Tennent & ors v Moukhlina & ors (RLD)

[2008] NSWADTAP 83

Appeal Panel - Internal

CITATION:	Tennent & ors v Moukhlina & ors (RLD) [2008] NSWADTAP 83
PARTIES:	APPELLANTS Sacha Tennent, Simon Conroy, Alexander Djordjevic and Red Star Pizza Pty Ltd (ACN 100 764 805) RESPONDENTS Alexandra Moukhlina, Alexandre Chevtchenko and Serge Guinzbourg
FILE NUMBER:	089009
HEARING DATES:	29 May 2008
SUBMISSIONS CLOSED:	20 June 2008
DATE OF DECISION:	17 December 2008
BEFORE:	O'Connor K - DCJ (President); Molloy G - Judicial Member; Fairweather R - Non-Judicial Member
CATCHWORDS:	Retail Leases - Option to Renew - Notice given by Third Party - Agency - Authority arising from course of dealings - Ratification - Estoppel - Notice effective - Appeal allowed
DECISION UNDER APPEAL:	Tennent and ors v Moukhlina and ors [2008] NSWADT 26
FILE NUMBER UNDER APPEAL:	075097
DATE OF DECISION UNDER APPEAL:	01/16/2008
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Conveyancing Act 1919 Retail Leases Act 1994
CASES CITED:	Ashford Shire Council v Dependable Motors [1959] HCA 25; (1961) AC 336 Carter v Schmitt [2003] NSWSC 1166 Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606 Churcher v Danes Hotels Pty Ltd (1980) 8 BPR 15863 Firth v Staines [1897] 2 QB 70 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480 Group Four Industries v Brosnan (1992) 59 SASR 22 Heley-Hutchison v Brayhead Ltd (1968) 1 QB 549 MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515 Mifsud v Campbell (1991) 21 NSWLR 725 MK & JA Roche Pty Ltd & Ors v Metro Edgley Pty Ltd & Anor [2005] NSWCA 39 Powercor Australia Ltd v Pacific Power [1999] VSC 110 Riltang v L [2002] NSWSC 625 Tennent and ors v Moukhlina and ors [2008] NSWADT 26 Tsaoucis v Gallipoli Memorial Club Ltd [1998] NSWSC 229 Young v Lamb [2001] NSWCA 225
REPRESENTATION:	APPELLANTS N Perram SC, A Narayan / Thomson Playford Cutlers RESPONDENTS G Blake SC / Stanefska & Associates
ORDERS:	1. Appeal allowed. 2. Declare that the lessors, Tennent and Conroy, have effectively renewed the original lease for a period of three years commencing 10 November 2006, subject to determination of the rent. 3. Parties to file and serve any applications for costs of the proceedings below and on appeal, according to the following timetable. Appellants to file and serve any application and submissions by 4 February 2009. Respondents to file and serve any application and submissions including submissions in reply to any application by the appellants, and submissions, within a further 21 days, i.e. by 25 February 2009. The respondents should indicate what aspects of their submissions made 12 February 2008 they continue to rely upon. Appellants to have 7 days for any submissions in reply to the respondents’ submissions. Decision to be made without holding a hearing, as permitted by section 76 of the Administrative Decisions Tribunal Act 1997. Parties to indicate in their submissions if they object to the Appeal Panel proceeding under section 76. 4. Liberty to apply.

1 This appeal arises out of a state of affairs of an atypical kind.

2 Three co-owners of shop premises leased the subject premises in November 2003. The premises comprised a ground level shop in a new apartment complex developed by Meriton at Waterloo. The three co-owners are the respondents to this appeal, Alexandra Moukhlina, her husband Alexandre Chevtchenko and Serge Guinzbourg. They and their agent had dealt with a group of four friends who were interested in running a restaurant at the site. Three of them are the first three appellants in this appeal, Sacha Tennent, Simon Conroy, Alexander Djordjevic. The fourth person was Simon Conroy’s wife, Tania Conroy. The restaurant business opened in February 2004 under the name ‘Red Star Pizza’. The fourth appellant is the company that ran that business, Red Star Pizza Pty Ltd. Throughout the company’s history, Mr Djordjevic has been a director and/or the company secretary. At the time the lease was executed Mr Conroy was also a director. By the time these proceedings commenced in the Tribunal, the directors were Mr Djordjevic and Ms Tennent.

3 Throughout its history the principal persons involved in the day to day operation of Red Star Pizza have been Mr Djordjevic and Ms Tennent. As from approximately mid-2004 Mr Conroy and his wife have had no active involvement in the business. While agents and solicitors had some involvement in the original negotiations, and the solicitors dealt with the preparation and execution of the lease, during that time and thereafter Mr Djordjevic had dealt directly with Mr Guinzbourg, and when Mr Guinzbourg was absent from Australia with Mr Chevtchenko.

4 For example it was routine for Mr Djordjevic to make payments of rent by cheque on the account of Red Star Pizza Pty Ltd and for Mr Guinzbourg to pick them up. Between 2001 and 2005 Mr Guinzbourg was employed as a sales agent by the developer of the apartment complex, and had his office in the next street to the Red Star restaurant. The direct rent payment arrangement ceased in May 2007 when the dispute which arose was about to give rise to proceedings in the Tribunal. Now payments of rent are made to a real estate agency on behalf of the lessors, Century 21 at Fairfield.

5 The appellants have seen it as relevant to their case that Mr Guinzbourg holds an Australian law degree and is experienced in real estate transactions and business more widely. As at the time of the hearing before the primary Tribunal, Mr Guinzbourg was employed as an insurance advisor by Allianz in Moscow.

6 Within the period specified by the lease, Mr Djordjevic sent a notice exercising the option to renew the lease for a further three years. The original term had been three years, and there were two options to renew each for a period of three years. The lease did not provide an address for service of the notice. So he sent it to the solicitor for the lessors named in the original lease, Eric Fung & Co. The notice was dated 11 March 2006. There was a dispute before the Tribunal at first instance as to whether a notice had ever been sent. The Tribunal held on the balance of probabilities that it was, and that its terms were sufficient to comply with the law relating to the contents of such a notice. These findings are not in issue in this appeal.

7 The first oddity of the case is that the notice was not rendered by either of the named lessees. The second oddity is that Mr Djordjevic did not take any steps by way of written communication to find out whether the notice had been received and drawn to the attention of the lessors. In evidence, he said that he had told Mr Chevtchenko about the notice around May or June of 2006. By this time he was dealing directly with Mr Chevtchenko. Mr Guinzbourg had started working in Moscow in June 2005. The Tribunal found against Mr Djordjevic on the question of whether he told Mr Chevtchenko about the notice. The Tribunal accepted Mr Chevtchenko’s evidence that he was not informed of the notice.

8 Mr Guinzbourg returned to Australia in August 2006. He and Mr Djordjevic met on at least three occasions (14, 24 and 30 August) during his return visit, a visit that lasted until 3 September. At the meeting on 24 August Mr Djordjevic informed Mr Guinzbourg of the exercise of the option. Mr Guinzbourg said he knew nothing about it, and contacted his solicitor, Mr Fung. Mr Fung could not find any record of receipt of the notice in his files. As noted, the Tribunal at first instance accepted Mr Djordjevic’s evidence that he had sent the notice. Its view, on balance, was that it had been received at Mr Fung’s office but mislaid. In any event it had been sent, and that was sufficient regardless of whether it was lost in the mail or lost in Mr Fung’s office.

