Werrong Properties Pty Ltd v Standard Options Australia Pty Ltd - [2006] NSWSC 272

No judgment structure available for this case.

CITATION: Werrong Properties Pty Ltd v Standard Options Australia Pty Ltd [2006] NSWSC 272
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 15, 16, 17, 18, 19 August 2005.
Written submissions filed 6, 13 and 20 September 2005

JUDGMENT DATE :
10 April 2006

JUDGMENT OF: Burchett AJ at 1

DECISION: Order to be made in favour of the Plaintiff pursuant to short minutes to be brought in.

CATCHWORDS: Tenancy at will arising out of ineffective oral agreement for lease for three years plus option of three years - effect of nil payment of rent - evidence showing occupation - effect of option under s 23D of the Conveyancing Act - construction of provision of oral agreement relating to cost of fit out and furnishing - whether suitable as a term of lease at will created by law.

LEGISLATION CITED: Conveyancing Act 1919, secs. 23C, 23D, 127

CASES CITED: Braythwayte v Hitchcock1842) 10 M & W at 497; 152 ER at 567
Chan v Cresdon Proprietary Limited (1989) 168 CLR 242
Hamerton v Stead (1824) 3 B & C 478; 107 ER 811
Leask v Farlmist Pty Ltd (1998) BC 9806783
Ledger v Cleveland Nominees Pty Ltd [2001] WASCA 269
Martin v Hogan (1917) 24 CLR 234
Moore v Dimond (1929) 43 CLR 105
Turner v York Motors Proprietary Limited (1951) 85 CLR 55
Peter Butt, Land Law (5 ed, 2006) at sec 1558; sec 1524 and cf secs. 1527, 1533
P.W. Young, Conveyancing and Real Property Legislation New South Wales, (3 ed, 2003), secs. 30429.10, 30429.15

PARTIES: Werrong Properties Pty Limited (Plaintiff)
Standard Options Australia Pty Limited (First Defendant)
Standard Film Australia Pty Limited (Second Defendant)

FILE NUMBER(S): SC 3571/02

COUNSEL: Mr C. F. Hodgson (for the Plaintiff)
Mr P. T. Newton (for the First Defendant)
No appearance of Second Defendant

SOLICITORS: M W A Lawyers (for the Plaintiff)
Kemp Strang (for the First Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BURCHETT AJ

MONDAY, 10 APRIL 2006

v STANDARD OPTIONS AUSTRALIA PTY LIMITED (First Defendant) and STANDARD FILM AUSTRALIA PTY LIMITED (Second Defendant)

JUDGMENT

1 HIS HONOUR: This proceeding was brought following a furious falling out between two men who had for thirty years been extremely close friends and business associates. They had indeed, for some period, lived together. At the time of the rupture in their relationship, they had for about a year had some mutual involvement in premises at 274 - 290 Victoria Street, Darlinghurst, and the question upon which this case must turn relates to the precise nature of the involvement of one of them, Mr Brian Price, and of a company controlled by him, Standard Options Australia Pty Limited, the first defendant (“Standard Options”). The building was owned by the plaintiff, Werrong Properties Pty Limited (“Werrong”), which was managed by the other of the men, Mr Michael Betar, on behalf of a company controlled by him, Standard Commodities International Pty Limited (“Standard Commodities International”), and of an Italian company, Sapi Spa. Mr Betar is a director of Werrong, fifty per centum of the shares in which are owned by Sapi Spa and the other fifty per centum by Standard Commodities International. The plaintiff alleges that an area of the building of about 100 square metres, which came to be designated Suite 102, was the subject of an oral agreement for its letting by Werrong for a period of three years, with an option to renew for a further three years, to the first defendant, Standard Options and another company, the second defendant, Standard Film Australia Pty Limited (“Standard Film”), the shares in which were owned in equal proportions by Mr Price and Mr Betar, who were its directors. The second defendant did not appear and took no part in the hearing, but the first defendant defended the proceeding as against it, denying it had ever agreed to the alleged lease or ever occupied any part of the building, and contending that any lease involved only the second defendant as lessee.

2 The total amount involved is not particularly large, but Mr Betar and Mr Price each insisted adamantly upon his stand in the matter. There were, too, a number of other witnesses, whose evidence bore upon the acceptability of the competing versions of the facts. The plaintiff’s claim is for a sum of $47,391.11 for outstanding rental or occupation fees for the period 1 June 2000 to 26 October 2001, together with the sum of $60,086.25 being the cost of the fitting out and furnishing of Suite 102, as the plaintiff alleges, in accordance with the wishes of Mr Price as director of Standard Options, it being agreed, the plaintiff further alleges, that the plaintiff would pay the cost of the fit out and furniture and Standard Options would reimburse the plaintiff for that expenditure. No amount at all has been paid by the first defendant, although credit has been allowed against rent in respect of a sum of $2,209.00 attributable to the second defendant.

