest Property Pty Ltd as trustee for the relevant 'Trust' (our group have numerous trusts that are used for property ownership purposes) is prepared to contract to purchase the property from the Owner on the following basis should they wish to sell it;
1.Contract to purchase would not take place until after a minimum of 3 x years from the SNLL commencement date with all conditions acceptable by the Buyer
2.Purchase Price agreed between Parties or via the Owner & Buyer each procuring an independent property valuation by a Licenced Valuer
3.A SNLL being in existence at the time of signing ther contract to purchase agreement
4.The Owner enteres into a 'Deed of Covenant'
5.The property being managed by a Real Estate Agent agreeable to the Buyer
Should the Owner wish to agree to the above proposal, the relevant legal contract would be sourced & prepared and also at the cost of the 'sterling group'.
Please convey this email onto the Owner for their revision and response while noting that time is of the essence in securing the potential SNLL Lessee whom is currently interested in the property.
Please note that I am the Sole Director of Acquest Property Pty Ltd and have authority to ofer the above proposal.
Kind Regards,
Ryan Jones
Director/Licensee
0419 830 811
E [email protected]
Sterling First (Aust) Ltd
T 08 9523 5800 | F 08 9523 5811
23‑24, 397 Warnbro Sound Avenue, Port Kennedy 6172
PO Box 7299 Secret Harbour WA 6173
Also attached to Ms Falkingham's email was a copy of an 'Exclusive Management Authority for Residential Premises' agreement to appoint Rental Management Australia as property manager for the Harrisdale property for a period of 40 years.[32] The material terms of this agreement included that:
(a)the term of the agreement was from 17 July 2017 until 16 July 2057, which term would not apply at the owner's discretion if a Sterling New Life Lease is not procured with the Sterling New Life Lease lessee entering into a Sterling New Life Lease to occupy the property;[33]
(b)the minimum term of the lease would be five years with a maximum term of 40 years;[34]
(c)the range of rent would be $390 to $844 per week, and the management fee would be 11% of gross collections, with an initial rent of $390 per week;[35] and
(d)Sterling First Projects Pty Ltd were appointed as sub‑agents to the property manager, Rental Management Australia, to advertise, market and do all things lawful in order to procure a Sterling New Life Lease lessee to reserve the premises with the intention to enter into a Sterling New Life Lease to lease/occupy the premises.[36]
[32] Exhibit A, Tab 20, 220 ‑ 232.
[33] Exhibit A, Tab 20, Annexure to Schedule, Item 6, Term of Management Agreement, 221 and 228.
[34] Exhibit A, Tab 20, Item 5, Rental, 221.
[35] Exhibit A, Tab 20, Item 5, Rental 221 and New Project ‑ Terms Sheet, 232.
[36] Exhibit A, Tab 20, 228.
On 17 July 2017, Mr Soussa signed the new 'Exclusive Management Authority for Residential Premises' agreement for the Harrisdale property with Rental Management Australia for 40 years, and sent a copy of the agreement and the 'New Project ‑ Terms Sheet' to Ms Falkingham by email.[37] In his email to Ms Falkingham, Mr Soussa informed Ms Falkingham that he would sign the Deed of Covenant 'once the additions/amendments have been made as per Ryan's email'.[38]
[37] Exhibit A, Tab 20, 217.
[38] Exhibit A, Tab 20, 217.
After the defendants inspected the Harrisdale property, Mr Lucks told Mr Thomas that before they could sign a lease and move into the Harrisdale property they would have to pay their lump sum investment amount upfront.
On 18 July 2017, Mr Lucks went to the defendants' rental home in Canning Vale with the document titled 'Offer to enter into a Sterling New Life Lease', which Mr and Mrs Thomas signed.[39] The Offer specified that Mr Soussa was the lessor, Mr and Mrs Thomas were 'the tenant' and the 'Manager' was Sterling First Projects Pty Ltd. On the following day, 19 July 2017, the Offer was signed on behalf of Mr Soussa by Mr Ryan Jones as agent of the lessor and also as the 'Manager' in his capacity as director of Sterling First Projects Pty Ltd.
[39] Exhibit A, Tab 23, 277; it is notable that Mr and Mrs Thomas signed the Offer one day prior to the document being executed on behalf of Mr Soussa.
The terms of the Offer were that the tenant offered to take a five year lease with seven options of a further five years each, totalling 40 years, of the Harrisdale property (defined as the 'Residential Premises') on the terms of the Residential Tenancy Agreement and the Payment Direction Deed (collectively known as the 'Sterling New Life Lease'). The Offer specified that the Sterling New Life Lease investment amount for the Harrisdale property for the purpose of a Sterling New Life Lease was '$241,500, being cash $230,000 plus weekly top up of $26.00'.
Sometime prior to entering into the Sterling New Life Lease, Mr Thomas was given a telephone number by Mr Lucks for a lawyer who had some familiarity with Sterling New Life Leases. Mr Thomas rang the telephone number and spoke to a lawyer and was told unless he had specific questions about the Sterling New Life Leases to discuss, there was no point in having a meeting.