9 The dispute therefore became whether, in these circumstances, the lessors were bound by the notice. The lessors’ objection is essentially that it was not given by one of the named lessees. The appellants in their case before the primary Tribunal put various propositions forward in an attempt to overcome this difficulty. One of them was that the true lessee was Red Star Pizza Pty Ltd, and Tennent and Conroy were merely agents. On this analysis a director of Red Star Pizza Pty Ltd could properly give the required notice. As Mr Djordjevic was a director that meant that the lessee had given the notice. This proposition was rejected by the Tribunal at first instance, and has not been pursued on appeal.

10 The other propositions were of two kinds – that Mr Djordjevic had acted with the authority of the named lessees in giving the notice, or that by their conduct (especially in the three week period when Mr Guinzbourg had dealt with Mr Djordjevic over the renewal of the lease) they were estopped from denying that the notice was effective to confer a right to a further three year term.

11 These lines of analysis were rejected by the Tribunal, with the result that the Tribunal held that the notice had not been given effectively: see Tennent and ors v Moukhlina and ors [2008] NSWADT 26. Had it been effective, a further term of three years would have resulted, 10 November 2006 to 9 November 2009.

12 The result is that the present occupation of the premises is on either a holding over basis under the old lease, month to month, or there is a new periodic lease month to month between Ms Tennent and Mr Djordjevic on the one hand and the co-owners on the other hand. The Tribunal did not need to deal with the question of what precisely was the nature of the tenancy now on foot.

13 The next oddity is that there has been no suggestion that the lease has been breached in any other way, and (with one exception, a notice given in or around May 2007) there has been no attempt by the co-owners to terminate the lease or remove Mr Djordjevic and Ms Tennent from occupation of the premises. Indeed there have been a number of offers by the co-owners of a new lease for a term of (three or five) years, one of which was the subject of an open offer at the commencement of the proceedings before the Tribunal at first instance.

14 The position of Mr Djordjevic and Ms Tennent throughout, as we discern it, has simply been that they gave notice of exercise of the option under the original lease, and the original lease is the one they wish to have the benefit of. They do not want to enter into a fresh lease with different features. The open offer, for example, was for the original lessees or the company, Red Star, to take out a fresh lease having the same terms as the original lease but with a rent of $670 per week as compared to the rent then being paid under the original lease of $708.

15 The history indicates that by the time Mr Djordjevic was dealing again with Mr Guinzbourg in August 2006 Mr Djordjevic was of the view that the rent should be reduced. He had suggested they get a current valuation, and had made an offer of $500 per week. This was not acceptable to Mr Guinzbourg. Mr Djordjevic had attempted again in March 2007 to have a rent review obtained. The question of rent appears to be one of the two real points of difference between the parties. The open offer was also made on the basis that each party bear their own costs without admission.

16 It is much to be regretted that a dispute of such narrow compass has generated a legal controversy that has led to the incurrence of legal costs that must far outweigh the commercial loss that either party might have suffered had they conceded or compromised. Solicitors have been engaged by both sides, copious affidavit material and submissions have been filed, and barristers appeared at first instance with senior counsel being engaged on appeal.

Background

17 The following account of the events before and after the giving of the purported renewal notice is a summarised version of the account that appears at paras [6] to [73] of the Tribunal’s reasons.

18 As previously mentioned, Alex Djordjevic, Sacha Tennent, Simon and Tania Conroy agreed in 2003 to go into business together. The company, Red Star Pizza Pty Ltd, had been formed by Mr Djordjevic some time earlier to provide the vehicle through which the business would be conducted. The main negotiations for the lease took place between Mr Djordjevic and Mr Guinzbourg, with the documentation being settled via their respective solicitors, Mr Storey for the lessee group and Mr Fung for the lessor group. Mr Guinzbourg at the time was a selling agent for a multi-storey Meriton apartment development at Waterloo. The shop was at street level on the Bourke Street edge of the development. The commencement date of the lease coincided with the time the lessee group moved into occupation and began setting up the business. The execution date of the lease was 31 March 2004. The Tribunal in its reasons explains the background to Sacha Tennent and Simon Conroy becoming the signatories to the lease. Originally Mr Djordjevic had wanted Red Star Pizza Pty Ltd to be the named lessee. But Mr Guinzbourg wanted to have the usual guarantees, and for that purpose preferred to have individual guarantees rather than a company guarantee. The result was that Ms Tennent and Mr Conroy agreed to be signatories and gave the guarantees.

19 Mr Conroy had never had a full-time involvement in the business but had assisted the business in relation to regulatory requirements in the start-up phase. Mrs Conroy had worked full-time in the business in its early months, but had ceased to be involved after becoming pregnant. During 2004, as a result of his wife’s pregnancy and promotion in his work, Mr Conroy indicated that he wished to withdraw from any active involvement in the business.

20 These changes left Ms Tennent and Mr Djordjevic running the business and managing payments under the lease. Ms Tennent and Mr Djordjevic reimbursed Mr Conroy his contribution to the set up costs. The evidence is in conflict as to what Mr Guinzbourg and Mr Chevtchenko knew about Mr Conroy’s inability to continue to be involved during 2004 and 2005. Eventually, a replacement guarantee was arranged and accepted by the lessors. That occurred in February 2006. The replacement guarantee took the form of a Westpac bank guarantee in the name of Red Star Pizza Pty Ltd dated 27 February 2006. It showed as the ‘favouree’s’ address, the office of Mr Fung.

The Purported Exercise of the Option to Renew

21 Clause 19 of the Lease granted an Option for Renewal to the lessee provided it was exercised not more than 9 months and not less than 6 months prior to the expiration of the term. It required that the notice be given in writing. The clause was in the usual terms. The lessor promised to grant a renewed lease if there was no subsisting breach or non-observance of any of the covenants on the same terms, subject to agreement as to the rent for the new term. The clause provided that if the parties were unable to agree on the rent, the commencement annual rental shall be the market rental at the commencement date, to be determined by reference to the rent review procedure set out in clause 18.2 of the Lease. The final due date for giving of notice was therefore 10 May 2006.

22 In January or February 2006, Ms Tennent and Mr Djordjevic decided that they would like to exercise the option to renew. By letter dated 11 March 2006, Mr Djordjevic purported to exercise the option to renew. He addressed a letter to Mr Fung in these terms:

‘11th March, 2006

To Eric Fung & Company,

Regarding lease to 161/806 Bourke St, Waterloo

We wish to inform you that we are exercising the option to renew the lease for the above premises and if you can contact your clients Alexandra Moulkhina, Alexandre Chevtchenko and Serge Guinzbourg so we can start negotiating the new rent.

For any further information please contact Alex Djordjevic on [phone number given].’

23 As noted earlier, Mr Djordjevic did not inform Mr Chevtchenko of the provision of the notice, though he continued to deal with him during the following months. He referred in evidence to his dissatisfaction with the way Mr Chevtchenko had dealt with him after Mr Guinzbourg had gone to Russia. He agreed that at none of his meetings with Mr Chevtchenko after sending the notice did he give him a copy of it.

The Three Weeks 14 August 2006 to 3 September 2006

24 Mr Guinzbourg returned to Australia for a short period of about 3 weeks as from 14 August 2006. Mr Djordjevic and Mr Guinzbourg had discussions about the terms of a new lease and the rent. The rent at that point was $708.05 plus GST. According to Mr Guinzbourg it was only on 24 August 2006 that Mr Djordjevic informed him of the letter exercising the option sent to Mr Fung. Mr Guinzbourg contacted Mr Fung. Mr Fung could not find any record of receipt of a notice. Mr Fung advised Mr Guinzbourg that the lease had not effectively been renewed.