3 It is common ground that Werrong had acquired the property at Darlinghurst during 1999, at a time when Mr Price and Mr Betar were still on good terms. The souring of their relationship seems to have really set in only in about July of the year 2001. Before the purchase of the property, Mr Price had inspected it with Mr Betar, when Mr Betar made it clear the space available exceeded the requirements of Standard Commodities International, and the possibility of Mr Price (by referring to whom the parties undoubtedly meant Standard Options) taking up part of the area was mooted. But Mr Price claims to have responded to this suggestion that he would be unable for the foreseeable future to afford premises there for Standard Options. Mr Betar, on the other hand, says Mr Price referred to the location as suitable not only because it would be good for them to work together but as well because premises at Darlinghurst “will attract smart money investors”. Both of the friends, through Standard Options and Standard Commodities International, were involved in trading, and Mr Price, whose business activities over the years had gained and lost many millions of dollars, was involved in futures trading and also in the raising and management of investment funds. According to Mr Betar, the parties met at the premises in October 1999, at a time when the whole of Level 1 (which included the future Suites 101 and 102) was a large vacant space, and discussed the area where Mr Price would have his trading desk and computers, together with other aspects of the area to be occupied by him (ie. on behalf of Standard Options).

4 In late November 1999, Mr Betar says that he had a telephone conversation with Mr Price in which he said that the fit out costs for Standard Commodities International were in excess of $250,000, to which Mr Price replied:

“I do not want to spend more than $70,000 including furniture. Is that OK for you to fund until I get up and running?”

Mr Betar says that he assented. Mr Price added:

“Until I get the hedge fund up, I would appreciate not having to pay rent and fit out charges until a convenient time”, to which Mr Betar responded:

“That’s fine, you pay when the hedge fund is up and running.”

“I am going to get Rose [ie. Mr Anthony Rose, an acquaintance of Mr Price] to do the work as he has some good ideas and I like his style.”

They agreed on that, and then Mr Betar’s evidence is that he said:

“Working off the market rental for the space it will be around $32,000 per year based on $320 per square metre. It depends on the exact floor space size. Plus GST. The rent is payable monthly in advance and the start date should be around June 2000.”

Mr Price, after some further remarks, said:

“OK that sounds fine.”

Mr Betar continued:

“Given our intentions down the track to have a film company operating as well, then this film company can contribute to the rent which Standard Options is responsible for”;

5 Subsequently, at a meeting between Mr Betar, Mr Price and Mr Rose at the premises, the area in question was ascertained as “about 100 square metres”. Mr Betar also gave evidence of confirmatory discussions between himself and Mr Price between April and June 2000. In June 2000, he said to Mr Price:

“It is prudent we get a lease drawn up particularly as I have shareholders in Werrong Properties. It will be a simple agreement outlining the basic terms and conditions and it will as much as possible marry up to the Standard Commodities lease. You know I am negotiating to sell my half of the property to the other owners and they will want things tidied up and leases to be put in place.”

Mr Price agreed, so Mr Betar said he would send him a copy by facsimile. Following this, he instructed his commercial manager, Mr Partridge, who gave evidence, to leave a copy on Mr Price’s desk (ie. at the premises, Suite 102) and send a copy by facsimile to his home. The premises the subject of these discussions were identified by Mr Anthony Rose, who arranged their fitting out, as Suite 102 on a floor plan endorsed in his handwriting “Plan of Brian’s Office Space”.

6 The lease document prepared on Mr Betar’s instructions by Mr Partridge is actually a one page summary of terms dated 1 June 2000. It names Werrong Properties Pty Limited as the Lessor and Standard Options Australia Pty Limited as the Lessee. It does not mention Standard Film Australia Pty Limited. It nominates the demised premises as “Suite 102, Level 1, 274 – 290 Victoria Street, Darlinghurst” and the term as “3 Calender [sic] years + option 3 years from the date of this document”. Immediately below those words appear the words: “Commencing 1st December 2000”, which the evidence of Mr Betar and Mr Partridge indicates were inserted by mistake. I accept that this is so. A yearly rent is also specified in the sum of “$32,000 excl [sic] GST, payable monthly in advance.” Provision is made for execution on behalf of Standard Options Australia Pty Limited as Lessee and Werrong Properties Pty Limited as Lessor, but no executed copy is in evidence. Mr Price claims never to have received the document; however, I accept the evidence of Mr Partridge that it was left for him at Suite 102 and that Mr Partridge, who entered that office from time to time to leave mail for Standard Options and other entities controlled by Mr Price, later observed that it was no longer there. I infer that Mr Price did receive it, being in about June 2000 in the building from time to time, both working and visiting Mr Betar. I am assisted in drawing this inference by the fact that there was no evidence of any complaint of a failure in delivery of other mail left for Standard Options, or for any entity associated with Mr Price, except that, as will appear, Mr Price claims never to have received invoices for rent left in the same manner. I also think it is more probable than not that Mr Partridge obeyed Mr Betar’s instruction to send a copy by facsimile to Mr Price, whose home telephone and fax numbers would certainly have been available in the office of Standard Commodities International, Mr Betar and Mr Price being in constant touch with each other.