On 20 July 2017, the defendants paid the lump sum of $230,000 to Sterling Corporate Services.[40]
[40] Pursuant to cl 2.1 of the Payment Direction Deed the money was paid to Sterling Corporate Services nominated bank account; Exhibit A, Tab 27, 291; Tab 60, 533 ‑ 534.
On 26 July 2017, Mr Soussa signed the Deed of Covenant and a Put Option. The Put Option enabled Mr Soussa to require Acquest Property Pty Ltd to purchase the Harrisdale property at an agreed price based on the average of two independent licensed valuers' valuations, after three years from the date of commencement of the first Sterling New Life Lessee (sic).[41]
[41] Exhibit A, Tab 21, 251 ‑ 252.
On the same day, the defendants met with Mr Ryan Jones at his office in Port Kennedy and signed the Residential Tenancy Agreement, each of the seven Options to Renew, each of the seven accompanying Notice of Exercise of Option to Renew, the Payment Direction Deed, the Sterling Income Trust application form and the Rental Subsidy Agreement. The material terms of each of these agreements are set out below in 4.2.
An objection was made to the admissibility of the evidence of Mr and Mrs Thomas about what was said when they met with Mr Ryan Jones on 26 July 2017 to sign all of the documents for a Sterling New Life Lease for the Harrisdale property. For the reasons set out below in 5.3 and 5.4, I have found that this evidence is admissible. This evidence is as follows.
It is the evidence of both Mr and Mrs Thomas that when they signed these documents they were not provided with any opportunity to look at the lengthy documents in detail. Mr Ryan Jones simply flicked through a lot of pages and asked them to sign certain pages. It is also both their evidence that when they finished signing the documents, Mr Ryan Jones gave them a folder of documents and keys to the Harrisdale property. They took the folder home, put it away and did not read any of the documents that they had signed. It was not until they went to a meeting convened by the administrators of the Sterling Group that they became aware that one of the documents in their folder was a product disclosure statement for the Sterling Income Trust.[42]
[42] ts, 9 February 2021, 139 ‑ 142.
Mrs Thomas could not recall exactly what was said at the meeting when they met with Mr Ryan Jones, but she did recall asking Mr Ryan Jones 'what would happen if Sterling went bust' and Mr Ryan Jones told her that 'it would never go bust, but if it did, Sterling had $900 million in assets and there would always be another company to step in and take it over'. He also said that 'there was no chance of losing our upfront payment'. She also asked Mr Ryan Jones whether they could 'get kicked out of our property' and Mr Ryan Jones told them that 'would not happen unless we wrecked the place'.
In addition to the matters Mrs Thomas could recall, Mrs Thomas also recalled that when she was asked to sign the Payment Direction Deed, Mr Ryan Jones said something like, 'this is the document that says you don't need to pay any rent as Sterling will take care of all of that'. It is Mrs Thomas' evidence that until the meeting with Mr Ryan Jones she was not aware that they would sign a five year lease with seven options to renew, as she had been told prior to signing the documents that a Sterling New Life Lease was a 40 year lease.[43] However, when pressed on this point in cross-examination she conceded that she might have been told prior to signing the lease that the lease was a five year lease with seven options to renew.[44]
[43] ts, 9 February 2021, 130.
[44] ts, 9 February 2021, 131 and 152 ‑ 153.
After Mrs Thomas signed the lease and the other documents, based on what she was told at the Gosnells meeting, she understood:[45]
[45] Exhibit 2 [63].
(a)our Lease would be for 40 years;
(b)if either Laurie or I passed away, the other person could remain in the house;
(c)our upfront payment would go into a trust fund where it could not be touched, and in return we would have our Property for the rest of our lives, with all bills paid including the rent;
(d)no one could touch our upfront payment and when Laurie and I both died, our upfront payment would still be there for our children to inherit;
(e)if our Property were sold, this would not affect our Lease;
…
(i)Laurie and I could not get kicked out of the house, and we could treat the house as if we were the owners;
…
After receiving the keys to the property, the defendants moved into the Harrisdale property, thereby taking possession of the property in accordance with the terms of the Sterling New Life Lease.
Both Mr and Mrs Thomas retired in about late November 2017 after Mr Thomas had a heart attack. Following their retirement, their only source of income is the old age pension because they had paid their superannuation and life savings into the Sterling Income Trust prior to entering into the lease.
It is Mrs Thomas' evidence that if they had known that there was any chance of losing the money they had invested, she would not have signed the Sterling New Life Lease.

4.0 The construction of the express terms of the Sterling New Life Lease agreements made between the parties

The contractual documents that expressly bind the parties are the Offer and the Residential Tenancy Agreement (which expressly incorporates the Payment Direction Deed and the Options and Notice to Renew Options).[46] The Offer does not form part of the terms of the Residential Tenancy Agreement.
[46] Exhibit A, Tab 28, 311; pursuant to Part C, cl 7, each of these documents form part of the lease.
The defendants claim that at the heart of the construction of the contractual agreements dispute is the determination of which party bore the contractual allocation of the risk of the funds invested by the defendants and others into units in the Sterling Income Trust being depleted to the point where the manager of Sterling Corporate Services was unable to make payments of rent to Mr Soussa.
The critical issues of construction arising from the express terms of the Residential Tenancy Agreement are whether:
(1)the term of the lease was for a period of 40 years. In particular, whether the operation of the terms of the lease, together with the fact that each of the defendants executed the options forming part of the lease, was effective for the lease to be operative for a term of 40 years; and
(2)the fact that no rent has been paid to Mr Soussa since 23 March 2019 constituted a breach of the terms of the lease, and a valid ground for termination of the lease by Mr Soussa, or whether no breach arose from this fact because of the operative effect of cl 2.7 of the Payment Direction Deed. In particular, whether:
(i)payment by the defendants of a lump sum of $230,000 on 20 July 2017 (the Sterling New Life Lease investment amount) into the Sterling Income Trust managed by Sterling Corporate Services, and entering into the Rental Subsidy Agreement on 26 July 2017 requiring the defendants to pay $26 a week to Sterling Corporate Services until the capital shortfall of $11,500 had been paid in full, had the effect of discharging the defendants' obligations to pay rent to Mr Soussa (or any lessor successor in title to the Harrisdale property);
(ii)the obligation to pay rent was limited to the distribution of funds from the defendants' units or redemption of the defendants' units in the Sterling Income Trust only, and there was no obligation on the defendants to make up any shortfall after the funds in the Sterling Income Trust were exhausted;[47] and
(iii)the fact that Mr Soussa was not paid rent after 23 March 2019 by the defendants' attorney, Sterling Corporate Services, was a breach of the lease, entitling Mr Soussa to terminate, but the operative effect of cl 2.7 is that the defendants are not liable for any loss incurred by Mr Soussa as a result of the non-payment of rent.

4.1 Construction of contracts - General principles

[47] Amended defence and counterclaim [9(c)].

The general principles to be applied in construing commercial contracts were recently summarised by the Court of Appeal in Bombardier Inc v Avwest Aircraft Pty Ltd as follows:[48]
The construction of a contract is an objective process. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean. The process of construction involves determination of the meaning of the words by reference to the text, context and purpose of the contract
The starting point in the construction of a contract is to look at the language used in the particular clause or clauses in issue and to identify the possible meanings that the words chosen by the parties can bear.
The instrument should be construed as a whole, and a construction that makes the various parts of the instrument harmonious is preferable.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. Indeed, at each point where a constructional choice is available, it is important to consider what reasonable business people reading the relevant clause or agreement would understand it to mean. That enquiry requires a consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.
The court is entitled to approach the task of construction on the basis that the parties intended to produce a commercial result, and one which makes commercial sense. This requires that the construction placed upon the clause be consistent with the commercial purpose or objects of the agreement. The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole. An appreciation of the commercial purpose or objects of a contract is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating.
Further, an instrument should be construed so as to avoid it making commercial nonsense or giving rise to a commercial inconvenience, bearing in mind that business common sense may be a topic on which minds may differ.
[48] Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2 [92] - [97] (footnotes omitted).
Consequently, the duty of the court in construing a contract is to endeavour to discover the intention of the parties of the contractual provision or provisions. To do so, the whole of the agreement has to be considered because the meaning of any one part of it may be revealed by other parts, and the provisions of the contract are to be construed with a view to achieving harmony.
Although extrinsic evidence may assist in determining the proper construction where there is a constructional choice, the following principles must be applied:[49]
(4)Extrinsic evidence may also assist in determining the proper construction where there is a constructional choice, although it is not necessary in this case to determine the question of whether matters external to a contract can be resorted to in order to identify the existence of the constructional choice.
(5)If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.
(6)To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.
(7)There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text. The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.
(8)There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.
[49] Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42] (footnotes omitted).
Where an agreement uses definitions, the court will give effect to those definitions. Unless the context requires otherwise, the proper course is to read the words of a definition into the operative text, and then to construe the relevant clause having regard to the contract as a whole.[50]

4.2 The material terms of the Residential Tenancy Agreement

[50] George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287 [82]; Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42(11)];Gourmania Holdings Pty Ltd v Schlegel [2021] WASCA 28 [68] (Buss P), [188] (Mitchell JA & Hill J).