25 The next day Mr Guinzbourg delivered a letter to the ‘business owners of Red Star Pizza’ offering a new lease for five years with a five year option, with an initial rent of $670 plus GST. In a letter dated 29 August 2006, Mr Djordjevic rejected the offer, and stated that ‘we’ had effectively exercised the option. He asked for the lease to be renewed at a rent of $500 per week. This counter offer was rejected by letter dated 30 August 2006, but Mr Guinzbourg offered a new three plus three lease at the rate of $670 plus GST adjusted annually by reference to CPI. He declined Mr Djordjevic’s request for a valuer to be engaged. On 3 September 2003, he returned to Russia and remained there until 14 March 2007. In the meantime Ms Tennent and Mr Djordjevic remained in occupation of the premises and continued to pay the rent.

The period September 2006 to May 2007

26 There is dispute as to what happened after Mr Guinzbourg returned, and whether there was further discussion of a new lease, and an independent valuation. Mr Guinzbourg says he and the other owners agreed at this time to an independent valuation being obtained. Mr Djordjevic says that had occurred back in August. In any event, on or about 27 March 2007, Mr Guinzbourg, at Mr Djordjevic’s request, signed a blank form of application to the Tribunal for appointment of a specialist retail valuer. He then returned to Russia.

27 The lessor’s consent section of the form had not been signed. According to Mr Djordjevic he approached Mr Chevtchenko, who declined to sign immediately. Instead he took the form away, and on 5 May 2007 notified Mr Djordjevic that he and Ms Moukhlina would not sign. The same day they handed a letter to the ‘business owners of the Red Star Pizza’ offering a five plus five lease, and a rent of $708 plus GST. They also gave notice that if a lease on these terms was not signed within 7 days, the recipients of the letter would be required to vacate the premises within 30 days from 12 May 2007. Although the offer was not accepted, no action was taken on the threat.

28 On 11 May 2007 an application for appointment of a specialist retail valuer was filed in the Tribunal by Ms Tennent and Mr Djordjevic, with the application referring to Mr Djordjevic as ‘assignor [sic] of Simon Conroy’. The application included a statutory declaration from Mr Djordjevic giving an explanation as to why it was not accompanied by a lessor’s consent.

The Proceedings in the Tribunal: June 2007

29 On 4 June 2007 the application underlying this appeal was lodged. The original application named the applicant parties as Ms Tennent and Mr Djordjevic (as assignee of Simon Conroy). The application was amended on 22 June 2007 to show the present appellants as the applicants, i.e. to include expressly Simon Conroy and Red Star Pizza Pty Ltd. The application sought the following orders: a declaration that the option had been validly exercised, either because the terms of the lease had been adhered to, or, if not, on the basis that the respondents were estopped from denying its validity; an order restraining them from acting on the purported notice of termination dated 5 May 2007, or in the alternative relief against forfeiture under s 129 and s 133F of the Conveyancing Act; declarations that the respondents had engaged in misleading or deceptive conduct and in unconscionable conduct; damages; and an order that a specialist retail valuer be appointed as sought in the earlier application; and costs. The application was dismissed.

30 As already noted, the Tribunal found, as a matter of fact, that the notice had been sent by Mr Djordjevic and had been received by Mr Fung. It found that it was acceptable to give the notice to Mr Fung on behalf of the lessees. The notice was given within the time permitted by the lease. There had been no default or non-observance of the terms of the lease. The evidence was that Ms Tennent had consented to the giving of the notice, and Mr Djordjevic had her authority to act as he did.

31 The lessors contended that, nonetheless, the requirements for an effective notice had not been demonstrated. Missing was any evidence that Mr Conroy had agreed to a renewal of the lease or authorised Mr Djordjevic to give the notice on his behalf.

32 The Tribunal rejected various arguments designed to show that the notice was effective despite the absence of any express authorisation by Mr Conroy. The Tribunal rejected an argument to the effect that the true lessees were not the named lessees, but either Red Star Pizza Pty Ltd or Ms Tennent and Mr Djordjevic jointly. (Ms Tennent and Mr Djordjevic were the directors of the company at the time the notice was given.) The Tribunal rejected an argument that Mr Djordjevic was the assignee in equity of Mr Conroy’s interest as lessee, and therefore was bound by the lease, and entitled to give notices such as the notice to renew. The Tribunal also rejected an argument that by their subsequent conduct the respondents were estopped from denying that the notice was binding (the knowledge they are said to have possessed in relation to the withdrawal of Mr Conroy from the business venture and the return of the guarantee, and their conduct in the period August 2006 to May 2007). The Tribunal rejected the other claims.

The Appeal

33 An appeal may be made as of right on a question of law, and by leave of the Appeal Panel may be extended to the merits (Retail Leases Act 1994 (RL Act), s 77; Administrative Decisions Tribunal Act 1997, ss 112, 113).

34 The appellants have applied for the Tribunal’s order of dismissal of their claims to be set aside and for substitution of an order in these terms:

‘Declare that the Lessor treat the notice given 11 March 2007 was effective; and that the operative lease is the original lease as renewed, subject to the question of determination of the rent.’

35 In the original notice of appeal the appellants set out 22 grounds said to raise questions of law or matters going to the application for leave to extend to the merits. Grounds 1 to 16 raised alleged errors of law. At hearing only Grounds 7,10, 12 and 15 were pressed. Grounds 17-25 gave reasons as to why leave should be granted to extend the appeal to the merits. All except Ground 25 were pressed. Many of the merits grounds included points going to the adequacy of the Tribunal’s consideration of the evidence, in particular whether critical evidence had been considered at all. The Appeal Panel suggested that a further ground relating to the adequacy of the reasons be added. That amendment was made after the hearing, with a new Ground 16A being added. As requested at the appeal hearing held 29 May 2008 the appellants filed an amended notice of appeal reflecting these changes. That occurred on 6 June 2008. In line with directions given by the Appeal Panel at the close of hearing, the respondents filed additional submissions on 20 June 2008.

36 The Appeal Panel had before it the underlying Tribunal file, including all affidavits filed, submissions and the transcript of the hearing. In connection with the appeal, the following further submissions were filed: appellants’ outline of submissions (17 March 2008); respondents’ outline of submissions (12 May 2008); appellants’ outline of submissions in reply (22 May 2008); and respondents’ further outline of submissions (20 June 2008).

37 The case for the appellants is, perhaps, put most strongly at [17] of the appellants’ submissions in reply:

The respondents had, from the outset, negotiated and dealt with Djordjevic. They knew full well that Conroy had departed from the business. It would be, in the appellants’ submission, unconscionable for the respondents to take advantage of this small mistake on the part of Djordjevic to obtain a windfall. This is especially so in circumstances where the evidence of the respondents in July 2006 was to [the] effect that they would accept a notice exercising the option in writing from Djordjevic which would then need to be shown to Guinzbourg on this return to Australia in August 2006: Moukhlina 8 [i.e. her affidavit at para 8]. In addition to the fact that the evidence plainly establishes that the respondents would have accepted a notice exercising the option in writing from Djordjevic, that evidence also establishes that nothing would have occurred with any notice exercising the option until such time as Guinzbourg arrived back in Australia in August 2006, accordingly no prejudice could arise by virtue of the fact that the first time the respondents saw the letter of 11 March 2006 exercising the option as on 25 August 2006: Guinzbourg 22.

38 The essence of the respondents’ case in reply appears at [5.6] and [5.7] of their main submissions:

The nature of the present ‘appeal’ … is such that they seek to overturn many of the findings of fact made by [the Tribunal], notwithstanding that there was a proper basis for those findings of fact.

No legal issues of waiver and estoppel or unconscionable conduct arise on the findings of fact made [by the Tribunal], which did not accept that the conversations on which the appellants purport to rely took place.

39 The first ground we will consider is Ground 10, as follows:

10. The [Tribunal] erred in fact and law in failing to find that Djordjevic had authority to give the notice exercising the option, having regard to the whole of the circumstances of the case, including the terms of the lease, and the role of the agent in the relationship between the parties: per Young v Lamb [2001] NSWCA 225 at [36]; Riltang v L [2002] NSWSC 625 at [13]-[14]; Carter v Schmitt [2003] NSWSC 1166 at [45]-[46].