7 In my opinion, it is significant that the lease document was prepared as early as June 2000, at a time when the relations between Mr Betar and Mr Price were close and cordial, whether or not Mr Price actually received a copy of it. That Mr Partridge should have prepared it, and at that time, is a fact entirely inconsistent with the version Mr Price now gives, according to which Suite 102 was never to be an office for any company through which he traded, but to be a film office for Standard Film, formed only on 24 May 2000 as a vehicle for activities in connection with the making of films in which both Mr Betar and Mr Price, but particularly Mr Price, had shown an interest for some time, not by way of a main business activity, but in the nature of a side venture that attracted them.

8 Although Mr Price insists the office in Suite 102 was a film office for Standard Film, and although Mr Rose, the designer of the fit out of that office, is also a film director, Mr Price expressly admitted in his affidavit that, “[f]rom time to time” in his discussions with Mr Betar and Mr Rose, he “heard Mr Betar and/or Mr Rose refer to the Film Office as ‘Brian’s office’“. At other times, when he was discussing the office in question with Mr Betar, Mr Betar “referred to it as ‘your office’”. Mr Price does not assert that he ever corrected either Mr Betar or Mr Rose, but he claims he “always assumed that these references were to the Film Office for SFA [ie. Standard Film]”. He claimed he did do work in the office for Standard Film, whereas Mr Betar mainly did work of that kind in his adjoining office in Suite 101 rented by Standard Commodities International. One of the problems with this explanation is that Standard Film was not incorporated until 24 May 2000, whereas Mr Rose was engaged in January 2000, and by 24 May 2000 the design of the layout and fit out of the office, being the subject of the discussions involving Mr Rose to which Mr Price’s explanation referred, must have been well behind them. Of course, the designation of the office as “Brian’s” on the layout plan could certainly not have arisen from usage that could only have taken place after the fitting out had at least substantially been done in accordance with the plan. Also, on 28 February 2000, Mr Rose sent a message by email to Mr Betar in which he referred to “brian’s office” [sic] in the context of finalising the plans, which, again, suggests that this was before their execution. The work included the hanging of a large model jet fighter from the ceiling, a feature the first defendant claimed to be related to the use of the office as a film office. However, although I do not doubt the office was, and was intended to be, used from time to time in connection with the activities related to films in which both Mr Price and Mr Betar were interested, as indeed the evidence shows Mr Betar’s own office was on at least one occasion, the model jet plane is not at all inconsistent with the office being intended for the general use of Mr Price. For he, it was shown, adopted a military style in conducting share market operations, even wearing a form of military jacket and badge, assuming a military rank, and designating assistants by junior military ranks. The choice as designer of Mr Rose, who was certainly more connected with Mr Price than with Mr Betar (for whose company Standard Commodities International a different designer worked on Suite 101), and had only met Mr Betar in December 1999, points in the same direction, as Mr Rose was also accustomed to adopting an imitation military style for himself. However, Mr Rose was not a witness I would accept where his evidence conflicted with that of Mr Betar or Mr Partridge. He gave very dubious, if not downright contradictory, evidence on the subject of his records, and he wrote a letter in response to a subpoena evincing a clearly hostile attitude towards the plaintiff and its solicitors. In cross-examination, six questions from counsel and an intervention from the bench were required to secure an answer to the question whether Mr Betar had conveyed to him that it was necessary Mr Price should approve the costs of the fit out. Finally, he gave a most reluctant affirmative.

9 Although the plaintiff relied upon the occupation of the office by Mr Price in the latter half of the year 2000 and the first half of 2001, and the first defendant relied on its use as a Film Office, there was not a great deal of evidence either of Mr Price’s presence there or of activities there related to films. So far as films were concerned, the evidence indicates that Mr Price and Mr Betar had dabbled in films for some time previously, Mr Price having initiated that activity and Mr Betar subsequently joined him in it. No commercial success had been achieved and the evidence does not demonstrate any net return. There is no evidence that, when Standard Film was formed, any moneys actually passed through it or any activity could properly be described as having been carried out by it. Mr Betar’s evidence was that he personally made payments, or a payment, to the extent of $50,000 and later received a contribution of $25,000 from Mr Price, but these were individual expenditures.

10 So far as Mr Price’s occupation of the office is concerned, there was evidence indicating he was there occasionally, but the evidence does not satisfy me that he ever transferred regular market trading activities of Standard Options, which involved electronic communications with overseas markets, from his home where the necessary equipment had been installed. That, of course, is not to say that he had not intended to do so or that he would not have done so had his relationship with Mr Betar not undergone a drastic change. There is evidence that he expressed an intention to move his operations to Darlinghurst. Whether pending such a move or for some other reason, the fact is that his brother, Tom Price did move into the office in Suite 102 and did conduct market trading activities there via computer. Mr Tom Price paid no rent to anyone, nor did he contribute to expenses such as electricity. Although he was also a friend of Mr Betar, no particular reason was alleged why Mr Betar should have wholly subsidised Mr Tom Price’s rent for a period of a year or more. On the other hand, Mr Betar claimed that Tom Price asserted his brother owed him a substantial sum of money and gave that as a reason for not contributing. Although it was the first defendant’s case, supported by Tom Price, that he was there by Mr Betar’s permission, he did answer “that’s correct” to the question:

“You were there without rent, thanks to the kindness of at least your brother, if not your brother and Mr Betar; that is the case, isn’t it?”