The Residential Tenancy Agreement executed by the parties is in the form prescribed by s 27A of the Residential Tenancies Act,[51] and has attached a number of annexures.
[51] Section 27A of the Residential Tenancies Act 1987 (WA) provides that a lessor must not enter into a written residential tenancy agreement except in the prescribed form.
Section 27A of the Residential Tenancies Act creates an offence for a lessor to enter into a written residential tenancy agreement except in the prescribed form.[52] Further, s 82 of the Residential Tenancies Act provides that:
[52] Section 3 of the Residential Tenancies Act 1987 (WA) defines 'prescribed' to mean prescribed in the regulations.
82. Contracting out
(1)Except as provided under this Act ‑
(a)any agreement or arrangement that is inconsistent with a provision of this Act or purports to exclude, modify or restrict the operation of this Act is to that extent void and of no effect; and
(b)any purported waiver of a right conferred by or under this Act is void and of no effect.
(2)A person must not enter into any agreement or arrangement with intent either directly or indirectly to defeat, evade or prevent the operation of this Act.
Penalty for this subsection: a fine of $10 000.
Pursuant to reg 10AA(a) of the Residential Tenancies Regulations 1989 (WA), the prescribed form for a written residential tenancy agreement that is not a social housing tenancy agreement is set out in sch 4 Form 1AA, and reg 18 provides that the forms set out in sch 4 are prescribed in relation to the matters specified in those forms. The prescribed form in Form 1AA contains three parts: Part A, Part B and Part C.
Part A of Form 1AA provides for details to be completed, including the names of the lessor and tenant, the names of the lessor's property manager, the means of giving of notices, the term of the agreement, the address of the residential premises, the maximum number of occupants, the amount of rent, the method by which the rent must be paid, the security bond, and how rent increases are to be calculated.
Part B of Form 1AA contains standard terms that are applicable to all residential tenancy agreements.
Part C of Form 1AA provides for additional terms to be included in the agreement but does not expressly prescribe any particular terms. However, the effect of Part C is that it prescribes that any additional terms may only be included if they do not conflict with the provisions of the Residential Tenancies Act, the Residential Tenancies Regulations and the standard terms of the agreement (that is, the standard terms in Part B).
Part C of Form 1AA provides as follows:
PART C
IMPORTANT INFORMATION
Additional terms may be included in this agreement if:
(a)both the lessor and tenant agree to the terms; and
(b)they do not conflict with the Residential Tenancies Act 1987, the Residential Tenancies Regulations 1989, or any other law; and
(c)they do not breach the provisions about unfair contract terms in the Fair Trading Act 2010; and
(d)they do not conflict with the standard terms of this agreement.
ADDITIONAL TERMS ARE NOT REQUIRED BY THE RESIDENTIAL TENANCIES ACT 1987. HOWEVER, ONCE THE PARTIES SIGN THIS AGREEMENT, THE ADDITIONAL TERMS ARE BINDING UPON THE PARTIES UNLESS THE TERM IS FOUND TO BE UNLAWFUL.
ADDITIONAL TERMS: .........................................................................
THE LESSOR AND TENANT ENTER INTO THIS AGREEMENT AND AGREE TO ALL ITS TERMS.
SIGNED BY THE LESSOR/PROPERTY MANAGER
...............................................................
[Signature of lessor/property manager]
Date: ...................................
SIGNED BY THE TENANT
.............................................
[Signature of tenant]
Date: ...................................
The Residential Tenancy Agreement as executed by the parties contains a Part A, Part B, Part C, Part D and several other annexures, which together comprise the lease. The lease executed by the parties comprising Part A, Part B and Part C is a pre-printed form that has on the top of the first page of Part A, Part B and Part C a stamp stating 'approved by the Real Estate Institute of Western Australia' and a Rental Management Australia logo.
The material terms of the lease executed by the parties in Part A are as follows:
(1)The term of agreement is fixed starting on 26 July 2017 and ending on 25 July 2022.[53]
(2)The rent is $390 payable weekly in advance starting on 26 July 2017.[54]
(3)The method by which the rent must be paid is specified as:[55]
Refer to the Payment Direction Deed
For the first month of the tenancy, from the commencement date to the last day of that month, payable on the twenty first of that month. For the second and subsequent months of the tenancy, from the first of that month to the last day of that month, payable on the twenty first of that month.
For the last month of the tenancy, from the first of that month to the termination date of the lease, payable on the twenty first of that month.
[53] Exhibit A, Tab 28, 299.
[54] Exhibit A, Tab 28, 300.
[55] Exhibit A, Tab 28, 300; the words 'Refer etc' do not form part of Part A of Form 1AA, and have been added in type.
The material terms of the lease executed by the parties in Part B (the 'Standard Terms Applicable to all Residential Tenancy Agreements') are as follows:
(1)Clause 3 provides that the tenant must pay rent on time or the lessor may issue a notice of termination, and if the rent is still not paid in full, the lessor may take action through the court to evict the tenant.[56]
(2)Clause 36 provides that it is an offence to contract out of any provision of the Residential Tenancies Act.
(3)Clause 37 provides that this Residential Tenancy Agreement can only be terminated in certain circumstances.[57]
(4)Clauses 38 to 41 provide for termination of the agreement in circumstances that do not apply in this matter.
(5)Clause 42 provides for other grounds for termination, which include, 'breach of this agreement by the tenant…'.[58]
[56] Exhibit A, Tab 28, 303.
[57] Exhibit A, Tab 28, 305.
[58] Exhibit A, Tab 28, 306.
The material terms of the lease executed by the parties in Part C (the 'Additional Terms') are as follows:
(1)Clause 2.1 provides that the tenant agrees to pay the rent punctually pursuant to the provisions of Part A, on the dates for payment, without any deductions or legal or equitable set-offs.[59]
[59] Exhibit A, Tab 28, 307.
(2)Clause 2.4 provides that if the lease is a fixed term tenancy agreement, then the rent will be increased annually by 2%.[60]
[60] Exhibit A, Tab 28, 307 - 308.
(3)Clause 3.1(b) provides that if the tenant otherwise breaches the lease and/or does not comply with the tenant's obligations under this lease, then the tenant is liable to pay any damages and losses to the lessor that the lessor suffers or will suffer as a result of the tenant's breach.[61] The lessor must endeavour to reasonably mitigate the lessor's damages and losses.[62]
[61] A footnote providing examples of the types of costs that may give rise to a need to make a break lease claim include, but are not limited to, rent; Exhibit A, Tab 28, 310.
[62] Exhibit A, Tab 28, 310.
(4)Clause 5.4 provides that where either the tenant or the lessor comprise more than one person, the obligations to be performed in this lease are binding upon such two or more persons jointly and severally.[63]
[63] Exhibit A, Tab 28, 311.
(5)Clause 7 provides that the following annexures form part of this lease:[64]
[64] Exhibit A, Tab 28, 311.
Part D ‑ Special Conditions
Annexure 3 ‑ Lease Renewal - Options & Notice to Renew Options
Form 2 ‑ Notice of Termination
Form 3 - Privacy Statement
Form 4 ‑ Management Statement
Payment Direction Deed