40 Mr Conroy stated in his affidavit that he regarded Mr Djordjevic as having been responsible for the negotiations that led to entry into the lease, which he saw as being conducted on behalf of the company. When Mr Guinzbourg expressed dissatisfaction with the company being the lessee, and indicated his preference for individuals to take the lease, Mr Conroy indicated his preparedness to be named as a lessee, but expected that the business would be run through the company. He was appointed a director of the company. He provided a security deposit of $9,320.54 by way of bank guarantee. Elsewhere he refers to he and his wife contributing half of the cost of the fit-out ($35,000 out of $70,000) with the balance coming from Djordjevic and Tennent.

41 Mr Conroy referred to the assistance he gave to the business in dealing with regulatory requirements (development applications etc), and assisting in the evenings. Mr Conroy refers to Mr Djordjevic remaining responsible for carrying on negotiations in relation to the business and the lease. He was aware at the time of leaving the business that his name was on the lease.

42 He referred in the final paragraphs of his affidavit to the reasons for his decision in April 2004 to give up any involvement in the business, and to being repaid the fit-out contribution by Mr Djordjevic, and eventually in February 2006 the security deposit. He referred to the difficulties that Mr Djordjevic expressed to him over getting Mr Chevtchenko and Mr Guinzbourg to agree to having his bank guarantee cancelled.

43 Mr Conroy was called at the hearing, and cross-examined. In cross-examination he showed a lack of awareness of various commitments to which he was bound under the lease, such as liability for outgoings including strata levies. His answers, including in re-examination on the issue of liabilities for outgoings and answers to questions from the Tribunal, are consistent with a belief that all business expenses including lease-related expenses were to be borne by the company.

44 The Tribunal appraised the evidence in this case, as follows:

‘118 Did Mr Djordjevic have authority to exercise the option as an agent for the persons entitled to exercise it? The Tribunal agrees with Mr Narayan that an option of renewal can be effectively exercised by a duly authorised agent of the lessee or lessees. It is sufficient to refer in this context to Young v Lamb [2001] NSWCA 225, which is one of a number of authorities that Mr Narayan cited.

119 Young v Lamb also stands for the proposition that where the lessees under a lease comprise two or more partners, the general rule of partnership law that each party has authority, unless there is evidence to the contrary, to bind his or her fellow-partners in transactions relating to the partnership business provides a sufficient basis for one of the lessees to exercise an option of renewal.

120 The Tribunal accepts, however, Mr McGrath’s submission that even if it may be assumed that Mr Djordjevic had authority to act as Ms Tennent’s agent in writing the letter, he had no such authority from Mr Conroy. There was no evidence that Mr Conroy was in partnership with either Ms Tennent or Mr Djordjevic, even during the brief period when he participated in the conduct of the restaurant business. Furthermore, there was a conspicuous absence of evidence from Mr Conroy, either in his affidavit or in cross-examination, to the effect that he authorised the writing of the letter, or even knew at the time that it was to be written.

121 The Tribunal views this as a matter of considerable importance. To hold that Mr Djordjevic had sufficient authority from Mr Conroy to exercise the option on his behalf by writing the letter would involve committing him, despite his decision in 2004 to quit the business, to assuming the obligations of a lessee for three years commencing in November 2007. No doubt, he could seek to procure an assignment of his interest to Mr Djordjevic or indeed RSP. But that would involve, amongst other things, fulfilling the requirements set out in section 6 of the Lease for obtaining the consent of the Respondent lessors.

122 With reference to this issue, Mr McGrath cited the decision of Young J in Tsaoucis v Gallipoli Memorial Club Ltd [1998] NSWSC 229. It is sufficient here to refer to the following dictum of his Honour:

It is, of course, always possible to exercise an option by an agent… However, the authorisation must exist at the date of the exercise of the option. Sometimes there can be ratification later, but once proceedings have commenced the time for ratification is usually over…

123 Since in the present case the principal argument by the Applicants was that RSP was the lessee and the option was exercised on its behalf, it cannot be assumed that Mr Conroy, by participating in these proceedings as one of the Applicants, thereby impliedly ratified (if that were still possible) any purported exercise of the option on his behalf.

124 This conclusion by the Tribunal is sufficient to defeat the claim by the Applicants that the option was validly exercised. In its opinion, this is the correct outcome irrespective of whether Mr Conroy had assigned in his interest in equity to Mr Djordjevic before the letter was sent.’

45 It can be seen that the Tribunal dealt with the following possibilities: whether Mr Conroy gave express authority to Mr Djordjevic to exercise the option to renew the lease: at para [120], and answered no. At para [121] the Tribunal appears to be dealing with the question of whether Mr Conroy had given an implied authority, and doubted that because of the gravity of the commitment that is involved in renewing a lease. At para [122] it turns to the question of whether Mr Conroy’s conduct in joining as a party the present proceedings constitutes ratification of Mr Djordjevic’s conduct; and rejects that possibility, it would seem on the basis of the reservation expressed by Young J in Tsaoucis.

46 In our view, the reasons do not address the possibility that Mr Conroy had by his course of conduct acquiesced in Mr Djordjevic undertaking those tasks which ordinarily fall to an agent responsible for the management of a lease.

47 A useful summary of relevant principles relating to authority arising from a course of conduct by the principal is found in Gillard J’s judgment in Powercor Australia Ltd v Pacific Power [1999] VSC 110. His Honour said:

‘1216. … [A]uthority may be established by a course of conduct. …

1218. In Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd (1964) 2 QB 480, Diplock, LJ exhaustively considered the principles of law concerning agency and in particular apparent authority.

1219. At p.502 he said -

"It is necessary at the outset to distinguish between an 'actual' authority of an agent on the one hand, and an 'apparent' or 'ostensible' authority on the other. Actual authority and apparent authority are quite independent of one another. Generally they co-exist and coincide, but either may exist without the other and their respective scopes may be different. ....

An 'actual' authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent."

1220. In Heley-Hutchison v Brayhead Ltd (1968) 1 QB 549 at 583, Lord Denning, MR said -

"It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques. It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the usual scope of that office." (Emphasis added.)

1221. If a document is signed which authorises an agent, it is to be construed like any other contractual document and the extent of his authority is to be determined by considering all the circumstances. It is a question of fact.

1222. The Privy Council said in Ashford Shire Council v Dependable Motors [1959] HCA 25; (1961) AC 336 at 349 -

"The extent of an agent's authority, if in doubt, must be determined by inference from the whole circumstances."’

48 The following emerges from the evidence before the Tribunal, much of which is uncontested: all of those involved in setting up the business (Djordjevic, Tennent, the Conroys) gave Djordjevic substantial responsibility for organising and managing the business including the lease; Ms Tennent and Mr Conroy did not have any direct relationship of significance with the lessees other than in respect of the guarantees; once the business got started, Mr Djordjevic dealt with Mr Guinzbourg, or in his absence Mr Chevtchenko. The respondents were aware that the business was effectively being managed and conducted by Mr Djordjevic. Nonetheless Mr Conroy remained a party to the lease. Had there been a default under the lease, he remained open to be sued, and was only protected to the extent of the replacement bank guarantee from a direct financial liability for any default.

49 In our view the way the appellants’ case was cast by the Tribunal at [120] and [121] was too narrow. The appellants’ case was, as we see it, rather, that Mr Djordjevic had been armed, impliedly by Mr Conroy, with a general authority to act on his behalf in the management of the lease. Being a commercial lease that included an option to renew clause, that authority could reasonably extend to exercise of the option to renew.