11 An interesting witness was George Gittoes, a war journalist and war artist, also involved in the making of films, who has received an award of the Order of Australia. In about the middle of the year 2000 Messrs Betar and Price, whom Mr Gittoes regarded as talented and stimulating beyond the ordinary, discussed with him at his premises in Bundeena the making of a documentary film about Rwanda, as well as other matters of interest to all three men. In the course of the discussion, Mr Price said:

“It would be cool if you would come to my office in Darlinghurst to see how it is progressing. I know your background as a war journalist and artist, and I am trying to create a space that reflect[s] courage and a strong nerve.”

“I am in the business of building portfolios and I trade options on the markets. I usually raise money from investors, and trade for them.”

12 An affidavit was also made by Mr Gittoes’ wife, Gabrielle Dalton, who is a director of a production company. In the middle of the year 2000, she had a meeting with Messrs Betar and Price at Level 1, 274 – 290 Victoria Street, Darlinghurst in an office next to the office shown to her as that of Standard Commodities International. She recalled Mr Betar saying to her in the presence of Mr Price: “This is Brian’s office”. At that stage the office was still in the process of being fitted out. There was at that time a proposal that Mr Price would assist a project in which Gabrielle Dalton was interested for the making of a film to be known as “Heart of Darkness” by raising funds from investors in the financial markets. However, this project, which concerned Rwanda, never proceeded.

13 Further evidence of the occupation of the office by Mr Brian Price was given by the affidavit of Andrea Muratori the foreign investment manager of Sapi Spa. Unfortunately, Mr Muratori did not arrive in Australia in time to be cross-examined, but I exercised my discretion to allow his affidavit to be relied upon. It refers to a meeting in Australia during 2001 on the occasion of which Mr Muratori visited 274 – 290 Victoria Street, Darlinghurst, where he was introduced to Mr Brian Price at Suite 102 by Mr Betar who said words to the effect: “This is Brian Price, he is taking up space for his trading fund, Iron Mountain.” Another Italian witness who did not arrive in time to be cross-examined, and whose affidavit was relied upon by leave, was Mauro Ciferri who was in charge of audit and accounting functions associated with Sapi Spa. Between 22 May 2001 and 5 June 2001, he visited Suite 102 where Mr Betar introduced him to Mr Brian Price, saying words to the effect: “This is Brian Price, he is taking up here to rent [sic]. He is using it for his business Standard Options Australia and the trading fund, Iron Mountain.”

14 At or about the time relations between Mr Price and Mr Betar broke down in July 2001, there were repeated references by Mr Betar, in emails to Mr Price, indicating his understanding that Mr Price or Standard Options had obligations in respect of the office at Suite 102. Mr Price acknowledges that he did not respond to these indications with any denial at that time, although he certainly responded with vituperative comments about Mr Betar and his manner of doing business. In this context, I have no difficulty in accepting the evidence of Mr Betar that, at this time, he said to Mr Price words to the effect there would be a sale of his (Mr Betar’s) interest in Werrong to Sapi Spa and that Mr Price would need “to set out in writing a plan of how [he was] going to pay the rent and fit out”, to which Mr Price responded: “This is my office, you have no right to assign any space or even conduct talks with anyone on using any space in this office.”

15 Among the entities associated with Mr Brian Price were a company Iron Mountain Limited and a hedge fund which came to be known as Iron Mountain Absolute Return Fund. Mr Price was described by one of the first defendant’s witnesses, Mr Ali Saffari, the Managed Funds Administrator of Tricom Equities Limited, a stock broking and financial services firm, which is the Custodian and Administrator for Iron Mountain Absolute Return Fund, as “the Investment Manager for that fund, through his company Standard Options Pty Limited”. Neither Iron Mountain Limited nor the fund had any connection with Mr Betar or Werrong. At some time after 31 December 2000, and approximate to that date, Standard Options by its director, Brian Price, executed a document subordinating a debt of $30,000 owed to it by Iron Mountain Limited to other claims. This document is on letterhead endorsed “address: suite 102. 274 – 290 victoria street. darlinghurst. postal: po box n679. grosvenor place sydney … phone: 8356–9033. fax: … 8356-9238”. The telephone and fax numbers are those applicable to Suite 102. On 12 December 2001, Standard Options used letterhead containing the same information, differently set out, for a letter to Mr Betar which also indicates an email reply address at “ironmntn”. Standard Options used, too, the post office box at Kings Cross (post office box 616) of Standard Commodities International, and an envelope so addressed to Standard Options was produced. There was evidence that this happened on a number of occasions and that mail for Standard Options, addressed either to the post office box or to 274 – 290 Victoria Street, was left by various persons including Mr Partridge from time to time in Suite 102.