Incorporated in Part C of the lease is Annexure 3, which comprises seven Option to Renew (Special Condition) Part C Residential Property Lease forms, and seven Notice of Exercise of Option to Renew Standard Residential Tenancy Agreement forms,[65] which were executed by the defendants and Ms Hope, on behalf of Mr Soussa, on 26 July 2017.[66] The terms of each Option to Renew are the same. The material terms of the first Option to Renew are as follows:[67]
(1)If the tenant has not committed a breach of this lease that has resulted in the lessor or agent serving a breach notice on the tenant, and gives the agent a written notice of exercise of option to the agent by 4.00pm on 25 July 2022 (Option Expiry Time) then the lessor grants the tenant an additional term of a five year period being 26 July 2022 to 25 July 2027 (Additional Term) commencing immediately upon the expiry of the term stipulated in Part A of the lease (Term).
(2)During the Additional Term the rent will be as provided by cl 2.4(C) of the original lease agreement Part C, but otherwise the conditions of the lease will apply except for this option.
(3)If the option is not exercised by the tenant by written notice before the Option Expiry Time, the Option to Renew will not apply. Time is of the essence in this clause.
[65] The Option to Renew (Special Condition) Part C Residential Property Lease forms and the Notice of Exercise of Option to Renew Standard Residential Tenancy Agreement forms are not forms prescribed by the Residential Tenancies Act 1987 (WA) or the Residential Tenancies Regulations 1989 (WA). They do, however, appear to be standard forms used in residential tenancy agreements as they each bear a stamp that they have been approved by the Real Estate Institute of Western Australia in addition to Rental Management Australia's logo.
[66] Exhibit A, Tab 29, 329 ‑ 349.
[67] Exhibit A, Tab 29, 329 ‑ 349; other than the dates of the Option Expiry Time and the dates of the additional term of each five year period, the terms of each Option to Renew are the same.
Incorporated in Part C of the lease is a 'Form 2 ‑ Notice of Termination'. This annexure comprises a blank form of notice that the tenant is required to complete if they wish to terminate the Sterling New Life Lease (in accordance with special conditions 4.2(b) and (c) of Part D).[68]
[68] Exhibit A, Tab 28, 319.
Incorporated in Part C of the lease is Form 3, a Privacy Act1988 (Cth) Tenant Information Sheet that contains the privacy policy and privacy disclosure statement made by Sterling First Projects Pty Ltd T/A Sterling New Life, which refers to Mr Ryan Jones' email address as the Sterling New Life contact for enquiries or complaints about Sterling First Projects' activities with respect to privacy and the National Privacy Principles.[69]
[69] Exhibit A, Tab 28, 321.
Incorporated in Part C of the lease is Form 4, a Management Statement for Multi Key Properties that sets out various duties of the tenant, proprietor and occupiers in respect of the use of the residential premises.[70]
[70] Exhibit A, Tab 28, 325 ‑ 328.
Incorporated in Part C of the lease is the Payment Direction Deed, the material terms of which, when the definitions in cl 1.1 are read in where they first appear as follows, are as follows:
(1)The parties, Mr Soussa (as landlord), the defendants (as tenant) and Sterling Corporate Services (as Manager), agree, in consideration of, among other things, the mutual promises contained in the deed.[71]
[71] Exhibit A, Tab 27, 288.
(2)Clause 2.1 provides that the deed is conditional upon:[72]
[72] Exhibit A, Tab 27, 291.
(i)the tenant paying the application fee to the Sterling Corporate Services nominated bank account;
(ii)the tenant paying the initial rent payment to the Sterling Corporate Services nominated bank account;
(iii)the tenant paying the amount of the investment amount (being the amount specified in Item 4 of the Reference Schedule which is an amount of $241,500 less $11,500, which is $230,000) less the application fee and the initial rent payment to the product disclosure statement nominated bank account; and
(iv)making an application pursuant to the product disclosure statement to invest the investment amount less the application fee and the initial rent payment in units (being the units subscribed in the Sterling Fund, being the registered managed investment scheme specified in Item 5 of the Reference Schedule as the Sterling Income Trust) by the end of the application period (being the period of 10 business days commencing on the date of the deed).
(3)Clause 2.2 provides that the tenant acknowledges and agrees that all distributions from and the proceeds of any redemption of the tenant's units (being the units issued to the tenant as a result of the investment amount less the application fee and the initial rent payment being invested in accordance with this deed) will be paid into the Sterling Corporate Services nominated bank account, to be held in accordance with the terms of cl 2.[73]
[73] Exhibit A, Tab 27, 291.
(4)By cl 2.3(b)(i), (iii) and (iv) Sterling Corporate Services and its officers are jointly and severally to be appointed the attorney of the tenant to perform among other functions:[74]
[74] Exhibit A, Tab 27, 292.
(i)upon the term ending, apply to redeem any of the tenant's units and to have the proceeds of redemption paid into the Sterling Corporate Services nominated bank account for the purpose of paying any rent (being the rent payable by the tenant under the Sterling New Life Lease) that is due at the end of the term that has not been paid;
…
(iii)upon the situation where the distributions from the tenant's units have been insufficient to pay any rent that is due, apply to redeem any of the tenant's units and to have the proceeds of redemption paid into the Sterling Corporate Services nominated bank account for the purpose of paying any rent that is due and which has not been paid; and
(iv)do anything and to execute any document for any of the purposes set out in cl 2.3(b)(i), (ii) and (iii) as fully and effectually as the tenant could do.
(5)By cl 2.4 the tenant authorises Sterling Corporate Services to pay the rent monthly in arrears during the term out of the money held in the Sterling Corporate Services nominated bank account in accordance with cl 2.[75]
(6)By cl 2.5 the tenant irrevocably authorises and directs Sterling Corporate Services to deal with each distribution from the tenant's units received by Sterling Corporate Services into the Sterling Corporate Services nominated bank account; first, to pay any rent that is due and which has not been paid.[76]
(7)Clause 2.7 provides, when the definition of 'Sterling New Life Lease' and 'rent' are read in where they first appear:[77]
Despite any provision to the contrary contained in this deed or the Sterling New Life Lease (being the residential tenancy agreement in respect of the Residential Premises entered into between the Landlord as lessor and the Tenant as tenant dated on or about the date of this deed):
(a)the liability of the Tenant to pay the Rent (being the rent by the Tenant (as tenant) under the Sterling New Life Lease) under the Sterling New Life Lease is limited to the payments made pursuant to the distribution from the Tenant's Units or the redemption of the Tenant's Units under clauses 2.5(a)(i), 2.5(a)(ii) and 2.5(b)(i) (Distribution and Redemption Payments); and
(b)if there is a shortfall between the amount of the Distribution and Redemption Payments and the amount of the Rent, the Tenant is not liable to pay that shortfall.
(8)By cl 3.1 the tenant acknowledges that the landlord recommended to the tenant that the tenant obtain independent legal and financial advice prior to entering into the deed and the Sterling New Life Lease, and the tenant has had the opportunity to obtain that independent legal and financial advice.
[75] Exhibit A, Tab 27, 293.
[76] Exhibit A, Tab 27, 293.
[77] Exhibit A, Tab 27, 294.
The material terms of the lease executed by the parties in Part D ‑ Special Conditions are as follows:
(1)Clause 1.1 defines terms used in the special conditions.[78]
[78] Exhibit A, Tab 28, 315.
(2)Clause 2(a) provides that the special conditions in this Part D are incorporated in and form part of this agreement.
(3)Clause 2(b) provides in the event of any inconsistency between a standard term (defined in cl 1.1 as a provision of the tenancy agreement in Part A; the standard terms in Part B; and the additional terms in Part C, of this agreement) and a special condition in this Part D, the special condition will prevail to the extent of that inconsistency.
(4)Clause 3 provides that despite any provision to the contrary in this agreement, the term (defined in cl 1.1 as the term of this agreement being a period of five years commencing on the starting date and, subject to special condition 3, ending on the end date specified in the tenancy agreement) will end on the earliest of:
…
(b)where the tenant is more than one person, the date of death of the last survivor of the tenant; and
(c)the date on which the Term ends upon a lawful termination of this agreement either pursuant to this agreement or the Act.