50 Mr Conroy exited the business but did not have his name taken off the lease. After mid-2004 he took no interest in the affairs of the business and the lease. He had his fit-out contribution repaid, and eventually was relieved of the risk that went with the guarantee, to the limit of the guarantee. Nonetheless he took no formal steps to have his name removed from the lease, and to obtain the lessor’s consent to Ms Tennent being the sole lessee or some other lessee being substituted or added by assignment. In our view it is clear that there was a course of conduct on the part of Mr Conroy which left Mr Djordjevic in charge of the management of the lease, in a way not dissimilar to the role that might be played by a real estate or managing agent.

51 The following dicta from a director’s duty case relating to the incurring of debts captures the same idea: Group Four Industries v Brosnan (1992) 59 SASR 22 (Full Court), at 66 per Debelle J:

‘When determining whether there is an implied consent for the purpose of s 556(2)(a) [of the Corporations Law of South Australia], acquiescence in a course of conduct is capable of constituting an implied consent. Just as inactivity or indifference may reach a degree from which an implied authority may be inferred so too inactivity or indifference may be of such a degree that consent or acquiescence may be inferred. A director who stands by and allows another director to incur debts on behalf of the company might, depending on the circumstances, have given his implied consent to the incurring of those debts.’

52 As to the submission that Mr Conroy’s conduct in joining the action amounted to ratification of the conduct, it is helpful, we think, to set out a fuller extract of the reasons of Young J than appeared in the Tribunal’s reasons:

‘3. … It is, of course, always possible to exercise an option by an agent; see for instance Farrands The Law of Options (LBC Melbourne 1992) p 101. However, the authorisation must exist at the date of the exercise of the option. Sometimes there can be ratification later, but once proceedings have commenced, the time for ratification is usually over. In the present case I find no sufficient evidence to prove agency by Mr Kafkis to Mr Tsaoucis back in 1995.

It is also significant that when Mr Tsaoucis did purport to exercise the option he used the singular pronoun "I" rather than "we".

Unless agency can be shown, an option addressed to two people must be exercised by them both. An exception is a case where the construction of the document shows otherwise, but that is not this case. Even if a former partner who was a grantee of the option has equitably assigned all his interest in the relevant lease to the surviving partner, the surviving partner is not able to exercise the option in his own name alone: MacDonald v Robins [1954] HCA 5; (1954) 90 CLR 515, 524-5 and Churcher v Danis Hotels Pty Ltd, Holland, J - 14 February, 1980, as yet unreported.’

53 We do not see why, in principle, ratification can not be demonstrated by the alleged principal joining in an action asserting the legitimacy of the agent’s act. As we read Young J’s dicta, his Honour does not go so far as to rule out the possibility.

54 Dal Pont, Law of Agency (2nd ed. 2008) states:

‘Where a principal sues on a transaction effected by an agent outside of his or her authority [numerous authorities cited], or alternatively grounds a defence to legal proceedings on the basis of the validity of such a transaction [the citation is ‘See, for example, Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606’], it is implicit in the principal’s actions that he or she has ratified the agent’s unauthorised transaction.’

55 Many of the cases relating to ratification have to do with the status of pre-incorporation contracts. In Celthene, Yeldham J referred to the following dicta of Wright J in Firth v Staines [1897] 2 QB 70 at 75 per Wright J:

‘… first, the agent whose act is sought to be ratified must have purported to act for the principal; secondly, at the time the act was done the agent must have had a competent principal; and, thirdly, at the time of the ratification the principal must be legally capable of doing the act himself.’

56 None of these preconditions present a difficulty in this case.

57 In this instance there were no factors of time or prejudice (see Celthene at 615) that might militate against recognising Mr Conroy’s conduct as ratification. Mr Conroy signified his assent, at the latest by having his name added as a party on 22 June 2007, Ms Tennent and Mr Djordjevic remained in occupation of the premises, and there is no breach of the lease alleged.

58 In our view, leave should be granted to extend the appeal to the merits, and a finding entered that Mr Djordjevic had authority as an agent to commit Mr Conroy in respect to any matter dealt with by the lease, including the exercise option to renew. In our view Mr Conroy conferred implied authority on Mr Djordjevic by his conduct, in particular his acquiescence in allowing Mr Djordjevic to manage the lease while he remained an inactive named lessee. If we are wrong, and no authority was conferred in that way, it was conferred, we consider by Mr Conroy’s conduct in joining in the legal proceedings and seeking orders to the effect that the lease was validly renewed.

59 The consequence is that the option to renew was exercised on behalf of both Mr Conroy and Ms Tennent. The parties were therefore obliged to settle the rent in the manner provided for by the lease, and that has yet to occur. Subject to that occurring and in the absence of any other default, the lessors are obliged to issue a new lease to Mr Conroy and Ms Tennent. If Mr Conroy wishes to resile from any connection to the renewed lease, he will have to proceed to obtain the lessors’ consent to an assignment. The provisions of clause 6 of the Lease and the Retail Leases Act are relevant in that regard.

60 A declaration should be granted to the effect that the Lease was validly renewed.

61 Accordingly, in our view, the appeal succeeds on this ground. It is strictly unnecessary to deal with the other grounds, but we will address them.

Equitable Assignee and Mode of Exercise of Option to Renew

62 The other basis upon which it was sought to show that Mr Djordjevic had direct authority to give the notice was by reference to an alleged equitable assignment by Mr Conroy of his interest as lessee to Mr Djordjevic.

63 Ground 7 is as follows:

7. The [Tribunal] erred in law in failing to apply or misapplying the test in Churcher v Danes Hotels Pty Ltd (1980) 8 BPR 15863 per Holland J.

64 Ground 7 depends on there first being a finding that the relationship between Mr Conroy and Mr Djordjevic gave rise to an equitable assignment. The Tribunal’s finding that there was no equitable assignment was not, in our view, put in issue by the appeal. Accordingly the foundation for considering the further point of how an equitable assignee should go about exercising the right to renew vested in the assignor by the lease is not established. In case we are wrong in that regard, we will examine the arguments.

65 In Churcher there was a dispute over whether a lessor was bound by a purported exercise of an option to renew by a plaintiff in practical occupation and management of hotel premises. The plaintiff claimed to be an assignee of the original tenant. The plaintiff had advertised the hotel business for sale on the basis that a renewed four year lease was in existence. The lessor gave notice to quit. The lessor denied that the lease had been renewed, and contended that the plaintiff was in occupation on a holding over basis. The lessor had accepted rent from the plaintiff and accepted that he was a lawful occupant of some kind.

66 The original lease had been between the owner of the site (as lessor) and a company (as lessee), subject to mortgage to a brewery, which had the benefit of a trade tie. There were clauses in the lease requiring the mortgagor’s consent, as well as the lessor’s consent, to various matters, including assignment of the lease.

67 The lessee company transferred the lease with the approval of the lessor to two persons as tenants in common, B and the plaintiff. There was no mortgagor consent. The plaintiff later procured an instrument of assignment of the lease from B, but there was no registered consent from either the lessor or the mortgagor. The mortgagor had at one stage indicated by letter that it had no objection to the transfers. The lessor knew of some of the events that had occurred affecting the management of the hotel, and the shift of control to the plaintiff.

68 On 17 April 1978, the plaintiff purported to exercise the option to renew referring to it as ‘my option’ in respect of ‘my lease’.

69 Three of the submissions put by the plaintiff as to the effect in law of the circumstances as at the date of purported exercise of the option were identical or similar to those put in this case: one, that an inference should be drawn that by the time the purported notice was given the lessor had agreed with the plaintiff to an assignment of the lease being made to him alone; two, that by that date the circumstances were such that the defendant had become estopped from denying that the plaintiff was an assignee and sole tenant of the lease; and three, that by that date, the plaintiff then being the legal owner of an interest as tenant in common, had become also the equitable assignee of the interest of the other tenant in common, and therefore the plaintiff was entitled, as against the lessor, to exercise the right of renewal for himself. These submissions did not succeed.