16 Standard Options was billed by Telstra variously at the post office box and at the street address for telephone service 8356-9033. Margaret Poppelwell, a bookkeeper who was employed to do administrative work for Standard Options and Iron Mountain Limited, work which at relevant times she performed from her home in Christchurch, New Zealand, also visiting Sydney several times a year, gave evidence that on 22 November 2001 she telephoned Telstra “and arranged for the account to be disconnected and for the closing account to be sent to the Standard Options post office box”. On the same day, she telephoned Energy Australia to arrange finalisation of the electricity account. Both of these statements related to Suite 102, although she did not use that expression. She appears to have had some difficulty in relation to the electricity connection, and she emailed Mr Partridge on 28 December 2001, as follows:

“I’ve been trying to sort out this electricity account with Energy Australia – as there has been some sort of muck up on the disconnection – i.e. they have no record of my original request. They now need a letter from you confirming the date that we moved out – could you please organise that for me and fax it to me … .”

“Further to our phone conversation of earlier this morning – I am enclosing a copy of the letter supplied by our old landlord as proof of our vacating the property at Craigend St, Kings Cross.

I would appreciate it if you could now draw up a final invoice on this account … .”

“This is to confirm that Standard Options Australia Pty Limited, vacated the premises at Suite 102 Level 1, 274 – 290 Victoria Street, Darlinghurst N.S.W. 2010 on the 26th October 2001.”

17 On 11 August 2000, Iron Mountain Limited (of which Margaret Poppelwell was a director) wrote a letter to its auditors using letterhead that gave its address as “Suite 102, 274 – 290 victoria street, darlinghurst” and its telephone and fax numbers as including 8356-9033 and 8356-9238 which appertained to that address. It repeatedly used this letterhead until December 2001. In particular, on 5 June 2001, it did so on a letter signed by Brian Price as director. The business address of Iron Mountain for its year 2000 tax return was changed in about January 2001 to the same Suite 102 address.

18 During 2001, an Information Memorandum (as it was called – it was in the nature of a prospectus) was issued on behalf of Iron Mountain Hedge Fund, the name by which Iron Mountain Absolute Return Fund was then known. Mr Price was responsible for the contents of that memorandum, although Margaret Poppelwell edited it. When she was doing so, she noticed an address was shown at Level 1, 274 Victoria Street, Darlinghurst, and she asked Mr Price about it. He replied, according to her recollection:

“I have arranged to use the Darlinghurst address as it’s preferable to using a residential address.”

19 On 2 February 2001, Iron Mountain Limited notified Australian Securities and Investments Commission (“ASIC”) that from 19 January 2001 its principal place of business was Suite 102, 274 – 290 Victoria Street. On 15 February 2002, it notified ASIC that from that date its current principal place of business was 89 Wycombe Road, Neutral Bay, the home of Brian Price, but it confirmed the previous principal place of business was from 19 January 2001 to 14 February 2002 Suite 102, 274 – 290 Victoria Street, Darlinghurst. In other words, not only was it not suggested that the previous notification had been given in error, but on the contrary the previous notification was extended to embrace the period up to 14 February 2002.

20 Mr Partridge gave evidence that, acting on instructions from Mr Betar, he prepared rental invoices addressed on behalf of Werrong to Standard Options in respect of Suite 102 and delivered them on or about their dates by placing them on a desk or filing cabinet in Suite 102. The invoices were prepared over a period from September 2000 through to 17 September 2001. Mr Partridge was not challenged in cross-examination on his evidence that, having left an invoice in Suite 102, on the next occasion when he left mail there the invoice previously left was gone. Likewise, he said that mail addressed to Standard Options at the premises appeared to have been taken when he next left mail. There was never any mail for Standard Film addressed to an address at 274 – 290 Victoria Street. Mr Price was cross-examined specifically as to the receipt of the lease summary, which he denied receiving, and he admitted that in the normal course of the procedures of the office he would expect to have received it if it had been left as alleged by Mr Partridge. I accept Mr Partridge’s evidence as to this, and as to the invoices for rent and the mail generally. The dates of the invoices were somewhat irregular, but it needs to be borne in mind that until the hedge fund became active about the middle of 2001, or at latest by September 2001, there was an arrangement deferring the payment of them, as well as of the fit out expenses. Although the first defendant did not dispute the fulfilment of the condition of the deferral, and I am satisfied the condition was met at least by September 2001, there is no evidence that Mr Price ever formally notified Werrong or Mr Partridge of this. At any rate, invoices were delivered in the manner I have indicated dated 15 September 2000 (for $11,466.69 covering rent for June, July, August and September 2000 (at $2,666.67 per month plus GST), 6 November 2000 (covering rent for October, November and December 2000 at the same rate), 10 January 2001 (covering rent for January, February and March 2001 at the same rate), 16 March 2001 (covering rent for April 2001 at the same rate), 29 April 2001 (covering rent for May 2001 at the same rate), 21 May 2001 (covering rent for June 2001 at the same rate), 16 July 2001 (covering rent for July 2001 at the same rate), 19 July 2001 (covering rent for August 2001 at the same rate), 21 August 2001 (covering rent for September 2001 at the same rate), and 17 September 2001 (covering rent for October 2001 at the same rate). All of these invoices were addressed from Werrong to Standard Options, although the last two added a reference to Standard Film (incorrectly referred to as Standard Films Australia Pty Limited). There was simply no response from Standard Options or Mr Brian Price to any of these. In accepting that they, or at least some of them, must have come to Mr Price’s notice, I take into account, in addition to matters I have already mentioned, the fact that other mail left in Suite 102 in the same manner, such as accounts for telephone and fax numbers and electricity accounts, must have come to notice and been attended to, or services would have been disrupted. No explanation was put forward in evidence for a selective receipt of some documents only.