4.3 The construction of the terms of the lease as construed by the legislative effect of s 27A and s 82 of the Residential Tenancies Act

Any act done under subsidiary legislation shall be deemed to be done under the written law under which the subsidiary legislation was made.[79]
[79] Interpretation Act 1984 (WA) s 47.
Although the terms set out in Part D are defined and described as special conditions, because of the operative effect of s 27A and s 82 of the Residential Tenancies Act, which prohibit any written residential tenancy agreement except in the prescribed form, and Part C of Form 1AA, which prescribes, among other matters, that additional terms may be included in an agreement and expressly provides that the effect of the additional terms is to yield to any inconsistency with the provisions of the Residential Tenancies Act, the Residential Tenancies Regulations and the standard terms (in the form prescribed in Part B of Form 1AA), it necessarily follows that the special conditions set out in Part D and the Payment Direction Deed can only be properly characterised as additional terms of the lease.
Pursuant to s 82 of the Residential Tenancies Act, cl 2(b) of Part D, of the lease which provides that in the event of any inconsistency between a standard term (insofar as a standard term is defined in cl 1.1 of Part D to include, among other terms, the standard terms in Part B) and a special condition in Part D, the special condition will prevail to the extent of that inconsistency, is void and of no effect. However, the legislative consequences of the operation of s 27A and s 82 of the Residential Tenancies Act in respect of the special conditions in Part D are not determinative of the issues to be determined in these proceedings.
Although there is no express provision in the Payment Direction Deed that provides that the terms of the deed are to prevail to the extent of any inconsistency, the legislative consequences of the operation of s 27A and s 82 of the Residential Tenancies Act are to the effect that any term of the Payment Direction Deed that is inconsistent with or purports to exclude, modify or restrict the operation of, or purports to waive a right under the prescribed terms of a residential tenancy agreement in Form 1AA is void and of no effect.
It is clear that the Payment Direction Deed only forms part of the terms of the lease as additional terms annexed to Part C of the lease. Although the Payment Direction Deed is referred to in Part A of the lease, no terms of the Payment Direction Deed are incorporated into Part A.
Further, because the terms of the Payment Direction Deed can only take effect as additional terms (within the meaning of what can be agreed to as additional terms by operation of Part C of Form 1AA) because of the legislative effect of s 27A and s 82 of the Residential Tenancies Act, no term of the Payment Direction Deed can prevail over any standard term in the case of any inconsistency between a standard term and a term of the Payment Direction Deed.

4.4 Was the execution of the options by the parties on 26 July 2017 effective to extend the term of the lease from 5 years to 40 years?

Where parties expressly incorporate terms into a contract, the incorporated terms must be construed as if they had been written out in full in the contract, and accordingly must be construed in the context of the contract into which they have been incorporated.[80]
[80] Lewison K and Hughes D, The Interpretation of Contracts (2012), 81 [3.09].
An option to extend a tenancy must be exercised in exact compliance with its terms.[81]
[81] Phillips Fox (A Firm) v Westgold ResourcesNL [2000] WASCA 85 [60] ‑ [63] (White J; Owen & Parker JJ agreeing).
Each of the seven Option to Renew and Notice of Exercise of Option to Renew documents are incorporated into the lease as annexures to Part C, so consequently they each take effect as additional terms. No issue of contracting out of the provisions of the Residential Tenancies Act or the Residential Tenancies Regulations arises in respect of either the form of these documents or the exercise of these documents at the time the lease was entered into. This is because the exercise of an option or options to extend the terms of a lease is not the subject matter of any provision of the Residential Tenancies Act or the Residential Tenancies Regulations.
The express terms of each of the options to renew the lease created two preconditions that the defendants had to meet for the exercise of each of the options to renew to be effective.
The first precondition to exercise the first, and each subsequent, option is, at the time of the exercise of the option, the defendants must not have committed a breach of the lease that had resulted in Mr Soussa or his agent (Rental Management Australia or its sub-agent Sterling First Projects) serving a breach notice on the defendants.
The second precondition to exercise the first, and each subsequent, option is that a written notice of exercise of the option must be given to Mr Soussa's agent by the time specified in each Option to Renew document (being by 4.00 pm on 25 July 2022 in respect of the first Option to Renew).
It is not in dispute that the defendants executed each of the options at the same time they executed all of the documents forming the lease. It is their evidence that when they executed the documents the only other person present was Mr Ryan Jones. However, on the face of each of the Option to Renew documents, together with all of the other documents forming the lease documents, is the signature of Ms Hope, an employee of Rental Management Australia, who has signed each document as an agent for Mr Soussa. The date '26 July 2017' is next to her signature, being the same date that the defendants executed all of the documents forming the lease. However, whether she signed the documents before or after the defendants is not known.
As senior counsel for the defendants points out, the time stipulation only applies to the second, and not the first precondition.
It is not in dispute that the defendants executed each of the options to renew and notices prior to taking possession of the Harrisdale property. The question that arises in light of this fact is whether the first precondition could have been met by the defendants, which required them to have not committed a breach of the lease that has resulted in service of the breach notice on them prior to the exercise of the option. Put another way, is the effect of the first precondition that no steps could be taken to exercise an Option to Renew until the defendants, as the tenant, had taken possession of the property?
One construction that is open is that to satisfy the first precondition it must be found only as a matter of fact that no notice of breach of the lease had been served on the defendants at the time they exercised the option. On the facts before the court, at the time of the exercise of the option no notice of breach had been served, and although the defendants had not entered into possession of the Harrisdale property, on execution of the lease by both of the parties, including the options, the precondition had been met, because the lease had commenced, and the defendants were not in breach of the lease when they exercised the options.
An argument is put on behalf of Mr Soussa that even if this construction is accepted, none of the options to renew could be exercised until after the initial five year term of the lease had commenced. However, the terms of the options to renew, including the giving of a written notice to renew, do not specify that each option could not be exercised at the same time the lease was entered into by the defendants. It is a term of each of the options to renew that written notice simply be given to Mr Soussa's agent by a specified date, defined in each Option to Renew as the 'Option Expiry Time'. On the facts before the court, clearly notice to exercise each of the options was given and received by Mr Soussa's agent well before each of the specified dates specified as the 'Option Expiry Time' in each of the Option to Renew documents.
For this reason, it is also clear that the second precondition for the exercise of each of the options to renew was satisfied, as Mr Soussa's agent, Ms Hope, signed each Option to Renew on 26 July 2017.
The second construction of the first precondition that is open is that even if the first precondition could not be met until the defendants entered into possession of the Harrisdale property, as senior counsel points out on behalf of the defendants, it was open for Mr Soussa as lessor to waive the condition.
Although the defendants have not specifically pleaded waiver of the first precondition, it is open to the defendants to raise the issue at trial because it is not pleaded by the plaintiff that the exercise of the options was not effective.
It is a common condition of the exercise of an option to extend the lease that the tenant has complied with the terms of the lease and has not breached the lease. However, such a condition is capable of waiver by a lessor.[82]
[82] Health Partners Incorporated v Gonos (1996) 67 SASR 338 (Matheson J).
On the facts before the court, on the executing of the lease by Ms Hope on behalf of Mr Soussa, including the options that expressly formed part of the additional conditions in Part C of the lease (which also had the effect of delivery of the notices by 4.00 pm on 25 July 2022 to Mr Soussa's agent, Rental Management Australia), the first precondition was waived.[83]
[83] No issue is raised in these proceedings on behalf of Mr Soussa that Rental Management Australia had not been given each of the notices of exercise of option, as required by the second precondition for the exercise of the options.
I do not find it necessary to decide which construction of the first precondition should be preferred because, on the facts, I am satisfied that irrespective of which construction is correct, the first precondition had been satisfied.
For these reasons, I find that on 26 July 2017, the parties entered into a lease for the Harrisdale property for a term of 40 years.