70 A further submission based on the conduct of the lessor after receipt of the notice of renewal did succeed.

71 Materially, on 6 June, a few weeks after the purported exercise of the option, the memorandum of transfer of the lease from B and the plaintiff to the plaintiff alone was registered with the co-operation of the lessor. In the period between June 1978 and April 1979, there were numerous dealings between the lessor and the plaintiff over matters to do with the lease. It was only at the latter stage of these dealings that the lessor asserted that it did not regard the notice as effective.

72 The Court found that the dealings that occurred between the parties from 17 April to December 1978 were such that ‘the plaintiff and the defendant by their communications with each other and their conduct entered into a contract whereby the defendant promised the plaintiff that the defendant would grant to him a lease of the demised premises upon the terms and conditions that would have applied had the covenant for renewal in the lease been duly exercised by the plaintiff as if at the time of exercise he had been the transferee and sole tenant of the lease.’

73 Consequently, the plaintiff’s application that the court exercise its discretion to grant an order for specific performance was successful. Critical to the conclusions reached in Churcher was the Court’s findings and assessment of the witnesses.

74 As to this issue, our provisional view is that an assignee should be at large in seeking to exercise an option, and the lawfulness or otherwise of its exercise should not turn on a procedural consideration such as whether the assignee used the words ‘in right of the assignor’. However, it would appear that the superior court authority, as it presently stands, is to that effect. If it is known to the lessor that the person giving the notice is doing so as an assignee, it must follow, we think, that it will be understood that he is claiming that right by devolution from the assignor.

75 Other Contentions Related to this Ground. At the appeal hearing, the appellants raised a further argument in connection with this ground, i.e. that the sending of the letter exercising the option operated as an offer by Djordjevic and Tennent to take a lease which was accepted by the respondents in line with the reasons in Churcher. The respondents opposed consideration of this point on the basis that it could have been put below and was not. In our view, the appellants’ contention is not sound.

76 In this case the history of dealings does not have the degree of clarity that existed in Churcher. The Court in Churcher favoured the evidence of the plaintiff on a number of points. In Churcher there was, for example, a chain of correspondence between solicitors for the parties, in which the occurrence of the basic business transactions that had led to the plaintiff being in effective control of the lease were identified. Many of them were found to have been known to the lessor at or near the time they occurred. There was substantial evidence that the parties had dealt with each other after the first four year lease expired as if a new, long term lease was in existence.

77 This case is less clear. The Tribunal found, on the balance of probabilities, that the purported notice had been posted, that it probably reached Mr Fung’s office but had gone astray. It accepted that the first Mr Fung or Mr Guinzbourg actually knew about the notice was when it was mentioned to Mr Guinzbourg by Mr Djordjevic on 25 August 2006, not long after Mr Guinzbourg had returned from an absence of more than a year in Russia.

78 The Tribunal noted that between April and August Mr Djordjevic had dealt with Mr Chevtchenko, but had never mentioned the notice. The lessors refused to accept that a notice had been given.

79 Nonetheless Mr Guinzbourg did proceed to make offers of new leases to Mr Djordjevic. It can reasonably be inferred, we think, from that conduct that Mr Guinzbourg was prepared to have Mr Djordjevic as a named tenant in any future lease (subject to such matters as agreement over rent, and provision of guarantees).

80 It is difficult, we think, to conclude that the sending of the notice was open to be construed as an ‘offer from Djordjevic and Tennent to take a lease’. Under the lease the persons entitled to exercise the option to renew were Tennent and Conroy. In Churcher, there were instruments created which purported to effect assignments and transfers, and a transfer was registered to the plaintiff as sole lessee to the knowledge of the lessor within a few weeks of the purported notice of exercise of the option.

Estoppel

81 In the event that Mr Djordjevic was found not to have direct authority (whether as director, agent or equitable assignee) to give the notice, the appellants have contended that by their conduct the co-owners were estopped from denying that they would act on the notice. The appellants’ estoppel case had the following elements:

(i) The appellants assumed there had been valid exercise of the option to renew.

(ii) Their assumption was based on the conduct of Mr Guinzbourg, and the conversations with Mr Djordjevic.

(iii) Relevant conduct included Mr Guinzbourg’s signing of the application for appointment of a specialist retail valuer. In regard to the importance to be attached to that signature, it was material that Mr Guinzbourg was a qualified Australian lawyer, and an experienced real estate salesperson.

(iv) The appellants had acted in reliance on the conduct by expending money upgrading the premises, and in particular, not continuing to seek alternative premises.

82 Ground 11 is as follows:

11. The [Tribunal] erred in fact and law in failing to find that the respondents were estopped from denying that there has been a valid exercise of the option to renew the Lease.

83 The challenge, as it evolved at hearing, put in issue the adequacy of the Tribunal’s reasoning process. As noted earlier, the appellants were asked to amend the appeal to include this ground. The respondents objected to this course in their submissions filed 20 June 2008. The new ground is:

16A. The [Tribunal] erred in fact and in law in failing to give adequate reasons for judgment.

84 Ground 16A links in turn to many of the Grounds given as reasons for extending the appeal to the merits. We do not think that Ground 16A raises a new ground. It simply provides a way, as we see it, of organising many of the points made in the merits grounds.

85 The Tribunal sat for two days (27, 28 September 2007), with submissions closing 18 October 2007. Mr Djordjevic, Mr Conroy, Ms Tennent, Mr Fung, Mr Guinzbourg and Mr Chevtchenko were called for cross-examination on their affidavits. The appellants also relied on affidavits from Ms Dalia Raymundo, Mr Ranko Despot and Mr Stanley Collakides, among others. They were received into evidence without objection. Much of the cross-examination concentrated on matters no longer in issue (in particular whether the notice was given, and whether it was received at Mr Fung’s office). The cross-examination was quite limited as to the conduct that bore on the period August 2006 to May 2007.

86 The submissions at the appeal hearing were to the effect that the Tribunal had failed to consider, and weigh, evidence critical to the appellants’ case founding an estoppel.

87 A failure to refer to critical evidence is an error of law: Mifsud v Campbell (1991) 21 NSWLR 725 at 728. Samuels JA said:

‘[I]t is an incident of the judicial duty for the judge to consider all the evidence in the case. It is plainly unnecessary for a judge to refer to all the evidence led in the proceedings or to indicate which of it is accepted or rejected. The extent of the duty to record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the individual case.

Accordingly a failure to refer to some of the evidence does not necessarily, when it occurs, indicate that the judge has failed to discharge the duty which rests upon him or her. However, for a judge to ignore evidence critical to an issue in a case and contrary to an assertion of fact made by one party and accepted by the judge – as the defendant’s denial of having consumed alcohol – may promote a sense of grievance in the adversary … . It tends to deny the fact and the appearance of justice having been done. … Whether it is an error of law or an error of fact, it seems to me a failure by the judge to do what the nature of the office requires.’

88 Mifsud was a case involving a civil claim for damages arising out of a motor car collision at an intersection. The plaintiff lost the claim. One of the issues was whether the defendant was affected by alcohol. The judge found that he was not, without referring to witness evidence to the contrary, without giving any explanation. There were a number of other pieces of evidence favourable to the plaintiff’s case that were also disregarded. For a recent decision finding that the Mifsud principle had not been infringed, and sufficient reasons given, a case relating to the assessment of evidence said to raise an estoppel: see MK & JA Roche Pty Ltd & Ors v Metro Edgley Pty Ltd & Anor [2005] NSWCA 39 (3 March 2005).