21 The first defendant relied on the evidence of a Mr Young, a business associate of Mr Price, who was managing director of HFA Asset Management Limited which in about late 2000 or early 2001 moved into part of Suite 101 at 274 – 290 Victoria Street as a sub-tenant of Standard Commodities International. He said that he gave permission to Mr Price, at some time after his company moved into Suite 101, to “use HFA’s office as the registered address for Iron Mountain”. Of course, even if this were true, it would not explain the actual address adopted by Iron Mountain Limited, which was Suite 102, not Suite 101, unless perhaps and to the extent that Suite 101 was intentionally referred to in the Information Memorandum. Mr Young did not recall any mail being delivered to Suite 101, which his company occupied, addressed to Iron Mountain. Nor did Margaret Poppelwell ever suggest that she inserted the address at Suite 102 in documents relating to Iron Mountain Limited on the basis of any information that Mr Young had given permission for the office of HFA Asset Management Limited to be used as the registered address for Iron Mountain.

22 Mr Price admitted that he told a journalist he “had an office in Darlinghurst”, but he attempted to explain this as having been “in reference to HFA”. However, on no view, was the office sub-leased by the company referred to as HFA in Suite 101 Mr Price’s office. At most, he had permission to use it as “the registered address for Iron Mountain”, and there is no suggestion that he ever occupied it for any purpose. Having regard to the significant amount of evidence that the office in Suite 102 was on a number of occasions referred to as Brian’s office, and so described to a number of people, and that he did use it as, for example, Mr Gittoes recalled, Mr Price’s reference to his office at Darlinghurst was, I conclude, a reference to Suite 102.

23 Messrs Brian Price, Tom Price, Young and Rose all gave the impression of being less than reliable in various respects under cross-examination. A number of relevant matters have already been referred to. It is unnecessary to burden these reasons with a further recitation of details. It is also unnecessary to discuss every minor witness, as the evidence which has been discussed must form the basic core of the decision of this case. Nevertheless, all of the evidence has been re-read and considered. I should add that there was nothing about the demeanour of Margaret Poppelwell under cross-examination to suggest she was other than an honest witness, but she appeared to have real difficulty in recalling the basis on which she proceeded in relation to Suite 102. It is hard to account for her use of that address in documents and her unqualified acknowledgment of the status of Standard Options in relation to it in communicating with Energy Australia, except on the basis of an understanding, even if somewhat imprecise, that Standard Options was a tenant or occupant of Suite 102.

24 On the main issues in the case, the evidence of Mr Betar and Mr Partridge was not shaken in cross-examination, and it established satisfactorily on the balance of probabilities the oral agreement alleged in respect of the letting to Standard Options and in respect of the arrangements for the fit out and furnishing of the premises. Both Mr Betar and Mr Partridge were acceptable witnesses.

25 So far as the term of the letting is concerned, Standard Options did not challenge at the hearing the plaintiff’s contention that, if there was occupation under a letting arrangement, it covered the period from 1 June 2000 to the end of October 2001, and of course the invoices covering that period were not challenged at the time of their delivery, nor was there any challenge in 2000 or 2001 to the commencement date indicated by the summary of the terms of the lease which, like the invoices, I have already held was more probably than not received by Mr Price. In the absence of any contention that there is any error in the calculation of the claim, and bearing in mind that it allows a possibly somewhat dubious credit previously mentioned, I conclude that, subject to a legal issue to be considered, the plaintiff is entitled to the amount of rent claimed.

26 The legal issue relates to the effect of the oral agreement for a lease. For the first defendant, it was argued that the oral agreement to lease Suite 102 was ineffective by reason of s 23C of the Conveyancing Act 1919, there being no relevant signed writing. Reference was made to s 23D of the Conveyancing Act, by which it is provided in ss 1:

“All interests in land created by parol and not put in writing and signed by the person so creating the same, or by the person’s agent thereunto lawfully authorised in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.”

27 Neither of the reasons for denying the existence of a tenancy at will put forward by counsel for the first defendant can be sustained. As to the question of exclusive possession, the proposition would deny the possibility of a letting to two persons as co-tenants. No case was cited for limiting a tenancy at will by such a rule, which, of course, does not apply to any other form of tenancy.