4.5 Does the fact that Mr Soussa has received no payments of rent for the Harrisdale property since 23 March 2019 entitle him to issue an effective notice to terminate the lease?

The defendants argue the effect of the terms of the lease, in particular the tripartite agreement comprising the Payment Direction Deed between the defendants, Mr Soussa and Sterling Corporate Services, is that once the defendants had completed their obligation to pay the investment amount into the fund managed by Sterling Corporate Services (the Sterling Investment Trust), the defendants had discharged all of their obligations in respect of the payment of rent for the whole of the 40 year term of the lease. Thereafter, the defendants say Sterling Corporate Services assumed the obligation to make the rental payments for them, and the defendants' liability was and is expressly limited to payments out of the Sterling Investment Trust, pursuant to cl 2.7(a) of the Payment Direction Deed. Further, they contend if there is no money left in the Sterling Investment Trust from which funds can be distributed, and their units in the trust redeemed, then there is no obligation on them or anyone to pay rent. In these circumstances, the defendants claim that it necessarily follows that there has been no breach of the lease.

What clearly emerges from this factual timeline is that Rental Management Australia and Sterling First Projects had no authority to act on behalf of Mr Soussa or to engage in conduct on his behalf, including to make any representations on his behalf in respect of a Sterling New Life Lease until 17 July 2017. It is also clear that prior to this date the defendants had inspected the Harrisdale property and had both formed an intention to enter into a Sterling New Life Lease, and had both expressed an interest in leasing the Harrisdale property on the terms of a Sterling New Life Lease.
Consequently, the acts and conduct of the parties prior to 17 July 2017 cannot form part of any of the oral or written representations inducing the assumptions pleaded in par 20 of the amended defence and counterclaim.
Mrs Thomas' evidence is to the effect that that the assumptions in par 20(b) and par 20(d) of the amended defence and counterclaim were held by her after hearing what was said by Mr Carvolth at the meeting in Gosnells in November 2016. Her evidence on this point is:[100]
[100] Exhibit 2 [26], [31] - [32], [35].
26.To the best of my recollection, Gary Carvolth did most of the talking at the meeting. I do not recall the actual words used by Gary, but he was talking about the Sterling New Life leases and saying that you pay your money upfront and then you would have a 40 year lease, meaning you would have a house for the rest of your life, and you don't have to pay any rent, any expenses, rates or anything.
…
31.Based on what Gary Carvolth and Annabel Crowther told me at the Gosnells meeting, I thought the idea of a Sterling New Life lease sounded really good. Laurie and I discussed Sterling New Life leases and agreed that we thought it was a really good option for our retirement and wanted to go ahead with signing up to a Sterling New Life leases. However, we didn't want to start looking for a house over the Christmas period, so we waited until after Christmas before contacting Annabel Crowther.
…
32.In January 2017, Laurie and I contacted Annabel Crowther.
…
35.Laurie and I inspected houses that we were interested. Sometimes we inspected properties with Annabel. Some of the properties that we inspected were not already part of the Sterling New Life lease scheme. In those circumstances, Annabel would speak with the landlord to see if they wanted to sign up to a Sterling New Life lease.
Mr Thomas' evidence is to the effect that the assumptions in pars 20(b), 20(d), 20(e), 20(f), 20(h) and 20(i) of the amended defence and counterclaim were held by him after hearing what was said at the meeting in Gosnells in November 2016. His evidence on this point is:[101]
[101] Exhibit 3 [16], [19], [23], [26] - [32].
16…
(a)you could get a lease for up to 40 years, or as long as you needed for your lifetime, by paying an upfront amount of rent in advance;
(b)you never had to pay any rent during the term of the lease, as this was taken care of by the upfront amount paid in advance;
(c) the landlord or Sterling could not ask you to pay any money for the house after the payment of the upfront amount of rent, except that you had to pay for contents insurance, water usage, electricity, gas and the home phone line;
(d)to get into a Sterling New Life lease, you needed an upfront amount of about 60% of the value of the house to pay rent in advance;
(e) the upfront amount would be held in the Sterling Income Trust, which was a trust fund that would generate the money for Sterling to pay the landlord rent;
(f) you did not need to pay for any rates or insurance for the house;
(g) the landlord could not evict you for anything unless you did irreparable damage to the house;
(h)if the property you were living in got sold, it would be sold with your lease as part of it and your lease would continue on after the sale;
(i) if you wanted to pull out of the Sterling New Life lease, you would have to give 180 days' notice and then the upfront amount you paid which was held in the Sterling Income Trust account would be returned to you; and
…
19I do not recall exactly what Gary said in the presentation, but he was very positive about Sterling New Life leases and this was a big confidence builder for me and one of the main reasons why Lou and I got into a Sterling New Life lease.
…
23Annabel, who I understood to be a sales representative for Sterling from what she had said and how she introduced herself, was the first available representative, so Lou and I spoke to her.
…
26From what I saw and heard at this meeting, I believed that the Sterling New Life lease was a really good arrangement and I thought that Lou and I should consider getting into a Sterling New Life lease. I was quite sure at this time that a Sterling New Life lease was right for us but just wanted to ask a few more questions to Annabel in the new year.
27I liked the idea of Sterling New Life leases because you could pay rent in advance and did not have to pay anything after that upfront amount, you could treat the house like your own, we could afford it if we found a house that was worth less than $400,000 and you had a long term lease so if something happened to either Lou or me the other one would have continuity of living.
Meetings with people from Sterling
28In or around mid-January 2017, Lou and I arranged to meet with Annabel to speak about Sterling New Life leases and suitable properties.
29Either at the Gosnells meeting or at a meeting with Annabel in early to mid‑2017, Annabel told us that her own father, sold his house and used the money from the sale to get into a Sterling New Life lease, and that she had helped him get into the Sterling New Life lease.
30In early to mid-2017, Lou and I met with Annabel several times to discuss the type of property Lou and I were looking for and to look at properties that were available for a Sterling New Life lease.
31During this time, we viewed properties in Harrisdale, Thornlie and others south of the river but these properties were not suitable to Lou and me.
32Typically, Annabel would call me when she found a potentially suitable property for us and she would make arrangements for Lou and me to view those properties.
The particulars of the assumptions are pleaded in par 20 of the amended defence and counterclaim as expressly contained, or alternatively implied, in the following documents provided by Mr Soussa or his agent to the defendants: the lease; the Sterling New Life Property Investor PowerPoint; the Sterling New Life Investor Summary and the Sterling New Life Frequently Asked Questions document. However, except for a copy of the lease which was provided to them when it was executed by each of them, neither of the defendants were able to say that they had seen or read any of the other documents pleaded in par 20 prior to or at the time they executed the lease.
Consequently, other than the lease (which includes all of the documents that are annexed and incorporated as terms of the lease), the defendants' claim of estoppel against Mr Soussa can only arise out of the representations made to them by persons who can be found to have made oral representations for and on behalf of Mr Soussa, on and after 17 July 2017, being the date that Rental Management Australia, and Sterling First Projects as a sub-agent of Rental Management Australia, were authorised by Mr Soussa to enter into a Sterling New Life Lease.
Senior counsel on behalf of the defendants made a submission that all that is necessary for the defendants to demonstrate is that both parties shared the same assumption or expectation about the Sterling New Life Lease scheme, and it does not matter that the sources of each party's assumption or expectation is different. Further, that all that matters is that the assumption or expectation be aligned, such that it is common.
As to the element of inducement (conduct of Mr Soussa) to rely upon the assumptions, it is contended that the defendants were induced to enter into the lease by the Offer to enter into a Sterling New Life Lease, which Offer was made to the defendants for and on behalf of Mr Soussa. This submission cannot be accepted.
The Offer to enter into a Sterling New Life Lease is not pleaded in par 20 as a document containing the assumptions. However, it is a document that contains written representations from which the defendants claim they were induced to form the assumptions, which they relied upon to their detriment.
However, the evidence does not support a finding that the defendants relied upon any written representations contained in the Offer. Further and more importantly, the Offer was not an offer made for and on behalf of Mr Soussa to the defendants; it was an offer from the defendants to Mr Soussa.
There is nothing in the terms of the Offer upon which it can be construed as an offer made by Mr Soussa as a lessor to enter into a Sterling New Life Lease. To the contrary, the Offer to enter into a Sterling New Life Lease was an offer the defendants made to Mr Soussa. This finding is the only inference that can properly be drawn from the following:
(a)the defendants executed the Offer the day before it was executed on behalf of Mr Soussa by a representative of Rental Management Australia;