89 These submissions had they been accepted would have meant that the defendants would have been obliged to renew the lease held by Mr Conroy and Ms Tennent even if there was an invalidity in the giving of the notice.

90 As to Mr Djordjevic’s quality as witness, the Tribunal said:

‘74 The foregoing account refers to some conflicts in the evidence given by Mr Djordjevic, on the one hand, and by Mr Guinzbourg or Mr Chevtchenko, on the other. In the Tribunal’s opinion, Mr Djordjevic was a less credible witness than either of these two individuals. More than once, his answers were vague and evasive.

75 In particular, Mr Djordjevic was not convincing when attempting to explain why, on his instructions, the application for appointment of a valuer signed by Mr Guinzbourg was put before the Tribunal even though Mr Chevtchenko and Ms Moukhlina had told him not to use this document. In a distinctly hesitant way, he suggested that the reason was that at the time when he was discussing this document with these two Respondents the three of them thought that it had been lost. Although in the application itself it was made clear that the Respondents were not formally consenting to its being made, the Tribunal does not see why the status of the form signed earlier by Mr Guinzbourg should have been affected in any way by its having been temporarily misplaced. It may be added that the claim that it had been misplaced was not, in fact, made in Mr Djordjevic’s affidavit.

76 An important consequence of this conclusion by the Tribunal is that it does not accept Mr Djordjevic’s allegations, denied by Mr Chevtchenko, that (a) both before and after posting the letter of 11 March 2006 to Mr Fung he spoke about exercising the option to Mr Chevtchenko and (b) Mr Chevtchenko on each occasion gave him to believe that this was in accordance with the Respondents’ wishes but that he would have to await Mr Guinzbourg’s return before negotiating the new rent.’

91 This assessment led the Tribunal to conclude:

‘134 The Tribunal has found (see [76] above) that statements claimed by Mr Djordjevic to have been made by Mr Chevtchenko, to the effect that the Respondents ‘wanted’ the lessees to have the benefit of a further lease, were not in fact made.

135 In the light of this finding, the Tribunal sees no basis for an argument that the Respondents waived compliance with the Lease’s requirements for exercise of the option, or that they should be estopped from asserting non-compliance.

136 With regard to the claim of estoppel, the Tribunal points out also that the expenses incurred by Ms Tennent and Mr Djordjevic during the period when they might have thought that their exercise of the option had been acknowledged were matched, more or less, by further expenses incurred after they were told that the Respondents did not believe the option to have been exercised. This significantly weakens their claim of reliance on relevant conduct by the Respondents.

137 The same applies, in the Tribunal’s opinion, to Mr Guinzbourg’s conduct in signing the form of application for the appointment of a specialist retail valuer. Mr Djordjevic knew that the Respondents had denied, and were continuing to deny, that the option had been validly exercised. This single act by Mr Guinzbourg cannot be taken to have signified a reversal of the Respondents’ attitude on this issue.’

92 In support of the application for leave to extend to the merits the following grounds were pressed. Grounds 17-19 refer directly to paras [74] to [76] of the Tribunal’s reasons. Grounds 17-19 assert:

17. The [Tribunal] erred in fact in finding in paragraph 75 of their judgment that:

a. Djordjevic filed in the Administrative Decisions Tribunal, the Application for the Appointment of a Specialist Retail Valuer signed by Guinzbourg; and

b. Alexandre Chevtchenko (Chevtchenko) and Alexandra Moukhlina (Moukhlina) had told him not to use this document.

18. The [Tribunal] erred in fact in finding in paragraphs 74 and 75 of their judgment that, by reason of the erroneous finding set out in paragraph 17 above, the applicants’ witness, Djordjevic was:

a. a less credible witness than either Chevtchenko and Serge Guinzbourg (Guinzbourg); and

b. that Djordjevic’s answers to questions put to him were vague and evasive.

19. The [Tribunal] erred in fact in finding in paragraph 76 of their judgment that, as a consequence of the erroneous finding as set out in paragraph 17 above, that they did not accept Djordjevic’s allegations, denied by Chevtchenko, that:

a. both before and after posting the letter of 11 March 2006 to Mr Fung he spoke about exercising the option to Chevtchenko; and

b. Chevtchenko on each occasion gave him to believe that this was in accordance with the respondents’ wishes but that he would have to await Guinzbourg’s return before negotiating the new rent.

20. The [Tribunal] erred in fact in finding that the letter dated 30 August 2007, was delivered to Djordjevic by Guinzbourg on or around that date.

21. The [Tribunal] erred in fact in finding that, by reason of the erroneous findings set out in paragraphs 17 to 20 above, the applicants’ had not made out their case, namely that:

a. the respondents had waived strict compliance with the terms of the Lease, insofar as it concerned the manner of exercise of the option to renew;

b. the respondents were estopped from denying that there has been a valid exercise of the option to renew the Lease;

c. the respondents were aware, and acquiesced in Conroy leaving the business and as a lessee;

d. the respondents engaged in conduct which, in all the circumstances, was unconscionable within the meaning of Section 62B of the Retail Leases Act 1994; [the related grounds of law were not pressed]

e. the respondents engaged in conduct which, in all the circumstances, was misleading or deceptive or likely to mislead or deceive within the meaning of Section 62D of the Retail Leases Act 1994; [the related grounds of law were not pressed] and

f. the applicants were entitled to relief against forfeiture pursuant to sections 129 and/or 135F of the Conveyancing Act 1919.

22. The [Tribunal] erred in fact in giving no weight, or insufficient weight, to the evidence given by:

a. affidavit of Alexander Djordjevic sworn 6 August 2007;

b. affidavit of Sacha Tennent sworn 6 August 2007;

c. affidavit of Simon Conroy sworn 7 August 2007;

d. affidavit of Alexander Djordjevic in reply sworn 26 September 2007.

23. The [Tribunal] erred in fact in giving no weight, or insufficient weight, to the evidence given by:

a. affidavit of Dalia Raymundo sworn 7 August 2007;

b. affidavit of Ranko Despot sworn 6 August 2007; and

c. affidavit of Stanley Collakides sworn 7 August 2007.

24. The [Tribunal] erred in fact in giving no weight, or insufficient weight, to the concessions made in cross examination by the respondents’ witnesses.

93 We note that during the period of June and July 2006, Mr Djordjevic’s evidence was that he was discussing with owners of other premises the possibility of moving to their premises. There is no clear explanation as to why he was acting in this way, when his evidence is that he was in regular contact with Mr Chevtchenko in place of Mr Guinzbourg in relation to his lease.

94 As to the period 14 August 2006 to 3 September 2006, the first item to which the appellants refer is the evidence provided by Ms Raymundo. She is a real estate agent who had operated at Waterloo in 2004 and since 2006 had operated at Randwick. Her evidence included an account of a conversation with Djordjevic on 20 August 2006 in which he referred to his dealings with Guinzbourg, and said that he was exercising his option and they were in dispute over the rent. Djordjevic had asked her to provide a valuation. Her evidence was that she did some research into comparable rents, and rendered advice.

95 On the other hand, Mr Guinzbourg’s evidence, accepted by the Tribunal, is that he first learnt of the option at a meeting on 24 August 2006. The Tribunal did not refer to the contradictory statement of Ms Raymundo, but in our view it was a statement to which no great weight could be attached, viewed in isolation.

96 More important is that evidence she gives of a meeting on that date, 24 August 2006, with Mr Guinzbourg. Her evidence was that Mr Guinzbourg was unprepared to move to lower the rent he was demanding. At para [13] she said:

‘I also recall that during the meeting Serge [Guinzbourg] said words to the effect:

The way Red Star have exercised their option is incorrect, but in the meantime I am willing to negotiate the lease with them.’