28 So far as the question of possession by the first defendant is concerned, I am satisfied that it exercised the right of possession as a tenant both by instructing Mr Rose to furnish and fit out Suite 102 in accordance with its desires (although pursuant to an agreement that the plaintiff would bear the cost in the first instance, but to be reimbursed under the deferred payment arrangement) and by Mr Brian Price’s occupation of it as his office with his desk in it, notwithstanding his attendances were, on the evidence, irregular. As well, I am satisfied that the first defendant through Mr Price exercised a right of possession when it permitted Mr Tom Price to use the office regularly without making any payment. In this regard, I accept the evidence of Mr Betar that it was not he who gave the requisite permission for Tom Price to occupy the office, but he simply indicated that he would have no objection (implicitly speaking on behalf of the landlord) if Mr Brian Price the director of the first defendant gave permission, the first defendant being entitled to do so. The receipt of mail at the office and its use as an official address for the first defendant and a company associated with it are confirmatory of the first defendant’s occupation. The complete lack of any challenge to the invoices for rent at the time of their delivery or at any time prior to the bringing of this proceeding is also strong confirmation.

29 Counsel for the first defendant referred to Chan v Cresdon Proprietary Limited (1989) 168 CLR 242 at 248, where, in the joint judgment of Mason CJ, Brennan, Deane and McHugh JJ, it was said:

“The failure to register the lease did not render it void. … As the lease was not void, it was capable of being or becoming a source of rights. … Furthermore … the existence of the unregistered lease operated to bring into existence or evidence an equitable lease, and occupation and payment of rent under the unregistered lease created an implied tenancy at common law. …

Real Property Act

Conveyancing Act

30 However, counsel’s argument ignores many authorities, a number of which were cited in the judgment in question, dealing with the effect of occupation not intended to be gratuitous, but unsupported by an effective lease. Their Honours did not suggest, in referring to the effect of the payment of rent, that these authorities have not correctly laid down the law in the other situation where there has been no such payment. A decision of the High Court which is cited as authoritative in the same passage is Moore v Dimond (1929) 43 CLR 105, where Knox CJ, Rich and Dixon JJ, in a joint judgment, said (at 112 – 113):

interesse termini

Land Law

Hamerton v Stead

“Where parties enter under a mere agreement for a future lease they are tenants at will; and if rent is paid under the agreement, they become tenants from year to year, determinable on the execution of the lease contracted for, that being the primary contract.”

Braythwayte v Hitchcock

“Although the law is clearly settled, that where there has been an agreement for a lease, and an occupation without payment of rent, the occupier is a mere tenant at will; yet it has been held that if he subsequently pays rent under that agreement, he thereby becomes tenant from year to year.”

Chan v Cresdon Proprietary Limited

31 Dixon J returned to the topic of the creation of a tenancy at will in Turner v York Motors Proprietary Limited (1951) 85 CLR 55 at 65, where he said:

quantum valebat

Moore v Dimond

Hamerton v Stead

32 It is by reason of these authorities (and see also Leask v Farlmist Pty Ltd (1998) BC 9806783) that Peter Butt was able to say (op. cit. sec. 1526), after referring to the Statute of Frauds of 1677 of which s 23C of the Conveyancing Act is a partial reflection:

“However, the common law courts managed in large measure to undermine this provision, by implying a tenancy from year to year where (absent compliance with the Statute’s requirements) the parties had agreed on a lease, and, under that agreement, the tenant had gone into possession and paid rent. More precisely, on entry into possession the lease was a lease at will only; but on payment of rent it ceased to be a lease at will and became a tenancy from year to year, determinable by six months’ notice… .”

33 In my opinion, it is clear that, upon the evidence which I have accepted, there came into existence at least a tenancy at will under which the plaintiff was the first defendant’s landlord and the first defendant was liable to pay the agreed rent during the period the subject of the claim. If in equity, or upon any other basis, the tenancy rose above a tenancy at will, which it is unnecessary to decide for this purpose, that would not of course have the effect of reducing in any way the plaintiff’s claim. There must therefore be an order in favour of the plaintiff for the amount of rent claimed against the first defendant. While some other form of tenancy would not affect the claim for rent, I should add that I think the correct conclusion is there was a tenancy at will. Section 23D provides an exception from the operation of s 23C of the Conveyancing Act, but this exception only operates where there is compliance with both a requirement that the rent be the best that can reasonably be obtained without taking a fine and also that the lease be for a term (including any option to renew) not exceeding three years: Peter Butt op. cit., secs. 1549, 1551; P W Young, Conveyancing and Real Property Legislation New South Wales, (3 ed, 2003) secs. 30429.10, 30429.15. On the evidence, particularly having regard to the option included in the agreement, the conditions of the operation of s 23D were not met in this case.

34 Before turning to the question of the claim for the cost of fit out and furnishing, I should mention the position of the second defendant, Standard Film. It did not defend the proceedings, being embarrassed by a deadlock arising from the equal shareholdings of Messrs Betar and Price, who are also its directors, and their irreconcilable differences. It was explained to me that Standard Film could simply not give instructions in respect of the proceedings. Its failure to defend the claim in these circumstances does not, of course, mean that an order must automatically be made against it. The Court has to be satisfied that it was a co-tenant of the first defendant and liable for the rent. On the evidence which I accept, the proof falls far short of this. Rejecting as I do Mr Price’s evidence that the office was to any significant extent used as a film office, I am left with the fact that Messrs Betar and Price undoubtedly expected or hoped the first defendant would permit it to be used for such film purposes as might arise from time to time, as indeed Mr Betar permitted his own Standard Commodities International office to be used for filming on one occasion. That is not sufficient to found an inference of a tenancy which I would be prepared to draw, and the claim against the second defendant will be dismissed.