(b)prior to the defendants executing the Offer, the defendants inspected the Harrisdale property and informed a representative of Rental Management Australia that they wished to enter into a Sterling New Life Lease to lease the Harrisdale property, and this information was conveyed to Mr Soussa prior to him entering into an Exclusive Management Authority on 17 July 2017 to appoint Rental Management Australia to lease the Harrisdale property on the terms of a Sterling New Life Lease; and
(c)clause 2(a) of the Offer is expressly an offer by the defendants as the tenant to Mr Soussa as the lessor to take a five year lease, with seven options of a further five years each, totalling 40 years, of the residential premises (the Harrisdale property) on the terms of the Residential Tenancy Agreement and the Payment Direction Deed (collectively known as the Sterling New Life Lease) provided to the defendants.
The Offer after execution by all parties was a tripartite agreement between Mr Soussa, the defendants and Sterling First Projects (as Manager).
Although the express terms of the Exclusive Management Authority executed by Mr Soussa on 17 July 2017 appointed Sterling First Projects as a sub-agent of Rental Management Australia, the express terms of the Offer, together with the fact that the Offer was executed by the defendants prior to being executed by Rental Management Australia for and on behalf of Mr Soussa, are not consistent with a finding of fact that Sterling First Projects was acting as a sub‑agent of Rental Management Australia in the execution of the Offer by the defendants. This is because the obligations of Sterling First Projects created by the express terms of the Offer as the 'Manager' are not entirely consistent with it being an agent of Mr Soussa. For example, pursuant to cl 5(b) the Manager or the Manager's agent must hold the defendants' deposit as stakeholder, and by cl 2(c) the defendants authorise the Manager to complete the Residential Tenancy Agreement with the 'Date of Commencement of Sterling New Life Lease' within the time specified in cl 2(b), and, in particular, where cl 2(b)(i) applies, where no date of commencement of the Sterling New Life Lease is stated, 14 days after Mr Soussa accepts 'this offer'.
Although the evidence establishes that the defendants paid the cash component of the Sterling New Life investment amount the day after the Offer was executed by Rental Management Australia on behalf of Mr Soussa, there is no evidence before the court that they did so in reliance on any oral or written representations made to them, or were induced to do so by any oral or written representations made to them for and on behalf of Mr Soussa.
In par 23 of the amended defence and counterclaim it is pleaded that the defendants, in reliance on the assumptions, acted to their detriment by taking the following steps:
(a)paid their life savings of $230,000 to the Sterling Group as pleaded in paragraph 8(c)(i) above;
(b)entered into the 40 year Lease;
(c)permitted SCS to pay the Rent payable under the Lease to the Plaintiff in accordance with clauses 2.4 and 2.5 of the Payment Direction Deed;
(d)conducted their affairs on the basis that they had a residential lease for the Property for up to 40 years upon exercising the options to renew; and
(e)did not withdraw from the SNL Lease and seek return of the Lump Sum Amount.
For the reasons set out above, it cannot be found that the defendants in reliance on the assumptions induced by conduct for and on behalf of Mr Soussa paid their life savings of $230,000 to the Sterling Group, in particular to Sterling Corporate Services.
As to whether it can be found that Mr Soussa is responsible for the other pleaded assumptions, and thus the pleaded acts of detriment, this turns on whether the defendants relied on the representations made to them by Mr Ryan Jones at the meeting on 26 July 2017, and whether the representations were made to the defendants by Mr Ryan Jones in his capacity as an agent of Mr Soussa.
Leaving aside for a moment the first issue, in determining the second issue it is relevant to have regard to the fact that when the defendants met Mr Ryan Jones on 26 July 2017, they executed not only all of the documents forming the lease but also executed the Sterling Income Trust application, and a Rental Subsidy Agreement. Also of importance is the fact that one of the documents forming the lease that was executed was the Payment Direction Deed.
The Payment Direction Deed was a tripartite agreement between Mr Soussa, the defendants, and Sterling Corporate Services, the authorised investment manager for the Sterling Income Trust. The Rental Subsidy Agreement was an agreement entered into by Sterling Corporate Services and the defendants. Mr Soussa was not a party to this agreement, nor was this agreement incorporated into the lease.
The Rental Subsidy Agreement was an agreement made between Sterling Corporate Services as assistor and the defendants as tenant whereby Sterling Corporate Services agreed to assist the defendants to pay the full cost of weekly rent of $390 until the Sterling New Life Lease capital shortfall of $11,500 had been paid in full by the defendants to the assistor by periodic payments of $26 a week by the defendants to Sterling Corporate Services.[102]
[102] The copy of the Rental Subsidy Agreement tendered into evidence contains an execution clause for each of the parties that states in type that the agreement is executed by Sterling Corporate Services by alternate director Ryan Kentore Jones, however it appears that the copy of the document does not contain the signature of Mr Ryan Jones.
The evidence before the court establishes that Mr Ryan Jones had the capacity to direct the mind and will of more than one corporate entity in the Sterling Group. He was the sole director of Acquest (the corporate entity that had entered into the Deed of Covenant to purchase the Harrisdale property). He was also a director of Sterling First Projects, and it appears that he may have been an alternate director of Sterling Corporate Services. However, I make no finding about whether he was at the material time an alternate director of Sterling Corporate Services.
Consequently, when Mr Ryan Jones met with the defendants, it is clear on the evidence it cannot be found that he did so only in his capacity as an agent of Mr Soussa, as a director of Sterling First Projects, having been appointed as a sub-agent of Rental Management Australia to do all things lawful to procure a Sterling New Life lessee. This is because at the same meeting he provided to the defendants the application form for each of them to sign to invest the cash component of the investment amount paid by the defendants to the Sterling Income Trust and asked them to each execute the Rental Subsidy Agreement. The execution of these two documents was part of the suite of documents that formed part of the Sterling New Life Lease scheme, but these documents did not form part of the contractual documents forming the lease.
Consequently, from this evidence it can be inferred that when Mr Ryan Jones met with the defendants he did so in two capacities. Firstly, as an agent of Mr Soussa to arrange for the execution of each of the documents comprising the lease and, secondly, as an agent of Sterling Corporate Services, as the authorised fund manager for the Sterling Income Trust, as it is clear that he had the authority to act for Sterling Corporate Services to procure the defendants to execute the Sterling Income Trust application.
It is not suggested by the defendants that Sterling Corporate Services were authorised to act on behalf of Mr Soussa. In any event, no submission could be put that any of the acts by Sterling Corporate Services, or persons authorised to act on its behalf, could be attributed as conduct made on behalf of Mr Soussa as there is no evidence that Sterling Corporate Services had any authority for any purpose to act as an agent for Mr Soussa.
In circumstances where the defendants paid their lump sum amount of $230,000 to Sterling Corporate Services, pursuant to the terms of the Offer, prior to executing the lease and by completing the application form to invest that sum in the Sterling Investment Trust, and where Sterling Corporate Services were the duly authorised investment manager for the trust, I am not satisfied that the representations Mr Ryan Jones made to the defendants (that there was no chance of losing their upfront lump sum payment and that Sterling would never go bust, but if it did it had $900 million in assets and there would always be another company to step in and take it over), which induced an assumption by each of them that the money that they had invested in the Sterling Investment Trust was 'safe', can be found to be oral representations made for and on behalf of Mr Soussa.
Although Mr Soussa is a party to the Payment Direction Deed, the defendants' evidence is that they did not read this document or any of the other documents that they signed when they met with Mr Ryan Jones on 26 July 2017. Further, although they took a copy of this document and all of the other documents they executed on that day home in a folder, they put the folder away, and did not look at it until after the Sterling Group entities went into administration.
The defendants bear the onus of proof of establishing estoppel. In particular, they bear the onus of establishing that it was the conduct of those who acted for and on behalf of Mr Soussa that induced them to adopt the assumptions upon which they relied to their detriment. From their evidence, the only assumptions made by them they say were induced by representations made to them were representations made at the Gosnells meeting in November 2016, and the oral representations made by Mr Ryan Jones on 26 July 2017.
The Sterling New Life Lease entered into by the parties was a tripartite agreement. The three parties to the tripartite agreement were Mr Soussa, the defendants and Sterling Corporate Services. Sterling Corporate Services is an entity in its own right and part of the corporate structure of the Sterling Group that created and promoted the Sterling New Life Lease scheme. In circumstances where Sterling Corporate Services was not at any material time an agent of Mr Soussa, no estoppel can arise against him by any representations or any conduct of Sterling Corporate Services.