97 The part of the first affidavit of Mr Djordjevic (the affidavit sworn 6 August 2007) upon which much emphasis was placed in the submissions at the appeal hearing was paras 96 and 97 where Djordjevic attests:

‘96. When Serge next attended the restaurant (which was around 29 August 2006) I handed to him the letter dated 29 August 2006 [the letter refusing the five year lease offer, and in which there is reference to the letter of 11 March 2006 purporting to exercise the option to renew]. Serge read the letter in front of me and after reading it he said to me, with a smile on his face, words to the effect:

We have not received this letter. Can you give me a copy of it.

By ‘this letter’ I understood Serge to be referring to my letter dated 11 March 2006. I got the impression that somehow Serge was expecting that I would raise the issue of my letter dated 11 March 2006. I was surprised by his reaction as I would have expected he would contact Eric Fung and ask him first. We then had a conversation with words to the following effect:

Serge: You will have to take our offer in the 24 August 2006 letter or leave it.

Me: Fine, I’ll leave it, I’ve got another premises I can move to at Victoria Road, Darlinghurst and we will move there.

Serge: Hey, no, of course you have a lease, you’ve said you are staying, we know you are staying, you have an option, we just didn’t get the letter.

Me: We have to agree with the rent or get a valuer to determine the rent.

Serge: OK let’s get a valuer to determine the new rent.

I think Serge left for Russia a few days later. I was to get a valuer.

97. On that day, or maybe the next day I rang Ranko on the telephone and said words to the effect:

Hi Ranko, it is Alex Djordjevic. I have worked out my problems with my landlord and they have agreed to get a valuer to determine the rent. I won’t need to take up Victoria Street but thank you for the opportunity.’

98 Ranko is Ranko Despot. Despot is a café proprietor in Double Bay, and owns two other restaurants, both in Darlinghurst. He said he met Djordjevic for the first time in June 2006 when dining at the Red Star Pizza with a friend who knew Djordjevic, and introduced them. There was a discussion in which Despot raised the possibility of Djordjevic taking up the second of his Darlinghurst restaurants (in Victoria Road). He said that Djordjevic said to him: ‘That sounds like a good place. However I am locked into a lease here. I have exercised an option for another three years.’

99 He recalled a later event when Djordjevic called on him at Double Bay with their mutual friend. He dated it ‘a couple of months later’. Djordjevic is reported as saying that he was having trouble negotiating ‘the new rent for my option period’. He is said to have asked whether the Darlinghurst restaurant was still available.

100 He advised him it was still available. The next paragraph, para [10], of the affidavit was given emphasis at hearing, as it corroborated paras [96] and [97] of the Djordjevic affidavit quoted above.

‘I recall sometime in late August 2006 Alex [Djordjevic] called me on the telephone and said words to the effect:

Hi Ranko. I have sorted out the problems with my landlord and we are going to get market rent determined at the Tribunal. Thank you for the opportunity but I won’t need to look at Victoria Road.’

101 Collakides is a café proprietor in Potts Point. He attested that he had known Djordjevic since 2002, and that he had a conversation with him in ‘early 2006’ in which Djordjevic said he had exercised the option ‘but we have to agree on the market rent for the new period’. He said that he told ‘Alex’ (i.e. Chevtchenko) that ‘we are staying for the option’. Collakides said that he asked him if Alex had confirmed this in writing, and Djordjevic had replied ‘Not in writing’. He said he told him he should make sure it is confirmed in writing. He then referred to a conversation ‘later in 2006’ where Djordjevic said that Serge had dropped in a letter and offered him a new lease but was not saying anything about the option.

102 The evidence of Despot and Collakides is of secondary importance. The evidence of Raymundo and Djordjevic is of greater importance. It records Guinzbourg as making commitments in relation to the granting of a new lease.

103 The Raymundo material is, we think, inconclusive in that regard. Guinzbourg’s statement may be seen as consistent with either of the cases – that Mr Guinzbourg did not accept the validity of the exercise of the option, but was nonetheless agreeable to negotiating a new lease, this time with Tennent/Djordjevic or the company; or, in support of the appellants’ case, that he was merely noting that the notice was technically deficient but regarded as binding. The appellants’ counsel, Mr Narayan, had the opportunity to cross-examine Mr Guinzbourg on this matter, and did not do so.

104 Djordjevic’s evidence of his conversation with Guinzbourg remains. Guinzbourg uses words when threatened with the loss of a tenant that convey a preparedness to accept the option as effective. Mr Djordjevic abandons his enquiries in relation to the availability of alternative premises, and thereby acts to his detriment and to the detriment of Ms Tennent.

105 Djordjevic was not cross-examined on this evidence. In our view, a finding favourable to Djordjevic (and the tenants) should have been made on this point.

106 Moreover, the evidence in our view is consistently to the effect that whenever Mr Guinzbourg was in Sydney he managed the affairs of the co-owners in relation to the premises. Mr Guinzbourg’s evidence was that he was agreeable in August 2006 to an independent rent valuation being obtained (though he would only have it done on a voluntary basis) and that in March 2007 he did sign a formal application to the Tribunal for the appointment of a valuer. These are items of conduct that support the tenants’ case that his conduct was consistent with an intention to treat the notice as effective, and that conduct should be treated as binding all three co-owners.

107 Despite the difficulty they later encountered in not being able to procure the consent of Mr Chevtchenko and Ms Moukhlina, the conduct of Mr Guinzbourg in March remained material to the estoppel case.

108 In our view, there was a substantial estoppel case presented.

The Relief Against Forfeiture Ground

109 The final question of law was expressed as follows:

15. The [Tribunal] erred in fact and law in failing to grant the applicants relief against forfeiture pursuant to sections 129 and/or 135F of the Conveyancing Act 1919 .

110 As already noted, Ms Tennent and Mr Djordjevic remain in occupation, in the eyes of the respondents on a holding over basis under the old lease. The relief against forfeiture element of the application is not addressed in the Tribunal’s comprehensive reasons, suggesting that it was not pressed before the Tribunal.

111 The argument made at appeal based on s 129 of the Conveyancing Act was that the appellants were entitled to be given relief against forfeiture of the interest that would have existed if the new lease had come into existence. That interest was a right to be granted a lease of three years’ duration, as distinct from being left with the much weaker interest of security of tenure of a month.

112 In light of our conclusions in relation to the agency and estoppel grounds we are disinclined to examine this ground of appeal closely.

Conclusions

113 As we have explained, the Tribunal, in our opinion erred in its finding as to whether Djordjevic was an agent for Conroy, and in not acceding to the submission that Guinzbourg and the other co-owners were estopped from denying the legitimacy of the exercise of the option. Accordingly, leave is granted to extend the appeal to the merits. It is not necessary to reconvene for any purpose to do with the substantive dispute. Accordingly the following orders include a declaration of the kind sought by the appellants.

114 The Tribunal reserved consideration of costs giving the following direction (16 January 2008):

‘139 Any application for costs in these proceedings must be filed and served, with supporting submissions, within 28 days of the date of this decision. The opposing party must file and serve submissions in reply within a further 28 days. Unless reasons are advanced for a hearing to be conducted, the matter will be resolved ‘on the papers’, pursuant to section 76 of the Administrative Decisions Tribunal Act 1997 . ’

115 The respondents (the lessors) applied for costs and filed submissions on 12 February 2008. The appellants requested a deferral of the direction as it affected them, pending resolution of the appeal. On 4 March 2008 the presiding member of the Tribunal granted that request.

116 The orders provide a process for any submissions as to costs. In our view, the directions given by the Tribunal below should be vacated. The Appeal Panel should deal with the question of costs at first instance and on appeal.