35 A consideration of the claim for furnishing and fit out expenses requires the making of a further finding of fact. Following the vacation of Suite 102 by the first defendant involving the departure of Mr Tom Price too, the plaintiff was able to relet the premises and did so quite promptly by November 2001. Suite 102 was let under the new lease, furnished and fitted out as it was. As I understand the position, it remained so let thereafter.

36 The question that then arises is whether the term included in the oral agreement for lease requiring the first defendant to reimburse the plaintiff for the costs of the fit out and furnishing of Suite 102 should be held to cover the entire amount notwithstanding the retention of all of the items including furniture which could not have constituted fixtures, together with any items which would properly have been tenant’s fixtures, by the landlord upon its electing to evict the tenant as a mere tenant at will.

37 Where a lessee takes possession under an ineffective lease agreement, so as to create a tenancy at will by operation of law, there is no reason to treat the tenancy at will as involving a term of the ineffective agreement which is unsuitable for incorporation in a tenancy at will: see Butt, op. cit., sec. 1524, and cf secs. 1527, 1533. The provision now under consideration was particularly appropriate to a lease for such a term as was contemplated (three years plus an option of a further three years), during which the lessee would have the benefit of the fit out effected at its expense. Obviously, it was also contemplated that the lessee would have the use of the furniture and any tenant’s fixtures during the term and would have them upon its effluxion. In my view, the provision should be understood in the context of the agreement for lease as a whole, and it is not applicable, according to its true construction, in the circumstances that arose. But if it is so applicable, then it is not suitable or appropriate for inclusion in the terms of the tenancy at will created by the law.

38 Although stated in the context of the law of sale of goods, the principle laid down by Isaacs and Rich JJ (with the apparent concurrence of Higgins J) in Martin v Hogan (1917) 24 CLR 234 at 262 is a relevant analogy:

simpliciter

Ledger v Cleveland Nominees Pty Ltd

39 Just as any claim for damages would have had to allow for the benefit taken over when Suite 102 was re-let in its outfitted and furnished state, so any claim in equity would have to allow for the same benefit. He who comes to equity must do equity.

40 The plaintiff’s claim on this issue was presented upon an all-or-nothing basis, and in my opinion it fails.

41 In the result the plaintiff succeeds as to the rent and fails as to the fit out and furnishing claim. The only formal order I make at this stage is that the plaintiff bring in, on a date to be fixed, short minutes of orders appropriate in the light of these reasons. At that time, I shall hear the parties as to costs.

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11/04/2006 - the word April in date line in judgment was incorrectly spelt - Paragraph(s) -

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Citations

Werrong Properties Pty Ltd v Standard Options Australia Pty Ltd [2006] NSWSC 272

Cases Citing This Decision

0

Cases Cited

7

Statutory Material Cited

1

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15

Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14

CITATION:	Werrong Properties Pty Ltd v Standard Options Australia Pty Ltd [2006] NSWSC 272 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	15, 16, 17, 18, 19 August 2005. Written submissions filed 6, 13 and 20 September 2005
JUDGMENT DATE :	10 April 2006
JUDGMENT OF:	Burchett AJ at 1
DECISION:	Order to be made in favour of the Plaintiff pursuant to short minutes to be brought in.
CATCHWORDS:	Tenancy at will arising out of ineffective oral agreement for lease for three years plus option of three years - effect of nil payment of rent - evidence showing occupation - effect of option under s 23D of the Conveyancing Act - construction of provision of oral agreement relating to cost of fit out and furnishing - whether suitable as a term of lease at will created by law.
LEGISLATION CITED:	Conveyancing Act 1919, secs. 23C, 23D, 127
CASES CITED:	Braythwayte v Hitchcock1842) 10 M & W at 497; 152 ER at 567 Chan v Cresdon Proprietary Limited (1989) 168 CLR 242 Hamerton v Stead (1824) 3 B & C 478; 107 ER 811 Leask v Farlmist Pty Ltd (1998) BC 9806783 Ledger v Cleveland Nominees Pty Ltd [2001] WASCA 269 Martin v Hogan (1917) 24 CLR 234 Moore v Dimond (1929) 43 CLR 105 Turner v York Motors Proprietary Limited (1951) 85 CLR 55 Peter Butt, Land Law (5 ed, 2006) at sec 1558; sec 1524 and cf secs. 1527, 1533 P.W. Young, Conveyancing and Real Property Legislation New South Wales, (3 ed, 2003), secs. 30429.10, 30429.15
PARTIES:	Werrong Properties Pty Limited (Plaintiff) Standard Options Australia Pty Limited (First Defendant) Standard Film Australia Pty Limited (Second Defendant)
FILE NUMBER(S):	SC 3571/02
COUNSEL:	Mr C. F. Hodgson (for the Plaintiff) Mr P. T. Newton (for the First Defendant) No appearance of Second Defendant
SOLICITORS:	M W A Lawyers (for the Plaintiff) Kemp Strang (for the First Defendant)