Insofar as representations were made to the defendants about the financial viability of the Sterling Income Trust, this cannot be found to be conduct of Mr Soussa that induced a belief in the defendants that their life savings were safe. It is clear that from this assumption the defendants acted in reliance by conducting their affairs on the basis that they had a residential lease for the Harrisdale property for up to 40 years without any requirement to make any payments of rent, other than the payment of $26 a week, until they had repaid the capital sum of $11,500, and that they did not withdraw from the Sterling New Life Lease and seek return of their life savings. However, the defendants have not proved that this assumption was induced by, or on behalf of, Mr Soussa.
Put simply, I am not satisfied that when any oral representations were made to the defendants by Mr Ryan Jones at the meeting he made those representations in his capacity as a director of Sterling First Projects, a sub-agent of Rental Management Australia, as an agent for Mr Soussa.
Consequently, the defendants' defence and counterclaim of estoppel must fail because the defendants have not proved that any oral or written conduct or representations made by, or for and on behalf of, Mr Soussa caused them to make any of the pleaded assumptions.
In any event, even if it could be found that Mr Ryan Jones was acting as the agent of Mr Soussa when he made the representations, a failure to fulfil a promise does not, of itself, amount to unconscionable conduct without something that points to the conduct of Mr Soussa being unconscionable. In this context, there must be something that Mr Soussa had done towards the creation of the assumptions. In this matter, as counsel for Mr Soussa points out, the fact that the Sterling New Life Lease scheme failed is not only unfair to the defendants but also to Mr Soussa and they have all been left in a position that is less than what they had assumed they had bargained for in entering into the lease.
The court is not in a position to right any unconscionable conduct in these proceedings, because these proceedings are between the victims of a failed scheme who are not responsible for the failure of the scheme.
In circumstances where the Sterling New Life Lease scheme was not a scheme of Mr Soussa's making, and in circumstances where he had no control of the funds the defendants invested in the Sterling Investment Trust, the part that Mr Soussa played in entering into the lease cannot be found to have causally induced the assumptions made by the defendants so as to raise any issue of unconscionability by the departure from the assumptions, which were, in fact, induced by those who promoted the Sterling New Life Lease scheme.
When all the circumstances of this matter are considered, it is clear that all parties to these proceedings are innocent persons who have all suffered a loss by the actions of third parties.

5.6 Disposition ‑ Estoppel claim

The defendants' defence to the action cannot succeed, and their counterclaim should be dismissed.

5.7 Orders

I will hear the parties as to the specific orders that should be made to reflect these reasons, and as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
VV
Associate to the Honourable Justice Smith
1 JUNE 2021